Exhibit (a)(1)
GLOBAL ALLIANCE FINANCE COMPANY, L.L.C.
A WHOLLY OWNED SUBSIDIARY OF Deutsche Bank North America
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Direct Line: 000-000-0000
Direct Fax: 000-000-0000
October 17, 1997
DavCo Restaurants, Inc.,
Southern Hospitality Corp. and a
Company to be Formed ("NewCo")
as joint and several co-borrowers
0000 Xxxxxxx Xxxx.
Xxxxxxx, XX 00000
RE: FRANCHISE LOAN FINANCING
Ladies and Gentlemen:
We refer to the Summary of Terms and Conditions (the "Summary of Terms")
for DavCo Restaurants, Inc., Southern Hospitality Corp. and a Company to be
Formed ("NewCo") (the "Borrowers") attached hereto as Exhibit A. Global
Alliance Finance Company, L.L.C. ( "GAFCo" or the "Lender") is pleased to
confirm, based on the terms and conditions contained herein and in the Summary
of Terms, its commitment to provide Loans in an aggregate principal amount of
$180,000,000.00 (the "Loans") to the Borrowers.
Our Commitment is subject to (i) the preparation, execution and delivery of
legal documentation in form and substance satisfactory to us and our counsel
incorporating the terms set forth herein and in the Summary of Terms, and (ii)
the absence of any material adverse change in the business, property, assets,
liabilities, condition (financial or otherwise), or prospects of the Franchise
or Franchisor referred to herein since the date hereof or the Borrowers and its
respective material subsidiaries and affiliates, taken individually and as a
whole, since the date of the financial statements submitted with the loan
application. FUNDING UNDER THIS COMMITMENT WILL NOT BECOME AVAILABLE UNTIL
SATISFACTORY COMPLETION OF THE NEGOTIATION, EXECUTION AND DELIVERY OF SUCH
DOCUMENTATION, AND THE PRIOR SATISFACTION OF THE CONDITIONS PRECEDENT TO FUNDING
CONTAINED IN SUCH DOCUMENTATION.
In consideration of the issuance of our Commitment, you hereby agree that,
for a period of 120 days following your acceptance of this Commitment, you will
not, directly or indirectly, engage in any discussions or negotiations with any
person with respect to any transaction similar to that described herein, unless
and until this Agreement is terminated by GAFCo or GAFCo fails to fund the Loans
in contravention of its commitment hereunder.
You agree to pay all reasonable costs and expenses (including the
reasonable fees and expenses of our outside counsel and local counsel, the
reasonable fees and expenses of third party consultants retained by us and our
reasonable out-of-pocket expenses) arising in connection with the preparation,
execution and delivery of this letter and the definitive financing agreements
and our due diligence efforts with respect thereto regardless of whether the
Loans closes or the effective date of the definitive financing agreements
occurs. You further agree to indemnify and hold harmless us and each director,
officer, employee and affiliate hereof (each an "indemnified person") in
connection with any losses, claims, damage, liabilities or other expenses to
which we or such indemnified persons may become subject, insofar as such
losses, claims, damages, liabilities (or actions or other proceedings commenced
or threatened in respect thereof) or other expenses arise out of or in any way
relate to or result from the Loans or any other transaction contemplated by this
letter or in any way arise from any use or intended use of this letter or the
proceeds of any of the Loans contemplated by this letter, and you agree to
reimburse us and each indemnified person for any legal or other expenses
incurred in connection with investigating, defending or participating in any
such loss, claim, damage, liability or action or other proceeding (whether or
not we or any such person is a party to any action or proceeding out of which
any such expenses arise), provided that you shall have no obligation hereunder
to indemnify us or any indemnified person for any loss, claim, damage, liability
or expense which resulted from the gross negligence or willful misconduct of
GAFCo or such indemnified person. This letter is furnished for your benefit, and
may not be relied upon by any other person or entity. We shall not be
responsible or liable to you or any other person for consequential damages which
may be alleged as a result of this letter.
The provisions of the immediately preceding paragraph shall survive any
termination of this letter.
GAFCo reserves the right to employ the services of any of its affiliates in
providing the services contemplated by this letter and to allocate, in whole or
in part, to such affiliate certain fees payable to GAFCo in such manner as GAFCo
and such
1 A wholly owned subsidiary of Deutsche Bank North America
affiliate may agree in their sole discretion. You acknowledge that GAFCo may
share with any of its affiliates any information relating to you or the
transaction contemplated by this letter.
In consideration for GAFCo making available the commitment set forth in
this letter, you shall pay to GAFCo, concurrently with your acceptance of this
letter, a portion of commitment fee payable in connection with the credit
facilities contemplated hereby, such portion to be in the amount of $835,000
(such portion of the commitment fee, the "Initial Commitment Fee"). Once paid,
the Initial Commitment Fee shall be deemed to be fully earned and no portion
thereof shall be refundable under any circumstances, except that, if GAFCo shall
determine that it shall not consummate the financing contemplated hereby, GAFCo
shall refund to you the excess, if any, of the Initial Commitment Fee over the
sum of $250,000 plus all of GAFCo's out-of-pocket costs and expenses incurred in
connection with this letter and the transactions contemplated hereby.
If you are in agreement with the foregoing, please sign and return to us
the enclosed copy of this letter. This offer shall terminate at 5:00 P.M., New
York time, on October 23, 1997 unless a signed copy of this letter, together
with your payment of the Initial Commitment Fee, has been delivered to us by
such time. This letter may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument.
You are not authorized to show or circulate this letter or the Summary of
Terms to any other person or entity (other than your legal and financial
advisors and NewCo's legal and financial advisors in connection with your
evaluation hereof) until such time as you have accepted this letter as provided
in the immediately preceding paragraph. If this letter is not accepted by you
as provided in the immediately preceding paragraph, you are directed to
immediately return this letter (and any copies hereof) to the undersigned.
This Commitment shall not be assignable by you and any purported assignment
shall be null and void. This letter and the Summary of Terms shall be governed
by, and construed in accordance with, the laws of the State of New York
We are pleased to be able to extend this Commitment to you and we look
forward to continued work with you on this transaction.
Very truly yours,
GLOBAL ALLIANCE FINANCE COMPANY, L.L.C.
By:_____________________________ By:_____________________________
Name Name:
Title: Title:
AGREED AND ACCEPTED:
DAVCO RESTAURANTS, INC. COMPANY TO BE FORMED ("NEWCO")
--------------------------------
By:_____________________________ By:_____________________________
Name Name:
Title: Title:
SOUTHERN HOSPITALITY CORP.
By:_____________________________
Name
Title:
One executed counterpart of this Commitment letter, accompanied by a check for
the Initial Commitment Fee made payable to Global Alliance Finance Company,
L.L.C. in the amount of $ 835,000.00 must be received by GAFCo no later than
5:00 p.m. New York time, October 23, 1997 addressed to GAFCo, 00 Xxxx 00x
Xxxxxx, XX, XX 00000 Attn.: Xxxxxx XxXxxx, 23d Floor.
2 A wholly owned subsidiary of Deutsche Bank North America
Exhibit A to
Commitment Letter
CONFIDENTIAL
SUMMARY OF TERMS AND
CONDITIONS FOR LOANS
This Summary of Terms and Conditions summarizes the principal terms and
conditions relating to the proposed Loans herein referred to. This Summary of
Terms and Conditions does not purport to summarize all the terms, conditions,
covenants, representations, warranties and other provisions which will be
contained in definitive legal documentation for the financing contemplated
hereby. In all cases, the terms of such definitive legal documentation will
supersede the terms summarized herein.
1. PARTIES
BORROWERS: DavCo Restaurants, Inc.,
Southern Hospitality Corp. and a
Company to be Formed ("NewCo")
GUARANTOR: FriendCo Restaurants, Inc.
FRANCHISE: Wendy's Old Fashion Hamburgers
FRANCHISOR: Wendy's International, Inc.
LENDER: Global Alliance Finance Company, L.L.C.
2. LOAN FACILITIES
LOAN AMOUNTS: See Term Sheets attached as Exhibit C
LOAN FACILITIES: Proceeds of the Loans may only be advanced on the date on
which the conditions to the Loans set forth in the
definitive loan agreement (the "Loan Agreement") are
satisfied or waived by the Lender (the "Closing Date"). No
amount of the Loans once repaid may be reborrowed.
AMORTIZATION: The Loans will be subject to consecutive monthly installment
payments in amounts necessary to fully amortize the Loans on
the terms set forth on Exhibit C.
INTEREST RATE AND
PAYMENT TERMS: The first interest payment under the Loan Agreement will be
payable in advance. Thereafter, interest will be payable
monthly in arrears.
LATE PAYMENT FEE: After the continuance of any payment default for 5
consecutive days, a late payment fee of 5% of any overdue
amount shall be due and payable. In the event that such
non-payment continues for 10 days or more, overdue amounts
shall be subject to the late payment fee outlined above and
in addition shall bear interest at an increased interest
rate as provided in the Loan Agreement.
LOAN FEES: The Borrowers shall pay a commitment fee (the "Commitment
Fee") equal to $2,205,000. The Lender acknowledges that the
Borrowers have heretofore paid $750,000 of the Commitment
Fee, and that the Borrowers shall pay an additional $835,000
(referred to in the Commitment letter as the Initial
Commitment Fee) upon the Borrower's acceptance of the
Commitment Letter, each of which payments shall be credited
against the Commitment Fee. The remainder of the Commitment
Fee shall be payable on the Closing Date. Annexed to this
term sheet is a schedule detailing such Commitment Fee.
If the closing of the Loans contemplated hereby shall not
have occurred by April 1, 1998, the Borrowers shall pay to
the Lender a termination fee of one-half of one percent
(1/2%) of the aggregate principal amount of the Loans
contemplated hereby; provided that, at the request of the
Borrowers, upon the payment of such fee GAFCo shall extend
the commitment to make available the Loan Facilities for an
additional 90 days.
1 A wholly owned subsidiary of Deutsche Bank North America
In addition to the foregoing fees, if prior to the closing
of the Loans contemplated hereby and prior to April 1, 1998,
the Borrowers shall, without the consent of the Lender,
enter into an alternative financing arrangement with one or
more lenders other than the Lender, the Borrowers shall pay
to the Lender a break-up fee of one-half of one percent
(1/2%) of the aggregate principal amount of the Loans
contemplated hereby.
VOLUNTARY
PREPAYMENTS: Loan 1and Loan 2 may be prepaid within the first 12 months,
Loan 3 may be prepaid within the first 24 months following
the Closing Date, and Loans under the Forward Commitment may
be prepaid prior to the date twelve months following the
Closing Date, in each case upon 90 days notice and the
payment of a 1% prepayment penalty of the principal amount
of the Loans. Thereafter, voluntary prepayments of the Loans
shall not be permitted prior to the later of (i) the fifth
anniversary of the Closing Date or (ii) the date that is
half-way between the Closing Date and the Maturity Date.
Thereafter, the Borrowers may, following notice, prepay all
(but not less than all) of the outstanding principal balance
of the Loans on selected prepayment dates and upon the
payment of a yield maintenance-based prepayment penalty.
Loans, the interest rate of which is determined with
reference to LIBOR, may be prepaid only on the last day of
an interest period with respect thereto.
MANDATORY
PREPAYMENTS: The amounts due under the Loans are subject to mandatory
prepayment upon a total loss, constructive total loss or
condemnation of each Restaurant as collateralized under the
Loans.
GUARANTEE: All of the Loans and other obligations under the Loans shall
be fully and unconditionally guaranteed by the Guarantor.
SECURITY: All of the Loans will be secured by a lien on, and perfected
security interest in, all assets of the Borrowers listed on
Exhibit B hereto; provided that each of the Loans and the
Forward Commitment listed on Exhibit C hereto will have a
prior claim to the proceeds of the collateral set forth with
respect to such Loan or Forward Commitment opposite the
appropriate caption "Primary Collateral" on such Exhibit C.
All documentation evidencing the security required pursuant
to the immediately preceding sentence shall be in form and
substance satisfactory to the Lender, and shall effectively
create first priority security interests in the property
covered thereby, with such exceptions as are acceptable to
the Lender in its sole discretion.
CONDITIONS
PRECEDENT: The Loan Agreement will provide for conditions precedent to
the funding of Loans 1, 2 and 3, and for the effectiveness
of the Forward Commitment, typical for these types of
facilities and any other conditions appropriate in the
context of the transaction, but which in any event shall
include (a) the Lender's satisfaction with the terms and
documentation for the merger of NewCo with and into DavCo
Restaurants, Inc. (the "Merger"), and the satisfaction of
all conditions precedent to the Merger, (b) receipt by the
Lender of a solvency letter from a third-party valuation
firm satisfactory to the Lender as to the solvency of the
Borrowers after giving effect to the Merger, the borrowing
of the Loans and the other transactions contemplated hereby,
in form and substance satisfactory to the Lender, (c)
evidence acceptable to the Lender as to the Borrowers'
compliance with and good standing under all of the Franchise
Documents as of the Closing Date, and (d) delivery of
security interest in all material leases and agreements and
other documentation under Exhibit B.. The Lender will
submit a closing memorandum to the Borrowers listing
documents required to be provided by the Borrowers on or
prior to the Closing Date.
The Loans under the Forward Commitment will be available
subject to the satisfaction of such conditions precedent as
are typical for such extensions of credit, including without
limitation satisfaction of the condition set forth on
Exhibit C with respect to the Forward Commitment opposite
the caption "Unit Seasoning Requirements".
REPRESENTATIONS
AND WARRANTIES: The Loan Agreement will provide for representations and
warranties of the Borrowers typical for these types of
facilities and any other representations and warranties
appropriate in the context of the transaction.
2 A wholly owned subsidiary of Deutsche Bank North America
COVENANTS: The Loan Agreement will provide for covenants of the
Borrowers typical for these types of facilities and any
other covenants appropriate in the context of the
transaction including, but not limited to, restrictions on
mergers and asset sales/purchases, debt obligations, liens,
contingent obligations, termination, waivers or amendments
of Franchise Documents; name changes; transactions with
affiliates; distributions and dividends; use of proceeds and
other covenants to be identified upon negotiation of the
documentation.
The Borrowers will also be required to use their best
efforts to cooperate with the Lender in arranging a
securitization of the Loans, including, without limitation,
providing such information to the Lender with respect to the
Borrowers and their respective businesses as the Lender may
reasonably require to include in a placement memorandum to
be prepared in connection with such transaction, to make
officers of the Borrowers available to potential investors
in such transaction, and to coordinate any other financing
transactions with such securitization.
EVENTS OF DEFAULT: The Loan Agreement will provide for Events of Default
typical for these types of facilities and any other
covenants appropriate in the context of the transaction
including Events of Default related to payment defaults,
misrepresentations, covenant defaults; material defaults
under Franchise Documents and other material contracts;
cross-defaults to other material indebtedness; failure to
have perfected liens of purported priority; termination of
Loan Documents or Franchise Documents; bankruptcy; adverse
judgments; abandonment of the Franchise; change of control
of the Borrowers without Lender consent; and other defaults
to be identified upon negotiation of the documentation.
ASSUMPTION: The Loans may be assumed in full, but not in part, subject
to approval by the Lender (and any other required party) of
both the Borrower who is to assume the Loans and the
transaction, and payment of a 1.50% assumption fee of the
principal amount of the Loans and any related costs and
expenses.
APPLICABLE LAW: The Loan Agreement and related and security documents
(collectively, the "Loan Documents") will be governed by the
laws of the State of New York, except that certain security
documents may be governed by the laws of the state where the
collateral is located to the extent necessary to grant the
Lender a perfected security interest.
DOCUMENTATION: The Commitment of the Lender hereunder is subject to the
negotiation and execution of definitive Loan Documents in
form and substance satisfactory to the Lender in its sole
discretion.
COSTS AND EXPENSES: The Borrowers shall pay all closing costs and reimburse the
Lender for all fees and other expenses incurred in
connection with the closing of the Loans (including, but not
limited to all consultant's fees, recording fees and taxes,
lien searches and legal fees). All such costs will be
deducted from the amounts to be drawn by the Borrowers under
the Loans.
3 A wholly owned subsidiary of Deutsche Bank North America
Exhibit B to
Commitment Letter
DESCRIPTION OF SECURITY
The Loans will be secured by a lien on, and perfected security interest in,
all assets of the Borrowers, including, without limitation, all equipment,
inventory, contract rights (other than rights under any contracts to the extent
that such contracts by their terms prohibit the collateral assignment thereof),
accounts, cash and other personal property of the Borrowers and the Borrower's
real property interest (whether leasehold or fee) in the site on which the
Restaurants are located (and all related fixtures, easements and other rights
relating to the site). Such liens and security interests must constitute first
liens on all property related to the Restaurant and all other assets of the
Borrowers; PROVIDED that, in the case of property related to other franchises
owned by the Borrowers, such liens may, in the discretion of the Lender, be
junior and subordinate to any liens granted by the Borrowers to other lenders
who financed such other franchises. The Loans will be cross-collateralized and
cross-defaulted, but certain collateral will be subject to prior application to
certain of the Loans as described in the Term Sheet opposite the caption
"Primary Collateral."
The Lender may, in its discretion, require if the Borrowers leases the site
on which the Restaurant is located, landlord estoppels from the lessor
(containing provisions in form and substance satisfactory to the Lender). A
lenders title insurance policy covering the site will also be required in an
amount and form satisfactory to the Lender.
1 A wholly owned subsidiary of Deutsche Bank North America
Exhibit C to
Commitment Letter
Loan 1
------
LOAN AMOUNT: $20,000,000 for designated locations consisting of 15
Restaurants.
INTEREST RATE: The interest rate will be fixed at closing based upon the
30-year US Treasury Rate plus 325 basis points p.a.
TERM AND
AMORTIZATION: Up to a 20-year term with equal monthly payments sufficient
to amortize the principal balance over the term of the loan.
PRIMARY COLLATERAL: First-fee mortgage on 15 Restaurants. Perfected first
security interest in all of the assets relating to and
including the 15 Restaurants.
Loan 2
------
LOAN AMOUNT: $104,000,000 for designated locations consisting of 124
Restaurants.
INTEREST RATE: The interest rate will be fixed at closing based upon the
10-year US Treasury Rate plus 350 basis points p.a.
TERM AND
AMORTIZATION: Up to a 15-year term with equal monthly payments sufficient
to amortize the principal balance over the term of the loan.
PRIMARY COLLATERAL: Perfected first security interest in all of the assets
relating to and including the 124 Restaurants.
2 A wholly owned subsidiary of Deutsche Bank North America
Exhibit C to
Commitment Letter
Continued
Loan 3
------
LOAN AMOUNT: $26,000,000 for designated locations consisting of 38
Restaurants.
INTEREST RATE: The interest rate will be based upon the one-month LIBOR
plus 350 basis points p.a. Rate setting will be monthly.
If the loan is converted to an amortizing loan within 2
years, the interest rate will be fixed at 10-year US
Treasury plus 350 basis points p.a.
TERM AND
AMORTIZATION: Up to a two- (2-) year term with interest-only monthly
payments during the term of the loan. Principal reduction
will occur upon the sale of Restaurants during life of the
loan. At the end of the two- (2-) year floating period, the
then outstanding principal balance of the loan will be
converted to a 15-year term loan, subject to no material
adverse change in the condition of the Borrowers.
PRIMARY COLLATERAL: First-fee mortgages on any real estate and improvements
owned by the Borrowers under the Restaurants. Perfected
first security interest in all assets of the 38 Restaurants.
LOAN ORIGINATION
FEE: 0.75% due upon execution of this proposal letter (the
"Deposit"), and 0.75% of the loan balance if converted to a
term loan after two (2) years.
Forward Commitment
------------------
TOTAL COMMITMENT
AMOUNT: $30,000,000.
TERM OF
COMMITMENT: Two (2) years.
MULTIPLE DRAW
OPTION: $30,000,000 subject to a maximum of 75% of the business and
realty value of the included newly constructed or acquired
Restaurants, as determined by Deloitte & Touche, LLP.
UNIT SEASONING
REQUIREMENTS: To be eligible for financing, the Restaurants pledged as
collateral for each loan must demonstrate sufficient cash
flow to provide for a minimum combined Fixed Charge Coverage
Ratio of 1.20:1 for each of three consecutive months (not
including the Franchises' opening month).
INTEREST RATE: A fixed-rate to be determined based upon the term of each
loan. The spread for each loan will be subject to change
based on the then prevailing market conditions.
TERM AND
AMORTIZATION: Up to a 15-year term on newly constructed or acquired
Restaurants secured by the equipment and business value, and
up to a 20-year term on newly constructed or acquired
Restaurants secured by real estate and Furniture, Fixtures
& Equipment. The monthly payment for each loan will be
sufficient to amortize the principal balance over the term
of the loan.
PRIMARY COLLATERAL: To be determined prior to the drawing of funds and based
upon the assets of the individual Restaurants to be included
in each financing. In addition, Loans originated under the
Forward Commitment will be cross-collateralized and
cross-defaulted with Loan 1, Loan 2 and Loan 3.
LOAN ORIGINATION
FEE: One time 0.50% of the principal amount of the Total
Commitment Amount to be paid upon Commitment and 1.25% of
each Loan Amount to be paid when funds are drawn.
3 A wholly owned subsidiary of Deutsche Bank North America
