EXHIBIT 10.1
AMENDMENT NO. 2 TO THE CREDIT AGREEMENT
Dated as of September 22, 2004
AMENDMENT NO. 2 TO THE CREDIT AGREEMENT (this "Amendment") referred to
below by and between AVADO BRANDS, INC., a Georgia corporation and
debtor-in-possession in the Chapter 11 Cases ("Avado"), on its own behalf and on
behalf of the other Borrowers, the Lenders parties hereto and DDJ CAPITAL
MANAGEMENT, LLC, as Administrative Agent and Collateral Agent for the Lenders.
PRELIMINARY STATEMENTS:
(1) Avado and certain of Avado's Subsidiaries, each of which is a
debtor-in-possession in the Chapter 11 Cases (as defined in the Credit
Agreement), the Lenders, the Administrative Agent, and the Collateral Agent have
entered into the Post-Petition Credit Agreement, dated as of February 11, 2004
(as amended or otherwise modified by the First Amendment, dated as of March 9,
2004, the Letter Amendment, dated as of April 9, 2004, the Waiver, dated as of
August 26, 2004 (the "Waiver"), and the Extension of Waiver, dated as of
September 10, 2004 (the "Waiver Extension"), the "Credit Agreement").
Capitalized terms used herein and not otherwise defined in this Amendment have
the same meanings as specified in the Credit Agreement.
(2) Pursuant to the Waiver and the Waiver Extension, the Lenders have, on
the terms and conditions stated therein, (i) waived the Event of Default under
Section 11.01(e) of the Credit Agreement with respect to the Borrowers' breach
of Section 10.01 of the Credit Agreement for the measurement periods ending July
25, 2004 and August 22, 2004 (the "Cash Flow Covenant Default") for a period
expiring at 5:00 p.m. (EST) on October 20, 2004; and (ii) waived irrevocably any
Event of Default under Section 11.01(n) of the Credit Agreement arising solely
on account of the closing of Restaurants identified on the Hops DMA and Closing
Analysis dated as of July 25, 2004 or otherwise approved for closing by the
Lenders and the Administrative Agent.
(3) The Borrowers, the Agent and the Lenders have agreed to amend the
Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to the Credit Agreement.
(a) Section 2.05 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
"Section 2.05. Optional Conversion to Exit Facility. So long as no Default
or Event of Default shall have occurred and be continuing at the time the
Conversion Notice is received by the Administrative Agent and following such
date until (and including) the Hearing Date, the Borrowers shall have the option
to convert the Facility to an exit facility, which exit facility will have
substantially similar terms as those provided in this Agreement, including,
without limitation, Articles II, III, and IV (except that the terms set forth in
Sections VII, VIII, IX, X, XI and XIV will be as agreed between the Agents, the
Lenders and the Borrowers in good faith based on the circumstances of the
Borrowers at the time of the Conversion Notice and proposed Hearing Date), would
provide Liens on the assets of the Borrowers substantially similar to those
provided in the Final Order, and would be for a term of 364 days following the
effective date of a consensual plan of reorganization, subject to the approval
of each Lender (which may be withheld in its sole and absolute discretion) and
the prior payment in full of the Conversion Commitment Fee as provided in
Section 4.02. If the Borrowers determine to exercise such option, they shall do
so by giving notice (the "Conversion Notice") to the Administrative Agent at
least sixty (60) days prior to the date established for the confirmation hearing
of such consensual plan of reorganization (the "Hearing Date"). The
Administrative Agent shall notify Avado, on behalf the Borrowers, of each
Lender's agreement (if any) to convert the Facility at least thirty (30) days
prior to the Hearing Date; provided that nothing herein or in such notice shall
be, or be deemed to be, an agreement by the Lenders and the Agents (or any of
them) to consummate an exit facility (or any conversion thereto) other than on
the terms of and subject to the conditions to such exit facility agreed upon by
the Lenders and the Agents with the Borrowers as contemplated under the first
sentence of this Section 2.05 (which terms and conditions shall include, without
limitation, as conditions precedent to the obligations of the Agents and the
Lenders under such exit facility that no Default, Event of Default, Material
Adverse Change or other material adverse change shall have occurred since the
Hearing Date)." This Section 2.05 shall not survive, and, if then in effect,
shall terminate as of the earlier to occur of (x) the payment in full of the
Loans has been made and the Commitments have been irrevocably terminated and (y)
the Commitment Termination Date.
(b) Section 10.01 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
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"Section 10.01. Cash Flow.
(a) The Borrowers shall have Don Pablo's EBITDA for each measurement period
specified below of not less than the amount specified below with respect to each
such measurement period.
Minimum
Measurement Period: Don Pablo's EBITDA
----------------------------------------------------------------------------
Fiscal month ended August 22, 2004 $1,899,000
Two fiscal month period ending September 26, 2004 $4,222,000
----------------------------------------------------------------------------
Measurement Period consisting of the rolling three Minimum
fiscal month period ending: Don Pablo's EBITDA
----------------------------------------------------------------------------
October 24, 2004 $5,758,000
November 21, 2004 $5,729,000
January 2, 2005 $6,942,000
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(b) The Borrowers shall have Hops EBITDA for each measurement period
specified below of not less than the amount specified below with respect to each
such measurement period.
Maximum
Measurement Period: Hops EBITDA Losses
----------------------------------------------------------------------------
Fiscal month ending September 26, 2004 $500,000
Two fiscal month period ending October 24, 2004 $540,000
----------------------------------------------------------------------------
Measurement Period consisting of the rolling three Maximum
fiscal month period ending: Hops EBITDA Losses
----------------------------------------------------------------------------
November 21, 2004 $630,000
January 2, 2005 $85,000
----------------------------------------------------------------------------
(c) The Borrowers shall have G&A EBITDA Expense for each measurement period
specified below of not more than the amount specified below with respect to each
such measurement period.
Maximum
Measurement Period: G&A EBITDA Expense
----------------------------------------------------------------------------
Fiscal month ended August 22, 2004 $1,620,000
Two fiscal month period ending September 26, 2004 $3,597,000
----------------------------------------------------------------------------
Measurement Period consisting of the rolling three Maximum
fiscal month period ending: G&A EBITDA Expense
----------------------------------------------------------------------------
October 24, 2004 $5,300,000
November 21, 2004 $5,311,000
January 2, 2005 $5,600,000
----------------------------------------------------------------------------
(c) Section 10.03 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
"Section 10.03. Repairs and Maintenance/Capital Expenditures.
(a) The Borrowers shall have Repairs and Maintenance/Capital Expenditures
(as defined below) made in ordinary course for each measurement period specified
below of not more than the amount specified below with respect to such
measurement period.
Maximum
Repairs and Maintenance/
Measurement Period: Capital Expenditures
----------------------------------------------------------------------------
Fiscal month ending September 26, 2004 $ 875,000
Two fiscal month period ending October 24, $ 1,574,000
2004
----------------------------------------------------------------------------
Maximum
Measurement Period consisting of the Repairs and Maintenance/
rolling three fiscal month peirod ending: Capital Expenditures
----------------------------------------------------------------------------
November 21, 2004 $2,210,000
January 5, 2005 $3,147,000
----------------------------------------------------------------------------
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Notwithstanding the foregoing, the Borrowers shall not make or commit to
make, or permit any of their Subsidiaries to make, any Repair and
Maintenance/Capital Expenditure (including, without limitation, any lease) that
is not in the ordinary course of such Borrower's business unless the Borrowers
have received the prior written consent of the Lenders, which consent may be
granted or withheld in the sole discretion of the Lenders, provided that the
Borrowers shall not be obligated to obtain the Lenders consent with respect to
any Repair and Maintenance/Capital Expenditure (or any commitment to make and
Repair any Maintenance/Capital Expenditure) outside the ordinary course of
business if such Repair and Maintenance/Capital Expenditure, together with all
other Repair and Maintenance/Capital Expenditures for (or made with respect to)
a single Restaurant does not exceed $15,000.
(b) Nothing in this Section 10.03 is or shall be deemed to constitute the
consent of any Agent or Lender, to any commitment, agreement or other obligation
to make, or the making of, any Repair and Maintenance/Capital Expenditure, with
respect to any project or program, including, without limitation, Hops City
Grill Re-image #2, Hops City Grill Re-image #3, any remodeling of any
restaurants, or the opening of (or any investment related to opening) new
restaurants for which the Borrowers have not received express written consent
from the Lenders. For the avoidance of doubt, acceptance by the Agents and the
Lenders (or any of them) of any budget or forecast that includes any such Repair
and Maintenance/Capital Expenditure shall not be (and shall not be deemed to be)
the consent of the Lenders for any such Repair and Maintenance/Capital
Expenditure. For the further avoidance of doubt, any Capital Expenditure made in
connection with any damage on account of hurricane or other natural phenomenon
is and shall be subject to the restrictions of this Section 10.03(b) of the
Credit Agreement, as amended hereby.
(c) Repairs and Maintenance/Capital Expenditures made in connection with
any damage on account of hurricanes Charley and Xxxxxxx shall not exceed
$320,000 in the aggregate, which shall be in addition to the amount permitted
under Section 10.03(a). Any Repair and Maintenance/Capital Expenditure made in
connection with any damage on account of other hurricanes or other natural
phenomenon is and shall be subject to the restrictions of Section 10.03(b),
unless the Borrower shall have received express written consent from the Lenders
related to such expenditures."
(d) Section 10.04 of the Credit Agreement is hereby amended to add to such
section the following new clauses (c) through (g), which clauses shall read as
follows:
"(c) "Don Pablo's EBITDA" shall mean Consolidated EBITDA attributed to the
Restaurants using or operating under the Don Pablo's name (collectively, the
"Don Pablo's Restaurants"), calculated without allocating any expense to such
Restaurants' EBITDA calculation if such expense is included in G&A EBITDA
Expense or Hops EBITDA, or is otherwise a non-direct restaurant level expense
with respect to the Don Pablo Restaurants that otherwise, under GAAP or past
practice, would not be allocated to the Don Pablo's Restaurants.
(d) "Hops EBITDA" shall mean Consolidated EBITDA attributed to Restaurants
using or operating under the Hops name (collectively, the "Hops Restaurants"),
calculated without allocating any expense to such Restaurants' EBITDA
calculation if such expense is included in G&A EBITDA or Don Pablo's EBITDA, or
is otherwise a non-direct or restaurant level expense with respect to the Hops
Restaurants that otherwise, under GAAP or past practice, would not be allocated
to the Hops Restaurants.
(e) "G&A EBITDA Expense" shall mean the consolidated G&A expenses of the
Borrowers and their Subsidiaries for those expenses (including of the type and
within the category) identified on the "2004 G&A Budget", which budget is
attached as Exhibit A to Amendment No. 2, dated as of September 22, 2004, to
this Agreement. For the avoidance of doubt, "G&A EBITDA Expense" shall be a
reference to the "Avado Consolidated" "Actual / Forecast" figure identified on
such 2004 G&A Budget.
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(f) "Consolidated EBITDA" means the consolidated net income (or loss) of
Avado and its Subsidiaries for such period, determined in accordance with GAAP,
(1) plus, without duplication, the sum of the following amounts of Avado and its
Subsidiaries for such period, determined in each case, in accordance with GAAP,
and solely to the extent such amounts have been deducted in determining such
consolidated net income (or loss) for such period: (A) (i) the gross
consolidated interest expense of Avado and its Subsidiaries (including, without
limitation, interest expense paid to Affiliates of Avado and its Subsidiaries,
and accrued interest expense, if any, in connection with the TECONS), less (ii)
consolidated interest income of Avado and its Subsidiaries for such period, (B)
income tax expense, (C) consolidated depreciation expense, (D) consolidated
amortization expense, (E) restructuring charges, asset revaluation and other
special charges, provided that prior to the closure of a Hops Restaurant or a
Don Pablo's Restaurant, Avado shall provide to the Agents a notice of such
proposed closure, and a store closing analysis and budget containing projected
cash and non-cash closing costs related to such restaurant for the Agents'
approval, it being understood that such approval shall be deemed to be effective
if the Agents have not objected to such closing costs within two Business Days
of the receipt of the notice of proposed closure, and the store closing analysis
and budget, (F) extraordinary (on an after tax basis) or non-recurring losses
not described under any other clause of this clause (1), (G) consolidated net
losses attributable to Dispositions, (H) all other non-cash items (including,
without limitation, the cumulative effect from changes in accounting principles
(on an after tax basis)), (I) Pre-Opening Costs, related to a project, actually
incurred during such period in an amount not to exceed $200,000 per Restaurant
newly opened or reopened on or after the date of this Agreement, (J) items
properly included in the category entitled "Other Income (Expense), Net" in
Avado's financial statements (other than payments made to any limited partner of
any Non-Wholly Owned Subsidiary) that are properly excluded under GAAP from the
operating income of Avado and its Subsidiaries, provided that such items shall
have been disclosed in reasonable detail to the Agents and the Lenders, as part
of the monthly reporting package, and if any such item (or series of related
items) exceeds $15,000, Avado shall have received the prior approval of the
Agents and the Lenders with respect to such item (or series of items), and (K)
the net losses associated with hurricanes Charley and Xxxxxxx relating to (i)
the impact of lost sales due to closed restaurants, (ii) repairs and maintenance
expenses from storm damage and (iii) lost food and beverage inventory due to
power outages or other damage directly attributable to those storms, in each
case consistent with GAAP, as applicable, and the past accounting practices of
Avado and its Subsidiaries, and not, in any event, to exceed $850,000, in the
aggregate; and (2) minus, without duplication, the sum of the following amounts
of Avado and its Subsidiaries for such period, determined, in each case, in
accordance with GAAP, and solely to the extent included in determining such
consolidated net income (or loss) for such period: (W) extraordinary (on an
after tax basis) or non-recurring gains, (X) consolidated net gains attributable
to Dispositions, (Y) items properly included in the category entitled "Other
Income (Expense), Net" in Avado's financial statements (other than payments made
to any limited partner of any Non-Wholly Owned Subsidiary) and which are
properly excluded under GAAP from the operating income of Avado and its
Subsidiaries, provided that such items shall have been disclosed in reasonable
detail to the Agents and the Lenders, as part of the monthly reporting package,
and if any such item (or series of related items) exceeds $15,000, Avado shall
have received the prior approval of the Agents and the Lenders with respect to
such item (or series of items), and (Z) all other non-cash items (including,
without limitation, the cumulative effect from changes in accounting principles
(on an after tax basis)).
(g) "Pre-Opening Costs" means costs accrued by Avado or any of its
Subsidiaries prior to opening a Restaurant, including wages and salaries, hourly
employee recruiting and training, initial license fees, advertising, pre-opening
parties, lease expense, food cost, utilities, meals, lodging, and travel plus
the cost of hiring and training the management teams and excluding, for the
avoidance of any doubt, any re-image of any Hops City Grill; provided that such
costs shall have been disclosed in reasonable detail to the Administrative Agent
and Lenders, the Administrative Agent and the Lenders shall be satisfied that
the opening of such Restaurant and the incurrence of such costs and expenditures
in connection therewith are permitted under this Agreement, and such costs have
been approved by the Administrative Agent and Lenders.
(h) "Repairs and Maintenance/Capital Expenditures" shall mean an amount
equal to the sum of (i) all Capital Expenditures and (ii) all items recorded as
a repair or maintenance expense in accordance with GAAP and past practices of
Avado and its Subsidiaries."
(d) Exhibit H to the Credit Agreement is hereby amended and restated in its
entirety to read as set forth on Exhibit B to this Amendment. SECTION 2. SECTION
2. Waiver of Cash Flow Covenant Default. The Cash Flow Covenant Default is
hereby irrevocably waived as of the date hereof.
SECTION 3. Conditions of Effectiveness. This Amendment shall be effective
upon the first date upon which:
(a) the Administrative Agent shall have received counterparts of this
Amendment executed and delivered by each of the parties hereto
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(b) the Borrowers shall have paid to the Administrative Agent for the
ratable accounts of the Lenders, an amendment fee in the amount of $150,000;
(c) the Administrative Agent shall have received the budgets of the
Borrowers and their Subsidiaries identified in Section 4(f) below, in form and
substance acceptable to it for the period ending January 2, 2005;
(d) the representations and warranties of the Borrowers set forth in
Section 4 below shall be true and correct; and
(e) the Bankruptcy Court shall have approved this Amendment.
SECTION 4. Representations and Warranties of the Borrower. The Borrowers
represent and warrant as follows:
(a) Representations and Warranties. As of the date hereof and the date on
which this Amendment shall first be effective (except where such representation
and warranty expressly relates to a specific date, in which case, as of such
specified date), after giving effect to this Amendment, each of the
representations and warranties contained in Section 6.01 of the Credit Agreement
and in the other Loan Documents is true and complete in all material respects.
(b) No Defaults. As of the date hereof and the date on which this Amendment
shall first be effective, no Default or Event of Default (other than the Cash
Flow Covenant Default) has occurred and is continuing; after giving effect to
this Amendment, no Default or Event of Default has occurred and is continuing,
nor will any Default or Event of Default result from the effectiveness of this
Amendment or the transactions contemplated hereunder.
(c) No Change in Condition. No Material Adverse Change has occurred since
the date of the Borrowing immediately preceding the date of this Amendment.
(d) No Authorizations, Etc. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body or any other third party is required for the due execution and delivery by
the Borrowers of this Amendment.
(e) Due Execution, Etc. This Amendment has been duly executed and delivered
by the Borrowers. The other Loan Documents, as modified hereby, are the legal,
valid and binding obligations of the Borrowers, enforceable against each
Borrower in accordance with their respective terms.
(f) Budget. Attached hereto as Exhibit A is a true and correct copy of each
of (i) the 2004 G&A Budget, (ii) the Hops Forecast for the fiscal year 2004
(iii) the Don Pablo Forecast for the fiscal year 2004, and (iv) the Capital
Expenditure/Repair and Maintenance Budget for fiscal year 2004, each which has
been prepared in accordance with historical past accounting and forecasting
practice. Such Hops Forecast accurately represents the Hops EBITDA. Such Don
Pablo Forecast accurately represents the Don Pablo's EBITDA. All costs and
expenses (including, without limitation, all general and administrative costs
and expenses) of the Borrowers are either (1) accurately represented in the
financial information identified in items (i) through (iv) of the foregoing
sentence and delivered to the Agents and the Lenders hereunder as Exhibit A
hereto, or (2) accurately represented in the Approved Budget in the line items
listed under the heading "Other Non-Operating Disbursements" or "Other
Disbursements" only relating to Alix Partners' fees.
SECTION 5. Reference to and Effect on the Credit Agreement and the other
Loan Documents.
(a) On and after the effectiveness of this Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof' or words of like
import referring to the Credit Agreement, and each reference in the Notes and
each of the other Loan Documents to "the Credit Agreement", "thereunder",
"thereof' or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement, as modified by this Amendment.
(b) The Credit Agreement, the Notes and each of the other Loan Documents,
as specifically modified by this Amendment, are and shall continue to be in full
force and effect and are hereby in all respects ratified and confirmed. Without
limiting the generality of the foregoing, the Collateral described in the Loan
Documents does and shall continue to secure the payment of all Obligations of
the Borrowers under the Loan Documents.
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Lender or any Agent under the Credit Agreement or any other Loan
Document, nor constitute a waiver of any provision of the Credit Agreement or
any other Loan Documents other than as expressly set forth herein.
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SECTION 6. Costs, Expenses. The Borrowers agree, jointly and several, to
pay on demand all costs and expenses of the Agents and the Lenders in connection
with the preparation, execution, delivery and administration, modification and
amendment of this Amendment (including, without limitation, the reasonable fees
and expenses of counsel for the Agents) in accordance with the terms of Section
14.04 of the Credit Agreement.
SECTION 7. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement. Delivery
of an executed counterpart of a signature page to this Amendment by telecopier
shall be effective as delivery of a manually executed counterpart of this
Amendment.
SECTION 8. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of The Commonwealth of Massachusetts.
[Signature page(s) follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AVADO BRANDS, INC., on behalf of itself
and the other Borrowers
By:
------------------------------------------------
Name:
Title:
DDJ CAPITAL MANAGEMENT, LLC, as Administrative Agent
and Collateral Agent
By:
------------------------------------------------
Name:
Title:
LENDERS:
B III-A CAPITAL PARTNERS, L.P.
By: GP III-A, LLC, its General Partner
By: DDJ Capital Management, LLC,
Manager
By:
---------------------------------------------
Name:
Title:
B IV CAPITAL PARTNERS, L.P.
By: GP Capital IV, LLC, its General Partner
By: DDJ Capital Management, LLC,
Manager
By:
---------------------------------------------
Name:
Title:
S-1
GMAM INVESTMENT FUNDS TRUST II - PROMARK
ALTERNATIVE HIGH YIELD BOND FUND
By: DDJ Capital Management, LLC, on behalf of
GMAM Investment Funds Trust II - Promark
Alternative High Yield Bond Fund, in its
capacity as investment manager
By:
---------------------------------------------
Name:
Title:
THE OCTOBER FUND, LIMITED PARTNERSHIP
By: October GP, LLC, its General Partner
By: DDJ Capital Management, LLC, Manager
By:
---------------------------------------------
Name:
Title:
S-2
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
