Document:

exv10w2

Exhibit 10.2

CONFIDENTIAL

October 13, 2009

Board of Directors

Rubio’s Restaurants, Inc.

1902 Wright Place, Suite 300

Carlsbad, CA 92008

TO THE MEMBERS OF THE BOARD OF DIRECTORS OF RUBIO’S RESTAURANTS, INC.:

Dear Board Member:

     We are writing to you to outline a proposal by which we would acquire 100% of the outstanding
capital stock of Rubio’s Restaurants, Inc. (“Rubio’s”) for cash consideration of $8.00 per share.
The transaction would be consummated by a group consisting of Alex Meruelo and his affiliates (the
“Meruelo Parties”) and Levine Leichtman Capital Partners IV, L.P. (“LLCP”). We propose to implement
this acquisition by a cash merger in which a wholly-owned subsidiary of a newly formed corporation
(“Newco”) would merge with and into Rubio’s, with Rubio’s as the surviving corporation wholly-owned
by Newco. Following the consummation of the merger, Rubio’s will continue as the surviving
corporation and as a wholly-owned subsidiary of Newco.

     As you may know, the Meruelo Parties currently own approximately 11.7% of Rubio’s common stock
and represents the company’s largest non-institutional shareholder. LLCP, as described in more
detail below, is a Los Angeles based private equity firm which manages approximately $5.0 billion
of investment capital.

     We are confident that our proposal is in the best interests of the shareholders of Rubio’s as
our offer represents:

	 	•	 	a premium of $1.88 per share or 30.7% over the closing price of Rubio’s common
stock on October 12, 2009; and
	 
	 	•	 	a premium of $2.14 per share or 36.5% over the weighted average of the closing
prices of Rubio’s common stock for the six-month period ending October 12, 2009;
and
	 
	 	•	 	a premium of $3.73 per share or 87.4% over the weighted average of the closing
prices of Rubio’s common stock for the twelve-month period ending October 12,
2009;

     Our proposal represents an opportunity for Rubios’s shareholders to realize extraordinary
value for their shares. We believe this offer is superior to any other alternative available to
Rubio’s and its shareholders.

 

 

Following are the key elements of our proposal:

	 	•	 	Compelling Valuation: We are valuing Rubio’s at a substantial premium to the
current market price and recent historical price levels. In addition, the valuation is
particularly compelling given Rubio’s financial performance and other key operating
benchmarks relative to its peer group.
	 
	 	•	 	All Cash Offer: We will acquire all of Rubio’s outstanding common shares for
cash.
	 
	 	•	 	No Financing Condition: There is no third-party financing required because LLCP
and the Meruelo Parties together are providing all the financing necessary to close this
transaction. There are no consents required internally for either LLCP or the Meruelo
Parties to fund the transaction. Attached as Exhibit A is a financing proposal executed by
LLCP and the Meruelo Parties that provides for all of the financing required to consummate
the transaction. The capital invested by LLCP and the Meruelo Parties, together with
available cash at Rubio’s, will be sufficient to close the transaction.
	 
	 	•	 	Ready to Proceed: The Meruelo Parties and LLCP have extensive experience in the
restaurant industry. Based on the due diligence work we and our advisors have already
performed and the resources we have committed, we are in a position to proceed with the
proposed merger on an expedited basis. Only limited confirmatory due diligence remains to
be completed and we will commit resources to complete this diligence work quickly.
Attached as Exhibit B is a proposed form of merger agreement which we would like to discuss
with you and/or a special committee of the Board of Directors at your earliest convenience.
	 
	 	•	 	Attractive Long-Term Solution: Under the proposed transaction, Rubio’s can focus
on long-term value creation rather than the short-term (quarterly) focus and eliminate the
regulatory costs and expenses associated with being a publicly held company. We have a
high regard for Rubio’s management team and believe that the management and employees of
Rubio’s are important to the achievement of future success. We plan to continue to invest
in the people at Rubio’s and anticipate that there will be attractive career opportunities
for employees of Rubio’s. Additionally, customers of Rubio’s will benefit as new capital
will be infused to support the expansion of restaurant locations and product offerings.

     The transaction will require us to make certain binding commitments, defer other projects,
incur substantial additional expenses and deploy significant resources. Before we will make such a
commitment, we ask that you enter into a forty-five (45) day exclusivity agreement in the form
attached as Exhibit C hereto, during which time we will complete our remaining due diligence and
finalize definitive documentation for this transaction.

     Alex Meruelo is the principal shareholder, Chairman and CEO of the Meruelo Group, a minority
owned and operated holding company with vested interests in food services, construction and
engineering, real estate and private equity. In 1986, Alex established La Pizza Loca, a quick
service restaurant catering to the Hispanic community, expanding it to more than

2

 

50 franchised and company owned stores. Real estate development soon followed and the Meruelo
Group now has a diversified portfolio of commercial/retail residential and industrial properties.
In 1999, Alex purchased the first of four construction companies and the Meruelo Group now has a
presence throughout Southern California. Alex is a founding shareholder and director of Commercial
Bank of California, and sits on the board of William Lyon Homes and ExaDigm, Inc.

     Levine Leichtman Capital Partners is a Los Angeles, California-based investment firm that
manages approximately $5.0 billion of institutional investment capital through private equity
partnerships and leveraged loan funds. LLCP is currently making new investments through Levine
Leichtman Capital Partners IV, L.P. Investments in the restaurant industry made by Levine
Leichtman Capital Partners include Quizno’s Corporation, Cici’s Pizza, Beef O’Brady’s and Wetzel’s
Pretzels. LLCP has a strong track record of completing transactions.

     We believe our proposal represents a compelling opportunity to create significant value and is
in the best interests of all of your shareholders. Our offer is compelling and warrants prompt and
thorough consideration by the Board of Directors of Rubio’s. Accordingly, please sign and return
to us the exclusivity agreement attached as Exhibit C hereto by 12.00 p.m. (Pacific Daylight Time)
on October 20, 2009. We look forward to meeting with you as soon as practicable to discuss moving
forward toward the closing of a transaction. This matter has the highest priority for us and we are
committed to work with Rubio’s in every way possible to bring this transaction to fruition.

We look forward to discussing this with you.

Very truly yours,

	 	 	 	 	 	 
	 
	/s/ Alex Meruelo

	 	 	 	/s/ Lauren Leichtman	 
	
 

	 	 	 	 	 
	Alex Meruelo

	 	 	 	Lauren Leichtman	 
	Chairman and Chief Executive Officer

	 	 	 	Chief Executive Officer	 
	Meruelo Group

	 	 	 	Levine Leichtman Capital Partners	 

3exv10w3

Exhibit 10.3

EXCLUSIVITY AGREEMENT

October __, 2009

Ladies and Gentlemen:

     In conjunction with our letter dated October 13, 2009 regarding a possible acquisition
transaction (the “Transaction”) involving Rubio’s Restaurants, Inc. (“Rubio’s”), and in
consideration of the investment of time and expense that will be required by a group consisting of
Alex Meruelo and his affiliates (the “Meruelo Parties”) and Levine Leichtman Capital Partners IV,
L.P. (“LLCP” and, together with the Meruelo Parties, the “Group”) in its evaluation of a possible
Transaction, Rubio’s and the Group agree as follows:

     From the date hereof until the earlier of (i) 5:00 p.m., Los Angeles time, on ___,
2009, and (ii) the date on which a definitive agreement with respect to the Transaction is entered
into (the “Exclusivity Period”), Rubio’s shall not, either directly or indirectly through its
officers, directors, advisors or other representatives, (a) solicit, initiate or encourage the
submission of proposals or offers relating to, (b) respond to any submissions, proposals or offers
relating to (other than to communicate that Rubio’s is not interested in considering such
submissions, proposals or offers at such time), (c) engage in any negotiations or discussions with
any person relating to, or (d) furnish any confidential information that might be useful to any
person in considering, any acquisition, however structured, recapitalization or similar transaction
involving all or any substantial portion of Rubio’s business, securities or assets (an “Alternative
Transaction”). Rubio’s shall promptly provide to the Group notice of the receipt of any
submissions, proposals, offers or inquiries concerning a possible Alternative Transaction made
during the Exclusivity Period.

     This Exclusivity Agreement does not constitute an agreement or understanding between the
parties to enter into the Transaction or any other transaction. The parties acknowledge, however,
that any definitive agreement entered into with respect to the Transaction will contain a “go-shop”
provision allowing Rubio’s and its representatives to solicit and accept competing proposals within
a period of no less than 30 days from the date of such agreement and on other mutually acceptable
terms, subject to the Group’s right to receive a to-be-negotiated “topping fee” in an amount
commensurate with such a go-shop provision. Each member of the Group shall be a third party
beneficiary of the provisions of this Exclusivity Agreement.

 

 

Please acknowledge your agreement and acceptance of the foregoing by signing in the space indicated
below.

Very truly yours,

	 	 	 	 	 	 
	 
	 

	 	 	 	 	 
	Alex Meruelo

	 	 	 	Lauren Leichtman	 
	on behalf of the Meruelo Parties

	 	 	 	on behalf of LLCP	 

Agreed and accepted on October __, 2009 by:

	 	 	 	 	 
	RUBIO’S RESTAURANTS, INC.

 	 	 
	By:  	
 	 	 
	 	Name:  	 	 	 
	 	Title:

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