Exhibit (a)(1)(I)
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FOR IMMEDIATE RELEASE
CONTACT
Lawrence E. Dennedy
MacKenzie Partners, Inc.
212-929-5500
NBO, LLC AND QDI ACQUISITION LLC EXTEND TENDER OFFER FOR QUALITY DINING AND
WITHDRAW A CONDITION TO THEIR TENDER OFFER.
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Southfield, Michigan -- June 5, 2000. NBO, LLC and its subsidiary, QDI
Acquisition LLC, today announced that their tender offer for all outstanding
shares of common stock of Quality Dining, Inc. (Nasdaq: QDIN) at $5.00 per share
in cash has been extended until 5:00 p.m. New York City time on Monday, July 10,
2000. A total of 3,222,706 shares had been tendered through June 5, 2000.
NBO's David Schostak commented: "In view of the fact that the Company has so far
refused to lift the poison pill and comply with other conditions to closing our
tender that are within its control, we are extremely pleased by this shareholder
response. We believe shareholders are sending a strong message that they want
the right to decide for themselves whether to sell their shares to us."
Mr. Schostak added: "We have received numerous calls from individual investors
seeking to tender at $5.00 per share. We urge the Board to agree publicly that
if shareholders tender a number of shares which, when added to ours, represent a
majority of all shares, the Company will cooperate with us and take such steps
as are within its control to satisfy the conditions to closing. I believe that
if they received such assurance, the shareholder response to our offer would be
overwhelming."
QDI Acquisition and NBO, LLC, also announced that NBO sent a letter to the Board
of Directors of Quality Dining, Inc. indicating, among other things, that the
"QDI Indebtedness Condition," to their $5.00 per share cash tender offer for all
Quality Dining stock was being withdrawn. This condition, which was dropped in
response to the Company's publicly expressed concerns, would have allowed NBO
not to close its offer if Quality Dining was in default under the terms of any
of its indebtedness. David W. Schostak, on behalf of NBO, stated, "As expressed
in our letter to the Board, we believe that the Company's concerns were more
smokescreen than substance. We have now addressed what the Quality Dining Board
presented as a principal reason for its failure to support our $5.00 per share
tender offer. Shareholders can now tender their shares without risk that
appropriate consents would not be obtained. We hope that the Board will see the
light and do what's right for the shareholders: agree to support the offer if
the shareholders vote to accept it by tendering their shares."
The letter also described to the Quality Dining Board of Directors why NBO
believes that $5.00 per share represents a viable alternative to a continued
investment in Quality Dining given the price of the stock notwithstanding the
opinion of the financial advisor hired by the Board. Mr. Schostak said, "the
advisor's opinion was based on projections provided by management that the
advisor simply assumed were capable of being achieved. We think shareholders
should have the right to choose between a continued investment in the Company's
long-term strategy or receiving $5.00 per share in cash now."
A copy of the letter is attached.
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The tender offer is conditioned upon, among other things: (a) there being
validly tendered and not withdrawn before the expiration of the Offer shares of
common stock of Quality Dining that, when added to the shares owned by QDI
Acquisition and NBO, would represent at least a majority of the outstanding
shares of Quality Dining on a fully diluted basis on the date of the purchase;
(b) that Quality Dining's Board of Directors redeem the Shareholder Rights or
make them inapplicable to QDI Acquisition's offer; (c) that the Quality Dining
Board approve the acquisition of shares by QDI Acquisition in the offer, or that
QDI Acquisition otherwise be satisfied that the proposed merger can occur under
Chapter 43 of the Indiana Business Corporation Law, as soon as practicable
following consummation of the offer; (d) that the Quality Dining Board approve
an amendment to Quality Dining's By-laws or otherwise ensure that QDI
Acquisition will be able to vote its shares acquired in the offer without
restriction or limitation under Chapter 42 of the Indiana BCL; (e) that QDI
Acquisition, in its reasonable discretion, be satisfied that the proposed merger
can be consummated without a supermajority vote of Quality Dining's shareholders
pursuant to Article VIII of Quality Dining's Restated Articles of Incorporation;
and (f) that the Quality Dining Board agree to cause a majority of the Board of
Directors to be comprised of representatives of QDI Acquisition and/or NBO
immediately following consummation of the offer.
The information agent for the tender offer is MacKenzie Partners, Inc.
(212) 929-5500.
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NBO, LLC
25800 NORTHWESTERN HIGHWAY
SUITE 750
SOUTHFIELD, MICHIGAN 48075
TEL. (248) 262-1000 FAX (248) 357-6116
June 5, 2000
BY FACSIMILE AND FEDERAL EXPRESS
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Board of Directors
Quality Dining, Inc.
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Dear Directors:
"The Company's fundamental business strategy," you wrote in Quality Dining's
Annual Report "is to maximize cash flow . . . through proven operating
management, reduce debt and appropriately grow. . . ." These words were quoted
not from your most recent Annual Report, but from the Annual Report for the
fiscal year ended October 26, 1997, a date marking the end of the last extended
period during which Quality Dining stock sustained and closed at trading levels
above $5 per share. You repeated this language unchanged in your Annual Report
for fiscal 1998. This message is, indeed, striking in its similarity to the
message you continue to deliver to shareholders even though the Company's
strategy has resulted in a plummet of Quality Dining's stock price from these
former levels to $2.03 per share by April 18, 2000, the day we announced that we
intended to launch our tender offer.
On May 22, 2000 your chairman and Quality Dining's Chief Executive Officer, Dan
Fitzpatrick, wrote that we, in offering shareholders the ability to sell their
shares at a higher price than he has realized for them in years, have offered
nothing new. Your failure (and Dan's) to acknowledge publicly the significant
value that we indeed offer shareholders is highlighted by Dan's action, with
your authorization, in purchasing 65,000 shares during April 2000 for an average
price of $2.27 per share - while you keep in place restrictions that prevent
shareholders from selling their stock to us for $5.00 per share. In his May 22
letter, Dan ignored this inequity and his own buying on the cheap and again
referenced a "long-term strategy." Dan stated that this strategy is "beginning
to produce results." Results for whom? When will the "results" of the strategy
repeated to us year after year be reflected in a stock price exceeding $5.00 per
share? WE BELIEVE THAT THE BOARD OF DIRECTORS SHOULD LET SHAREHOLDERS DECIDE
WHETHER TO SELL THEIR QUALITY DINING STOCK TO US AND NOT OBSTRUCT THEIR DECISION
BY KEEPING IN PLACE A "POISON PILL" AND OTHER RESTRICTIONS THAT EFFECTIVELY
PREVENT US FROM BUYING THEIR SHARES. SHAREHOLDERS COULD THEN EXERCISE THEIR OWN
FREEDOM OF CHOICE AND DECIDE WHETHER TO HOLD THEIR SHARES, IF THEY BELIEVE IN
DAN'S LONG-TERM STRATEGY, OR SELL THEM TO US FOR $5.00 PER SHARE IN CASH.
We have carefully considered Dan's May 22 letter and reviewed your simultaneous
filing with the Securities and Exchange Commission. I believe that we share the
feelings of our fellow shareholders when we say we are disappointed in you as a
board. WE BELIEVE THAT YOU HAVE NOT ACTED IN A MANNER THAT SERVES THE BEST
INTERESTS OF QUALITY DINING AND ITS SHAREHOLDERS. Rather, we believe that the
Board continues to protect the privileged positions of management while ignoring
its failed business strategy and preventing shareholders from seriously
considering our alternative - $5.00 per share in cash. Indeed your constant
refrain that the shareholders rejected our $5.00 per share cash merger proposal
because the incumbent directors were elected at this year's Annual Meeting is
blatantly false: you were elected only after promising that the Board would
fairly consider our offer after the Annual Meeting. As we feared, however, you
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then rejected that merger proposal without any indication that you gave it
serious consideration.
With regard to our cash tender offer, we object in the most strenuous way
possible to your misleading and transparent claim that our tender offer is
"illusory." The time has come to set the record straight:
RIGHT PRICE. We believe that $5.00 per share is a full and fair price for the
Company's stock. Not only does it represent a tremendous premium over market
price, but the "fairness" opinion on which you relied to justify your rejection
of our offer cannot withstand analysis. Among other things, the bulk of the
$385,000 fee (equivalent to nearly one-quarter of the Company's net income) you
paid to your advisor for this opinion was payable only after you heard the
results of this opinion - obviously compromising the independence of the
advisory firm. Perhaps more importantly, your advisor based its opinion on
projections provided strictly by you that it "assumed" were capable of being
achieved. Your advisor did not opine as to the reasonableness of these
projections, you have not publicly released them to shareholders, and you have
not commented on what price you believe would be "fair" to shareholders from a
financial point of view. Finally, we note that you granted this advisor the
right to act as "exclusive financial advisor" in connection with any proposed
acquisition of the Company, an engagement that can be terminated by the Company
at will. We believe that this "carrot" also could influence the advisor's
judgment. In any event, WE REMAIN CONVINCED THAT THE PRICE WE OFFER WILL NOT BE
ACHIEVED IN THE MARKETPLACE IN THE REASONABLY FORESEEABLE FUTURE BY A
CONTINUATION OF MANAGEMENT'S (UNSUCCESSFUL) STRATEGY.
RIGHT TIME. Management has offered no new strategy to stem the Company's lagging
stock price. Thus, we have no reason to believe that tangible results will be
seen in the foreseeable future from management's stated strategy of maximizing
cash flow, reducing debt and slow growth - which strategy has not produced any
tangible benefit to shareholders for years. OUR ALTERNATIVE IS SIMPLE - WE OFFER
CASH. NOW.
NOT UNLIKELY TO SUCCEED. Since we announced our intention to launch our tender
offer, Quality Dining's stock price has increased by over 60%. While no one is
capable of predicting the future, especially where the markets are concerned, we
believe that all of this increased value represents investors' belief that our
tender offer will not fail. In fact, we are astounded at the hollow and poorly
reasoned suggestions you have made concerning the ability of our tender offer to
succeed. After all, we have shown you a firm $55 million bank commitment. As
discussed below, we believe that none of the financial issues that you have
raised is legitimate, but we will revise our tender offer to assuage the
Company's alleged concerns that we can simply walk away because of the "QDI
Financing Condition."
Standard Credit and Franchise Agreement Terms. You correctly point out that your
revolving credit and franchise agreements contain standard language giving your
banks and franchisors the right to terminate these agreements upon a change of
control. You have failed, however, to suggest any reason why any of these
parties would be inclined to exercise this right simply because management
shifted from current management to new management put in place by NBO. In
addition, you failed to present to shareholders critical information about our
experience as franchisees that gives us reason to believe that these termination
rights would not be exercised.
Qualified and Experienced Franchisees. As we know Dan is aware, businesses
operated by the Schostaks have been Burger King franchisees for nearly 20 years.
We currently operate 69 Burger King restaurants as franchisees and believe that
our relations with the Burger King Corporation are good. Indeed, as you may be
aware, our Burger King affiliate was selected by Burger King Corporation as one
of only four U.S. winners of the prestigious Burger King Development Excellence
Award for 2000. In addition, we are familiar with the objective and subjective
criteria applied in evaluation of potential franchisees. In fact, we have
purchased many Burger King Restaurants from numerous other franchisees as well
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as from the Burger King Corporation and, in each and every instance, were
approved as franchisees without delay. We are confident that we will receive
appropriate Burger King consents. Similarly, in view of our experience in the
industry, we believe that consents would be granted in the case of the Company's
Chili's restaurants as well. Indeed, we believe that the risk of any failure to
acquire such consents is so low that we did not condition our tender offer, as
we believe other bidders might have done, on receipt of such consents. We
believe that you do shareholders a grave disservice to suggest that these
termination clauses should be a significant factor in deciding whether they
should tender their shares to us.
Tender Offer Condition Withdrawn. We had conditioned our offer on Quality Dining
not being in default under the terms of any of its indebtedness. Because certain
of the Company's indebtedness has "change of control" default provisions, you
have suggested that our offer is "illusory." We disagree. We are familiar with
the bank group providing the Company's existing financing and have had business
dealings with, and borrowings from, members of this group for purposes of
financing our affiliated Burger King franchise operations. We have no reason to
believe that, if Quality Dining drops its opposition to our offer, the existing
bank group would not consent to the change of control that would result.
Certainly, Dan's letter has given us no reason to reconsider this view.
Moreover, it should be possible to obtain any necessary replacement financing
from other sources. IN ANY EVENT, IN ORDER TO DEMONSTRATE THAT WE DO NOT
CONSIDER THE COMPANY'S CURRENT FINANCING ARRANGEMENTS TO BE AN IMPEDIMENT TO
CLOSING OUR OFFER, WE HEREBY INFORM YOU THAT WE WILL REVISE OUR TENDER OFFER TO
ELIMINATE THE "QDI INDEBTEDNESS CONDITION."
IN SUM, THE BOARD SHOULD LET THE SHAREHOLDERS DECIDE - THE STOCK WE SEEK TO
PURCHASE BELONGS TO THEM.
Once again, we urge you, as the board of directors, to act in the shareholders'
best interest. We urge you to agree publicly that, if sufficient shares are
tendered such that our minimum condition is satisfied, Quality Dining will fully
cooperate with NBO and take such steps as are within its control to satisfy all
conditions to our offer. In this way, Quality Dining shareholders, with both our
offer and your recommendation in hand, can then decide whether to tender their
shares with the assurance that the Company will not frustrate the decision of
the holders of a majority of its shares.
Very truly yours,
/s/ David W. Schostak
David W. Schostak
cc: Philip J. Faccenda
Daniel B. Fitzpatrick
James K. Fitzpatrick
Ezra H. Friedlander
Steven M. Lewis
Christopher J. Murphy III
Bruce M. Jacobson
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