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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended May 11, 2003
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______________ to ____________________
Commission file number 0-23420
QUALITY DINING, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1804902
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4220 Edison Lakes Parkway, Mishawaka, Indiana 46545
_____________________________________________________
(Address of principal executive offices and zip code)
(574) 271-4600
__________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X____ No ________
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes o No x
The number of shares of the registrant's common stock outstanding as of
June 20, 2003 was 11,598,447.
QUALITY DINING, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MAY 11, 2003
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 15
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 24
Item 4. Controls and Procedures 24
Part II - Other Information
Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults upon Senior Securities 25
Item 4. Submission of Matters to Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 26
Part I. FINANCIAL INFORMATION
Item 1. - CONSOLIDATED FINANCIAL STATEMENTS
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 11, May 12, May 11, May 12,
2003 2002 2003 2002
Revenues: ------ ------ ------- -------
Burger King $ 24,985 $ 28,262 $ 58,222 $ 63,806
Chili's Grill & Bar 18,616 17,695 42,132 40,249
Grady's American Grill 4,509 10,757 11,092 25,947
Italian Dining Division 4,163 3,918 9,808 9,137
------- ------- ------- -------
Total revenues 52,273 60,632 121,254 139,139
------- ------- ------- -------
Operating expenses:
Restaurant operating expenses:
Food and beverage 14,437 17,334 33,365 39,689
Payroll and benefits 15,314 17,699 36,126 41,668
Depreciation and amortization 2,347 2,461 5,575 5,648
Other operating expenses 13,537 15,326 32,123 34,994
Total restaurant operating ------- ------- ------- -------
Expenses 45,635 52,820 107,189 121,999
------- ------- ------- -------
Income from restaurant operations 6,638 7,812 14,065 17,140
General and administrative 4,031 4,708 8,937 10,265
Impairment of assets and
facility closing costs 4,411 204 4,411 204
Amortization of intangibles 87 98 203 228
------- ------- ------- -------
Operating income (loss) (1,891) 2,802 514 6,443
------- ------- ------- -------
Other income (expense):
Recovery of note receivable 3,459 - 3,459 -
Interest expense (1,782) (1,945) (4,207) (4,715)
Gain (loss) on sale of property
and equipment 7 245 (4) 170
Other income (expense), net 257 297 710 727
------- ------- ------- -------
Total other income (expense), net 1,941 (1,403) (42) (3,818)
------- ------- ------- -------
Income from continuing operations
before income taxes 50 1,399 472 2,625
Income tax provision 262 318 613 743
Income (loss) from continuing ------- ------- ------ -------
operations (212) 1,081 (141) 1,882
Income (loss) from discontinued
operations (68) 142 40 283
------- ------- ------- -------
Net income (loss) $ (280) $ 1,223 $ (101) $ 2,165
======= ======= ======= =======
Basic net income (loss) per share:
Continuing operations (0.02) 0.10 (0.01) 0.17
Discontinued operations - 0.01 - 0.02
------- ------- ------- -------
Basic net income (loss) per share $( 0.02) $ 0.11 $ (0.01) $ 0.19
======= ======= ======= =======
Diluted net income (loss) per share:
Continuing operations (0.02) 0.10 (0.01) 0.17
Discontinued operations - 0.01 - 0.02
------- ------- ------- -------
Diluted net income (loss) per
share $ (0.02) $ 0.11 $ (0.01) $ 0.19
======= ======= ======= =======
Weighted average shares outstanding:
Basic 11,311 11,206 11,311 11,206
======= ======= ======= =======
Diluted 11,311 11,422 11,311 11,378
======= ======= ======= =======
See Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
May 11, October 27,
2003 2002
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 1,121 $ 1,021
Accounts receivable 1,757 1,615
Inventories 1,822 1,843
Deferred income taxes 2,470 2,356
Assets held for sale 3,150 3,673
Other current assets 2,185 2,222
------- -------
Total current assets 12,505 12,730
------- -------
Property and equipment, net 103,327 107,586
------- -------
Other assets:
Deferred income taxes 7,530 7,644
Trademarks, net 2,076 5,317
Franchise fees and development fees, net 9,076 9,379
Goodwill 7,960 7,960
Liquor licenses, net 2,670 2,653
Other 3,200 3,672
------- -------
Total other assets 32,512 36,625
------- -------
Total assets $148,344 $156,941
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capitalized leases
and long-term debt $ 2,102 $ 1,978
Accounts payable 5,620 9,884
Accrued liabilities 21,079 20,295
------- -------
Total current liabilities 28,801 32,157
Long-term debt 90,428 95,305
Capitalized leases principally to related
parties, less current portion 3,416 3,726
------- -------
Total liabilities 122,645 131,188
------- -------
Stockholders' equity:
Preferred stock, without par value:
5,000,000 shares authorized; none issued - -
Common stock, without par value: 50,000,000
shares authorized; 12,957,447 and 12,969,672
shares issued, respectively 28 28
Additional paid-in capital 237,406 237,434
Accumulated deficit (207,487) (207,386)
Unearned compensation (625) (700)
------- -------
29,322 29,376
Treasury stock, at cost, 1,360,573
and 1,360,573 shares, respectively (3,623) (3,623)
------- -------
Total stockholders' equity 25,699 25,753
------- -------
Total liabilities and stockholders' equity $148,344 $156,941
======= =======
See Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Twenty-Eight Weeks Ended
May 11, May 12,
2003 2002
Cash flows from operating activities: ------- -------
Net income (loss) $ (101) $ 2,165
Income from discontinued operations (40) (283)
Adjustments to reconcile net income to net
cash provided by operating activities of
continuing operations:
Depreciation and amortization of
property and equipment 5,441 5,444
Amortization of other assets 865 862
Impairment of assets 4,411 -
Gain on sale of property and equipment (4) (170)
Amortization of unearned compensation 47 128
Changes in current assets and current liabilities:
Net increase in current assets (84) (1,445)
Net increase (decrease) in current liabilities (3,480) 1,164
Net cash provided by operating activities of ------- -------
continuing operations 7,055 7,865
------- -------
Cash flows from investing activities:
Proceeds from the sale of property and equipment 581 256
Purchase of property and equipment (2,698) (4,329)
Purchase of other assets (199) (454)
Other 294 (108)
------- -------
Net cash used for investing activities (2,022) (4,635)
------- -------
Cash flows from financing activities:
Borrowings of long-term debt 28,914 62,990
Repayment of long-term debt (33,705) (66,354)
Payment for stock subject to redemption - (264)
Repayment of capitalized lease obligations (272) (266)
------- -------
Net cash used by financing activities (5,063) (3,894)
------- -------
Cash provided by discontinued operations 130 363
------- -------
Net increase (decrease) in cash and cash equivalents 100 (301)
Cash and cash equivalents, beginning of period 1,021 2,070
------- -------
Cash and cash equivalents, end of period $ 1,121 $ 1,769
======= =======
See Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Note 1: Description of Business.
Quality Dining, Inc. (the "Company") operates four distinct restaurant
concepts. It owns the Grady's American Grill(R) and two Italian Dining
concepts and operates Burger King(R)restaurants and Chili's Grill & Bar(R)
("Chili's") as a franchisee of Burger King Corporation and Brinker
International, Inc. ("Brinker"), respectively. The Company operates its
Italian Dining restaurants under the tradenames of Spageddies Italian
Kitchen(R) ("Spageddies"(R)) and Papa Vino's(TM) Italian Kitchen
("Papa Vino's"). As of May 11, 2003, the Company operated 174
restaurants, including 116 Burger King restaurants, 34 Chili's, 15 Grady's
American Grill restaurants, three Spageddies and six Papa Vino's.
Note 2: Summary of Significant Accounting Policies.
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of Quality Dining, Inc. and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for annual
financial statement reporting purposes. In the opinion of management,
all adjustments, consisting only of normal recurring accruals,
considered necessary for a fair presentation have been included.
Operating results for the 28-week period ended May 11, 2003 are not
necessarily indicative of the results that may be expected for the 52-
week year ending October 26, 2003.
These financial statements should be read in conjunction with the
Company's audited financial statements for the fiscal year ended October
27, 2002 included in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
As a result of the adoption of Statement of Financial Accounting
Standard ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", the Company has classified the revenues, expenses
and related assets and liabilities of one Grady's American Grill
restaurant that was sold in the second quarter of fiscal 2003 and three
Grady's American Grills that are held for sale, as discontinued
operations in the accompanying consolidated financial statements.
Intangible Assets
Franchise Fees and Development Fees - The Company's Burger King and
Chili's franchise agreements require the payment of a franchise fee for
each restaurant opened. Franchise fees are deferred and amortized on
the straight-line method over the lives of the respective franchise
agreements. Development fees paid to Brinker are deferred and expensed
in the period the related restaurants are opened. Franchise fees are
being amortized on a straight-line basis, generally over 20 years.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Trademarks - The Company owns the trademarks for its Grady's American
Grill, Spageddies Italian Kitchen and Papa Vino's Italian Kitchen.
During the second quarter of fiscal 2003 the Company recorded an
impairment charge (See Note 3) that reduced the net book value of the
Grady's American Grill trademark by $2,882,000. The impairment charge
reduced the Grady's American Grill trademark net book value to
$1,994,000 as of May 11, 2003. During the second quarter of fiscal 2003
the Company reviewed the useful life of the Grady's American Grill
trademark and determined that the remaining useful life should be
reduced from 15 years to five years. In determining the fair value of
the impaired assets, the Company relied primarily on the discounted cash
flow analyses that incorporated an investment horizon of five years and
utilized a risk adjusted discount factor.
Below are the gross carrying amount and accumulated amortization of the
trademarks, franchise fees and development fees as of May 11, 2003.
Amortized Intangible Assets
- ---------------------------
As of May 11, 2003
--------------------------------
Gross Carrying Accumulated
Amount Amortization
($000s) ($000s)
Amortized intangible assets: ------- -------
Trademarks $ 2,705 $ (629)
Franchise fees and development fees 14,712 (5,636)
------- -------
Total $ 17,417 $ (6,265)
======= =======
The Company's intangible asset amortization expense for the twenty-eight
weeks ended May 11, 2003 was $600,000. The estimated intangible
amortization expense for each of the next five years is $1,136,000.
Goodwill
The Company operates four distinct restaurant concepts in the food-
service industry. It owns the Grady's American Grill and two Italian
Dining concepts and operates Burger King restaurants and Chili's Grill &
Bar restaurants as a franchisee of Burger King Corporation and Brinker
International, Inc., respectively. The Company has identified each
restaurant concept as an operating segment based on management structure
and internal reporting. The Company has two operating segments with
goodwill - Chili's Grill & Bar and Burger King. The Company had a total
of $7,960,000 in goodwill as of May 11, 2003. The Chili's Grill and Bar
operating segment had $6,902,000 of goodwill and the Burger King
operating segment had $1,058,000 of goodwill.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Stock Options
The Company accounts for all of its stock-based compensation awards in
accordance with APB Opinion No. 25 which requires compensation cost to
be recognized based on the excess, if any, between the quoted market
price of the stock at the date of grant and the amount an employee must
pay to acquire the stock. Under this method, no compensation cost has
been recognized for stock option awards.
Had compensation cost for the Company's stock-based compensation plans
been determined based on the fair value method as prescribed by SFAS
123, the Company's net earnings (loss) and net earnings (loss) per share
would have been the pro forma amounts indicated below:
May 11, May 12,
2003 2002
----------- -----------
Net income (loss), as reported $ (101,000) $ 2,165,000
Deduct: Total stock option based employee
compensation expense determined by using
the Black-Scholes option pricing model,
net of related tax effects (19,000) (26,000)
---------- -----------
Net income (loss), pro forma $ (120,000) $ 2,139,000
---------- -----------
Basic net income (loss) per common share,
as reported $ (0.01) $ 0.19
========== ===========
Basic net income (loss) per common share,
pro forma $ (0.01) $ 0.19
========== ===========
New Pronouncements
Consolidation of Variable Interest Entities: In January 2003, the FASB
issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities. The objective of this interpretation is to provide
guidance on how to identify a variable interest entity (VIE) and
determine when the assets, liabilities, noncontrolling interests, and
results of operations of a VIE need to be included in a company's
consolidated financial statements. A company that holds variable
interests in an entity will need to consolidate the entity if the
company's interest in the VIE is such that the company will absorb a
majority of the VIE's expected losses and/or receive a majority of the
entity's expected residual returns, if they occur. FIN 46 also requires
additional disclosures by primary beneficiaries and other significant
variable interest holders. The effective date for FIN 46 is not until
interim periods after June 15, 2003 for variable interest entities in
which the Company holds a variable interest it acquired before February
1, 2003. The Company is currently assessing the impact, if any, the
interpretation will have on the Company's financial statements.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Note 3: Acquisitions and Dispositions.
During the second quarter of fiscal 2003, the Company entered into
agreements or was in negotiations to sell four of its Grady's American
Grill restaurants. One restaurant was sold during the second quarter of
fiscal 2003, two were sold in the third quarter of fiscal 2003,
resulting in a net gain of $275,000, and one is expected to be sold by
the end of fiscal 2003.
As discussed in Note 2, discontinued operations includes the revenues
and expenses of the four Grady's American Grill restaurants that either
had been sold or were being held for sale as of May 11, 2003. The
decision to dispose of the four locations reflects the Company's ongoing
process of evaluating the performance of the Grady's American Grill
restaurants and using the proceeds from dispositions to reduce debt.
Assets held for sale includes property, plant and equipment totaling
$3,150,000 as of May 11, 2003. As of May 11, 2003, the net book value of
Grady's American Grill's tangible long-lived and intangible assets was
$14,019,000 and $1,994,000, respectively.
Net income (loss) from discontinued operations for the periods ended May
11, 2003, and May 12, 2002, were made up of the following components:
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 11, May 12, May 11, May 12,
2003 2002 2003 2002
(In thousands) -------- ------- -------- -------
Revenue discontinued operations $ 1,164 $ 1,537 $ 2,895 $ 3,533
Income discontinued
Restaurant operations 104 148 220 296
Store closing expense (109) - (114) -
Loss on sale of assets (60) - (60) -
-------- ------- -------- -------
Income (loss) before taxes (65) 148 46 296
Income tax provision (3) (6) (6) (13)
Income (loss) from ________ _______ _______ _______
discontinued operations $ (68) $ 142 $ 40 $ 283
======== ======== ======= =======
Note 4: Commitments.
As of May 11, 2003, the Company had commitments aggregating
approximately $2,207,000 for restaurant construction and the purchase of
new equipment.
Note 5: Debt Instruments.
As of May 11, 2003, the Company had a financing package totaling
$109,066,000, consisting of a $60,000,000 revolving credit agreement and
a $49,066,000 mortgage facility (the "Mortgage Facility"), as described
below.
The Mortgage Facility currently includes 34 separate mortgage notes,
with terms of either 15 or 20 years. The notes have fixed rates of
interest of either 9.79% or 9.94%. The notes require equal monthly
interest and principal payments. The mortgage notes are collateralized
by a first mortgage/deed of trust and security agreement on the real
estate, improvements and equipment on 19 of the Company's Chili's
restaurants (nine of which the Company mortgaged its leasehold interest)
and 15 of the Company's Burger King restaurants (three of which the
Company mortgaged its leasehold interest). The mortgage notes contain,
among other provisions, certain restrictive covenants including
maintenance of a consolidated fixed charge coverage ratio for the
financed properties.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
On June 10, 2002, the Company refinanced its prior $76,000,000 credit
facility with a $60,000,000 revolving credit agreement with JP Morgan
Chase Bank, as agent, and four other banks (the "Bank Facility"). The
weighted average borrowing rate under the Bank Facility on May 11, 2003
was 4.42%. The Company had $11,365,000 available under the Bank Facility
as of May 11, 2003. The Bank Facility is collateralized by the stock of
certain subsidiaries of the Company, certain interests in the Company's
franchise agreements with Brinker and Burger King Corporation and
substantially all of the Company's real and personal property not
pledged in the Mortgage Facility.
The Bank Facility contains restrictive covenants including maintenance
of certain prescribed debt and fixed charge coverage ratios, limitations
on the incurrence of additional indebtedness, limitations on
consolidated capital expenditures, cross-default provisions with other
material agreements, restrictions on the payment of dividends (other
than stock dividends) and limitations on the purchase or redemption of
shares of the Company's capital stock.
The Bank Facility provides for borrowings at the adjusted LIBOR rate
plus a contractual spread which is as follows:
RATIO OF FUNDED DEBT
TO CASH FLOW LIBOR MARGIN
- -------------------- ---------------
Greater than or equal to 3.50 3.00%
Less than 3.5x but greater than or equal to 3.0x 2.75%
Less than 3.0x but greater than or equal to 2.5x 2.25%
Less than 2.5x 1.75%
The Bank Facility also contains covenants requiring maintenance of
funded debt to cash flow and fixed charge coverage ratios, which are as
follows:
MAXIMUM FUNDED DEBT
TO CASH FLOW RATIO COVENANT
- ------------------- ---------
Fiscal 2003
Q1 through Q3 4.00
Q4 3.75
Fiscal 2004
Q1 through Q3 3.75
Q4 3.50
Fiscal 2005
Q1 through Q2 3.50
Thereafter 3.00
FIXED CHARGE COVERAGE RATIO 1.50
On May 5, 2003, the Bank Facility was amended to exclude the expenses
which the Company incurred in the BFBC litigation (See Note 8) for
purposes of calculating its fixed charge coverage ratio and its funded
debt to cash flow ratio.
The Company was in compliance with all of its debt covenants as of May
11, 2003.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Note 6: Earnings (Loss) Per Share.
The Company had outstanding at May 11, 2003 common shares totaling
11,598,447. The Company has 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 twenty-eight week periods ended May 12, 2002. The following is a
reconciliation of the numerators and denominators of the basic and
diluted earnings per share computation as required by SFAS 128.
Twelve weeks ended Twenty-Eight weeks ended
May 11, May 12, May 11, May 12,
2003 2002 2003 2002
------- ------- ------- -------
(In thousands, except per share amounts)
Basic net income (loss) per share:
Net income (loss) available to
common shareholders (numerator) $ (280) $ 1,223 $ (101) $ 2,165
======= ======= ======= =======
Weighted average common shares
outstanding (denominator) 11,311 11,206 11,311 11,206
======= ======= ======= =======
Basic net income (loss) per share $ (0.02) $ 0.11 $ (0.01) $ 0.19
======= ======= ======= =======
Twelve weeks ended Twenty-Eight weeks ended
May 11, May 12, May 11, May 12,
2003 2002 2003 2002
------- ------- ------- -------
(In thousands, except per share amounts)
Diluted net income (loss) per share:
Net income (loss) available to
common shareholders (numerator) $ (280) $ 1,223 $ (101) $ 2,165
======= ======= ======= =======
Weighted average common shares
outstanding 11,311 11,206 11,311 11,206
Effect of dilutive securities:
Options on common stock - 216 - 172
Total common shares and dilutive ------- ------- ------- -------
securities(denominator) 11,311 11,422 11,311 11,378
======= ======= ======= =======
Diluted net income (loss) per share $ (0.02) $ 0.11 $ (0.01) $ 0.19
======= ======= ======= =======
For the twelve and twenty-eight week periods ended May 11, 2003, 5,000
and 16,000 options, respectively were excluded from the diluted earnings
per share calculations because to do so would have been anti-dilutive.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Note 7: Segment Reporting.
The Company operates four distinct restaurant concepts in the food-
service industry. It owns the Grady's American Grill and two Italian
Dining concepts and operates Burger King restaurants and Chili's Grill &
Bar as a franchisee of Burger King Corporation and Brinker
International, Inc., respectively. The Company has identified each
restaurant concept as an operating segment based on management structure
and internal reporting. For purposes of applying SFAS 131, the Company
considers the Grady's American Grill, the two Italian concepts and
Chili's Grill & Bar to be similar and has aggregated them into a single
reportable operating segment (Full Service). The Company considers the
Burger King restaurants as a separate reportable segment (Quick
Service). Summarized financial information concerning the Company's
reportable segments is shown in the following table. The "other" column
includes corporate related items and income and expense not allocated to
reportable segments.
Full Quick
(Dollars in thousands) Service Service Other Total
- ------------------------------------------------------------------------
Second quarter fiscal 2003
- ---------------------------
Revenues $ 27,289 $ 24,984 $ - $52,273
Income from restaurant
operations 3,730 2,888 20 6,638
Operating income (loss)(1) (2,114) 466 (243) $(1,891)
Interest expense (1,782)
Other income 3,723
Income before income ---------
taxes $ 50
=========
Depreciation and
amortization 1,201 1,162 300 2,663
Second quarter fiscal 2002
- ---------------------------
Revenues $ 32,370 $ 28,262 $ - $ 60,632
Income from restaurant
operations 4,002 3,881 (71) 7,812
Operating income (loss) 1,937 1,192 (327) $ 2,802
Interest expense (1,945)
Other income 542
Income before income ---------
taxes $ 1,399
=========
Depreciation and
amortization 1,413 1,070 247 2,730
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Full Quick
(Dollars in thousands) Service Service Other Total
- ------------------------------------------------------------------------
First twenty-eight weeks of fiscal 2003
- --------------------------------
Revenues $ 63,033 $ 58,221 $ - $ 121,254
Income from restaurant
operations 8,161 5,856 48 14,065
Operating income (loss)(1) 541 536 (563) $ 514
Interest expense (4,207)
Other income 4,165
Income before income ---------
taxes $ 472
=========
Depreciation and
amortization 2,898 2,712 657 6,267
First twenty-eight weeks of fiscal 2002
- --------------------------------
Revenues $ 75,333 $ 63,806 $ - $ 139,139
Income from restaurant
operations 9,141 7,998 1 17,140
Operating income (loss) 4,828 2,197 (582) $ 6,443
Interest expense (4,715)
Other income 897
Income before income ---------
taxes $ 2,625
=========
Depreciation and
amortization 3,290 2,408 608 6,306
(1) Includes charges for the impairment of assets totaling $4,411,000.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 11, 2003
(Unaudited)
Note 8: Contingencies.
As previously reported, the Company had been party to a lawsuit with
BFBC Ltd ("BFBC"), a former franchisee of Bruegger's Bagels, and certain
principals of BFBC (the "Franchisee Parties").
During the second quarter of fiscal 2003, the Company entered into a
settlement agreement with the Franchisee Parties that provided for a
cash payment by the Franchisee Parties to the Company in the amount of
$3.75 million and the dismissal of all remaining claims in the lawsuit.
Subsequent to the end of the second quarter of fiscal 2003, and
ancillary to the BFBC settlement, the Company transferred to Bruegger's
Corporation's senior secured lender the Company's interest in the $10.7
million Subordinated Note issued by Bruegger's Corporation to the
Company in connection with the divestiture of the Company's bagel-
related businesses in 1997. The Company received payment of $55,000 for
the Subordinated Note. The Company had previously reserved for the full
amount of the Subordinated Note. Accordingly, the Company will record a
$55,000 gain in respect of this payment in the third quarter of fiscal
2003.
The Company is involved in various other legal proceedings incidental to
the conduct of its business, including employment discrimination claims.
Based upon currently available information, the Company does not expect
that any such proceedings will have a material adverse effect on the
Company's financial position or results of operations but there can be
no assurance thereof.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company has a 52/53-week fiscal year ending on the last Sunday in
October of each year. The current fiscal year consists of 52 weeks and
ends October 26, 2003. The first quarter of the Company's fiscal year
consists of 16 weeks with all subsequent quarters being 12 weeks in
duration.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages which certain items of revenue and expense bear to total
revenues.
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 11, May 12, May 11, May 12,
2003 2002 2003 2002
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Restaurant operating expenses
Food and beverage 27.6 28.6 27.5 28.5
Payroll and benefits 29.3 29.2 29.8 29.9
Depreciation and amortization 4.5 4.1 4.6 4.1
Other operating expenses 25.9 25.3 26.5 25.2
----- ----- ----- -----
Total restaurant operating expenses 87.3 87.2 88.4 87.7
----- ----- ----- -----
Income from operations 12.7 12.8 11.6 12.3
----- ----- ----- -----
General and administrative 7.7 7.8 7.4 7.4
Impairment of assets and
facility closing costs 8.4 0.3 3.6 0.1
Amortization of intangibles 0.2 0.2 0.2 0.2
----- ----- ----- -----
Operating income (loss) (3.6) 4.5 0.4 4.6
----- ----- ----- -----
Other income (expense):
Recovery of note receivable 6.6 - 2.9 -
Interest expense (3.4) (3.2) (3.5) (3.4)
Other income (expense), net 0.5 0.9 0.6 0.6
----- ----- ----- -----
Total other income (expense), net 3.7 (2.3) - (2.8)
----- ----- ----- -----
Income from continuing operations
before income taxes 0.1 2.2 0.4 1.8
Income tax provision 0.5 0.5 0.5 0.5
----- ----- ----- -----
Income (loss) from continuing
operations (0.4) 1.7 (0.1) 1.3
Income (loss) from discontinued
operations (0.1) 0.2 - 0.2
----- ----- ----- -----
Net income (loss) (0.5)% 1.9% (0.1)% 1.5%
===== ===== ===== =====
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Restaurant sales for the Company were $52,273,000 for the second quarter
of fiscal 2003 versus $60,632,000 for the comparable period in fiscal
2002, a decrease of $8,359,000. Restaurant sales for the first twenty-
eight weeks of fiscal 2003 were $121,254,000 versus $139,139,000 for the
comparable period in fiscal 2002, a decrease of $17,885,000.
The Company's Burger King restaurant sales were $24,985,000 in the
second quarter of fiscal 2003 compared to sales of $28,262,000 in the
same period of fiscal 2002, a decrease of $3,277,000. The Company had
increased revenue of $369,000 due to additional sales weeks from one new
restaurant opened in fiscal 2003 and one restaurant opened in fiscal
2002. The Company's Burger King restaurants had average weekly sales of
$17,948 in the second quarter of fiscal 2003 versus $20,303 in the same
period in fiscal 2002. Sales at restaurants open for more than one year
decreased 11.6% in the second quarter of fiscal 2003 when compared to
the same period in fiscal 2002. Sales decreased $5,584,000 to
$58,222,000 for the first twenty-eight weeks of fiscal 2003 compared to
$63,806,000 for the comparable period in fiscal 2002. The Company had
increased revenue of $1,198,000 due to additional sales weeks from one
restaurant opened in fiscal 2003 and two restaurants opened in fiscal
2002. Average weekly sales were $17,995 in the first twenty-eight weeks
of fiscal 2003 versus $19,659 in the same period in fiscal 2002. Sales
at restaurants open for more than one year decreased 8.6% in the first
twenty-eight weeks of fiscal 2003 when compared to the same period in
fiscal 2002. The Company believes that the decrease in comparable store
sales was mainly due to fierce price competition in the quick service
hamburger segment.
The Company's Chili's Grill & Bar restaurant sales increased $921,000 to
$18,616,000 in the second quarter of fiscal 2003 compared to $17,695,000
in the same period in fiscal 2002. The Company had increased revenue of
$539,000 due to additional sales weeks from one restaurant opened during
fiscal 2002. Average weekly sales increased to $45,627 in the second
quarter of fiscal 2003 versus $44,685 in the same period of fiscal 2002.
Sales at restaurants open for more than one year increased 2.2% in the
second quarter of fiscal 2003 when compared to the same period in fiscal
2002. Sales for the first twenty-eight weeks of fiscal 2003 increased
$1,883,000 to $42,132,000 compared to $40,249,000 for the same period in
fiscal 2002. The Company had increased revenue of $1,231,000 due to
additional sales weeks from one new restaurant opened during fiscal
2002. The average weekly sales were $44,257 in the first twenty-eight
weeks of fiscal 2003 versus $43,560 in the same period in fiscal 2002.
Sales at restaurants open for more than one year increased 2.1% in the
first twenty-eight weeks of fiscal 2003 when compared to the same period
in fiscal 2002. The Company believes that the increase in average
weekly sales was mainly due to successful operational and marketing
initiatives both by the Company and the franchisor.
Sales in the Company's Grady's American Grill restaurant division were
$4,509,000 in the second quarter of fiscal 2003 compared to sales of
$10,757,000 in the same period in fiscal 2002, a decrease of $6,248,000.
The Company closed or sold 18 units during fiscal 2002. The absence of
these units contributed approximately $4,696,000 to the sales decrease
during the first quarter of fiscal 2003. The Company sold one
restaurant in the second quarter of fiscal 2003, two restaurants during
the third quarter of fiscal 2003 and plans to sell one more restaurant
before the end of fiscal 2003. As required by Statement of Financial
Accounting Standards No. 144 (SFAS 144) Accounting for the Impairment or
Disposal of Long-Lived Assets, the results of operations for the four
restaurants have been classified as discontinued operations for all
periods reported. The remaining twelve Grady's American Grill
restaurants had average weekly sales of $31,321 in the second quarter of
fiscal 2003 versus $32,015 in the same period in fiscal 2002. Sales at
restaurants open for more than one year decreased 24.5% in the second
quarter of fiscal 2003 when compared to the same period in fiscal 2002.
Sales for the first twenty-eight weeks of fiscal 2003 were $11,092,000
compared to $25,947,000 for the same period in fiscal 2002, a decrease
of $14,855,000. The absence of the closed restaurants contributed
approximately $11,542,000 to the sales decrease. Average weekly sales,
for the remaining twelve restaurants, were $33,016 in the first twenty-
eight weeks of fiscal 2003 versus $32,412 in the same period in fiscal
2002. Sales at restaurants open for more than one year decreased 23.4%
in the first twenty-eight weeks of fiscal 2003 when compared to the same
period in fiscal 2002.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
During the first twenty-eight weeks of fiscal 2003 the Company closed
three Grady's American Grill restaurants. The Company sold one of the
closed restaurants in the second quarter of fiscal 2003 receiving net
proceeds of $571,000. The Company sold the other two restaurants in the
third quarter of fiscal 2003 receiving net proceeds of $3,041,000. In
light of these disposals and the continued decline in sales and cash
flow in its Grady's American Grill division, the Company reviewed the
carrying amounts for the balance of its Grady's American Grill
Restaurant assets. The Company estimated the future cash flows expected
to result from the continued operation and the residual value of the
remaining restaurant locations in the division and concluded that, in
eight locations, the undiscounted estimated future cash flows were less
than the carrying amount of the related assets. Accordingly, the
Company concluded that these assets had been impaired. The Company
measured the impairment and recorded an impairment charge related to
these assets aggregating $4,411,000.
In determining the fair value of the aforementioned restaurants, the
Company relied primarily on discounted cash flow analyses that
incorporated an investment horizon of five years and utilized a risk
adjusted discount factor.
In connection with the impairment charge discussed above the Company
also reviewed the remaining useful life of the Grady's American Grill
trademark. In light of the continuing negative trends in both sales and
cash flows, the increase in the pervasiveness in these declines amongst
individual stores, and the accelerating rate of decline in both sales
and cash flow in the first twenty-eight weeks of fiscal 2003, the
Company has determined that the useful life of the Grady's American
Grill trademark should be reduced from 15 to five years. As part of the
above impairment charge, the Company reduced the net book value of the
Grady's American Grill trademark by $2,882,000. The Grady's trademark
had a net book value of $1,994,000 as of May 11, 2003.
The Company continues to pursue various management actions in response
to the negative trend in its Grady's business, including evaluating
strategic business alternatives for the division both as a whole and at
each of its restaurant locations.
The Company's Italian Dining Division restaurant sales increased
$245,000 to $4,163,000 in the second quarter of fiscal 2003 compared to
$3,918,000 in the same period in fiscal 2002. The Company had increased
revenue of $497,000 due to additional sales weeks from one restaurant
opened during fiscal 2002. The average weekly sales were $38,549 in the
second quarter of fiscal 2003 versus $40,809 in the same period of
fiscal 2002. Sales at restaurants open for more than one year decreased
6.4% in the second quarter of fiscal 2003 when compared to the same
period in fiscal 2002. Sales for the first twenty-eight weeks of fiscal
2003 increased $671,000 to $9,808,000 compared to $9,137,000 for the
same period in fiscal 2002. The Company had increased revenue of
$1,230,000 due to additional sales weeks from one restaurant opened
during fiscal 2002. The average weekly sales were $38,920 in the first
twenty-eight weeks of fiscal 2003 versus $40,791 in the same period in
fiscal 2002. Sales at restaurants open for more than one year decreased
6.1% in the first twenty-eight weeks of fiscal 2003 when compared to the
same period in fiscal 2002.
Total restaurant operating expenses, as a percentage of restaurant
sales, increased to 87.3% for the second quarter of fiscal 2003 versus
87.2% in the second quarter of fiscal 2002, and 88.4% in the first
twenty-eight weeks of fiscal 2003 versus 87.8% in the same period of
fiscal 2002. The following factors influenced the operating margins.
Food and beverage costs decreased to 27.6% of total revenues in the
second quarter of fiscal 2003 compared to 28.6% of total revenues in the
same period in fiscal 2002, and 27.5% in the first twenty-eight weeks of
fiscal 2003 compared to 28.5% in the same period of fiscal 2002. Food
and beverage costs as a percentage of sales decreased in the quick
service segment mainly due to improved margins in the Company's Grand
Rapids, Michigan Burger King market. The Company acquired these
restaurants on October 15, 2001, and since the acquisition has made
progress in reducing food costs as a percentage of sales. The full
service segment's food and beverage costs, as a percentage of sales,
were lower in the second quarter and the first twenty-eight weeks of
fiscal 2003 versus the same period in fiscal 2002.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The decrease was mainly due to the reduced number of Grady's American
Grill restaurants, which historically have had higher food and beverage
costs, as a percentage of total restaurant sales, than the Company's
other full service concepts.
Payroll and benefits were 29.3% of total revenues in the second quarter
of fiscal 2003 compared to 29.2% in the same period of fiscal 2002.
Payroll and benefits were 29.8% of total revenues in the first twenty-
eight weeks of fiscal 2003 compared to 29.9% in the same period of
fiscal 2002. Payroll and benefits, as a percentage of sales, increased
in the quick service and decreased in the full service segments. The
increase in the quick service segment was mainly due to a decrease in
average weekly sales. The decrease in the full service segment was
mainly due to the reduced number of Grady's American Grill restaurants,
which historically have had higher payroll and benefit costs, as a
percentage of total restaurant sales, than the Company's other full
service concepts.
Depreciation and amortization, as a percentage of total revenues,
increased to 4.5% for the second quarter of fiscal 2003 compared to 4.1%
in the same period in fiscal 2002. Depreciation and amortization, as a
percentage of total revenues, increased to 4.6% in the first twenty-
eight weeks of fiscal 2003 compared to 4.1% in the same period in fiscal
2002. The increase, as a percentage of revenues, was mainly due to the
decrease in average weekly sales at the Company's Burger King, Italian
Dining and Grady's American Grill restaurants.
Other restaurant operating expenses include rent and utilities,
royalties, promotional expense, repairs and maintenance, property taxes
and insurance. Other restaurant operating expenses as a percentage of
total revenues increased in the second quarter of fiscal 2003 to 25.9%
compared to 25.3% in the same period of fiscal 2002 and to 26.5% in the
first twenty-eight weeks of fiscal 2003 compared to 25.3% in the same
period of fiscal 2002. The Company's other operating expenses, as a
percentage of sales, increased mainly due to lower average weekly sales
at the Company's Burger King, Italian Dining and Grady's American Grill
restaurants.
Income from restaurant operations decreased $1,174,000 to $6,638,000, or
12.7% of revenues, in the second quarter of fiscal 2003 compared to
$7,812,000, or 12.8% of revenues, in the comparable period of fiscal
2002. Income from restaurant operations in the Company's Quick Service
segment decreased $993,000 while the Company's Full Service segment
decreased $272,000 from the prior year. Income from restaurant
operations decreased $3,075,000 to $14,065,000, or 11.6% of revenues, in
the first twenty-eight weeks of fiscal 2003 compared to $17,140,000, or
12.2% of revenues, in the comparable period of fiscal 2002. Income from
restaurant operations in the Company's Quick Service segment decreased
$2,142,000 while the Company's Full Service segment decreased $980,000
when compared to the first twenty-eight weeks of the prior year.
General and administrative expenses were $4,031,000 in the second
quarter of fiscal 2003 compared to $4,708,000 in the second quarter of
fiscal 2002 and $8,937,000 in the first twenty-eight weeks of fiscal
2003 compared to $10,265,000 in the same period of fiscal 2002. As a
percentage of total restaurant sales, general and administrative
expenses were 7.7% in the second quarter of fiscal 2003 versus 7.8% in
the second quarter of fiscal 2002, and 7.4% in the first twenty-eight
weeks of fiscal 2003 compared to 7.4% in the same period of fiscal 2002.
The decrease in general and administrative expense was mainly due to a
decrease in litigation expense. In the second quarter of fiscal 2003 the
Company recorded approximately $118,000 in expenses related to the
Company's litigation with BFBC, LTD (See Note 8) versus $595,000 in
fiscal 2002 second quarter. In the first twenty-eight weeks of fiscal
2003 the Company recorded approximately $284,000 for the BFBC, LTD
litigation versus $880,000 in the first twenty-eight weeks of fiscal
2002.
Amortization of intangibles, as a percentage of total revenues, remained
constant as a percent of revenues at 0.2% for the second quarter of
fiscal 2003 compared to 0.2% in the same period in fiscal 2002, and 0.2%
in the first twenty-eight weeks of fiscal 2003 compared to 0.2% for the
same period in fiscal 2002.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Total interest expense for the second quarter of fiscal 2003 was
$1,782,000 compared to $1,945,000 during the same period in fiscal 2002.
Total interest expense was $4,207,000 in the first twenty-eight weeks of
fiscal 2003 compared to interest expense of $4,715,000 in the same
period of fiscal 2002. The decreases were due to lower interest rates
and lower debt levels.
During the second quarter of fiscal 2003 the Company recorded a
$3,459,000 gain on the collection of a note receivable that had
previously been written off (See Note 8). The Company did not have any
similar activity in fiscal 2002.
The provision for income taxes was $262,000 for the second quarter of
fiscal 2003 versus $318,000 in the comparable period in fiscal 2002. The
provision for income taxes was $613,000 for the first twenty-eight weeks
of fiscal 2003 versus $743,000 in the comparable period in fiscal 2002.
The provision for income taxes in fiscal 2003 and fiscal 2002 consisted
of the Company's estimated state tax expense. The Company expects to
utilize net operating loss carryforwards to offset current year federal
taxable income.
At the end of the second quarter of fiscal 2003 the Company had a
valuation reserve against its deferred tax asset resulting in a net
deferred tax asset of $10,000,000. The Company's assessment of its
ability to realize the net deferred tax asset was based on the weight of
both positive and negative evidence, including the taxable income of its
current operations. Based on this assessment, the Company believes it is
more likely than not that the net deferred tax asset of $10,000,000 will
be realized. Such evidence is reviewed periodically and could result in
the recognition of additional tax benefit or expense related to its net
deferred tax asset position in the future.
Discontinued operations includes one Grady's American Grill restaurant
sold during the second quarter of fiscal 2003, two Grady's American
Grill restaurants sold in the third quarter of fiscal 2003, and one
Grady's American Grill restaurant expected to be sold by the end of
fiscal 2003. The decision to dispose of these four locations reflects
the Company's ongoing process of evaluating the performance and cash
flows of its various restaurant locations and using the proceeds from
the sale of closed restaurants to reduce outstanding debt. The net loss
from discontinued operations for the quarter ended May 11, 2003, was
$68,000 versus income of $142,000 in the same period of fiscal 2002. The
total restaurant sales from discontinued operations for the quarter
ended May 11, 2003 were $1,164,000 versus $1,537,000 in the same period
of fiscal 2002. The restaurant sales from discontinued operations were
$2,895,000 versus $3,533,000 in the same period of fiscal 2002 and the
net income from discontinued operations was $40,000 for the twenty-eight
weeks ended May 11, 2003 versus $283,000 in the same period of fiscal
2002.
For the second quarter of fiscal 2003, the Company reported a net loss
of $280,000 compared to net income of $1,223,000 for the same period of
fiscal 2002 and a net loss of $101,000 in the first twenty-eight weeks
of fiscal 2003 compared to net income of $2,165,000 in the same period
of fiscal 2002.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally for building or acquiring new
restaurants, replacing equipment and remodeling existing restaurants.
The Company's restaurants generate cash immediately through sales. As
is customary in the restaurant industry, the Company does not have
significant assets in the form of trade receivables or inventory, and
customary payment terms generally result in several weeks of trade
credit from its vendors. Therefore, the Company's current liabilities
have historically exceeded its current assets.
During the first twenty-eight weeks of 2003, net cash provided by
operating activities was $7,055,000 compared to $7,865,000 in fiscal
2002. The decrease was mainly due to decreased profitability of the
Company.
During the first twenty-eight weeks of fiscal 2003, the Company had
$2,698,000 in capital expenditures in connection with building one new
quick service restaurant and the refurbishing of existing restaurants.
During the first twenty-eight weeks of fiscal 2003 the Company built one
quick service restaurant. The Company also replaced one quick service
restaurant building with a new building at the same location. Subsequent
to the end of the second quarter of fiscal 2003, the Company opened two
additional quick service restaurants in facilities leased from a related
party.
The Company had a net repayment of $3,950,000 under its revolving credit
agreement during the first twenty-eight weeks of fiscal 2003. As of May
11, 2003, the Company's revolving credit agreement had an additional
$11,365,000 available for future borrowings. The Company's average
borrowing rate on May 11, 2003 was 4.42%.
The Company's primary cash requirements in fiscal 2003 will be capital
expenditures in connection with the building or acquiring of new
restaurants, remodeling of existing restaurants, maintenance
expenditures, and the reduction of debt under the Company's debt
agreements. During the second half of fiscal 2003, the Company does not
anticipate building any additional quick service restaurants, but does
plan to build three or four full service restaurants. The Company also
plans to replace two existing quick service buildings with new buildings
at the same locations. The actual amount of the Company's cash
requirements for capital expenditures depends in part on the number of
new restaurants opened, whether the Company owns or leases new units and
the actual expense related to remodeling and maintenance of existing
units. While the Company's capital expenditures for fiscal 2003 are
expected to range from $10,000,000 to $13,000,000, if the Company has
alternative uses or needs for its cash, the Company believes it could
reduce such planned expenditures without affecting its business plan.
The Company has debt service requirements of approximately $1,474,000 in
fiscal 2003, consisting primarily of the principal payments required
under the mortgage facility.
The Company anticipates that its cash flow from operations, together
with the $11,365,000 available under its revolving credit agreement as
of May 11, 2003, will provide sufficient funds for its operating,
capital expenditure, debt service and other requirements through the end
of fiscal 2003.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
As of May 11, 2003, the Company had a financing package totaling
$109,066,000, consisting of a $60,000,000 revolving credit agreement
(the "Bank Facility") and a $49,066,000 mortgage facility (the "Mortgage
Facility"), as described below.
The Mortgage Facility currently includes 34 separate mortgage notes,
with initial terms of either 15 or 20 years. The notes have fixed rates
of interest of either 9.79% or 9.94%. The notes require equal monthly
interest and principal payments. The mortgage notes are collateralized
by a first mortgage/deed of trust and security agreement on the real
estate, improvements and equipment on 19 of the Company's Chili's
restaurants (nine of which the Company mortgaged its leasehold interest)
and 15 of the Company's Burger King restaurants (three of which the
Company mortgaged its leasehold interest). The mortgage notes contain,
among other provisions, certain restrictive covenants including
maintenance of a consolidated fixed charge coverage ratio for the
financed properties.
The Bank Facility is collateralized by the stock of certain subsidiaries
of the Company, certain interests in the Company's franchise agreements
with Brinker and Burger King Corporation and substantially all of the
Company's personal property not pledged in the Mortgage Facility.
The Bank Facility contains restrictive covenants including maintenance
of certain prescribed debt and fixed charge coverage ratios, limitations
on the incurrence of additional indebtedness, limitations on
consolidated capital expenditures, cross-default provisions with other
material agreements, restrictions on the payment of dividends (other
than stock dividends) and limitations on the purchase or redemption of
shares of the Company's capital stock.
The Bank Facility provides for borrowings at the adjusted LIBOR rate
plus a contractual spread which is as follows:
RATIO OF FUNDED DEBT
TO CASH FLOW LIBOR MARGIN
Greater than or equal to 3.50 3.00%
Less than 3.5x but greater than or equal to 3.0x 2.75%
Less than 3.0x but greater than or equal to 2.5x 2.25%
Less than 2.5x 1.75%
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The Bank Facility also contains covenants requiring maintenance of
funded debt to cash flow and fixed charge coverage ratios as follows:
MAXIMUM FUNDED DEBT
TO CASH FLOW RATIO COVENANT
Fiscal 2003
Q1 through Q3 4.00
Q4 3.75
Fiscal 2004
Q1 through Q3 3.75
Q4 3.50
Fiscal 2005
Q1 through Q2 3.50
Thereafter 3.00
FIXED CHARGE COVERAGE RATIO 1.50
On May 5, 2003, the Bank Facility was amended to exclude the expenses
which the Company incurred in the BFBC litigation (See Note 8) for
purposes of calculating its fixed charge coverage ratio and its funded
debt to cash flow ratio.
The revolving credit agreement is subject to certain restrictive
covenants that require the Company, among other things, to achieve
agreed upon levels of cash flow. Under the revolving credit agreement
the Company's funded debt to consolidated cash flow ratio could not
exceed 4.00 and its fixed charge coverage ratio could not be less than
1.50 on May 11, 2003. The Company was in compliance with these
requirements with a funded debt to consolidated cash flow ratio of 3.75
and a fixed charge coverage ratio of 1.75.
The Company's funded debt to consolidated cash flow ratio is required to
be 3.75 by the end of fiscal 2003. While the Company expects to generate
sufficient cash flow to maintain the required ratio of 3.75, there can
be no assurance thereof, particularly in light of the negative trends
that the Company is experiencing in its Burger King and Grady's American
Grill divisions. Should the Company not be able to generate sufficient
cash flow to meet this covenant, the Company believes it could reduce
its capital spending. Its principal opportunities to reduce capital
spending would be to scale back its new unit development and/or its
planned remodel budget. The Company could also increase consolidated
cash flow through reductions in general and administrative expenses. If
the Company were not successful in meeting the required funded debt to
consolidated cash flow ratio it would experience an event of default.
The Company would then need to seek waivers from its lenders or
amendments to the covenants.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies
Management's Discussion and Analysis of Financial Condition and Results
of Operations are based upon the consolidated financial statements,
which were prepared in accordance with accounting principles generally
accepted in the United States of America. These principles require
management to make estimates and assumptions that affect the reported
amounts in the consolidated financial statements and notes thereto.
Actual results may differ from these estimates, and such differences may
be material to the consolidated financial statements. Management
believes that the following significant accounting policies involve a
higher degree of judgment or complexity.
Property and equipment
Property and equipment are depreciated on a straight-line basis over the
estimated useful lives of the assets. The useful lives of the assets are
based upon management's expectations for the period of time that the
asset will be used for the generation of revenue. Management
periodically reviews the assets for changes in circumstances that may
impact their useful lives.
Impairment of long-lived assets
Management periodically reviews property and equipment for impairment
using historical cash flows as well as current estimates of future cash
flows. This assessment process requires the use of estimates and
assumptions that are subject to a high degree of judgment. In addition,
management periodically assesses the recoverability of goodwill and
other intangible assets which requires assumptions regarding the future
cash flows and other factors to determine the fair value of the assets.
If these assumptions change in the future, management may be required to
record impairment charges for these assets.
Income taxes
The Company has recorded a valuation allowance to reduce its deferred
tax assets since it is more likely than not that some portion of the
deferred assets will not be realized. Management has considered all
available evidence, both positive and negative, including its historical
operating results, estimates of future taxable income and ongoing
feasible tax strategies in assessing the need for the valuation
allowance; if these estimates and assumptions change in the future, the
Company may be required to adjust its valuation allowance. This could
result in a charge to, or an increase in, income in the period such
determination is made.
Other estimates
Management is required to make judgments and/or estimates in the
determination of several of the accruals that are reflected in the
consolidated financial statements. Management believes that the
following accruals are subject to a higher degree of judgment.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Management uses estimates in the determination of the required accruals
for general liability, workers' compensation and health insurance. These
estimates are based upon a detailed examination of historical and
industry claims experience. The claim experience may change in the
future and may require management to revise these accruals.
Management continually reassesses its assumptions and judgments and
makes adjustments when significant facts and circumstances dictate.
Historically, actual results have not been materially different than the
estimates that are described above.
This report contains and incorporates forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995,
including statements about the Company's development plans and trends in
the Company's operations and financial results. Forward-looking
statements can be identified by the use of words such as "anticipates,"
"believes," "plans," "estimates," "expects," "intends," "may," and other
similar expressions. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future
developments and their potential effects on the Company. There can be
no assurance that the Company will actually achieve the plans,
intentions and expectations discussed in these forward-looking
statements. Actual results may differ materially. Among the risks and
uncertainties 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; changes in governmental regulations, including
increases in the minimum wage; the results of pending litigation; and
weather and other acts of God. The Company undertakes no obligation to
update or revise any forward-looking information, whether as a result of
new information, future developments or otherwise.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to interest rate risk in connection with its
$60.0 million revolving credit facility which provides for interest
payable at the LIBOR rate plus a contractual spread. The Company's
variable rate borrowings under this revolving credit facility totaled
$47.0 million at May 11, 2003. The impact on the Company's annual
results of operations of a one-point interest rate change would be
approximately $407,000.
ITEM 4. CONTROLS AND PROCEDURES.
The Company maintains a set of disclosure controls and procedures that
are designed to ensure that information required to be disclosed by the
Company in the reports filed by the Company under the Securities
Exchange Act of 1934, as amended ("Exchange Act") is recorded,
processed, summarized and reported within the time periods specified in
the SEC's rules and forms. Within the 90 days prior to the filing date
of this report, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management,
including the Company's President and Chief Executive Officer and the
Company's Executive Vice President (Principal Financial Officer), of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-14 of the Exchange Act.
Based on that evaluation, the Company's President and Chief Executive
Officer and the Company's Executive Vice President concluded that the
Company's disclosure controls and procedures are effective.
There have been no significant changes in the Company's internal
controls or other factors that could significantly affect those controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Note 8 to the unaudited consolidated financial statements of the Company
included in Part I of this report is incorporated herein by reference.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
The Chairman and Chief Executive Officer of the Company,
Daniel B. Fitzpatrick, is having discussions with NBO, LLC
("NBO"), concerning a potential transaction pursuant to
which Mr. Fitzpatrick would purchase all 1,148,014 shares of
the Company's common stock, presently owned by NBO, ("NBO
Shares") for approximately $4.1 million. The Board of
Directors of the Company has determined that the Company is
not presently in a position to repurchase the NBO Shares.
The Board of Directors has further determined that it would
be in the best interests of the Company for Mr. Fitzpatrick
to purchase NBO's shares. Therefore, the Company approved
in advance Mr. Fitzpatrick's purchase the NBO Shares for
purposes of the Company's Shareholder Rights Plan and
Indiana's Business Combination statute. The Company also
amended its By-Laws to opt out of Indiana's Control Share
Acquisition statute.
No definitive agreement between Mr. Fitzpatrick and NBO has
been reached and there can be no assurance that a definitive
agreement will be reached or that such an agreement, if
reached, will be consummated. If such an agreement is
consummated, it is expected that NBO and its principals
would enter into a Standstill Agreement pursuant to which
they would be precluded from purchasing additional shares of
the Company's common stock or otherwise engaging in
activities hostile to the Company and its management for a
period of 10 years. In addition, if such a transaction were
consummated, the Company would be required to take a one-
time non-cash charge in an amount equal to the premium to
the market price which Mr. Fitzpatrick pays for the NBO
shares and there would be a corresponding increase in the
Company's additional paid-in capital.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
A list of exhibits required to be filed as part of this report is
set forth in the Index to Exhibits, which immediately precedes such
exhibits, and is incorporated herein by reference.
(b)Reports on Form 8-K
None
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Quality Dining, Inc.
(Registrant)
Date: June 24, 2003 By: /s/John C. Firth
--------------------------
Executive Vice President
General Counsel and Secretary
(Principal Financial Officer)
CERTIFICATIONS
I, Daniel B. Fitzpatrick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Quality Dining,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules l3a-14 and 15d-14) for the registrant and
have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in the other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: June 24, 2003
/s/ Daniel B. Fitzpatrick
__________________________
Daniel B. Fitzpatrick
President and Chief Executive
Officer
I, John C. Firth, certify that:
1.I have reviewed this quarterly report on Form 10-K of Quality Dining,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules l3a-14 and 15d-14) for the registrant and
have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in the other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: June 24, 2003
/s/ John C. Firth
____________________________________
John C. Firth
Executive Vice President and General
Counsel
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- ---------------------------------
3-B By-Laws, amended as of June 11, 2003
10-W Lease by Fitzpatrick Properties, LLC, an Indiana
limited liability company and Bravokilo, Inc.
for Burger King #2148, Southfield, MI.
10-X Lease by Fitzpatrick Properties, LLC, an
Indiana limited liability company and Bravokilo,
Inc. for Burger King #6296, Taylor, MI.
4-Q First Amendment dated May 5, 2003 to Fourth Amended
and Restated Revolving Credit Agreement dated as of
May 30, 2002.
99.1 Certification of Daniel B. Fitzpatrick pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of John C. Firth pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 3.B
- -------------
BY-LAWS
OF
QUALITY DINING, INC.
(As last amended effective October 20, 1999
to amend Sections 1.2 and 1.3,
January 24, 2000 to amend Section 2.1; and
June 11, 2003 to amend Section 9.4)
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meetings. Annual meetings of the
shareholders of the Corporation shall be held on the first Monday
of March of each year commencing in March, 1995, at such hour and
at such place within or without the State of Indiana as shall be
designated by the Board of Directors. In the absence of
designation, the meeting shall be held at the principal office of
the Corporation at 11:00 a.m. (local time). The Board of
Directors may, by resolution, change the date or time of such
annual meeting. If the day fixed for any annual meeting of
shareholders shall fall on a legal holiday, then such annual
meeting shall be held on the first following day that is not a
legal holiday.
Section 1.2 Purposes of Annual Meetings
(a) At each annual meeting, the shareholders shall elect one
group of Directors. At any such annual meeting any business
properly brought before the meeting may also be transacted.
(b) To be properly brought before an annual meeting, business
must be (i) specified in the notice of the meeting (or any
supplement thereto) given by or at the direction of the Board of
Directors (ii) otherwise properly brought before the meeting by
or at the direction of the Board of Directors or (iii) otherwise
properly brought before the meeting by a shareholder. For
business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given written notice
thereof, either by personal delivery or by United States mail,
postage prepaid, to the Secretary, at the principal executive
offices of the Company, not less than 70 days nor more than 90
days prior to the anniversary date of the immediately preceding
annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days earlier or more
than 60 days later than such anniversary date, notice by the
shareholder must be so delivered or received not earlier than the
90th day prior to such annual meeting and not later than the
close of business on the later of the 70th day prior to such
annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Any such
notice shall set forth as to each matter the shareholder proposes
to bring before the annual meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons
for conducting such business at the meeting and in the event that
such business includes a proposal to amend the Restated Articles
of Incorporation of the Company, the language of the proposed
amendment, (ii) the name and address of the shareholder proposing
such business, (iii) a representation that the shareholder is a
holder of record of shares of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the
meeting to propose such business, (iv) any material interest of
the shareholder to such business, and (v) if the shareholder
intends to solicit proxies in support of such shareholder's
proposal, a representation to that effect. The foregoing notice
requirements shall be deemed satisfied by a shareholder if the
shareholder has notified the Company of his or her intention to
present a proposal at an annual meeting and such shareholder's
proposal has been included in a proxy statement that has been
prepared by management of the Company to solicit proxies for such
annual meeting; provided, however, that if such shareholder does
not appear or send a qualified representative to present such
proposal at such annual meeting, the Company need not present
such proposal for a vote at such meeting, notwithstanding that
the proxies in respect of such vote may have been received by the
Company. No business shall be conducted at an annual meeting of
shareholders except in accordance with this Section 1.2(b) and
the chairman of any annual meeting of shareholders may refuse to
permit any business to be brought before an annual meeting
without compliance with the foregoing procedures or if the
shareholder solicits proxies in support of such shareholder's
proposal without such shareholder having made the representation
required by clause (v) of the preceding sentence.
Section 1.3. Special Meetings. Special meetings of
the shareholders of the Corporation may be called at any time by
the Board of Directors or the Chairman of the Board and shall be
called by the Board of Directors if the Secretary receives
written, dated and signed demands for a special meeting,
describing in reasonable detail the purpose or purposes for which
it is to be held, from the holders of shares representing at
least 80% of all the votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting. If
the Secretary receives one (1) or more proper written demands for
a special meeting of shareholders, the Board of Directors may set
a record date for determining shareholders entitled to make such
demand. The Board of Directors or the Chairman of the Board, as
the case may be, calling a special meeting of shareholders shall
set the date, time and place of such meeting, which may be held
within or without the State of Indiana.
Section 1.4. Notices. A written notice, stating the
date, time, and place of any meeting of the shareholders, and, in
the case of a special meeting, the purpose or purposes for which
such meeting is called, shall be delivered or mailed by the
Secretary of the Corporation, to each shareholder of record of
the Corporation entitled to notice of or to vote at such meeting
no fewer than ten (10) nor more than sixty (60) days before the
date of the meeting. In the event of a special meeting of
shareholders required to be called as the result of a demand
therefore made by shareholders, such notice shall be given no
later than the sixtieth (60th) day after the Corporation's
receipt of the demand requiring the meeting to be called. Notice
of shareholders' meetings, if mailed, shall be mailed, postage
prepaid, to each shareholder at his address shown in the
Corporation's current record of shareholders.
Notice of a meeting of shareholders shall be given to
shareholders not entitled to vote, but only if a purpose for the
meeting is to vote on any amendment to the Corporation's Restated
Articles of Incorporation, merger, or share exchange to which the
Corporation would be a party, sale of the Corporation's assets,
dissolution of the Corporation, or consideration of voting rights
to be accorded to shares acquired or to be acquired in a "control
share acquisition" (as such term is defined in the Indiana
Business Corporation Law). Except as required by the foregoing
sentence or as otherwise required by the Indiana Business
Corporation Law or the Corporation's Restated Articles of
Incorporation, notice of a meeting of shareholders is required to
be given only to shareholders entitled to vote at the meeting.
A shareholder or his proxy may at any time waive notice
of a meeting if the waiver is in writing and is delivered to the
Corporation for inclusion in the minutes or filing with the
Corporation's records. A shareholder's attendance at a meeting,
whether in person or by proxy, (a) waives objection to lack of
notice or defective notice of the meeting, unless the shareholder
or his proxy at the beginning of the meeting objects to holding
the meeting or transacting business at the meeting, and
(b) waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described
in the meeting notice, unless the shareholder or his proxy
objects to considering the matter when it is presented. Each
shareholder who has, in the manner above provided, waived notice
or objection to notice of a shareholders' meeting shall be
conclusively presumed to have been given due notice of such
meeting, including the purpose or purposes thereof.
If an annual or special shareholders' meeting is
adjourned to a different date, time, or place, notice need not be
given of the new date, time, or place if the new date, time, or
place is announced at the meeting before adjournment, unless a
new record date is or must be established for the adjourned
meeting.
Section 1.5. Voting. Except as otherwise provided by
the Indiana Business Corporation Law or the Corporation's
Restated Articles of Incorporation, each share of the capital
stock of any class of the Corporation that is outstanding at the
record date established for any annual or special meeting of
shareholders and is outstanding at the time of and represented in
person or by proxy at the annual or special meeting, shall
entitle the record holder thereof, or his proxy, to one (1) vote
on each matter voted on at the meeting.
Section 1.6. Quorum. Unless the Corporation's
Restated Articles of Incorporation or the Indiana Business
Corporation Law provide otherwise, at all meetings of
shareholders, a majority of the votes entitled to be cast on a
matter, represented in person or by proxy, constitutes a quorum
for action on the matter. Action may be taken at a shareholders'
meeting only on matters with respect to which a quorum exists;
provided, however, that any meeting of shareholders, including
annual and special meetings and any adjournments thereof, may be
adjourned to a later date although less than a quorum is present.
Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new
record date is or must be set for that adjourned meeting.
Section 1.7. Vote Required To Take Action. If a
quorum exists as to a matter to be considered at a meeting of
shareholders, action on such matter (other than the election of
Directors) is approved if the votes properly cast favoring the
action exceed the votes properly cast opposing the action, except
as the Corporation's Restated Articles of Incorporation or the
Indiana Business Corporation Law require a greater number of
affirmative votes. Directors shall be elected by a plurality of
the votes properly cast.
Section 1.8. Record Date. Only such persons shall be
entitled to notice of or to vote, in person or by proxy, at any
shareholders' meeting as shall appear as shareholders upon the
books of the Corporation as of such record date as the Board of
Directors shall determine, which date may not be earlier than the
date seventy (70) days immediately preceding the meeting. In the
absence of such determination, the record date shall be the
fiftieth (50th) day immediately preceding the date of such
meeting. Unless otherwise provided by the Board of Directors,
shareholders shall be determined as of the close of business on
the record date.
Section 1.9. Proxies. A shareholder may vote his
shares either in person or by proxy. A shareholder may appoint a
proxy to vote or otherwise act for the shareholder (including
authorizing the proxy to receive, or to waive, notice of any
shareholders' meeting within the effective period of such proxy)
by signing an appointment form, either personally or by the
shareholders' attorney-in-fact. An appointment of a proxy is
effective when received by the Secretary or other officer or
agent authorized to tabulate votes and is effective for
eleven (11) months unless a longer period is expressly provided
in the appointment form. The proxy's authority may be limited to
a particular meeting or may be general and authorize the proxy to
represent the shareholder at any meeting of shareholders held
within the time provided in the appointment form. Subject to the
Indiana Business Corporation Law and to any express limitation on
the proxy's authority appearing on the face of the appointment
form, the Corporation is entitled to accept the proxy's vote or
other action as that of the shareholder making the appointment.
Section 1.10. Removal of Directors. Any or all of the
members of the Board of Directors may be removed, for good cause,
only at a meeting of the shareholders called expressly for that
purpose, by a vote of the holders of outstanding shares
representing at least sixty-six and two-thirds percent (66-2/3%)
of the votes then entitled to be cast at an election of
Directors. Directors may not be removed in the absence of good
cause.
Section 1.11. Written Consents. Any action required
or permitted to be taken at a shareholders' meeting may be taken
without a meeting if the action is taken by all the shareholders
entitled to vote on the action. The action must be evidenced by
one (1) or more written consents describing the action taken,
signed by all the shareholders entitled to vote on the action,
and delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. Action taken under this
Section 1.10 is effective when the last shareholder signs the
consent, unless the consent specifies a different prior or
subsequent effective date, in which case the action is effective
on or as of the specified date. Such consent shall have the same
effect as a unanimous vote of all shareholders and may be
described as such in any document.
Section 1.12. Participation by Conference Telephone.
The Chairman of the Board or the Board of Directors may permit
any or all shareholders to participate in an annual or special
meeting of shareholders by, or through the use of, any means of
communication, such as conference telephone, by which all
shareholders participating may simultaneously hear each other
during the meeting. A shareholder participating in a meeting by
such means shall be deemed to be present in person at the
meeting.
ARTICLE II
Directors
Section 2.1. Number and Terms. The business and
affairs of the Corporation shall be managed under the direction
of a Board of Directors consisting of seven (7) directors.
The Directors shall be divided into three (3) groups,
with each group consisting of one-third (1/3) of the total
Directors, as near as may be, with the term of office of the
first group to expire at the annual meeting of shareholders in
1995, the term of office of the second group to expire at the
annual meeting of shareholders in 1996, and the term of office of
the third group to expire at the annual meeting of shareholders
in 1997; and at each annual meeting of shareholders, the
Directors chosen to succeed those whose terms then expire shall
be identified as being of the same group as the Directors they
succeed and shall be elected for a term expiring at the third
succeeding annual meeting of shareholders.
Despite the expiration of a Director's term, the
Director shall continue to serve until his successor is elected
and qualified, or until the earlier of his death, resignation,
disqualification or removal, or until there is a decrease in the
number of Directors. Any vacancy occurring in the Board of
Directors, from whatever cause arising, shall be filled by
selection of a successor by a majority vote of the remaining
members of the Board of Directors (although less than a quorum).
The term of a Director elected or selected to fill a vacancy
shall expire at the end of the term for which such Director's
predecessor was elected, or if the vacancy arises because of an
increase in the size of Board of Directors, at the end of the
term specified at the time of election or selection.
Nominations of persons for election as Directors may be
made by the Board or by any shareholder who is a shareholder of
record at the time of giving of the notice of nomination provided
for in this Section 2.1 and who is entitled to vote for the
election of Directors. Any shareholder of record entitled to
vote for the election of Directors at a meeting may nominate a
person or persons for election as Directors only if written
notice of such shareholder's intent to make such nomination is
given in accordance with the procedures for bringing business
before the meeting set forth in Section 1.2(b) of these By-Laws,
either by personal delivery or by United States mail, postage
prepaid, to the Secretary not later than (i) with respect to an
election to be held at an annual meeting of shareholders, not
less than 70 nor more than 90 days in advance of the anniversary
date of the immediately preceding annual meeting; provided,
however, that in the event that the date of the annual meeting is
more than 30 days earlier or more than 60 days later than such
anniversary date, notice by the shareholder must be so delivered
or received not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of
the 70th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of
such meeting is first made, and (ii) with respect to an election
to be held at a special meeting of shareholders for the election
of Directors, not earlier than the 90th day prior to such special
meeting and not later than the close of business on the later of
the 60th day prior to such special meting or the 10th day
following the day on which public announcement of the date of the
special meeting is first made and of the nominees to be elected
at such meeting. Each such notice shall set forth: (a) the name
and address of the shareholder who intends to make the nomination
and of the person or persons to be nominated; (b) a
representation that the shareholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of
all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are
to be made by the shareholder; (d) such other information
regarding each nominee proposed by such shareholder as would have
been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the
Board; (e) the consent of each nominee to serve as a Director if
so elected; and (f) if the shareholder intends to solicit proxies
in support of such shareholder's nominee(s), a representation to
that effect. The chairman of any meeting of shareholders to
elect Directors and the Board may refuse to acknowledge the
nomination of any person not made in compliance with the
foregoing procedure or if the shareholder solicits proxies in
support of such shareholder's nominee(s) without such shareholder
having made the representation required by clause (f) of the
preceding sentence.
The Directors and each of them shall have no authority
to bind the Corporation except when acting as a Board.
Section 2.2. Quorum and Vote Required To Take Action.
A majority of the whole Board of Directors shall be necessary to
constitute a quorum for the transaction of any business, except
the filling of vacancies. If a quorum is present when a vote is
taken, the affirmative vote of a majority of the Directors
present shall be the act of the Board of Directors, unless the
act of a greater number is required by the Indiana Business
Corporation Law, the Corporation's Restated Articles of
Incorporation or these By-Laws.
Section 2.3. Annual and Regular Meetings. The Board
of Directors shall meet annually, without notice, immediately
following the annual meeting of the shareholders, for the purpose
of transacting such business as properly may come before the
meeting. Other regular meetings of the Board of Directors, in
addition to said annual meeting, shall be held on such dates, at
such times and at such places as shall be fixed by resolution
adopted by the Board of Directors and specified in a notice of
each such regular meeting, or otherwise communicated to the
Directors. The Board of Directors may at any time alter the date
for the next regular meeting of the Board of Directors.
Section 2.4. Special Meetings. Special meetings of
the Board of Directors may be called by any member of the Board
of Directors upon not less than twenty-four (24) hours' notice
given to each Director of the date, time, and place of the
meeting, which notice need not specify the purpose or purposes of
the special meeting. Such notice may be communicated in person
(either in writing or orally), by telephone, telegraph, teletype,
or other form of wire or wireless communication, or by mail, and
shall be effective at the earlier of the time of its receipt or,
if mailed, five (5) days after its mailing. Notice of any
meeting of the Board may be waived in writing at any time if the
waiver is signed by the Director entitled to the notice and is
filed with the minutes or corporate records. A Director's
attendance at or participation in a meeting waives any required
notice to the Director of the meeting, unless the Director at the
beginning of the meeting (or promptly upon the Director's
arrival) objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to
action taken at the meeting.
Section 2.5. Written Consents. Any action required or
permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting if the action is taken by all
members of the Board. The action must be evidenced by one (1) or
more written consents describing the action taken, signed by each
Director, and included in the minutes or filed with the corporate
records reflecting the action taken. Action taken under this
Section 2.5 is effective when the last Director signs the
consent, unless the consent specifies a different prior or
subsequent effective date, in which cases the action is effective
on or as of the specified date. A consent signed under this
Section 2.5 shall have the same effect as a unanimous vote of all
members of the Board and may be described as such in any
document.
Section 2.6. Participation by Conference Telephone.
The Board of Directors may permit any or all Directors to
participate in a regular or special meeting by, or through the
use of, any means of communication, such as conference telephone,
by which all Directors participating may simultaneously hear each
other during the meeting. A Director participating in a meeting
by such means shall be deemed to be present in person at the
meeting.
Section 2.7. Executive Committee. The Board of
Directors shall appoint up to six (6) members to an Executive
Committee. The Executive Committee shall, subject to the
restrictions of Section 2.9, be authorized to exercise the
authority of the full Board of Directors at any times other than
during regular or special meetings of the Board of Directors.
All actions taken by the Executive Committee shall be reported at
the first regular meeting of the Board of Directors following
such actions. Members of the Executive Committee shall serve at
the pleasure of the Board of Directors.
Section 2.8. Other Committees. (a) The Board of
Directors may create one (1) or more committees in addition to
the Executive Committee and appoint members of the Board of
Directors to serve on them, by resolution of the Board of
Directors adopted by a majority of all the Directors in office
when the resolution is adopted. The committee may exercise the
authority of the Board of Directors to the extent specified in
the resolution. Each committee may have one (1) or more members,
and all the members of such committee shall serve at the pleasure
of the Board of Directors.
Section 2.9. Limitations on Committees; Notice, Quorum
and Voting.
(a) Neither the Executive Committee nor any other
committee hereafter established may:
(1) authorize dividends or other distributions, except
a committee may authorize or approve a
reacquisition of shares if done according to a
formula or method prescribed by the Board of
Directors;
(2) approve or propose to shareholders action that is
required to be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any
of its committees;
(4) except as permitted under Section 2.9(a)(7) below,
amend the Corporation's Restated Articles of
Incorporation under IC 23-1-38-2;
(5) adopt, amend, repeal, or waive provisions of these
By-Laws;
(6) approve a plan of merger not requiring shareholder
approval; or
(7) authorize or approve the issuance or sale or a
contract for sale of shares, or determine the
designation and relative rights, preferences, and
limitations of a class or series of shares, except
the Board of Directors may authorize a committee
(or an executive officer of the Corporation
designated by the Board of Directors) to take the
action described in this Section 2.9(a)(7) within
limits prescribed by the Board of Directors.
(b) Except to the extent inconsistent with the
resolutions creating a committee, Sections 2.1 through 2.6 of
these By-Laws, which govern meetings, action without meetings,
notice and waiver of notice, quorum and voting requirements and
telephone participation in meetings of the Board of Directors,
apply to each committee and its members as well.
ARTICLE III
Officers
Section 3.1. Designation, Selection and Terms. The
officers of the Corporation shall consist of the Chairman of the
Board, the President, the Chief Financial Officer, the Treasurer
and the Secretary. The Board of Directors may also elect Vice
Presidents, Assistant Secretaries and Assistant Treasurers, and
such other officers or assistant officers as it may from time to
time determine by resolution creating the office and defining the
duties thereof. In addition, the Chairman of the Board or the
President may, by a certificate of appointment creating the
office and defining the duties thereof delivered to the Secretary
for inclusion with the corporate records, from time to time
create and appoint such assistant officers as they deem
desirable. The officers of the Corporation shall be elected by
the Board of Directors (or appointed by the Chairman of the Board
or the President as provided above) and need not be selected from
among the members of the Board of Directors, except for the
Chairman of the Board and the President who shall be members of
the Board of Directors. Any two (2) or more offices may be held
by the same person. All officers shall serve at the pleasure of
the Board of Directors and, with respect to officers appointed by
the Chairman of the Board or the President, also at the pleasure
of such officers. The election or appointment of an officer does
not itself create contract rights.
Section 3.2. Removal. The Board of Directors may
remove any officer at any time with or without cause. An officer
appointed by the Chairman of the Board or the President may also
be removed at any time, with or without cause, by either of such
officers. Vacancies in such offices, however occurring, may be
filled by the Board of Directors at any meeting of the Board of
Directors (or by appointment by the Chairman of the Board or the
President, to the extent provided in Section 3.1 of these
By-Laws).
Section 3.3. Chairman of the Board. The Chairman of
the Board shall be the chief executive and principal policymaking
officer of the Corporation. Subject to the authority of the
Board of Directors, he shall formulate the major policies to be
pursued in the administration of the Corporation's affairs. He
shall study and make reports and recommendations to the Board of
Directors with respect to major problems and activities of the
Corporation and shall see that the established policies are
placed into effect and carried out under the direction of the
President. The Chairman of the Board shall, if present, preside
at all meetings of the shareholders and of the Board of
Directors.
Section 3.4. Co-Chairman of the Board. The
Co-Chairman of the Board shall not be an officer of the
Corporation, but shall have such power and perform such duties as
the Board of Directors or the Chairman of the Board may, from
time to time, prescribe. In the absence of the Chairman of the
Board, or at the request of the Chairman of the Board, the
Co-Chairman of the Board shall preside at meetings of the
shareholders and of the Board of Directors.
Section 3.5. President. Subject to the provisions of
Section 3.3, the President shall be the chief operating officer
of the Corporation, shall exercise the powers and perform the
duties which ordinarily appertain to that office and shall manage
and operate the business and affairs of the Corporation in
conformity with the policies established by the Board of
Directors and by the Chairman of the Board, or as may be provided
for in these By-Laws. In connection with the performance of his
duties, he shall keep the Chairman of the Board fully informed as
to all phases of the Corporation's activities. In the absence of
the Chairman of the Board, the President shall preside at
meetings of the shareholders and of the Board of Directors.
Section 3.6. Chief Financial Officer. The Chief
Financial Officer shall be the chief financial officer of the
Corporation and shall perform all of the duties customary to that
office. He shall be responsible for all of the Corporation's
financial affairs, subject to the supervision and direction of
the Chairman of the Board and the President, and shall have and
perform such further powers and duties as the Board of Directors
may, from time to time, prescribe and as the Chairman of the
Board or the President may, from time to time, delegate to him.
Section 3.7. Vice Presidents. Each Vice President
shall have such powers and perform such duties as the Board of
Directors may, from time to time, prescribe and as the Chairman
of the Board or the President may, from time to time, delegate to
him.
Section 3.8. Treasurer. The Treasurer shall perform
all of the duties customary to that office, shall be the chief
accounting officer of the Corporation and shall be responsible
for maintaining the Corporation's accounting books and records
and preparing its financial statements, subject to the
supervision and direction of the Chief Financial Officer and
other superior officers within the Corporation. He shall also be
responsible for causing the Corporation to furnish financial
statements to its shareholders pursuant to IC 23-1-53-1.
Section 3.9. Assistant Treasurer. In the absence or
inability of the Treasurer, the Assistant Treasurer, if any,
shall perform only such duties as are specifically assigned to
him, in writing, by the Board of Directors, the Chairman of the
Board, the President, the Chief Financial Officer, or the
Treasurer.
Section 3.10. Secretary. The Secretary shall be the
custodian of the books, papers, and records of the Corporation
and of its corporate seal, if any, and shall be responsible for
seeing that the Corporation maintains the records required by
IC 23-1-52-1 (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the annual
report required by IC 23-1-53-3. The Secretary shall be
responsible for preparing minutes of the meetings of the
shareholders and of the Board of Directors and for authenticating
records of the Corporation, and he shall perform all of the other
duties usual in the office of Secretary of a corporation.
Section 3.11. Assistant Secretary. In the absence or
inability of the Secretary, the Assistant Secretary, if any,
shall perform only such duties as are provided herein or
specifically assigned to him, in writing, by the Board of
Directors, the Chairman of the Board, the President, or the
Secretary.
Section 3.12. Salary. The Board of Directors may, at
its discretion, from time to time, fix the salary of any officer
by resolution included in the minute book of the Corporation.
ARTICLE IV
Checks
All checks, drafts, or other orders for payment of
money shall be signed in the name of the Corporation by such
officers or persons as shall be designated from time to time by
resolution adopted by the Board of Directors and included in the
minute book of the Corporation; and in the absence of such
designation, such checks, drafts, or other orders for payment
shall be signed by the Chairman, the President, the Vice
President-Finance or the Treasurer.
ARTICLE V
Loans
Such of the officers of the Corporation as shall be
designated from time to time by resolution adopted by the Board
of Directors and included in the minute book of the Corporation
shall have the power, with such limitations thereon as may be
fixed by the Board of Directors, to borrow money in the
Corporation's behalf, to establish credit, to discount bills and
papers, to pledge collateral, and to execute such notes, bonds,
debentures, or other evidences of indebtedness, and such
mortgages, trust indentures, and other instruments in connection
therewith, as may be authorized from time to time by such Board
of Directors.
ARTICLE VI
Execution of Documents
The Chairman of the Board, the President or any other
officer authorized by the Board of Directors may, in the
Corporation's name, sign all deeds, leases, contracts, or similar
documents unless otherwise directed by the Board of Directors or
otherwise provided herein or in the Corporation's Restated
Articles of Incorporation, or as otherwise required by law.
ARTICLE VII
Stock
Section 7.1. Execution. Certificates for shares of
the capital stock of the Corporation shall be signed by the
Chairman of the Board or the President and by the Secretary and
the seal of the Corporation (or a facsimile thereof), if any, may
be thereto affixed. Where any such certificate is also signed by
a transfer agent or a registrar, or both, the signatures of the
officers of the Corporation may be facsimiles. The Corporation
may issue and deliver any such certificate notwithstanding that
any such officer who shall have signed, or whose facsimile
signature shall have been imprinted on, such certificate shall
have ceased to be such officer.
Section 7.2. Contents. Each certificate issued after
the adoption of these By-Laws shall state on its face the name of
the Corporation and that it is organized under the laws of the
State of Indiana, the name of the person to whom it is issued,
and the number and class of shares and the designation of the
series, if any, the certificate represents, and shall state
conspicuously on its front or back that the Corporation will
furnish the shareholder, upon his written request and without
charge, a summary of the designations, relative rights,
preferences, and limitations applicable to each class and the
variations in rights, preferences, and limitations determined for
each series (and the authority of the Board of Directors to
determine variations for future series).
Section 7.3. Transfers. Except as otherwise provided
by law or by resolution of the Board of Directors, transfers of
shares of the capital stock of the Corporation shall be made only
on the books of the Corporation by the holder thereof, in person
or by duly authorized attorney, on payment of all taxes thereon
and surrender for cancellation of the certificate or certificates
for such shares (except as hereinafter provided in the case of
loss, destruction, or mutilation of certificates) properly
endorsed by the holder thereof or accompanied by the proper
evidence of succession, assignment, or authority to transfer, and
delivered to the Secretary or an Assistant Secretary.
Section 7.4. Stock Transfer Records. There shall be
entered upon the stock records of the Corporation the number of
each certificate issued, the name and address of the registered
holder of such certificate, the number, kind, and class of shares
represented by such certificate, the date of issue, whether the
shares are originally issued or transferred, the registered
holder from whom transferred, and such other information as is
commonly required to be shown by such records. The stock records
of the Corporation shall be kept at its principal office, unless
the Corporation appoints a transfer agent or registrar, in which
case the Corporation shall keep at its principal office a
complete and accurate shareholders' list giving the names and
addresses of all shareholders and the number and class of shares
held by each. If a transfer agent is appointed by the
Corporation, shareholders shall give written notice of any
changes in their addresses from time to time to the transfer
agent.
Section 7.5. Transfer Agents and Registrars. The
Board of Directors may appoint one or more transfer agents and
one or more registrars and may require each stock certificate to
bear the signature of either or both.
Section 7.6. Loss, Destruction, or Mutilation of
Certificates. The holder of any of the capital stock of the
Corporation shall immediately notify the Corporation of any loss,
destruction, or mutilation of the certificate therefor, and the
Board of Directors may, in its discretion, cause to be issued to
him a new certificate or certificates of stock, upon the
surrender of the mutilated certificate, or, in the case of loss
or destruction, upon satisfactory proof of such loss or
destruction. The Board of Directors may, in its discretion,
require the holder of the lost or destroyed certificate or his
legal representative to give the Corporation a bond in such sum
and in such form, and with such surety or sureties as it may
direct, to indemnify the Corporation, its transfer agents, and
registrars, if any, against any claim that may be made against
them or any of them with respect to the capital stock represented
by the certificate or certificates alleged to have been lost or
destroyed, but the Board of Directors may, in its discretion,
refuse to issue a new certificate or certificates, save upon the
order of a court having jurisdiction in such matters.
Section 7.7. Form of Certificates. The form of the
certificates for shares of the capital stock of the Corporation
shall conform to the requirements of Section 7.2 of these By-Laws
and be in such printed form as shall from time to time be
approved by resolution of the Board of Directors.
ARTICLE VIII
Seal
The corporate seal of the Corporation shall, if the
Corporation elects to have one, be in the form of a disc, with
the name of the Corporation and "INDIANA" on the periphery
thereof and the word "SEAL" in the center.
ARTICLE IX
Miscellaneous
Section 9.1. Indiana Business Corporation Law. The
provisions of the Indiana Business Corporation law, as amended,
applicable to all matters relevant to, but not specifically
covered by, these By-Laws are hereby, by reference, incorporated
in and made a part of these By-Laws.
Section 9.2. Fiscal Year. The fiscal year of the
Corporation shall end on the last Sunday in October of each year.
Section 9.3. Election to be governed by Indiana Code
23-1-43. Effective upon the registration of the Corporation's
common stock under Section 12 of the Securities Exchange Act of
1934, as amended, the Corporation shall be governed by the
provisions of IC 23-1-43 regarding business combinations.
Section 9.4. Control Share Acquisition Statute.
Effective on and after June 11, 2003, the provisions of
IC 23-1-42 shall not apply to the acquisition of shares of the
Corporation.
Section 9.5. Redemption of Shares Acquired in Control
Share Acquisitions. If and whenever the provisions of IC 23-1-42
apply to the Corporation, any or all control shares acquired in a
control share acquisition shall be subject to redemption by the
Corporation, if either:
(a) no acquiring person statement has been filed
with the Corporation with respect to such control share
acquisition in accordance with IC 23-1-42-6, or
(b) the control shares are not accorded full
voting rights by the Corporation's shareholders as
provided in IC 23-1-42-9.
A redemption pursuant to Section 9.5(a) may be made at any time
during the period ending sixty (60) days after the last
acquisition of control shares by the acquiring person. A
redemption pursuant to Section 9.5(b) may be made at any time
during the period ending two (2) years after the shareholder vote
with respect to the granting of voting rights to such control
shares. Any redemption pursuant to this Section 9.5 shall be
made at the fair value of the control shares and pursuant to such
procedures for such redemption as may be set forth in these
By-Laws or adopted by resolution of the Board of Directors.
As used in this Section 9.5, the terms "control
shares," "control share acquisition," "acquiring person
statement," and "acquiring person" shall have the meanings
ascribed to such terms in IC 23-1-42.
Section 9.6. Amendments. These By-Laws may be
rescinded, changed, or amended, and provisions hereof may be
waived, at any meeting of the Board of Directors by the
affirmative vote of a majority of the entire number of Directors
at the time, except as otherwise required by the Corporation's
Articles of Incorporation or by the Indiana Business Corporation
Law.
Section 9.7. Definition of Articles of Incorporation.
The term "Articles of Incorporation" as used in these By-Laws
means the Amended or Restated Articles of Incorporation of the
Corporation as from time to time are in effect.
Exhibit 10-W
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LEASE
Table of Contents
Page
1. Premises 5
1.1 Lease. 5
1.2 Purchase. 5
2. Term of Lease. 5
2.1 Commencement and Duration. 5
2.2 Lease Year Defined. 5
2.3 Renewal Terms. 6
3. Rent Reserved. 6
3.1 Base Rent. 6
3.1.1 6
3.1.2 Failure to Give Notice. 6
3.2 Percentage Rental. 6
3.3 Quarterly Accounting. 7
3.4 Annual Accounting. 7
3.5 Records and Audit. 7
3.6 Gross Sales Defined. 7
4. Use and Maintenance. 8
5. Utilities. 8
6. Liens, Taxes and Assessments. 8
6.1 Prior Taxes. 8
6.2 Taxes. 8
6.3 Exclusion from Tenant's Taxes. 8
6.4 Payment of Taxes. 8
6.5 Contesting of Tax By Tenant. 8
7. Insurance. 9
7.1 Public Liability Insurance. 9
7.2 Property Insurance. 9
7.3 Insurance Policy Requirements. 9
7.4 Tenant Property. 9
7.5 Insurance Proceeds. 10
8. Intentionally Deleted. 10
9. Alterations, Additions and Improvements. 10
10. Quiet Enjoyment. 10
11. Fire or Disaster. 10
11.2 Tenant's Right to Avoid Rebuilding. 10
12. Condemnation. 11
13. Return of Premises. 11
14. Waiver of Subrogation. 11
15. Default and Landlord's Remedies. 11
16. Intentionally Deleted. 12
17. Notices. 12
18. Successors. 13
19. Additional Covenants. 13
20. Warranty of Title. 13
21. Subordination. 13
28.2 Subsequent Mortgages 13
21.3 Landlord's Right to Subordinate. 14
22. Assignment and Subletting. 14
23. Legal Expenses. 14
24. Environmental Representations. 14
25. Indemnification as to Environmental Matters. 15
26. Effective Date. 16
27. Entire Agreement. 16
28. Counterparts. 16
29. Recordation, Short Form. 16
30. Estoppel Certificate. 16
31. Collateral Assignment. 16
32. Real Estate Broker. 16
33. Right of First Refusal. 16
EXHIBITS:
A Legal Description
B Encumbrances
C Subordination, Nondisturbance and Attornment Agreement
D Memorandum of Lease
BK #2148
26211 West 12 Mile Road
Southfield, MI 48034
LEASE
THIS LEASE is made as of May 21, 2003 by Fitzpatrick
Properties, LLC, an Indiana limited liability company, with
offices at 4220 Edison Lakes Parkway, Mishawaka, Indiana 46545
(hereinafter called "Landlord"), and Bravokilo, Inc., an Indiana
corporation, with offices at 4220 Edison Lakes Parkway,
Mishawaka, Indiana 46545 (hereinafter called "Tenant").
W I T N E S S E T H:
IN CONSIDERATION of the rent reserved and the covenants and
provisions contained in this Lease, Landlord and Tenant covenant
and agree as follows:
1. Premises.
1.1 Lease. Landlord leases to Tenant, and Tenant
leases from Landlord, the land located in the City of
Southfield, State of Michigan, which land is legally
described in the attached Exhibit A, together with all
buildings and facilities that exist on the land from
time to time, together with all Landlord's easements and
rights appurtenant to said Premises, in, over and upon
adjoining and adjacent public and private land,
highways, roads, streets, lanes and other areas
reasonably required for the installation, maintenance,
operation and service of any and all utilities and means
of ingress and egress to or from the Premises, but only
to the extent of Landlord's interest in such easements
and rights appurtenant, which land, buildings, easements
and rights appurtenant are herein called the "Premises".
1.2 Purchase. Tenant hereby purchases the
leasehold improvements located on the Premises for Forty
Three Thousand Nine Hundred Forty One and 15/100 Dollars
($43,941.15), which amount shall be payable within ten
(10) days after the date first set forth above.
2. Term of Lease.
2.1 Commencement and Duration. The Primary Term shall
commence on the date first set forth above (the
"Commencement Date") and shall expire on September 17,
2008.
2.2 Lease Year Defined. A Lease Year shall be defined in
this Lease as that twelve (12) month period during the
Primary Term or any Renewal Term (as defined below)
commencing on the Commencement Date or the annual
anniversary thereof, as may be applicable; provided,
however, that if the Commencement Date is a day other
than the first day of a calendar month, then the first
Lease Year shall include that period of time from the
Commencement Date to the first day of the next calendar
month, and any subsequent Lease Year shall be the twelve
(12) month period beginning on the first day of such
month on the annual anniversary thereof.
2.3 Renewal Terms. Provided Tenant is not in default,
Landlord does hereby grant to Tenant the right,
privilege and option to extend this Lease for one (1)
period of four (4) years immediately followed by four
(4) successive periods of five (5) years each
(individually, a "Renewal Term", and collectively the
"Renewal Terms"), upon the same terms and conditions as
herein contained.
2.4 Notice. Tenant, if it elects to exercise any
option, shall do so by giving written notice at least
one hundred eighty (180) days prior to the expiration of
the then current term. The Primary Term and any Renewal
Terms are sometimes collectively referred to as the
"Term."
3. Rent Reserved. In consideration for the use and
occupancy of the Premises and all other rights and privileges
under the Lease, Tenant agrees to pay Landlord the following:
3.1 Base Rent.
3.1.1 Tenant shall pay to Landlord (on the
first day of each month during the Primary Term and
any Renewal Terms) monthly rent in the amount of
Eight Thousand Two Hundred Fifty One and 69/100
Dollars ($8,251.69) (the "Base Rent").
3.1.2 Failure to Give Notice. If Tenant shall fail
to give any notice as provided in Section 2.3, Tenant's
right to exercise its option shall nevertheless continue
until thirty (30) days after Landlord shall have given
Tenant notice of Landlord's election to terminate such
option and Tenant may exercise such option at any time
until the expiration of said thirty (30) day period. It
is the intention of the parties to avoid forfeiture of
Tenant's rights to extend the term under any of the
options set forth in Section 2.3 through inadvertent
failure to give notice of exercise thereof within the
time limits prescribed. Accordingly, if Tenant shall
fail to give notice to Landlord of Tenant's election to
extend the term for any of the aforesaid options and if
Landlord shall fail to give notice to Tenant of
Landlord's election to terminate Tenant's right to
extend this Lease under the option applicable thereto,
then and so often as such event shall occur, the term
shall be automatically extended from year to year at the
rent that would be applicable if the Tenant had extended
the term and upon all of the other terms and conditions
then in effect, subject to Tenant's right under such
option to extend the term for the remainder of the
option period and to Landlord's right to place the
thirty (30) day limit on such option by a notice in the
manner provided above.
3.2 Percentage Rental. In addition to Base Rent,
Tenant shall pay percentage rent ("Percentage Rent")
during the Primary Term and any Renewal Term, if any, in
the amount by which eight percent (8%) of Tenant's Gross
Sales for any Lease Year exceeds the annual Base Rent.
Percentage rent shall be payable annually along with
Tenant's annual accounting as provided in Section 3.4.
Notwithstanding the foregoing paragraph, in the
event Tenant remodels the Premises at a total cost of
Three Hundred Thousand Dollars ($300,000) or more,
excluding furniture, fixtures and equipment, within a
six (6) month period, Percentage Rent shall be reduced
to the amount, if any, by which seven percent (7%) of
Tenant's Gross Sales for any Lease Year exceeds the
annual Base Rent, for twenty (20) years commencing on
the date the restaurant reopens after the Major Remodel
is complete.
3.3 Quarterly Accounting. Within thirty (30) days
after the end of each quarter during the term of this Lease,
Tenant shall deliver to Landlord a statement in writing on
a form reasonably approved by the Landlord, setting forth the
Gross Sales for the preceding month. The statement shall
conform to the statement that Tenant is required to provide
to Burger King Corporation.
3.4 Annual Accounting. Within forty-five (45) days
after the end of each Lease Year, the Tenant shall deliver to
Landlord a statement showing the Gross Sales made at the
Premises during the previous year.
3.5 Records and Audit. Tenant agrees to keep full,
true and accurate records and books of accounts of all
transactions connected with its business. Landlord shall
have the right to examine and inspect the books and records
of Tenant at any reasonable time during normal business hours
in order to verify the accuracy of statements rendered by the
Tenant. Notwithstanding the foregoing, Landlord shall have
no right to examine or inspect such books and records more
than two (2) years after the date such books and records were
prepared.
3.6 Gross Sales Defined. For purposes of this
Lease, the term "Gross Sales" shall include the gross sale
price of all goods, wares and merchandise and/or the price
charged for the performance of any service for any customer
or party for compensation by Tenant, on a cash or charge
basis, paid or unpaid, collected or uncollected, provided,
however, that income from vending machines and pay telephones
shall be excluded in determining gross sales. Also excluded
from Gross Sales shall be the amount of any federal, state,
county, or city sales taxes, excise taxes, cigarette or
tobacco taxes that may now or hereafter be imposed upon or
required to be paid by Tenant as against its sales on the
Premises and any credit card fees, returns, employee meals,
complimentary meals, coupons and the sale of fixtures not in
the ordinary course of business. Also excluded from Gross
Sales shall be cash received as payment in credit
transactions where the extension of credit itself has already
been included in Gross Sales. Also excluded from Gross Sales
are receipts from the sale of promotional items where the
sale price of the promotional item is no more than the FOB
Restaurant cost plus a fifteen percent (15%) mark-up, unless
there has been an authorization, at Burger King Corporation
A.D.I. level, for a charity donation to be made from the sale
of each promotional item in which case the sale price of that
promotional item may be no more than the FOB Restaurant cost
plus a twenty-five percent (25%) mark-up. If the sale price
of such promotional items exceed fifteen percent (15%) or
twenty-five percent (25%), whichever percentage is
applicable, then the entire amount of the sale price must be
included in determining Gross Sales.
4. Use and Maintenance. From and after the Commencement
Date, Tenant shall have the responsibility of (i) maintaining and
keeping the Premises and all of its appurtenant facilities in
good condition and repair; and (ii) complying with all federal,
state and municipal laws and ordinances with respect to Tenant's
use of the Premises.
5. Utilities. Tenant shall be fully responsible for
the cost of all usage charges for the utilities or other
services related to the Premises during the Primary Term and
any Renewal Term.
6. Liens, Taxes and Assessments.
6.1 Prior Taxes. Landlord represents that upon its
signing of this Lease, all taxes assessed against the
Premises, except current taxes not delinquent, have been
paid in full. Landlord promptly after receipt of any tax
notice or bill on the Premises, shall furnish Tenant with
a copy of such document.
6.2 Taxes. Tenant shall be responsible for the payment
of all real estate taxes and assessments which accrue
during the term of this Lease (including Renewal Terms, if
any). Tenant shall pay such taxes and assessments as they
come due. Taxes shall be prorated at the beginning and end
of the term
6.3 Exclusion from Tenant's Taxes. Nothing herein
contained shall require the Tenant to pay municipal, state
or federal income taxes assessed against the Landlord, or
municipal, state or federal capital levy, estate,
succession, inheritance, excise, gift, or transfer taxes
of the Landlord, or corporate franchise taxes imposed upon
any corporate owner of the fee of the Premises or any
similar tax or assessment, including the Michigan Single
Business Tax, if any, imposed on Landlord.
6.4 Payment of Taxes. In the event the Premises are not
separately assessed when a bill for taxes and assessments
is received, Landlord shall forward to Tenant a notice of
the amount owing setting forth Landlord's reasonably
detailed calculation of the amount due from Tenant
together with reasonable supporting documentation. Taxes
and assessments due during the term of this Lease which
are the Tenant's responsibility to pay, shall be paid by
Tenant within thirty (30) days thereafter. At such time
as the Premises are separately assessed, Tenant shall pay
the taxes and assessments directly to the taxing authority
and provide Landlord with written verification of such
payment prior to the due dates thereof.
6.5 Contesting of Tax By Tenant. If the Tenant desires
to contest any ad valorem assessment or the validity of
any tax and gives the Landlord written notice of this
intention, then the Tenant may contest the assessment or
tax without being in default hereunder, provided that (i)
neither the Premises nor any part thereof nor interest
therein would be in any danger of being sold, forfeited,
lost or interfered with; (ii) Tenant shall have furnished
such security, if any, as may be required in the
proceedings or reasonably requested by Landlord; and (iii)
all expenses incurred in connection with such proceedings
shall be paid by Tenant. Tenant agrees to indemnify
Landlord and hold Landlord harmless from all costs,
expenses and damages of whatsoever nature arising out of
any contest made by Tenant.
7. Insurance.
7.1 Public Liability Insurance. The Tenant agrees that
it will, at its cost and expense, obtain and keep in
force and effect, and name Landlord as "additional
insured" commercial general liability insurance coverage
against any and all claims for personal injury or
property damage occurring in, about or upon the Premises
during the term of this Lease. Such insurance shall be
maintained with limits of liability of not less than One
Million Dollars ($1,000,000) per occurrence combined
single limit for both bodily injury and property damage,
and One Million Dollars ($1,000,000) annual aggregate.
Commercial general liability shall be on an occurrence
basis and shall include "products and completed
operations coverage."
7.2 Property Insurance. The Tenant agrees that it will,
at its cost and expense, obtain and keep in force and
effect and name Landlord "additional insured" as its
interests may appear, a Causes of Loss-Special Form
insurance policy or policies, or the insurance industry
equivalent, protecting the building on the Premises from
loss or damage within the coverage of such insurance
policy(ies) for a sum not less than one hundred percent
(100%) of the greater of the full insurable value
thereof or the replacement value, if available, of said
building, excluding foundation and site work.
7.3 Insurance Policy Requirements. Under all policies
of insurance referred to in Sections 7.1 and 7.2 above,
the holder of any mortgage on the Premises, if any,
shall be named as "additional insured." Tenant agrees
to cause the insurance companies issuing the aforesaid
policies of insurance to forward to Landlord
certificates of insurance. All insurance provided by
Tenant as required by this Article shall be procured
from companies authorized to do business in the State of
where the Premises are located. All such insurance
policies shall provide for payment of loss thereunder to
Landlord, and renewals of the policies shall be
delivered to Landlord at least ten (10) days prior to
the expiration dates of the respective policies. All
insurance provided for in this Lease may be in the form
of a general coverage, floater policy or so-called
blanket policy which may be furnished by Tenant or any
entity related to Tenant. Notwithstanding the foregoing,
Tenant may self-insure any risk required to be insured
by it hereunder. Tenant agrees to name Landlord as
additional insured under any blanket policy of liability
insurance Tenant purchases with respect to the Premises.
7.4 Tenant Property. In addition to all other insurance
required in this Lease to be carried by Tenant, Tenant
shall carry insurance to cover other property, fixtures,
furnishings, equipment and inventory, and such policy or
policies shall include waiver(s) of subrogation as
required in Article 14 below. Notwithstanding the
foregoing, Tenant may self-insure any risk required to
be insured by it hereunder.
7.5 Insurance Proceeds. Landlord and Tenant agree that
in the event of loss under any policy or policies
required above, Tenant shall proceed with the repair and
restoration of the damaged or destroyed building in
accordance with Article 11 hereof and that the insurance
proceeds shall be paid to Tenant for application to such
repair and restoration.
8. Intentionally Deleted.
9. Alterations, Additions and Improvements. Tenant may,
from time to time, make such alterations, additions or
improvements to the Premises as it shall deem necessary for its
use and operation of the Premises; provided, however, that Tenant
first obtains the written consent of Landlord, which consent
shall not be unreasonably withheld.
Landlord shall be deemed to consent in advance to all
alterations, additions or improvements to the Premises as may be
reasonably required to satisfy all requirements of the Franchise
Agreement. All such alterations, additions or improvements shall
become a part of the Premises, excluding trade fixtures,
shelving, cases, counters and equipment placed on the Premises by
Tenant and not permanently affixed. These excluded items may be
removed by Tenant provided any resulting injury or damage is
repaired at Tenant's expense. Notwithstanding the foregoing,
Tenant may make nonstructural alterations, additions or
improvements to the Premises without Landlord's consent.
10. Quiet Enjoyment. Landlord covenants it has full
authority to lease the Premises under the terms contained in this
Lease, and Tenant shall peaceably and quietly have, hold and
enjoy the Premises for the Primary Term and any renewal thereof
without suits, trouble or hindrance from Landlord or any other
person, with respect to Landlord's title to the Premises or
Landlord's authority to enter into this Lease Agreement.
11. Fire or Disaster.
11.1 If at any time the building herein leased is
wholly or partially destroyed or rendered untenantable
by fire, casualty or otherwise, then the Rent reserved
herein shall not abate and, except as set forth in
paragraph 11.2 below, Tenant shall promptly repair,
replace or rebuild the building at least to the extent
of the value and as nearly as possible to the character
of the buildings and improvements existing immediately
prior to such occurrence. The Landlord and any
mortgagee of the fee shall make available to Tenant for
this purpose all insurance proceeds collected, although
Tenant's obligation under this Article 11 shall not be
limited to insurance proceeds collected. If repairing,
replacing, or rebuilding the building to the character
of the building existing prior to the damage is not, in
Tenant's reasonable judgment, likely to maximize revenue
for the Premises, Tenant may, at its option, alter the
structure.
11.2Tenant's Right to Avoid Rebuilding. Should the
buildings and improvements on the Premises be so damaged
or destroyed so as to render same totally or
substantially untenantable within two (2) years prior to
the termination of the Primary Term or any Renewal Term,
Tenant shall have the right and option to declare the
Lease terminated. In such event, Landlord and Tenant
shall equally share any insurance proceeds paid in
respect of the building and Tenant shall be entitled to
any insurance proceeds paid in respect of the furniture,
fixtures and equipment.
If Tenant desires to exercise its option to terminate, it
shall make known its intention to do so by written notice
delivered to the Landlord within ninety (90) days after the date
of such damage or destruction. If Tenant does not exercise such
option, then this Lease shall not terminate and Tenant shall
rebuild the building and Improvements pursuant to Section 11
above.
12. Condemnation. If all the Premises are taken under the
exercise of the right of eminent domain, then either Landlord or
Tenant shall have the right to terminate this Lease without
further liability, upon written notice to the other party. If
only a portion of the Premises are taken under the exercise of
the right of eminent domain, this Lease shall continue in full
force and effect. Notwithstanding the foregoing, if the effect
of the taking of a portion of the Premises diminishes Gross Sales
generated by the operations of the Premises or otherwise
adversely affects the operation of Tenant's business in Tenant's
sole discretion, then Tenant shall have the right to terminate
this Lease upon written notice to Landlord. Any proceeds arising
from the exercise of said right of eminent domain, either through
judicial award or through settlement thereof, shall inure to the
benefit of both Landlord and Tenant as their interests may
appear.
13. Return of Premises. Upon the expiration of this Lease
or any renewal thereof, Tenant shall return the Premises to
Landlord in as good general condition as they were when received
by Tenant excepting reasonable wear and tear.
14. Waiver of Subrogation. Each party, for itself and on
behalf of its insurance carrier, waives any right or cause of
action for any loss of or damage to any of its property (whether
or not such loss or damage for which that other party may be
responsible), which loss or damage is or would be covered by the
insurance required to be carried hereunder or similar policies
covering real property or personal property. Landlord and Tenant
shall each obtain insurance policies unless Tenant elects to self-
insure (which allow such a waiver of subrogation). This Article
14 shall not be interpreted to require Landlord to insure the
Premises or in any way modify Tenant's obligations under Article
7.
15. Default and Landlord's Remedies. It shall be a default if
Tenant fails to pay any sums to Landlord when due and does not
cure such failure to pay within ten (10) days after receipt of
written notice; or if Tenant fails to perform any other covenant
or condition of this Lease and does not cure such other failure
within thirty (30) days after receipt of written notice from
Landlord specifying the failure complained of, unless such
failure cannot reasonably be cured within such thirty (30) day
period, and if Tenant commences to cure such failure within such
thirty (30) day period and proceeds diligently to cure such
failure; or if Tenant abandons or vacates the Premises without
paying rent; or if Tenant is adjudicated a bankrupt or makes any
assignment for the benefit of creditors.
In the event of a default, Landlord shall have the right, at
its option, in addition to and not exclusive of any other remedy
Landlord may have by operation of law, without any further demand
or notice, to re-enter the Premises and eject all persons
therefrom, and either (a) declare this Lease at an end, in which
event Tenant shall immediately pay Landlord a sum of money equal
to the total of (i) the amount of the unpaid rent accrued through
the date of termination; (ii) the amount by which the unpaid rent
reserved for the balance of the Primary Term or the then current
Renewal Term, whichever is applicable, exceeds the fair market
rent for the balance of the Primary Term, or then current Renewal
Term, discounted to the present using a ten percent (10%) factor;
and (iii) all damages proximately caused by Tenant's failure to
perform its obligations under this Lease, or (b) without
terminating this Lease, relet the Premises, or any part thereof,
for the account of Tenant upon such terms and conditions as
Landlord may deem advisable, and any monies received from such
reletting shall be applied first to the expenses of such
reletting and collection, including necessary renovation and
alterations of the Premises, reasonable attorneys' fees, any real
estate commissions paid, and thereafter toward payment of all
sums due or to become due Landlord hereunder, and if a sufficient
sum shall not be thus realized to pay such sums and other
charges, Tenant shall pay Landlord any deficiency monthly,
notwithstanding that Landlord may have received rental in excess
of the rental stipulated in this Lease in previous or subsequent
months, and Landlord may bring an action therefor as such monthly
deficiency shall arise. Tenant shall receive a credit against
all amounts owed to Landlord for such amounts received by
Landlord in excess of rental stipulated in this Lease.
No-entry and taking of possession of the Premises by Landlord
shall be construed as an election on Landlord's part to terminate
this Lease, regardless of the extent of renovations and
alteration by Landlord, unless a written notice of such intention
is given to Tenant by Landlord. Notwithstanding any reletting
without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach. Additionally,
whether or not the Lease is terminated, Landlord shall be
entitled to collect from Tenant as additional rent a charge equal
to three percent (3%) for each installment of Rent paid to
Landlord after the due date to reimburse Landlord for
administrative expense incurred in collecting rent. The three
percent (3%) penalty shall not apply so long as the rent is
actually paid within ten (10) days after written notice of the
date when it is due, and there has been no other late Rental
payment within the past three (3) months, nor shall it apply for
purposes of determining damages to Landlord in the event of
default, when Landlord resorts to remedies pursuant to this
Article 15.
16. Intentionally Deleted.
17. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be
personally delivered or sent to the address set forth below by
registered or certified mail, postage prepaid, return receipt
requested, or by a recognized overnight delivery service, or
delivered or sent by telex or telecopy and shall be deemed
received (i) if personally delivered, the date of delivery to the
address of the person to receive such notice (ii) if mailed three
(3) business days after the date of posting by U.S. Mail, (iii)
if given by Federal Express, Airborne Express or a similar
overnight delivery service, the following business day, or (iv)
if sent by telex or telecopy, when confirmation of delivery is
received:
Landlord: Fitzpatrick Properties, LLC
Attention: Daniel B. Fitzpatrick
4220 Edison Lakes Parkway
Mishawaka, IN 46545
Facsimile: 574-243-4377
Tenant: Bravokilo, Inc.
Attention: President
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 243-4377
With a copy to:
Bravokilo, Inc.
Attention: General Counsel
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 271-4613
Any party desiring change of address shall make such change known
in writing to the other party. Properly mailed notices that are
delivered to the place to which they are properly addressed shall
be effective when received. If a properly mailed notice is
delivered to the place to which it is properly addressed and is
refused or unclaimed, notice shall be effective when delivered
nevertheless. In the event a properly mailed and addressed
notice from Landlord to Tenant is refused or unclaimed, Landlord
may effectively serve such notice by delivery to the Premises, or
by ordinary U.S. Mail effective upon mailing.
18. Successors. This Lease shall be binding upon and inure
to the benefit of the parties hereto and their successors and
assigns.
19. Additional Covenants. Tenant hereby agrees to initially
operate on the Premises a Burger King restaurant in accordance
with practices established by Burger King Corporation from time
to time. In the event Tenant ceases to so operate or is not
franchised or permitted to so operate a Burger King restaurant,
Tenant may use the Premises for any other legal purpose.
20. Warranty of Title. Landlord warrants that it has fee
simple title to the Premises, which Premises are presently free
and clear of all liens and encumbrances except as reflected on
Exhibit B.
21. Subordination.
21.1 Subordination. Subject to the following condition
precedent, this Lease shall be subject and subordinate to the
lien of all mortgages and underlying leases which may now or
hereafter affect the Premises and to all renewals,
extensions, modifications, amendments, replacements and
consolidations thereof, provided Landlord shall, promptly
after execution of this Lease, deliver to Tenant from each
then existing mortgagee and ground lessor, a properly
executed and acknowledged, recordable non-disturbance
agreement substantially in the form as set forth on Exhibit C
attached hereto.
21.2 Subsequent Mortgages. Landlord shall promptly
notify Tenant prior to Landlord's execution of any new
mortgages or ground leases on the Premises. Promptly after
the execution of any new mortgage or ground lease, Landlord
shall deliver to Tenant a properly executed, acknowledged,
recordable non-disturbance agreement in accordance with
Section 21.1 above from such new mortgagee or ground lessor.
Tenant's subordination and agreement to attorn to any
mortgagee or ground lessor are expressly conditional upon
Tenant's receipt of all such non-disturbance agreements.
21.3 Landlord's Right to Subordinate. Subject to the
provisions of Sections 21.1 and 21.2, Landlord reserves the
right to subject and subordinate this Lease to the lien of
any mortgage or mortgages now or hereafter placed upon the
Landlord's interest in the Premises and on the land and
buildings of which the Premises are a part.
22. Assignment and Subletting. Tenant shall retain the right
to sublease the Premises, or any right or privilege connected
therewith by first obtaining the written consent of Landlord,
which shall not be unreasonably delayed, conditioned or withheld.
Notwithstanding the foregoing, Tenant may, without Landlord's
prior consent, assign this Lease or sublet the Premises (1) to
any bona-fide Burger King Restaurant operating company or any
franchisor, franchisee or developer of Burger King Restaurants,
or (2) to any corporation that is in the food industry and which
has its voting stock listed on a recognized securities exchange
or which is wholly-owned by another corporation whose voting
stock is so listed, or (3) to any corporation, partnership or
other entity that is controlled by or under common control with
Tenant, or any entity resulting from a merger or consolidation
with Tenant, or which acquires all or substantially all of
Tenant's assets. In addition, in the event of an assignment or
sublease to any assignee or subtenant ("Transferee") that
demonstrates to Landlord's reasonable satisfaction that such
Transferee has the financial ability and business experience to
perform Tenant's obligations under this lease, Landlord agrees
that Tenant shall be released from further liability to Landlord
under this Lease from and after the date such qualified
Transferee assumes in writing all of Tenant's obligations under
this Lease.
23. Legal Expenses. In case suit shall be brought for
recovery of possession of the Premises, for the recovery of any
rent or any amount due under the provisions of this Lease, or
because of the breach of any other covenant herein contained on
the part of Tenant to be kept or performed, and a breach shall be
established, Tenant shall pay to Landlord all expenses incurred
therefor, including reasonable attorneys' fees, which shall have
been incurred on the prosecution of such action, whether or not
such action is prosecuted to judgment. Conversely, should the
Landlord breach any of the terms of this Lease, and a breach
shall be established, Landlord shall pay to Tenant all expenses
incurred therefor, including reasonable attorneys' fees, which
shall have been incurred on the prosecution of such action,
whether or not such action is prosecuted to judgment.
24. Environmental Representations. Landlord represents as
follows:
(a) Landlord is not aware of any environmental
contamination on the Premises;
(b) Landlord has never generated, stored or disposed of
any hazardous substances or waste products or materials on
the Premises, other than cleaning supplies and related
materials stored on or used on the Premises, and has no
knowledge of the generation, storage or disposal of such
substances on the Premises. For purposes of this Lease
"hazardous substances or waste product" shall include
petroleum, petroleum distillates and "hazardous substances"
as defined in the Comprehensive Environmental Response
compensation and Liability Act of 1984, as amended, 42 USC
9601 et seq., as amended, and "hazardous waste" as defined
in the Michigan Hazardous Waste Management Act of 1979, as
amended, being Act 64 of the Public Acts of 1979;
(c) Landlord is not aware of any outstanding citation or
notice thereof or any violation of any environmental
provision, requirement or condition respecting the Premises,
nor is there any uncorrected condition on the Premises
relating to any past citation;
(d) There are no underground fuel or other storage tanks
located upon the Premises; and
(e) To the best of Landlord's knowledge, there are no
asbestos-containing materials or urea formaldehyde foam
insulation in, on or upon the Premises.
25. Indemnification as to Environmental Matters.
(a) Landlord shall indemnify, defend and hold harmless
Tenant from and against all loss, liability, damage and
expense, including costs associated with administrative and
judicial proceedings and attorneys' fees ever suffered or
incurred by Tenant on account of (1) Landlord's or any prior
tenant's failure, prior to the Commencement Date, to comply
with any environmental health, safety or sanitation law,
code, ordinance, rule or regulation or any interpretation or
order of any regulatory or administrative authority with
respect thereto relating to the Premises, including, but not
limited to, CERCLA, RCRA, MERA and MHWMA, as amended; (2) any
release of hazardous waste or substances occurring prior to
the Commencement Date, from, on, upon or into the Premises;
(3) any and all damages to natural resources or real property
and/or harm or injury to persons resulting or alleged to have
resulted from such failure to comply and/or release of
hazardous materials or substances, which release or failure
to comply occurred prior to the Commencement Date, or (4) any
inaccuracy in or breach of the representations made by
Landlord in Article 24 of this Lease. This indemnity shall
continue as an obligation of Landlord notwithstanding
Landlord's subsequent assignment of its interest under this
Lease.
(b) Tenant shall indemnify, defend and hold harmless
Landlord from and against all loss, liability, damage and
expense, including costs associated with administrative and
judicial proceedings and attorneys' fees ever suffered or
incurred by Landlord on account of (1) Tenant's failure,
subsequent to the Commencement Date, to comply with any
environmental health, safety or sanitation law, code,
ordinance, rule or regulation or any interpretation or order
of any regulatory or administrative authority with respect
thereto relating to the Premises, including, but not limited
to, CERCLA, RCRA, MERA and MHWMA, as amended; (2) any release
of hazardous waste or substances occurring subsequent to the
Commencement Date, from, on, upon or into the Premises; or
(3) any and all damage to natural resources or real property
and/or harm or injury to persons resulting or alleged to have
resulted from such failure to comply and/or release of
hazardous materials or substances, which release or failure
to comply occurred subsequent to the Commencement Date.
26. Effective Date. This Lease shall be effective as of the
month and day first above written, regardless of its date of
actual execution.
27. Entire Agreement. This Lease contains the entire
agreement of the parties with respect to the subject matter
hereof. The parties hereby terminate and release each other from
any prior lease relating to the Premises.
28. Counterparts. This Lease may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
29. Recordation, Short Form. This Lease shall not be
recorded. Landlord agrees, upon Tenant's request to execute a
short form of this Lease, entitled Memorandum of Lease,
substantially in the form attached hereto as on Exhibit D.
Tenant will record such short form Lease and Landlord agrees to
share equally in the cost and expense of doing so. The
provisions of this Lease shall control, however, in regard to any
omissions from said short form, or in respect of any provisions
hereof which may be in conflict with such short form.
30. Estoppel Certificate. Tenant and Landlord shall, from
time to time, and upon written request by the other party,
furnish the requesting party with a written statement, signed by
such party and addressed to the person designated in such
request, on the status of any matter pertaining to the Lease,
including that, at the date of such statement to the best of such
party's knowledge (i) the provisions and conditions of Lease have
been complied with, (ii) there are no defaults by the requesting
party known to the party signing such statement, (iii) the Lease
is still in full force and effect, (iv) there has been no notice
received by such party of any default which has not been cured.
If any or all of (i), (ii), (iii) or (iv) are not stated in the
affirmative in the statement, the statement shall describe the
facts and matters which such party alleges prevents such
affirmative statement.
31. Collateral Assignment. Notwithstanding anything to
the contrary contained in this Lease, Tenant may from time to
time, upon prior written notice to Landlord, assign its interest
in the Lease as collateral to an institutional lender or lenders
as partial security for a loan or loans. Said assignment shall
include a right to re-assign the Tenant's right, title and
interest under the Lease subject to Landlord's consent, which
consent shall not be unreasonably withheld or delayed. Within
ten (10) days after request from Tenant, Landlord shall promptly
execute documents evidencing its approval of an assignment
consistent with this provision. Furthermore, Landlord hereby
waives any statutory lien it may have on Tenant's property.
32. Real Estate Broker. Landlord and Tenant each represent
and warrant to the other that they have not dealt with any real
estate broker or agent or any finder in connection with the
transaction represented by this Lease. Landlord and Tenant each
hereby indemnify and agree to save harmless the other party from
and against the claims of or liability to any other real estate
broker or agent or any finder for commissions or fees in
connection with the transaction.
33. Right of First Refusal. If Landlord makes a bona-fide
offer to a third party, or receives a bona-fide offer from a
third party which is acceptable to Landlord, for sale or transfer
of the Premises, Landlord shall notify Tenant of the sale or
transfer, the name of the offeror, the offered consideration and
provisions of the offer. Within twenty (20) days after receipt
of Landlord's notice, Tenant may elect by notice to Landlord to
purchase the Premises, for the consideration and upon the other
provisions stated in Landlord's notice; except that title shall
close the later of thirty (30) days after Tenant elects to
purchase, or the date agreed upon the offeror. Should Tenant
fail to exercise this right to purchase within the time and in
the manner required above, or waives such right in writing,
Landlord shall be free to consummate the sale or transfer to the
named offeror for the consideration and upon the other provisions
set forth in Landlord's notice to Tenant; however, Landlord
agrees that such sale or transfer shall be subject to the
provisions of this Lease, including this right of first refusal.
If such sale or transfer is not consummated within six (6) months
after the expiration of the earlier of the date Tenant fails to
exercise its right as hereinabove required or the date Tenant
waives such right in writing, the rights granted to Tenant in
this Article shall once again apply to the offer described above
as well as to any new offer.
This provision shall not apply to a sale or transfer of the
Premises pursuant to a foreclosure of any institutional first
mortgage or deed of trust, or deed in lieu of foreclosure,
covering the Premises or to a transfer to an immediate family
member of any member or partner of Landlord for estate planning
purposes; provided, however, that the restrictions contained in
this Article 33 shall bind the Landlord's heirs, executors,
distributees, representatives, successors, permitted assigns,
transferees and grantees other than the first mortgagee, as well
as any successor, permitted assign, grantee or transferee of the
first mortgagee.
IN WITNESS WHEREOF, the parties have executed this Lease as of
the day and year first above written.
LANDLORD:
FITZPATRICK PROPERTIES, LLC
By:________________________
Daniel B. Fitzpatrick
Manager
TENANT:
BRAVOKILO, INC.
By:_____________________
John C. Firth
Executive Vice President
EXHIBIT A
Legal Description
(to be supplied by Landlord)
EXHIBIT B
Encumbrances
(to be supplied by Landlord)
EXHIBIT C
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
(this "Agreement") is made and entered into as of the day
of ____________________, by and between
________________________________________, a (the "Lender"), whose
address is
_______________________________________________________, and
Bravokilo, Inc., whose address is 4220 Edison Lakes Parkway,
Mishawaka, Indiana 46545 (the "Tenant").
WHEREAS, Lender has made a loan or is about to make a loan
to __________
____________________________ (the "Landlord") secured by a
mortgage or deed of trust (hereinafter called the "Mortgage")
covering a parcel of land described on Exhibit A-1 annexed hereto
and made a part hereof, together with the improvements now or
hereafter erected thereon (said parcel of land and improvements
thereon being hereafter called the "Real Property"); and
WHEREAS, by a certain lease heretofore entered into between
Landlord and Tenant dated as of __________________ (the lease and
all amendments, extensions and renewals thereto are hereinafter
called the "Lease"), Landlord leased to Tenant a portion of the
Real Property; and
WHEREAS, a Memorandum of Lease dated _________________ was
recorded in the land records of _____________________________, on
______________________, Document No. __________; and
WHEREAS, as a condition precedent to Tenant's agreement to
enter into the Lease, Tenant has required that Lender agree not
to disturb Tenant's rights under the Lease, in return for which
Tenant has agreed that the Lease will be subordinate to the lien
of the Mortgage;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties agree as follows:
1. Subordination. The Lease, the leasehold estate created
thereby, and the rights of Tenant in, to or under the Lease and
the portion of the Real Property, are hereby subjected and
subordinated and shall remain in all respects and for all
purposes subject, subordinate and junior to the lien of the
Mortgage, as fully and with the same effect as if the Mortgage
had been duly executed, acknowledged and recorded, and the
indebtedness secured thereby had been fully disbursed, prior to
the execution of the Lease, or possession of the portion of the
Real Property by Tenant.
2. Tenant Not to Be Disturbed. The parties acknowledge
and agree that the Lease shall be subordinate to the lien of
Lender provided that, so long as Tenant attorns to Lender and is
not in default under the Lease, Lender shall not join Tenant as a
party defendant in any action or proceeding foreclosing a
Mortgage (unless required to foreclose the mortgage, and then
only for such purpose and not for the purpose of termination of
the Lease), in any eviction proceeding or in any action to
terminate the Lease, and that Tenant's possession of the portion
of the Real Property and Tenant's rights and privileges under the
Lease, including but not limited to quiet enjoyment, or any
extension or renewal thereof which may be exercised in accordance
with the Lease, shall not be diminished or interfered with by
Lender, Tenant's occupancy of the portion of the Real Property
shall not be disturbed by Lender, and Lender agrees to cause
Landlord's obligations under the Lease to be performed from and
after the date it succeeds to Landlord's interest in the
Premises. Notwithstanding the foregoing, Lender will not be
liable for any act or omission of any prior landlord, including
Landlord, unless such act or omission continues after Lender
succeeds to the interest of Landlord. Lender will not be liable
for any security deposits held by Landlord pursuant to the Lease
unless such deposits are transferred to Lender.
3. Tenant to Attorn to Lender. If the interests of
Landlord shall be transferred to and owned by Lender by reason of
foreclosure or other proceedings brought by it in lieu of or
pursuant to a foreclosure, or by any other manner, and Lender
succeeds to the interest of the Landlord under the Lease, Tenant
shall be bound to Lender under all of the terms, covenants and
conditions of the Lease for the balance of the term thereof
remaining and any extensions or renewals thereof which may be
exercised in accordance with any option therefor in the Lease,
with the same force and effect as if Lender were the landlord
under the Lease; and Tenant shall attorn to Lender, as its
landlord, said attornment to be effective and self-operative
immediately upon Lender succeeding to the interest of Landlord
without the execution of any further instruments on the part of
any of the parties hereto. The respective rights and obligations
of Tenant and Lender under the Lease following such attornment
shall be and are the same as now set forth in the Lease, it being
the intention of the parties hereto for this purpose to
incorporate the Lease in this Agreement by reference with the
same force and effect as if set forth at length herein.
4. Notice and Cure of Landlord's Default. Tenant agrees
to send Lender a copy of any notice relating to a breach or
default by Landlord under the Lease which Tenant intends to use
as a basis to terminate the Lease. Tenant agrees that Lender, at
its sole option and without obligation so to do, may cure any
such default within a reasonable period, but in no event longer
than sixty (60) days measured from the date that Tenant delivers
a copy of such notice to Lender.
5. No Modification. No modification, amendment, or
release of any provision of this Agreement, or of any right,
obligation, claim, or cause of action arising hereunder shall be
valid or binding for any purpose whatsoever unless in writing and
executed by the party against whom the same is sought to be
asserted.
6. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be
personally delivered or sent to the address set forth below by
registered or certified mail, postage prepaid, return receipt
requested, or by a recognized overnight delivery service, or
delivered or sent by telex or telecopy and shall be deemed
received (i) if personally delivered, the date of delivery to the
address of the person to receive such notice (ii) if mailed three
(3) business days after the date of posting by U.S. Mail, (iii)
if given by Federal Express, Airborne Express or a similar
overnight delivery service, the following business day, or (iv)
if sent by telex or telecopy, when confirmation of delivery is
received:
Landlord:___________________________________
___________________________________
___________________________________
___________________________________
Facsimile:________________________
Tenant: Bravokilo, Inc.
Attention: President
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 243-4377
With a copy to:
Bravokilo, Inc.
Attention: General Counsel
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 271-4613
Any party desiring change of address shall make such change known
in writing to the other party. Properly mailed notices that are
delivered to the place to which they are properly addressed shall
be effective when received. If a properly mailed notice is
delivered to the place to which it is properly addressed and is
refused or unclaimed, notice shall be effective when delivered
nevertheless. In the event a properly mailed and addressed
notice from Landlord to Tenant is refused or unclaimed, Landlord
may effectively serve such notice by delivery to the Premises, or
by ordinary U.S. Mail effective upon mailing.
7. Landlord Consent. Landlord is joining herein solely
for the purpose of consenting to the terms and conditions of the
Agreement and agreeing that Tenant may rely upon any and all
notice from Lender relating to the rights of Lender hereunder and
under the Mortgage.
8. Successors and Assigns. This Agreement and each and
every covenant, agreement and other provisions hereof shall be
binding upon the parties hereto and their heirs, administrators,
representatives, successors and assigns.
9. Choice of Law. This Agreement is made and executed
under and in all respects is to be governed and construed by the
laws of the state in which the Real Property is located.
10. Counterparts. This Agreement may be executed in any
number of counterparts for the convenience of the parties, all of
which, when taken together and after execution by all parties
hereto, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be executed as of the date first above written.
WITNESSES: TENANT:
BRAVOKILO, INC.
Name:_______________________ By:____________________________
John C. Firth
Executive Vice President
Name:______________________
WITNESSES: LENDER:
___________________________ _______________________________
Name:______________________
By:____________________________
Name:______________________ Name:__________________________
Title:_________________________
The foregoing Agreement is hereby consented and agreed to by
the undersigned as set forth in Paragraph 7 hereof.
WITNESSES: LANDLORD:
____________________________ _________________________
Name:_______________________
By:______________________
____________________________
Name:_______________________ Name:____________________
Title:___________________
ACKNOWLEDGMENT
STATE OF INDIANA___________)
) SS:
COUNTY OF ST. JOSEPH________)
ON THIS ___________ day of _______________, 2003, before me, the
subscriber, personally appeared John C. Firth, to execute the
within instrument; and that he signed his name thereto by like
order as the free and voluntary act and deed of said Officer.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
seal the day and year first above written.
____________________
Notary Public
ACKNOWLEDGMENT
STATE OF____________)
) SS:
COUNTY OF___________)
ON THIS ___________ day of _______________, 2003, before me, the
subscriber, personally appeared _____________________, to execute
the within instrument; and that he signed his name thereto by
like order as the free and voluntary act and deed of said
________________________________.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
seal the day and year first above written.
_____________________
Notary Public
ACKNOWLEDGMENT
STATE OF____________)
) SS:
COUNTY OF___________)
ON THIS ___________ day of _______________, 2003, before me, the
subscriber, personally appeared _____________________, to execute
the within instrument; and that he signed his name thereto by
like order as the free and voluntary act and deed of said
________________________________.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
seal the day and year first above written.
_____________________
Notary Public
EXHIBIT D
Memorandum of Lease
This Memorandum of Lease Agreement is made by and between
Fitzpatrick Properties, LLC, an Indiana limited liability company
("LANDLORD"), and Bravokilo, Inc., an Indiana corporation
("TENANT").
WHEREAS, the parties executed a Lease as of
________________(the "Lease") that relates to the premises
described herein;
WHEREAS, the parties desire to set forth a Memorandum of
Lease for the purpose of recording the same in the ____________
County Clerk's Office, State of ____________.
NOW, THEREFORE, in consideration of the foregoing premises
and other good and valuable consideration, the parties agree as
follows:
1. Description of Premises.
The LANDLORD and TENANT have entered into a lease whereby
LANDLORD leased to the TENANT and the TENANT leased from the
LANDLORD the following described premises:
See Exhibit A
2. Commencement and Term.
Said Lease is for an initial term of five (5) years
commencing on _________________and expiring September 17, 2008,
unless terminated sooner as provided in the Lease. The Lease
also grants TENANT the right and option to extend the term one
(1) period of four (4) years immediately followed by four (4)
successive periods of five (5) years each.
3. Complete Lease.
A more complete lease is in the possession of both LANDLORD
and TENANT. It is understood that this Memorandum of Lease shall
be recorded in the __________ County Clerk's Office.
4. Competition.
Landlord covenants and agrees that during the term of the
Lease, no property owned by Landlord or its affiliates, directly
or indirectly within one (1) mile of the Premises shall be used
for a restaurant or any other business engaged in the retail sale
of prepared foods for consumption on or off-premises.
5. Conflicts.
In the event any conflicts exist between the terms of this
Agreement and the terms of the Lease, the terms of the Lease
shall control. Terms not defined herein have the same meaning as
set forth in the Lease.
Dated this ___ day of ___________, 2003.
Witness: LANDLORD:
FITZPATRICK PROPERTIES, LLC
___________________
Name:______________ By:__________________________
Daniel B. Fitzpatrick
Manager
Name:______________
Witness: TENANT:
BRAVOKILO, INC.
Name:__________________ By:___________________________
John C. Firth
Executive Vice President
Name:__________________
STATE OF INDIANA )
) SS:
COUNTY OF ST. JOSEPH )
Before me, a Notary Public in and for said County and State,
personally appeared on this date, John C. Firth, the Executive
Vice President of Bravokilo, Inc., and acknowledged the execution
of the foregoing document as the free act and deed of said
corporation and his or her free act and deed as such Officer.
Witness my hand and Notarial Seal, this _______ day of
____________________ , 2003.
_________________________
(signature)
_________________________
(typed or printed name)
Notary Public
My commission expires on: My county of
residence is:
______________, 20 ____ _____________
_____________ State
STATE OF_________________)
) SS:
COUNTY OF_________________)
Before me, a Notary Public in and for said County and State,
personally appeared on this date, Daniel B. Fitzpatrick, the
Manager of Fitzpatrick Properties, LLC, and acknowledged the
execution of the foregoing document as the free act and deed of
said corporation and his or her free act and deed as such
Officer.
Witness my hand and Notarial Seal, this _______ day of
____________________ , 2003.
________________________
(signature)
________________________
(typed or printed name)
Notary Public
My commission expires on: My county of
residence is:
___________________, 20 ____ __________County.
__________State
This document was prepared by James R. Meyer, Jr., 4220 Edison
Lakes Parkway, Mishawaka, IN 46545.
Exhibit A
to a Memorandum of Lease between
Exhibit 10-X
LEASE
Table of Contents
Page
1. Premises 5
1.1 Lease. 5
1.2 Purchase. 5
2. Term of Lease. 5
2.1 Commencement and Duration. 5
2.2 Lease Year Defined. 5
2.3 Renewal Terms. 6
3. Rent Reserved. 6
3.1 Base Rent. 6
3.1.1 6
3.1.2 Failure to Give Notice. 6
3.2 Percentage Rental. 6
3.3 Quarterly Accounting. 7
3.4 Annual Accounting. 7
3.5 Records and Audit. 7
3.6 Gross Sales Defined. 7
4. Use and Maintenance. 8
5. Utilities. 8
6. Liens, Taxes and Assessments. 8
6.1 Prior Taxes. 8
6.2 Taxes. 8
6.3 Exclusion from Tenant's Taxes. 8
6.4 Payment of Taxes. 8
6.5 Contesting of Tax By Tenant. 8
7. Insurance. 9
7.1 Public Liability Insurance. 9
7.2 Property Insurance. 9
7.3 Insurance Policy Requirements. 9
7.4 Tenant Property. 9
7.5 Insurance Proceeds. 10
8. Intentionally Deleted. 10
9. Alterations, Additions and Improvements. 10
10. Quiet Enjoyment. 10
11. Fire or Disaster. 10
11.2 Tenant's Right to Avoid Rebuilding. 10
12. Condemnation. 11
13. Return of Premises. 11
14. Waiver of Subrogation. 11
15. Default and Landlord's Remedies. 11
16. Intentionally Deleted. 12
17. Notices. 12
18. Successors. 13
19. Additional Covenants. 13
20. Warranty of Title. 13
21. Subordination. 13
28.2 Subsequent Mortgages 13
21.3 Landlord's Right to Subordinate. 14
22. Assignment and Subletting. 14
23. Legal Expenses. 14
24. Environmental Representations. 14
25. Indemnification as to Environmental Matters. 15
26. Effective Date. 16
27. Entire Agreement. 16
28. Counterparts. 16
29. Recordation, Short Form. 16
30. Estoppel Certificate. 16
31. Collateral Assignment. 16
32. Real Estate Broker. 16
33. Right of First Refusal. 16
34. Right to Terminate. 17
EXHIBITS:
A Legal Description
B Encumbrances
C Subordination, Nondisturbance and Attornment Agreement
D Memorandum of Lease
BK #6296
26776 Eureka Road
Taylor, MI 48180
LEASE
THIS LEASE is made as of May 21, 2003 by Fitzpatrick
Properties, LLC, an Indiana limited liability company, with
offices at 4220 Edison Lakes Parkway, Mishawaka, Indiana 46545
(hereinafter called "Landlord"), and Bravokilo, Inc., an Indiana
corporation, with offices at 4220 Edison Lakes Parkway,
Mishawaka, Indiana 46545 (hereinafter called "Tenant").
W I T N E S S E T H:
IN CONSIDERATION of the rent reserved and the covenants and
provisions contained in this Lease, Landlord and Tenant covenant
and agree as follows:
1. Premises.
1.1 Lease. Landlord leases to Tenant, and Tenant
leases from Landlord, the land located in the City of
Taylor, State of Michigan, which land is legally
described in the attached Exhibit A, together with all
buildings and facilities that exist on the land from
time to time, together with all Landlord's easements and
rights appurtenant to said Premises, in, over and upon
adjoining and adjacent public and private land,
highways, roads, streets, lanes and other areas
reasonably required for the installation, maintenance,
operation and service of any and all utilities and means
of ingress and egress to or from the Premises, but only
to the extent of Landlord's interest in such easements
and rights appurtenant, which land, buildings, easements
and rights appurtenant are herein called the "Premises".
1.2 Purchase. Tenant hereby purchases the
leasehold improvements located on the Premises for Sixty
Four Thousand Five Hundred Forty Seven and 30/100
Dollars ($64,547.30), which amount shall be payable
within ten (10) days after the date first set forth
above.
2. Term of Lease.
2.1 Commencement and Duration. The Primary Term shall
commence on the date first set forth above (the
"Commencement Date") and shall expire on December 28,
2008.
2.2 Lease Year Defined. A Lease Year shall be defined in
this Lease as that twelve (12) month period during the
Primary Term or any Renewal Term (as defined below)
commencing on the Commencement Date or the annual
anniversary thereof, as may be applicable; provided,
however, that if the Commencement Date is a day other
than the first day of a calendar month, then the first
Lease Year shall include that period of time from the
Commencement Date to the first day of the next calendar
month, and any subsequent Lease Year shall be the twelve
(12) month period beginning on the first day of such
month on the annual anniversary thereof.
2.3 Renewal Terms. Provided Tenant is not in default,
Landlord does hereby grant to Tenant the right,
privilege and option to extend this Lease for four (4)
successive periods of five (5) years each (individually,
a "Renewal Term", and collectively the "Renewal Terms"),
upon the same terms and conditions as herein contained.
2.4 Notice. Tenant, if it elects to exercise any
option, shall do so by giving written notice at least
one hundred eighty (180) days prior to the expiration of
the then current term. The Primary Term and any Renewal
Terms are sometimes collectively referred to as the
"Term."
3. Rent Reserved. In consideration for the use and
occupancy of the Premises and all other rights and privileges
under the Lease, Tenant agrees to pay Landlord the following:
3.1 Base Rent.
3.1.1 Tenant shall pay to Landlord (on the
first day of each month during the Primary Term and
any Renewal Terms) monthly rent in the amount of
Three Thousand Eight Hundred Ninety Three and
68/100 Dollars ($3,893.68) (the "Base Rent").
3.1.2 Failure to Give Notice. If Tenant shall fail
to give any notice as provided in Section 2.3, Tenant's
right to exercise its option shall nevertheless continue
until thirty (30) days after Landlord shall have given
Tenant notice of Landlord's election to terminate such
option and Tenant may exercise such option at any time
until the expiration of said thirty (30) day period. It
is the intention of the parties to avoid forfeiture of
Tenant's rights to extend the term under any of the
options set forth in Section 2.3 through inadvertent
failure to give notice of exercise thereof within the
time limits prescribed. Accordingly, if Tenant shall
fail to give notice to Landlord of Tenant's election to
extend the term for any of the aforesaid options and if
Landlord shall fail to give notice to Tenant of
Landlord's election to terminate Tenant's right to
extend this Lease under the option applicable thereto,
then and so often as such event shall occur, the term
shall be automatically extended from year to year at the
rent that would be applicable if the Tenant had extended
the term and upon all of the other terms and conditions
then in effect, subject to Tenant's right under such
option to extend the term for the remainder of the
option period and to Landlord's right to place the
thirty (30) day limit on such option by a notice in the
manner provided above.
3.2 Percentage Rental. In addition to Base Rent,
Tenant shall pay percentage rent ("Percentage Rent")
during the Primary Term and any Renewal Term, if any, in
the amount by which seven percent (7%) of Tenant's Gross
Sales for any Lease Year exceeds the annual Base Rent.
Percentage rent shall be payable annually along with
Tenant's annual accounting as provided in Section 3.4.
Notwithstanding the foregoing paragraph, in the
event Tenant remodels the Premises at a total cost of
Three Hundred Thousand Dollars ($300,000) or more,
excluding furniture, fixtures and equipment, within a
six (6) month period, Percentage Rent shall be reduced
to the amount, if any, by which six percent (6%) of
Tenant's Gross Sales for any Lease Year exceeds the
annual Base Rent, for twenty (20) years commencing on
the date the restaurant reopens after the Major Remodel
is complete.
3.3 Quarterly Accounting. Within thirty (30) days
after the end of each quarter during the term of this Lease,
Tenant shall deliver to Landlord a statement in writing on a
form reasonably approved by the Landlord, setting forth the
Gross Sales for the preceding month. The statement shall
conform to the statement that Tenant is required to provide
to Burger King Corporation.
3.4 Annual Accounting. Within forty-five (45) days
after the end of each Lease Year, the Tenant shall deliver to
Landlord a statement showing the Gross Sales made at the
Premises during the previous year.
3.5 Records and Audit. Tenant agrees to keep full,
true and accurate records and books of accounts of all
transactions connected with its business. Landlord shall
have the right to examine and inspect the books and records
of Tenant at any reasonable time during normal business hours
in order to verify the accuracy of statements rendered by the
Tenant. Notwithstanding the foregoing, Landlord shall have
no right to examine or inspect such books and records more
than two (2) years after the date such books and records were
prepared.
3.6 Gross Sales Defined. For purposes of this
Lease, the term "Gross Sales" shall include the gross sale
price of all goods, wares and merchandise and/or the price
charged for the performance of any service for any customer
or party for compensation by Tenant, on a cash or charge
basis, paid or unpaid, collected or uncollected, provided,
however, that income from vending machines and pay telephones
shall be excluded in determining gross sales. Also excluded
from Gross Sales shall be the amount of any federal, state,
county, or city sales taxes, excise taxes, cigarette or
tobacco taxes that may now or hereafter be imposed upon or
required to be paid by Tenant as against its sales on the
Premises and any credit card fees, returns, employee meals,
complimentary meals, coupons and the sale of fixtures not in
the ordinary course of business. Also excluded from Gross
Sales shall be cash received as payment in credit
transactions where the extension of credit itself has already
been included in Gross Sales. Also excluded from Gross Sales
are receipts from the sale of promotional items where the
sale price of the promotional item is no more than the FOB
Restaurant cost plus a fifteen percent (15%) mark-up, unless
there has been an authorization, at Burger King Corporation
A.D.I. level, for a charity donation to be made from the sale
of each promotional item in which case the sale price of that
promotional item may be no more than the FOB Restaurant cost
plus a twenty-five percent (25%) mark-up. If the sale price
of such promotional items exceed fifteen percent (15%) or
twenty-five percent (25%), whichever percentage is
applicable, then the entire amount of the sale price must be
included in determining Gross Sales.
4. Use and Maintenance. From and after the Commencement
Date, Tenant shall have the responsibility of (i) maintaining and
keeping the Premises and all of its appurtenant facilities in
good condition and repair; and (ii) complying with all federal,
state and municipal laws and ordinances with respect to Tenant's
use of the Premises.
5. Utilities. Tenant shall be fully responsible for
the cost of all usage charges for the utilities or other
services related to the Premises during the Primary Term and
any Renewal Term.
6. Liens, Taxes and Assessments.
6.1 Prior Taxes. Landlord represents that upon its
signing of this Lease, all taxes assessed against the
Premises, except current taxes not delinquent, have been
paid in full. Landlord promptly after receipt of any tax
notice or bill on the Premises, shall furnish Tenant with
a copy of such document.
6.2 Taxes. Tenant shall be responsible for the payment
of all real estate taxes and assessments which accrue
during the term of this Lease (including Renewal Terms, if
any). Tenant shall pay such taxes and assessments as they
come due. Taxes shall be prorated at the beginning and end
of the term
6.3 Exclusion from Tenant's Taxes. Nothing herein
contained shall require the Tenant to pay municipal, state
or federal income taxes assessed against the Landlord, or
municipal, state or federal capital levy, estate,
succession, inheritance, excise, gift, or transfer taxes
of the Landlord, or corporate franchise taxes imposed upon
any corporate owner of the fee of the Premises or any
similar tax or assessment, including the Michigan Single
Business Tax, if any, imposed on Landlord.
6.4 Payment of Taxes. In the event the Premises are not
separately assessed when a bill for taxes and assessments
is received, Landlord shall forward to Tenant a notice of
the amount owing setting forth Landlord's reasonably
detailed calculation of the amount due from Tenant
together with reasonable supporting documentation. Taxes
and assessments due during the term of this Lease which
are the Tenant's responsibility to pay, shall be paid by
Tenant within thirty (30) days thereafter. At such time
as the Premises are separately assessed, Tenant shall pay
the taxes and assessments directly to the taxing authority
and provide Landlord with written verification of such
payment prior to the due dates thereof.
6.5 Contesting of Tax By Tenant. If the Tenant desires
to contest any ad valorem assessment or the validity of
any tax and gives the Landlord written notice of this
intention, then the Tenant may contest the assessment or
tax without being in default hereunder, provided that (i)
neither the Premises nor any part thereof nor interest
therein would be in any danger of being sold, forfeited,
lost or interfered with; (ii) Tenant shall have furnished
such security, if any, as may be required in the
proceedings or reasonably requested by Landlord; and (iii)
all expenses incurred in connection with such proceedings
shall be paid by Tenant. Tenant agrees to indemnify
Landlord and hold Landlord harmless from all costs,
expenses and damages of whatsoever nature arising out of
any contest made by Tenant.
7. Insurance.
7.1 Public Liability Insurance. The Tenant agrees that
it will, at its cost and expense, obtain and keep in
force and effect, and name Landlord as "additional
insured" commercial general liability insurance coverage
against any and all claims for personal injury or
property damage occurring in, about or upon the Premises
during the term of this Lease. Such insurance shall be
maintained with limits of liability of not less than One
Million Dollars ($1,000,000) per occurrence combined
single limit for both bodily injury and property damage,
and One Million Dollars ($1,000,000) annual aggregate.
Commercial general liability shall be on an occurrence
basis and shall include "products and completed
operations coverage."
7.2 Property Insurance. The Tenant agrees that it will,
at its cost and expense, obtain and keep in force and
effect and name Landlord "additional insured" as its
interests may appear, a Causes of Loss-Special Form
insurance policy or policies, or the insurance industry
equivalent, protecting the building on the Premises from
loss or damage within the coverage of such insurance
policy(ies) for a sum not less than one hundred percent
(100%) of the greater of the full insurable value
thereof or the replacement value, if available, of said
building, excluding foundation and site work.
7.3 Insurance Policy Requirements. Under all policies
of insurance referred to in Sections 7.1 and 7.2 above,
the holder of any mortgage on the Premises, if any,
shall be named as "additional insured." Tenant agrees
to cause the insurance companies issuing the aforesaid
policies of insurance to forward to Landlord
certificates of insurance. All insurance provided by
Tenant as required by this Article shall be procured
from companies authorized to do business in the State of
where the Premises are located. All such insurance
policies shall provide for payment of loss thereunder to
Landlord, and renewals of the policies shall be
delivered to Landlord at least ten (10) days prior to
the expiration dates of the respective policies. All
insurance provided for in this Lease may be in the form
of a general coverage, floater policy or so-called
blanket policy which may be furnished by Tenant or any
entity related to Tenant. Notwithstanding the foregoing,
Tenant may self-insure any risk required to be insured
by it hereunder. Tenant agrees to name Landlord as
additional insured under any blanket policy of liability
insurance Tenant purchases with respect to the Premises.
7.4 Tenant Property. In addition to all other insurance
required in this Lease to be carried by Tenant, Tenant
shall carry insurance to cover other property, fixtures,
furnishings, equipment and inventory, and such policy or
policies shall include waiver(s) of subrogation as
required in Article 14 below. Notwithstanding the
foregoing, Tenant may self-insure any risk required to
be insured by it hereunder.
7.5 Insurance Proceeds. Landlord and Tenant agree that
in the event of loss under any policy or policies
required above, Tenant shall proceed with the repair and
restoration of the damaged or destroyed building in
accordance with Article 11 hereof and that the insurance
proceeds shall be paid to Tenant for application to such
repair and restoration.
8. Intentionally Deleted.
9. Alterations, Additions and Improvements. Tenant may,
from time to time, make such alterations, additions or
improvements to the Premises as it shall deem necessary for its
use and operation of the Premises; provided, however, that Tenant
first obtains the written consent of Landlord, which consent
shall not be unreasonably withheld.
Landlord shall be deemed to consent in advance to all
alterations, additions or improvements to the Premises as may be
reasonably required to satisfy all requirements of the Franchise
Agreement. All such alterations, additions or improvements shall
become a part of the Premises, excluding trade fixtures,
shelving, cases, counters and equipment placed on the Premises by
Tenant and not permanently affixed. These excluded items may be
removed by Tenant provided any resulting injury or damage is
repaired at Tenant's expense. Notwithstanding the foregoing,
Tenant may make nonstructural alterations, additions or
improvements to the Premises without Landlord's consent.
10. Quiet Enjoyment. Landlord covenants it has full
authority to lease the Premises under the terms contained in this
Lease, and Tenant shall peaceably and quietly have, hold and
enjoy the Premises for the Primary Term and any renewal thereof
without suits, trouble or hindrance from Landlord or any other
person, with respect to Landlord's title to the Premises or
Landlord's authority to enter into this Lease Agreement.
11. Fire or Disaster.
11.1 If at any time the building herein leased is
wholly or partially destroyed or rendered untenantable
by fire, casualty or otherwise, then the Rent reserved
herein shall not abate and, except as set forth in
paragraph 11.2 below, Tenant shall promptly repair,
replace or rebuild the building at least to the extent
of the value and as nearly as possible to the character
of the buildings and improvements existing immediately
prior to such occurrence. The Landlord and any
mortgagee of the fee shall make available to Tenant for
this purpose all insurance proceeds collected, although
Tenant's obligation under this Article 11 shall not be
limited to insurance proceeds collected. If repairing,
replacing, or rebuilding the building to the character
of the building existing prior to the damage is not, in
Tenant's reasonable judgment, likely to maximize revenue
for the Premises, Tenant may, at its option, alter the
structure.
11.2Tenant's Right to Avoid Rebuilding. Should the
buildings and improvements on the Premises be so damaged
or destroyed so as to render same totally or
substantially untenantable within two (2) years prior to
the termination of the Primary Term or any Renewal Term,
Tenant shall have the right and option to declare the
Lease terminated. In such event, Landlord and Tenant
shall equally share any insurance proceeds paid in
respect of the building and Tenant shall be entitled to
any insurance proceeds paid in respect of the furniture,
fixtures and equipment.
If Tenant desires to exercise its option to terminate, it
shall make known its intention to do so by written notice
delivered to the Landlord within ninety (90) days after the date
of such damage or destruction. If Tenant does not exercise such
option, then this Lease shall not terminate and Tenant shall
rebuild the building and Improvements pursuant to Section 11
above.
12. Condemnation. If all the Premises are taken under the
exercise of the right of eminent domain, then either Landlord or
Tenant shall have the right to terminate this Lease without
further liability, upon written notice to the other party. If
only a portion of the Premises are taken under the exercise of
the right of eminent domain, this Lease shall continue in full
force and effect. Notwithstanding the foregoing, if the effect
of the taking of a portion of the Premises diminishes Gross Sales
generated by the operations of the Premises or otherwise
adversely affects the operation of Tenant's business in Tenant's
sole discretion, then Tenant shall have the right to terminate
this Lease upon written notice to Landlord. Any proceeds arising
from the exercise of said right of eminent domain, either through
judicial award or through settlement thereof, shall inure to the
benefit of both Landlord and Tenant as their interests may
appear.
13. Return of Premises. Upon the expiration of this Lease
or any renewal thereof, Tenant shall return the Premises to
Landlord in as good general condition as they were when received
by Tenant excepting reasonable wear and tear.
14. Waiver of Subrogation. Each party, for itself and on
behalf of its insurance carrier, waives any right or cause of
action for any loss of or damage to any of its property (whether
or not such loss or damage for which that other party may be
responsible), which loss or damage is or would be covered by the
insurance required to be carried hereunder or similar policies
covering real property or personal property. Landlord and Tenant
shall each obtain insurance policies unless Tenant elects to self-
insure (which allow such a waiver of subrogation). This Article
14 shall not be interpreted to require Landlord to insure the
Premises or in any way modify Tenant's obligations under Article
7.
15. Default and Landlord's Remedies. It shall be a default if
Tenant fails to pay any sums to Landlord when due and does not
cure such failure to pay within ten (10) days after receipt of
written notice; or if Tenant fails to perform any other covenant
or condition of this Lease and does not cure such other failure
within thirty (30) days after receipt of written notice from
Landlord specifying the failure complained of, unless such
failure cannot reasonably be cured within such thirty (30) day
period, and if Tenant commences to cure such failure within such
thirty (30) day period and proceeds diligently to cure such
failure; or if Tenant abandons or vacates the Premises without
paying rent; or if Tenant is adjudicated a bankrupt or makes any
assignment for the benefit of creditors.
In the event of a default, Landlord shall have the right, at
its option, in addition to and not exclusive of any other remedy
Landlord may have by operation of law, without any further demand
or notice, to re-enter the Premises and eject all persons
therefrom, and either (a) declare this Lease at an end, in which
event Tenant shall immediately pay Landlord a sum of money equal
to the total of (i) the amount of the unpaid rent accrued through
the date of termination; (ii) the amount by which the unpaid rent
reserved for the balance of the Primary Term or the then current
Renewal Term, whichever is applicable, exceeds the fair market
rent for the balance of the Primary Term, or then current Renewal
Term, discounted to the present using a ten percent (10%) factor;
and (iii) all damages proximately caused by Tenant's failure to
perform its obligations under this Lease, or (b) without
terminating this Lease, relet the Premises, or any part thereof,
for the account of Tenant upon such terms and conditions as
Landlord may deem advisable, and any monies received from such
reletting shall be applied first to the expenses of such
reletting and collection, including necessary renovation and
alterations of the Premises, reasonable attorneys' fees, any real
estate commissions paid, and thereafter toward payment of all
sums due or to become due Landlord hereunder, and if a sufficient
sum shall not be thus realized to pay such sums and other
charges, Tenant shall pay Landlord any deficiency monthly,
notwithstanding that Landlord may have received rental in excess
of the rental stipulated in this Lease in previous or subsequent
months, and Landlord may bring an action therefor as such monthly
deficiency shall arise. Tenant shall receive a credit against
all amounts owed to Landlord for such amounts received by
Landlord in excess of rental stipulated in this Lease.
No-entry and taking of possession of the Premises by Landlord
shall be construed as an election on Landlord's part to terminate
this Lease, regardless of the extent of renovations and
alteration by Landlord, unless a written notice of such intention
is given to Tenant by Landlord. Notwithstanding any reletting
without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach. Additionally,
whether or not the Lease is terminated, Landlord shall be
entitled to collect from Tenant as additional rent a charge equal
to three percent (3%) for each installment of Rent paid to
Landlord after the due date to reimburse Landlord for
administrative expense incurred in collecting rent. The three
percent (3%) penalty shall not apply so long as the rent is
actually paid within ten (10) days after written notice of the
date when it is due, and there has been no other late Rental
payment within the past three (3) months, nor shall it apply for
purposes of determining damages to Landlord in the event of
default, when Landlord resorts to remedies pursuant to this
Article 15.
16. Intentionally Deleted.
17. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be
personally delivered or sent to the address set forth below by
registered or certified mail, postage prepaid, return receipt
requested, or by a recognized overnight delivery service, or
delivered or sent by telex or telecopy and shall be deemed
received (i) if personally delivered, the date of delivery to the
address of the person to receive such notice (ii) if mailed three
(3) business days after the date of posting by U.S. Mail, (iii)
if given by Federal Express, Airborne Express or a similar
overnight delivery service, the following business day, or (iv)
if sent by telex or telecopy, when confirmation of delivery is
received:
Landlord: Fitzpatrick Properties, LLC
Attention: Daniel B. Fitzpatrick
4220 Edison Lakes Parkway
Mishawaka, IN 46545
Facsimile: 574-243-4377
Tenant: Bravokilo, Inc.
Attention: President
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 243-4377
With a copy to:
Bravokilo, Inc.
Attention: General Counsel
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 271-4613
Any party desiring change of address shall make such change known
in writing to the other party. Properly mailed notices that are
delivered to the place to which they are properly addressed shall
be effective when received. If a properly mailed notice is
delivered to the place to which it is properly addressed and is
refused or unclaimed, notice shall be effective when delivered
nevertheless. In the event a properly mailed and addressed
notice from Landlord to Tenant is refused or unclaimed, Landlord
may effectively serve such notice by delivery to the Premises, or
by ordinary U.S. Mail effective upon mailing.
18. Successors. This Lease shall be binding upon and inure
to the benefit of the parties hereto and their successors and
assigns.
19. Additional Covenants. Tenant hereby agrees to initially
operate on the Premises a Burger King restaurant in accordance
with practices established by Burger King Corporation from time
to time. In the event Tenant ceases to so operate or is not
franchised or permitted to so operate a Burger King restaurant,
Tenant may use the Premises for any other legal purpose.
20. Warranty of Title. Landlord warrants that it has fee
simple title to the Premises, which Premises are presently free
and clear of all liens and encumbrances except as reflected on
Exhibit B.
21. Subordination.
21.1 Subordination. Subject to the following condition
precedent, this Lease shall be subject and subordinate to the
lien of all mortgages and underlying leases which may now or
hereafter affect the Premises and to all renewals,
extensions, modifications, amendments, replacements and
consolidations thereof, provided Landlord shall, promptly
after execution of this Lease, deliver to Tenant from each
then existing mortgagee and ground lessor, a properly
executed and acknowledged, recordable non-disturbance
agreement substantially in the form as set forth on Exhibit C
attached hereto.
21.2 Subsequent Mortgages. Landlord shall promptly
notify Tenant prior to Landlord's execution of any new
mortgages or ground leases on the Premises. Promptly after
the execution of any new mortgage or ground lease, Landlord
shall deliver to Tenant a properly executed, acknowledged,
recordable non-disturbance agreement in accordance with
Section 21.1 above from such new mortgagee or ground lessor.
Tenant's subordination and agreement to attorn to any
mortgagee or ground lessor are expressly conditional upon
Tenant's receipt of all such non-disturbance agreements.
21.3 Landlord's Right to Subordinate. Subject to the
provisions of Sections 21.1 and 21.2, Landlord reserves the
right to subject and subordinate this Lease to the lien of
any mortgage or mortgages now or hereafter placed upon the
Landlord's interest in the Premises and on the land and
buildings of which the Premises are a part.
22. Assignment and Subletting. Tenant shall retain the right
to sublease the Premises, or any right or privilege connected
therewith by first obtaining the written consent of Landlord,
which shall not be unreasonably delayed, conditioned or withheld.
Notwithstanding the foregoing, Tenant may, without Landlord's
prior consent, assign this Lease or sublet the Premises (1) to
any bona-fide Burger King Restaurant operating company or any
franchisor, franchisee or developer of Burger King Restaurants,
or (2) to any corporation that is in the food industry and which
has its voting stock listed on a recognized securities exchange
or which is wholly-owned by another corporation whose voting
stock is so listed, or (3) to any corporation, partnership or
other entity that is controlled by or under common control with
Tenant, or any entity resulting from a merger or consolidation
with Tenant, or which acquires all or substantially all of
Tenant's assets. In addition, in the event of an assignment or
sublease to any assignee or subtenant ("Transferee") that
demonstrates to Landlord's reasonable satisfaction that such
Transferee has the financial ability and business experience to
perform Tenant's obligations under this lease, Landlord agrees
that Tenant shall be released from further liability to Landlord
under this Lease from and after the date such qualified
Transferee assumes in writing all of Tenant's obligations under
this Lease.
23. Legal Expenses. In case suit shall be brought for
recovery of possession of the Premises, for the recovery of any
rent or any amount due under the provisions of this Lease, or
because of the breach of any other covenant herein contained on
the part of Tenant to be kept or performed, and a breach shall be
established, Tenant shall pay to Landlord all expenses incurred
therefor, including reasonable attorneys' fees, which shall have
been incurred on the prosecution of such action, whether or not
such action is prosecuted to judgment. Conversely, should the
Landlord breach any of the terms of this Lease, and a breach
shall be established, Landlord shall pay to Tenant all expenses
incurred therefor, including reasonable attorneys' fees, which
shall have been incurred on the prosecution of such action,
whether or not such action is prosecuted to judgment.
24. Environmental Representations. Landlord represents as
follows:
(a) Landlord is not aware of any environmental
contamination on the Premises;
(b) Landlord has never generated, stored or disposed of
any hazardous substances or waste products or materials on
the Premises, other than cleaning supplies and related
materials stored on or used on the Premises, and has no
knowledge of the generation, storage or disposal of such
substances on the Premises. For purposes of this Lease
"hazardous substances or waste product" shall include
petroleum, petroleum distillates and "hazardous substances"
as defined in the Comprehensive Environmental Response
compensation and Liability Act of 1984, as amended, 42 USC
9601 et seq., as amended, and "hazardous waste" as defined
in the Michigan Hazardous Waste Management Act of 1979, as
amended, being Act 64 of the Public Acts of 1979;
(c) Landlord is not aware of any outstanding citation or
notice thereof or any violation of any environmental
provision, requirement or condition respecting the Premises,
nor is there any uncorrected condition on the Premises
relating to any past citation;
(d) There are no underground fuel or other storage tanks
located upon the Premises; and
(e) To the best of Landlord's knowledge, there are no
asbestos-containing materials or urea formaldehyde foam
insulation in, on or upon the Premises.
25. Indemnification as to Environmental Matters.
(a) Landlord shall indemnify, defend and hold harmless
Tenant from and against all loss, liability, damage and
expense, including costs associated with administrative and
judicial proceedings and attorneys' fees ever suffered or
incurred by Tenant on account of (1) Landlord's or any prior
tenant's failure, prior to the Commencement Date, to comply
with any environmental health, safety or sanitation law,
code, ordinance, rule or regulation or any interpretation or
order of any regulatory or administrative authority with
respect thereto relating to the Premises, including, but not
limited to, CERCLA, RCRA, MERA and MHWMA, as amended; (2) any
release of hazardous waste or substances occurring prior to
the Commencement Date, from, on, upon or into the Premises;
(3) any and all damages to natural resources or real property
and/or harm or injury to persons resulting or alleged to have
resulted from such failure to comply and/or release of
hazardous materials or substances, which release or failure
to comply occurred prior to the Commencement Date, or (4) any
inaccuracy in or breach of the representations made by
Landlord in Article 24 of this Lease. This indemnity shall
continue as an obligation of Landlord notwithstanding
Landlord's subsequent assignment of its interest under this
Lease.
(b) Tenant shall indemnify, defend and hold harmless
Landlord from and against all loss, liability, damage and
expense, including costs associated with administrative and
judicial proceedings and attorneys' fees ever suffered or
incurred by Landlord on account of (1) Tenant's failure,
subsequent to the Commencement Date, to comply with any
environmental health, safety or sanitation law, code,
ordinance, rule or regulation or any interpretation or order
of any regulatory or administrative authority with respect
thereto relating to the Premises, including, but not limited
to, CERCLA, RCRA, MERA and MHWMA, as amended; (2) any release
of hazardous waste or substances occurring subsequent to the
Commencement Date, from, on, upon or into the Premises; or
(3) any and all damage to natural resources or real property
and/or harm or injury to persons resulting or alleged to have
resulted from such failure to comply and/or release of
hazardous materials or substances, which release or failure
to comply occurred subsequent to the Commencement Date.
26. Effective Date. This Lease shall be effective as of the
month and day first above written, regardless of its date of
actual execution.
27. Entire Agreement. This Lease contains the entire
agreement of the parties with respect to the subject matter
hereof. The parties hereby terminate and release each other from
any prior lease relating to the Premises.
28. Counterparts. This Lease may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
29. Recordation, Short Form. This Lease shall not be
recorded. Landlord agrees, upon Tenant's request to execute a
short form of this Lease, entitled Memorandum of Lease,
substantially in the form attached hereto as on Exhibit D.
Tenant will record such short form Lease and Landlord agrees to
share equally in the cost and expense of doing so. The
provisions of this Lease shall control, however, in regard to any
omissions from said short form, or in respect of any provisions
hereof which may be in conflict with such short form.
30. Estoppel Certificate. Tenant and Landlord shall, from
time to time, and upon written request by the other party,
furnish the requesting party with a written statement, signed by
such party and addressed to the person designated in such
request, on the status of any matter pertaining to the Lease,
including that, at the date of such statement to the best of such
party's knowledge (i) the provisions and conditions of Lease have
been complied with, (ii) there are no defaults by the requesting
party known to the party signing such statement, (iii) the Lease
is still in full force and effect, (iv) there has been no notice
received by such party of any default which has not been cured.
If any or all of (i), (ii), (iii) or (iv) are not stated in the
affirmative in the statement, the statement shall describe the
facts and matters which such party alleges prevents such
affirmative statement.
31. Collateral Assignment. Notwithstanding anything to
the contrary contained in this Lease, Tenant may from time to
time, upon prior written notice to Landlord, assign its interest
in the Lease as collateral to an institutional lender or lenders
as partial security for a loan or loans. Said assignment shall
include a right to re-assign the Tenant's right, title and
interest under the Lease subject to Landlord's consent, which
consent shall not be unreasonably withheld or delayed. Within
ten (10) days after request from Tenant, Landlord shall promptly
execute documents evidencing its approval of an assignment
consistent with this provision. Furthermore, Landlord hereby
waives any statutory lien it may have on Tenant's property.
32. Real Estate Broker. Landlord and Tenant each represent
and warrant to the other that they have not dealt with any real
estate broker or agent or any finder in connection with the
transaction represented by this Lease. Landlord and Tenant each
hereby indemnify and agree to save harmless the other party from
and against the claims of or liability to any other real estate
broker or agent or any finder for commissions or fees in
connection with the transaction.
33. Right of First Refusal. If Landlord makes a bona-fide
offer to a third party, or receives a bona-fide offer from a
third party which is acceptable to Landlord, for sale or transfer
of the Premises, Landlord shall notify Tenant of the sale or
transfer, the name of the offeror, the offered consideration and
provisions of the offer. Within twenty (20) days after receipt
of Landlord's notice, Tenant may elect by notice to Landlord to
purchase the Premises, for the consideration and upon the other
provisions stated in Landlord's notice; except that title shall
close the later of thirty (30) days after Tenant elects to
purchase, or the date agreed upon the offeror. Should Tenant
fail to exercise this right to purchase within the time and in
the manner required above, or waives such right in writing,
Landlord shall be free to consummate the sale or transfer to the
named offeror for the consideration and upon the other provisions
set forth in Landlord's notice to Tenant; however, Landlord
agrees that such sale or transfer shall be subject to the
provisions of this Lease, including this right of first refusal.
If such sale or transfer is not consummated within six (6) months
after the expiration of the earlier of the date Tenant fails to
exercise its right as hereinabove required or the date Tenant
waives such right in writing, the rights granted to Tenant in
this Article shall once again apply to the offer described above
as well as to any new offer.
This provision shall not apply to a sale or transfer of the
Premises pursuant to a foreclosure of any institutional first
mortgage or deed of trust, or deed in lieu of foreclosure,
covering the Premises or to a transfer to an immediate family
member of any member or partner of Landlord for estate planning
purposes; provided, however, that the restrictions contained in
this Article 33 shall bind the Landlord's heirs, executors,
distributees, representatives, successors, permitted assigns,
transferees and grantees other than the first mortgagee, as well
as any successor, permitted assign, grantee or transferee of the
first mortgagee.
34. Right to Terminate. Tenant shall have the right at any
time during the term of this Lease, by providing Landlord with
prior written notice (the "Termination Notice"), to terminate
this Lease. In such event, Tenant shall surrender possession of
the Premises to Landlord on or before six (6) months after the
date of the Termination Notice (the "Surrender Date"). In such
event, this Lease shall expire on the Surrender Date.
IN WITNESS WHEREOF, the parties have executed this Lease as of
the day and year first above written.
LANDLORD:
FITZPATRICK PROPERTIES, LLC
By:_______________________
Daniel B. Fitzpatrick
Manager
TENANT:
BRAVOKILO, INC.
By:_________________________
John C. Firth
Executive Vice President
EXHIBIT A
Legal Description
(to be supplied by Landlord)
EXHIBIT B
Encumbrances
(to be supplied by Landlord)
EXHIBIT C
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
(this "Agreement") is made and entered into as of the day
of ____________________, by and between
________________________________________, a (the
"Lender"), whose address is
_______________________________________________________, and
Bravokilo, Inc., whose address is 4220 Edison Lakes Parkway,
Mishawaka, Indiana 46545 (the "Tenant").
WHEREAS, Lender has made a loan or is about to make a loan
to ______________________________________ (the "Landlord") secured
by a mortgage or deed of trust (hereinafter called the "Mortgage")
covering a parcel of land described on Exhibit A-1 annexed hereto
and made a part hereof, together with the improvements now or
hereafter erected thereon (said parcel of land and improvements
thereon being hereafter called the "Real Property"); and
WHEREAS, by a certain lease heretofore entered into between
Landlord and Tenant dated as of __________________ (the lease and
all amendments, extensions and renewals thereto are hereinafter
called the "Lease"), Landlord leased to Tenant a portion of the
Real Property; and
WHEREAS, a Memorandum of Lease dated _________________ was
recorded in the land records of _____________________________, on
______________________, Document No. __________; and
WHEREAS, as a condition precedent to Tenant's agreement to
enter into the Lease, Tenant has required that Lender agree not
to disturb Tenant's rights under the Lease, in return for which
Tenant has agreed that the Lease will be subordinate to the lien
of the Mortgage;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties agree as follows:
1. Subordination. The Lease, the leasehold estate created
thereby, and the rights of Tenant in, to or under the Lease and
the portion of the Real Property, are hereby subjected and
subordinated and shall remain in all respects and for all
purposes subject, subordinate and junior to the lien of the
Mortgage, as fully and with the same effect as if the Mortgage
had been duly executed, acknowledged and recorded, and the
indebtedness secured thereby had been fully disbursed, prior to
the execution of the Lease, or possession of the portion of the
Real Property by Tenant.
2. Tenant Not to Be Disturbed. The parties acknowledge
and agree that the Lease shall be subordinate to the lien of
Lender provided that, so long as Tenant attorns to Lender and is
not in default under the Lease, Lender shall not join Tenant as a
party defendant in any action or proceeding foreclosing a
Mortgage (unless required to foreclose the mortgage, and then
only for such purpose and not for the purpose of termination of
the Lease), in any eviction proceeding or in any action to
terminate the Lease, and that Tenant's possession of the portion
of the Real Property and Tenant's rights and privileges under the
Lease, including but not limited to quiet enjoyment, or any
extension or renewal thereof which may be exercised in accordance
with the Lease, shall not be diminished or interfered with by
Lender, Tenant's occupancy of the portion of the Real Property
shall not be disturbed by Lender, and Lender agrees to cause
Landlord's obligations under the Lease to be performed from and
after the date it succeeds to Landlord's interest in the
Premises. Notwithstanding the foregoing, Lender will not be
liable for any act or omission of any prior landlord, including
Landlord, unless such act or omission continues after Lender
succeeds to the interest of Landlord. Lender will not be liable
for any security deposits held by Landlord pursuant to the Lease
unless such deposits are transferred to Lender.
3. Tenant to Attorn to Lender. If the interests of
Landlord shall be transferred to and owned by Lender by reason of
foreclosure or other proceedings brought by it in lieu of or
pursuant to a foreclosure, or by any other manner, and Lender
succeeds to the interest of the Landlord under the Lease, Tenant
shall be bound to Lender under all of the terms, covenants and
conditions of the Lease for the balance of the term thereof
remaining and any extensions or renewals thereof which may be
exercised in accordance with any option therefor in the Lease,
with the same force and effect as if Lender were the landlord
under the Lease; and Tenant shall attorn to Lender, as its
landlord, said attornment to be effective and self-operative
immediately upon Lender succeeding to the interest of Landlord
without the execution of any further instruments on the part of
any of the parties hereto. The respective rights and obligations
of Tenant and Lender under the Lease following such attornment
shall be and are the same as now set forth in the Lease, it being
the intention of the parties hereto for this purpose to
incorporate the Lease in this Agreement by reference with the
same force and effect as if set forth at length herein.
4. Notice and Cure of Landlord's Default. Tenant agrees
to send Lender a copy of any notice relating to a breach or
default by Landlord under the Lease which Tenant intends to use
as a basis to terminate the Lease. Tenant agrees that Lender, at
its sole option and without obligation so to do, may cure any
such default within a reasonable period, but in no event longer
than sixty (60) days measured from the date that Tenant delivers
a copy of such notice to Lender.
5. No Modification. No modification, amendment, or
release of any provision of this Agreement, or of any right,
obligation, claim, or cause of action arising hereunder shall be
valid or binding for any purpose whatsoever unless in writing and
executed by the party against whom the same is sought to be
asserted.
6. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be
personally delivered or sent to the address set forth below by
registered or certified mail, postage prepaid, return receipt
requested, or by a recognized overnight delivery service, or
delivered or sent by telex or telecopy and shall be deemed
received (i) if personally delivered, the date of delivery to the
address of the person to receive such notice (ii) if mailed three
(3) business days after the date of posting by U.S. Mail, (iii)
if given by Federal Express, Airborne Express or a similar
overnight delivery service, the following business day, or (iv)
if sent by telex or telecopy, when confirmation of delivery is
received:
Landlord:__________________
__________________
__________________
__________________
Facsimile:___________________
Tenant: Bravokilo, Inc.
Attention: President
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 243-4377
With a copy to:
Bravokilo, Inc.
Attention: General Counsel
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Facsimile: (574) 271-4613
Any party desiring change of address shall make such change known
in writing to the other party. Properly mailed notices that are
delivered to the place to which they are properly addressed shall
be effective when received. If a properly mailed notice is
delivered to the place to which it is properly addressed and is
refused or unclaimed, notice shall be effective when delivered
nevertheless. In the event a properly mailed and addressed
notice from Landlord to Tenant is refused or unclaimed, Landlord
may effectively serve such notice by delivery to the Premises, or
by ordinary U.S. Mail effective upon mailing.
7. Landlord Consent. Landlord is joining herein solely
for the purpose of consenting to the terms and conditions of the
Agreement and agreeing that Tenant may rely upon any and all
notice from Lender relating to the rights of Lender hereunder and
under the Mortgage.
8. Successors and Assigns. This Agreement and each and
every covenant, agreement and other provisions hereof shall be
binding upon the parties hereto and their heirs, administrators,
representatives, successors and assigns.
9. Choice of Law. This Agreement is made and executed
under and in all respects is to be governed and construed by the
laws of the state in which the Real Property is located.
10. Counterparts. This Agreement may be executed in any
number of counterparts for the convenience of the parties, all of
which, when taken together and after execution by all parties
hereto, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be executed as of the date first above written.
WITNESSES: TENANT:
BRAVOKILO, INC.
_____________________
Name:________________ By:__________________________
John C. Firth
Executive Vice President
_____________________
Name:________________
WITNESSES: LENDER:
_____________________ __________________________
Name:________________
By:__________________________
Name:________________ Name:________________________
Title:_______________________
The foregoing Agreement is hereby consented and agreed to by
the undersigned as set forth in Paragraph 7 hereof.
WITNESSES: LANDLORD:
_____________________ __________________________
Name:________________
By:__________________________
Name:________________ Name:________________________
Title:_______________________
ACKNOWLEDGMENT
STATE OF INDIANA )
) SS:
COUNTY OF ST. JOSEPH )
ON THIS ___________ day of _______________, 2003, before me, the
subscriber, personally appeared John C. Firth, to execute the
within instrument; and that he signed his name thereto by like
order as the free and voluntary act and deed of said Officer.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
seal the day and year first above written.
________________________
Notary Public
ACKNOWLEDGMENT
STATE OF_________________)
) SS:
COUNTY OF________________)
ON THIS ___________ day of _______________, 2003, before me, the
subscriber, personally appeared _____________________, to execute
the within instrument; and that he signed his name thereto by
like order as the free and voluntary act and deed of said
________________________________.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
seal the day and year first above written.
_______________________
Notary Public
ACKNOWLEDGMENT
STATE OF_________________)
) SS:
COUNTY OF________________)
ON THIS ___________ day of _______________, 2003, before me, the
subscriber, personally appeared _____________________, to execute
the within instrument; and that he signed his name thereto by
like order as the free and voluntary act and deed of said
________________________________.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
seal the day and year first above written.
___________________________
Notary Public
EXHIBIT D
Memorandum of Lease
This Memorandum of Lease Agreement is made by and between
Fitzpatrick Properties, LLC, an Indiana limited liability company
("LANDLORD"), and Bravokilo, Inc., an Indiana corporation
("TENANT").
WHEREAS, the parties executed a Lease as of
________________(the "Lease") that relates to the premises
described herein;
WHEREAS, the parties desire to set forth a Memorandum of
Lease for the purpose of recording the same in the ____________
County Clerk's Office, State of ____________.
NOW, THEREFORE, in consideration of the foregoing premises
and other good and valuable consideration, the parties agree as
follows:
1. Description of Premises.
The LANDLORD and TENANT have entered into a lease whereby
LANDLORD leased to the TENANT and the TENANT leased from the
LANDLORD the following described premises:
See Exhibit A
2. Commencement and Term.
Said Lease is for an initial term of five (5) years
commencing on _________________and expiring December 28, 2008,
unless terminated sooner as provided in the Lease. The Lease
also grants TENANT the right and option to extend the term for
four (4) successive periods of five (5) years each..
3. Complete Lease.
A more complete lease is in the possession of both LANDLORD
and TENANT. It is understood that this Memorandum of Lease shall
be recorded in the __________ County Clerk's Office.
4. Competition.
Landlord covenants and agrees that during the term of the
Lease, no property owned by Landlord or its affiliates, directly
or indirectly within one (1) mile of the Premises shall be used
for a restaurant or any other business engaged in the retail sale
of prepared foods for consumption on or off-premises.
5. Conflicts.
In the event any conflicts exist between the terms of this
Agreement and the terms of the Lease, the terms of the Lease
shall control. Terms not defined herein have the same meaning as
set forth in the Lease.
Dated this ___ day of ___________, 2003.
Witness: LANDLORD:
FITZPATRICK PROPERTIES, LLC
_____________________
Name:________________ By:__________________________
Daniel B. Fitzpatrick
_____________________ Manager
Name:________________
Witness: TENANT:
BRAVOKILO, INC.
_____________________
Name:________________ By:__________________________
John C. Firth
_____________________ Executive Vice President
Name:
STATE OF INDIANA )
) SS:
COUNTY OF ST. JOSEPH )
Before me, a Notary Public in and for said County and State,
personally appeared on this date, John C. Firth, the Executive
Vice President of Bravokilo, Inc., and acknowledged the execution
of the foregoing document as the free act and deed of said
corporation and his or her free act and deed as such Officer.
Witness my hand and Notarial Seal, this__________day of
____________________ , 2003.
_______________________
(signature)
_______________________
(typed or printed name)
Notary Public
My commission expires on: My county of residence is:
________________, 20 ____ _________________________
____________________State
STATE OF_________________)
) SS:
COUNTY OF_________________)
Before me, a Notary Public in and for said County and State,
personally appeared on this date, Daniel B. Fitzpatrick, the
Manager of Fitzpatrick Properties, LLC, and acknowledged the
execution of the foregoing document as the free act and deed of
said corporation and his or her free act and deed as such
Officer.
Witness my hand and Notarial Seal, this _______ day of
____________________ , 2003.
_______________
(signature)
_______________
(typed or printed name)
Notary Public
My commission expires on: My county of residence is:
________________, 20 ____ ________________County.
________________State
This document was prepared by James R. Meyer, Jr., 4220 Edison
Lakes Parkway, Mishawaka, IN 46545.
Exhibit A
to a Memorandum of Lease between
Exhibit 4-Q
- -----------------
FIRST AMENDMENT
-----------------
This FIRST AMENDMENT dated as of the __ day of _________,
2003 (this "Amendment") amends (i) the Fourth Amended and
Restated Revolving Credit Agreement dated as of May 30, 2002 (as
amended hereby and as hereafter amended, restated, supplemented
or otherwise modified from time to time, the "Credit Agreement")
by and among Quality Dining, Inc., an Indiana corporation, and
GAGHC, Inc., a Delaware corporation, as borrowers (the
"Borrowers"), the banks now or hereafter parties signatory hereto
(the "Banks"), and JP Morgan Chase Bank (as successor to Chase
Bank of Texas, National Association), in its capacity as
Administrative Agent for the Banks (in its capacity as such, and
together with any successor administrative agent hereunder, the
"Administrative Agent") and (ii) the Post Closing Agreement dated
as of June 10, 2002 (as amended hereby and as hereafter amended,
restated, supplemented or otherwise modified from time to time,
the "Post Closing Agreement") by and among the Borrowers, the
Banks and the Administrative Agent. Capitalized terms used in
this Amendment and not otherwise defined have the meanings
assigned to such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Banks and the Administrative
Agent are parties to the Credit Agreement;
WHEREAS, the Borrowers, the Banks and the Administrative
Agent are also parties to the Post Closing Agreement; and
WHEREAS, the Borrowers have requested that the Banks and the
Administrative Agent amend certain provisions of the Credit
Agreement and the Post Closing Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, and for other good and valuable consideration
the receipt and sufficiency of which are acknowledged, the
parties hereto agree as follows:
SECTION 1. AMENDMENT
1.1 On the date this Amendment becomes effective, after
satisfaction of each of the conditions set forth in Section 3
(the "Effective Date"):
(a) Amendments to Article I of Credit Agreement. Article I of
the Credit Agreement is amended as follows:
(i) To replace the definition of "Consolidated Cash Flow" in its
entirety to read as follows:
""Consolidated Cash Flow" of any person shall
mean, for any period for which the amount
thereof is to be determined, Consolidated Net
Income of such Person for such period, plus
(to the extent deducted in determining
Consolidated Net Income and without
duplication to adjustments to net income of
such Person (determined in accordance with
GAAP) made in the determination of
Consolidated Net Income) (i) provisions for
any Federal, state or local taxes during such
period, (ii) interest expense of such Person
during such period, (iii) depreciation and
amortization of such Person during such
period, (iv) BFBC-related Expenses during
such period and (v) other non-cash income or
expenses of such Person during such period."
(ii) To add a new definition of the term "BFBC-related Expenses",
to be inserted in alphabetical order, to read as follows:
""BFBC-related Expenses" shall mean
litigation expenses (including court costs,
attorneys' fees and expenses, and other out-
of-pocket costs) incurred by QDI and its
Subsidiaries in connection with the
litigation, and/or settlement, of claims of
QDI and/or its Subsidiaries against a former
franchisee of the bagel business, BFBC Ltd.,
and its affiliates, provided that the
aggregate amount of such expenses which
constitute BFBC-related Expenses shall not
exceed the aggregate amount of cash received
by QDI in settlement of such claims."
(b) Amendment to Section 5.13(a) of Credit Agreement. Section
5.13(a) of the Credit Agreement is amended to revise the
parenthetical appearing in the third line of said section to read
as follows:
"(other than any Excluded Property and other
than the Chili's Bar and Grill Restaurants
located at 175 East City Avenue, Bala Cynwyd,
PA 19004 (CH #56) and at 739 West DeKalb
Pike, King of Prussia, PA 19406 (CH #58))"
(c) Amendments to Post-Closing Agreement. Exhibit A to the Post-
Closing Agreement is amended as follows:
(i) To delete any and all references therein to "BK13830"; and
(ii) To insert at the end thereof a new sentence to read as
follows:
"Notwithstanding the foregoing, Borrowers
will timely order from Lawyers Title
Insurance Corporation, for delivery to the
Banks, the title insurance policies for each
of the sites identified below promptly
following Borrowers' receipt of the recorded
copies of the applicable mortgages/deeds of
trust for such sites:
BK14045 CH200
BK12980 CH1500
BK3260 CH1800
(iii) Notwithstanding the foregoing, the
title insurance policies for BK12945,
BK13981, BK14142, and BK14045 will each have
a face value of $800,000.
SECTION 2. REPRESENTATIONS AND WARRANTIES
2.1 To induce the Banks and the Administrative Agent to enter
into this Amendment, each Borrower represents and warrants to the
Banks and the Administrative Agent that as of the Effective Date,
after giving effect to this Amendment, (i) no Default or Event of
Default under the Credit Agreement has occurred and is continuing
and (ii) the representations and warranties of each Borrower
contained in the Credit Agreement are true and correct in all
material respects.
SECTION 3. CONDITIONS TO EFFECTIVENESS
The effectiveness of this Amendment is subject to
satisfaction of the following conditions:
3.1 Representations and Warranties. The representations and
warranties of the Borrowers contained in this Amendment are true
and correct as of the Effective Date.
3.2 Documents. The Administrative Agent shall have received all
of the following:
(a) Amendment. Counterparts of this Amendment, duly executed by
the Borrowers, the Banks and the Administrative Agent.
(b) Other. Such other documents as the Banks and the
Administrative Agent may reasonably request.
SECTION 4. MISCELLANEOUS
4.1 Captions. The recitals to this Amendment (except for
definitions) and the section captions used in this Amendment are
for convenience only, and do not affect the construction of this
Amendment.
4.2 Governing Law; Severability. This Amendment shall 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. Any
provision of this Amendment 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 Amendment
or affecting the validity or enforceability of such provision in
any other jurisdiction.
4.3 Counterparts. This Amendment may be executed in any number
of counterparts and by the different parties on 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.
4.4 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Borrowers, the Banks and the
Administrative Agent and their respective successors and assigns.
4.5 References. From and after the Effective Date, each
reference in the Credit Agreement and the Post Closing Agreement
to "this Agreement," "hereunder," "hereof," "herein," or words of
like import, and each reference in the Credit Agreement, the Post
Closing Agreement or any other Loan Document to the Credit
Agreement, the Post Closing Agreement or to any term, condition
or provision contained "thereunder," "thereof," "therein," or
words of like import, means and shall be a reference to the
Credit Agreement or the Post Closing Agreement (or such term,
condition or provision, as applicable) as amended, supplemented,
restated or otherwise modified by this Amendment.
4.6 Continued Effectiveness. Notwithstanding anything contained
in this Amendment, the terms of this Amendment are not intended
to and do not serve to effect a novation as to the Credit
Agreement or the Post Closing Agreement. The parties to this
Amendment expressly do not intend to extinguish the Credit
Agreement or the Post Closing Agreement. Instead, it is the
express intention of the parties to this Amendment to reaffirm
the indebtedness created under the Credit Agreement. Each of the
Credit Agreement and the Post Closing Agreement remains in full
force and effect and the terms and provisions thereof, as
modified hereby, are ratified and confirmed.
4.7 Costs, Expenses and Taxes. The Borrowers affirm and
acknowledge that Section 10.4 of the Credit Agreement applies to
this Amendment and the transactions and agreements and documents
contemplated under this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
QUALITY DINING, INC.
Address: 4220 Edison Lakes Parkway
Mishawaka, Indiana
46545
Attention: John C.
Firth
Executive Vice
President, General
Counsel and Secretary
By:____________________________
John C. Firth
Executive Vice President,
General Counsel and
Secretary
GAGHC, INC.
By:___________________________
John C. Firth
Vice President
JP MORGAN CHASE BANK, in its
individual capacity and as
Administrative Agent
Address: 712 Main Street
Houston, TX 77002
Attention: Michael
Costello
By:__________________________
Name:___________________
Title:__________________
BANK OF AMERICA NATIONAL ASSOCIATION
Address: 600 Peachtree Street, NE, 19th Floor
Atlanta, GA 30308
Attention: Daniel Holland
By:______________________
Name:____________________
Title:___________________
LASALLE BANK N.A.
Address: 120 S. LaSalle Street
Chicago, IL 60603
Attention: David Knapp
By:____________________
Name:__________________
Title:_________________
NATIONAL CITY BANK OF INDIANA
Address: 101 N. Main Street
Elkhart, IN 46516
Attention: Gary Graham
By:_____________________
Name:___________________
Title:__________________
THE NORTHERN TRUST COMPANY
Address: 50 S. LaSalle Street, B-2
Chicago, IL 60675
Attention: Art Fogel
By:_______________________
Name:_____________________
Title:____________________
REAFFIRMATION OF SUBSIDIARY GUARANTY
Each of the undersigned guarantors hereby consents to the First Amendment
to which this Reaffirmation of Subsidiary Guaranty is attached and agrees
that each of the Loan Documents, as defined in the Credit Agreement
(as defined in said First Amendment), to which it is a party and each and
every covenant, condition, obligation, representation (except those
representations which relate only to a specific date, which are confirmed
as of such date only), warranty and provisions set forth therein are, and
shall continue to be, in full force and effect and are hereby confirmed,
reaffirmed and ratified in all respects.
IN WITNESS WHEREOF, each of the undersigned has caused this Reaffirmation
of Subsidiary Guaranty to be executed and delivered as of
the ___ day of ______, 2003.
BRAVOKILO, INC.
SOUTHWEST DINING, INC.
GRAYLING CORPORATION
FULL SERVICE DINING, INC.
GRADY'S INC.
BRAVOGRAND, INC.
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
By:_____________________
Name: John C. Firth
Title: Executive Vice President
GRADY'S AMERICAN GRILL, LP
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
By: Grady's American Grill Restaurant
Corporation, as general partner
By:_______________________
Name: John C. Firth
Title: President
GRADY'S AMERICAN GRILL
RESTAURANT CORPORATION
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
By:_____________________
Name: John C. Firth
Title: President
GAGLC, INC.
4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
By:_____________________
Name: James W. Gallagher
Title: President
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Quality Dining, Inc.
(the "Company") on Form 10-Q for the period ending May 11, 2003
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Daniel B. Fitzpatrick, Chairman of the
Board, President and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to
906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Daniel B. Fitzpatrick
Daniel B. Fitzpatrick
Chairman of the Board, President and
Chief Executive Officer
June 24, 2003
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging or otherwise
adopting the signature that appears in typed form within the
electronic version of this written statement required by Section
906, has been provided to Quality Dining, Inc. and will be
retained by Quality Dining, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Quality Dining, Inc.
(the "Company") on Form 10-Q for the period ending May 11, 2003
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, John C. Firth, Executive Vice President
and General Counsel (Principal Financial Officer) of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to
906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ John C. Firth
John C. Firth,
Executive Vice President and
General Counsel (Principal Financial Officer)
June 24, 2003
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging or otherwise
adopting the signature that appears in typed form within the
electronic version of this written statement required by Section
906, has been provided to Quality Dining, Inc. and will be
retained by Quality Dining, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.