SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended August 2, 1998
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______________ to____________________
Commission file number 0-23420
------------
QUALITY DINING, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1804902
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S.EmployerIdentification No.)
incorporation or organization)
4220 Edison Lakes Parkway, Mishawaka, Indiana 46545
---------------------------------------------------
(Address of principal executive offices and zip code)
(219) 271-4600
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X____ No ________
The number of shares of the registrant's common stock outstanding as of
September 14, 1998 was 12,599,444.
QUALITY DINING,
INC. QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED
August 2, 1998
INDEX
Page
PART I. - Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Statements of Operations....................3
Consolidated Balance Sheets..............................4
Consolidated Statements of Cash Flows....................5
Notes to Consolidated Financial Statements...............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........12
Part II - Other Information
Item 1. Legal Proceedings.......................................18
Item 2. Changes in Securities...................................18
Item 3. Defaults upon Senior Securities.........................18
Item 4. Submission of Matters to a Vote of Security Holders.....18
Item 5. Other Information.......................................18
Item 6. Exhibits and Reports on Form 8-K........................18
Signatures........................................................18
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Twelve Weeks Ended Forty Weeks Ended
August 2, August 3, August 2, August 3,
1998 1997 1998 1997
-------- -------- -------- --------
Revenues:
Restaurant sales:
Grady's American Grill $ 17,553 $ 18,453 $ 63,861 $ 66,821
Burger King 20,262 17,915 61,276 56,225
Bruegger's Bagel Bakery - 18,635 - 47,892
Chili's Grill & Bar 13,244 13,253 42,994 41,340
Italian Dining 3,558 3,364 11,471 9,481
------- ------- ------- -------
Total restaurant sales 54,617 71,620 179,602 221,759
Franchise related revenue - 1,712 - 9,190
------- ------- ------- -------
Total revenues 54,617 73,332 179,602 230,949
------- ------- ------- -------
Operating expenses:
Restaurant operating expenses:
Food and beverage 16,134 21,459 53,191 67,637
Payroll and benefits 15,711 21,787 51,357 67,137
Depreciation and
amortization 2,586 4,505 8,919 13,401
Other operating expenses 13,324 18,783 43,083 56,900
Total restaurant operating ------- ------- ------- -------
expenses 47,755 66,534 156,550 205,075
General and administrative 3,642 7,977 12,077 23,473
Amortization of intangibles 251 267 824 2,828
Impairment of assets - - - 185,000
Store closing costs - - - 15,513
Franchise operating
partner expense - - - 2,066
------- ------- ------- -------
Total operating expenses 51,648 74,778 169,451 433,955
------- ------- ------- -------
Operating income (loss) 2,969 (1,446) 10,151 (203,006)
Other income (expense):
Interest expense (2,596) (3,043) (9,252) (7,578)
Gain (loss) on sale
of property and equipment (8) 538 1 539
Interest income 45 36 155 158
Other income (expense),
net 164 (16) 253 101
------- ------- ------- -------
Total other expense, net (2,395) (2,485) (8,843) (6,780)
------- ------- ------- -------
Income (loss) before
income taxes (benefit) 574 (3,931) 1,308 (209,786)
Income taxes (benefit) 344 40 803 (5,703)
------- ------- ------- -------
Net income (loss) $ 230 $ (3,971) $ 505 $(204,083)
======= ======= ======= =======
Basic net income (loss)
per share $ .02 $ (0.23) $ 0.04 $ (12.07)
======= ======= ======= =======
Diluted net income (loss)
per share $ .02 $ (0.23) $ 0.04 $ (12.07)
======= ======= ======= =======
Weighted average shares outstanding:
Basic 12,599 16,910 12,599 16,910
======= ======= ======= =======
Diluted 12,601 16,910 12,671 16,910
======= ======= ======= =======
See Accompanying Notes to Consolidated Financial Statements.
QUALITY DINING,INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
August 2, October 26,
1998 1997
ASSETS -------- ----------
Current assets:
Cash and cash equivalents $ 1,938 $ 7,500
Accounts receivable 2,865 3,265
Inventories 1,897 1,912
Deferred income taxes 3,115 5,191
Other current assets 2,738 5,942
------- -------
Total current assets 12,553 23,810
------- -------
Property and equipment, net 139,466 144,363
------- -------
Other assets:
Deferred income taxes 6,310 4,809
Trademarks, net 12,396 12,651
Franchise fees and
development costs, net 9,404 9,732
Goodwill, net 8,719 9,135
Notes receivable, less allowance 6,000 6,000
Pre-opening costs and
non-competition agreements, net 264 888
Liquor licenses, net 3,079 3,217
Other 970 1,368
------- -------
Total other assets 47,142 47,800
------- -------
Total assets $ 199,161 $ 215,973
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capitalized
lease and non-competition
obligations $ 504 $ 464
Accounts payable 6,873 8,648
Accrued liabilities 19,195 22,937
------- -------
Total current liabilities 26,572 32,049
Long-term debt 115,506 127,106
Capitalized lease and non-competition
obligations, principally to related
parties, less current portion 5,765 6,005
------- -------
Total liabilities 147,843 165,160
------- -------
Stockholders' equity:
Preferred stock, without par value:
5,000,000 shares authorized; none
issued Common stock, without par
value: 50,000,000 shares authorized;
12,619,444 and 12,619,059
shares issued, respectively 28 28
Additional paid-in capital 236,420 236,420
Accumulated deficit (184,880) (185,385)
------- -------
51,568 51,063
Less treasury stock, at cost,
20,000 shares 250 250
------- -------
Total stockholders' equity 51,318 50,813
Total liabilities and stockholders' ------- -------
equity $ 199,161 $ 215,973
======= =======
See Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Forty Weeks Ended
August 2, August 3,
1998 1997
Cash flows from operating activities: ------- -------
Net income (loss) $ 505 $(204,083)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization of
property and equipment 8,643 12,291
Amortization of other assets 2,304 6,034
Impairment of assets - 185,000
Store closing accrual - 15,513
Deferred income taxes 575 (4,215)
Gain on sale of property and equipment (1) (539)
Changes in assets and liabilities, net of
consolidation of controlled affiliate:
Net increase(decrease) in current assets 3,619 (4,818)
Net increase (decrease) in
current liabilities (5,034) (10,368)
Other - (29)
Net cash provided (used) by ------- -------
operating activities 10,611 (5,214)
------- -------
Cash flows from investing activities
Increase in notes receivable - (23,927)
Proceeds from sale of property and equipment 839 1,905
Purchase of property and equipment (5,067) (30,772)
Payment of other assets (214) (3,110)
Other 69 -
------- -------
Net cash used in investing activities (4,373) (55,904)
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options - 1
Borrowings of long-term debt - 62,500
Repayment of long-term debt (11,600) (4)
Repayment of capitalized lease
and non-competition obligations (200) (198)
Net cash provided (used) ------- -------
by financing activities (11,800) 62,299
------- -------
Net increase (decrease) in cash and cash equivalents (5,562) 1,181
Cash and cash equivalents, beginning of period 7,500 444
------- -------
Cash and cash equivalents, end of period $ 1,938 $ 1,625
======= =======
See Accompanying Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 2, 1998
(Unaudited)
Note 1: Description of Business.
Nature of Business - Quality Dining, Inc. and its
subsidiaries (the "Company") develop and operate 145
quick service and full service restaurants in 20
states. As of August 2, 1998 the Company owned and
operated 40 Grady's American Grill restaurants, four
restaurants under the tradename of Spageddies Italian
Kitchen and four restaurants under the tradename of Papa
Vino's Italian Kitchen. The Company also operated, as
a franchisee, 69 Burger King restaurants and 28 Chili's
Grill & Bar restaurants.
Note 2: Basis of Presentation.
The accompanying consolidated financial statements include
the accounts of Quality Dining, Inc. and its wholly
owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X promulgated by
the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes
required by generally accepted accounting principles for
annual financial statement reporting purposes. In the
opinion of management, all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for
the twelve-week and forty-week periods ended August 2,
1998 are not necessarily indicative of the results that
may be expected for the 52-week year ending October 25, 1998.
These financial statements should be read in
conjunction with the Company's audited financial
statements for the fiscal year ended October 26, 1997
included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
Note 3: Disposition of Bagel-Related Businesses
On October 20, 1997, the Company sold its bagel-related
businesses to Mr. Nordahl L. Brue, Mr. Michael J. Dressell
and an entity controlled by them and their affiliates. The
sale included the stock of Bruegger's Corporation and the
stock of all of the other bagel-related businesses. The
total proceeds from the sale were $45,164,000. The
consideration included the issuance by Bruegger's
Corporation of a junior subordinated note in the amount of
$10,000,000, which was recorded as $6,000,000 due to a
$4,000,000 reserve for legal indemnification, the
transfer of 4,310,740 shares of the Company's common stock
valued at $21,823,000, owned by Messrs. Brue and Dressell,
which were retired, a receivable for purchase price
adjustment of $500,000, and $16,841,000 in cash.
The subordinated note has an annual interest rate of 12% and
will mature in October of 2004. Interest will be accrued
and added to the principal amount of the note for the first
three years and will be paid in cash for the remaining
life of the note. The Company did not recognize any
interest income from this note in the first forty weeks of fiscal 1998.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued August 2, 1998
(Unaudited)
The cash component of the proceeds included an
adjustment for the calculation of the net working
capital deficit. The calculation used was subject to
final adjustment and is being disputed by Messrs. Brue and
Dressell. The Company does not expect the ultimate
resolution of this dispute to have a material adverse
effect on the Company's financial position or results of operations.
Note 4: Impairment of Long-Lived Assets
On May 10, 1997, the Company's Board of Directors committed
the Company to a plan of action to divest the Bruegger's
bagel-related businesses. During the second quarter of
fiscal 1997 the Company recorded a non-cash impairment
charge of $185,000,000 and a store closing charge of
$15,513,000 as a result of this decision. The non-cash
impairment charge represented a reduction of the carrying
amounts of bagel-related assets to their estimated fair
values. The impairment charge included non-cash charges for
the write-off of goodwill and the write-down of notes
receivable and property and equipment. During the second
quarter of fiscal 1997 the Company received non-binding
offers to purchase its bagel-related assets and used
these offers, less estimated costs to sell, to determine
the current fair value of the bagel-related assets. On
October 20, 1997 the Company sold all its bagel-related
assets and no further charges were incurred.
The store closing charge represented the estimated costs
associated with closing under-performing Bruegger's units
and other Bruegger's units which were at various stages
of development when the decision was made to divest the
Bruegger's bagel-related businesses. The charge included
amounts for terminating leases, the write-off of fixed
assets and preopening costs, restaurant management
severance costs and other store closing costs. As of
August 2, 1998, $12,634,000 in costs related to these
activities had been incurred, of which $1,841,000 were
cash payments and $10,793,000 were non-cash charges,
primarily for the writedown of fixed assets. The remaining
costs are primarily associated with terminating occupancy
leases which the Company expects to be substantially
complete by the end of fiscal 1998. The Company believes
that the remaining reserve is adequate to cover all
future expenses relating to the closed stores.
Note 5: Franchise Operating Partner Program
During the second quarter of fiscal 1997 the Company
recorded a $2,066,000 charge for expenses relating to
the Franchise Operating Partner Program. These costs were
primarily related to the professional services of
financial advisors involved in negotiating with potential
equity investors for the Franchise Operating Partner
Program. The Franchise Operating Partner Program was
canceled when the Company decided to divest Bruegger's Corporation.
Note 6: Commitments.
As of August 2, 1998, the Company had commitments
aggregating approximately $764,000 for the construction of new
restaurants.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
August 2, 1998
(Unaudited)
Note 7: Long-Term Debt.
On September 11, 1998, the Company amended its
revolving credit agreement with Chase Bank of Texas, as
agent for a group of seven banks, providing for borrowings
of up to $130,000,000 with interest payable at the adjusted
LIBOR rate plus a contractual spread (8.6875% at August 2,
1998). The revolving credit agreement is secured by the
stock of certain subsidiaries of the Company, the $10
million junior subordinated note issued by Bruegger's
Corporation and substantially all of the Company's personal
property. The revolving credit expires on April 26, 2000,
at which time all amounts are due. As a result of this
amendment, the Company has classified its outstanding
borrowings under the credit agreement as long-term debt.
The revolving credit agreement contains, among other
provisions, certain restrictive covenants including
maintenance of certain prescribed debt and fixed charge
coverage ratios, limitations on the incurrence of
additional indebtedness, limitations on
consolidated capital expenditures, restrictions on the
payment of dividends (other than stock dividends)and
limitations on the purchase or redemption of shares of the
Company's capital stock. In addition, the revolving
credit agreement contains a mandatory reduction in
borrowing availability on December 31, 1999 to the lesser
of $125,000,000 or an amount based on a contractual formula.
In addition, based on a contractual formula, the borrowing
availability may be reduced on June 30, 1999. At August 2, 1998,
the fair value of the amount outstanding under the Revolving
Credit Agreement approximated the carrying amount.
Note 8: Earnings Per Share
The Company had outstanding at August 2, 1998 common
shares totaling approximately 12,599,000. The Company had
also granted options to purchase common shares to its employees
and outside directors. These options have a dilutive effect on the
calculation of earnings per share for the twelve and
forty week periods ended August 2, 1998. These options
were anti-dilutive for the twelve and forty week periods
ended August 3, 1997. The following is a reconciliation of
the numerators and denominators of the basic and diluted
earnings per share computation as required by SFAS 128.
Twelve weeks ended Forty weeks ended
August 2, August 3, August 2, August 3,
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands, except per share amounts)
Basic net income (loss) per share:
Net income (loss) available to
common shareholders (numerator) $ 230 $ (3,971) $ 505 $(204,083)
======= ======= ======= =======
Weighted average common shares
outstanding (denominator) 12,599 16,910 12,599 16,910
======= ======= ======= =======
Basic net income (loss) per share $ 0.02 $ (0.23) $ 0.04 $ (12.07)
======= ======= ======= =======
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,Continued
August 2, 1998
(Unaudited)
Note 8: Earnings Per Share (continued)
Twelve weeks ended Forty weeks ended
August 2, August 3, August 2, August 3,
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands, except per share amounts)
Diluted net income (loss) per share:
Net income (loss) available to
common shareholders (numerator) $ 230 $ (3,971) $ 505 $(204,083)
======= ======= ======= =======
Weighted average common shares
outstanding 12,599 16,910 12,599 16,910
Effect of dilutive securities:
Options on common stock 2 - 72 -
------- ------- ------- -------
Total common shares and dilutive
securities(denominator) 12,601 16,910 12,671 16,910
======= ======= ======= =======
Diluted net income(loss)per share $ 0.02 $ (0.23) $ 0.04 $ (12.07)
======= ======= ======= =======
Note 9: Contingencies.
The Company and certain of its officers and directors are
parties to various legal proceedings relating to the
Company's purchase, operation and financing of the Company's
bagel-related businesses.
BruWest, L.L.C., a franchisee of Bruegger's Franchise
Corporation (a former indirect subsidiary of the Company),
and Timothy Johnson, Gregory LeMond, Michael Snow and
Matthew Starr, principals of BruWest (collectively "BruWest")
commenced an action on January 30, 1997 filed in the United States
District Court, Districtof Minnesota, against Bruegger's Franchise
Corporation, Quality Dining, Inc., Daniel B. Fitzpatrick (the
"Bruegger's Defendants") and an investment banking firm
retained by BruWest, alleging inter alia that the
Bruegger's Defendants breached commitments to provide
financing to BruWest, interfered with the plaintiffs'
efforts to obtain financing from third parties, violated
existing franchise and development agreements between
BruWest and Bruegger's Franchise Corporation, violated
certain provisions of the Minnesota Franchise Act and
breached duties and implied covenants of good faith and
fair dealing. The Bruegger's Defendants denied all
allegations in the complaint. Without admitting any
liability or obligation to do so, on March 11, 1997,
Bruegger's Corporation loaned $1.2 million to the
plaintiffs. The loan is secured by certain assets of the
plaintiffs and personal guarantees of Messrs. LeMond and
Snow. The loan provides for monthly interest payments
commencing April 11, 1997 at the rate of nine percent
(9%) per annum and matured on September 11, 1997. On
March 14, 1997, the complaint was dismissed, without
prejudice. On May 22, 1997, BruWest refiled the
complaint with additional allegations challenging the
enforceability of the loan documents and personal
guarantees. BruWest has ceased payment of royalties as
required under its franchise agreements and did not repay
the loan at maturity. This action was settled on August 19,1998.
Quality Baking, LLC, a franchisee of Bruegger's Franchise
Corporation, and Mark Ratterman, Chris Galloway and Peter Shipman,
principals ofQuality Baking, LLC, commenced an action on July 9, 1997
filed in the United States District Court, for the Eastern District of
Missouri, Eastern Division, against Bruegger's Corporation, Bruegger's
Franchise Corporation, Nordahl Brue, Michael Dressell, Daniel B. Fitzpatrick
and John Firth.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued August 2, 1998
(Unaudited)
On April 22, 1998, the Court granted the defendants' Motion to Transfer
this matter to the United States District Court for the
Northern District of Indiana. The complaint alleges that the plaintiffs
purchased their franchises based upon financial representations that
have not materialized, that they purchased preferred stock in
Bruegger's Corporation based upon false representations, that the
defendants falsely represented their intentions with respect to
repurchasing bakeries from the plaintiffs, and that the defendants violated
implied covenants of good faith and fair dealing.
D & K Foods, Inc., Pacific Capital Ventures, Inc., and PLB
Enterprises, Inc., franchisees of Bruegger's Franchise
Corporation, and Ken Wagnon, Dan Carney, Jay Wagnon and
Patrick Beatty, principals of the foregoing franchisees,
commenced an action on July 16, 1997 filed in the United
States District Court, for the District of Maryland,
against Bruegger's Corporation, Bruegger's Franchise
Corporation, Quality Dining, Inc., Daniel B. Fitzpatrick,
Michael J. Dressell and Nordahl L. Brue, alleging that the plaintiffs
purchased their franchises based upon financial representations that
have not materialized, that they purchased preferred stock in Bruegger's
Corporation based upon false representations, that Bruegger's Corporation
falsely represented its intentions with respect to purchasing
bakeries from the plaintiffs or providing financing to the
plaintiffs, and that the defendants violated implied covenants of good faith
and fair dealing.
Both of the above pending franchise related actions are in
preliminary stages and only limited discovery has
occurred. In all of the above cases, one or more
present or former officers and directors of the Company
have been named as party defendants and the Company has and
is advancing defense costs on their behalf. Pursuant to the
Share Exchange Agreement by and among Quality Dining, Inc.,
Bruegger's Corporation, Nordahl L. Brue and Michael J. Dressell,
the Agreement and Plan of Merger by and among Quality Dining, Inc.,
Bagel Disposition Corporation and Lethe, LLC, and certain
other related agreements entered into as part of the disposition of the
Company's bagel-related businesses, the Company is responsible for 50% of
the first $14 million of franchise related litigation expenses, inclusive
of attorney's fees, costs, expenses, settlements and judgments (collectively
"Franchise Damages"). Bruegger's Corporation and certain of its affiliates are
obligated to indemnify the Company from all other Franchise Damages.
The Company is obligated to pay the first $3 million of its share of
Franchise Damages in cash. Through August 31, 1998, the Company has paid
approximately $850,000 in cash and assigned its $1.2 million note from
BruWest to Bruegger's Corporation which together reduce the Company's
remaining obligation to pay cash in respect of Franchisee Damages to
approximately $950,000. The remaining $4 million of the Company's share of
Franchise Damages is payable by crediting amounts owed to the Company
pursuant to the $10 million junior subordinated note issued to the
Company by Bruegger's Corporation. Through August 31, 1998, the
outstanding balance due under the junior subordinated note has been
reduced by $600,000 in respect of Franchisee Damages. Based upon
the currently available information, the Company does not believe that
these cases individually or in the aggregate will have a material
adverse effect on the Company's financial position and results of
operations. Such assessment is based upon the Company's belief that
Bruegger's Corporation has and will continue to have the ability to
perform its indemnity obligations.
James T. Bies filed a shareholder derivative action in the
United States District Court for the Southern District of
Michigan on October 14, 1997. The complaint named as
defendants 12 individuals who are current or former
directors or officers of the Company. The complaint
alleged that the individual defendants as directors breached
fiduciary duties to the Company by approving certain
transactions in 1997 involving loans to Bagel Acquisition Corporation
that allegedly benefited Daniel B. Fitzpatrick, the Company's
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued August 2, 1998
(Unaudited)
Chairman, President and Chief Executive Officer. The
plaintiff also alleged that individual defendants
participated in a "conspiracy to waste, dissipate,
and improperly use funds, property and assets of
Quality" for the benefit of Bagel Acquisition
Corporation and Mr. Fitzpatrick. The plaintiff alleged
that the Company and its shareholders had been damaged in
an amount in excess of $28,000,000. The relief sought also
included the appointment of a receiver, an accounting and
attorney's fees. On April 27, 1998, the Court dismissed the
complaint without prejudice, for failure to make a "demand"
upon the Company's board of directors. By letter dated May 12,
1998, Mr. Bies has demanded that the Company pursue these
claims against the defendants. In accordance with the
Indiana Business Corporation Law, the board of directors has
appointed a special committee to investigate the allegations
and determine whether it is in the best interests of the
Company to pursue this matter. The special committee
consists of three of the Company's outside directors,
Messrs. Decio, Lewis and Murphy (named defendants in the
action) along with David T. Link, Dean of the Notre
Dame Law School. Subsequent to the establishment of the
special committee, Mr. Bies refiled his action on July
30, 1998. The Company intends to request the District
Court to dismiss and/or stay this proceeding pending
completion of the special committee's investigation.
The Company and certain of its executive officers are
defendants in two class action lawsuits filed in the United
States District Court for the Northern District of
Indiana. The complaints allege, among other things,
that the defendants violated Section 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended, and Rule
10b-5 thereunder by failing to disclose various matters in
connection with the Company's acquisition, development,
financing and disposition of its bagel-related businesses.
The putative class period in such actions is from June 7,
1996 to May 13, 1997 on which dates the price of the
Company's common stock closed at $34.25 and $6.56,
respectively. The plaintiffs are seeking, among other
things, an award of unspecified compensatory damages,
interest, costs and attorney's fees. The Company believes
that it and its executive officers have meritorious
defenses to the allegations and it intends to vigorously
defend against the allegations made in the complaints.
However, there can be no assurance that the ultimate
outcome of these or other actions (including other
actions under federal or state securities laws) arising
out of the Company's acquisition, development, financing
and disposition of its bagel-related businesses will not
have a material adverse effect on the Company's financial
position or results of operations.
The Company is involved in various other legal proceedings
incidental to the conduct of its business. Management does
not expect that any such proceedings will have a
material adverse effect on the Company's financial
position or results of operations.
As previously disclosed, the Company remains liable on a
guarantee it made in 1997 of $4.2 million of debt between
Chase Bank of Texas and a franchisee of Bruegger's. This
debt is secured by certain of the assets of the franchisee
and by the personal guarantees of the principals of the
franchisee (collectively the "Collateral Security").
Subsequent to the close of the third quarter the
franchisee informed the Company that it anticipates
defaulting on the debt in the near future. In such
event, it is reasonably possible that the Company could
suffer a loss in an amount equal to the difference between
the full amount of the debt and the amount that can be
realized from the Collateral Security. The Company is
proceeding to assess the value that can be received from
the Collateral Security as well as the various rights,
obligations and options that may be available to it in
the event of a default. There can be no assurance that
the Company will be able to realize sufficient value from
the Collateral Security to satisfy the amount of the
obligation.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company has a 52/53-week fiscal year ending on the last
Sunday in October of each year. The first quarter of the
Company's fiscal year consists of 16 weeks with all
subsequent quarters being 12 weeks in duration. The
current fiscal year ends October 25, 1998.
RESULTS OF OPERATIONS
The following table sets forth, for the periods
indicated, the percentages which certain items of revenue
and expense bear to total revenues, except where
otherwise noted.
Twelve Weeks Ended Forty Weeks Ended
August 2, August 3, August 2, August 3,
1998 1997 1998 1997
-------- -------- -------- --------
Revenues:
Restaurant sales 100.0% 97.7% 100.0% 96.0%
Franchise related revenue - 2.3 - 4.0
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating expenses:
Restaurant operating expenses (as % of restaurant sales)
Food and beverage 29.5 30.0 29.6 30.5
Payroll and benefits 28.8 30.4 28.6 30.3
Depreciation and amortization 4.7 6.3 5.0 6.0
Other operating expenses 24.4 26.2 24.0 25.7
----- ----- ----- -----
Total restaurant
operating expenses 87.4 92.9 87.2 92.5
General and administrative 6.7 10.9 6.7 10.2
Amortization of intangibles 0.5 0.4 0.5 1.2
Impairment of assets - - - 80.1
Store closing costs - - - 6.7
Franchise operating
partner expense - - - 0.9
----- ----- ----- -----
Total operating expenses 94.6 102.0 94.4 187.9
----- ----- ----- -----
Operating income (loss) 5.4 (2.0) 5.6 (87.9)
----- ----- ----- -----
Other income (expense):
Interest expense (4.8) (4.1) (5.2) (3.3)
Interest income .1 - .1 .1
Gain on sale of property
and equipment - .7 - .2
Other income (expense), net .3 - .1 .1
----- ----- ----- -----
Total other expense, net (4.4) (3.4) (5.0) (2.9)
----- ----- ----- -----
Income (loss) before income
taxes (benefit) 1.0 (5.4) 0.6 (90.8)
Income taxes (benefit) 0.6 - 0.4 (2.5)
----- ----- ----- -----
Net income (loss) 0.4% (5.4)% 0.2% (88.3)%
===== ===== ===== =====
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Restaurant sales for the third quarter of fiscal 1998 were
$54,617,000, a decrease of 23.7% over restaurant sales of
$71,620,000 for the comparable period in fiscal 1997.
Restaurant sales for the first forty weeks of fiscal 1998
were $179,602,000, a decrease of 19.0% over restaurant sales
of $221,759,000 for the comparable period in fiscal 1997.
The decrease for the quarter and the first forty weeks
was attributable to the disposition of the Company's
bagel-related businesses on October 20, 1997. Total revenues
in fiscal 1997 included franchise related revenues from Bruegger's
Corporation. Due to the sale of the bagel-related businesses,
the Company no longer has any bagel related revenue.
As a percentage of restaurant sales, total restaurant
operating expenses decreased to 87.4% for the third quarter
of fiscal 1998 from 92.9% in the third quarter of fiscal
1997 and to 87.2% in the first forty weeks of fiscal
1998 from 92.5% in the same period of fiscal 1997.
Contributing to the decreases were lower food and
beverage expense, lower payroll and benefits expense, lower
depreciation expense and lower other operating expenses.
This was primarily the result of the Company's divestiture
of the bagel-related businesses and improved margin
performance at each of the Company's remaining restaurant concepts.
General and administrative expenses, as a percentage of
total revenues, were 6.7% in the third quarter of fiscal
1998 versus 10.9% in the comparable period in fiscal
1997. General and administrative expenses, as a
percentage of total revenues, were 6.7% for the first forty
weeks of fiscal 1998 versus 10.2% in the comparable period
in fiscal 1997. The reduction for the quarter and the first
forty weeks was due to the sale of the bagel-related businesses.
During the second quarter of fiscal 1997, the Company
recorded a noncash impairment charge of $185,000,000 as a
result of the decision to divest its bagel-related
businesses. The non-cash impairment charge represented a
reduction of the carrying amounts of bagel-related assets
to their estimated fair value. The impairment charge
included non-cash charges for the write-off of goodwill
and the write-down of notes receivable and property and
equipment. On October 20, 1997 the Company sold the bagel-
related businesses and no further charges were recorded.
In the second quarter of fiscal 1997, the Company recorded a
$15,513,000 charge for closing under-performing
Bruegger's units and other Bruegger's units which were
at various stages of development when the decision was
made to divest the bagel-related businesses. The charge
included amounts for terminating leases, write-offs of fixed
assets and pre-opening costs, restaurant management
severance costs and other store closing costs.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
During the second quarter of fiscal 1997, the Company
recorded a $2,066,000 charge for expenses related to
the Franchise Operating Partner Program. These costs were
primarily related to the professional services of
financial advisors involved in negotiating with potential
equity investors for the Franchise Operating Partner
Program. The Franchise Operating Partner Program was
canceled due to the Company's decision to divest
Bruegger's Corporation.
Amortization of intangibles, as a percentage of
total revenues, increased to 0.5% for the third quarter
of fiscal 1998 compared to 0.4% for the same period in
fiscal 1997. For the first forty weeks of fiscal 1998
amortization of intangibles, as a percentage of total
revenues, decreased to 0.5% compared to 1.2% for the same
period in fiscal 1997. The decrease for the first forty
weeks of fiscal 1998 was primarily due to the write-off
of the bagel-related goodwill in the second quarter of fiscal 1997.
Total other expenses, as a percentage of total revenues,
increased to 4.4% for the third quarter of fiscal
1998 from 3.4% during the comparable period in fiscal 1997.
Total other expenses, as a percentage of total revenues, increased
to 5.0% from 2.9% for the first forty weeks of fiscal 1998
compared to fiscal 1997. The increase was primarily due to an
increase in interest expense resulting from increased borrowings and
higher interest rates under the Company's revolving credit agreement.
The effective income tax rates for the twelve and forty
weeks ended August 2, 1998 were 59.9% and 61.4%,
respectively, compared to 1.0% and 2.7% (benefit) for the
twelve and forty weeks ended August 3, 1997.
The provision for income taxes includes federal and state
income taxes using the Company's estimated effective
income tax rate for the respective fiscal year. The
high effective income tax rate for fiscal 1998 is mainly
due to a large portion of state taxes being based on
criteria other than income. The low income tax benefit rate
in fiscal 1997 is a result of a significant portion of the
$185.0 million non-cash charge for asset impairment being
non-deductible for tax purposes.
For the third quarter of fiscal 1998, the Company reported
net income of $230,000 compared to net loss of $3,971,000
for the third quarter of fiscal 1997. For the first
forty weeks of fiscal 1998, the Company reported net
income of $505,000 compared to net loss of $204,083,000
for the same period in fiscal 1997. The net loss for the
third quarter of fiscal 1997 was mainly due to the poor
performance of the Company's bagel-related businesses. The
net loss for the first forty weeks ended August 3, 1997
was primarily due to the $185,000,000 non-cash asset
impairment charge and the $15,513,000 store closing charge,
relating to the decision to divest the Bruegger's bagel-
related businesses.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------
The Company's cash and cash equivalents were $1,938,000 at
August 2, 1998, a decrease of $5,562,000 from the
$7,500,000 at October 26, 1997. The principal source of
funds for the forty weeks ended August 2, 1998 were
provided by operations ($10,611,000). The primary uses of
funds for the period consisted of: (i) expenditures
associated with new restaurant development and restaurant
remodeling ($5,067,000) and (ii) repayment of long-term debt
($11,600,000).
The Company's primary cash requirements for the remainder of
fiscal 1998 will be to finance (i) the reduction of
debt under the Company's revolving credit agreement,
(ii) the development of new restaurants, (iii) remodeling
and maintenance expenditures at existing restaurants and
(iv) corporate capital expenditures. The Company's
capital expenditures budget is expected to range from
$5,000,000 to $7,000,000 for fiscal 1998. During fiscal
1998, the Company has opened four Burger King restaurants.
One Burger King restaurant was opened during the first quarter,
two opened during the third quarter and one is planned for
the fourth quarter (which opened on August 10, 1998).
The Company does not anticipate opening any other restaurants
during fiscal 1998. The actual amount of the Company's cash
requirements for capital expenditures depends in part on the
number of new restaurants opened and the actual expense related to
remodeling and maintenance of existing units.
On September 11, 1998, the Company amended its
revolving credit agreement with Chase Bank of Texas, as
agent for a group of seven banks, providing for borrowings
of up to $130,000,000 with interest payable at the adjusted
LIBOR rate plus a contractual spread (8.6875% at August 2,
1998). The revolving credit agreement is secured by the
stock of certain subsidiaries of the Company, the $10
million junior subordinated note issued by Bruegger's
Corporation and substantially all of the Company's personal
property. The revolving credit expires on April 26, 2000,
at which time all amounts are due. As a result of this
amendment, the Company has classified its outstanding
borrowings under the credit agreement as long-term debt.
The revolving credit agreement contains, among other
provisions, certain restrictive covenants including
maintenance of certain prescribed debt and fixed charge
coverage ratios, limitations on the incurrence of
additional indebtedness, limitations on
consolidated capital expenditures, restrictions on the
payment of dividends (other than stock dividends) and
limitations on the purchase or redemption of shares of the
Company's capital stock. In addition, the revolving
credit agreement contains a mandatory reduction in
borrowing availability December 31, 1999 to the lesser
of $125,000,000 or an amount based on a contractual formula.
In addition, based on a contractual formula, the borrowing
availability may be reduced on June 30, 1999.
The Company anticipates that its cash flow from
operations, together with amounts available under its
revolving credit agreement and other sources, will be
sufficient to fund its planned expansion and other
operating cash requirements through the end of fiscal 1998.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
IMPACT OF YEAR 2000
- -------------------
The term "Year 2000" is a general term used to describe
the various problems that may result from the improper
processing of dates and datesensitive calculations by
computers and other machinery and equipment as the year
2000 is approached and thereafter. These problems
generally arise from the fact that most of the world's
computer hardware and software has historically used only
two digits to identify the year in a date, often meaning
that the computer will fail to distinguish dates in the
"2000's" from dates in the "1900's."
The Company's State of Readiness.
- ---------------------------------
The Company has established a formal plan ("Year 2000 Plan")
to (i) test its information technology systems to evaluate
Year 2000 compliance, (ii) assess the Year 2000 compliance
of its information technology vendors, (iii) assess its non-
information technology systems that utilize embedded
technology such as microcontrollers and (iv) determine
the readiness of third parties such as government agencies,
utility companies, telecommunication companies, suppliers and
other "non-technology" third party vendors. The extent of any
additional charges or expenses the Company may incur have not
yet been determined.
Independent of the Company's Year 2000 Plan, the Company has
previously determined it would replace its point of sale equipment
in its 76 full service dining restaurants. This determination was
part of the Company's ongoing efforts to enhance financial controls
through a centralized, computerized, accounting system to enhance
the tracking of data to enable the Company to better manage its operations.
The Company is currently evaluating point of sale systems and expects to
replace the point of sale equipment in its full service restaurants by
August, 1999 with systems that will be Year 2000 compliant. The Company
expects the replacement of the point of sale equipment in its 76 full
service restaurants to cost approximately $3 million. The Company's point
of sale equipment in its 70 Burger King restaurants is Year 2000 compliant.
Costs to Address the Company's Year 2000 Issues.
- -------------------------------------------------
The Company expenses costs associated with its Year 2000 Plan
as the costs are incurred except for costs that the Company would
otherwise capitalize. The Company is unable to estimate the costs
it may incur as a result of Year 2000 problems suffered by third
parties with which it deals.
Risks Presented by Year 2000 Problems.
- ---------------------------------------
To operate its businesses, the Company relies upon government
agencies, utility companies, telecommunications companies, suppliers
and other third party service providers over which it can assert little
control. The Company's ability to conduct its business is dependent upon
the ability of these third parties to avoid Year 2000 related disruption.
If they do not adequately address their Year 2000 issues, the Company's
business may be materially affected which could result in a materially
adverse effect on the Company's results of operations and financial
condition. If the Company is not able to integrate replacement point of sale
systems at its full service restaurants, its ability to effectively operate
those restaurants could be substantially impaired. As a result of the
Company's ongoing assessment, the Company may identify additional areas of
its business that are at risk of Year 2000 disruption. The absence of
any such determination at this point represents only the current status
of the assessment phase of the Company's Year 2000 Plan and should not
be construed to mean that there are no other areas of the Company's business
which are at risk of a Year 2000 related disruption.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The Company's Contingency Plans.
- --------------------------------
The Company's Year 2000 Plan calls for the development of contingency
plans for areas of its business that are susceptible to a substantial
risk of a Year 2000 related disruption. The Company has not yet developed
detailed contingency plans specific to Year 2000 events for any specific area of
business. Consistent with its Year 2000 Plan, the Company will develop
specific Year 2000 contingency plans for such areas of business as and if
such determinations are made.
This report contains certain forward-looking statements, including
statements about the Company's development plans, that involve a number
of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: the availability and
cost of suitable locations for new restaurants; the availability and
cost of capital to the Company; the ability of the Company to develop
and operate its restaurants; the hiring, training and retention of
skilled corporate and restaurant management and other restaurant personnel;
the integration and assimilation of acquired concepts; the overall success
of the Company's franchisors; the ability to obtain the necessary government
approvals and third-party consents; the ability of the Company and third
party providers to modify or redesign its computer systems to work properly
in the year 2000 and the cost thereof; and changes in governmental
regulations, including increases in the minimum wage.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Note 9 to the unaudited consolidated financial statements of the Company
included in Part I of this report is incorporated herein by reference.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits required to be filed as part of
this report is set forth in the Index to Exhibits,
which immediately precedes such exhibits, and is
incorporated herein by reference.
(b) Reports on Form 8-K
None
Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Quality Dining, Inc.
(Registrant)
Date: September 14, 1998 By: /s/Martin Miranda
Vice President & Controller
(Principal accounting officer)
INDEX TO EXHIBITS
Exhibit
No. Description
- -------- ------------
27 Financial Data Schedule
4-C (i) Second Amendment and Restated Revolving
Credit Agreement, dated as of September 11,
1998 between the Registrant and GAGHC, Inc.,
as borrowers, and Chase Bank of Texas
National Association, as administrative
agent, NBD Bank, N.A., as documentation
agent and the Banks named therein.
4-C (ii) Pledge and Security Agreement to Chase Bank
of Texas, National Association, as Agent
dated as of September 11, 1998.
4-C (iii) Reaffirmation of Subsidiary Guaranty, dated
as of September 11, 1998.
Exhibit 4-C (i)
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 11, 1998
BY AND BETWEEN
QUALITY DINING, INC.
AND
GAGHC, INC.,
as Borrowers,
AND
THE BANKS WHICH ARE PARTY HERETO
AND
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(f/k/a Texas Commerce Bank National Association),
as Administrative Agent
AND
NBD Bank, N.A.
as Documentation Agent
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS.......................................1
ARTICLE II. THE ADVANCES....................................13
2.1.Advances.................................................13
2.2.Election by Borrower.....................................18
2.3.Increased Costs; Capital Adequacy........................19
2.4.Liquidation Fee..........................................21
2.5.Basis for Determining LIBOR Rate Inadequate
or Unfair................................................21
2.6.Payments.................................................22
2.7.Setoff; etc..............................................22
2.8.Sharing..................................................23
2.9.Commitment Fee...........................................23
2.10.Amendment Fees..........................................23
2.11.Lending Branch..........................................23
2.12.Letters of Credit.......................................23
2.13.Application of Payments and Collections.................26
2.14.Extension of Termination Date...........................27
ARTICLE III. CONDITIONS PRECEDENT...........................28
3.1.Conditions Precedent to Initial Advance..................28
3.2.ConditionsPrecedent to All Advances......................30
ARTICLE IV. REPRESENTATIONS AND WARRANTIES..................30
4.1.Organization;etc.........................................30
4.2.Due Authorization........................................31
4.3.Subsidiaries.............................................31
4.4.Validity of the Agreement; etc...........................31
4.5.Financial Statements.....................................31
4.6.Litigation; etc..........................................32
4.7.Compliance with Law......................................32
4.8.ERISA Compliance.........................................32
4.9.Title to Assets..........................................33
4.10.Indebtedness............................................33
4.11.Use of Proceeds.........................................33
4.12.Margin Stock............................................33
4.13.Investment Company Act..................................33
4.14.Unregistered Securities.................................33
4.15.Public Utility Holding Company Act......................33
4.16.Accuracy of Information.................................34
4.17.Tax Returns; Audits.....................................34
4.18.Environmental and Safety Regulations....................34
4.19.Forecasts...............................................35
4.20.Solvency................................................35
4.21.No Default..............................................35
4.22.Subsidiary Guarantors...................................35
4.23.Year 2000 Compliance....................................35
ARTICLE V. CERTAIN AFFIRMATIVE COVENANTS....................36
5.1.Financial Information; etc...............................36
5.2.Maintenance of Corporate Existence; etc..................38
5.3.Payment of Taxes; etc....................................38
5.4.Compliance with Laws.....................................38
5.5.Books and Records; etc...................................38
5.6.Insurance................................................39
5.7.Conduct of Business......................................39
5.8.Maintain Business........................................39
5.9.ERISA....................................................39
5.10.Changes to GAAP.........................................40
5.11.Use of Proceeds.........................................40
5.12.Subsidiary Guaranty.....................................40
5.13.Security Documents......................................41
5.14.Year 2000 Compliance....................................42
5.15.Survival of Warranties and Representations..............42
ARTICLE VI.CERTAIN FINANCIAL COVENANTS
AND NEGATIVE COVENANTS............................42
6.1.Fixed Charge Coverage Ratio..............................43
6.2.Ratio of Funded Debt to Pro Forma ConsolidatedCash Flow..43
6.3.Limitations on Indebtedness..............................43
6.4.Liens....................................................44
6.5.Dividends, Stock Purchases and Restricted Payments.......45
6.6.Sales of Assets..........................................46
6.7.Mergers and Consolidations...............................46
6.8.Preferred Stock of Subsidiaries..........................46
6.9.Disposition ofSecurities of a Subsidiary.................46
6.10.Investments.............................................47
6.11.Transactions with Affiliates............................47
6.12.Capital Expenditures....................................48
6.13.Acquisitions............................................48
ARTICLE VII. EVENTS OF DEFAULT..............................48
7.1.Events of Default........................................48
7.2.Action If Event of Default...............................50
7.3.Remedies.................................................50
ARTICLE VIII. THE AGENT.....................................51
8.1.Appointmentand Authorization.............................51
8.2.Power....................................................51
8.3.Employment ofCounsel; etc................................52
8.4.Reliance.................................................52
8.5.General Immunity.........................................52
8.6.Credit Analysis..........................................53
8.7.Agent and Affiliates.....................................53
8.8.Indemnification..........................................53
8.9.Successor Administrative Agent...........................54
8.10.Agents' Fees............................................54
8.11.Collateral Matters......................................54
ARTICLE IX. AMENDMENT AND RESTATEMENT........................55
9.1.Amendment and Restatement of Existing Credit Agreement...55
9.2.Replacement Notes........................................55
9.3.Security Documents.......................................55
ARTICLE X. MISCELLANEOUS....................................56
10.1.Waivers, Amendments; etc................................56
10.2.Payment Dates...........................................56
10.3.Notices.................................................56
10.4.Costs and Expenses......................................56
10.5.Indemnification.........................................57
10.6.Severability............................................57
10.7.Cross-References........................................58
10.8.Headings................................................58
10.9.Governing Law...........................................58
10.10.Successors and Assigns.................................58
10.11.Execution in Counterparts..............................59
10.12.Joint and Several Liability............................59
10.13.Financial Information..................................60
10.14.Consent toJurisdiction.................................60
10.15.WAIVER OF JURYTRIAL....................................60
SCHEDULE I -Commitments
ANNEX I - List of Jurisdictions in which the Borrower
is Qualified to Do Business
ANNEX II - List of Subsidiaries; Jurisdiction of
Incorporation and Stock Ownership
ANNEX III - Indebtedness; Liens
ANNEX IV - Investments
EXHIBIT A-Form of Note
EXHIBIT B-Notice of Borrowing
EXHIBIT C-Legal Opinion of Counsel
EXHIBIT D-Form of Assignment Agreement
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This Second Amended and Restated Revolving Credit
Agreement dated as of September 11, 1998 by and
between Quality Dining, Inc., an Indiana corporation,
and GAGHC, Inc., a Delaware corporation, as
Borrowers, the banks now or hereafter parties hereto
(the "Banks"), Chase Bank of Texas, National
Association, in its capacity as Administrative Agent
for the Banks (in its capacity as such, and together
with any successor administrative agent hereunder,
the "Administrative Agent") and NBD Bank, N.A. in its
capacity as Documentation Agent for the Banks (in
such capacity, the "Documentation Agent").
WHEREAS, the Borrowers have requested and the Banks
have agreed to amend the Existing Credit Agreement
(as defined below);
WHEREAS, the Borrowers, the Banks and the Agents have
agreed to enter into this Agreement in order to (i)
amend and restate the Existing Credit Agreement; (ii)
re-evidence the Obligations, which shall be repayable
in accordance with the terms of this Agreement; and
(iii) set forth the terms and conditions under which
the Banks will, from time to time, make loans and
extend other financial accommodations to or for the
benefit of the Borrowers; and
WHEREAS, it is the intention of the parties to this
Agreement that this Agreement not constitute a novation of the
obligations under the Existing Credit Agreement and
that, from and after the Effective Date, the Existing
Credit Agreement shall be amended and restated hereby
and all references herein to "hereunder," "hereof,"
or words of like import and all references in any
other Loan Document to the "Credit Agreement" or
words of like import shall mean and be a reference to
the Existing Credit Agreement as amended and restated hereby.
NOW, THEREFORE, in consideration of the terms and
conditions contained herein, and of any loans or
extensions of credit heretofore, now or hereafter
made to or for the benefit of the Borrowers by the
Banks and the Agents, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
The following terms when used in this Agreement
shall, except where the context otherwise requires,
have the following meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"Acquisition" means any transaction, or any series of
related transactions, consummated on or after the
Effective Date, by which either of the Borrowers
and/or their respective Subsidiaries (i) acquires any
going business or all or substantially all of the
assets of any firm, corporation or division thereof,
whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in
one transaction or as the most recent transaction in
a series of transactions) voting power for the
election of directors (other than securities having
such power only by reason of the happening of a
contingency) or a majority (by percentage of voting
power) of the outstanding partnership interests of a
partnership (any such target business, assets,
corporation, partnership or the like herein referred
to as a "Target").
"Acquisition Closing Date" means the date of the
consummation of any Acquisition of any Target under
the terms of this Agreement.
"Adjusted LIBOR Rate" shall mean a rate per annum
determined pursuant to the following formula:
LIBOR Rate
-----------------------
Adjusted LIBOR Rate = 1 - Reserve Requirement
"Advance" shall mean an Advance as described in Section 2.1(a).
"Affiliate" shall include, with respect to any
Person, any Person which directly or indirectly
controls, is controlled by, or is under common
control with such party and in addition, in the case
of the Borrower and each Subsidiary, each officer,
director, stockholder, joint venturer and partner of
the Borrower and each Subsidiary. For purposes of
this definition, a Person shall be deemed to control
another Person if the controlling Person owns
directly or indirectly five percent (5%) or more of
the shares of stock of the controlled Person or
possesses, directly or indirectly, the power to
direct or cause the direction of the management and
policies of the controlled Person, whether through
ownership of stock, by contract or otherwise.
"Agent" shall mean each of the Administrative Agent
and the Documentation Agent, and "Agents" shall mean
the Administrative Agent and the Documentation Agent collectively.
"Agreement" shall mean this Second Amended and
Restated Revolving Credit Agreement as originally
executed and as amended, modified or supplemented
from time to time.
"Available Excess Cash Flow" shall mean, as of any
date of determination thereof, 50% of Excess Cash
Flow, if any, calculated semiannually on a cumulative
basis for the period from October 25, 1998 to and
including the last day of the second fiscal quarter
of QDI or the last day of the fiscal year of QDI, as
applicable, for which consolidated financial
statements of QDI and its Subsidiaries shall have
been delivered to the Banks pursuant to Section 4.5,
less the sum of (i) any Restricted Payments pursuant
to clause (y) of Section 6.5 hereof from and after
the Effective Date through such date and (ii) any
Capital Expenditures pursuant to Section 6.12(b)
hereof from and after the Effective Date through such
date.
"Banks" shall mean the Banks referenced in the
preamble hereto or any assignee or successor thereto.
"Base Rate" shall mean, for any day, a fluctuating
rate of interest per annum equal to the higher of (i)
the Prime Rate for such day, and (ii) the Federal
Funds Rate plus 0.50%.
"Base Rate Loan" shall mean, as of any date, an
Advance designated as a "Base Rate Loan" pursuant to
Section 2.2.
"Board of Directors" shall mean the Board of
Directors of QDI, GAGHC or any Subsidiary Guarantor,
as applicable.
"Borrower" shall mean each of QDI and GAGHC; and
"Borrowers" shall mean QDI and GAGHC together.
"Business Day" shall mean any day on which commercial
banks are not authorized or required to close in
Houston, Texas and if such day relates to an event, a
transaction or a notice in respect of a LIBOR Base
Loan, a day which is also a day on which dealings in
U.S. Dollar deposits are carried out in the London
interbank market.
"Capital Expenditure" shall mean any expenditure by a
Borrower or any Subsidiary in respect of the purchase
or other acquisition of assets which, in conformity
with GAAP, are included in the property, plant,
equipment, or other fixed asset accounts reflected in
the consolidated balance sheet of QDI.
"Capital Lease" shall mean a lease of (or other
agreement conveying the right to use) real and/or
personal property, which obligation is, or in
accordance with GAAP (including Statement of
Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board) is required to
be, classified and accounted for as a capital lease
on a balance sheet of such Person.
"Capital Lease Obligations" shall mean, with respect
to any Person, any obligation of such Person to pay
rent or other amounts under a Capital Lease and for
purposes of this Agreement the amount of each Capital
Lease Obligation shall be the capitalized amount
thereof determined in accordance with GAAP.
"CBT" shall mean Chase Bank of Texas, National
Association, in its individual capacity.
"Change of Control" shall mean the ownership, through
purchase or otherwise (including the agreement to act
in concert without anything more), by any Person or
group of Persons (other than one
or more of Daniel B. Fitzpatrick, the spouse,
children or grandchildren or the heirs of Daniel B.
Fitzpatrick or any trusts created for their benefit)
acting in concert, directly or indirectly, in one or
more transactions, of (i) beneficial ownership or
control of securities representing more than 30% of
the combined voting power of QDI's Voting Stock or
(ii) substantially all of the assets of QDI.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"Commitment" shall mean, for each Bank for any
period, the amount appearing opposite such Bank's
name under the heading "Commitments" in Schedule I,
as such amount may be reduced pursuant to Section
2.1(b) or temporarily adjusted pursuant to Section
2.1(d) and as said Schedule I may be amended from
time to time pursuant to Section 10.1; provided,
however that the aggregate Commitments of all Banks
shall not exceed $130,000,000.
"Consolidated Capital Expenditures" shall mean, for
any fiscal period, the sum of all Capital
Expenditures made by the Borrowers and their
consolidated Subsidiaries during such period.
"Consolidated Cash Flow" of any person shall mean,
for any period for which the amount thereof is to be
determined, Consolidated Net Income of such Person
for such period, plus (to the extent deducted in
determining Consolidated Net Income and without
duplication to adjustments to net income of such
Person (determined in accordance with GAAP) made in
the determination of Consolidated Net Income) (i)
provisions for any Federal, state or local taxes
based upon the income or profits of such Person
during such period, (ii) interest expense of such
Person during such period and (iii) depreciation and
amortization of such Person during such period, and
(iv) other non-cash income or expenses of such Person
during such period.
"Consolidated Net Income" shall mean, for any period
for which the amount thereof is to be determined, the
net income (or net losses) of QDI and its
Subsidiaries on a consolidated basis as determined in
accordance with GAAP after deducting, to the extent
included in computing said net income and without
duplication, (i) the income (or deficit) of any
Person (other than a Subsidiary) in which QDI or any
of its Subsidiaries has any ownership interest,
except to the extent that any such income has been
actually received by QDI or such Subsidiary in the
form of cash dividends or similar cash distributions,
(ii) any income (or deficit) of any other Person
accrued prior to the date it becomes a Subsidiary of
QDI or merges into or consolidates with QDI or
another of its Subsidiaries, (iii) the gain or loss
(net of any tax effect) resulting from the sale,
exchange or disposal of any capital assets, (iv) any
gains or losses, or other income (net of any tax
effect in respect thereof) which is nonrecurring or
otherwise properly classified as extraordinary in
accordance with GAAP, (v) income resulting from any
reappraisal, reevaluation or write-up of any assets,
(vi) any portion of the net income of the
Subsidiaries which for any reason is not available
for distribution, and (vii) the proceeds of any life
insurance policy on the life of any officer, director
or employee of QDI or any of its Subsidiaries.
"Default" shall mean any event which if continued
uncured would, with notice or lapse of time or both,
constitute an Event of Default.
"Earnings Available for Fixed Charges" shall mean,
for any period for which the amount thereof is to be
determined, the sum of(without duplication): (i) the
Consolidated Cash Flow of QDI and its Subsidiaries for
such period, and (ii) the rents and other payments
(exclusive of property taxes, property and liability
insurance premiums and maintenance costs) made by QDI
and its Subsidiaries during such period under Operating Leases.
"Effective Date" shall mean the later of September
11, 1998 and the date on which the conditions set
forth in Article III are satisfied.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any successor
statute of similar import, together with the
regulations thereunder and under the Code, in each
case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to
any successor sections.
"ERISA Affiliate" shall mean any corporation, trade
or business that is, along with QDI or any of its
Subsidiaries, a member of a controlled group of
corporations or a controlled group of trades or
businesses, as described in Sections 414(b) and
414(c), respectively, of the Code or Section 4001 of
ERISA.
"Event of Default" shall mean any Event of Default
described in Article VII.
"Excess Cash Flow" shall mean, for any period, an
amount equal to (a) Consolidated Cash Flow for such
period minus the sum of (i) Federal, state or local
taxes paid during such period, (ii) the lesser of
Capital Expenditures made during such period (other
than any Capital Expenditures made pursuant to
Section 6.12(b) hereof) and the Specified Amount, and
(iii) all interest on Indebtedness paid during such
period by QDI and/or its Subsidiaries.
"Existing Credit Agreement" shall mean the Amended
and Restated Revolving Credit Agreement dated as of
December 21, 1995 by and between QDI, GAGHC, the
Banks which are party thereto (the "Existing Banks")
and CBT (f/k/a Texas Commerce Bank, National
Association), as Agent, as amended by a First
Amendment to Amended and Restated Revolving Credit
Agreement dated as of November 7, 1996, a Waiver and
Amendment dated as of September 16, 1997 and a Second
Amendment to Amended and Restated Revolving Credit Agreement
dated as of October 9, 1997.
"Existing Notes" shall mean the promissory notes
issued by the Borrowers in favor of the Existing
Banks evidencing the Loans outstanding under the
Existing Credit Agreement.
"Federal Funds Rate" means a fluctuating interest
rate per annum equal for each day to the weighted
average of the rates on overnight Federal funds
transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as
published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a
Business Day, the average of the quotations for such
day on such transactions received by the
Administrative Agent from three Federal funds brokers
of recognized standing selected by it.
"Fixed Charges" shall mean, for any period for which
the amount thereof is to be determined, the sum of
the following (without duplication): (i) Interest
Charges of QDI and its Subsidiaries for such period,
plus (ii) all rents and other payments (exclusive of
property taxes, property and liability insurance
premiums and maintenance costs) which are made by QDI
and its Subsidiaries during such period under Operating
Leases in respect of which QDI or any of its
Subsidiaries is obligated as a lessee or user or as a
guarantor of the obligations of a lessee or user,
plus (iii) Capital Lease Obligations paid or required
to be paid by QDI or any of its Subsidiaries during
such period, plus (iv) the Principal Requirement for such period.
"Funded Debt" of any Person shall mean all
Indebtedness owed or guaranteed by such Person which
by its terms matures more than one year from the date
of creation or which is renewable at the option of
the obligor for more than one year from such date
whether or not theretofore renewed; provided that,
for purposes of the computation of the Indebtedness
Ratio and the financial covenant set forth in Section
6.2, the guarantee by QDI of a credit facility in an
amount not to exceed $4,200,000 to BFBC, Ltd., a
Florida limited partnership, shall be included.
"GAAP" shall mean generally accepted accounting
principles consistently applied and maintained
throughout the term of this Agreement except for such
changes as are in accordance with the generally
accepted accounting principles in effect at the time
of such change and shall be concurred in by the
certified public accountants certifying the financial
statement of QDI and its Subsidiaries. Whenever any
accounting term is used herein which is not otherwise
defined, it shall be interpreted in accordance with
GAAP.
"GAGHC" shall mean GAGHC, Inc., a Delaware
corporation, and its successors and assigns, and any
surviving, resulting or transferee corporation.
"Guarantee(s)" shall mean all guarantees, sales with
recourse, endorsements (other than for collection or
deposit in the ordinary course of business) and other
obligations (contingent or otherwise) by any Person
to pay, purchase, repurchase or otherwise acquire or
become liable upon or in respect of any Indebtedness
of any other Person, and, without limiting the
generality of the foregoing, all obligations
(contingent or otherwise) by any Person to purchase
products, supplies or other property or services for
any Person under agreements requiring payment
therefor regardless of the non-delivery or non-
furnishing thereof, or to make investments in any
other Person, or to maintain the capital, working
capital, solvency or general financial conditions of
any other Person, or to indemnify any other Person
against and hold him harmless from damages, losses
and liabilities, all under circumstances intended to
enable such other Person or Persons to discharge any
Indebtedness or to comply with agreements relating to
such Indebtedness or otherwise to assure or protect
creditors against loss in respect of such
Indebtedness. The amount of any Guarantee shall be
deemed to be the amount of the Indebtedness of, or
damages, losses or liabilities of, the other Person
or Persons in connection with which the Guarantee is
made or to which it is related unless the obligations
under the Guarantee are limited to a determinable
amount, in which case the amount of such Guarantee
shall be deemed to be such determinable amount.
"Indebtedness" of any Person shall mean and include,
as of any date as of which the amount thereof is to
be determined, (i) all obligations of such Person for
borrowed money or which has been incurred in
connection with the acquisition of Property; (ii) all
Guarantees of such Person; (iii) all indebtedness,
liabilities and other obligations secured by any Lien
on or in respect of Property of such Person, whether
or not liability has been assumed by such Person for
the payment of such obligations;(iv) all indebtedness,
liabilities and other obligations of such
Person arising under any conditional sale or other
title retention agreement, whether or not the rights
and remedies of the seller or lender under such
agreement in the event of default are limited to
repossession or sale of such property; and
(v) Capital Lease Obligations of such Person.
"Indebtedness Ratio" shall mean, as of any date of
determination thereof, the ratio of (i) Funded Debt
of QDI and its Subsidiaries as of such date, to (ii)
the Pro Forma Consolidated Cash Flow of QDI and its
Subsidiaries for the twelve-month period ending on
such date.
"Interest Charges" of any Person shall mean, for any
period for which the amount thereof is to be
determined, the sum of (i) all interest on
Indebtedness paid or payable during such period by
such Person (including the portion of rents payable
under Capital Leases allocable to interest), plus
(ii) all debt discount and expense amortized or
required to be amortized during such period by such
Person.
"Interest Period" shall mean, with respect to any
LIBOR Base Loan, the period designated by a Borrower
for the computation of interest commencing on the
date the relevant Advance is made and ending on the
date which is one (1), two (2), three (3) or six (6)
months thereafter. For purposes of determining an
Interest Period, a month means a period starting on
one day in a calendar month and ending on a
numerically corresponding date in the next calendar
month, provided, however, that if there is no
numerically corresponding day in the month in which
an Interest Period is to end or if an Interest Period
begins on the last day of a calendar month, such
Interest Period shall end on the last Business Day of
such calendar month and provided further that no
Interest Period may extend beyond the Termination
Date.
"Investment" shall mean any purchase of capital
stock, obligations or other securities of any Person,
any contribution of capital to any Person, any loan,
advance or extension of credit to any Person or other
investment or acquisition of any interest in any
Person.
"Junior Subordinated Note" shall mean the junior
subordinated note dated October 20, 1997 in the
original principal amount of $10,000,000 issued by
Bruegger's Corporation to QDI, and thereafter
assigned by QDI to Southwest Dining, Inc., as it may
be amended, modified, restated or replaced from time
to time.
"LIBOR Base Loan" shall mean, for any Interest
Period, an Advance designated as a LIBOR Base Loan
pursuant to Section 2.2.
"LIBOR Rate" shall mean for each Interest Period the
rate of interest per annum as determined by the
Administrative Agent (rounded upward, if necessary,
to the nearest whole multiple of one-sixteenth of one
percent (1/16th of 1%)) at which deposits of United
States Dollars in immediately available and freely
transferable funds are offered at 11:00 A.M. London
time two (2) Business Days prior to the commencement
of such Interest Period to the Administrative Agent
or its agent in the London interbank market for a
term comparable to such Interest Period and in an
amount comparable to the principal amount of the
LIBOR Base Loan to be outstanding during such
Interest Period.
"Lien" shall mean: (a) any interest in Property
(whether real, personal or mixed and whether tangible
or intangible) which secures the payment of
indebtedness or an obligation owed to, or a claim by,
a Person other than the owner of such Property,
whether such interest is based on the common law,
statute or contract, including, without limitation, any such
interest arising from a mortgage, charge, pledge,
security agreement, conditional sale, Capital Lease
or trust receipt, or arising from a lease,
consignment or bailment given for security purposes,
and (b) any exception to or defect in the title to or
ownership interest in such Property, including,
without limitation, reservations, rights of entry,
possibilities of reverter, encroachments, easements,
rights of way, restrictive covenants, leases and
licenses. For purposes of this Agreement, a Borrower
or any Subsidiary shall be deemed to be the owner of
any Property which it has acquired or holds subject
to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the
Property has been retained by or vested in some other
person for security purposes.
"Loan" shall mean, individually or collectively, as
the case may be, a Base Rate Loan or a LIBOR Base Loan.
"Loan Document" shall mean, individually or
collectively, as the case may be, this Agreement, the
Notes, the Subsidiary Guaranty, the Reaffirmation of
Subsidiary Guaranty and each Security Document, each
as originally executed and as amended, modified or
supplemented from time to time.
"Material Adverse Occurrence" shall mean any
occurrence of whatsoever nature (including, without
limitation, any adverse determination in any
litigation, arbitration or governmental investigation
or proceeding) which could materially adversely
affect the business, properties, operations or
condition, financial or otherwise, of QDI and its
Subsidiaries or could materially impair the ability
of QDI or its Subsidiaries to perform its obligations
under the Loan Documents.
"Maximum Primary Capital Expenditures" shall mean (i)
for the 1999 fiscal year of QDI, $10,000,000 and (ii)
for the 2000 fiscal year of QDI, $8,000,000.
"Monthly Payment Date" shall mean the first Business
Day of each calendar month, commencing on the first
of such dates to occur after the Effective Date.
"Net Proceeds" shall mean, with respect to any sale
of assets, the proceeds of such sale net of (i)
direct out-of-pocket costs and expenses of such sale,
(ii) federal and state income taxes, sales taxes,
transfer taxes or similar taxes imposed on the seller
on account of such sale, and (iii) amounts, if any,
required to be paid with respect to Indebtedness
secured by any Lien on such assets which is senior in
priority to the Lien of the Administrative Agent, if
any, on such assets.
"Northern" shall mean The Northern Trust Company, in
its individual capacity.
"Note(s)" shall mean, individually or collectively,
as the case may be, each of the promissory notes,
substantially in the form of Exhibit A attached
hereto, made by the Borrowers payable to the order of
each of the Banks to evidence the Advances made by
such Bank, and such other promissory notes accepted
by the Banks in exchange for or in substitution of
any such Notes.
"Note Pledge Agreement" shall mean the Note Pledge
Agreement dated as of October 22, 1997 by and between
Southwest Dining, Inc. and the Administrative Agent
for the benefit of the Banks, as it may be amended,
modified, restated or replaced from time to time.
"Notice of Borrowing" shall mean the notice in the
form of Exhibit B attached hereto to be delivered to
the Administrative Agent pursuant to Section 2.1(d).
"Obligations" shall mean all loans (including the
Loans), Advances, debts, liabilities, obligations,
covenants and duties owing by the Borrowers or the
Subsidiary Guarantors to the Administrative Agent,
the Banks or any Bank of any kind or nature, present
or future, arising under this Agreement or any other
Loan Document, whether evidenced by any note,
guaranty or other instrument, whether for the payment
of money or in kind, whether arising by reason of any
extension of credit, issuing, guaranteeing or
confirming of a letter of credit, guaranty,
indemnification or in any other manner, whether
direct or indirect (including those acquired by
assignment or purchase), absolute or contingent, due
or to become due, and however acquired. The term
includes, without limitation, all principal,
interest, fees, charges, expenses, reasonable
attorneys' fees, and any other sum chargeable to the
Borrowers under this Agreement.
"Operating Lease" shall mean a lease (excluding
Capital Leases) of Property to which QDI or any of
its Subsidiaries is a party as lessee having an
unexpired term (including any periods of renewal or
extension which may be exercised at the option of the
lessor or lessee) in excess of one year.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation and any entity succeeding to any or all
of its functions under ERISA.
"Percentage" shall mean, with respect to each Bank,
the percentage derived from dividing such Bank's
Commitment by the sum of the aggregate Commitments
for all Banks; provided that after the termination of
the Commitments, "Percentage" shall mean, with
respect to each Bank, the percentage derived by
dividing the principal amount outstanding of such
Bank's Note by the aggregate principal amount
outstanding of all Notes.
"Permitted Disposition" shall mean (i) any sale by a
Borrower or any Subsidiary of inventory in the
ordinary course of its business and on usual and
customary terms, (ii) any sale of a past due
receivable for collection only in the ordinary course
of business, (iii) any sale of assets of a Subsidiary
to QDI or a Subsidiary Guarantor, (iv) any sale of
equipment no longer used or useful in the business of
a Borrower or any Subsidiary and (v) any sale or lease
by a Borrower or any Subsidiary of any other assets
(including without limitation the capital stock of any Subsidiary),
provided that no sale or financing of assets by the Borrower or a
Subsidiary described in clause (v) above shall be a
Permitted Disposition unless the Net Proceeds of such
sale or financing are applied within twelve months
(x) to prepay Funded Debt of the Borrowers and/or (y)
to acquire replacement assets having equal or greater value.
"Permitted Investment" shall mean any of the
following Investments made by QDI or any of its
Subsidiaries in any Person: (i) obligations, with a
maturity of less than two years from the date of
acquisition thereof, issued by or unconditionally
guaranteed by the United States of America or an
agency or instrumentality thereof backed by the full
faith and credit of the United States of America;
(ii) direct obligations of any state of the United
States, any subdivision or agency thereof or any
municipality therein which are rated by Standard &
Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's") in one of the top two
rating classifications and maturing within two years
of the date of acquisition thereof;
(iii) certificates of deposit or banker's
acceptances, maturing within two years of the date of
acquisition thereof, issued by commercial banks
organized under the laws of the United States or any
state thereof, having capital, surplus and undivided
profits aggregating not less than $100 million and
whose unsecured longterm debt is rated in one of the
top two rating classifications by S&P or Moody's;
(iv) commercial paper of any corporation organized
under the laws of the United States or any state
thereof, rated in one of the top two rating
classifications by S&P or Moody's and with a maturity
of less than 270 days from the date of acquisition
thereof; (v) Investments of QDI in and to any Wholly-
Owned Subsidiary of QDI and Investments of any Wholly
Owned Subsidiary of QDI in and to QDI or any Wholly-
Owned Subsidiary of QDI, including any Investments in
a corporation which after giving effect thereto will
become a Wholly-Owned Subsidiary; (vi) Investments
existing as of the date of this Agreement, as
disclosed on Annex IV; (vii) Investment of not in
excess of $1,000,000 in a joint venture for the
construction and ownership of a new office building
and (viii) the Junior Subordinated Note.
"Person" shall mean any natural person, corporation,
firm, joint venture, partnership, limited liability
company, association, trust or other entity or
organization, whether acting in an individual,
fiduciary or other capacity, or any government or
political subdivision thereof or any agency,
department or instrumentality thereof.
"Plan" shall mean each employee benefit plan or other
class of benefits covered by Title IV of ERISA, in
either case whether now in existence or hereafter
instituted, of QDI, any of its Subsidiaries or any
ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement,
dated as of October 31, 1997, entered into by certain
of QDI's Subsidiaries in favor of the Administrative
Agent for the benefit of the Banks, as it may be
amended, modified, restated or replaced from time to
time.
"Pledgor" shall mean each of the Borrowers and their
respective Subsidiaries and Affiliates which is a
party to the Pledge Agreement, the Note Pledge
Agreement or the Security Agreement at any time or
from time to time.
"POS Expenditures" shall mean Capital Expenditures of
QDI and/or its Subsidiaries for point of sale
conversion in an aggregate amount from and after the
Effective Date not to exceed $4,000,000.
"Preferred Stock" shall mean any class of capital
stock of a Person with respect to which mandatory
payments are required or with respect to which a
payment (of interest, dividends or return of capital)
has a preference or priority over the making of a
similar payment on any other class of capital stock
of such Person.
"Prime Rate" shall mean the rate announced by CBT
from time to time as its prime rate, changing as and
when such prime rate changes; CBT may lend to its
customers at rates that are at, above or below the
Prime Rate.
"Principal Requirements" shall mean, for any period
for which the amount thereof is to be determined, all
payments of principal made or required to be made by
QDI and its Subsidiaries during such period on
Indebtedness for borrowed money (other than Capital Leases).
"Pro Forma Consolidated Cash Flow" shall mean, for
any period for which the amount thereof is to be
determined, Consolidated Cash Flow of QDI and its
Subsidiaries during such period; provided that (i) in
respect of any Acquisition consummated during such
period the Consolidated Cash Flow thereof shall be
calculated on a pro forma basis as if such
Acquisition had occurred on the first day of such
period, and (ii) in respect of any Property developed
during such period, the Consolidated Cash Flow of
such Property shall be the Consolidated Cash Flow of
such Property for the portion of such period that
such Property has been in operation annualized for
such period.
"Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed,
or tangible or intangible.
"QDI" shall mean Quality Dining, Inc., an Indiana
corporation, and its successors and assigns, and any
surviving, resulting or transferee corporation.
"Real Property" shall mean all real property or
interests therein wherever situated now, heretofore
or hereafter owned, leased or utilized by QDI or any
of its Subsidiaries.
"Regulation D" shall mean Regulation D of the Board
of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation U" shall mean Regulation U of the Board
of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulatory Change" shall mean any change after the
date hereof in any (or the adoption after the date
hereof of any new):
(a) Federal or state law or foreign law applying to a
class of financial institutions (including an Agent
or one or more of the Banks); or
(b) regulation, interpretation, directive or request
(whether or not having the force of law) applying to
a class of financial institutions (including an Agent
or one or more of the Banks) of any court or
governmental authority charged with the
interpretation or administration of any law referred
to in clause (a) of this definition or of any fiscal,
monetary or other authority having jurisdiction over
an Agent or any Bank.
"Required Banks" shall mean Banks (excluding Banks
whose failure to fund an advance have not been cured)
whose Percentage, in the aggregate, equals or exceeds
51%.
"Reserve Requirement" shall mean, for any Interest
Period for any LIBOR Base Loan, the sum (expressed as
a decimal) of (a) the average maximum rate at which
reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained
during such Interest Period under Regulation D by
member banks of the Federal Reserve System against
"Eurocurrency liabilities" and (b) any other reserves
required to be maintained by such member banks by
reason of any Regulatory Change against (i) any
category of liabilities which includes deposits by
reference to which the LIBOR Rate is to be determined
or (ii) any category of extensions of credit or other
assets which includes a LIBOR Base Loan.
"Security Agreement" shall mean the Pledge and
Security Agreement dated as of September 11, 1998,
entered into by the Borrowers and certain of their
respective Subsidiaries in favor of the
Administrative Agent for the benefit of the Banks, as
it may be amended, modified, restated or replaced
from time to time.
"Security Document" shall mean the Pledge Agreement,
the Note Pledge Agreement, the Security Agreement and
each other mortgage, assignment, pledge or security
agreement or document executed from time to time by
any person in favor of the Administrative Agent for
the benefit of the Banks, to secure all or any
portion of the Obligations, as said agreements or
documents may be amended, modified, restated or
replaced from time to time.
"Specified Amount" shall mean (i) for the first two
consecutive fiscal quarters during fiscal year 1999
of QDI, $7,000,000, (ii) for the second two consecutive fiscal quarters
during fiscal year 1999 of QDI, $7,000,000, and (iii)
thereafter, $5,000,000.
"Subsidiary" of any Person shall mean (i) any
corporation of which more than 50% of the outstanding
shares of capital stock of any class or classes
having ordinary voting power for the election of
directors (irrespective of whether or not at the time
stock of any class or classes of such corporation
shall have or might have voting power by reason of
the happening of any contingency) is now or hereafter
owned directly or indirectly by such Person, by such
Person and one or more of its Subsidiaries, or by one
or more of such Person's other Subsidiaries, and
(ii) any partnership, association, limited liability
company, joint venture or other entity in which such
Person, directly or indirectly through Subsidiaries,
is either a general partner or has a 50% or more
equity interest at the time.
"Subsidiary Guaranty" shall mean the Subsidiary
Guaranty dated December 21, 1995 entered into by each
of the Subsidiary Guarantors, in favor of Northern,
as agent for the benefit of the Banks, as reaffirmed
as of the Effective Date by each such Subsidiary
Guarantor in favor of the Administrative Agent
hereunder for the benefit of the Banks.
"Subsidiary Guarantor" shall mean each of Bravokilo,
Inc., Southwest Dining, Inc., Full Service Dining,
Inc., Grayling Corporation, GAGLC, Inc., Grady's
American Grill Restaurant Corporation, Grady's, Inc.
and Grady's American Grill, LP and each other Person
which shall hereafter be or become a WhollyOwned
Subsidiary of QDI and shall become a party to the
Subsidiary Guaranty.
"Termination Date" shall mean the date which is the
earlier of (a) April 26, 2000, or such later date as
may be established pursuant to Section 2.14, or (b)
the date upon which the obligation of the Banks to
make Advances is terminated pursuant to Section
2.1(c).
"Unfunded Obligations" shall mean at any time the
obligations of the Borrowers to CBT in respect of
undrawn amounts of Letters of Credit. Each Unfunded
Obligation will be deemed to be in an amount equal to
the undrawn amount of the relevant Letter of Credit.
"Unused Portion" shall mean, as of any date, the
excess of the aggregate Commitments on such date over
the sum of the aggregate outstanding principal amount
of the Advances and the aggregate stated amount of
the outstanding Letters of Credit on such date.
"Voting Stock" shall mean stock or similar interests
of any class or classes (however designated), the holders of which
are generally and ordinarily, in the absence of
contingencies, entitled to vote for the election of
the directors (or Persons performing similar
functions) of a corporation or other business entity.
"Wholly-Owned Subsidiary" shall mean a Subsidiary in
which all voting shares (except for directors'
qualifying shares, if any) are owned by QDI and/or
one or more Wholly Owned Subsidiaries of QDI.
Other terms defined herein shall have the meanings ascribed to them herein.
ARTICLE II.
THE ADVANCES
2.1.Advances
(a) Commitments. Each Bank severally agrees, subject
to the terms and conditions hereinafter set forth, to
make an advance (each an "Advance") to the Borrowers
from time to time on any Business Day during the
period from the date hereof and ending on the
Termination Date; provided, however, that no Bank
shall be required to make any Advance if, after
giving effect to such Advance, the aggregate
outstanding principal amount of all Advances made by
such Bank would exceed such Bank's Commitment. Each
borrowing under this Section 2.1(a) shall consist of
Advances made on the same day by the Banks ratably in
accordance with their respective Commitments. Within
the limits set forth above, the Borrowers may borrow,
prepay and reborrow pursuant to this Section 2.1(a).
Each Advance shall be in an aggregate minimum amount
of $500,000.00.
(b) Reduction of Commitments.
(i) The Borrowers, or either of them, at any time on
at least three (3) Business Days' prior written
notice to the Administrative Agent (which shall
promptly notify each Bank), may reduce the
Commitments pro rata among the Banks permanently in a
minimum aggregate amount of $100,000.00; provided,
however, that the Borrowers may not reduce any such
Commitments below an amount equal to the sum of the
principal amount then outstanding on the Notes plus
the aggregate amount of the Letters of Credit issued
and outstanding.
(ii) The aggregate Commitments of the Banks shall be
automatically and permanently reduced (i) as of June
30, 1999, by an amount equal to 50% of the Excess
Cash Flow for the first two fiscal quarters of fiscal
year 1999 of QDI and (ii) as of December 31, 1999, to
the lesser of (x) $125,000,000 and (y) the aggregate
Commitments of the Banks as of June 30, 1999, after
taking into account any reduction pursuant to clause
(i) above, less 50% of the Excess Cash Flow for the
last two fiscal quarters of fiscal year 1999 of QDI.
Any reduction of the Commitments of the Banks
pursuant to this Section 2.1(b)(ii) shall be applied
to reduce the Commitments pro rata among the Banks.
(iii) The aggregate Commitments of the Banks shall be
automatically and permanently reduced pursuant to
Section 2.1(h)(ii) hereof.
(c) Termination. The obligation of the Banks to make
Advances shall terminate:
(i) Upon written notice by the Borrowers to the
Administrative Agent (which shall promptly notify
each Bank) at any time when no amount is outstanding
on the Notes;
(ii) Immediately and without further action upon the
occurrence of an Event of Default described in
clauses (f) and (g) of Section 7.1; or
(iii) Immediately when any Event of Default (other
than of the nature specified in clauses (f) and (g)
of Section 7.1) shall have occurred and be continuing
and either: (A) the Required Banks shall have
demanded payment of the Notes or (B) the Required
Banks shall so elect by giving written notice to the
Borrowers for purposes of this clause.
(d) Manner of Borrowing. Either Borrower may request
an Advance by delivering to the Administrative Agent
in respect of each requested Advance a written Notice
of Borrowing (which may be transmitted by telecopier)
or by oral notice to the Administrative Agent
confirmed by a written Notice of Borrowing (which may
be transmitted by telecopier), indicating thereon the
amount of the Advance requested, by not later than
10:00 a.m. (Houston, Texas time) on the Business Day
preceding the Business Day on which an Advance is to
be made; provided, however, if such Advance is to be
made as a LIBOR Base Loan, such Borrower shall give
such Notice of Borrowing to the Administrative Agent
by not later than 10:00 a.m. (Houston, Texas time) on
the third Business Day preceding the Business Day on
which an Advance is to be made. Any such Notice of
Borrowing given by a Borrower shall be irrevocable.
Upon receipt of such Notice of Borrowing, the
Administrative Agent shall promptly notify each Bank
thereof. By not later than 2:00 p.m. (Houston, Texas
time) on the requested Business Day of an Advance,
each Bank shall make available to the Administrative
Agent, at its address referred to in Section 10.3, in
immediately available funds, the amount of such
Bank's Advance. After (and subject to) the
Administrative Agent's receipt of such funds and upon
satisfaction of the applicable conditions set forth
in Article III, the Administrative Agent shall make
such Advance available to the requesting Borrower by
transferring the amount thereof in immediately
available funds for credit to an account (other than
a payroll account) maintained by such Borrower at the
Administrative Agent, or otherwise as directed by
such Borrower. If the Administrative Agent shall
receive less than all the amounts payable by the
Banks in accordance with this Section 2.1, the
Administrative Agent shall make available to the
requesting Borrower such amount as it shall actually
have received. Unless the Administrative Agent shall
have been notified by any Bank prior to the date of
an Advance that such Bank does not intend to make
available to the Bank its portion of such Advance,
the Administrative Agent may assume that each Bank
has made such amount available to the Administrative
Agent on the date of such Advance and the
Administrative Agent may, in reliance upon such
assumption, make available to the requesting Borrower
a corresponding amount. If and to the extent any
Bank shall not have made available its Advance to the
Administrative Agent on the date of any Advance, the
Administrative Agent shall notify such Bank and CBT
of such Bank's failure and, if such Bank fails to
make its Advance, CBT may in its sole discretion make
an Advance (the "Over-Advance") to repay the
Administrative Agent forthwith on demand a
corresponding amount and the Bank which failed to
make its Advance agrees to repay CBT forthwith on
demand a corresponding amount together with interest
thereon, for each day from the date such amount is
made available to the Borrowers until the date such
amount is repaid to CBT at the interest rate
applicable during such period to the Advances and the
principal amount repaid by such Bank shall constitute such Bank's
Advance for purposes of this Agreement. In the event
any Bank fails to make available its Advance to the
Administrative Agent on the date of any Advance and
CBT elects not to make an Over-Advance, such Bank and
the Borrowers severally agree to repay to the
Administrative Agent forthwith upon demand such
corresponding amount together with interest thereon
for each day from the date such amount is made
available by the Administrative Agent to the date
such amount is repaid to the Administrative Agent at
the rate applicable to such Advance. If CBT makes
any Over-Advance, CBT's and such other Bank's
relevant Commitments shall be temporarily increased
and decreased, respectively, by the amount of the
OverAdvance and any payments allocable to such other
Bank shall be paid to CBT until the principal of and
interest on the OverAdvance shall be paid in full.
The failure of any Bank to make any Advance to be
made by it shall not relieve any other Bank of its
obligation, if any, hereunder to make its Advance on
the date of such Advance. No Bank shall be
responsible for the failure of any other Bank to make
an Advance to be made by such Bank on the date of any
such Advance. The Administrative Agent shall
promptly give the Borrowers notice of any Bank's
failure to make its Advance. Each request for an
Advance shall be deemed a representation and warranty
by the Borrowers, binding upon each of the Borrowers,
that all conditions precedent to such Advance under
Article III are satisfied as of the date of such
request and as of the date of such Advance.
(e) Revolving Credit Notes. The Advances (other than
any OverAdvance) made by a Bank shall be evidenced
by, and be payable in accordance with the terms of,
the Note made by the Borrowers payable to the order
of such Bank in a principal amount equal to the
Commitment of such Bank; subject, however, to the
provisions of such Note to the effect that the
principal amount payable thereunder at any time shall
not exceed the then unpaid principal amount of the
Advances made by such Bank. Each of the Borrowers
hereby irrevocably authorizes each Bank to make or
cause to be made, at or about the time of each
Advance made by such Bank, an appropriate notation on
the records of such Bank, reflecting the principal
amount of such Advance, and such Bank shall make or
cause to be made, on or about the time of receipt of
payment of any principal of any Advance, an
appropriate notation on its records reflecting such
payment and such Bank will, prior to any transfer of
any of such Note, endorse on the reverse side thereof
the outstanding principal amount of the Advances
evidenced thereby. Failure to make any such notation
shall not affect the Borrowers' obligations in
respect of such Advances. The aggregate amount of
all Advances set forth on the records of such Bank
shall be rebuttable presumptive evidence of the
principal amount owing and unpaid on such Bank's
Note. The aggregate amount of all Over-Advances set
forth on the records of CBT shall be rebuttable
presumptive evidence of the principal amount owing
and unpaid on the Over-Advances. Upon request of the
Borrowers, or either of them, each Bank agrees to
provide the Borrowers with a written summary of the
records maintained by it under this Section 2.1(e).
(f) Interest on Advances. The Borrowers agree to pay
interest on the aggregate outstanding principal
amount of the Advances as follows:
(A) with respect to any Advance constituting a Base
Rate Loan, at a fluctuating rate per annum equal to
the Base Rate; and
(B) with respect to any Advance constituting a LIBOR
Base Loan, at a rate per annum equal at all times
during the Interest Period relating to such LIBOR
Base Loan to the sum of the Adjusted LIBOR
Rate, plus the Applicable Margin (as determined in
accordance with Section 2.1(g)).
The Borrowers agree to pay interest on any overdue
installment of principal of or interest on any
Advance from the due date thereof until paid, (i) in
the case of any Base Rate Loan, at a rate per annum
at all times equal to the sum of the rate in effect
thereon plus 1.50% per annum and (ii) in the case of
any LIBOR Base Loan, at a rate per annum equal to the
sum of 1.50% plus the rate of interest in effect
thereon at the time of such default until the end of
the Interest Period then applicable thereto and
thereafter at a rate per annum equal to the sum of
1.50% per annum plus the Base Rate from time to time
in effect.
Interest accrued on each Advance shall be payable (A)
with respect to each Base Rate Loan, on each Monthly
Payment Date; and (B) with respect to each LIBOR Base
Loan, on the last day of each Interest Period
applicable thereto and in the case of any Interest
Period in excess of three (3) months, on each date
occurring at three (3) month intervals after the
first day of such Interest Period. Interest accrued
after the Termination Date shall be payable upon
demand. No provision of this Agreement or the Notes
shall require the payment or permit the collection of
interest in excess of the rate permitted by
applicable law. Interest shall be calculated for
actual days elapsed on the basis of a 360-day year.
(g)Determination of Applicable Margin.
(i) The Applicable Margin in respect of any LIBOR Base
Loan shall be determined by reference to the table
set forth below on the basis of the Indebtedness
Ratio determined by reference to the most recent
financial statements delivered pursuant to Section
5.1(a) or 5.1(b).
Applicable LIBOR Applicable Base
Indebtedness Ratio Rate Margin Rate Margin
- ---------------------- ---------------- ----------------
Greater than 4.50:1.00 3.00% .75%
Less than or equal to 2.75% .50%
4.50:100 but greater
than 4.00:1.00
Less than or equal to 2.50% .25%
4.00:1.00 but greater
than 3.50:1.00
Less than or equal to 2.25% 0%
3.50:1.00 but greater
than 3.00:1.00
Less than or equal to 1.75% 0%
3.00:1.00 but greater
than 2.50:1.00
Less than or equal to 1.25% 0%
2.50:1.00
(ii) Upon receipt of the financial statements
delivered pursuant to Section 5.1(a) or Section
5.1(b), as applicable, the Applicable Margin shall be
adjusted, such adjustment being effective on the
tenth Business Day after receipt of such financial
statements and the Compliance Certificate to be
delivered in connection therewith; provided, however,
if the Borrowers shall not have timely delivered such
financial statements in accordance with Section
5.1(a) or Section 5.1(b), as applicable, beginning
with the date upon which such financial statements
should have been delivered and continuing until such
financial statements are delivered, the Applicable
Margin shall equal the Applicable Margin for the
prior period; provided further, however, that if upon
delivery of such financial statements the Applicable
Margin is adjusted upwards, the adjustment of the
Applicable Margin shall be retroactive to the date
upon which such financial statements should have been
delivered.
(h) Prepayment. (i) The Borrowers shall have the
right, by giving written notice to the Administrative
Agent by not later than 11:00 a.m. (Houston, Texas
time) on the second Business Day preceding the date
of such prepayment, to prepay all or any portion of
an Advance, without premium or penalty; provided,
that any Base Rate Loan may be prepaid in whole or in
part at any time and any LIBOR Base Loan may be
prepaid in whole or in part on the last day of the
Interest Period applicable thereto; provided further,
that each partial prepayment shall be in an aggregate
principal amount of not less than $100,000.00 and
shall be accompanied by accrued interest to the date
of prepayment on the amount prepaid. No voluntary
prepayment of any LIBOR Base Loan prior to the last
day of the Interest Period applicable thereto shall
be made.
(ii) Concurrently with the consummation of a sale, in
a transaction or a series of related transactions, of
all or a portion of the assets of the Borrowers and
their Subsidiaries (including without limitation the
capital stock of any Subsidiary of QDI but excluding
the assets sold in any Permitted Disposition
described in clauses (i), (ii), (iii) and (iv) of the
definition of Permitted Disposition) the aggregate
Net Proceeds of which exceed $10,000,000 (the "Excess
Proceeds"), the Borrowers shall (i) prepay the Loans
in a principal amount equal to the Net Proceeds of
such sale and (ii) permanently and automatically
reduce the Commitments of the Banks in an amount
equal to the Excess Proceeds.
(iii) At any time that the sum of the aggregate
outstanding principal balance of the Loans and the
aggregate stated amount of outstanding Letters of
Credit exceeds the aggregate Commitments, the
Borrowers shall immediately prepay the outstanding
principal amount of the Loans in an amount equal to
such excess.
2.2.Election by Borrower . The Borrowers, or either
of them, may elect in accordance with this Section
2.2 to obtain and maintain all or any portion of an
Advance as a Base Rate Loan or all or any portion of
an Advance which is in an integral multiple of
$500,000.00 as a LIBOR Base Loan. In addition, the
Borrowers, or either of them, may elect in accordance
with this Section 2.2 to convert all or any portion
of any Advance from one type of Loan to another type
of Loan; provided however, that (a) any conversion to
a LIBOR Base Loan shall be only in an integral
multiple of $500,000.00, (b) any conversion of any
LIBOR Base Loan into a Base Rate Loan shall be made
on, and only on, the last day of the Interest Period
then applicable thereto and
(c) no Loan may be obtained, continued as, or
converted into, a LIBOR Base Loan when any Default or
Event of Default has occurred and is continuing.
Subject to the provisions of the prior sentence, the
Borrowers, or either of them, may convert a LIBOR
Base Loan into a Base Rate Loan upon one Business
Day's prior written notice to the Administrative
Agent of the Borrower's
election to do so. A Borrower, not less than three
(3) Business Days prior to the date on which (i) a
LIBOR Base Loan is to be obtained, (ii) a Base Rate
Loan is to be converted into a LIBOR Base Loan or
(iii) any LIBOR Base Loan is to be continued as a
LIBOR Base Loan at the end of the Interest Period
then applicable thereto, shall give written notice to
the Administrative Agent of such Borrower's election
to do so; said notice shall specify the amount of
such LIBOR Base Loan and the first day and duration
of the Interest Period pertaining thereto. If, upon
the expiration of any Interest Period, the Borrowers
shall fail to elect the duration of a new Interest
Period for any LIBOR Base Loan or to designate a Base
Rate Loan in accordance with this Section 2.2, the
Borrowers shall be deemed to have elected
automatically to convert such LIBOR Base Loan into a
Base Rate Loan on the last day of the Interest Period
then applicable thereto. On the date on which the
aggregate unpaid principal amount of any LIBOR Base
Loan shall be reduced, by payment or prepayments or
otherwise, to less than an integral multiple of
$500,000.00, such LIBOR Base Loan shall automatically
convert into a Base Rate Loan at the end of the
Interest Period then applicable thereto. Each of the
Borrowers hereby irrevocably authorizes each Bank to
make, or cause to be made, an appropriate notation on
the records of such Bank, reflecting the date and
original principal amount of each Advance made by
such Bank, the dates for each period when such
Advance is being maintained as a Base Rate Loan or a
LIBOR Base Loan, the interest rate for each such
period and the dates of principal and interest
payments on such Advance. Failure to make any such
notation shall not affect the Borrowers' obligations
in respect of such Advances. Each Bank's records
shall be rebuttable presumptive evidence of the
matters stated therein. Upon request by the
Borrowers, or either of them, each Bank agrees to
provide the Borrowers with a written summary of the
records maintained by it under this Section 2.2.
2.3. Increased Costs; Capital Adequacy .
(a) Increased Costs. If (i) as a result of any
Regulatory Change (A) any reserve (other than the
amount of such reserve as has been included in the
computation of the Adjusted LIBOR Rate), special
deposit or similar requirements relating to any
extension of credit or other assets of or any
deposits with or other liabilities of, any Bank which
affects the making or maintaining by such Bank of any
loans (including the Loans) or letters of credit
(including the Letters of Credit) are imposed,
modified or deemed applicable; or (B) any other
condition affecting this Agreement or the making or
maintaining by any Bank of any loans (including the
Loans) or letters of credit (including the Letters of
Credit) is imposed on such Bank; or (ii) other
circumstances arise affecting any Bank or the
position of any Bank in the relevant market, and such
Bank reasonably determines that, by reason thereof,
the cost to such Bank of making or maintaining any
loans (including the Loans) or letters of credit
(including the Letters of Credit) is increased as a
result of such change in circumstances, or any amount
receivable hereunder in respect of any Loan or Letter
of Credit is reduced (and such Bank shall not have
been compensated for such increase or reduction by an
increase in interest or otherwise by Regulatory
Change), then such Bank shall promptly notify the
Borrowers in writing and the Borrowers shall pay upon
request such additional amount or amounts (which
shall be specified in such request) as will (in the
reasonable determination of such Bank) compensate
such Bank for such additional cost or reduction;
provided, however, that the Borrowers' liability for
additional amounts computed in accordance with this
Section 2.3(a) shall be neither changed nor waived by
any failure to give such notice.
(b) Capital Adequacy. If any Regulatory Change
imposes, modifies or deems applicable any capital
adequacy, capital maintenance or similar requirement
(including a request or requirement which affects the
manner in which any Bank allocates capital resources
to its commitments, including its Commitment
hereunder) and as a result thereof, the rate of
return on any Bank's capital as a consequence of its
Commitment hereunder or the making or maintaining of
any Loans or Letters of Credit hereunder is reduced
to a level below that which such Bank could
reasonably have achieved but for such circumstances,
then and in each such case upon notice from time to
time by a Bank to the Borrowers, the Borrowers shall
pay to such Bank such additional amount or amounts as
shall compensate such Bank for such reduction in rate
of return; provided, however, that the Borrowers'
liability for additional amounts computed in
accordance with this Section 2.3(b) shall be neither
changed nor waived by any failure to give such notice.
(c) Taxes. If any Regulatory Change shall subject any
Bank or any Loan or Letter of Credit to any tax
(including, without limitation, any United States
interest equalization tax or similar tax however
named applicable to the acquisition or holding of
debt obligations and any interest or penalties with
respect thereto), duty, charge, stamp tax, fee,
deduction or withholding in respect of this Agreement
or any Loan or Letter of Credit, except such taxes as
may be measured by the overall net income of such
Bank and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in
which such Bank's principal executive office or its
lending branch is located and such Bank in good faith
determines that the result thereof is to increase the
cost (whether by incurring a cost or adding to a
cost) to such Bank of making or maintaining any Loan
or Letter of Credit hereunder or to reduce the amount
of principal or interest received by such Bank
(without benefit of, or credit for, any prorations,
exemptions, credits or other offsets available under
any such laws, treaties, regulations, guidelines or
interpretations thereof), then such Bank shall
promptly notify in writing the Borrowers and the
Borrowers shall pay, upon request, such additional
amount or amounts as will (in the reasonable
determination of such Bank) compensate such Bank for
such additional cost or reduction; provided, however,
that the Borrowers' liability for additional amounts
computed in accordance with this Section 2.3(c) shall
be neither changed nor waived by any failure to give
such notice.
(d) Applicable Tax Forms. On or prior to the
Effective Date in the case of each Bank which is a
party hereto as of the Effective Date, and on the
date of the delivery to the Administrative Agent of
the Assignment Agreement pursuant to which it became
a Bank in the case of each other Bank, each Bank
organized under the laws of a jurisdiction outside
the United States shall provide the Administrative
Agent and the Borrowers with the forms prescribed by
the Internal Revenue Service of the United States
certifying that such Bank is exempt from United
States withholding taxes with respect to all payments
to be made to such Bank hereunder and under the
Notes. Each Bank which so delivers such a form
further undertakes to deliver to each of the
Borrowers and the Administrative Agent additional
copies of such form (or a successor form) on or
before the date that such form expires or becomes
obsolete or after the occurrence of any event
requiring a change in the most recent forms so
delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably
requested by the Borrowers or the Administrative
Agent, in each case certifying that such Bank is
entitled to receive payments under this Agreement and
the Notes without deduction or withholding of any
United States federal income
taxes. If for any reason during the term of this
Agreement, any Bank becomes unable to submit the
forms referred to above or the information or
representations contained therein are no longer
accurate in any material respect, such Bank shall
promptly notify the Administrative Agent and the
Borrowers in writing to that effect. Unless the
Borrowers and the Administrative Agent have received
forms or other documents satisfactory to them
indicating that payments hereunder or under any Note
are not subject to United States withholding tax, the
Borrowers or the Administrative Agent shall withhold
taxes from such payments at the applicable statutory
rate in the case of payments to or for any Bank
organized under the laws of a jurisdiction outside
the United States.
(e) Change in Lending Office. Any Bank claiming any
additional amounts payable pursuant to this Section
2.3 shall use its best efforts (consistent with its
internal policy and legal and regulatory
restrictions) to change the jurisdiction of its
lending office or branch if the making of such change
would avoid the need for, or reduce the amount of,
any such additional amounts which may thereafter
accrue and would not, in the reasonable judgment of
such Bank, be otherwise disadvantageous to such Bank.
(f) Conclusive and Binding; Survival. With respect to
any additional amount or amounts owing by the
Borrowers pursuant to this Section 2.3, a statement
of a Bank as to any such additional amount or amounts
shall, in the absence of manifest error, be
conclusive and binding on the Borrowers. In
determining such amount, a Bank may use any method of
averaging and attribution that it (in its sole and
absolute discretion) shall deem applicable. The
obligations of the Borrowers under this
Section 2.3 shall survive the termination of this
Agreement.
2.4. Liquidation Fee . Each of the Borrowers
understands that upon the request for a LIBOR Base
Loan for an Interest Period, each Bank intends to
enter into funding arrangements with third parties on
terms and conditions which could result in
substantial losses to such Bank if such LIBOR Base
Loan is not made or does not remain outstanding for
the entire Interest Period. Therefore, if either (a)
after a Borrower requests a LIBOR Base Loan, the LIBOR
Base Loan is not made on the first day of the specified
Interest Period for any reason (including, but not limited to, the
failure of the Borrowers to comply with one or more
of the conditions precedent to any Advance under this
Agreement) other than a wrongful failure by such Bank
to make the LIBOR Base Loan, or (b) any LIBOR Base
Loan is repaid in whole or in part prior to the last
day of its Interest Period (whether as a result of
acceleration, operation of law or otherwise), the
Borrowers agree to indemnify such Bank for any loss,
cost and expense incurred by it resulting therefrom,
including without limitation any loss of profit and
any loss or cost in liquidating or employing deposits
acquired to fund or maintain the LIBOR Base Loan.
2.5. Basis for Determining LIBOR Rate Inadequate or Unfair .
If with respect to any Interest Period:
(a) a Bank is advised that deposits in lawful money of
the United States of America (in the applicable
amounts) are not being offered to such Bank in the
eurodollar market for the relevant Interest Period,
or a Bank otherwise determines (which determination
shall be binding and conclusive on all parties) that
by reason of circumstances affecting the relevant
market or the position of such Bank in such market
adequate and reasonable means do not exist for
ascertaining the Adjusted LIBOR Rate; or
(b) a Bank determines that the Adjusted LIBOR Rate
will not adequately and fairly reflect the cost to
such Bank of maintaining or funding a LIBOR Base Loan
for the relevant Interest Period, or that the making
or funding of a LIBOR Base Loan has become
impracticable as a result of an event occurring after
the date of this Agreement which in the opinion of
such Bank materially affects such LIBOR Base Loan; or
(c) a Bank determines in good faith that any
Regulatory Change makes it unlawful or impracticable
for such Bank to make or continue to maintain any
LIBOR Base Loan;
then such Bank shall promptly notify the Borrowers of
such circumstances and then so long as such
circumstances shall continue: (i) the obligation of
such Bank to make a LIBOR Base Loan and to convert
any Loan into a LIBOR Base Loan shall be terminated
and (ii) all LIBOR Base Loans of such Bank then
outstanding shall automatically be converted into
Base Rate Loans on the last day of the Interest
Period then applicable thereto, provided that if it
shall become unlawful or impracticable for such Bank
to maintain any LIBOR Base Loan, such Loan shall
automatically and immediately be converted into a
Base Rate Loan.
2.6. Payments . Any other provision of this Agreement
to the contrary notwithstanding, the Borrowers shall
make each payment of interest on and principal of the
Notes and fees and other payments due under this
Agreement in immediately available funds to the
Administrative Agent at its office referred to in
Section 10.3 hereof not later than 11:00 a.m.
(Houston, Texas time) on the date when due. Each of
the Borrowers hereby authorizes and directs the
Administrative Agent and agrees that on the Business
Day on which any payment of principal, interest
and/or fees are due, the Administrative Agent may
automatically charge one or more demand deposit
accounts of the Borrowers maintained with the
Administrative Agent. All payments by the Borrowers
under this Agreement shall be made without offset,
counterclaim or other deduction and in such amounts
as may be necessary in order that all such payments
shall not be less than the amounts otherwise
specified to be paid under this Agreement and the
Notes. The Administrative Agent will promptly
thereafter distribute like funds ratably to each Bank
(unless such amount is not to be shared ratably in
accordance with the terms hereof).
2.7. Setoff; etc . Upon the occurrence and during the
continuance of an Event of Default, each Bank is
hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being
expressly waived by the Borrowers), to set off and
apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank to
or for the credit or the account of the Borrowers, or
either of them, including specifically any amounts
held in any account maintained at such Bank, against
any and all amounts which may be owed to the
Administrative Agent or the Banks, or any of them, by
the Borrowers, or either of them, in connection with
this Agreement or any Loan Document. The rights of
the Banks under this Section 2.7 are in addition to
other rights and remedies (including, without
limitation, other rights of set-off) which the Banks
may have. Each of the Borrowers agrees that any
holder of a Note or of any participation in a Note
may, to the fullest extent permitted by law, exercise
all its rights of payment (including set-off) with
respect to such participation as fully as if such
holder were the direct creditor of such Borrower in
the amount of such participation. Each Bank agrees
to use reasonable efforts to notify the Borrowers of
any exercise of its rights pursuant to
this Section 2.7, provided, however, that failure to
provide such notice shall not affect the Bank's
rights under this Section 2.7 or the effectiveness of
any action taken pursuant hereto.
2.8. Sharing. If any Bank shall obtain any payment
(whether voluntary, involuntary, by application of
offset or otherwise) on account of the Loans made by
it in excess of such Bank's ratable share of payments
on account of the Loans obtained by all the Banks,
such Bank shall purchase from the other Banks such
participations in the Loans made by them as shall be
necessary to cause such purchasing Bank to share the
excess payment ratably with each of them; provided,
however, that if all or any portion of the excess
payment is thereafter recovered from such purchasing
Bank, the purchase shall be rescinded and the
purchase price restored pro rata according to the
extent of such recovery, but without interest. Each
of the Borrowers agrees that any Bank so purchasing a
participation from another Bank pursuant to this
Section 2.8 may, to the fullest extent permitted by
law, exercise all its rights of payment (including
the right to setoff) with respect to such
participation as fully as if such Bank were the
direct creditor of such Borrower in the amount of
such participation.
2.9. Commitment Fee. The Borrowers agree to pay a
commitment fee (the "Commitment Fee") (i) for the
period (including, without limitation, any portion
thereof when the Banks' obligation to lend shall be
suspended by reason of the Borrower's inability to
satisfy the conditions of Article III) commencing on
the Monthly Payment Date immediately preceding the
Effective Date and continuing through the Termination
Date of one-quarter of one percent (1/4 of 1%) per
annum of the Unused Portion. Such Commitment Fee
shall be payable to the Agent for the ratable benefit
of the Banks in arrears on each Monthly Payment Date
occurring after the Effective Date.
2.10. Amendment Fees. The Borrowers agree to pay on
the Effective Date to each of the Banks (other than
the Agents) which is party hereto as of the Effective
Date a nonrefundable amendment fee pursuant to the
terms of a letter, dated September 11, 1998, between
the Borrowers and the Banks.
2.11. Lending Branch. Subject to the provisions of
Section 2.3(e), each Bank may, at its option, elect
to make, fund or maintain its Loans hereunder at the
branch or office specified on the signature pages
hereto or such other of its branches or offices as
such Bank may from time to time elect.
2.12. Letters of Credit.
(a) Subject to all of the terms and conditions hereof
(including Section 2.1(a) hereof, assuming the
Borrowers had requested an Advance in the amount of
the stated amount of the Letter of Credit), at the
written request of a Borrower, CBT will on or after
the date hereof issue standby letters of credit
("Letters of Credit") for the account or benefit of
such Borrower expiring on or before the Termination
Date; provided, however, CBT shall not be required to
issue a Letter of Credit if, after giving effect
thereto, (i) the aggregate stated amount of all
outstanding Letters of Credit, plus unreimbursed
reimbursement obligations, would exceed $5,000,000 or
(ii) the sum of the aggregate outstanding principal
amount of all Advances and the aggregate stated
amount of all outstanding Letters of Credit would
exceed the aggregate amount of the Commitments. The
aggregate stated amount of any and all Letters of
Credit shall count against and reduce the available
Commitments hereunder on a pro rata basis.
(b) Immediately upon the issuance of each Letter of
Credit hereunder, each Bank shall be deemed to have
automatically, irrevocably and unconditionally
purchased and received from CBT an undivided interest
and participation in and to such Letter of Credit,
the obligations of the Borrowers in respect thereof,
and the liability of CBT thereunder in an amount
equal to the amount available for drawing under such
Letter of Credit multiplied by such Bank's
Percentage. The Administrative Agent will notify
each Bank promptly (a) upon the issuance of any
Letter of Credit and (b) upon any draw under a Letter
of Credit. On or before the Business Day on which
CBT makes payment of any draw on a Letter of Credit,
on demand of CBT (which demand shall not require
payment prior to the Business Day such payment is
required to be made under the Letter of Credit), each
Bank shall make payment to the Administrative Agent
for the account of CBT, in immediately available
funds an amount equal to such Bank's Percentage of
the amount of such payment or draw. The obligation
of each Bank to reimburse the Administrative Agent
for the account of CBT shall be unconditional,
continuing, irrevocable and absolute. In the event
that any Bank fails to make payment to the
Administrative Agent for the account of CBT of any
amount due hereunder, the Administrative Agent shall
be entitled to receive, retain and apply against such
obligation the principal and interest otherwise
payable to such Bank hereunder until the
Administrative Agent receives such payment from such
Bank on behalf of CBT or such obligation is otherwise
fully satisfied; provided, however, that nothing
contained in this sentence shall relieve such Bank of
its obligation to reimburse the Administrative Agent
on behalf of CBT for such amount in accordance with
this Section 2.12.
(c) If and to the extent a drawing is at any time made
under such a Letter of Credit, the Borrowers agree to
pay to the Administrative Agent, for the account of
CBT and the Banks immediately and unconditionally
upon demand in lawful money of the United States, an
amount equal to each amount which shall be so drawn;
and the Administrative Agent shall have the right to
convert automatically the reimbursement obligation of
the Borrowers arising out of any such drawing into an
Advance made under this Agreement (each of the
Borrowers hereby irrevocably authorizing the
Administrative Agent to refinance without notice to
the Borrowers the reimbursement obligation of the
Borrowers arising out of any such drawing into such
an Advance and to take all action on behalf of the
Borrowers required pursuant to Section 2.1(d) hereof
to request such Advance), and such Advance to be
evidenced by the Notes and for all purposes of this
Agreement although without regard to the conditions
precedent to making any such Advance and any
requirement of this Agreement that each Advance under
this Agreement be in a minimum amount.
If and to the extent any such Letter of Credit
expires or otherwise terminates in a manner
satisfactory to CBT without having been drawn upon,
the available Commitments of the Banks shall to such
extent be reinstated.
(d) The Borrowers agree to pay (i) monthly, in
arrears, to the Administrative Agent for the ratable
benefit of the Banks a letter of credit fee, computed
at an annual rate equal to the Applicable LIBOR Rate
Margin in effect from time to time applied to the
aggregate amount available for drawing under all of
the Letters of Credit issued for the account of the
Borrowers, or either of them, from the date of
issuance of each Letter of Credit until the
expiration thereof, and (ii) to CBT directly for its
benefit as issuing bank, all customary fees
(including fronting fees) and other issuance,
amendment, document examination, negotiation and
presentment expenses and related charges in
connection with the issuance, amendment, presentation
of drafts, and the like customarily charged by CBT
with respect to standby letters of credit, payable at
the time of invoice of such amounts.
(e) (i) In addition to amounts payable as elsewhere
provided in this Agreement, each of the Borrowers
hereby agrees to protect, indemnify, pay and save
harmless the Administrative Agent, each Bank and CBT
from and against any and all liabilities and costs
which the Administrative Agent, any Bank or CBT may
incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit
other than, in the case of CBT, as a result of (A)
its gross negligence or willful misconduct, as
determined by the final judgment of a court of
competent jurisdiction, in determining whether
documents presented under any Letter of Credit comply
with the terms thereof, or (B) the failure of CBT to
honor a drawing under such Letter of Credit as a
result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de
facto governmental authority (all such acts or
omissions herein called "Governmental Acts").
(ii) As among the Borrowers, the Banks, CBT and the
Administrative Agent, the Borrowers assume all risks
of the acts and omissions of, or misuse of such
Letter of Credit by, the beneficiary of any Letter of
Credit. In furtherance and not in limitation of the
foregoing, subject to the provisions of the Letter of
Credit applications and Letter of Credit
reimbursement agreements executed by the Borrowers,
or either of them, at the time of request for any
Letter of Credit, CBT, the Administrative Agent and
the Banks shall not be responsible: (A) for the
form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party
in connection with the application for and issuance
of the Letters of Credit, even if it should in fact
prove to be in any or all respects invalid,
insufficient , inaccurate, fraudulent or forged; (B)
for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer
or assign a Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or
in part, which may prove to be invalid or ineffective
for any reason; (C) for failure of the beneficiary of
a Letter of Credit to comply with conditions required
in order to draw upon such Letter of Credit; (D) for
errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail,
cable, telegraph, telex, or other similar form of
teletransmission or otherwise; (E) for errors in
interpretation of technical trade terms; (F) for any
loss or delay in the transmission or otherwise of any
document required in order to make a drawing under
any Letter of Credit or of the proceeds thereof; (G)
for the misapplication by the beneficiary of a Letter
of Credit of the proceeds of any drawing under such
Letter of Credit; and (H) for any consequences
arising from causes beyond the control of the
Administrative Agent, CBT and the Banks.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set
forth, any action taken or omitted by CBT under or in
connection with Letters of Credit issued on behalf of
the Borrowers, or either of them, or any related
certificates shall not, in the absence of gross
negligence or willful misconduct of CBT, as
determined by the final judgment of a court of
competent jurisdiction, in determining whether
documents presented under any Letter of Credit comply
with the terms thereof, put CBT, the Agent or any
Bank under any resulting liability to the Borrowers
or relieve the Borrowers of any of their obligations
hereunder to any such Person.
(iv) Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements
and obligations of the Borrowers contained in this
Section 2.12(e) shall survive the payment in full of
principal and interest hereunder, the termination of
the Letters of Credit and termination of this
Agreement.
2.13. Application of Payments and Collections .
(a) Subject to the provisions of subsection (b) below
or any agreement of the Administrative Agent and the
Banks to the contrary, all payments and prepayments
and any other amounts received by the Administrative
Agent from or for the benefit of the Borrowers shall
be applied, first, to pay principal of and interest
on any portion of the Advances which the
Administrative Agent may have advanced on behalf of
any Bank for which the Administrative Agent has not
then been reimbursed by such Bank or the Borrowers,
second, to pay all other obligations in respect of
fees, expenses, reimbursements or indemnities then
due and payable, third, to pay interest then due in
respect of the Loans, and fourth, to pay the
principal of the Loans then due and payable.
(b) After the occurrence of an Event of Default and
while the same is continuing, the Administrative
Agent shall, unless the Administrative Agent and the
Banks shall agree otherwise, apply all payments and
prepayments in respect of any Obligations hereunder
in the following order:
FIRST, to pay interest on and then principal of any
portion of the Advances which the Administrative
Agent may have advanced on behalf of any Bank for
which the Administrative Agent has not then been
reimbursed by such Bank or the Borrowers;
SECOND, to pay Obligations in respect of any fees,
expense reimbursements or indemnities then due to the
Administrative Agent;
THIRD, to pay Obligations in respect of any fees,
expenses, reimbursements or indemnities then due to
the Banks;
FOURTH, to the payment of interest accrued on the
Loans and any amounts due pursuant to Section 2.3, to
be allocated among the Banks pro rata based on the
respective aggregate amounts of such accrued interest
and amounts owed to them; and
FIFTH, to the payment of the outstanding principal
amounts of the Loans and to the provision of cash
collateral for Unfunded Obligations, to be allocated
among the Banks and CBT pro rata based on the
respective outstanding principal amounts of the Loans
and the aggregate outstanding Unfunded Obligations.
(c) Each of the Banks hereby irrevocably designates
the Administrative Agent its attorney in fact for the
purpose of receiving any and all payments to be made
to such Bank in respect of Obligations held by it,
and hereby directs each payor of any such payment to
make such payment to the Administrative Agent; and
each of the Banks hereby further agrees that if,
notwithstanding the foregoing, it should receive any
such payment, it shall hold such payment in trust
for, and promptly deliver such payment to, the
Administrative Agent.
(d) Whenever any portion of any payment received or
amount realized by the Administrative Agent is
applied pursuant to FIFTH of clause (b) above, the
part thereof allocated to Unfunded
Obligations shall be held by the Administrative Agent
for the benefit of CBT and the Banks. Upon any draw
on a Letter of Credit, the Administrative Agent shall
pay the amounts allocated in respect of such Unfunded
Obligation to CBT. Pending distribution of such
amounts, the Administrative Agent shall hold such
amounts in a cash collateral account. Upon
cancellation or termination of a Letter of Credit
without its being fully drawn, the Administrative
Agent shall reapply the amounts allocated in respect
of such Unfunded Obligation as provided in clause (a)
or (b) above, as applicable, as if such portion had
then been paid to the Administrative Agent by the
Borrowers for application pursuant to said clause.
(e) The Administrative Agent shall promptly distribute
to each Bank at its primary address set forth on the
appropriate signature page hereof or at such other
address as a Bank may request in writing, such funds
as such Bank may be entitled to receive.
2.14. Extension of Termination Date . At least 90 but
not more than 120 days prior to each date that is 180
days prior to the then-effective Termination Date,
the Borrowers may request the Banks, by written
notice to the Administrative Agent, to consent to a
one-year extension of the Termination Date. Each
Bank shall, in its sole discretion, determine whether
to consent to such request and shall notify the
Administrative Agent of its determination within 60
days of such Bank's receipt of notice of such
request. If any Bank shall not have consented to
such request during such 60-day period, the
Termination Date shall not be extended. If such
request shall have been consented to by the
Administrative Agent and all the Banks, the
Administrative Agent shall notify the Borrowers in
writing of such consent, and such extension shall
become effective upon the delivery by the Borrowers
to the Administrative Agent and each Bank, on or
prior to the date which is two years prior to the
then-effective Termination Date, of (i) a certificate
of a duly authorized officer of the Borrowers, dated
such date, as to the accuracy, both before and after
giving effect to such proposed extension, of the
representations and warranties set forth in Article
IV and as to the absence, both before and after
giving effect to such proposed extension, of any
Default or Event of Default, (ii) certified copies of
all corporate and governmental approvals, if any,
required to be obtained by the Borrowers, or either
of them, or any of the Subsidiary Guarantors in
connection with such extension and (iii) an opinion
or opinions of counsel to the Borrowers and the
Subsidiary Guarantors as to the matters set forth in
Exhibit C after giving effect to such extension and
such other matters as any Bank, through the
Administrative Agent, may reasonably request.
ARTICLE III.
CONDITIONS PRECEDENT
3.1. Conditions Precedent to Initial Advance . The
effectiveness of this Agreement and the obligation of
each of the Banks to make any Advance hereunder or of
CBT to issue any Letter of Credit hereunder is
subject to the condition precedent that the
Administrative Agent shall have received copies (in
sufficient number for each of the Banks to receive a
copy) of all of the following, each in form and
substance reasonably satisfactory to the
Administrative Agent and the Banks, unless waived by
each of the Banks:
(a) This Agreement, appropriately completed and duly
executed by the parties hereto;
(b) The Notes payable to the order of each of the
Banks, appropriately completed and duly executed by
the Borrowers;
(c) Reaffirmation of Subsidiary Guaranty, duly
executed and delivered by each of the Subsidiary
Guarantors;
(d) Such Security Documents appropriately completed
and duly executed by the Borrowers and their
respective Subsidiaries as may be required by the
Administrative Agent as necessary or appropriate to
create a Lien on the following assets of the
Borrowers and their respective Subsidiaries now
existing or hereafter arising (i) all shares of
capital stock of each Subsidiary of QDI (excluding
any Subsidiary of QDI that is restricted by a
franchise agreement to pledge its stock) and
(ii) all Collateral (as defined in the Security
Agreement) of the Borrowers and their respective
Subsidiaries;
(e) Evidence satisfactory to the Administrative Agent
that all actions shall have been taken as are
necessary or appropriate for the Administrative Agent
to acquire and perfect a first, prior and perfected
security interest in the collateral as described in
and contemplated by the Security Documents,
including, without limitation, the filing or
recording of financing statements or such of the Loan
Documents as may be necessary or appropriate;
(f) A certified copy of resolutions of the Board of
Directors and of the stockholders (if required) of
each of the Borrowers authorizing the execution,
delivery and performance of the Loan Documents and
any other documents provided for in this Agreement;
(g) A certified copy of resolutions of the Board of
Directors and of the stockholders (if required) of
each of the Subsidiary Guarantors, authorizing the
execution, delivery and performance of the Subsidiary
Guaranty or the Reaffirmation of Subsidiary Guaranty,
as applicable, and any other documents provided in
connection therewith;
(h) A certified copy of all documents evidencing any
necessary consent or governmental approvals (if any)
with respect to the execution, delivery and
performance of the Loan Documents and the
consummation of the transactions contemplated hereby;
(i) A certificate executed by the secretary or any
assistant secretary of each of the Borrowers
certifying the names of the officers of such Borrower
authorized to sign the Loan Documents and to give
notices and other communications in connection with
this Agreement and the transactions contemplated
hereby, together with a sample of the true signature
of such officers;
(j) A certificate executed by the secretary or an
assistant secretary of each of the Subsidiary
Guarantors certifying the names of the officers of
such Subsidiary authorized to sign the Subsidiary
Guaranty or the Reaffirmation of Subsidiary Guaranty,
as applicable, together with a sample of the true
signature of such officers;
(k) A copy of the articles of incorporation (including
all amendments thereto) of each Borrower, certified
by the Secretary of State of the state of its
incorporation;
(l) A copy of the bylaws of each Borrower, certified
by the secretary or assistant secretary of such
Borrower;
(m) Certificates of Good Standing (or the substantial
equivalent thereof) for each Borrower certified as of
a recent date by the
Secretaries of State of its state of incorporation
and by each other state in which it is required to be
qualified to do business;
(n) A favorable opinion of counsel to the Borrowers
and the Subsidiary Guarantors substantially in the
form of Exhibit C attached hereto;
(o) Evidence of insurance for all insurance required
by this Agreement and the Security Documents;
(p) A closing certificate (the "Closing Certificate"),
executed by the president, senior vice president or
chief financial officer of QDI, certifying that the
representations and warranties contained in this
Agreement and each other Loan Document are true and
accurate in all material respects and that no Default
or Event of Default has occurred and is continuing;
(q) Payment by the Borrowers of all costs and expenses
of the Administrative Agent's special counsel
(including, without limitation, legal fees and
expenses) incurred in connection with the preparation
and execution of the Loan Documents and incident to
all proceedings in connection with, transactions
contemplated by, and documents relating to this
Agreement and the Loan Documents; and
(r) Such other approvals or documents as the
Administrative Agent or the Required Banks may
reasonably request.
Upon the making of the initial Advance, the foregoing
conditions shall be deemed to be satisfied; provided,
however, that the making of such Advance shall not
constitute a waiver by the Administrative Agent or
any Bank of any right which the Administrative Agent
or such Bank may have in the event that any
certificate, financial statement or other document
delivered pursuant to this Section 3.1 or otherwise
in connection with the transactions contemplated by
this Agreement shall prove to have been false or
misleading in any material respect.
3.2. Conditions Precedent to All Advances . The
obligation of each of the Banks to make any Advance
hereunder or of CBT to issue any Letters of Credit
shall be further subject to the satisfaction of each
of the following conditions, unless waived in writing
by each of the Banks:
(a) In the case of an Advance, a Notice of Borrowing
appropriately completed and duly executed by a
Borrower and, in the case of a Letter of Credit, an
application for a letter of credit, in form and
substance satisfactory to CBT, appropriately
completed and duly executed by a Borrower;
(b) The representations and warranties set forth in
Article IV are true and correct on the Effective Date
and on the date of and after giving effect to the
making of the Advance or the issuance of the Letter
of Credit, except that the representations and
warranties set forth in Section 4.5 as to the
financial statements of QDI shall be deemed a
reference to the audited and unaudited financial
statements of QDI, as the case may be, most recently
delivered to the Banks pursuant to Section 5.1;
(c) No Default or Event of Default and no Material
Adverse Occurrence shall then have occurred and be
continuing on the date of the making of the Advance
or the issuance of the Letter of Credit; and
(d) The making of the Advance by such Bank is not in
violation of any applicable law, rule or regulation or any
directive, request or order of any court or governmental
authority having jurisdiction over such Bank.
The delivery of the Notice of Borrowing or the
application for the issuance of a Letter of Credit by
a Borrower shall constitute a certification by the
Borrowers, binding upon each of the Borrowers, as to
the matters set forth in subsections (b) and (c)
above.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each of the Borrowers represents and warrants to the
Administrative Agent and each of the Banks that as of
the date hereof, as of the Effective Date, and as of
the date of each Advance and each issuance of a
Letter of Credit, as follows:
4.1. Organization; etc . Each of the Borrowers is a
corporation validly organized and existing and in
good standing under the laws of the state of its
organization, has full power and authority to own its
property and conduct its business as conducted by it
and is duly qualified to do business and is in good
standing as a foreign corporation in each
jurisdiction where the nature of its business or the
character of its property makes such qualification or
licensing necessary. A list of jurisdictions in
which each of the Borrowers is qualified to do
business is set forth in Annex I. Each of the
Borrowers has full power and authority to enter into
and to perform its obligations under the Loan
Documents and to request Advances under the
Agreement. Each of the Borrowers has all licenses
and permits necessary to carry on its business as now
being conducted and to own and operate its Property,
except for permits and licenses the failure of which
to obtain will not result in a Material Adverse
Occurrence.
4.2. Due Authorization . The execution, delivery and
performance by each of the Borrowers and of each of
the Subsidiary Guarantors of the Loan Documents to
which it is a party have been duly authorized by all
necessary corporate action, do not require any
approval or consent of, or any registration,
qualification or filing with, any governmental agency
or authority or any approval or consent of any other
Person, do not and will not conflict with, result in
any violation of or constitute any default under, any
provision of the articles of incorporation or bylaws
of either of the Borrower or any of the Subsidiary
Guarantors, any agreement binding on or applicable to
the Borrowers, or either of them, any of the
Subsidiary Guarantors or any of their respective
Property, or any law or governmental regulation or
court decree or order binding upon or applicable to
the Borrowers, or either of them, any of the
Subsidiary Guarantors or any of their respective
Property and will not result in the creation or
imposition of any Lien on any of their respective
Property pursuant to the provisions of any agreement
binding on or applicable to the Borrowers, either of
them, any of the Subsidiary Guarantors or any of
their respective Property.
4.3. Subsidiaries . Neither of the Borrowers has any
Subsidiaries except those listed on Annex II, which
correctly sets forth the name of each Subsidiary, the
jurisdiction of its incorporation and the percentage
ownership of each Subsidiary which is owned, of
record or beneficially, by each Borrower and/or one
or more of its Subsidiaries. Each of the Borrowers
and QDI's Subsidiaries has good and marketable title
to all of the shares or other
equity interests it purports to own of each of its
Subsidiaries, free and clear of any Lien and all such
shares have been duly issued and are fully paid and
nonassessable. Each Subsidiary has been duly
organized and is validly existing and in good
standing under the laws of its jurisdiction of
incorporation or organization and is duly licensed or
qualified and in good standing as a foreign
corporation in each other jurisdiction where the
nature of the business transacted by it or the
character of its properties owned or leased makes
such qualification or licensing necessary. A list of
the jurisdictions in which each Subsidiary is
qualified to do business is set forth on the attached
Annex II. Each Subsidiary has full power and
authority to own and operate its properties, to carry
on its business as now conducted and, as to each
Subsidiary Guaranty, to enter into and perform the
Subsidiary Guaranty.
4.4. Validity of the Agreement; etc. Each Loan
Document is the legal, valid and binding obligation
of each of the Borrowers and of each of the
Subsidiary Guarantors which are a party thereto and
is enforceable in accordance with its terms.
4.5. Financial Statements . The consolidated balance
sheets of QDI and its Subsidiaries as of October 26,
1997, October 27, 1996 and October 29, 1995 and the
related consolidated statements of income,
stockholders' equity and cash flows for the three
years ended October 26, 1997, October 27, 1996 and
October 29, 1995 certified by Coopers & Lybrand,
QDI's independent public accountants, copies of which
have heretofore been delivered to the Banks, were
prepared in accordance with generally accepted
accounting principles consistently applied throughout
the periods involved and present fairly the financial
condition and results of operations and cash flows of
QDI and its Subsidiaries for and as of the end of
each of such years. The unaudited consolidated
balance sheet of QDI and its Subsidiaries as of May
10, 1998 and the unaudited statements of operations
for the twenty-eight week period ended on said date,
copies of which have heretofore been delivered to the
Banks, have been prepared in accordance with GAAP,
present fairly in all material respects the financial
position of QDI and its Subsidiaries, on a
consolidated basis, as of said date and the result of
operations and cash flows of QDI and its
Subsidiaries, on a consolidated basis, for said
period, subject to customary year-end adjustments.
4.6. Litigation; etc . Except as disclosed in QDI's
Quarterly Report on Form 10-Q for the quarter ended
May 10, 1998, there is no action, suit or proceeding
at law or equity, or before or by any federal, state,
local or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or
foreign, pending, or to the knowledge of the
Borrowers threatened, against the Borrowers or any of
QDI's Subsidiaries or any of their respective
Property, which if determined adversely would be a
Material Adverse Occurrence or would affect the
ability of the Borrowers or any of QDI's Wholly-Owned
Subsidiaries to perform their respective obligations
under the Loan Documents; and neither of the
Borrowers nor any of QDI's Subsidiaries is in default
with respect to any final judgment, writ, injunction,
decree, rule or regulation of any court or federal,
state, local or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, where the effect of such default
would be a Material Adverse Occurrence.
4.7. Compliance with Law . Neither of the Borrowers
nor any of QDI's Subsidiaries is (a) in default with
respect to any order, writ, injunction or decree of
any court, governmental authority
or arbitration board or tribunal to which it is a
named party or (b) in violation of any law, rule,
regulation, ordinance or order relating to its or
their respective business, the violation of which
would result in a Material Adverse Occurrence.
4.8. ERISA Compliance . The Internal Revenue Service
has issued a determination that each Plan (except for
any Plan which is unfunded and maintained primarily
for the purpose of providing deferred compensation
for a select group of management or highly
compensated employees) is qualified under Section
401(a) and related provisions of the Code, as amended
by ERISA, and that each related trust or custodial
account is exempt from taxation under Section 501(a)
of the Code. All Plans comply in all material
respects with ERISA and other applicable laws. There
exist with respect to the Borrowers, or either of
them, or any of QDI's Subsidiaries no "multi-employer
plans," as defined in the Multi-employer Pension Plan
Amendments Act of 1980, for which a material
withdrawal or termination liability may be incurred.
There exist with respect to all Plans or trusts: (a)
no material accumulated funding deficiency within the
meaning of ERISA;
(b) no termination of any Plan or trust which would
result in any material liability to the PBGC or any
"reportable event," as that term is defined in ERISA,
which is likely to constitute grounds for termination
of any Plan or trust by the PBGC; and (c) no
"prohibited transaction," as that term is defined in
ERISA, which is likely to subject any Plan, trust or
party dealing with any Plan or trust to any material
tax or penalty on prohibited transactions imposed by
Section 4975 of the Code.
4.9. Title to Assets . Each of the Borrowers and each
of QDI's Subsidiaries has good and marketable fee
simple title to all of its Property constituting real
property and good and marketable title to and
ownership of all of its Property and assets
constituting personal property, in each case as
disclosed on the consolidated financial statements of
QDI as of and for the period ending May 10, 1998
(except for any such Property disposed of by the
Borrowers or any of QDI's Subsidiaries in the
ordinary course of business), free and clear of all
Liens except for Liens and other encumbrances
permitted pursuant to Section 6.4.
4.10. Indebtedness . Except for Indebtedness listed
in Annex III, neither of the Borrowers nor any of
QDI's Subsidiaries has any Indebtedness.
4.11. Use of Proceeds . The proceeds of the Advances
will be used by the Borrowers to fund the working
capital requirements of the Borrowers and for other
general corporate purposes.
4.12. Margin Stock . No part of any Advance shall be
used at any time by the Borrowers, or either of them,
to purchase or carry margin stock (within the meaning
of Regulation U) or to extend credit to others for
the purpose of purchasing or carrying any margin
stock. Neither of the Borrowers nor any of QDI's
Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending
credit for the purposes of purchasing or carrying any
such margin stock. No part of the proceeds of any
Advance will be used by the Borrowers, or either of
them, for any purpose which violates, or which is
inconsistent with, any regulations promulgated by the
Board of Governors of the Federal Reserve System.
4.13. Investment Company Act . Neither of the
Borrowers nor any of QDI's Subsidiaries is an
"investment company," or an "affiliated person" of,
or a "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in
the Investment Company Act of 1940, as amended. The
making of the Advances, the application of the
proceeds and repayment thereof by the Borrowers and
the performance of the transactions contemplated by
the Agreement will not violate any provision of said
Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
4.14. Unregistered Securities . Neither of the
Borrowers nor any of QDI's Subsidiaries has (a)
issued any unregistered securities in violation of
the registration requirements of Section 5 of the
Securities Act of 1933, as amended, or any other law;
or
(b) violated any rule, regulation or requirement
under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.
4.15. Public Utility Holding Company Act . Neither of
the Borrowers nor any of QDI's Subsidiaries is a
"holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.16. Accuracy of Information. All information
heretofore or herewith furnished by or on behalf of
the Borrowers to the Administrative Agent or the
Banks for purposes of or in connection with the
Agreement or any transaction contemplated by the
Agreement is, and all other such information
hereafter furnished by or on behalf of the Borrowers
to the Administrative Agent or the Banks will be,
true and accurate in every material respect on the
date as of which such information is dated or
certified and no such information contains any
material misstatement of fact or omits to state a
material fact or any fact necessary to make the
statements contained therein not misleading.
4.17. Tax Returns; Audits. Each of the Borrowers and
QDI's Subsidiaries has filed all federal, state and
local income tax returns and other reports which are
required to be filed, and has paid all taxes as shown
on said returns and on all assessments received by
any such Person (except for any assessments which are
being contested in good faith by appropriate
proceedings that will prevent a forfeiture or sale of
any property and for which an adequate book reserve
in accordance with GAAP shall have been set aside),
to the extent that such taxes have become due or has
obtained extensions with respect to the filing of
such returns and has made provision for the payment
of taxes anticipated to be payable in connection with
such returns. Each of the Borrowers and QDI's
Subsidiaries has made all required withholding
deposits. The Borrowers do not have knowledge of any
objections to or claims for additional taxes by
federal, state or local taxing authorities against it
or any of its Subsidiaries which would be a Material
Adverse Occurrence.
4.18. Environmental and Safety Regulations . Each of
the Borrowers and each of QDI's Subsidiaries are in
compliance with all requirements of applicable
federal, state and local environmental, pollution
control, health and safety statutes, laws and
regulations except for any noncompliance which,
individually or in the aggregate, could not result in
a Material Adverse Occurrence with respect to such
Borrower or such Subsidiary and are not the subject
of any federal or state investigation evaluating
whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance
into the environment. Each of the Borrowers further
represents and warrants that (i) the Real Property
and its intended use complies with all applicable
laws, governmental regulations and the terms of any
enforcement action by any federal, state,
regional or local governmental agency, including,
without limitation, all applicable federal, state and
local laws pertaining to air and water quality,
hazardous waste, waste disposal and other
environmental matters (including, but not limited to,
the Clean Water, Clean Air, Federal Water Pollution
Control, Solid Waste Disposal, Resource Conservation
and Recovery and Comprehensive Environmental
Response, Compensation, and Liability Acts, as said
acts may be amended), and the rules, regulations and
ordinances of all applicable federal, state and local
agencies and bureaus, except in each case for any
noncompliance which, individually or in the
aggregate, could not result in a Material Adverse
Occurrence and (ii) no notice, demand, request for
information, citation, summons or order has been
issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is
pending or threatened by any governmental or other
entity with respect to any alleged failure by the
Borrowers, or either of them, or any of QDI's
Subsidiaries to comply in any respect with any of
such environmental laws except for any such liability
for which an adequate book reserve in accordance with
GAAP shall have been set aside in respect thereto.
4.19. Forecasts. The forecasts of QDI and its
Subsidiaries, furnished to the Administrative Agent
and each of the Banks, consisting of consolidated
balance sheets, consolidated cash flow statements and
consolidated income statements of QDI and its
Subsidiaries after giving effect to the making of the
Advances hereunder and the application of the
proceeds thereof, together with appropriate
supporting details and a statement of underlying
assumptions, have been prepared in the light of the
past business history of QDI and its Subsidiaries and
on the basis of the assumptions set forth therein,
which assumptions are in the opinion of the Borrowers
reasonable. Such forecasts have been prepared in
good faith and represent the good faith opinion of
the Borrowers as to the most probable course of
business of QDI and its Subsidiaries on the basis of
the assumptions which are set forth therein.
4.20. Solvency. After giving effect to the
transactions contemplated by this Agreement, each of
the Borrowers and QDI's Subsidiaries has capital
sufficient to carry on its business, is solvent and
is able to pay its debts and obligations as they
mature in the ordinary course. After giving effect
to the consummation of the transactions contemplated
by this Agreement, each of the Borrowers and QDI's
Subsidiaries now owns property having a value, both
at fair valuation and at present fair saleable value,
greater than the amount required to pay its debts,
obligations and contingent liabilities.
4.21. No Default. As of the date hereof, no Default
or Event of Default has occurred and is continuing.
4.22. Subsidiary Guarantors. Each of the Wholly-
Owned Subsidiaries of QDI have executed the
Subsidiary Guaranty and the Security Agreement,
except for Wholly-Owned Subsidiaries of QDI which do
not in the aggregate have assets in excess of
$500,000. Grady, Inc. does not have assets in excess
of $225,000.
4.23. Year 2000 Compliance. (a) Each of the
Borrowers has conducted, and have caused each of
their respective Subsidiaries to conduct, an analysis
of all of its products, services, businesses and
operations, including without limitation surveys of
Systems (as defined below) and surveys of and
discussions with customers, suppliers and vendors, to
determine the extent to which a Borrower or its
Subsidiaries may be adversely affected by its failure
to be Year 2000 Compliant (as defined below). The
Borrowers and their respective Subsidiaries have
developed a plan (the "Year 2000 Plan") to become
Year 2000 Compliant and remedy any material loss it
may suffer if it fails to be Year 2000 Compliant on a
timely basis. Each of the Borrowers and their
respective Subsidiaries have implemented and continue
to proceed with the Year 2000 Plan materially in
accordance with its terms and timetables.
(b) Each of the Borrowers reasonably believes that the
Year 2000 Plan, if implemented in accordance with its
terms, will result in the Borrowers and their
respective Subsidiaries being Year 2000 Compliant on
a timely basis.
(c) Each of the Borrowers reasonably believe that each
of such Borrowers' and its Subsidiaries' customers,
suppliers and vendors whose failure to be Year 2000
Compliant could result in a Material Adverse
Occurrence, is Year 2000 Compliant or has developed a
plan to become Year 2000 Compliant and remedy any
material loss such person may suffer if it fails to
be Year 2000 Compliant on a timely basis with respect
to all of its own computer systems and applications.
The term "Year 2000 Compliant" means that all of such
person(s) computer systems and applications,
including without limitation software and hardware
("Systems"), will function prior to, during, and
after the calendar year 2000, and that no change in
or to such calendar year will have a material effect
on the performance of the Systems or on the
functioning of the business of any of the Borrowers
or their respective Subsidiaries.
ARTICLE V.
CERTAIN AFFIRMATIVE COVENANTS
Each of the Borrowers agrees with the Administrative
Agent and each of the Banks that, from the date
hereof and thereafter for so long as any portion of
any Advance or any Letter of Credit shall be
outstanding or any Bank shall have any Commitment
hereunder, unless the Required Banks shall otherwise
consent in writing:
5.1. Financial Information; etc. The Borrowers will
furnish to the Administrative Agent and each of the
Banks copies of the following financial statements,
reports and information:
(a) as soon as available and in any event within
ninety (90) days after the end of each fiscal year of
QDI, a copy of its annual consolidated audited
report, including balance sheet, related statements
of income, statements of stockholders' equity and
statements of cash flows of QDI and its consolidated
Subsidiaries for such fiscal year, with comparative
figures for the preceding fiscal year, prepared in
accordance with GAAP certified without qualification
or exception by a nationally recognized firm of
independent public accountants which are reasonably
acceptable to the Administrative Agent and the
Required Banks;
(b) as soon as available and in any event within forty-
five (45) days after the end of each of the first
three (3) fiscal quarterly periods of each fiscal
year of QDI, consolidated statements of income,
stockholders' equity and cash flows of QDI and its
consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal
year to the end of such period, and the related
consolidated balance sheets as at the end of such
period, setting forth in each case in comparative
form the corresponding consolidated figures for the
corresponding period in the preceding fiscal year,
accompanied by a certificate of a senior financial officer
of QDI which shall state that said financial statements
fairly present the consolidated financial condition
and results of operations of QDI and its Subsidiaries
in accordance with GAAP for such period;
(c) with each financial statement required by Section
5.1(a) and (b) to be delivered to the Administrative
Agent and each of the Banks, (i) a certificate
("Compliance Certificate") in a form acceptable to
the Administrative Agent and the Required Banks
signed by the president, the senior vice president or
the chief financial officer of QDI (i) stating that,
to the best of his knowledge after reasonable
investigation, no Default or Event of Default has
occurred and is continuing, or if a Default or an
Event of Default has occurred and is continuing, a
statement of the nature thereof and the action which
the Borrowers propose to take with respect thereto,
and (ii) setting forth, in sufficient detail, the
information and computations required to establish
whether or not the Borrowers were in compliance with
the requirements of Sections 6.1 through 6.3,
inclusive, during the periods covered by the
financial reports then being furnished and as of the
end of such periods;
(d) with each financial statement required by Section
5.1(a) to be delivered to the Administrative Agent
and each of the Banks for a fiscal year, a separate
written statement of the independent public
accountant which certified such financial statements
that (i) such accountants have obtained no knowledge
of any Default or Event of Default having occurred
and continuing, or if such accountants have obtained
knowledge of any such Default or Event of Default,
the accountants shall disclose such Defaults or
Events of Default and the nature thereof and (ii)
that such accountants have reviewed the Compliance
Certificate to be delivered by QDI for and as of the
end of such fiscal year and found the calculations
contained therein to be accurate and in agreement
with such financial statements;
(e) promptly upon their becoming available, copies of
all registration statements and reports (including
without limitation reports on Forms 10-K, 10-Q and 8-
K) which QDI shall have filed with the Securities and
Exchange Commission;
(f) promptly upon the mailing thereof to the
stockholders of QDI, copies of all financial
statements, reports and proxy statements so mailed;
(g) promptly after a Borrower knows or has reason to
know that any Default has occurred, a notice of such
Default describing the same in reasonable detail and
a description of the action that the Borrowers have
taken and propose to take with respect thereto;
(h) promptly after receipt thereof, all letters and
reports to management of QDI prepared by its
independent certified public accountants and the
response of the management of QDI thereto;
(i) promptly following the commencement of any
litigation, suit, administrative proceeding or
arbitration relating to the Borrowers, or either of
them, or any of QDI's Subsidiaries relating to the
transactions contemplated by this Agreement or which
if adversely determined could be a Material Adverse
Occurrence, a notice thereof describing the
allegations of such litigation, suit, administrative
proceeding or arbitration and such Borrower's or such
Subsidiary's response thereto;
(j) promptly upon learning thereof, a notice of any
"reportable event" or "prohibited transaction" or the
imposition of a withdrawal or termination liability within
the meaning of ERISA in connection with any Plan and,
when known, any action taken by the Internal Revenue
Service, Department of Labor or PBGC with respect
thereto; and
(k) such other information with respect to the
financial condition and operations of the Borrowers
or any of QDI's Subsidiaries as the Administrative
Agent or any Bank may reasonably request.
5.2. Maintenance of Corporate Existence; etc. Except
as permitted by Section 6.7, each of the Borrowers
shall maintain and preserve, and cause each of their
respective Subsidiaries to maintain and preserve, its
corporate existence and qualification and good
standing in all states in which such qualification
and good standing are required in order to conduct
its business and own its property as conducted and
owned in such states.
5.3. Payment of Taxes; etc. Each of the Borrowers
shall pay and discharge, and shall cause each of
their respective Subsidiaries to pay and discharge,
as the same may become due and payable, all taxes,
assessments and other governmental charges or levies
against or on any of its Property, as well as claims
of any kind which, if unpaid, might become a Lien
upon any of its Property; provided, however, that the
foregoing shall not require the Borrowers or any of
their Subsidiaries to pay any such tax, assessment,
charge, levy or Lien so long as the validity thereof
shall be contested in good faith by appropriate
proceedings that will prevent a forfeiture or sale of
any Property and an adequate book reserve in
accordance with GAAP shall have been set aside with
respect thereto. Each of the Borrowers shall make,
and shall cause each of their respective Subsidiaries
to make, all required withholding deposits.
5.4. Compliance with Laws. Each of the Borrowers
shall carry on, and shall cause each of their
respective Subsidiaries to carry on, its business
activities in substantial compliance with all
applicable federal or state laws and all applicable
rules, regulations and orders of all governmental
bodies and offices having power to regulate or
supervise its business activities, including, without
limitation, all applicable environmental, pollution
control, health and safety statutes, laws and
regulations. Each of the Borrowers shall maintain,
and shall cause each of their respective Subsidiaries
to maintain, all material rights, liens, franchises,
permits, certificates of compliance or grants of
authority required in the conduct of its business.
Each of the Borrowers agrees that the Real Property
and its intended use will comply at all times with
all applicable laws, governmental regulations and the
terms of any enforcement action now or hereafter
commenced by any federal, state, regional or local
governmental agency, including, without limitation,
all applicable federal, state and local laws
pertaining to air and water quality, hazardous waste,
waste disposal and other environmental matters
(including, but not limited to, the Clean Water,
Clean Air, Federal Water Pollution Control, Solid
Waste Disposal, Resource Conservation and Recovery
and Comprehensive Environmental Response,
Compensation, and Liability Acts, as said acts may be
amended from time to time), and the rules,
regulations and ordinances of all applicable federal,
state and local agencies and bureaus.
5.5. Books and Records; etc. Each of the Borrowers
shall keep, and shall cause each of their respective
Subsidiaries to keep, books and records reflecting
all of its business affairs and transactions in
accordance with GAAP and permit the Administrative
Agent and each of the Banks and their respective
representatives, at reasonable times and intervals
and upon
reasonable notice to the Borrowers, to visit the
offices of Borrowers and their Subsidiaries, discuss
financial matters with officers of the Borrowers or
their Subsidiaries and with its independent public
accountants (and by this provision each of the
Borrowers authorizes its independent public
accountants to participate in such discussions) and
examine any of the Borrowers' or any of its
Subsidiaries' books and other corporate records.
5.6. Insurance. Each of the Borrowers will maintain,
and will cause each of their respective Subsidiaries
to maintain, insurance coverage in such forms and
amounts and against such risks including without
limitation insurance with respect to its Property,
the operation thereof and its business against
casualties, contingencies and risks and insurance
against loss or damage from such hazard and risks to
the person or property of others, as are customary
for corporations similarly situated and engaged in
the same or a similar business and owning and
operating similar properties. All such insurance
shall be carried with financially sound and reputable
insurers.
5.7. Conduct of Business. Each of the Borrowers
shall maintain and keep, and shall cause each of
their respective Subsidiaries to maintain and keep,
its assets, property and equipment in good repair,
working order and condition and from time to time
make or cause to be made all needed renewals,
replacements and repairs.
5.8. Maintain Business. Each of the Borrowers shall
continue to engage primarily, and shall cause each of
their respective Subsidiaries to continue to engage
primarily, in the business or businesses being
conducted on the date of this Agreement.
5.9. ERISA.
(a) Each of the Borrowers agrees that all assumptions
and methods used to determine the actuarial valuation
of employee benefits, both vested and unvested, under
any Plan, and each such Plan, will comply in all
material respects with ERISA and other applicable
laws.
(b) Neither of the Borrowers will at any time permit
any Plan to:
(i) engage in any "prohibited transaction" as such
term is defined in Section 4975 of the Code or in
Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as
such term is defined in Section 302 of ERISA, whether
or not waived; or
(iii) be terminated under circumstances which are
likely to result in the imposition of a lien on the
property of the Borrowers, or either of them, or any
of QDI's Subsidiaries pursuant to Section 4068 of
ERISA, if and to the extent such termination is
within the control of the Borrower;
if the event or condition described in (i), (ii) or
(iii) above is likely to subject the Borrowers, or
either of them, or any Subsidiary or ERISA Affiliate
to a Material Adverse Occurrence.
(c) Upon the request of the Administrative Agent or
any Bank, the Borrowers will furnish a copy of the
annual report of each Plan (Form 5500) required to be
filed with the Internal Revenue Service. Copies of
annual reports shall be delivered no later than
thirty (30) days after the date the copy is
requested.
5.10. Changes to GAAP. In the event that the
Borrowers, or either of them, makes any changes to
the generally accepted accounting principles used in
the preparation of such Borrower's books and/or financial
statements such that such principles are not applied
consistently with any such principles applied during any
prior period, (a) such change shall be in accordance with
the generally accepted accounting principles in
effect at the time of such change and shall be
concurred in by the certified public accountants
certifying the financial statements of QDI and its
Subsidiaries, and (b) the Borrowers shall give the
Administrative Agent thirty (30) days prior written
notice thereof. The Required Banks are hereby
authorized, in consultation with the Borrowers, to
adjust the financial covenants of this Agreement to
reflect the effect of such changes.
5.11. Use of Proceeds. The Borrowers will use the
proceeds of the Advances only for lawful purposes and
in accordance with Sections 4.11 and 4.12 hereof.
5.12. Subsidiary Guaranty. QDI hereby agrees to
cause each Person which is or may hereafter become a
Wholly-Owned Subsidiary of QDI (other than (i) GAGHC
and (ii) Wholly-Owned Subsidiaries of QDI which in
the aggregate have assets of less than $500,000) to
execute, deliver and perform the Subsidiary Guaranty.
At the time that any Wholly-Owned Subsidiary becomes
a party to the Subsidiary Guaranty, the Borrowers
shall have delivered to the Administrative Agent
copies (in sufficient number for each of the Banks to
receive a copy) of each of the following documents in
form and substance reasonably satisfactory to the
Administrative Agent and the Banks:
(a) Counterpart signature page to the Subsidiary
Guaranty, duly executed by such Subsidiary;
(b) A copy of the articles of incorporation (or
similar charter document), including all amendments
thereto, of such Subsidiary, certified by the
Secretary of State of the state of its incorporation;
(c) A copy of (i) the By-laws (or similar charter
document) of such Subsidiary and (ii) the resolutions
of the Board of Directors and of the shareholders (if
required) of such Subsidiary authorizing the
execution, delivery and performance of the Subsidiary
Guaranty, each certified as true and complete by the
secretary or assistant secretary of such Subsidiary;
(d) An incumbency certificate executed by the
secretary or assistant secretary of such Subsidiary,
certifying the names of the officers authorized to
execute the Subsidiary Guaranty, together with a
sample of the true signatures of such officers;
(e) Certificates of good standing (or the substantial
equivalent thereof) for such Subsidiary certified by
the Secretaries of State of the state of its
incorporation and each other state in which it is
required to be qualified; and
(f) a favorable opinion of counsel to such Subsidiary
in form and substance reasonably satisfactory to the
Administrative Agent.
5.13. Security Documents. (a) If at any time either
Borrower or any Subsidiary of a Borrower acquires an
ownership interest in or creates an entity which is
or becomes a Subsidiary, such Borrower shall, or
shall cause its Subsidiaries, to take all such action
and execute such agreements, documents and
instruments, including without limitation execution
and delivery of a counterpart signature page in the
form of Annex I to the Pledge Agreement and Annex I
to the Security Agreement, that may be necessary or
desirable to grant to the Administrative Agent, for
the benefit of the Banks, a first priority, perfected security
interest in all of the assets of and all of the capital stock of
such new Subsidiary. Notwithstanding the foregoing, (i) the Borrowers
shall not be required to, or be required to cause its
Subsidiaries to, pledge the assets or capital stock
of any Subsidiary if QDI and/or any of its
Subsidiaries is subject to any contractual obligation
which prohibits the pledge of the assets or capital
stock of such Subsidiary pursuant to the Pledge
Agreement or the Security Agreement; provided that
QDI and/or its Subsidiaries shall use reasonable
efforts to obtain any necessary waivers, consents or
amendments to permit such pledge or to obtain
reasonably equivalent security and (ii) the Borrowers
and their Subsidiaries shall not be obligated to
pledge the assets or capital stock of a Subsidiary,
provided that the aggregate value of the assets and
the capital stock of the Subsidiaries that have not
been pledged to the Administrative Agent for the
benefit of the Banks shall not at any time exceed
$500,000.
(b) At the time that any Borrower or any Subsidiary or
Affiliate thereof becomes a party to a Security
Document, the Borrowers shall have delivered to the
Administrative Agent copies (in sufficient number for
each of the Banks to receive a copy) of each of the
following documents in form and substance reasonably
satisfactory to the Administrative Agent and the
Banks:
(i) (A) Counterpart signature page to the Pledge
Agreement, duly executed by such Borrower or such
Subsidiary and (B) counterpart signature page to the
Security Agreement, duly executed by the applicable
Pledgor.
(ii) A copy of (A) the articles of incorporation (or
similar charter document), including all amendments
thereto, of each Pledgor, (B) the By-laws (or similar
charter document) of each Pledgor and (C) the
resolutions of the Board of Directors and of the
shareholders (if required) of each Pledgor
authorizing the execution, delivery and performance
of each such Security Document, each certified as
true and complete by the secretary or assistant
secretary of such Pledgor;
(iii) An incumbency certificate executed by the
secretary or assistant secretary of each Pledgor,
certifying the names of the officers authorized to
execute each such Security Document, together with a
sample of the true signatures of such officers;
(iv) A favorable opinion of counsel to each Pledgor in
form and substance reasonably satisfactory to the
Administrative Agent;
(v) Delivery of stock certificates, stock powers,
irrevocable proxies, instructions or other
instruments or documents required to be delivered
pursuant to the applicable Security Document; and
(vi) UCC-1 Financing Statements in form acceptable to
the Administrative Agent appropriately completed,
duly executed by the applicable Pledgor and filed in
all places that the Administrative Agent, in its sole
judgment, deems necessary or desirable.
5.14. Year 2000 Compliance. The Borrowers shall, and
shall cause each of their respective Subsidiaries to,
take all action necessary or desirable in order to
implement the Year 2000 Plan in all material respects
and in order to ensure that the Borrowers and their
Subsidiaries are Year 2000 Compliant on a timely
basis. The Borrowers shall, and shall cause each of
their respective Subsidiaries to, monitor the
progress of their respective customers, suppliers and
vendors to assure that such Persons are Year 2000 Compliant
on a timely basis and take all action necessary to remedy any
potential material loss which the Borrowers and their
Subsidiaries could suffer if such Persons fail to be
Year 2000 Compliant on a timely basis. The Borrowers
shall notify the Administrative Agent promptly upon
learning of any failure, or prospective failure, of
the Borrowers or their respective Subsidiaries, or of
any customer, supplier or vendor to the Borrowers or
their Subsidiaries, to be Year 2000 Compliant on a
timely basis which could result in a Material Adverse Occurrence.
5.15. Survival of Warranties and Representations.
Each of the Borrowers covenants, warrants and
represents to the Administrative Agent and each Bank
that all representations and warranties of the
Borrowers contained in this Agreement and in the
other Loan Documents shall be true at the time of
Borrowers' execution of this Agreement and shall
survive the execution, delivery and acceptance hereof
and thereof by the parties thereto and the closing of
the transactions described herein and therein or
related hereto and thereto and any investigation at
any time made by or on behalf of the Administrative
Agent or any of the Banks shall not diminish their
rights to rely thereon.
ARTICLE VI.
CERTAIN FINANCIAL COVENANTS AND NEGATIVE COVENANTS
Each of the Borrowers agrees with the Administrative
Agent and each of the Banks that, from the date
hereof and thereafter for so long as any portion of
any Advance or any Letter of Credit shall be
outstanding or any Bank shall have any Commitment
hereunder, unless the Required Banks shall otherwise
consent in writing:
6.1. Fixed Charge Coverage Ratio. (a) For each twelve-month
period ending on the last day of each fiscal quarter
of QDI, the Borrowers shall maintain a ratio of
Earnings Available for Fixed Charges to Fixed Charges
of not less than the ratio set forth below:
Minimum Fixed Charge
Applicable Fiscal Quarter Coverage Ratio
- ------------------------- ---------------------
Third and fourth fiscal 1.35:1.00
quarters of 1998 fiscal year
Each fiscal quarter of 1999 1.35:1.00
fiscal year
Each fiscal quarter of 2000 1.40:1.00
fiscal year
(b) Neither of the Borrowers will, nor permit any of
its Subsidiaries to, enter into any Operating Lease
if after giving effect thereto on a pro forma basis
the ratio of Earnings Available for Fixed Charges to
Fixed Charges would be less than the ratio set forth
above for the applicable period.
6.2. Ratio of Funded Debt to Pro Forma Consolidated Cash Flow.
For each twelve-month period ending on
the last day of each fiscal quarter of QDI, the
Borrowers shall maintain a ratio of Funded Debt of
QDI and its Subsidiaries, on a consolidated basis, as
of the last day of such fiscal quarter to Pro Forma
Consolidated Cash Flow for the twelve-month period
ending on such date, of not more than the ratio set
forth below:
Maximum Ratio ofFunded Debt to
Applicable Fiscal Quarter ProForma Consolidated Cash Flow
- ------------------------- -------------------------------
Third and fourth fiscal 5.50:1.00
quarters of 1998 fiscal year
First, second and third fiscal 5.00:1.00
quarters of 1999 fiscal year
Fourth fiscal quarter of 1999 4.75:1.00
fiscal year
Each fiscal quarter of 2000 4.75:1.00
fiscal year
6.3. Limitations on Indebtedness. Neither of the Borrowers will,
nor will permit any of its Subsidiaries to, create,
issue, guarantee or otherwise become liable in
respect of any Indebtedness, except:
(a) Capital Lease Obligations existing on the date
hereof and disclosed on Annex III hereto;
(b) Capital Lease Obligations incurred after April 26,
1996, provided that, after taking into account the
incurrence of such Capital Lease Obligations, (x) the
aggregate outstanding Capital Lease Obligations
incurred pursuant to this clause (b) shall not exceed
$5,000,000 and (y) no Default or Event of Default
shall exist;
(c) Indebtedness represented by the Notes or
outstanding under the Subsidiary Guaranty or any
other Loan Document; and
(d) Indebtedness owing to QDI or any of its Wholly-
Owned Subsidiaries.
6.4. Liens. Neither of the Borrowers will, nor will
permit any of its Subsidiaries to, create, incur or
permit to exist any Lien on its Property, whether now
owned or hereafter acquired, or upon any income or
profits therefrom, or own or acquire or agree to
acquire Property of any kind subject to any Lien,
except the following:
(a) Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of
contractors, materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons,
provided the payment thereof is not at the time
required by Section 5.3 hereof;
(b) Liens incurred or deposits made in the ordinary
course of business (A) in connection with workmen's
compensation, unemployment insurance, social security
and other like laws or (B) to secure the performance
of letters of credit, bids, tenders, sales contracts,
leases, statutory obligations, surety, appeal and
performance bonds and other similar obligations not
incurred in connection with the borrowing of money,
the obtaining of advances or the payment of the
deferred purchase price of Property;
(c) attachments, judgment and other similar Liens
arising in connection with court proceedings,
provided the execution or other enforcement of such
Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith
and by appropriate proceedings in such manner as not
to have the
Property subject to such Liens forfeitable;
(d) easements, rights-of-ways, reservations,
exceptions, minor encroachments, restrictions and
similar charges created or incurred in the ordinary
course of business which in the aggregate do not
materially interfere with the business operations of
the Borrowers, or either of them, or any of their
respective Subsidiaries;
(e) Liens securing Capital Lease Obligations existing
on April 26, 1996 and disclosed on Annex III hereto;
(f) Liens securing Capital Lease Obligations incurred
pursuant to Section 6.3(b) hereof;
(g) Liens on tangible personal property at any site
which secure Capital Lease Obligations or obligations
under Operating Leases in respect of such site, in
each case existing on the date hereof and disclosed
on Annex III hereto;
(h) Liens in favor of QDI or a Subsidiary Guarantor;
(i) Liens in favor of the Administrative Agent for the
benefit of the Banks; and
(j) Liens on QDI's equity interest in Six Edison
Lakes, L.L.C., a limited liability company ("Six
Edison"), to secure the performance of QDI's
obligations under the Lease, dated September 19,
1996, between QDI and Six Edison regarding the office
building at QDI's headquarters.
For purposes of this Section 6.4, all Liens of a
Person which becomes a Subsidiary and which are
outstanding as of the date such Person becomes a
Subsidiary shall be deemed to have been incurred as
of such date.
6.5. Dividends, Stock Purchases and Restricted Payments.
Neither of the Borrowers will, nor permit
any of its Subsidiaries to, except as hereinafter
provided: (a) declare or pay any dividends, either
in cash or Property, on any shares of its capital
stock of any class (except dividends payable by QDI
solely in shares of common stock of QDI and dividends
payable solely to QDI or a Wholly-Owned Subsidiary of
QDI); or (b) directly or indirectly, or through any
Subsidiary, purchase, redeem, retire, or otherwise
acquire any shares of its capital stock, or other
equity interests therein, of any class or any
warrants, rights or options to purchase or acquire
any shares of its capital stock, or other equity
interests therein (except for any such purchases,
redemptions, retirements or other acquisitions
payable solely in shares of common stock of QDI); or
(c) make any other distribution, either directly or
indirectly or through any Subsidiary, in respect of
its capital stock, or other equity interests therein
(such declarations or payments of dividends,
purchases, redemptions or retirements of stock and
warrants, rights or options, and all such other
distributions being herein collectively called
"Restricted Payments"); provided that,
notwithstanding the foregoing, QDI may repurchase
shares of its capital stock outstanding if (i) after
giving effect thereto, the aggregate cumulative
amount of all Restricted Payments from and after the
Effective Date does not exceed the sum of (x)
$2,500,000, plus (y) from and after June 30, 1999 and
if and only if as of the date of payment of such
Restricted Payments the ratio of Funded Debt of QDI
and its Subsidiaries, on a consolidated basis, as of
the last day of the preceding fiscal quarter of QDI
to Pro Forma Consolidated Cash Flow of QDI for the
twelve-month period ending on such date, after giving
effect tosuch Restricted Payment (and any Indebtedness
incurred in connection therewith), is less than 4.25,
an additional amount equal to the lesser of
$2,500,000 and Available Excess Cash Flow as of such
date and (ii) at the time of payment of such
Restricted Payment no Default or Event of Default
exists and, after giving effect to such Restricted
Payment, no Default or an Event of Default would
exist, and provided, further, that the restrictions
set forth in this Section 6.5 shall not apply to any
Rights nor to any shares of Series B Participating
Cumulative Preferred Stock distributed or issued
pursuant to the Rights Agreement, dated as of March
27, 1997, between QDI and KeyCorp Shareholder
Services, Inc. as Rights Agent (the "Rights
Agreement"). As used herein, the term "Rights" shall
have the same meaning ascribed to it in the Rights
Agreement.
For purposes of this Section 6.5, the amount of any
Restricted Payment which is payable or distributable
in Property other than cash or shares of capital
stock of QDI shall be deemed to be the fair market
value (as determined in good faith by the Board of
Directors of QDI) of such Property as of the date of
the payment of such Restricted Payment.
6.6. Sales of Assets. Neither of the Borrowers will,
nor permit any of its Subsidiaries to, sell, lease,
transfer or otherwise dispose of assets (including
without limitation the capital stock of any
Subsidiary), other than Permitted Dispositions.
6.7.Mergers and Consolidations . Neither of the
Borrowers will, nor permit any of its Subsidiaries
to, consolidate with or merge into any other Person
or permit any other Person to consolidate with or
merge into it (except that a Subsidiary may
consolidate with or merge into QDI or a Wholly-Owned
Subsidiary of QDI); provided that the foregoing
restriction does not apply to the merger or
consolidation of QDI with another corporation if:
(i)the corporation which results from such merger or
consolidation (the "surviving corporation") is
organized under the laws of the United States of
America or a jurisdiction thereof;
(ii)the due and punctual payment of the principal of
and premium, if any, and interest on the Notes,
according to their tenor, and the due and punctual
performance and observance of all of the covenants in
the Notes and this Agreement to be performed or
observed by QDI, are expressly assumed in writing by
the surviving corporation; and
(iii)immediately after the consummation of the
transaction and after giving effect thereto, no
condition or event shall exist which constitutes a
Default, an Event of Default or a Change of Control.
6.8. Preferred Stock of Subsidiaries. The Borrowers
will not permit any Subsidiary of QDI to issue
Preferred Stock, any security convertible into
Preferred Stock or options, warrants or rights to
purchase Preferred Stock of any Subsidiaries of QDI
except shares held by QDI or a Wholly-Owned
Subsidiary of QDI and shares of Preferred Stock held
by others at the time such Subsidiary becomes a
Subsidiary of QDI, provided that such shares of
Preferred Stock are not issued or transferred by QDI
or any Subsidiary to others in contemplation of, or
in connection with, such Subsidiary becoming a
Subsidiary.
6.9. Disposition of Securities of a Subsidiary.
Neither of the Borrowers will, nor permit any of its
Subsidiaries to, sell or otherwise dispose of any
shares of the stock or other equity
interests therein (or any options or warrants to
purchase stock or other equity interests therein or
other securities convertible or exchangeable
therefor) of a Subsidiary (said stock, options,
warrants and other securities herein called
"Subsidiary Stock"), nor will either of the Borrowers
permit any of its Subsidiaries to issue, sell or
otherwise dispose of any shares of its own Subsidiary
Stock, if the effect of the transaction would be to
reduce the proportionate interest of such Borrower
and its other Subsidiaries in the outstanding
Subsidiary Stock of the Subsidiary whose shares are
the subject of the transaction, provided that the
foregoing restrictions shall not apply to:
(a) the issue of directors' qualifying shares; or
(b) the sale for cash consideration to a Person in a
single transaction (other than directly or indirectly
to an Affiliate) of the entire investment (whether
represented by stock, debt, claims or otherwise) of
such Borrower and its other Subsidiaries in any
Subsidiary (other than GAGHC), if all of the
following conditions are met:
(i) the sale or other disposition of the assets of
such Borrower and its other Subsidiaries is permitted
by Section 6.6;
(ii) in the opinion of such Borrower's Board of
Directors, the sale is for fair value and is in the
best interests of such Borrower;
(iii) the Subsidiary being disposed of has no
continuing investment in any other Subsidiary not
being simultaneously disposed of or in the Borrowers;
and
(iv) immediately after the consummation of the
transaction and after giving effect thereto, no
condition or event shall exist which constitutes a
Default or an Event of Default.
Notwithstanding the foregoing, GAGHC shall at all
times remain a Wholly-Owned Subsidiary of QDI.
6.10. Investments. Neither of the Borrowers will,
nor permit any of its Subsidiaries to, make or permit
to exist any Investment other than Permitted Investments.
6.11. Transactions with Affiliates. Neither of the
Borrowers will, nor permit any of its Subsidiaries
to, enter into any material transaction (including,
without limitation, the purchase, sale or exchange of
Property, the rendering of any service, the making of
any material investment in an Affiliate or the
repayment of any indebtedness owed to an Affiliate)
with an Affiliate (other than a Borrower or a
Subsidiary Guarantor (other than Grady's, Inc.)),
except in the ordinary course of business and
pursuant to the reasonable requirements of such
Borrower's or such Subsidiary's business, upon terms
which are fair and reasonable to such Borrower or
such Subsidiary and which are not less favorable to
such Borrower or such Subsidiary than would be
obtained in a comparable transaction with a Person
not an Affiliate.
6.12. Capital Expenditures. (a) The Borrowers shall
not, and shall not permit any of their Subsidiaries
to, expend or contract to expend any amount for
Capital Expenditures during any fiscal year if as a
result thereof the Consolidated Capital Expenditures
for such fiscal year exceeds the sum of the
following:
(i) the Maximum Primary Capital Expenditures
applicable to such fiscal year;
(ii) Net Proceeds of any Permitted Disposition
described in clause (iv) or (v) of the definition of
"Permitted Disposition" in an amount not to exceed
$10,000,000;
(iii) from and after October 25, 1998, an amount equal
to the lesser of (i) $1,500,000 and (ii) the
difference of $7,500,000 and the Consolidated Capital
Expenditures of QDI and its Subsidiaries during
fiscal year 1998; and
(iv) POS Expenditures by the Borrowers and their
Subsidiaries from and after the Effective Date in an
amount not to exceed in the aggregate $4,000,000.
provided that the Capital Expenditures (described in
Section 6.12(a)(i) above) of QDI shall not exceed the
applicable Specified Amount.
(b) Notwithstanding the foregoing, and in addition to
the limitations set forth in subsection (a) above,
the Borrowers may, and may permit one or more
Subsidiaries to make Capital Expenditures at any time
in an amount not to exceed the Available Excess Cash
Flow as of such date.
6.13. Acquisitions. The Borrowers shall not, nor
permit any of their respective Subsidiaries to, make
any Acquisitions, other than an Acquisition relating
to the operation and development of Burger King
restaurants and/or Chili's Grill and Bar restaurants.
ARTICLE VII.
EVENTS OF DEFAULT
7.1. Events of Default. The term "Event of Default"
shall mean any of the following events:
(a) A default in the payment when due of the principal
of the Notes;
(b) A default in the payment when due of any interest
on the Notes or of fees under this Agreement and such
default shall continue unremedied for five (5) days;
(c) A default in the due performance and observance of
any of the covenants contained in Sections 5.2, 5.6,
6.1 through 6.13, inclusive;
(d) A default (other than those defaults described in
other subsections of this Section 7.1) by the
Borrowers, or either of them, in the due performance
and observance of any of the covenants contained in
this Agreement and such default shall continue
unremedied for a period of thirty (30) days after
notice from the Administrative Agent or any Bank to
either of the Borrowers thereof;
(e) A default by the Borrowers, or either of them, or
any of their respective Subsidiaries on any
Indebtedness or any event shall occur or any
condition shall exist in respect of any Indebtedness
of such Borrower or such Subsidiary, or under any
agreement securing or relating to such Indebtedness,
the effect of which is (i) to result in the failure
to pay when due at least $500,000 in aggregate
principal amount of such Indebtedness or (ii) to
cause or permit any holder of such Indebtedness or a
trustee to cause at least $500,000 in aggregate
principal amount of such Indebtedness to become due
prior to its stated maturity or prior
to its regularly scheduled dates of payment;
(f) An involuntary case under any applicable federal
or state bankruptcy laws shall be commenced against
either of Borrowers or any of QDI's Subsidiaries and
the petition shall not be dismissed, stayed, bonded
or discharged within sixty (60) days after the
commencement of the case; the entry of a decree or
order by a court having jurisdiction in the premises
in respect of either of the Borrowers or any of QDI's
Subsidiaries under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other
similar law; or the entry of a decree or order by a
court having jurisdiction in the premises appointing
a receiver, liquidator, assignee, trustee,
sequestrator or other similar official of either of
the Borrowers or any of QDI's Subsidiaries or of any
substantial part of the property of either of the
Borrowers or any of QDI's Subsidiaries, or ordering
the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and
in effect for a period of sixty (60) consecutive days;
(g) The commencement by either of the Borrowers or any
of QDI's Subsidiaries of a voluntary case under the
federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law or the
consent by it to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator or other
similar official of the Borrower or any of QDI's
Subsidiaries or of any substantial part of the
property of either of the Borrowers or any of QDI's
Subsidiaries, or the making by it of an assignment
for the benefit of creditors, or the failure by
either of the Borrowers or any of QDI's Subsidiaries
to pay its debts generally as they become due, or the
taking of any action by either of the Borrowers or
any of QDI's Subsidiaries in furtherance thereof;
(h) Any judgments, writs, warrants of attachment,
executions or similar process (to the extent not
covered by insurance) shall be issued or levied
against either of the Borrowers or any of QDI's
Subsidiaries or any of the assets of either of the
Borrowers or any of QDI's Subsidiaries where the
amount of such judgments, writs, warrants of
attachment, executions or similar process exceeds
$500,000 in the aggregate and where such judgments,
writs, warrants of attachment, executions or similar
process are not released, vacated, suspended, stayed,
abated or fully bonded prior to any sale and in any
event within thirty (30) days after its issue or
levy;
(i) Any representation or warranty set forth in this
Agreement or any other Loan Document shall be untrue
in any material respect on the date as of which the
facts set forth are stated or certified;
(j) Default shall occur in the observance or
performance by any Subsidiary of any provision,
covenant or agreement of the Subsidiary Guaranty;
(k) The Subsidiary Guaranty shall cease to be in full
force and effect or any Subsidiary shall so state in
writing;
(l) A Change of Control shall occur; or
(m) Any Security Document shall cease to be in full
force and effect or any Pledgor shall so state in
writing; or the Administrative Agent, for the benefit
of the Banks, shall cease to have a first priority,
perfected security interest on all or any portion of
the collateral subject or purported to be subject
to any Security Document.
7.2. Action If Event of Default. If an Event of
Default described in Section 7.1(f) or (g) shall
occur, the full unpaid principal amount of the Note
and all other amounts due and owing hereunder shall
automatically be due and payable without any
declaration, notice, presentment, protest or demand
of any kind (all of which are hereby waived) and the
obligation of the Banks to make additional Advances
or to issue Letters of Credit shall automatically
terminate. If any other Event of Default shall occur
and be continuing, the Required Banks, upon written
notice to the Borrowers, may terminate the Banks'
obligation to make additional Advances and CBT's
obligation to issue Letters of Credit and may declare
the outstanding principal amount of the Notes and all
other amounts due and owing hereunder to be due and
payable without other notice to the Borrowers,
presentment, protest or demand of any kind (all of
which are hereby waived), whereupon the full unpaid
amount of the Notes and any and all other amounts,
which shall be so declared due and payable shall be
and become immediately due and payable.
7.3. Remedies.
(a) The Administrative Agent, personally or by
attorney, may in its discretion, proceed to protect
and enforce its rights by pursuing any available
remedy including a suit or suits in equity or at law,
whether for damages or for the specific performance
of any obligation, covenant or agreement contained in
this Agreement or in the Notes, or in aid of the
execution of any power herein or therein granted, or
for the enforcement of any other appropriate legal or
equitable remedy, as the Administrative Agent shall
deem most effectual to collect the payments then due
and thereafter to become due on the Notes or under
this Agreement, to enforce performance and observance
of any obligation, agreement or covenant of the
Borrowers hereunder or under the Notes or to protect
and enforce any of the Administrative Agent's or any
Bank's rights or duties hereunder.
(b) No remedy herein conferred upon or reserved to the
Administrative Agent or any Bank is intended to be
exclusive of any other remedy or remedies, and each
and every such remedy shall be cumulative, and shall
be in addition to every other remedy given hereunder
or under any other Loan Document now or hereafter
existing at law, in equity or by statute.
(c) Each Bank agrees that it will not take any action,
nor institute any actions or proceedings, against the
Borrowers hereunder or under any Loan Document,
without the prior written consent of the Required
Banks or, as may be provided in this Agreement or the
other Loan Documents, at the direction of the
Administrative Agent.
ARTICLE VIII.
THE AGENT
8.1. Appointment and Authorization. Each Bank
hereby irrevocably appoints CBT as the administrative
agent of such Bank and authorizes the Administrative
Agent to act on such Bank's behalf to the extent
provided herein or under any of the other Loan
Documents or in connection therewith, and to take
such other action and exercise such other powers as
may be reasonably incidental thereto.
Notwithstanding the use of the term "Agent," it is
expressly understood and agreed that the
Administrative Agent shall not have any fiduciary
responsibilities to any Bank by reason of this
Agreement and that the Administrative Agent is
merely acting as the representative of the Banks with
only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its
capacity as the Banks' contractual representative,
the Administrative Agent (i) does not hereby assume
any fiduciary duties to any of the Banks and (ii) is
acting as an independent contractor, the rights and
duties of which are limited to those expressly set
forth in this Agreement and the other Loan Documents.
Each of the Banks hereby agrees to assert no claim
against the Administrative Agent on any agency theory
or any other theory of liability for breach of
fiduciary duty, all of which claims each Bank hereby
waives.
8.2. Power. The Administrative Agent shall have and
may exercise such powers under this Agreement and any
other Loan Documents as are specifically delegated to
the Administrative Agent by the terms hereof or
thereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly
provided for by the Loan Documents (including,
without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be
required to exercise any discretion or take any
action, but shall be required to act or to refrain
from acting (and shall be fully protected in so
acting or refraining from acting) upon the
instructions of the Required Banks, and such
instructions shall be binding upon all Banks and all
holders of the Notes; provided, however, that the
Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to
personal liability or which is contrary to any Loan
Document or applicable law. The Administrative Agent
shall not have any implied duties or any obligation
to take any action under this Agreement or any other
Loan Document except such action as is specifically
provided by this Agreement or any other Loan Document
to be taken by the Administrative Agent. The
Administrative Agent shall act as an independent
contractor in performing its obligations as
Administrative Agent hereunder and nothing contained
herein shall be deemed to create a fiduciary
relationship among or between the Administrative
Agent and the Borrowers or among or between the
Administrative Agent and any Bank.
8.3. Employment of Counsel; etc.
The Administrative Agent may execute any of its duties
under this Agreement or any other Loan Document, and
any instrument, agreement or document executed,
issued or delivered pursuant hereto or in connection
herewith, by or through employees, agents and
attorneys-in-fact and shall not be answerable for the
default or misconduct of any such employee, agent or
attorney-in-fact selected by it with reasonable care.
The Administrative Agent shall be entitled to rely on
advice of counsel (including counsel who are the
employees of the Administrative Agent) selected by
the Administrative Agent concerning all matters
pertaining to the agency hereby created and its
duties under any of the Loan Documents.
8.4. Reliance. The Administrative Agent shall be
entitled to rely upon and shall not be under a duty
to examine or pass upon the validity, effectiveness,
genuineness of any notice, consent, waiver,
amendment, certificate, affidavit, letter, telegram,
statement, paper, document or writing believed by it
to be genuine and to have been signed or sent by the
proper Person or Persons, and the Administrative
Agent shall be entitled to assume that the same are
valid, effective and genuine and what they purport to
be.
8.5. General Immunity. Neither the Administrative
Agent nor any of the Administrative Agent's
directors, officers, agents, attorneys or employees
shall be liable to any Bank for any action taken or
omitted to be taken by it or them under the Loan
Documents or in connection therewith except that the
Administrative Agent shall be obligated on the terms
set forth herein for performance of its express
obligations hereunder and except that no Person shall
be relieved of any liability imposed by law for
willful misconduct or gross negligence. Without
limitation on the generality of the foregoing, the
Administrative Agent: (a) shall not be responsible
to any Bank for any recitals, statements, warranties
or representations under the Loan Documents or any
agreement or document relative thereto or for the
financial condition of the Borrowers; (b) shall not
be responsible for the authenticity, accuracy,
completeness, value, validity, effectiveness, due
execution, legality, genuineness, enforceability or
sufficiency of any of the Loan Documents;
(c) shall not be responsible for the validity,
genuineness, creation, perfection or priority of any
of the liens created or reaffirmed by any of the Loan
Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of
any collateral or other security; (d) shall not be
bound to ascertain or inquire as to the performance
or observance of any of the terms, covenants or
conditions of any of the Loan Documents on the part
of the Borrowers or of any of the terms of any such
agreement by any party thereto and shall have no duty
to inspect the property (including the books and
records) of the Borrowers; (e) shall incur no
liability under or in respect of any of the Loan
Documents or any other document or Collateral by
acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram,
cable or telex) believed by the Administrative Agent
to be genuine and signed or sent by the proper party;
and (f) may consult with legal counsel (including
counsel for the Borrowers), independent public
accountants and other experts selected by the
Administrative Agent and shall not be liable for any
action taken or omitted to be taken in good faith in
accordance with the advice of such counsel,
accountants or experts.
8.6. Credit Analysis. Each Bank has made, and shall
continue to make, its own independent investigation
or evaluation of the operations, business, property
and condition, financial and otherwise, of the
Borrowers in connection with the making of its
commitments hereunder and has made, and will continue
to make, its own independent appraisal of the
creditworthiness of the Borrowers. Without limiting
the generality of the foregoing, each Bank
acknowledges that prior to the execution of this
Agreement, it had this Agreement and all other Loan
Documents and such other documents or matters as it
deemed appropriate relating thereto reviewed by its
own legal counsel as it deemed appropriate, and it is
satisfied with the form of this Agreement and all
other Loan Documents. Each Bank agrees and
acknowledges that neither the Administrative Agent
nor any of its directors, officers, attorneys or
employees makes any representation or warranties
about the creditworthiness of the Borrowers or with
respect to the due execution, legality, validity,
genuineness, effectiveness, sufficiency or
enforceability of this Agreement or any other Loan
Documents, or the validity, genuineness, execution,
perfection or priority of Liens created or reaffirmed
by any of the Loan Documents, or the validity,
genuineness, enforceability, existence, value or
sufficiency of any collateral or other security.
Each of the Banks shall use its best efforts to
provide the other Banks with any credit or other
material information which comes into the possession
of such Bank on or before a Default or Event of
Default or at any time thereafter with respect to the
operations, business, property condition or
creditworthiness of the Borrowers but no Bank shall
have any liability to any other Bank for its
inadvertent failure to do so. Each Bank, upon the
request of another Bank, shall deliver to such other
bank any financial statement, report, certificate or
other document required to be delivered to the Banks
pursuant to Section 5.1 which the requesting Bank did
not receive. Except as explicitly provided herein,
neither the Administrative Agent nor any Bank has any
duty or responsibility, either initially or on a
continuing basis, to provide any other Bank with any
credit or other information with respect to such
operations, business, property, condition or
creditworthiness, whether such information comes into
its possession on or before a Default or an Event of
Default or at any time thereafter.
8.7. Agent and Affiliates. With respect to the Loans
made by it and the Notes issued to it, each Agent, in
its individual capacity, shall have the same rights
and powers under the Loan Documents as any other Bank
and may exercise the same as though it were not an
Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include each Agent in
its individual capacity. Each Agent, in its
individual capacity, and its Affiliates may accept
deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of
business with, the Borrowers, or either of them, and
any person or entity who may do business with or own
securities of the Borrowers, or either of them, all
as if it were not an Agent and without any duty to
account therefor to the Banks.
8.8. Indemnification. The Banks jointly and
severally agree to indemnify and hold harmless the
Administrative Agent and its officers, directors,
employees and agents (to the extent not reimbursed by
the Borrowers), ratably according to their respective
Commitments, from and against any and all claims,
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against
the Administrative Agent or any of its officers,
directors, employees or agents, in any way relating
to or arising out of any investigation, litigation or
proceeding concerning or relating to the transaction
contemplated by this Agreement or any of the other
Loan Documents, or any of them, or any action taken
or omitted by the Administrative Agent or any of its
officers, directors, employees or agents, under any
of the Loan Documents; provided, however, that no
Bank shall be liable for any portion of such claims,
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or
willful misconduct of the Administrative Agent or any
of its officers, directors, employees or agents.
Without limitation of the foregoing, each Bank agrees
to reimburse the Administrative Agent promptly upon
demand for such Bank's proportionate share of any out-
of-pocket expenses (including counsel fees) incurred
by Administrative Agent or its officers, directors,
employees or agents in connection with the
preparation, execution, administration, or
enforcement of, or legal advice in respect of rights
or responsibilities under any of, the Loan Documents,
to the extent that the Administrative Agent is not
reimbursed for such expenses by the Borrowers.
8.9. Successor Administrative Agent. The
Administrative Agent may resign at any time as
Administrative Agent under the Loan Documents by
giving thirty (30) days' prior written notice thereof
to the Banks and the Borrowers. Upon any such
resignation, the Required Banks shall have the right
to appoint a successor Administrative Agent
hereunder; provided that prior to the occurrence of a
Default the Borrowers shall consent (which consent
shall not be unreasonably withheld) thereto. If no
successor Administrative Agent shall have been so
appointed by the Required Banks, and shall have
accepted such appointment, within 30 days after the
retiring Administrative Agent's giving
of notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks,
appoint a successor Administrative Agent, which shall
be a commercial bank organized under the laws of the
United States or of any state thereof and having a
combined capital and surplus of at least
$200,000,000.00. Upon the acceptance of any
appointment as Administrative Agent under the Loan
Documents by a successor Administrative Agent, such
successor Administrative Agent shall thereupon
succeed to and become vested with all the rights,
powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and
obligations under the Loan Documents. After any
retiring Administrative Agent's resignation or
removal as Administrative Agent under the Loan
Documents, the provisions of this Article VIII shall
inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent
under the Loan Documents.
8.10. Agents' Fees. The Borrowers agree to pay to
CBT, for its own account, the fees agreed to by QDI
and CBT pursuant to that certain Revolving Credit
Facility Fee Letter dated September 11, 1998, or as
otherwise agreed from time to time.
8.11. Collateral Matters. The Administrative Agent
is authorized on behalf of all the Banks, without the
necessity of any notice to or further consent from
the Banks, from time to time to take any action with
respect to the Security Documents or any collateral
thereunder which may be necessary to perfect and
maintain perfected the security interest in and Liens
upon the collateral granted pursuant to the Security
Documents. The Banks irrevocably authorize the
Administrative Agent, at its option and in its
discretion, to release any Lien granted to or held by
the Administrative Agent upon any collateral (i) upon
termination of the Commitments and payment in full of
all Loans and all other obligations of the Borrowers
known to the Administrative Agent and payable under
this Agreement or any other Loan Document; (ii)
constituting property sold or to be sold or disposed
of as part of or in connection with any disposition
permitted hereunder; (iii) consisting of an
instrument evidencing Indebtedness or other debt
instrument, if the Indebtedness evidenced thereby has
been paid in full; or (iv) if approved, authorized or
ratified in writing by all the Banks. Upon request
by the Administrative Agent at any time the Banks
will confirm in writing the Administrative Agent's
authority to release particular types or items of
collateral pursuant to this Section 8.11, provided
that the absence of any such confirmation for
whatever reason shall not affect the Administrative
Agent's rights under this Section 8.11.
ARTICLE IX.
AMENDMENT AND RESTATEMENT
9.1. Amendment and Restatement of Existing Credit Agreement.
The Borrowers, the Banks, and the Agents
agree that, upon the execution and delivery by each
of the parties hereto of this Agreement and
satisfaction of the conditions set forth in Article
III, the terms and provisions of the Existing Credit
Agreement shall be and hereby are amended, superseded
and restated in their entirety by the terms and
provision of this Agreement. This Agreement is not
intended to and shall not constitute a novation. All
Loans made and Obligations incurred under the
Existing Credit Agreement which are outstanding on
the Effective Date shall continue as Loans and
Obligations under (and shall be governed by the terms
of) this Agreement.
9.2. Replacement Notes. The Borrowers shall execute
and deliver replacement Notes to each of the Banks
hereunder. Each of the Notes amends and restates and
is issued in substitution for each of the Existing
Notes. On the Effective Date: (a) each of the Banks
shall return its Existing Note to the Borrowers, in
exchange for a new Note in the principal amount of
such Bank's Commitment; and (b) all loans made
pursuant to the Existing Credit Agreement outstanding
on such date shall be deemed to be Loans hereunder by
the Banks, ratably in accordance with their
respective Commitments, shall be evidenced by the
Notes, and shall be entitled to all of the benefits
and bear all of the obligations of this Agreement.
9.3. Security Documents. Each of the Borrowers
hereby acknowledges and agrees that the Notes, all
Advances now outstanding or hereafter made hereunder
and all amounts now or hereafter owing to the
Administrative Agent and the Banks under or pursuant
to this Agreement shall be secured under and pursuant
to the Note Pledge Agreement, the Pledge Agreement,
the Security Agreement and each and every other
Security Document and that all references therein to
the "Credit Agreement" shall be deemed a reference to
this Agreement and all capitalized terms not
otherwise defined therein shall have the meanings
ascribed thereto in this Agreement.
ARTICLE X.
MISCELLANEOUS
10.1. Waivers, Amendments; etc.
The provisions of this Agreement, including the closing
conditions set forth herein, may from time to time be amended,
modified or waived, if such amendment, modification
or waiver is in writing and consented to by the
Borrowers and the Required Banks; provided, that no
amendment, waiver or consent shall, unless in writing
and signed by all the Banks, do any of the following:
(a) waive any of the conditions specified in Article
III, (b) increase the Commitments of the Banks or
subject the Banks to any additional obligations, (c)
reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, (d)
postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other
amounts payable hereunder, (e) change the percentage
of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of
Banks, which shall be required for the Banks or any
of them to take any action hereunder, or (f) amend
this Section 10.1 or (g) except as specifically
permitted hereby or thereby, release or impair the
security interest in any of the collateral granted to
the Administrative Agent, for the benefit of the
Banks, under the Security Documents or discharge any
Subsidiary Guarantor; provided, further, that no
amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to
the Banks required above to take such action, affect
the rights or duties of the Administrative Agent
under this Agreement or any Note.
No failure or delay on the part of the Administrative
Agent, any Bank or the holder of any Note in
exercising any power or right under this Agreement or
any Note shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power or
right preclude any other or further exercise thereof
or the exercise of any other power or right. No
notice to or demand on the Borrowers in any case
shall entitle it to any notice or demand in similar
or other circumstances.
10.2. Payment Dates. Whenever any payment to be made hereunder
by or to the Banks or to the holder of any Note shall
otherwise be due on a day which is not a Business
Day, such payment shall be made on the next
succeeding Business Day, and such extension of time
shall be included in computing the fees or interest
payable on such next succeeding Business Day.
10.3. Notices. All communications and notices
provided under this Agreement shall be in writing by
mail, telecopy or personal delivery and if to the
Borrowers addressed or delivered to QDI at its
address shown on the signature page hereof or if to
the Administrative Agent or the Banks delivered to it
at the address shown on the signature page hereof, or
to any party at such other address as may be
designated by such party in a notice to the other
parties. Any notice, if mailed properly addressed,
shall be deemed given upon the third Business Day
after the placing thereof in the United States mail,
postage prepaid; any notice shall be deemed given
when transmitted by telecopier or when personally
delivered.
10.4. Costs and Expenses. The Borrowers agree to
pay, or reimburse, the Administrative Agent for all
reasonable expenses for the preparation of this
Agreement, including exhibits, and the Loan Documents
and any amendments hereto or thereto or consents or
waivers hereunder or thereunder as may from time to
time hereafter be required thereby or by the
transactions contemplated hereby, including, but not
limited to, the fees and out-of-pocket expenses of
the Administrative Agent, charges and disbursements
of special counsel to the Administrative Agent from
time to time incurred in connection with the
preparation and execution of this Agreement and any
document relevant to this Agreement, including the
Loan Documents, any amendments hereto or thereto, or
consents or waivers hereunder or thereunder, and the
consideration of legal questions relevant hereto and
thereto. The Borrowers agree to pay, or reimburse, the
Administrative Agent and each Bank upon demand for
all reasonable costs and expenses (including
attorneys', auditors' and accountants' fees and
expenses) arising out of the transactions
contemplated by this Agreement and the Loan
Documents, in connection with any work-out or
restructuring of the transactions contemplated hereby
and by the Loan Documents and any collection or
enforcement of the obligations of the Borrowers
hereunder or thereunder, whether or not suit is
commenced, including, without limitation, reasonable
attorneys' fees and legal expenses in connection with
any appeal of a lower court's order or judgment. The
obligations of the Borrowers under this Section 10.4
shall survive any termination of this Agreement.
10.5. Indemnification. In consideration of the
execution and delivery of this Agreement by the
Administrative Agent and the Banks, the Borrowers
agree to indemnify, exonerate and hold the
Administrative Agent, each Bank and their respective
officers, directors, employees and agents (the
"Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits,
losses, claims, damages, penalties, judgments,
liabilities and damages, and expenses in connection
therewith, including, without limitation, reasonable
attorneys' fees and disbursements and all expenses of
litigation or preparation therefor whether or not the
Administrative Agent or such Bank is a party thereto
(the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or
arising out of, or relating to:
(a) any transaction financed or to be financed in
whole or in part directly or indirectly with proceeds
of any Advance, or
(b) the execution, delivery, performance or
enforcement of this
Agreement, the Loan Documents or any document
executed pursuant hereto or thereto by any of the
Indemnified Parties, except for any such Indemnified
Liabilities arising on account of such Indemnified Party's
breach of contract or such Indemnified Party's gross negligence
or willful misconduct in violation of law or in tort.
The provisions of this Section 10.5 shall survive
termination of this Agreement and payment in full of
the Notes.
10.6. Severability. Any provision of this Agreement
or the Notes executed pursuant hereto which is
prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability
without invalidating the remaining provisions of this
Agreement or the Notes or affecting the validity or
enforceability of such provision in any other
jurisdiction.
10.7. Cross-References. References in this Agreement
to any Section or Article are, unless otherwise
specified, to such Section or Article of this
Agreement.
10.8. Headings. The various headings of this
Agreement are inserted for convenience only and shall
not affect the meaning or interpretation of this
Agreement or any provisions hereof.
10.9. Governing Law. This Agreement and the Notes
shall each be deemed to be a contract made under and
governed by the internal laws (and not the law of
conflicts) of the State of Indiana.
10.10. Successors and Assigns. (a) This Agreement
shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors
and assigns except that: (i) neither of the
Borrowers may assign or transfer its rights hereunder
without the prior written consent of each of the
Banks; and (ii) any assignment by a Bank must be made
in compliance with subsection (b) below.
Notwithstanding clause (ii) of this subsection (a),
any Bank may at any time, without the consent of
Borrowers or the Administrative Agent, assign all or
any portion of its rights under this Agreement and
its Notes to a Federal Reserve Bank; provided,
however, that no such assignment shall release the
transferor Bank from its obligations hereunder.
Except to the extent otherwise required by its
context, the word "Bank" where used in this Agreement
shall mean and include any such assignee and such
assignee shall be bound by and have the benefits of
this Agreement the same as if such holder had been a
signatory hereto.
(b) Any Bank may, in the ordinary course of its
business and in accordance with applicable law, at
any time assign to one or more banks or other
entities ("Purchasers") all or a portion of its
rights and obligations under this Agreement
(including, without limitation, its Commitments, all
Loans owing to it, all of its participation interests
in existing Letters of Credit, and its obligation to
participate in additional Letters of Credit
hereunder) in accordance with the provisions of this
subsection (b). Each assignment shall be of a
constant, and not a varying, ratable percentage of
all of the assigning Bank's rights and obligations
under this Agreement. Such assignment shall be
substantially in the form of Exhibit D hereto and
shall not be permitted hereunder unless (i) such
assignment is for all of such Bank's rights and
obligations under the Loan Documents or (ii) the
amount of the Commitment assigned by the assigning
Bank pursuant to each assignment shall be at least
$10,000,000 and the amount of the Commitment retained
by the assigning Bank shall be
at least $10,000,000. The consent of the
Administrative Agent (which consent shall not be
unreasonably withheld or delayed) shall be required
prior to an assignment becoming effective with
respect to a transferee which is not a Bank or an
Affiliate thereof if at the time of such assignment
no Event of Default shall have occurred and is
continuing. In addition, the consent of the
Borrowers shall be required (which consent shall not
be unreasonably withheld or delayed) prior to an
assignment becoming effective if such assignment is
at a time when no Default or Event of Default has
occurred and is continuing. Upon
(i) delivery to the Administrative Agent of an
executed Assignment Agreement, together with any
required consents and (ii) payment of a $2,000 fee to
the Administrative Agent for processing such
assignment, such assignment shall become effective on
the effective date specified in such Assignment
Agreement. On and after the effective date of such
assignment, such transferee, if not already a Bank,
shall for all purposes be a Bank party to this
Agreement and any other Loan Documents executed by
the Banks and shall have all the rights and
obligations of a Bank under the Loan Documents, to
the same extent as if it were an original party
hereto, and no further consent or action by the
Borrowers, the Banks or the Administrative Agent
shall be required to release the transferor Bank with
respect to the percentage of the Commitment, Loans
and Letter of Credit participations assigned to such
transferee Bank. Upon the consummation of any
assignment pursuant to this
Section 10.10, the Administrative Agent and the
Borrowers shall make appropriate arrangements so that
replacement Notes are issued to such transferor Bank
and new Notes or, as appropriate, replacement Notes,
are issued to such transferee Bank, in each case in
principal amounts reflecting their Commitment, as
adjusted pursuant to such assignment.
(c) Each Bank may, without the consent of the
Borrowers or the Administrative Agent, sell
participations to one or more banks or other entities
in all or a portion of its rights and obligations
under this Agreement (including all or a portion of
its Commitment, the Loans owing to it, its interest
as an issuer with respect to Letters of Credit, its
participations in Letters of Credit and its
obligation to participate in additional Letters of
Credit hereunder); provided, however, that (i) such
Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible to the
other parties hereto for the performance of such
obligations, (iii) the participating banks or other
entities shall be entitled to the benefit of the cost
protection provisions contained in
Section 2.3 to the extent of the Bank selling such
participation and the Borrowers' aggregate
obligations with respect to Section 2.3 shall not be
increased by reason of such participation, and (iv)
the Borrowers, the Administrative Agent and the other
Banks shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and
obligations under this Agreement, and such Bank shall
retain the sole right (and shall not limit its
rights) to enforce the obligations of the Borrowers
relating to the Loans and to approve any amendment,
modification or waiver of any provision of this
Agreement (other than amendments, modifications or
waivers with respect to any fees payable hereunder
(to the extent such participants are entitled to such
fees) or the amount of principal of or the rate at
which interest is payable on the Loans, or the dates
fixed for payments of principal of or interest on the
Loans).
10.11. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by
different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be
an original and all of which taken together shall
constitute one and the same agreement.
10.12. Joint and Several Liability. The obligations
of the Borrowers to make payment of the Obligations
hereunder and under the Notes are joint and several.
The Administrative Agent may proceed directly against
either or both of the Borrowers to obtain performance
of and to collect and recover the full amount, or any
portion, of the Obligations, without first proceeding
against the other Borrower or any other Person, or
against any security or collateral for the
Obligations.
10.13. Financial Information. Each Borrower assumes
responsibility for keeping itself informed of the
financial condition of the other Borrower and any and
all endorsers and/or other guarantors of all or any
part of the Obligations, and of all other
circumstances bearing upon the risk of nonpayment of
the Obligations, or any part thereof, that diligent
inquiry would reveal, and such Borrower agrees that
the Administrative Agent and the Banks shall have no
duty to advise such Borrower of information known to
them regarding such condition or any such circumstances.
10.14. Consent to Jurisdiction. EACH OF THE
BORROWERS HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY INDIANA STATE OR FEDERAL COURT
SITTING IN SOUTH BEND, INDIANA, OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND
EACH OF THE BORROWERS HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR
FEDERAL COURT. EACH OF THE BORROWERS HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. EACH OF THE BORROWERS IRREVOCABLY
CONSENTS TO THE SERVICE OF COPIES OF THE SUMMONS AND
COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING BY
UNITED STATES CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, OF COPIES OF SUCH PROCESS TO THE
BORROWER'S ADDRESS SPECIFIED IN SECTION 10.3. EACH
OF THE BORROWERS AGREES THAT A JUDGMENT, FINAL BY
APPEAL OR EXPIRATION OF TIME TO APPEAL WITHOUT AN
APPEAL BEING TAKEN, IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION
10.14 SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR ANY BANK TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY BANK TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWERS OR EITHER OF
THEM, OR THEIR RESPECTIVE PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION.
10.15. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS,
THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY NOTE, OR ANY OTHER INSTRUMENT OR
DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
[The rest of this page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective
officers thereunto duly authorized as of the day and
year first above written.
QUALITY DINING, INC.
Address: 4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Attention: John C. Firth Executive
Vice President, General
Counsel and Secretary
with a copy to: David M. Findlay,
Senior Vice
President Finance
By:_______________________________
John C. Firth
Executive Vice President, General
Counsel and Secretary
GAGHC, INC.
By:
________________________________
David M. Findlay
Vice President
CHASE BANK OF TEXAS NATIONAL ASSOCIATION, in
its individual capacity and
as Administrative Agent
Address:712 Main Street
Houston, Texas 77002-8059
Attention:Manager, Franchise System Finance
By:_____________________________
Name:___________________________
Title:__________________________
NBD BANK, N.A., in its individual capacity and as
Documentation Agent
Address:One Indiana Square
Suite 7028
Indianapolis, IN 46266
Attention:John C. Otteson
By:__________________
Name:________________
Title:_______________
LASALLE NATIONAL
BANK Address:120 S. LaSalle Street
Chicago, IL 60603
Attention: David Knapp
By:_________________
Name:_______________
Title:______________
NATIONS BANK, N.A.
Address:600 Peachtree Street,
NE, 19th Floor Atlanta, GA 30308
Attention:Dan Holland
By:__________________
Name:________________
Title:_______________
THE NORTHERN TRUST
COMPANY Address:50 S. LaSalle Street, B-2
Chicago, IL 60675
Attention:Art Fogel
By:___________________
Name:________________
Title:_______________
KEYBANK NATIONAL ASSOCIATION (successor in
interest to SOCIETY NATIONAL BANK)
Address:127 Public Square OH-01-27-0606
Cleveland, OH 44114
Attention:Mark LoSchiavo
By:_________________
Name:_______________
Title:______________
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.
Address:200 S. Orange Avenue
Orlando, FL 32802
Attention:Christopher A. Black
By:_______________
Name:_____________
Title:____________
SCHEDULE I
COMMITMENTS
Bank Commitment Percentage
--------------- --------------- ----------
Chase Bank of Texas $26,000,000.00 20.00%
NBD Bank $26,000,000.00 20.00%
LaSalle National Bank $21,666,666.67 16.67%
NationsBank $17,333,333.33 13.33%
Sun Trust Bank $17,333,333.33 13.33%
NorthernTrust $13,000,000.00 10.00%
Key Bank N.A. $ 8,666,666.67 6.67%
-------------- -------
TOTALS $130,000,000.00 100.00%
============== =======
ANNEX I
LIST OF JURISDICTIONS IN WHICH THE BORROWER IS
QUALIFIED TO DO BUSINESS
See attached
ANNEX II
LIST OF SUBSIDIARIES; JURISDICTION OF
INCORPORATION AND STOCK OWNERSHIP
See attached
ANNEX III
INDEBTEDNESS; LIENS
See attached
ANNEX IV
INVESTMENTS
See attached
EXHIBIT A
[Form of Note]
PROMISSORY NOTE
$__________ __________, 199_
Mishawaka, Indiana
FOR VALUE RECEIVED, QUALITY DINING, INC., an Indiana
corporation, and GAGHC, Inc., a Delaware corporation
(collectively together with their successors and
assigns, the "Borrowers"), hereby promise, jointly
and severally, to pay to ____________________ (the
"Holder"), the principal sum of __________ DOLLARS
($__________), or such lesser amount as shall equal
the aggregate unpaid principal amount of the Advances
(as defined in the hereinafter defined Credit
Agreement) made by the Holder to the Borrowers, or
either of them, under the Credit Agreement, on the
Termination Date (as defined in the Credit Agreement)
and to pay interest on the unpaid principal amount of
each Advance, for the period commencing on the date
of such Advance until such Advance shall be paid in
full, at the rates per annum and on the dates
provided in the Credit Agreement.
Both principal and interest are payable in lawful
money of the United States of America and in
immediately available funds to the Administrative
Agent (as defined in the Credit Agreement) to such
domestic account as the Administrative Agent may
designate. The date, amount and type of each Advance
made by the Holder to the Borrowers, or either of
them, and each payment made on account of the
principal thereof, shall be recorded by the Holder on
its books and, prior to any transfer of this Note,
endorsed by the Holder on the schedule attached
hereto or any continuation thereof; provided that the
Holder's failure to make any such recordation or
notation shall not affect the Obligations of the
Borrowers hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in the
Second Amended and Restated Revolving Credit Agreement (as amended
from time to time, the "Credit Agreement") dated as
of _______, 1998 by and between the Borrowers, the
banks party thereto (the "Banks"), Chase Bank of
Texas, National Association, as administrative agent
(the "Administrative Agent") and NBD Bank, N.A., as
documentation agent, which amends and restates the
Amended and Restated Revolving Credit Agreement dated
as of April 26, 1996 by and between the Borrowers,
the banks party thereto and Chase Bank of Texas,
National Association (f/k/a Texas Commerce Bank
National Association), as agent for the Banks (the
"Existing Credit Agreement"). This Note amends and
restates and is issued in substitution for a
Promissory Note dated April 26, 1996 (the "Existing
Note") issued by the Borrowers pursuant to the
Existing Credit Agreement and evidences Advances made
thereunder. This Note does not constitute a novation
of the obligations of the Borrowers under the
Existing Note. Capitalized terms used in this Note
have the respective meanings assigned to them in the
Credit Agreement.
The Credit Agreement provides for the acceleration of
the maturity of the Advances evidenced by this Note
upon the occurrence of certain events and for
prepayments of Advances upon the terms and conditions
specified therein. This Note is secured by a Subsidiary
Guaranty issued by certain Wholly-Owned Subsidiaries of Quality
Dining, Inc. in favor of the Administrative Agent for
the benefit of the Banks, by certain assets of the
Borrowers and their respective Subsidiaries pursuant
to the Pledge Agreement, the Security Agreement and
the Note Pledge Agreement and may now or hereafter be
secured by one or more other security agreements,
pledge agreements, assignments, mortgages,
guaranties, instruments or agreements of the
Borrowers or any other Person.
The Borrowers hereby waive demand, presentment,
protest and notice of nonpayment and protest.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
INDIANA.
QUALITY DINING, INC.
By: _____________________________________
John C. Firth
Executive Vice President, General Counsel
and Secretary
GAGHC, INC.,
By:______________________________________
David M. Findlay
Vice President
Schedule to Promissory Note
Date
Date of Amount Type Principal of
Advance of Advance of Advance Advance Repaid
- ------- ---------- ---------- --------------
EXHIBIT B
NOTICE OF BORROWING
CHASE BANK OF TEXAS NATIONAL ASSOCIATION, as
Administrative Agent 712 Main Street
Houston, Texas 77002-8059
Attention:______________ _______, 19__
(Date of Notice)
Ladies and Gentlemen:
The undersigned, [Quality Dining, Inc., an Indiana
corporation] [GAGHC, Inc., a Delaware corporation],
refers to the Second Amended and Restated Revolving
Credit Agreement, dated as of September 11, 1998
(said Second Amended and Restated Revolving Credit
Agreement, as amended, modified or supplemented from
time to time being the "Agreement") by and between
Quality Dining, Inc. and GAGHC, Inc., as borrowers,
the banks party thereto, Chase Bank of Texas,
National Association, as administrative agent, and
NBD Bank, N.A., as documentation agent. The terms
used herein shall have the meanings ascribed thereto
in the Agreement. Pursuant to the terms of the
Agreement the undersigned hereby requests an Advance
under the Agreement, and in that connection sets
forth below the information relating to such Advance
(the "Proposed Advance"):
(i) The borrowing date (which shall be a Business Day)
of the Proposed Advance is __________, 19__.
(ii )The aggregate amount of the Proposed Advance is $_______.
(iii) The Proposed Advance is to be made as the
following type(s) of Loan:
(A) $ Base Rate Loan; or
(B) $ LIBOR Base Loan.
(iv) If the Proposed Advance is to be made as a LIBOR
Base Loan, the Interest Period applicable thereto is months.
The undersigned confirms that the conditions
precedent set forth in Article III of the Agreement
are satisfied as of the date hereof.
[QUALITY DINING, INC.]
[GAGHC, INC.]
By: ______________________________________
Its: ________________________________
EXHIBIT C
LEGAL OPINION OF COUNSEL
The opinion of counsel for the Borrowers shall be
addressed to the Agents and each of the Banks and
shall be to the effect that:
1. Each of the Borrowers and the Subsidiary Guarantors is a
corporation organized and validly existing in good standing
under the laws of its jurisdiction of incorporation, and has
all requisite corporate power and authority to carry on the
business now being conducted by it and to own its property
and to enter into and perform the Loan Documents to which it
is a party.
2. Each of the Borrowers and each of the Subsidiary
Guarantors is duly qualified and in good standing as a
foreign corporation in the jurisdictions enumerated in Annex
I to this opinion and such jurisdictions are all of the
jurisdictions where the nature of their business or the
character of their properties makes such qualification or
licensing necessary.
3. Each of the Loan Documents have been duly authorized by
proper corporate (or partnership) action on the part of the
Borrowers, the Pledgors and the Subsidiary Guarantors which
are party thereto and have been duly executed and delivered
by an authorized officer (or general partner) of each of
such Borrowers, Pledgors and Subsidiary Guarantors. Each of
the Loan Documents constitutes the legal, valid and binding
obligations of the Borrowers, the Pledgors and the
Subsidiary Guarantors which are a party thereto, enforceable
in accordance with their respective terms, except to the
extent that enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting
the enforcement of the rights of creditors or by equitable
principles (regardless of whether enforcement is sought in a
proceeding in equity or at law).
4. The Security Agreement creates an enforceable security
interest in favor of the Administrative Agent for the
benefit of the Banks in the collateral described in the
Security Agreement (the "Collateral") which is subject to
Article 9 of the Indiana Uniform Commercial Code (the "UCC"
as security for the payment, to the extent set forth
therein, of the Obligations.
5. The information in each of the Financing Statements is
correct and complete for filing. Assuming each Financing
Statement is properly recorded and/or indexed in the records
of the Filing Offices, the security interests in favor of
the Administrative Agent for the benefit of the Banks in the
Collateral described in such Financing Statements will be
perfected to the extent a security interest in such
Collateral can be perfected by filing a financing statement
under the provisions of the UCC.
6. Assuming the Lender takes possession of and holds the
certificates evidencing the shares of capital stock
delivered to the Administrative Agent pursuant to the Pledge
Agreement (the "Pledged Shares"), with undated stock powers
duly indorsed in blank, the Pledge Agreement creates a valid
and perfected security interest under the UCC (to the extent
a security interest in the Pledged Shares can be perfected
under the provisions of the UCC) in favor of the
Administrative Agent for the benefit of the Banks in the
rights of the Pledgors in such Pledged Shares as security
for the payment of the Obligations. Assuming the Lender
acquired its interest in the Pledged Shares in good faith
and without notice of any adverse claims, the Administrative
Agent acquired its security interest in the Pledged Shares
free of adverse claims.
7. No authorization, approval or consent of any governmental
or regulatory body is necessary or required in connection
with the lawful execution, delivery and performance by the
Borrowers, the Pledgors and the Subsidiary Guarantors of the Loan
Documents.
8. The execution and delivery of the Loan Documents and
compliance with the terms thereof by the Borrowers, the
Pledgors and the Subsidiary Guarantors will not conflict
with, or result in any breach of any of the provisions of,
or constitute a default under, or result in the creation or
imposition of any Lien upon any of the Property of the
Borrowers, the Pledgors or the Subsidiary Guarantors
pursuant to the provisions of the articles of incorporation,
by-laws or other charter document of the Borrowers, the
Pledgors or the Subsidiary Guarantors or any loan agreement
under which Borrowers, the Pledgors or the Subsidiary
Guarantors are bound, or other agreement or instrument under
which the Borrowers, the Pledgors or the Subsidiary
Guarantors or their Property is bound.
9. There are no actions, suits or proceedings pending or, to
the best of my knowledge after due inquiry, threatened
against, or affecting the Borrowers, the Pledgors or the
Subsidiary Guarantors at law or in equity or before or by
any federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which (i) would
contest or affect the execution, validity or performance of
any of the Loan Documents, or (ii) could result, either
individually or collectively, in a Material Adverse
Occurrence, except as disclosed in Quality Dining, Inc.'s
Report on Form 10-Q for the quarter ended _______, 1998.
10. Each of the Borrowers, the Pledgors and the Subsidiary
Guarantors have all franchises, permits, licenses and other
authority as are material to enable them to carry on their
business as now being conducted and as proposed to be
conducted, and they are not in default under any of such
franchises, permits, licenses or other authority, which
defaults could, individually or in the aggregate, result in
a Material Adverse Occurrence.
11. The execution and delivery of the Loan Documents and the
performance thereof by the Borrowers, the Pledgors and the
Subsidiary Guarantors will not result in a breach or
violations of any of the terms, conditions, or provisions of
any law or regulation (including any usury laws), order,
writ, injunction or decree of any court or governmental
authority applicable to the Borrowers, the Pledgors or the
Subsidiary Guarantors.
12. None of the Borrowers, the Pledgors or Subsidiary
Guarantors is (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a
"holding company" or an "affiliate" of such a "subsidiary
company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or (ii) a "public
utility" as defined in the Federal Power Act, as amended, or
(iii) an "investment company" or an "affiliated person"
thereof or an "affiliated person" of any such "affiliated
person", as such terms are defined in the Investment Company
Act of 1940, as amended.
13. All of the issued and outstanding shares of capital stock
of each of the Subsidiary Guarantors have been duly and
validly issued, are fully paid and non-assessable and are
owned by Quality Dining, Inc., and/or a subsidiary of
Quality Dining, Inc. as reflected on Annex II attached to
this opinion free and clear of any lien or encumbrance. The
general partner and limited partner of Grady's American
Grill, LP are Grady's American Grill Restaurant Corporation
and GAGHC, Inc., respectively.
14. Assuming the truth and accuracy of the Borrowers'
representations and warranties contained in the Credit
Agreement, the issuance of the Notes and the use of the
proceeds of the sale of the Notes do not violate or conflict
with Regulations T, U, or X of the Board of Governors of the
Federal Reserve System (12 C.F.R., Chapter II).
EXHIBIT D
FORM OF
ASSIGNMENT AGREEMENT
Reference is made to the Second Amended and Restated
Revolving Credit Agreement dated as of September 11, 1998
(the "Credit Agreement") among Quality Dining, Inc. an
Indiana corporation, and GAGHC, Inc., a Delaware corporation
(collectively the "Borrowers"), the Banks party thereto (the
"Banks"), Chase Bank of Texas, National Association, as
administrative agent (in such capacity, the "Administrative
Agent") and NBD Bank, N.A., as documentation agent. Terms
defined in the Credit Agreement are used herein with the
same meanings.
_____________________________________ (the "Assignor") and
__________________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor,
a ___% interest in and to the Assignor's rights and
obligations under the Credit Agreement and the other Loan
Documents as of the Effective Date (as defined below)
(including, without limitation, such percentage interest in
the Commitment, such percentage interest of the Assignor's
participations in Letters of Credit on the Effective Date
and such percentage interest in each Loan owing to the
Assignor outstanding on the Effective Date, together with
such percentage interest in all unpaid interest and
Commitment Fees accrued to the Effective Date).
2. The Assignor represents that as of the date hereof
(without giving effect to assignments thereof which have not
yet become effective): (i) its Commitment is $__________,
(ii) the outstanding principal balance (unreduced by any
assignments thereof which have not yet become effective) of
its Note is $________________ and the stated amount of its
participations in Letters of Credit is $______________. The
Assignor (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties
or representations made in or in connection with the Credit
Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Legal Document or any other
instrument or document furnished pursuant thereto, other
than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; and (ii)
makes no representation or warranty and assumes no
responsibility with respect to the financial condition of
the Borrowers or any of their Subsidiaries or the
performance or observance by the Borrowers or any of their
Subsidiaries of any of their respective obligations under
the Credit Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto or thereto.
3. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment Agreement;
(ii) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.1 thereof and
such other documents and
information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment
Agreement; (iii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor
or any other person which has become a Bank and based on
such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement; (iv)
appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such
powers under the Credit Agreement as is delegated to the
Administrative Agent by the terms thereof, together with
such powers as are reasonably incidental thereto and (v)
agrees that it will be bound by the provisions of the Credit
Agreement and will perform in accordance with their terms
all the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Bank.
4. The effective date of this Assignment and Acceptance shall
be _______________ (the "Effective Date").1
5. From and after the Effective Date, (i) the Assignee shall
be a party to the Credit Agreement and, to the extent
provided in this Assignment Agreement, have the rights and
obligations of a Bank thereunder and under the Loan
Documents and (ii) the Assignor shall, to the extent
provided in this Assignment Agreement, relinquish its rights
and be released from its obligations under the Credit
Agreement.
6. This Assignment and Acceptance shall be governed by and
construed in accordance with the internal laws (and not the
law of conflicts) of the State of Illinois.
[NAME OF ASSIGNOR],
by
____________________________________
Title:
[NAME OF ASSIGNEE],
by
____________________________________
Title:
_______________________________
1 The Effective Date must be at least five Business Days
after the delivery of the executed Assignment Agreement to
the Agent.
Exhibit 4-C (ii)
PLEDGE AND SECURITY AGREEMENT
TO
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,AS AGENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Security
Agreement") is executed as of the 11th day of September,
1998 by and among each of the parties listed on the
signature pages hereof and those additional entities that
hereafter become parties hereto by executing counterpart
signature pages in substantially the form of Exhibit 1
hereto (each a "Grantor" and collectively the "Grantors") in
favor of Chase Bank of Texas, National Association, as
administrative agent (in such capacity, the "Agent") for the
banks (the "Banks") which are parties to the Second Amended
and Restated Revolving Credit Agreement dated as of
September 11, 1998 (as amended, supplemented, restated or
otherwise modified from time to time in accordance with the
terms thereof, the "Credit Agreement") among Quality Dining,
Inc. and GAGHC Inc., as borrowers (the "Borrowers"), the
Banks, the Agent and NBD Bank, N.A., as documentation agent.
W I T N E S S E T H:
WHEREAS, the Borrowers have entered into the Credit
Agreement, pursuant to which the Banks have agreed to make
available to the Borrowers revolving credit loans and
letters of credit in accordance with the terms thereof;
WHEREAS, to evidence the Borrowers' obligation to repay the
indebtedness provided in the Credit Agreement, the Borrowers
executed and delivered to the Banks one or more promissory
notes (together with all amendments and modifications
thereto, and all notes issued in exchange therefor or upon
transfer thereof, the "Notes") payable to the order of the
Banks;
WHEREAS, certain direct and indirect wholly-owned
subsidiaries of the Borrowers (the "Subsidiaries") executed
and delivered that certain Subsidiary Guaranty dated
December 21, 1995, as reaffirmed (together with all
amendments and modifications thereto, the "Guaranty") in
favor of The Northern Trust Company (as predecessor agent),
pursuant to which such Subsidiaries jointly and severally
guaranteed the full and prompt payment when due of the
indebtedness evidenced by the Notes and provided in the
Credit Agreement; and
WHEREAS, it is a condition to the agreement of the Banks to
enter into the Credit Agreement that the Borrowers secure
their obligations under the Credit Agreement and as
evidenced by the Notes and the Subsidiaries secure their
obligations under the Subsidiary Guaranty as provided
herein;
NOW THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. DEFINITIONS.
1.1. As used in this Security Agreement:
"Accounts" means "accounts" (as defined in the Code) and all
rights to receive payments, whether for goods sold or leased
by any of the Grantors, for services rendered by any of the
Grantors or otherwise, whether or not earned by performance,
together with all security interests or other security held
by or granted to any of the Grantors to secure such rights to
payment, all other rights related thereto including any right of
stoppage in transit and all rights in any of such sold or leased
goods which are returned or repossessed.
"Agent" means Chase Bank of Texas, National Association, in
its capacity as administrative agent under the Credit
Agreement and not in its individual capacity, and any
successor administrative agent appointed under Credit
Agreement.
"Chattel Paper" means any writing or group of writings which
evidences both a monetary obligation and a security interest
in or a lease of specific goods and all "chattel paper" (as
defined in the Code).
"Code" means the Uniform Commercial Code as enacted in the
State of Indiana.
"Collateral" means right, title and interest in (a) all
Inventory, Equipment, and Fixtures in which the Grantors, or
any of them, now has or hereafter acquires any right, title
or interest, and all additions or accessions to any of the
foregoing, (b) all books and records related to the
foregoing, and (c) all proceeds of any of the foregoing
(including all "proceeds" as defined in the Code), whether
constituting Accounts, Chattel Paper, Documents, Equipment,
Fixtures, General Intangibles, Instruments, Inventory or
Investment Property, and insurance proceeds and products
thereof.
"Default" means an event described in Section 5.
"Documents" means all documents of title and goods evidenced
thereby, including, without limitation, all bills of lading,
dock warrants, dock receipts, all "documents" (as defined in
the Code), warehouse receipts and orders for the delivery of
goods, and also any other document which in the regular
course of business or financing is treated as adequately
evidencing that the person in possession of it is entitled
to receive, hold and dispose of such document and the goods
it covers.
"Equipment" means all equipment, machinery, computers,
molds, furniture and goods used or usable by any of the
Grantors in its business and all other goods (other than
Inventory), and all accessions and additions thereto,
including, without limitation, the Fixtures, and all
"equipment" (as defined in the Code).
"Event of Default" shall have the meaning assigned thereto
in the Credit Agreement.
"Fixtures" means all goods of any of the Grantors, which
have been attached to real property in such a manner that
their removal would cause damage to the realty and which
have taken on the character of real property, including,
without limitation, all trade fixtures and all property
which are "fixtures" (as that term is used in the Code).
"General Intangibles" means all intangible personal property
including, without limitation, all contracts, all contract
rights, rights to receive payments of money, choses in
action, judgments, tax refunds and tax refund claims,
inventions, patents, patent applications, trademarks,
trademark applications, trade names, copyrights, copyright
applications, licenses, franchises, leasehold interests in
real or personal property, rights to receive rentals of real
or personal property or payments under letters of credit,
insurance proceeds, know-how, trade secrets, goodwill,
computer software, guarantee claims and
insurance policies, including claims or rights to payment
thereunder, and all "general intangibles" (as defined in the
Code).
"Instruments" means all "instruments" (as defined in the
Code), and other writings which evidence a right to the
payment of money (whether absolute or contingent) and which
are not themselves security agreements or leases and are of
a type which in the ordinary course of business are
transferred by delivery with any necessary endorsement or
assignment, including, without limitation, all checks,
drafts, notes, bonds, debentures, government securities,
certificates of deposit and letters of credit in which any
of the Grantors now has or hereafter acquires any rights.
"Inventory" means all "inventory" (as defined in the Code),
raw materials, work in process, finished goods, returned or
repossessed goods, goods used or consumed in any of the
Grantors' businesses, goods held for sale or lease or
furnished or to be furnished under contracts of service and
goods released to any of the Grantors or to third parties
under trust receipts or similar Documents.
"Investment Property" means a security, whether certificated
or uncertificated (all as defined in the Code), a security
entitlement (as defined in the Code), a securities account
(as defined in the Code), a commodity contract (as defined
in the Code) or a commodity account (as defined in the Code)
and all other "investment property" (as defined in the
Code), and any stock, any dividend or other distribution and
any other right or property which any Grantor shall receive
or shall become entitled to receive for any reason
whatsoever with respect to, in substitution for or in
exchange for any and all shares of stock and other
Investment Property, any right to receive or acquire any
Investment Property, and any right to receive earnings, in
which any Grantor now has or hereafter acquires any right.
"Lien" has the meaning assigned thereto in the Credit
Agreement.
"Loan Documents" has the meaning assigned thereto in the
Credit Agreement.
"Obligations" has the meaning assigned thereto in the Credit
Agreement.
"Permits" means all permits, approvals and authorizations
issued by any federal, state or local governmental authority
or agency, and all modifications and amendments thereto and
all replacement permits, approvals and authorizations
relating to the right of any Grantor to operate its
business.
"Potential Default" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a
Default.
"Section" means a numbered section of this Security
Agreement, unless another document is specifically
referenced.
"Security Agreement" means this Pledge and Security
Agreement, as it may be amended from time to time.
"Security Documents" shall have the meaning assigned thereto
in the Credit Agreement.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
1.2. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned thereto in the
Credit Agreement.
2. GRANT OF SECURITY INTEREST.
Each of the Grantors hereby pledges, assigns and grants a
security interest in, and a right of setoff against, the
Collateral to the Agent for the benefit of the Agent and the
Banks to secure payment, performance and observance of the
Obligations.
3. REPRESENTATIONS AND WARRANTIES.
Each Grantor represents and warrants to the Agent and each
Bank that as of the date hereof:
3.1. Existence and Standing. Such Grantor is duly
incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all
requisite power and authority to conduct its business in
each jurisdiction in which its business is conducted.
3.2. Authorization, Validity and Enforceability. Such
Grantor has the corporate power and authority and legal
right to execute and deliver this Security Agreement and to
perform its obligations hereunder. The execution and
delivery by such Grantor of this Security Agreement has been
duly authorized by proper corporate proceedings, and this
Security Agreement constitutes the legal, valid and binding
obligation of such Grantor enforceable in accordance with
its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject also
to the availability of equitable remedies if equitable
remedies are sought.
3.3. Conflicting Laws and Contracts. Neither the execution
and delivery by such Grantor of this Security Agreement, nor
the creation and perfection of the security interest in the
Collateral, nor compliance with the provisions hereof will
violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on such Grantor or such
Grantor's certificate or articles of incorporation or by-
laws or the provisions of any indenture, instrument or
agreement to which such Grantor is a party or is subject, or
by which it, or its property, is bound, or conflict with or
constitute a default thereunder, or result in the creation
or imposition of any Lien in, of or on the property of such
Grantor pursuant to the terms of any such indenture,
instrument or agreement except any violation or default
which would not have a material adverse effect on the
business, financial condition or operations of such Grantor.
No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or
exemption by, any governmental body or authority, or
subdivision thereof, which has not heretofore been obtained
is required to authorize, or is required in connection with,
the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, this Security
Agreement.
3.4. Principal Location. Such Grantor's mailing address, and
the location of its chief executive office and each location
of any books and records (including, without limitation, all
computer data and related software and source codes)
relating to the Receivables is disclosed in Annex I hereto;
such Grantor has no other places of business except those
set forth in Annex I hereto.
3.5. Property Locations. The Inventory and Equipment of such
Grantor are located solely at the locations described in
Annex I hereto. None of said locations are leased by such
Grantor as lessee except those designated in Annex I hereto.
3.6. No Other Names. Except as listed on Annex II hereto,
such Grantor does not conduct and has not conducted any
trade or business currently conducted by such Grantor under
any name except the name in which it has executed this
Security Agreement.
3.7. No Default. No Default or Potential Default exists.
3.8. Filing Requirements. None of the Equipment pledged by
such Grantor is covered by any certificate of title. The
legal description and street addresses of the properties on
which any Fixtures are located are set forth on Annex III
hereto together with the name and address of the record
owner of each such property.
3.9. No Liens; No Financing Statements. No Liens exist on
all or any portion of the Collateral owned by such Grantor
except the security interest created by this Security
Agreement and the Liens permitted by each of the Loan
Documents. No financing statement describing all or any
portion of the Collateral pledged by such Grantor which has
not lapsed or been terminated naming such Grantor as debtor
has been filed in any jurisdiction except financing
statements (a) naming the Agent as secured party and (b)
covering Liens permitted by each of the Loan Documents.
3.10. Accuracy of Information. No information, exhibit or
report furnished by such Grantor to the Agent or the Banks
in connection with the negotiation of, or compliance with,
this Security Agreement contained any material misstatement
of fact or omitted to state a material fact or any fact
necessary to make the statements contained herein not
misleading.
4. COVENANTS.
From the date of this Security Agreement, and thereafter
until this Security Agreement is terminated, each Grantor
covenants and agrees with the Agent as follows:
4.1. General.
4.1.1. Inspection. Such Grantor will permit the Agent and
each Bank, by their respective representatives and agents,
to inspect the Collateral, to examine and make copies of the
records of such Grantor relating thereto, and to discuss the
Collateral and the records of such Grantor with respect
thereto with, and to be advised as to the same by, such
Grantor's officers and employees, all at such reasonable
times and intervals as the Agent or any Bank may determine,
and, if no Default or Potential Default exists, upon prior
notice to such Grantor. If a Default or Potential Default
shall have occurred and be continuing, the Grantors shall
pay or reimburse the Agent or the Banks for expenses which
it may incur in connection with any such inspection.
4.1.2. Records and Reports. Such Grantor will maintain
complete and accurate books and records with respect to the
Collateral pledged by such Grantor, and furnish to the Agent
such reports relating to such Collateral as the Agent shall
from time to time reasonably request.
4.1.3. Financing Statements and Other Actions. Such Grantor
will execute and deliver to the Agent all financing
statements, amendments thereto, continuation statements in
respect thereof and other documents and take such other
actions (and if so requested by the Agent, use its best
efforts to obtain landlord waivers or other applicable
consents) as are from time to time reasonably requested by
the Agent in order to perfect and to maintain and protect a
first priority (subject only to Liens permitted by each of
the Loan Documents) perfected security interest in the
Collateral pledged by such Grantor or to enable the Agent to
exercise and enforce its rights and remedies hereunder with
respect to such Collateral. Such Grantor will pay all fees
and expenses in connection therewith.
4.1.4. Disposition of Collateral. Such Grantor will not,
without the Agent's prior written consent, sell, assign,
lease or otherwise dispose of the Collateral pledged by such
Grantor, either voluntarily or involuntarily, or enter into
a contract to do any of the foregoing, except for so long as
no Default has occurred and is continuing, (i) sales or
leases of Inventory in the ordinary course of business and
(ii) as otherwise permitted by the Loan Documents.
4.1.5. Liens and Consignment. Such Grantor will not, without
the Agent's prior written consent, (i) create, incur, or
suffer to exist any Lien, either voluntarily or
involuntarily or enter into a contract to do any of the
foregoing, except the security interest created by this
Security Agreement and Liens permitted by the Loan
Documents, (ii) consign all or any portion of the Collateral
or (iii) enter into or assume any agreement containing a
negative pledge which requires a sharing of an interest in
the Collateral, or which prohibits the grant of any such
interest under the Security Documents. Such Grantor
warrants and agrees to defend title to and ownership of the
Collateral pledged by such Grantor and the Lien created by
this Security Agreement against the claims of all persons
and maintain and preserve such Lien at all times during the
term of this Security Agreement.
4.1.6. Change in Location or Name. Such Grantor will not (i)
have any Inventory, Equipment or Fixtures pledged by such
Grantor or proceeds or products thereof (other than
Collateral disposed of as permitted by Section 4.1.4) at a
location other than a location specified in Annex I hereto,
except for Inventory in transit between such locations, (ii)
maintain records relating to the Collateral at a location
other than those locations specified on Annex I as a
location where such records are kept,
(iii) maintain a place of business at a location other than
a location specified on Annex I hereto, (iv) change its
name, or (v) change its mailing address, unless in each case
such Grantor shall have given the Agent at least 30 days'
prior written notice thereof and delivered any financing
statements or other documents requested by the Agent.
4.1.7. Other Financing Statements. Such Grantor will not
sign or authorize the signing on its behalf of any financing
statement naming it as debtor which covers all or any
portion of the Collateral, except financing statements
naming the Agent as secured party and those signed in
respect of Liens permitted by the Loan Documents. Such
Grantor will diligently protect and maintain the secrecy of
all Collateral pledged by such Grantor consisting of
confidential information and will maintain and obtain
patent, trademark, trade name, service mark and copyright
protection of all Collateral for which it would be
advantageous to such Grantor to obtain and maintain such
protection. Such Grantor will immediately notify the Agent
and each Bank of any material loss or depreciation in the
value of the Collateral
taken as a whole.
4.2. Insurance. Such Grantor will (i) maintain fire and
extended coverage insurance on the Inventory and Equipment
pledged by such Grantor as required by the Loan Documents
containing a lender's loss payable clause in favor of the
Agent, designating the Agent as an additional insured and
providing that said insurance will not be terminated or
modified except after at least 30 days' prior written notice
from the insurance company to the Agent and (ii) furnish to
the Agent upon the request of the Agent from time to time
copies of all policies of insurance on such Inventory and
Equipment and duplicate original policies or insurance
binders with respect to such insurance and in the case of
insurance about to expire, furnish duplicate original
certificates and copies of each renewal policy, together
with evidence of full payment of premiums thereon, not less
than ten (10) days prior to their respective dates of
expiration.
4.3. Bailees. If any Inventory or Equipment pledged by such
Grantor is in the possession or control of any warehouseman
or any of such Grantor's processors or other bailees, such
Grantor shall notify such warehousemen, processors and other
bailees in writing (with a copy to the Agent) of the Agent's
security interest therein and, upon the Agent's request,
instruct them to hold all such Inventory and Equipment for
the Agent's account and subject to the Agent's instructions.
4.4. Hot Goods. None of the Inventory pledged by such
Grantor has been or will be produced in violation of any
provision of the Fair Labor Standards Act of 1938, 29 U.S.C.
201 et seq., or in violation of any other law.
5. DEFAULT.
5.1. The occurrence of any one or more of the following
events shall constitute a Default:
5.1.1. Any representation or warranty made by or on behalf
of any of the Grantors in this Security Agreement shall have
been false in any material respect when made.
5.1.2. The breach by any of the Grantors of any of the terms
or provisions of this Security Agreement.
5.1.3. Any material portion of the Collateral shall be lost,
stolen, damaged or destroyed and shall not be covered by
insurance.
5.1.4. Any Event of Default not otherwise described in this
Section 5 shall have occurred and be continuing.
5.1.5. The occurrence and continuance of any default under
any lease, which default continues beyond any period of
grace provided therein, for premises used by any of the
Grantors for the storage, warehousing or maintenance of a
material amount of Inventory or which contains a material
amount of Equipment; provided, however, that the Agent may,
immediately upon such default, enter upon such premises and
take control over such Inventory or Equipment.
5.2. Remedies. If any Default occurs, whether or not all of
the obligations shall have become due and payable, the Agent
on behalf of the Agent and the Banks may:
5.2.1. Obligations That May Be Accelerated. Exercise any or
all of the rights and remedies provided (i) in this Security
Agreement, (ii) to a secured party when a debtor is in
default under a security agreement governed by the Code or
the Uniform Commercial Code as in effect in any other
applicable jurisdiction or (iii) to a secured party when a
debtor is in default by any other applicable law. Without
precluding any other methods of sale, the sale of Collateral
shall be deemed to have been made in a commercially
reasonable manner if conducted in conformity with reasonable
commercial practices of asset-based lenders disposing of
similar property but in any event the Agent may sell on such
terms as the Agent may choose without assuming any credit
risk and without any obligation to advertise or give notice
of any kind not expressly required hereunder.
5.2.2. Contingent Obligations. With respect to Obligations
which are contingent and cannot be accelerated by their
nature, require the Grantors to deposit cash or other
acceptable collateral with the Agent in an amount sufficient
to cover principal and interest which will have accrued by
the respective maturity dates of said Obligations to be held
as security for said Obligations.
5.2.3. Sale or Disposition of Instruments and Investment
Property. Sell, resell, assign, transfer and deliver all or
any part of the Instruments or the Investment Property owned
or held by any of the Grantors and pledged to the Agent
hereunder. Upon such sale, the Agent or any Bank, unless
prohibited by a provision of any applicable statute, may
purchase all or any part of the Instruments or the
Investment Property being sold, free from all trusts,
claims, rights of redemption and equities of the Grantors.
If, at any time when the Agent determines to exercise its
rights to sell all or any part of the Instruments or
Investment Property pursuant to this Section 5.2.3, the sale
thereof shall not be effectively registered or exempt under
the Securities Act of 1933, as amended, the Agent, in its
sole and absolute discretion, is hereby expressly authorized
to sell such Instruments or Investment Property, or any part
thereof, by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable
in order that such sale may be legally effected without such
registration. Without limiting the generality of the
foregoing, the Agent, in its sole and absolute discretion,
may approach and negotiate with a restricted number of
potential purchasers to effect such sale or restrict such
sale to a purchaser or purchasers who will represent and
agree that it or they are purchasing for its or their own
account, for investment only, and not with a view to the
distribution of such Instruments or Investment Property or
any part thereof. Any such sale shall be deemed to be a
sale made in a commercially reasonable manner within the
meaning of the Code and the Grantors hereby consent and
agree that none of the Agent and the Banks shall incur any
responsibility or liability for the Agent's selling all or
any part of the Instruments or Investment Property under
such procedures, notwithstanding the possibility that a
substantially higher price might be realized if registration
was accomplished and a public sale thereof was affected.
5.2.4. Access to Leased Premises. Immediately enter upon any
premises leased by any of the Grantors for the storage,
warehousing or maintenance of Inventory or containing any
Equipment and remove, take possession and dispose of, or
store at another site, such Inventory or Equipment, in the
Agent's sole discretion.
5.2.5. Grant of License to Use Intangibles. Solely for the
purpose of enabling the Agent to exercise rights and
remedies hereunder at such time as the Agent, without regard
to this Section 5.2.5, shall be lawfully entitled to
exercise such rights and remedies, each of the Grantors hereby
grants to the Agent, for the benefit of the Agent and the Banks, an
irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to the Grantors) to
use, assign, license or sublicense any of the General
Intangibles, now owned or hereafter acquired by the
Grantors, and wherever the same may be located, including in
such license reasonable access to all media in which any of
the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout
thereof.
5.3. Debtor's Obligations Upon Default. Upon the request of
the Agent after the occurrence and during the continuance of
a Default, each Grantor will:
5.3.1. Assembly of Collateral. Assemble and make available
to the Agent the Collateral pledged by such Grantor and all
records relating thereto at any reasonable location
specified by the Agent within the continental United States
of America.
5.3.2. Access. Permit the Agent, or the Agent's
representatives and agents, to enter any premises where all
or any part of the Collateral pledged by such Grantor, or
the books and records relating thereto, or both, are
located, to take possession of all or any part of such
Collateral and to remove all or any part of such Collateral.
5.4. Marshaling. The Agent shall have no obligation to
marshal any assets in favor of any Grantor or any other
party or against or in payment of any or all of the
Obligations.
5.5. Collection of Receivables. The Agent may at any time
after the occurrence and during the continuance of a
Default, by giving the Grantors written notice, elect to
enforce collection of any Receivable and to require that the
Receivables be paid directly to the Agent. In such event,
the Grantor or Grantors pledging such Receivables shall, and
shall permit the Agent to, promptly notify the account
debtors or obligors under the Receivables of the Agent's
interest therein and direct such account debtors or obligors
to make payment of all amounts then or thereafter due under
the Receivables directly to the Agent. Upon receipt of any
such notice from the Agent, the Grantor or Grantors pledging
such Receivables shall thereafter hold in trust for the
Agent all amounts and proceeds received by it with respect
to such Receivables and other Collateral, shall segregate
all such amounts and proceeds from other funds of such
Grantor, and shall at all times thereafter promptly deliver
to the Agent all such amounts and proceeds in the same form
as so received, whether by cash, check, draft or otherwise,
with any necessary endorsements.
5.6. Application of Proceeds. The proceeds of any sale or
other disposition of the Collateral shall be distributed and
applied in the following order of priority: first, on
account of all costs and expenses incident to the sale;
second, to the repayment of the Obligations and all other
items which under the terms hereof constitute secured
indebtedness additional to that constituting the
Obligations, with interest thereon as herein provided; and
third, any surplus to the Grantors, their successors or
assigns, or to such other parties, as their rights may
appear. Notwithstanding anything contained in this Section
5.6 to the contrary, proceeds from any sale or other
disposition of the Collateral shall be distributed and
applied in accordance with the terms and conditions of the
Credit Agreement.
After the occurrence and during the continuance of a
Default, the Agent shall have the continuing and exclusive
right to apply or reverse and re-apply any and all payments
to any portion of the Obligations, as set forth in the Credit
Agreement. To the extent that any of the Grantors makes a payment
or payments to the Agent or any Bank or any such party receives any
payment or proceeds of the Collateral, which payment or
proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, receiver or any other
party under any bankruptcy law, state or federal law, common
law or equitable cause, then, to the extent of such payment
or proceeds, the Obligations or part thereof intended to be
satisfied and this Security Agreement shall be revived and
continue in full force and effect, as if such payment or
proceeds had not been received by such party.
6. WAIVERS, AMENDMENTS AND REMEDIES.
No delay or omission of the Agent to exercise any right,
power or remedy granted under this Security Agreement shall
impair such right, power or remedy or be construed to be a
waiver of any Default or an acquiescence therein, and any
single or partial exercise of any such right, power or
remedy shall not preclude other or further exercise thereof
or the exercise of any other right, power or remedy, and no
waiver, amendment or other variation of the terms,
conditions or provisions of this Security Agreement
whatsoever shall be valid unless signed by each of the
parties hereto, and then only to the extent specifically set
forth in such writing. All rights, powers and remedies
contained in this Security Agreement or afforded by law
shall be cumulative and all shall be available to the Agent
and the Banks until the Obligations have been paid in full.
7. GENERAL PROVISIONS.
7.1. Notice of Disposition of Collateral. Except as
specifically set forth herein, each Grantor hereby waives
notice of the time and place of any public sale or the time
after which any private sale or other disposition of all or
any part of the Collateral may be made. To the extent such
notice may not be waived under applicable law, any notice
made shall be deemed reasonable if given to the Grantors as
set forth in Section 8.1, at least 10 days prior to the time
of any such public sale or the time after which any such
private sale or other disposition may be made.
7.2. Compromises and Collection of Collateral. Each Grantor
recognizes that setoffs, counterclaims, defenses and other
claims may be asserted by obligors with respect to certain
of the Receivables, that certain of the Receivables may be
or become uncollectible in whole or in part and that the
expense and probability of success in litigating a disputed
Receivable may exceed the amount that reasonably may be
expected to be recovered with respect to a Receivable. In
view of the foregoing, each Grantor agrees that the Agent
may, at any time and from time to time if a Default has
occurred and is continuing, compromise with the obligor on
any Receivable, accept in full payment of any Receivable
such amount as the Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by
the Agent shall be commercially reasonable so long as the
Agent acts in good faith based on information known to it at
the time it takes any such action.
7.3. Performance of Debtor Obligations. Without having any
obligation to do so, upon the occurrence and during the
continuance of any Default or Potential Default, the Agent
may perform or pay any obligation which the Grantors have
agreed to perform or pay in this Security Agreement but has
not performed or paid on a timely basis in accordance with
the provisions of this Security Agreement and the Grantors
shall reimburse the Agent for any amounts paid or incurred
pursuant to this Section 7.3. The Grantors' obligation to
reimburse pursuant to the preceding sentence shall be a joint
and several obligation of the Grantors and shall constitute an
Obligation payable on demand.
7.4. Authorization To Take Certain Action. Each Grantor
irrevocably authorizes the Agent at any time and from time
to time in the sole discretion of the Agent, and appoints
the Agent as its attorney-in-fact to act on behalf of such
Grantor, in the name of such Grantor or otherwise, from time
to time in the Agent's discretion: (i) to execute on behalf
of such Grantor as debtor and to file financing statements
necessary or desirable in the Agent's sole discretion to
perfect and to maintain the perfection and priority of the
Agent's security interest in the Collateral; (ii) during the
continuance of a Default, to endorse, deposit and collect
any cash, Instruments and other proceeds of the Collateral;
(iii) to file a carbon, photographic or other reproduction
of this Security Agreement or any financing statement with
respect to the Collateral as a financing statement in such
offices as the Agent in its sole discretion deems necessary
or desirable to perfect and to maintain the perfection and
priority of the Agent's security interest in the Collateral;
(iv) during the continuance of a Default, to enforce payment
of the Receivables in the name of the Agent or such Grantor;
(v) to cause the proceeds of any Collateral received by the
Agent to be applied to the Obligations; (vi) during the
continuance of a Default, to sign such Grantor's name on any
invoice or bill of lading relating to any Receivable, on
drafts against customers, on schedules and assignments of
Receivables, on notices of assignment, financing statements
and other public records, on verification of accounts and on
notices to customers; (vii) during the continuance of a Default,
to notify the post office authorities to change the address for delivery
of such Grantor's mail to an address designated by the
Agent, and to receive, open and dispose of all mail
addressed to such Grantor; (viii) during the continuance of
a Default, to send requests for verification of Receivables
to customers or account debtors; and (ix) during the
continuance of a Default, to take any action and to execute
any instrument which the Agent may deem necessary or
advisable to accomplish the purposes of this Security
Agreement. Each Grantor ratifies and approves all acts of
such attorney-in-fact. The Agent will not, absent gross
negligence or willful misconduct, be liable for any acts or
omissions nor for any error of judgment or mistake of fact
or law. The power conferred on the Agent hereunder is
solely to protect its interests in the Collateral and shall
not impose any duty upon the Agent to exercise such power.
This power, being coupled with an interest, is irrevocable
until Obligations have been fully paid and satisfied and all
Commitments have been terminated.
7.5. Specific Performance of Certain Covenants. Each Grantor
acknowledges and agrees that a breach of any of the
covenants contained in Sections 4.1.4, 4.1.5, 4.1.6, 4.3,
5.3, 5.5 and 5.6 will cause irreparable injury to the Agent
and the Banks, no adequate remedy at law will exist in
respect of such breaches, and therefore agrees, without
limiting the right of the Agent to seek and obtain specific
performance of other obligations of such Grantor contained
in this Security Agreement, that the covenants of such
Grantor contained in the Sections referred to in this
Section 7.5 shall be specifically enforceable against such
Grantor.
7.6. Use and Possession of Certain Premises. Upon the
occurrence and during the continuance of a Default, the
Agent or its agents or representatives shall be entitled to
occupy and use any premises owned or leased (to the extent
permitted by any lease) by the Grantors where any of the Collateral
or any records relating to the Collateral are located until the
Obligations are paid and all Commitments are terminated or until the
Collateral is removed therefrom, whichever occurs first,
without any obligation to pay the Grantors for such use and occupancy.
7.7. Dispositions of Collateral.
7.7.1. Dispositions Not Authorized. The Grantors are not
authorized to sell or otherwise dispose of the Collateral
except as set forth in Section 4.1.4 and notwithstanding any
course of dealing between the Grantors or any of them and
any one or more of the Agent and the Banks or other conduct
of any one or more of the Agent and the Banks, no
authorization to sell or otherwise dispose of the Collateral
shall be binding upon the Agent unless such authorization is
in writing signed by the Agent.
7.7.2. Authorized Dispositions. Upon a sale or other
disposition of the Collateral expressly permitted by Section
4.1.4, the Agent will, at the expense of the Grantors and in
accordance with the provisions of the Credit Agreement,
execute and deliver to the Grantors such documents (without
recourse, representation or warranty) as the Grantors shall
reasonably request to evidence the release of such Collateral.
7.8. Release. (a) Any one or more of the Grantors may
request the Agent to release all of the Collateral on or
after the date on which (i) all of the Obligations shall
have been paid to, or in the case of any Obligations which
shall then not be due and payable, secured to the
satisfaction of, the Banks and the Agent, (ii) all
Commitments of the Banks under any Loan Document shall have
been terminated and (iii) all accrued and unpaid fees, costs
and expenses of the Agent shall have been paid in full.
(b) Any Grantor may request the Agent to release all or a
portion of the Collateral pursuant to, and in accordance
with, the terms of the Credit Agreement.
7.9. Definition of Certain Terms. Terms defined in the Code
which are not otherwise defined in this Security Agreement
are used in this Security Agreement as defined in the Code
as in effect on the date hereof.
7.10. Benefit of Agreement. The terms and provisions of this
Security Agreement shall be binding upon and inure to the
benefit of each of the Grantors, the Agent and the Banks and
their respective successors and assigns, except that no
Grantor shall have the right to assign its rights or
obligations under this Security Agreement, or any interest
herein, without the prior written consent of the Agent.
7.11. Survival of Representations. All representations and
warranties of the Grantors contained in this Security
Agreement shall survive the execution and delivery of this
Security Agreement.
7.12. Taxes and Expenses. Any taxes (other than taxes on the
overall net income of the Agent or any Bank) payable or
ruled payable by Federal or State authority in respect of
this Security Agreement shall be paid by the Grantors,
together with interest and penalties, if any. The Grantors
shall reimburse the Agent and each Bank for any and all of
the costs and expenses (including all reasonable fees of
attorneys for said parties, which attorneys may be employees
of said parties) paid or incurred by the Agent or such Bank
in connection with the amendment, modification, collection
and enforcement of this Security Agreement and after the occurrence
and during the continuance of a Default, in the audit, analysis,
administration, collection, preservation or sale of the
Collateral (including the expenses and charges associated
with any periodic or special audit of the Collateral). If a
Default shall have occurred, the Grantors shall reimburse
the Agent and each Bank for any and all costs and expenses
(including all reasonable fees of attorneys for said
parties, which attorneys may be employees of said parties)
in connection with such Default and collection or other
proceedings resulting therefrom.
7.13. Headings. The title of and section headings in this
Security Agreement are for convenience of reference only,
and shall not govern the interpretation of any of the terms
and provisions of this Security Agreement.
7.14. Termination. This Security Agreement shall continue in
effect until no Obligation (other than contingent
liabilities under any indemnity or similar provision herein
or any Loan Documents, if no indemnifiable claim is pending
or threatened) shall be outstanding and all Commitments have
been terminated. Upon the termination of this Security
Agreement, the Agent will, at the expense of the Grantors,
execute and deliver to the Grantors such documents (without
recourse, representation or warranty) as the Grantors shall
reasonably request to evidence the termination of this
Security Agreement and the release of the Collateral.
7.15. Choice of Law. This Security Agreement shall be
construed in accordance with the internal laws (as opposed
to conflicts of law provisions) of the State of Indiana
applicable to contracts made and performed wholly in
Indiana.
7.16. Distribution of Reports. Each Grantor authorizes the
Agent and each Bank to discuss with and furnish to any other
person or entity having an interest in the Obligations
(whether as a guarantor, pledgor of collateral, assignee,
participant or otherwise), all financial statements, audit
reports and other information pertaining to such Grantor and
its Subsidiaries, whether such information was provided by
such Grantor or prepared or obtained by the Agent or any
Bank. Neither the Agent or any Bank nor any of their
employees, officers, directors or agents makes any
representation or warranty regarding any audit reports or
other analyses of the Grantor's and their Subsidiaries'
condition which any person may prepare and elect to
distribute, nor shall the Agent or any Bank or any of their
employees, officers, directors or agents be liable to any
person or entity receiving a copy of such reports or
analyses for any inaccuracy or omission contained in or
relating thereto.
7.17. Amendment. No amendment or modification of any
provision of this Security Agreement shall be effective
without the written agreement of the Agent and each of the
Grantors and no termination or waiver of any provision of
this Security Agreement or consent to any departure by the
Grantors therefrom shall in any event be effective without
the written concurrence of the Agent.
7.18. Indemnity. Each Grantor hereby agrees to assume
liability for, and does hereby agree to indemnify and keep
harmless the Agent and each of the Banks and their
respective successors, assigns, agents and employees (the
"Indemnified Parties"), from and against any and all
liabilities, damages, penalties, suits, costs, and expenses
of any kind and nature, imposed on, incurred by or asserted
against the Indemnified Parties (or any of them), in any way
relating to or arising out of this Security Agreement,
or the manufacture, purchase, acceptance, rejection,
ownership, delivery, lease, possession, use, operation,
condition, sale, return or other disposition of any
Collateral (including, without limitation, latent and other
defects, whether or not discoverable by any Indemnified
Party or any Grantor, and any claim for patent, trademark or
copyright infringement); excluding as to any particular
Indemnified Party any and all liabilities, damages,
penalties, suits, costs, and expenses of such Indemnified
Party to the extent they have arisen or resulted from the
gross negligence or willful misconduct of such Indemnified
Party. Any amounts payable under the foregoing indemnity
shall constitute Obligations. As long as no Default is
continuing, the Grantors shall be entitled to assume and
conduct the defense of indemnified claims brought by Persons
other than the Agent or any Bank as long as such defense is
promptly assumed and diligently pursued and if the counsel
retained for such defense is reasonably acceptable to the
Indemnified Parties. The obligations of the Grantors under
this Section shall survive the termination of this Security
Agreement.
7.19. Waivers. Each Grantor hereby waives presentment and
protest of any instrument and notice thereof, notice of
default and, except as otherwise expressly provided herein,
all other notices to which such Grantor might otherwise be
entitled. Failure by the Agent or any Bank to exercise any
right, remedy or option under this Security Agreement or any
other agreement between the parties hereto, or delay by the
Agent or any Bank in exercising the same, will not operate
as a waiver; no waiver by the Agent or any Bank will be
effective unless it is in writing, and then only to the
extent specifically stated, and no waiver by the Agent or
any Bank on any occasion shall affect or diminish such
party's right thereafter to require strict performance by
the Grantors with any provision of this Security Agreement.
7.20. Cumulative Remedies. The Agent's rights and remedies
under this Security Agreement will be cumulative and not
exclusive of any other right or remedy which Agent may have.
7.21. Entire Agreement. This Security Agreement embodies the
entire agreement and understanding of the parties hereto
relating to the Collateral and the subject matter hereof and
supersedes all prior and contemporaneous written and oral
agreements and understandings of the parties hereto.
7.22. Partial Invalidity. The parties hereto intend and
believe that each provision in this Security Agreement
complies with all applicable local, state and federal laws
and judicial decisions. However, if any provision or
provisions, or if any portion of any provision or
provisions, in this Security Agreement are found by a court
of competent jurisdiction to be in violation of any
applicable local, state or federal ordinance, statute, law,
administrative or judicial decisions or public policy, and
if such court should declare such portion, provision or
provisions of this Security Agreement to be illegal,
invalid, unlawful, void or unenforceable as written, then it
is the intent of the parties hereto that such portion,
provision or provisions shall be given force to the fullest
possible extent that it or they are legal, valid and
enforceable, that the remainder of this Security Agreement
shall be construed as if such illegal, invalid, unlawful,
void or unenforceable portion, provision or provisions were
not contained herein, and that the rights, obligations and
interests of the parties hereto under the remainder of this
Security Agreement shall continue in full force and effect.
7.23. Waivers; Consents. To the fullest extent permitted by
law, each Grantor does hereby (i) consent to all extensions
and renewals of the Obligations; (ii) consent to the addition,
release or substitution of any Person liable on all or any
portion of the Obligations; (iii) waive all demands, notices
and protests of any action taken by the Agent or any Bank
pursuant to this Security Agreement or in connection with
the Obligations; (iv) waive any indulgence by the Agent or
the Banks; (v) consent to any substitutions for, exchanges
of or releases of the collateral or any portion thereof;
(vi) waive notice prior to taking possession or control of
the Collateral or any bond or security which might be
required by any court prior to allowing the Agent to
exercise any of the Agent's remedies, including the issuance
of an immediate writ of possession, except as expressly
required in any of the Loan Documents; (vii) waive any
marshalling of assets, or any right to compel the Agent to
resort first to any collateral or other Persons before
pursuing such Grantor for payment of the Obligations; (viii)
waive the benefit of all valuation, appraisement and
exemption laws; and (ix) waive notice of acceptance hereof.
Each Grantor acknowledges that the foregoing consents and
waivers are a material inducement to the Agent's and the
Banks' entering into the Credit Agreement and that the Agent
and the Banks are relying upon the foregoing consents and
waivers.
7.24. WAIVER OF CLAIMS. EXCEPT AS OTHERWISE PROVIDED IN THIS
SECURITY AGREEMENT, EACH GRANTOR HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL
HEARING IN CONNECTION WITH THE AGENT'S TAKING POSSESSION OR
THE DISPOSITION OF ANY OF THE COLLATERAL INCLUDING, WITHOUT
LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH
GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, AND EACH
GRANTOR HEREBY FURTHER WAIVES:
(a) all damages occasioned by such taking of possession
except any damages which are the direct result of the
Agent's gross negligence or willful misconduct;
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement
of the Agent's rights hereunder if the Grantors have been
given ten (10) days' notice of such terms and conditions of
the enforcement of the Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any
applicable law in order to prevent or delay the enforcement
of this Security Agreement or the absolute sale of the
Collateral or any portion thereof, and each Grantor, for
itself and all Persons who may claim under it, insofar as it
or they now or hereafter lawfully may, hereby waives the
benefit of all such laws.
Any sale of, or the grant of options to purchase, or any
other realization upon, any Collateral shall operate to
divest all right, title, interest, claim and demand, either
at law or in equity, of the Grantors therein and thereto,
and shall be a perpetual bar both at law and in equity
against the Grantors and against any and all persons
claiming or attempting to claim the Collateral so sold,
optioned or realized upon, or any part thereof, from,
through and under the Grantors.
8. NOTICES; COUNTERPARTS.
8.1. Notices. Any request, demand or other notice required
or permitted to be given under this Security Agreement shall
be in writing and may be, and shall be deemed, given and
sent the next succeeding business day after timely delivery
to the courier, if sent by overnight courier; the fifth business
day after deposit in the United States mail, postage
prepaid, if mailed; at the time delivered by hand,
if personally delivered; when receipt is
acknowledged, if telecopied, addressed:
If to a Grantor, to:
[Name of Grantor]
c/o Quality Dining, Inc.
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Attention:President
Fax No.:(219) 243-4377
If to the Agent, to:
Chase Bank of Texas, National Association
712 Main Street, 4 CBBN 59
Houston, Texas 77002-8059
Attention: Manager, Franchise System Finance
By facsimile: (713) 216-6710
If to any Bank, to the address set forth in the
Credit Agreement.
and/or to such other respective address or addresses
as may be designated by notice given in accordance
with the provisions of this Section 8.1.
8.2. Counterparts. This Security Agreement may be
executed in any number of counterparts, each of such
counterparts shall constitute an original and all of
which taken together shall constitute one agreement.
Any of the parties hereto may execute this Security
Agreement by signing any such counterpart. The
failure of any Subsidiary to execute a counterpart
hereof shall not affect or impair the validity or
enforceability of this Security Agreement against any
Grantor executing this Security Agreement.
9. COLLATERAL AGENT.
9.1. Each Grantor acknowledges that the Agent is
acting as collateral agent for the benefit, security
and protection of the Banks according to the terms
and subject to the conditions set forth in the Credit
Agreement.
IN WITNESS WHEREOF, each Grantor has executed this
Security Agreement as of the date first above
written.
QUALITY DINING, INC. GAGHC, INC.
By: __________________________________ By:_____________________________
John C. Firth, Executive Vice President David M. Findlay, Vice President
General Counsel and Secretary
BRAVOKILO, INC. SOUTHWEST DINING, INC.
By: __________________________________ By:_____________________________
John C. Firth, Executive Vice President John C. Firth,Executive Vice
General Counsel and Secretary President
GRAYLING CORPORATION FULL SERVICE DINING, INC.
By:_______________________________ By:__________________________
John C. Firth, Executive Vice President John C. Firth, Executive Vice
General Counsel and Secretary President
GRADY'S AMERICAN GRILL
RESTAURANT CORPORATION GAGLC, INC.
By:_______________________________ By:__________________________
David M. Findlay, President Robert C. Hudson II,
President
GRADY'S AMERICAN GRILL, LP GRADY'S INC.
By: Grady's American Grill Restaurant By:__________________________
Corporation, as general partner John C. Firth, Executive Vice
President, General Counsel and
Secretary
By:______________________________
David M. Findlay, President
Accepted:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as Agent
By: ____________________________
Title: ___________________________
EXHIBIT 1
[Form of Counterpart Signature Page to Security Agreement]
By signing below [each of] the undersigned becomes a
Grantor under the Pledge and Security Agreement dated
as of September 11, 1998 [, as amended] (the
"Security Agreement"), to which this signature page
is attached and made a part of and agrees to be bound
by the terms of the Security Agreement.
[Name of Grantor]
Date:_________________________ By:____________________
Title:_________________
ANNEX I
LOCATIONS
Chief Executive Office and Mailing Address: See Attached
Location of Receivables Records: See Attached
Location of Inventory and Equipment: See Attached
ANNEX II
FICTITIOUS NAMES
See Attached
ANNEX III
LOCATION OF FIXTURES
(including legal description and names of record owners)
See attached.
Exhibit 4-C (iii)
REAFFIRMATION OF SUBSIDIARY GUARANTY
Each of the undersigned (a "Guarantor"), a guarantor of all
the indebtedness outstanding and unpaid at any time of
QUALITY DINING, INC., an Indiana corporation, and GAGHC,
Inc., a Delaware corporation (the "Borrowers"), under that
certain Amended and Restated Revolving Credit Agreement
dated as of April 26, 1996, as amended by the First
Amendment to Amended and Restated Revolving Credit Agreement
dated as of November 7, 1996, the Waiver and Amendment dated
as of September 16, 1997 and the Second Amendment to Amended
and Restated Credit Agreement dated as of October 9, 1997
(together, the "Existing Credit Agreement") by and between
the Borrowers, the Banks party thereto and Chase Bank of
Texas, National Association (f/k/a Texas Commerce Bank
National Association), as Agent, hereby acknowledges and
consents to the execution and delivery by the Borrowers of
that certain Second Amended and Restated Revolving Credit
Agreement dated as of September 11, 1998 (the "Credit
Agreement") between the Borrowers, the Banks party thereto
(the "Banks"), Chase Bank of Texas, National Association, as
Administrative Agent (the "Administrative Agent") and NBD
Bank, N.A, as Documentation Agent, amending and restating
the Existing Credit Agreement, and those certain promissory
notes (the "Notes") in an aggregate principal amount of up
to One Hundred Thirty Million Dollars ($130,000,000) issued
by the Borrowers in favor of the Banks under the Credit
Agreement (which Notes amend, restate and replace in their
entirety those certain promissory notes issued under the
Existing Credit Agreement) and all other documents,
certificates, agreements and instruments executed in
connection therewith. Each of the undersigned acknowledges
that an executed (or conformed) copy of the Credit Agreement
has been made available to its principal executive officers
and such officers are familiar with the contents thereof.
Each Guarantor hereby confirms that the execution by the
Borrowers of the Credit Agreement and the Notes and all
other documents, certificates, agreements and instruments
contemplated thereby shall in no way diminish or extinguish
the liability of the Guarantor under that certain Subsidiary
Guaranty (the "Guaranty") dated as of December 21, 1995
executed by the Guarantor in favor of The Northern Trust
Company, as predecessor agent, for the benefit of the Banks.
Each of the undersigned acknowledges and affirms to the
Administrative Agent and the Banks that the undersigned is
and shall be primarily liable for the indebtedness of the
Borrowers to the Banks now or hereafter outstanding and
unpaid at any time the Banks seek to recover against such
Guarantor under the Guaranty, including without limitation
the liabilities and obligations of the Borrowers to the
Banks under the Credit Agreement and the Notes pursuant to
and in accordance with the terms of the Guaranty. Each of
the undersigned hereby acknowledges and agrees that the
Notes, all Advances now outstanding or hereafter made under
the Credit Agreement, and all amounts now or hereafter owing
to the Administrative Agent and the Banks under or pursuant
to the Credit Agreement shall be secured under and pursuant
to the Note Pledge Agreement, the Pledge Agreement, the
Security Agreement and each and every other Security
Document and that all references therein to the "Credit
Agreement" shall be deemed a reference to the Credit
Agreement and all capitalized terms not otherwise defined
therein shall have the meanings ascribed thereto in the
Credit Agreement. To the fullest extent permitted by law,
each of the undersigned does hereby (i) consent to all
extensions and renewals of the Obligations; (ii) consent to
the addition, release or substitution of any person liable
on any portion of the Obligations; (iii) waive all demands,
notices and protests of any action taken by the
Administrative Agent pursuant to the Loan
Documents or in connection with the Obligations; (iv) waive
any indulgence by the Administrative Agent or any Bank; (v)
consent to any substitutions for, exchanges of or releases
of the collateral or any portion thereof for the
Obligations; (vi) waive notice prior to taking possession or
control of the collateral or any bond or security which
might be required by any court prior to allowing the
Administrative Agent to exercise any of its remedies,
including the issuance of an immediate writ of possession,
except as expressly required in any of the Loan Documents;
(vii) waive any marshalling of assets, or any right to
compel the Administrative Agent to resort first to any
collateral or other persons before pursuing any of the
undersigned for payment of the Obligations; (viii) waive the
benefit of all valuation, appraisement and exemption laws;
and (ix) waive notice of acceptance hereof.
Each of the Guarantors also hereby acknowledges and agrees
that the Administrative Agent and the Banks are relying upon
this Reaffirmation of Subsidiary Guaranty in extending any
loans or other credit to the Borrowers under the Credit
Agreement and the Notes.
IN WITNESS WHEREOF, each Guarantor has caused this
Reaffirmation of Subsidiary Guaranty to be executed and
delivered as of the 11th day of September, 1998.
BRAVOKILO, INC. SOUTHWEST DINING, INC.
4220 Edison Lakes Parkway 4220 Edison Lakes Parkway
Mishawaka, Indiana 46545 Mishawaka, Indiana 46545
By:______________________ By:______________________
Name: John C. Firth Name: John C. Firth
Title: Executive Vice President Title: Executive Vice President
GRAYLING CORPORATION FULL SERVICE DINING, INC.
4220 Edison Lakes Parkway 4220 Edison Lakes Parkway
Mishawaka, Indiana 46545 Mishawaka, Indiana 46545
By:--------------------- By: ______________________
Name: John C. Firth Name: John C. Firth
Title: Executive Vice President Title: Executive Vice President
GRADY'S AMERICAN GRILL GAGLC, INC.
RESTAURANT CORPORATION 4220 Edison Lakes Parkway
4220 Edison Lakes Parkway Mishawaka,Indiana 46545
Mishawaka, Indiana 46545
By:_____________________ By:______________________
Name: David M. Findlay Name: Robert C. Hudson II
Title: President Title:President
GRADY'S AMERICAN GRILL, LP GRADY'S INC.
4220 Edison Lakes Parkway 4220 Edison Lakes Parkway
Mishawaka, Indiana 46545 Mishawaka, Indiana 46545
By: Grady's American Grill Restaurant By:_______________________
Corporation, as general partner
Name:John C. Firth
Title:Executive Vice President
By:____________________________
Name: David M. Findlay
Title: President
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