October 4, 1999
All Parties described below as "Borrowers"
c/o Xxxx X. Xxxxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Via Facsimile: (000) 000-0000
Re Fixed Rate Commitment Letter: Total Note Amount: $15,555,555.64 (consisting
of $14,000,000.00 of Aggregate Loan Amount and $1,555,555.64 of Aggregate Credit
Enhancement Amount).
Dear Xx. Xxxxxxxx:
AMRESCO Commercial Finance, Inc. ("ACFI" or the "Lender") is pleased to approve
your loan application ("Application") for a loan and agrees to lend you the
total amount set forth above to the following companies (collectively, "you",
"your", or the "Borrower"): The Quizno's Corporation; The Quizno's Operating
Company; S & S Company; The Quizno's Realty Company; The Quizno's Acquisition
Company; The Quizno's Licensing Company; and Quizno's Kansas, L.L.C. The
allocation of the aggregate Loan Amount and the Total Note Amount and
corresponding terms will be set forth on Exhibit A attached hereto and made a
part hereof:
The following terms and conditions will apply on your loan(s):
1. Note Amount: Your loan(s) will be evidenced by two secured
-------------
promissory notes (collectively, the "Note") in an aggregate
amount ("Total Note Amount") of $15,555,555.64 of which
$14,000,000.00 will be the principal amount disbursed to you
at closing pursuant to your instructions and the terms of
this Commitment Letter (excluding your closing costs which
are withheld) and $1,555,555.64 will be your aggregate Credit
Enhancement Amount.
2. Interest Rate: Prior to an event of default, the interest
---------------
rate on the loan(s) will be equal to the 10-year treasury
note rate 10 days prior to the closing date plus 4.25%,
which as of September 28, 1999 would equate to an annual
interest rate of 10.10%. The loan and enhancement payments
herein reflect an assumed interest rate of 10.10%, but are
subject to change based upon the 10-year treasury note rate
as of the date the interest rate is locked. ACFI will have
the unilateral right, at any time, to readjust this rate
once within four months from the closing date, at a rate
equal to 4.25% plus the then current 10 year treasury note
rate. If requested by Xxxxxx, Borrower shall execute slip
pages to the Note necessary to conform the Note to the
interest rate set forth in this section 2
3. Scheduled Monthly Credit Enhancement Obligation Payment:
--------------------------------------------------------
You will pay an aggregate amount of $13,092.65 each month
while your aggregate Credit Enhancement Amount remains
outstanding.
4. Scheduled Monthly Loan Payment: You will pay an aggregate
--------------------------------
amount of $193,337.48 each month while all the loan(s) listed
above remain outstanding. This amount will be reduced accordingly
for any such loan(s) that mature or are paid off.
5. Payments and Monthly Enhancement Rebates: The first payment
-----------------------------------------
under the loan(s) ("Closing Payment") will be due on the
date that such loans close and will be withheld from the loan
proceeds to be disbursed to you at the Closing Date. The
Closing Payment will equal the sum of (i) interest payable
on each Loan Amount from the Closing Date to the first day
of the next month, (ii) the Scheduled Monthly Loan Payment
for each of your loan(s) and (iii) the Scheduled Monthly
Credit Enhancement Obligation payment for each of your
loan(s). The Scheduled Monthly Loan Payment for each loan
will consist of (i) amortization of the corresponding Note
Amount over the stated loan term and (ii) interest on the
outstanding Loan Amount corresponding to such loan. The
Scheduled Monthly Loan Payment will be the same amount every
month. You will make payments of the Scheduled Monthly Loan
Payment and Scheduled Monthly Credit Enhancement Obligation
Payment no later than the first day of each month (each a
"Payment Date") beginning on January 1, 2000 (assuming an
October 1999 closing).
If no loan in the pool of loans made by ACFI (of which your
loans are a part) is delinquent or in default, you will be
entitled to an aggregate monthly enhancement rebate ("Monthly
Enhancement Rebate") of $13,092.65, an amount equal to your
initial aggregate Scheduled Monthly Credit Enhancement Obligation
Payment. If any loans in such loan pool are delinquent or in
default, the amount of your Monthly Enhancement Rebate will be
reduced and may be eliminated entirely. All calculations of the
Monthly Enhancement Rebate will be made by ACFI, its agent or
representatives. Your Monthly Enhancement Rebate will be
applied to your next Scheduled Monthly Credit Enhancement
Obligation Payment which is due. In the event you are entitled
to such credit, you will be notified prior to the next Payment
Date of the reduced amount due on the next Payment Date. All
payments will be made in United States dollars and at the
offices of the Lender or such other place or places as the
Lender may notify you.
6. Prepayment: Each loan may be prepaid in full (but not
----------- in part) subject to certain restrictions and
payment of a yield maintenance make-whole premium, if due.
The yield maintenance make-whole premium shall be in effect
for the first seven (7) years of the loan term, after which
such premium shall be 1% of the then outstanding loan balance.
7. Use: You will use the Aggregate Loan Amount solely for the
---- business or commercial purpose identified as follows
(allocations are estimates):
Refinance Existing Debt $3,515,000
*Escrowed funds for various uses as
described below 9,900,000
Closing costs (including 1st month
payment) 585,000
-----------
Total Loan Proceeds $14,000,000
* The escrowed funds will be split into two different uses. 60% of the
escrowed amount will be used for any of the specific uses as follows:
going-private transaction, tender offers to Quizno's shareholders or
other QSR chains, open market purchases of QUIZ stock, acquisition of new
stores, upgrades at the corporate and store level, repurchase area
directorships. 40% of the escrowed funds can be used for anything that
Quizno's wishes to use the funds for with specific exception to working
capital, dividends or distributions, or to "cash-out" the two majority
equity holders.
Xxxxxx's may use a maximum of $2 million of the escrowed funds for a
program that will offer limited financing to franchisees. In this program
Quizno's will finance no more that 66.7% of the start-up costs for a
franchisee, with the franchisee injecting the additional 33.3% in equity.
Xxxxxx's will be allowed to draw on this escrow account a maximum of $1
million per month. If the total amount in draws in a specific month is
higher than $1 million, ACFI must approve the disbursement of funds that
month. ACFI will receive monthly reports on the disbursements and uses of
funds until the balance of the escrow is $0.
8. Collateral: Your obligations will be secured by a blanket,
----------- first priority, perfected security interest in all
of your present and future assets other than real and personal
property acquired in the future subject to a purchase money
security agreement, to the extent and in form and substance
satisfactory to us and our counsel. These assets must include,
but are not limited to all presently owned and future acquired:
equipment and personal property relating to the corporate office
and each of the units listed on Exhibit A; leasehold
mortgages/deeds of trust for at least 50% of the unit locations
listed on Exhibit A (if 50% of the leasehold mortgages cannot be
obtained ACFI will allow a substitution of other collateral in
form and substance satisfactory to ACFI in its sole discretion);
all of your general intangibles (as defined in the Uniform
Commercial Code), including all trademarks, patents, trade names,
trade secrets, service marks, service names, franchise agreements,
license agreements, contract rights, and all proceeds and income
thereof. Upon your request, Lender shall release its lien on all
franchise agreements entered into subsequent to the date that the
Borrower achieves $7 million in annual EBITDA and a FCCR of 2.00:1
based on annual audited financial statements.
9. Fixed Charge Coverage Ratios:
a. You are obligated to maintain a Fixed Charge Coverage Ratio
(FCCR) of 1.35:1 at the corporate (consolidated) level
throughout the life of your loan(s). ACFI will monitor this
compliance on an annual basis and sometimes more frequently if
conditions warrant.
b. YOU MAY NOT BORROW OR INCUR ADDITIONAL INDEBTEDNESS IF THE
PAYMENTS ON SUCH INDEBTEDNESS WOULD CAUSE THE FCCR to GO below
1.50:1 (POST TRANSACTION). Any additional indebtedness may not
be secured by any of the collateral referred to above.
10. Closing Documents: At the closing you must execute and deliver
------------------ standard ACFI loan documents, in form and
substance satisfactory to us, including the following:
a. Secured Promissory Notes evidencing your obligation to repay
such loan(s);
b. Pledge and Security Agreement granting a security interest to
the Lender in the collateral referred to above;
c. Leasehold Mortgages/Deeds of Trust and other real property
documentation, as applicable;
d. An opinion of your legal counsel in form and substance
satisfactory to us and our counsel;
e. UCC-1 Financing Statements and all other documents required to
perfect a security interest in the collateral referenced
above; and
f. Any and all other documents required by us in connection with
your loan.
Execution copies: Execution copies of the Secured Promissory Notes, Pledge
-----------------and Security Agreement, UCC-1 Financing Statements,
Leasehold Mortgages/Deeds of Trust and other real property documentation,
and/or Affiliate Guarantee(s), as applicable, and a form of the required
opinion letter will be provided to you and your counsel following your
acceptance of this letter.
11. Additional Conditions: This offer is subject to the following
----------------------additional conditions:
a. You must sign, date and return the enclosed copy of this letter
on or before October 4, 1999.
b. You must provide evidence to Lender that it shall receive at
closing a first priority, perfected security interest in the
collateral referred to above.
c. Prior to closing, you must execute and deliver into escrow
pending the closing, all closing documents referenced above.
d. The closing of this loan must occur on or before October 12, 1999
at such place as Lender may select. If the loan(s) does not close
on or before this date, ACFI may change or withdraw its
commitment, or change the applicable interest rate at its sole
discretion.
e. Xxxxxx's counsel must be satisfied with the documentation,
proceedings and legal opinions incident to this transaction.
f. There shall have been no material adverse change in your
financial condition or prospects since the date of this
commitment letter.
g. ACFI must receive each of the following, in form and substance
acceptable to ACFI in its sole discretion: (i) a legal review of
your loan files; (ii) Borrowing Resolutions from each of the
entities listed above as Borrowers; (iii) completed and signed
environmental questionnaires for each unit; (iv) landlord
estoppels for at least 50% of the locations listed on Exhibit A;
(v) resolution of various lease issues as noted on fax dated
September 20, 1999; and (vi) the unqualified approval of the
Loan by XXXX's warehouse lender.
12. Fees:
-----
a. Application Fee: For and in consideration of providing this
commitment letter, Xxxxxxxx has paid Lender a non-refundable
application deposit of $70,000 (The "Application Fee") which
will be credited against the Loan Fee (as defined below) on
the loan closing date. If the loan does not close, Lender
shall retain the Application Fee.
b. Loan Fee: For and in consideration for the loan, Borrower
shall pay, from the proceeds of the loan at closing, a loan
fee ("Loan Fee") of 2.5% of the Aggregate Loan Amount, less
the Application Fee. If the loan closes, the Loan Fee shall
be used to pay for lending costs and expenses. However, if the
loan does not close, Xxxxxxxx must pay for all costs and
expenses incurred in connection with the loan.
If you accept this letter on the terms and conditions provided herein, please
sign in the space provided below and return to the Lender at the address noted
above on or before October 4, 1999.
Sincerely,
AMRESCO Commercial Finance, Inc.
By: /s/ Xxxx Xxxxx
--------------------------------
Xxxx Xxxxx, Senior Underwriter
By the undersigned's signature below, the undersigned accepts the offer for the
loan(s) described in this commitment letter and agrees to all of the terms and
conditions to such loan(s) described above.
The Quizno's Corporation, as Borrower The Quizno's Operating Company as Borrower
By: _________________________________________ By:
----------------------------------------
Name: ______________________________________ Name:
--------------------------------------
Title: _______________________________________ Title:
---------------------------------------
Date: _______________________________________ Date:
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S & S Company, as Borrower The Quizno's Realty Company, as Borrower
By: _________________________________________ By:
----------------------------------------
Name: ______________________________________ Name:
--------------------------------------
Title: _______________________________________ Title:
---------------------------------------
Date: _______________________________________ Date:
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The Quizno's Acquisition Company, as Borrower The Quizno's Licensing Company, as Borrower
By: _________________________________________ By:
----------------------------------------
Name: ______________________________________ Name:
--------------------------------------
Title: _______________________________________ Title:
---------------------------------------
Date: _______________________________________ Date:
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Quizno's Kansas, L.L.C., as Borrower
By: _________________________________________
Name: ______________________________________
Title: _______________________________________
Date: _______________________________________
AMRESCO Commercial Finance, Inc.
Exhibit A
The Quizno's Corporation Schedule of Loan Allocation
Original Credit Original Loan Loan
Loan Enhancement Note Term Interest Loan Enhancement
Unit # Amount Amount Amount (mos) Rate Payment Payment
------------- -------------- ------------- --------------- ------ ----------- ---------- -------------
Corporate $10,250,000.00 $1,138,888.89 $11,388,888.89 120 10.10% $141,550.73 $9,585.65
E. Arapahoe 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
Gunpark 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
Blue River 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
E. Orchard 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
Pearl Street 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
S. University 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
Grant Street 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
S. Hover 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
Lincoln Street 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
West Colfax 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
North Washington 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
W. Colfas 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
18th Street 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
S. Tamarac 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
17th Street 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
W. Central 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
N. Waco 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
R. Xxxxx 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
N. Rock Road 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
S. Senecca 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
W. 21st Street 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
X. Xxxxx 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
E. 47th Street 150,000.00 16,666.67 166,666.67 120 10.10% 2,071.47 140.28
-------------- ------------- -------------- ----------- ----------
$14,000,000.00 $1,555,555.64 $15,555,555.64 $193,337.48 $13,092.65
