FIFTH AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIFTH AMENDMENT TO PARTICIPATION AGREEMENT (hereinafter, as it may be
modified, amended or supplemented from time to time, called this "Amendment"),
made and entered into as of August 24, 1999, among (i) AVADO BRANDS, INC.
formerly known as Apple South, Inc., a corporation organized and existing under
the laws of Georgia (herein, together with its successors and assigns permitted
hereunder, called the "Lessee"), (ii) FIRST SECURITY BANK, NATIONAL ASSOCIATION,
a national banking association ("First Security"), not in its individual
capacity except as expressly provided herein, but solely as Owner Trustee under
Apple South Trust No. 97-1 (herein in such capacity, together with its
successors and assigns permitted hereunder, called the "Owner Trustee"), (iii)
STI CREDIT CORPORATION, a Nevada corporation, as assignee of SunTrust Bank,
Atlanta, in its capacity as the holder of the beneficial interest in the trust
estate established under Apple South Trust No. 97-1 (in such capacity as of the
date hereof, the "Holder", and together with its successors and assigns
permitted hereunder, called the "Holders"), (iv) the financial institutions now
parties to the Participation Agreement (as defined below) as Lenders (each
herein in such capacity, together with its successors and assigns permitted
hereunder, called a "Lender" and collectively, the "Lenders"), and (v) SUNTRUST
BANK, ATLANTA, a banking corporation organized and existing under the laws of
Georgia, ("SunTrust"), as collateral agent and administrative agent for the
Lenders and the Holders (in such capacity, the "Administrative Agent").
W I T N E S S E T H
WHEREAS, the Lessee, the Owner Trustee, the Holder, the Lenders and the
Administrative Agent are parties to that certain Participation Agreement, dated
as of September 24, 1997, as amended by the First Amendment to the Participation
Agreement, dated as of March 27, 1998, as amended by the Second Amendment to the
Participation Agreement, dated as of August 14, 1998, as amended by the Third
Amendment to the Participation Agreement, dated as of November 13, 1998, and as
amended by the Fourth Amendment to the Participation Agreement, dated as of
February 22, 1999 (as so amended, the "Participation Agreement");
WHEREAS, the Lessee, the Owner Trustee, the Holder, the Lenders and the
Administrative Agent have agreed to amend the Participation Agreement in certain
respects, as described more particularly below;
NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00), the
foregoing premises, to induce the Holder and the Lenders to amend the
Participation Agreement and to continue to perform their obligations thereunder,
and for other good and valuable consideration, the sufficiency and receipt of
all of which are acknowledged, the Lessee, the Owner Trustee, the Holder, the
Lenders and the Administrative Agent agree as follows:
A. DEFINITIONS
Unless the context otherwise requires, all capitalized terms used herein
and not otherwise defined herein shall have the meanings set forth in Appendix A
to the Participation Agreement for all purposes of this Amendment. The General
Provisions of Appendix A to the Participation Agreement are hereby incorporated
by reference herein.
B. AMENDMENTS:
1. Amendment to Existing Section 3.2: Section 3.2 of the Participation
Agreement is amended by deleting Section 3.2 in its entirety and substituting in
its place the following revised Section 3.2:
SECTION 3.2. Representations and Warranties of the Lessee.
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The Lessee represents and warrants to the other parties to this Agreement
that:
(a) Each of the Lessee and each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to transact business in every jurisdiction
where, by the nature of its business, such qualification is necessary, and has
all corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to so qualify, or obtain such licenses, authorizations, consents or
approvals could not be reasonably expected to have or cause a Material Adverse
Effect.
(b) The execution, delivery and performance by the Lessee of this
Agreement, the Lease and the other Operative Agreements to which it is party and
by each Subsidiary Guarantor of the Subsidiary Guaranty and the other Operative
Agreements to which it is party (i) are within the Lessee's and such Subsidiary
Guarantor's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of or filing with,
any governmental body, agency or official, (iv) do not contravene, or constitute
a default under, any provision of applicable law or regulation or of the
articles of incorporation or by-laws of the Lessee or any Subsidiary Guarantor
or, to the best of the Lessee's knowledge, of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Lessee or any of
its Subsidiaries, and (v) do not result in the creation or imposition of any
Lien on any asset of the Lessee or any of its Subsidiaries.
(c) This Agreement and the Lease constitute valid and binding obligations
of the Lessee enforceable in accordance with their terms, and the Subsidiary
Guaranty and the other Operative Agreements, when executed and delivered in
accordance with this Agreement and the Lease, will constitute valid and binding
obligations of the Lessee, to the extent that it is party thereto, and each
Subsidiary Guarantor, to the extent that it is party thereto, enforceable in
accordance with their respective terms, provided that the enforceability hereof
and thereof is subject in each case to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally.
(d) The audited balance sheet of the Lessee and its Consolidated
Subsidiaries as of the Fiscal Year ended closest to December 31, 1998, and the
related consolidated audited statements of income, shareholders' equity and cash
flows of the Lessee and its Consolidated Subsidiaries for the Fiscal Year then
ended, and the unaudited balance sheet of the Lessee and its Consolidated
Subsidiaries as of the Fiscal Quarter ended closest to March 31, 1999, and the
related consolidated unaudited statements of income, shareholders' equity and
cash flows of the Lessee and its Consolidated Subsidiaries for the Fiscal
Quarter then ended, copies of which have been delivered to each of the Holder
and the Lenders, fairly present, in conformity with GAAP, the financial position
of the Lessee and its Consolidated Subsidiaries as of such dates and the results
of its operations and cash flow for such periods stated; provided, that during
the term of this Agreement after the Fifth Amendment Date, future
representations as to the matters set forth in this sentence shall be deemed to
refer to the most recent financial statements delivered pursuant to Sections
5.1(a) and 5.1(b). Since December 31, 1998, there has been no event, act,
condition or occurrence having or which could be expected to have a Material
Adverse Effect; provided that during the term of this Agreement following the
Fifth Amendment Date, future representations as to matters set forth in this
sentence shall be deemed to refer to the last day of the most recent audited
financial statements delivered by the Lessee pursuant to Section 5.1(a).
(e) There is no action, suit or proceeding pending, or to the knowledge of
the Lessee threatened, against or affecting the Lessee or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official which could have a Material Adverse Effect except as described on
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Schedule 3.2(e), or which in any manner draws into question the validity of, or
could impair the ability of the Lessee or any Subsidiary Guarantor to perform
its obligations under, this Agreement, the Lease, the Subsidiary Guaranty or any
of the other Operative Agreements.
(f) The Lessee and each Subsidiary are in compliance in all material
respects with applicable laws (including, but not limited to, ERISA),
regulations and similar requirements of governmental authorities (including, but
not limited to, PBGC), noncompliance with which could have or cause a Material
Adverse Effect, except where the necessity of such compliance is being contested
in good faith through appropriate proceedings. To the best of the Lessee's
knowledge, (i) the Lessee and each member of the Controlled Group have fulfilled
their respective obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and are in compliance in all material
respects with the presently applicable provisions of ERISA and the Code, and
have not incurred any liability to the PBGC or a Plan under Title IV of ERISA;
and (ii) neither the Lessee nor any member of the Controlled Group is or ever
has been obligated to contribute to any Multiemployer Plan.
(g) There have been filed on behalf of the Lessee and its Subsidiaries all
federal, state and local income, excise, property and other tax returns which
are required to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of the Lessee or any
Subsidiary have been paid, except for amounts that either are immaterial or are
being disputed in good faith and by appropriate proceedings. The charges,
accruals and reserves on the books of the Lessee and its Subsidiaries in respect
of taxes or other governmental charges are, in the opinion of the Lessee,
adequate.
(h) As of the Fifth Amendment Date, the Lessee has no Subsidiaries, except
for the Subsidiaries set forth on Schedule 3.2(h) all of which are Consolidated
Subsidiaries.
(i) Neither the Lessee nor any Subsidiary is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," or a "public
utility," within the meaning of the Public Utility Holding Company Act of 1935,
as amended; or a "public utility" within the meaning of the Federal Power Act,
as amended; or an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended; or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
(j) The Lessee and each of its Subsidiaries owns Properties, or interests
in Properties, sufficient for the conduct of its business; and none of such
Properties is subject to any Lien except as permitted in Section 5.8.
(k) Neither the Lessee nor any of its Subsidiaries is in default under or
with respect to any agreement, instrument or undertaking to which it is a party
or by which it or any of its property is bound which could have or cause a
Material Adverse Effect. No Lease Default has occurred and is continuing.
(l) All written information and, to the best of the Lessee's knowledge, all
other information, heretofore furnished by the Lessee to the Owner Trustee, any
Holder, any Lender or the Administrative Agent for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Lessee to the Owner Trustee, any Holder,
any Lender or the Administrative Agent will be, true, accurate and complete in
every material respect or based on reasonable estimates on the date as of which
such information is stated or certified. The Lessee has disclosed in its
offering circular dated June 2, 1999, a copy of which has been delivered to each
of the Owner Trustee, any Holder, any Lender or the Administrative Agent, or
otherwise in a writing delivered to the Owner Trustee, any Holder, any Lender or
the Administrative Agent, any and all facts which could reasonably be expected
to have or cause a Material Adverse Effect.
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(m) To the best of the Lessee's knowledge, (i) neither the Lessee nor any
Subsidiary is subject to any Environmental Liability which could have or cause a
Material Adverse Effect and neither the Lessee nor any Subsidiary has been
designated as a potentially responsible party under CERCLA or under any state
statute similar to CERCLA; (ii) none of the Properties located in the United
States, owned by either the Lessee or a Subsidiary, has been identified on any
current or proposed (A) National Priorities List under 40 C.F.R. ss. 300, (B)
CERCLIS list or (C) any list arising from a state statute similar to CERCLA;
(iii) to the best of the Lessee's knowledge, no Hazardous Materials have been or
are being used, produced, manufactured, processed, treated, recycled, generated,
stored, disposed of, managed or otherwise handled at, or shipped or transported
to or from the Properties or are otherwise present at, in or under the
Properties, owned or operated by either the Lessee or a Subsidiary, or, to the
best of the knowledge of the Lessee, at or from any adjacent site or facility,
except for Hazardous Materials, such as cleaning solvents, pesticides and other
materials used, produced, manufactured, processed, treated, recycled, generated,
stored, disposed of, managed, or otherwise handled in the ordinary course of
business in compliance with all applicable Environmental Requirements; and (iv)
to the best of the Lessee's knowledge, the Lessee and its Subsidiaries are in
compliance with all Environmental Requirements in connection with the ownership,
use and operation of the Properties and the Lessee's and such Subsidiary's
respective businesses.
(n) All Capital Stock, debentures, bonds, notes and all other securities of
the Lessee and its Subsidiaries presently issued and outstanding are validly and
properly issued in accordance with all applicable laws, including but not
limited to, the "Blue Sky" laws of all applicable states and the federal
securities laws.
(o) Neither the Lessee nor any of its Subsidiaries is engaged principally,
or as one of its important activities, in the business of purchasing or carrying
any Margin Stock, and no part of the proceeds of any Loan will be used to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock, or be used for any purpose which
violates, or which is inconsistent with the provisions of, Regulations T, U or
X.
(p) After giving effect to the execution and delivery of this Agreement,
the Lease and the other Operative Agreements to which it is a party, and the
leasing of the Equipment to Lessee under the Lease, the Lessee will be Solvent.
(q) The Lessee and its Subsidiaries possess to the extent material all
franchises, certificates, licenses, permits and other authorizations from
governmental and political subdivisions or regulatory authorities, and all
patents, trademarks, service marks, trade names, copyrights, franchises,
licenses and other rights that are necessary for ownership, maintenance and
operation of any of their respective material Properties and assets, and neither
the Lessee nor any of its Subsidiaries is in violation of any thereof, which,
individually or in the aggregate, would or might have or cause a Material
Adverse Effect.
(r) The Lessee and each of its Subsidiaries maintains adequate insurance
on, and in respect of the ownership and operation of, its Properties in at least
such amounts and against at least such risks as are usually insured against in
the same general area by companies of established repute engaged in the same or
similar business.
(s) By the Fifth Amendment Date, the Lessee shall have developed and
delivered to the Administrative Agent a comprehensive plan (the "Y2K Plan"),
including milestones ("Y2K Plan Milestones"), to identify whether its and its
Subsidiaries' computer software and hardware systems which materially impact or
affect the business operations of the Lessee and such Subsidiaries will be Year
2000 Compliant and Ready.
(t) The principal place of business and chief executive office of the
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Lessee and the place where the Lessee shall retain its records concerning the
Equipment and all its interest in, to and under all documents relating to the
Trust Estate (i) are located in ▇▇▇▇▇▇ County, Georgia and (ii) have been
located at such address for no less than the six month period immediately
preceding the Closing Date.
(u) The legal name of the Lessee is "Avado Brands, Inc."
(v) Each item of Equipment is personal property and is not, and is not
intended to be, attached to real estate in such manner that any item of
Equipment constitutes or would constitute a fixture.
(w) The Equipment will (i) qualify as property with respect to which the
depreciation deductions provided by Code Section 167(a) are determined pursuant
to Code Section 168 using the applicable depreciation method set forth in Code
Section 168(b)(1) and the applicable convention described in Code Section
168(d)(4); (ii) qualify as "five-year property" within the meaning of Code
Section 168(d)(1); and (iii) have a tax basis equal to one hundred percent
(100%) of Equipment Cost (not taking into account the Transaction Costs).
2. Amendment to Existing Section 5: Section 5 of the Participation
Agreement is amended by deleting Section 5 in its entirety and substituting in
its place the following revised Section 5:
SECTION 5. COVENANTS OF LESSEE:
SECTION 5.1. Information.
The Lessee will deliver to each of the Holder and the Lenders:
(a) As soon as available and in any event within ninety (90) days after the
end of each Fiscal Year, a consolidated balance sheet of the Lessee and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of income, shareholders' equity and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous fiscal year, all certified by independent public accountants of
nationally recognized standing, with such certification to be free of any
material exceptions and qualifications; provided that, the information required
by this paragraph may be satisfied by delivery of information pursuant to
Section 5.1 (e) or Section 5.1.(f);
(b) As soon as available and in any event within fifty (50) days after the
end of each of the first three (3) Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Lessee and its Consolidated Subsidiaries as of
the end of such Fiscal Quarter and the related statement of income and statement
of cash flows for such quarter and for the portion of the Fiscal Year ended at
the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of the
previous Fiscal Year, all certified (subject to normal year-end adjustments) as
to fairness of presentation, GAAP and consistency by the chief financial officer
of the Lessee; provided that the information required by this paragraph may be
satisfied by delivery of information pursuant to Section 5.1(e) or Section
5.1(f);
(c) Simultaneously with the delivery of each set of financial statements
referred to in Sections 5.1(a) and 5.1(b), a certificate, substantially in the
form of Attachment B (a "Compliance Certificate"), of the chief financial
officer of the Lessee (i) setting forth in reasonable detail the calculations
required to establish whether the Lessee was in compliance with the requirements
of Sections 5.4, 5.5, 5.6, 5.7 and 5.19 on the date of such financial statements
and (ii) stating whether any Lease Default exists on the date of such
certificate and, if any Lease Default then exists, setting forth the details
thereof and the action which the Lessee is taking or proposes to take with
respect thereto;
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(d) Promptly (and, in any event, within five (5) Domestic Business Days)
after the Lessee becomes aware of the occurrence of any Lease Default, a
certificate of the chief financial officer of the Lessee setting forth the
details thereof and the action which the Lessee is taking or proposes to take
with respect thereto;
(e) Promptly upon the mailing thereof to the shareholders of the Lessee
generally, copies of all financial statements, reports and proxy statements so
mailed;
(f) Promptly upon the filing thereof, copies of all registration statements
and annual, quarterly or monthly reports which the Lessee shall have filed with
the Securities and Exchange Commission;
(g) If and when any member of the Controlled Group (i) gives or is required
to give notice to the PBGC of any reportable event (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to terminate
or appoint a trustee to administer any Plan, a copy of such notice;
(h) Simultaneously with the delivery of each set of annual and quarterly
financial statements referred to in Section 5.1(a) and Section 5.1(b) until such
time as Lessee is Year 2000 Compliant and Ready, a statement of the chief
executive officer, chief financial officer, or chief technology officer of the
Lessee to the effect that nothing has come to his attention to cause him to
believe that the Y2K Plan Milestones have not been achieved (or cannot be
achieved) in a manner such that the Lessee's and its Subsidiaries' hardware and
software systems will not be Year 2000 Compliant and Ready in accordance with
the Y2K Plan. In addition, if, prior to the delivery date of any such
statements, the Lessee becomes aware of any material deviations from the Y2K
Plan or any Y2K Plan Milestones which would be reasonably likely to cause the
Lessee and its Subsidiaries not to be Year 2000 Compliant and Ready, a statement
of the chief executive officer, chief financial officer, or chief technology
officer of Lessee setting forth the details thereof and the action which the
Lessee is taking or proposes to take with respect thereto shall be delivered to
each of the Holder and the Lenders promptly thereafter; and
(i) From time to time such additional information regarding the financial
position or business of the Lessee and its Subsidiaries as the Administrative
Agent, at the request of any Holder or Lender, may reasonably request.
5.2 Inspection of Property, Books and Records.
The Lessee will keep, and require each Subsidiary to keep, proper books of
record and account in which full, true and correct entries in conformity with
GAAP (or, in the case of any non-domestic Subsidiary, such other accounting
standards, rules, regulations and practices applicable to businesses operating
in the locality in which each such Person operates); and permit, and cause each
Subsidiary to permit, representatives of any Holder or Lender at such Holder or
Lender's expense prior to the occurrence of a Lease Default and at the Lessee's
expense after the occurrence and during the continuance of a Lease Default to
visit and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants. The Lessee agrees to cooperate and
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assist in such visits and inspections in each case at such reasonable times and
as often as may reasonably be desired.
5.3. Y2K.
The Lessee will diligently endeavor to meet the Y2K Plan Milestones such
that all computer hardware and software systems identified as material will be
Year 2000 Compliant and Ready in accordance with the Y2K Plan.
5.4. Adjusted Total Debt/Adjusted Total Capital Ratio.
The Adjusted Total Debt/Adjusted Total Capital Ratio will not at any time
exceed .70:1.0.
5.5. Fixed Charge Coverage Ratio.
Lessee's Fixed Charge Coverage Ratio, measured on a rolling four (4) Fiscal
Quarters' basis as of the end of each Fiscal Quarter, commencing with the Fiscal
Quarter ended closest to June 30, 1999, shall be (i) not less than 1.50:1, for
the Fiscal Quarters ending closest to June 30, 1999, September 30, 1999 and
December 31, 1999, (ii) not less than 1.75:1, for the Fiscal Quarters ending
closest to March 31, 2000, June 30, 2000, September 30, 2000 and December 31,
2000; and (iii) not less than 2.00:1, for each Fiscal Quarter ending thereafter.
5.6. Total Debt/EBITDA Ratio.
The ratio which (i) the Total Debt of the Lessee and its Consolidated
Subsidiaries at the end of any Fiscal Quarter, commencing with the Fiscal
Quarter ended closest to June 30, 1999, bears to (ii) the EBITDA of the Lessee
and its Consolidated Subsidiaries, measured on a rolling four (4) Fiscal
Quarters' basis as of the end of such Fiscal Quarter (the "Total Debt/EBITDA
Ratio"), shall be (i) not more than 4.00:1, for the Fiscal Quarters ending
closest to June 30, 1999, September 30, 1999 and December 31, 1999, (ii) not
more than 3.75:1 for the Fiscal Quarters ending closest to March 31, 2000, June
30, 2000, September 30, 2000 and December 31, 2000 and (iii) not more than
3.50:1 for each Fiscal Quarter ending thereafter. In computing EBITDA in respect
of the foregoing ratio and the ratio set forth in Section 5.7, (a) any asset or
stock dispositions by the Lessee consisting of the sale of a business line,
segment or other group of related stores occurring within a Fiscal Quarter shall
be accounted for by reducing EBITDA by the individual EBITDA attributable to
each store within such group for such Fiscal Quarter and the three (3) preceding
Fiscal Quarters or, in the event that any such store had negative individual
EBITDA for such periods, by increasing EBITDA by the amount of such negative
EBITDA; and (b) any asset or stock acquisitions by the Lessee consisting of the
purchase of a business, line, segment or other group of related stores occurring
within a Fiscal Quarter shall be accounted for by increasing EBITDA by the
individual EBITDA attributable to each store within such group for such Fiscal
Quarter and for the three (3) preceding Fiscal Quarters or, in the event that
any such store had negative individual EBITDA for such periods, by decreasing
EBITDA by the amount of such negative EBITDA; in each instance, on an historical
basis, in a manner which Lessee shall determine, but subject to prior review
with, and approval by, the Administrative Agent.
5.7 Total Senior Debt/EBITDA Ratio.
The ratio which (i) the Total Senior Debt of the Lessee and its
Consolidated Subsidiaries at the end of any Fiscal Quarter, commencing with the
Fiscal Quarter ended closest to June 30, 1999, bears to (ii) EBITDA of the
Lessee and its Consolidated Subsidiaries, measured on a rolling Four Quarters'
basis as of the end of such Fiscal Quarter (adjusted, however, as reflected in
Section 5.6), shall be (i) not more than 3.00:1, for the Fiscal Quarters ending
closest to June 30, 1999, September 30, 1999 and December 31, 1999, (ii) not
more than 2.75:1 for the Fiscal Quarters ending closest to March 31, 2000, June
30, 2000, September 30, 2000 and December 31, 2000 and (iii) not more than
2.50:1, for any Fiscal Quarter ending thereafter.
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5.8. Negative Pledge.
The Lessee will not, nor will the Lessee permit any Subsidiary to, create,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by it, except: (i) those Liens, if any, described on Schedule 5.8, concerning
existing Debt of the Lessee, to be set forth and described more particularly
therein, together with any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any such Lien, provided that such
Debt is not secured by any additional assets, and the amount of such Debt
secured by any such Lien is not increased; (ii) Liens incidental to the conduct
of its business or the ownership of its Properties which (A) do not secure Debt
and (B) do not in the aggregate materially detract from the value of its
Properties or materially impair the use thereof or the operation of its
business, including, without limitation, easements, rights of way, restrictive
covenants, zoning and other similar restrictions on real property; (iii)
materialmen's, mechanics', warehousemen's, carriers', landlords' and other
similar statutory Liens which secure Debt or other obligations that are not past
due, or, if past due are being contested in good faith by the Lessee or the
appropriate Subsidiary by appropriate proceedings; (iv) Liens for taxes not
delinquent or taxes being contested in good faith and by appropriate
proceedings; (v) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation; (vi) deposits to
secure performance of bids, trade contracts, leases, statutory obligations (to
the extent not excepted elsewhere herein); (vii) grants of security and rights
of setoff in deposit accounts, securities and other properties held at banks or
financial institutions to secure the payment or reimbursement under overdraft,
letter of credit, acceptance and other credit facilities; (viii) rights of
setoff, banker's liens and other similar rights arising solely by operation of
law; (ix) Purchase Money Liens, provided that the total amount of all such Debt,
when aggregated with any Debt described in clause (x) below then outstanding,
does not exceed, at any time, in aggregate amount, fifteen percent (15%) of
Tangible Net Worth; (x) Liens on any Properties acquired by Lessee or any
Subsidiary subsequent to June 2, 1999, to the extent that (A) such Liens are
existing at the time of acquisition, (B) the Debt secured thereby is not secured
by any other Properties of Lessee or such Subsidiary except the acquired
Properties, (C) the amount of such Debt so secured thereby is not increased at
or subsequent to the acquisition and (D) the total amount of all such Debt
secured by all such acquired Properties, when aggregated with all purchase money
Debt then outstanding, does not exceed at any time, in aggregate amount, fifteen
percent (15%) of Tangible Net Worth; together with any Lien arising out of the
refinancing, extension, renewal or refunding of any Debt secured by any such
Lien, provided that such Debt is not secured by any additional assets, and the
amount of such Debt secured by any such Lien is not increased; (xi) capital
leases made in the ordinary course of business (but excluding, however,
sale-leaseback transactions in any event) in which there is no provision for
title to the leased Property to pass to the Lessee or such Subsidiary at the
expiration of the lease term or as to which no bargain purchase option exists;
and (xii) rights of lessors in respect of Properties leased to the Lessee or its
Subsidiaries under operating leases.
5.9. Maintenance of Existence.
Except as permitted in Section 5.10 and 5.11, the Lessee shall, and shall
cause each Subsidiary to, maintain its corporate existence and carry on its
business in substantially the same manner and in substantially the same fields
as such business is now carried on and maintained.
5.10. Dissolution.
Neither the Lessee nor any of its Subsidiaries shall suffer or permit
dissolution or liquidation either in whole or in part, except through corporate
reorganization to the extent permitted by Section 5.11.
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5.11. Consolidations, Mergers and Sales of Assets.
The Lessee will not, nor will it permit any Subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or any substantial
part of its assets to, any other Person, or discontinue or eliminate any
business line or segment, provided, however, that, (i) subject at all times to
Section 5.19, the Lessee or any Subsidiary may merge with another Person (which
is not the Lessee or such Subsidiary) if (A) such Person was organized under the
laws of the United States of America or one of its states, (B) the Lessee or
such Subsidiary (as the case may be) is the corporation surviving such merger
and (C) immediately after giving effect to such merger, no Lease Default shall
have occurred and be continuing, (ii) any Subsidiaries of the Lessee may (A)
merge or consolidate with each other or with the Lessee (so long as the Lessee
is the corporation surviving such merger), or (B) sell assets to each other or
to the Lessee and (iii) in connection with acquisitions permitted pursuant to
clause (l) of Section 5.19, the Lessee may cause one or more Subsidiaries formed
for such purpose to merge into acquisition targets in order to consummate such
acquisitions; and, provided, further, that the Lessee may consummate Asset Sales
so long as, unless otherwise approved in writing by the Required Lenders, each
of the following conditions is met: (i) the Asset Sales are to Persons other
than Affiliates, (ii) the Asset Sales are made for cash, (iii) the Net Cash
Proceeds from all such Asset Sales (other than any in respect of Non-Core
Assets) in any one Fiscal Year do not exceed Ten Million Dollars ($10,000,000),
(iv) the proceeds of all such Asset Sales (other than any in respect of Non-Core
Assets) are applied in the manner provided in Section 2.9.2 of the Credit
Agreement, to the extent required thereby, and to the extent not so required, to
make optional prepayments of the Revolving Loans (as defined in the Credit
Agreement) pursuant to Section 2.8 of the Credit Agreement and for working
capital in Lessee's business, but for no other purpose and (v) no Lease Default
has occurred which is then continuing or otherwise would result from such sale
occurring.
5.12. Compliance with Laws; Payment of Taxes.
The Lessee will, and will cause each of its Subsidiaries and each member of
the Controlled Group to, comply in all material respects with applicable laws
(including but not limited to ERISA), regulations and similar requirements of
governmental authorities (including but not limited to PBGC), except where the
necessity of such compliance is being contested in good faith through
appropriate proceedings. The Lessee will, and will cause each of its
Subsidiaries to, pay promptly when due all taxes, assessments governmental
charges, claims for labor, supplies, rent and other obligations which, if
unpaid, might become a Lien against the Property of the Lessee or any
Subsidiary, except liabilities being contested in good faith and against which,
if requested by the Administrative Agent, the Lessee will set up reserves in
accordance with GAAP.
5.13. Insurance.
The Lessee will maintain, and will cause each of its Subsidiaries to
maintain (either in the name of the Lessee or in such Subsidiary's own name),
with financially sound and reputable insurance companies, insurance on, and in
respect of the ownership and operation of, its Properties in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or
similar business.
5.14. Change in Fiscal Year.
The Lessee will not change its Fiscal Year without the consent of the
Required Lenders.
5.15. Maintenance of Property.
The Lessee shall, and shall cause each Subsidiary to, maintain all of its
Properties in good condition, repair and working order, ordinary wear and tear
excepted.
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5.16. Environmental Notices.
The Lessee shall furnish to the Administrative Agent, promptly after the
Lessee becomes aware thereof, written notice of all Environmental Liabilities,
pending, threatened Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders and Environmental Releases, at, on, in, under
or in any way affecting the Properties or any adjacent property and all facts,
events, or conditions that could reasonably be expected to lead to any of the
foregoing.
5.17. Environmental Matters.
The Lessee will not, and will not permit any Third Party to, use, produce,
manufacture, process, treat, recycle, generate, store, dispose of, manage at, or
otherwise handled or ship or transport to or from the Properties any Hazardous
Materials except for Hazardous Materials such as cleaning solvents, pesticides
and other similar materials used, produced, manufactured, processed, treated,
recycled, generated, stored, disposed, managed, or otherwise handled in the
ordinary course of business in compliance with all applicable Environmental
Requirements.
5.18. Environmental Releases.
The Lessee agrees that upon the occurrence of an Environmental Release
(except for any Environmental Release which (x) occurred in compliance with all
Environmental Requirements and (y) could not reasonably be expected to have or
cause a Material Adverse Effect), it will act immediately to investigate the
extent of, and to take appropriate remedial action to eliminate, such
Environmental Release, whether or not ordered or otherwise directed to do so by
any Environmental Authority.
5.19. Investments.
The Lessee will not make (nor will the Lessee permit any Subsidiary to
make) any investment in any Person or Property (which term "investment," for
purposes hereof, shall mean and include, without limitation, the acquisition of
any property, the issuance, acquisition or exchange of any capital stock, debt
or other obligations or security to, from or with any Person, the making of any
loan, advance, extension of credit, credit accommodation, Guarantee or capital
contribution to or on behalf of any Person, and the leasing or subleasing of any
property to any Person, but shall not include the issuance by the Lessee of its
Capital Stock in exchange for cash consideration), provided, however, that,
notwithstanding the foregoing, the Lessee (or any Subsidiary) may, from time to
time, undertake the following, without the necessity of obtaining the Required
Lenders' prior written consent thereto:
(a) Current Assets. Acquire current assets for use in, or arising from, the
sale of goods or services in the ordinary course of its business (including, for
this purpose, but without limitation, credit card receivables);
(b) Capital Expenditures. Make capital expenditures in the ordinary course
of its business;
(c) Franchise Fees. Pay franchisee fees and royalties to its franchisors in
the ordinary course of its business;
(d) Escrow Deposits. Make or maintain escrow deposits for the payment of
taxes, rents, utilities, insurance or like matters in the ordinary course of its
business;
(e) Bank Accounts. Make and maintain deposits of cash in demand deposit
accounts of banks in the ordinary course of its business, and make endorsements
of checks, drafts or other instruments in connection therewith;
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(f) Surplus Cash. Consistent at all times with the Lessee's internal
Statement of Investment Policy, invest surplus cash in (A) obligations of, or
guaranteed by, the United States of America or any agency thereof, (B)
short-term certificates of deposit issued by, and time deposits with, any Lender
or any other financial institution domiciled in the United States of America
with assets of at least $500,000,000, (C) short-term commercial paper rated at
least "A1" by Standard & Poors or "P1" by ▇▇▇▇▇'▇, and (D) fixed or adjustable
rate corporate debt securities with a credit rating of at least double A (Aa/AA)
by either ▇▇▇▇▇'▇ or Standard & Poors, provided that any fixed rate debt
securities have a maturity of one year or less;
(g) Subsidiaries. Have investments in Consolidated Subsidiaries of the
Lessee in the ordinary course of, and pursuant to the reasonable requirements
of, the Lessee's and such Subsidiaries' respective businesses (including,
without limitation, the issuance of Guarantees of the obligations of such
Consolidated Subsidiaries), provided that the aggregate amount of such
investments which may be outstanding at any one time hereafter, as to all such
Subsidiaries, other than any which are Subsidiary Guarantors (as to which no
limitation shall apply), shall not exceed (A) as to the Hops Subsidiaries, the
sum of (1) the aggregate amount thereof which already has been invested and
remains outstanding on the Fifth Amendment Date, or has been committed to be
invested as of the Fifth Amendment Date, as set forth on Schedule 5.19 attached
hereto (without credit for any reductions thereof which may occur subsequent to
the Fifth Amendment Date), plus (2) an additional amount, which shall represent
the maximum amount, in the aggregate, which may be invested in the Hops
Subsidiaries subsequent to the Fifth Amendment Date, not to exceed Two Million
Five Hundred Thousand Dollars ($2,500,000) per annum, measured from the Fifth
Amendment Date, in annual increments (without any rollover from year-to-year);
and (B) as to all Subsidiaries, other than the Hops Subsidiaries and any
Subsidiaries which are Subsidiary Guarantors, an aggregate amount which does not
exceed, when aggregated with all investments (whether or not made in, by or
through Subsidiaries) under clause (j) of this Section 5.19, ten percent (10%)
of the sum of (A) Lessee's Stockholders Equity at any time plus (B) the amount
of the TECONS at such time; it being understood and agreed that there shall be
deducted in any event from the amount of investments in such Subsidiaries which
may be made pursuant to this subclause (B) the aggregate amount of Capitalized
Lease Obligations of all such Subsidiaries which are at any time outstanding, if
and to the extent not already counted against such amount as an investment of
Lessee; i.e., as a Capitalized Lease Obligation owing to Lessee as lessor or
sublessor.
(h) Travel Advances. Make travel and similar advances to employees from
time to time in the ordinary course of business;
(i) Special Life Insurance Program. The Lessee may invest up to Eight
Hundred Fifty Thousand Dollars ($850,000) per Fiscal Year in the making of
annual premiums payable on the split dollar joint survivor life insurance
program implemented, or to be implemented, covering the lives of ▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇. and his spouse ▇▇▇▇ ▇▇▇▇▇▇, with an initial death benefit of Fifty Million
Dollars ($50,000,000), provided, however, that (i) such investments are made
over a period not to exceed ten (10) Fiscal Years and (ii) Lessee maintains at
all times during the effective period of the program a security interest in
policy proceeds and cash values of policies issued as part of the program equal
in amount to not less than its then cumulative premium investments;
(j) Restaurant Concepts. So long as no Lease Default has occurred and is
continuing or would be caused thereby, make investments in restaurant concepts
and joint ventures (including, without limitation, by the issuance of Guarantees
of the obligations of such restaurant concepts and joint ventures), and whether
directly or through one or more Subsidiaries, for the operation of restaurants
so long as the total amount of all such investments at any time (after
subtracting therefrom the amount of cash returns received on any such
investments) does not exceed, when aggregated with all investments in
Subsidiaries described in and permitted under subclause (B) to clause (g) of
this Section 5.19, ten percent (10%) of the sum of (A) Lessee's Stockholders
Equity at any time plus (B) the amount of the TECONS at such time;
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(k) Other Advances. Make loans or advances to Affiliates (excluding
therefrom, however, Subsidiaries), shareholders, directors, officers or
employees in addition to those described in clauses (a) through (j) hereinabove,
in an aggregate amount as to all such loans and advances at any time outstanding
to all such Persons not to exceed Eight Million Dollars ($8,000,000) so long as,
and provided that, (A) no Lease Default has occurred and is continuing or would
be caused thereby, (B) each such loan or advance is repaid in full, not later
than two (2) years from the date of its disbursement and (C) the aforesaid Eight
Million Dollar ($8,000,000) limitation shall be reduced by the amount of such
repayments until such limitation is reduced to Five Million Dollars
($5,000,000);
(l) Acquisitions. Acquire all of the stock or assets of any Person, so long
as (A) the aggregate amount of cash, or value of Property, paid as consideration
in connection with all such acquisitions, and liabilities assumed by the Lessee
or any Subsidiary in connection with all such acquisitions consummated during
any eighteen (18) month period, determined initially for the eighteen (18) month
period commencing on the Fifth Amendment Date and thereafter for each eighteen
(18) month period commencing on the first day of each month thereafter, does not
exceed the lesser of (1) five percent (5%) of consolidated total assets of
Lessee and its Consolidated Subsidiaries and (2) Fifty Million Dollars
($50,000,000), (ii) after giving effect to all such acquisitions, no Lease
Default has occurred and is continuing and (iii) after giving effect to all such
acquisitions, Lessee's and its Consolidated Subsidiaries' total Senior
Debt/EBITDA Ratio and Total Debt/EBITDA Ratio, determined on a pro forma basis
as of the most recently ended Fiscal Quarter of the Lessee for which financial
statements have been delivered to the Holder and the Lenders pursuant to Section
5.1(b), as if such acquisitions had been consummated prior to the date of such
financial statements, shall not exceed 2.50:1.0 and 3.50:1.0, respectively.
In the event that, and to the extent that, as of the Fifth Amendment Date,
any of the terms or conditions set forth in this Section 5.19 (or in Section
5.20 or Section 5.21 below) shall operate to restrict the ability of any
Consolidated Subsidiary to (i) pay dividends or make distributions permitted
under applicable law on any capital stock of such Subsidiary owned by the Lessee
or any other Consolidated Subsidiary, (ii) pay any indebtedness or other
obligation owed to the Lessee or any other Consolidated Subsidiary, (iii) make
loans or advances to the Lessee or any other Consolidated Subsidiary, or (iv)
transfer any of its property or assets to Lessee or any other Consolidated
Subsidiary (the "Subsidiary Activities"), and the imposition of such restriction
on any such Subsidiary Activities pursuant hereto is expressly prohibited under,
or constitutes an event of default under, the terms of the Lessee's existing
indenture for its 9-3/4% senior notes of due June 1, 2006, then, notwithstanding
the foregoing, such Subsidiary Activities shall be permitted.
5.20. Debt.
The Lessee will not incur, assume or suffer to exist any Debt or obligation
under any Guarantee (or permit any Subsidiary to do so), except for: (i) Debt
for Borrowed Money existing on the date of this Agreement and disclosed in the
interim financial statements described in Section 3.2(d); (ii) Debt and
Guarantees incurred pursuant to this Agreement or the other Operative
Agreements; (iii) trade payables and contractual obligations to suppliers and
customers incurred in the ordinary course of business; (iv) accrued pension fund
and other employee benefit plan obligations and liabilities (provided, however,
that such Debt does not result in the existence of any Lease Event of Default or
Lease Default under any other provision of this Agreement); (v) deferred taxes;
(vi) Debt resulting from endorsements of negotiable instruments received in the
ordinary course of its business; (vii) any Debt described in, and permitted
within Section 5.8; (viii) Debt and Guarantees described in and permitted
pursuant to clauses (g) and (j) of Section 5.19; (ix) Debt arising under or in
connection with interest rate protection contracts entered into by the Lessee
with a Bank in the ordinary course of business, and not for speculation; (x) in
the case of the Lessee and Subsidiary Guarantors, Capitalized Lease Obligations;
(xi) other Debt for Borrowed Money in respect of letters of credit issued in
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conjunction with debts, liabilities and obligations arising from time to time in
the ordinary course of, and pursuant to the customary operation of, Lessee's
business; and (xii) the Subordinated Debt.
5.21. Dividends and Distributions.
The Lessee will not, nor will the Lessee permit any Subsidiary to, (i) pay
any cash dividend; (ii) make any capital distribution; (iii) redeem, repurchase
or retire for cash any Capital Stock (except as permitted pursuant to Section
5.24); or (iv) take any other action which would have an effect equivalent to
any of the foregoing (the actions described in the preceding clauses (i) through
(iv) herein called, generally, "Distributions"); provided, however, that,
notwithstanding the foregoing, (A) so long as no Lease Default has occurred and
is continuing or would be caused thereby, the Lessee may pay cash dividends on
its Capital Stock in each Fiscal Year in an aggregate amount not to exceed Three
Million Dollars ($3,000,000) per Fiscal Year during its Fiscal Years ending on
or about December 31, 1999 and December 31, 2000 and Four Million Dollars
($4,000,000) during each Fiscal Year thereafter, (B) each Subsidiary may make
Distributions on any Capital Stock of such Subsidiary owned by the Lessee or
another Consolidated Subsidiary which is a Subsidiary Guarantor and (C) Lessee
may make Distributions on the TECONS.
5.22. Transactions With Affiliates.
The Lessee will not, and will not permit any Subsidiary to enter into, or
be a party to, any transaction with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of its business and upon fair and
reasonable terms and are no less favorable to Lessee or said Subsidiary than
would be obtained in a comparable arm's length transaction with a Person not an
Affiliate.
5.23. Subsidiary Guaranties.
The Lessee shall cause each Consolidated Subsidiary of the Lessee acquired
or coming into existence after the Fifth Amendment Date which is a wholly-owned
Subsidiary, directly or indirectly, of Lessee (excepting therefrom any having
total assets of less than Ten Thousand Dollars ($10,000)), as soon as
practicable after, but in any event within thirty (30) days after, its
acquisition or creation, to execute a Subsidiary Guaranty, together with all
other such documents which the Administrative Agent may reasonably request in
connection therewith, including a secretary's certificate, confirming the
existence of enabling authorization in respect of such Subsidiary Guarantor and
signing officer incumbency, and an opinion of counsel, confirming that such
Subsidiary Guaranty is a valid, binding and enforceable obligation of the
Subsidiary party thereto, subject to customary assumptions, exceptions and
limitations acceptable to Administrative Agent. There shall be excluded from the
foregoing requirements any Consolidated Subsidiary of the Lessee which, as a
result of planned transfers of Capital Stock to store managers, (A) will be a
wholly-owned Subsidiary of the Lessee for a period of not more than ninety (90)
days after its acquisition or creation or (B) becomes a wholly-owned Subsidiary
as a result of the return to the Lessee of, or the cancellation of, any Capital
Stock by any store manager for a period of not more than ninety (90) days after
such return or cancellation occurs; provided, however, that, (i) such
requirements shall apply if such planned transfers are not made during such
period such that such Subsidiary continues to be a wholly-owned Subsidiary at
the expiration of such grace period and (ii) all such Subsidiaries shall be
treated at all times, for purposes of Section 5.19(g), as if such Subsidiaries
were not wholly-owned Subsidiaries. Should any Subsidiary which is otherwise
exempt from this Section 5.23 by reason of (i) such Subsidiary having total
assets of less than Ten Thousand Dollars ($10,000) on the Fifth Amendment Date
or (ii) such Subsidiary which, as a result of planned transfers of Capital Stock
to store managers, will be a wholly owned Subsidiary of the Lessee for a period
of less than ninety (90) days after the Fifth Amendment Date, cease to qualify
for such exemption, the requirements of this Section 5.23 shall likewise apply.
In addition to the foregoing, the Lessee may, at its option, at any time, cause
13
any other Subsidiary to execute a Subsidiary Guaranty, together with all other
such documents as the Administrative Agent may request in connection therewith,
consistent with the foregoing provisions, after which such Subsidiary shall be a
Subsidiary Guarantor for all purposes hereof.
5.24. Stock Purchases, Etc.
The Lessee will not, and will not permit any Consolidated Subsidiary of the
Lessee, to purchase any Capital Stock of the Lessee, whether in a "spot"
transaction, pursuant to an Equity Forward Contract or otherwise, except (i) in
respect of shares of Capital Stock which are subject to Equity Forward Contracts
entered into prior to October 1, 1998 which are pending settlement as of the
Fifth Amendment Date, and (ii) so long as no Lease Default has occurred and is
continuing or would be caused thereby, other purchases of Lessee's Capital Stock
in an aggregate amount not in excess of Five Million Dollars ($5,000,000) during
the term of this Agreement, nor will Lessee enter into, or permit any
Consolidated Subsidiary to enter into, any Equity Forward Contract or amend or
modify any Equity Forward Contract in effect on the Fifth Amendment Date so as
to increase the amount of, or price of, any shares of Capital Stock which are
subject to Equity Forward Contracts pending settlement as of the Fifth Amendment
Date.
5.25. No Prepayment of Senior Notes.
The Lessee will not prepay, and will not permit any Subsidiary to prepay,
the principal amount of any of the Lessee's 9-3/4% Senior Notes, due 2006,
heretofore issued by the Lessee in the aggregate principal amount of
$125,000,000, nor will Lessee repurchase or permit any Subsidiary to repurchase,
such Notes.
5.26. Subordinated Debt.
The Lessee will not, and will not permit any Subsidiary to: (i) make any
payment (whether of principal, interest, premium or otherwise) on any
Subordinated Debt unless and except to the extent, if any, expressly permitted
by the express, written terms of subordination governing such Subordination Debt
as then approved in writing by the Required Lenders; or (ii), in any event, make
any prepayment of any part or all of any Subordinated Debt, or otherwise
repurchase, redeem or retire any instrument evidencing any Subordinated Debt
prior to maturity; or enter into any agreement which could in any way be
construed to amend, modify, alter or terminate any one or more instruments or
agreements evidencing or relating to any Subordinated Debt.
5.27 Change of Chief Executive Office.
No less than 30 days prior to the date upon which the Lessee shall change
its chief executive office (as such term is defined in Article 9 of the Uniform
Commercial Code as in effect in the State of Georgia), principal place of
business or the place where the Lessee shall retain its records concerning the
Equipment and all its interests in, to and under all documents relating to the
Trust Estate from ▇▇▇▇▇▇▇ at Washington, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, then in any
such case the Lessee shall notify the Administrative Agent (on behalf of the
Owner Trustee, the Holders and the Lenders) of the same and of the need to make
additional Uniform Commercial Code filing with respect thereto.
5.28 Lien Searches.
Within 30 days after the Fifth Amendment Date and within 30 days after the
last Commencement Date, the Administrative Agent (on behalf of the Owner
Trustee, the Holders and the Lenders) shall have received Lien searches
regarding the Lessee and the Equipment (including, without limitation, Uniform
Commercial Code searches and similar searches in foreign jurisdictions, Tax Lien
searches and judgment Lien searches) in such jurisdictions as such parties shall
determine in their reasonable discretion, and Lessee shall cause all such Liens
which would materially impair the rights of such parties (as reasonably
14
determined by such parties) to be removed at such time or otherwise handled in a
manner satisfactory to all such parties.
5.29 Classification of Equipment.
At all times during the Term, the Lessee shall cause all Equipment to be
personal property, not fixtures.
5.30 Lien Perfection Filings.
Regarding the Uniform Commercial Code financing statements and other
filings referenced in Section 4.2 of this Agreement relating to any Commencement
Date, the Lessee shall execute and deliver any and all such financing statements
and filings as the Administrative Agent may deem necessary or desirable promptly
and no later than five Business Days after receipt of such financing statements
and filings by the Administrative Agent. The Lessee also hereby authorizes the
Administrative Agent, for the benefit of itself, the Lenders and the Holders, to
file any such financing statements, filings or continuation statements without
the signature of the Lessee to the extent permitted by applicable law, and to
pay all reasonable fees and expenses in connection therewith.
5.31 Allocation of Equipment Cost among the States and Counties.
On each December 31 during the Term, the Lessee shall provide a certificate
to the Administrative Agent on behalf of the Owner Trustee, the Lenders and the
Holders certifying (a) any changes in the allocation of Equipment Cost among the
various States and counties therein referenced in each Certificate of Delivery
and Acceptance and (b) the Lessee shall have made all necessary and appropriate
payment of additional filing taxes and other like charges in connection with the
foregoing. The Lessee shall provide evidence of the same to the Administrative
Agent on each such date.
5.32 UCC Filing Amendments.
The Administrative Agent (at the direction of the Majority In Interest but
at the cost and expense of the Lessee) shall have the option of electing to
amend the Uniform Commercial Code financing statements filed with respect to the
Equipment in a manner determined by the Administrative Agent in its reasonable
discretion (such amendments to be in form and substance satisfactory to the
Majority In Interest) in order to correct or supplement the description of the
property therein or any other information set forth therein. The Lessee hereby
agrees to execute any and all such amendments (as provided by the Administrative
Agent to the Lessee) and to promptly return the same to the Administrative
Agent.
3. Amendment to Appendix A:
Appendix A of the Participation Agreement is amended by adding the
following definition to Appendix A in the proper alphabetical order:
"Adjusted Total Debt" shall mean and include the sum (without duplication)
of the following, at any Fiscal Quarter end, for the Lessee and its Consolidated
Subsidiaries, on a consolidated basis: (i) Total Debt; plus (ii) an amount equal
to seven (7) times the amount of the operating lease payments which were owed by
the Lessee and such Subsidiaries during the period of four (4) Fiscal Quarters
ending on such date.
"Adjusted Total Debt/Adjusted Total Capital Ratio" shall mean the ratio
which (i) the Adjusted Total Debt of the Lessee and its Consolidated
Subsidiaries at any date bears to (ii) the Adjusted Total Capital of the Lessee
and its Consolidated Subsidiaries at such date.
"Adjusted Total Capital" shall be equal to the sum at any date of: (i)
Adjusted Total Debt; plus (ii) Stockholders' Equity plus (iii) the TECONS.
15
"Asset Sale" shall mean the sale by the Lessee or any of its Subsidiaries
of any of their Properties, excluding inventory sold in the ordinary course of
business.
"Debt" of any Person shall mean at any date, without duplication, all items
which in accordance with GAAP would be included in determining total liabilities
of such Person as shown on the liability side of a balance sheet of such Person
as of the date on which such determination is to be made.
"Debt for Borrowed Money" shall mean Debt of any Person for money borrowed
from any Person, including, without limitation, Debt represented by notes
payable or bonds, Debt under any Guarantee and Debt in respect of any letter of
credit; but, excluding, however, the TECONS.
"Domestic Business Day" shall mean any day except a Saturday, Sunday or
other day on which commercial banks are not required to be open for business in
the State of Georgia or the State of Utah.
"EBITDAR" shall mean, for any fiscal period of the Lessee and its
Consolidated Subsidiaries, that amount equal to the sum of EBITDA for such
period plus operating lease expense of Lessee and its Consolidated Subsidiaries
for such period.
"Fifth Amendment Date" shall mean June 22, 1999.
"Hops Subsidiaries" shall mean those Subsidiaries listed on Schedule 1.2
attached hereto plus any Subsidiaries (other than any which are Subsidiary
Guarantors) hereafter created or acquired for the purpose of owning or operating
any "Hops" restaurant or related business.
"Net Cash Proceeds" shall mean the total cash proceeds received by the
Lessee or any Subsidiary from any Asset Sale, less (i) provisions for all taxes
actually paid or payable as a result thereof, (ii) any direct costs incurred by
Lessee or any Subsidiary associated therewith, and (iii) any payments made to
repay any indebtedness or other obligation outstanding at the time of an Asset
Sale that is secured by a Purchase Money Lien on the property or assets sold.
"Non-Core Assets" shall mean those assets so identified on Schedule 1.1.
"Subordinated Debt" shall mean Debt of Lessee incurred on or prior to the
Fifth Amendment Date pursuant to an indenture and other documents satisfactory
in all respects to the Holder and the Lenders, including, without limitation,
with respect to the subordination provisions thereof, the covenants included
therein, the repayment terms thereof and the interest rate payable thereon.
"TECONS" shall mean the Lessee-obligated mandatorily redeemable preferred
securities of Avado Financing I, as in existence on the Fifth Amendment Date.
"Total Debt" shall mean that portion of the Debt of the Lessee and its
Consolidated Subsidiaries at any date equal to the sum (without duplication) of:
(i) all Debt for Borrowed Money at such date (including, for this purpose, Debt
in respect of any outstanding bankers' acceptances); plus (ii) all Capitalized
Lease Obligations outstanding at such date; plus (iii) all Debts, liabilities
and obligations which are Guaranteed by the Lessee or any Consolidated
Subsidiary as of such date; plus (iv) all Debts, liabilities or obligations at
such date to any seller incurred to pay the deferred price of property or
services having a deferred purchase price of One Million Dollars ($1,000,000) or
more, excepting, in any event, trade accounts payable arising in the ordinary
course of business and purchase options prior to their exercise; plus (v) all
Debts, liabilities and obligations outstanding at such date in respect of any
Synthetic Leases; plus (vi) all Debts, liabilities and obligations under any
Equity Forward Contracts, pending settlement.
"Total Debt/EBITDA Ratio" shall have the meaning given to such term in
Section 5.6.
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"Total Senior Debt" shall mean, at any date, Total Debt of Lessee and its
Consolidated Subsidiaries minus the then outstanding principal balance of the
Subordinated Debt.
"Y2K Plan" shall have the meaning set forth in Section 3.2(s).
"Y2K Plan Milestones" shall have the meaning set forth in Section 3.2(s).
"Year 2000 Compliant and Ready" shall mean that (a) the Lessee's and its
operating divisions' and Subsidiaries' computer hardware or software in question
will: (i) handle date information involving any and all dates before, during
and/or after January 1, 2000, including accepting input, providing output and
performing date calculations in whole or in part; (ii) operate, accurately
without interruption on and in respect of any and all dates before, during
and/or after January 1, 2000 and without any change in performance; and (iii)
store and provide date input information without creating any ambiguity as to
the century; provided all other information technology properly exchanges date
data information with it; and (b) the Lessee has developed alternative plans to
ensure business continuity in the event of the failure of any or all of items
(i) through (iii) above.
4. Amendment to Appendix A:
Appendix A of the Participation Agreement is amended by deleting the
definitions of "Compliance Certificate", "Consolidated Net Income", "Credit
Agreement", "EBITDA", "Equity Forward Contract", "Fixed Charge Coverage Ratio",
"GAAP", "Material Adverse Effect", "Purchase Money Liens", "Redeemable Preferred
Stock", "Stockholders' Equity" "Subsidiary Guarantor", "Subsidiary Guaranty",
"Synthetic Lease" and "Tangible Net Worth" in their entirety and replacing such
definitions in Appendix A in the proper alphabetical order:
"Compliance Certificate" shall have the meaning set forth in Section
5.1(c).
"Consolidated Net Income", for any period, shall mean the net income of the
Lessee and its Consolidated Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, excluding, however (without
duplication), (i) any extraordinary items and (ii) any equity interest of the
Lessee or any Consolidated Subsidiary in the unremitted earnings of any Person
which is not a Subsidiary; in each case as likewise determined on a consolidated
basis in accordance with GAAP.
"Credit Agreement" shall mean that certain Credit Agreement dated as of
June 22, 1999, among Lessee, Wachovia Bank, National Association, as
Administrative Agent, BancBoston, N.A., as Syndication Agent, Wachovia
Securities, Inc., as Arranger, BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc., as
Co-Arranger and the other banks and financial institutions that are parties
thereto, as the same may be amended, restated, and supplemented from time to
time, and any loan or credit agreement executed in connection with the
refinancing of all or any substantial portion of the indebtedness outstanding
under such Credit Agreement, as such loan or credit agreement may be amended,
restated, and supplemented from time to time.
"EBITDA" shall mean, for any fiscal period of the Lessee and its
Consolidated Subsidiaries, that amount equal to the sum, determined in
accordance with GAAP, of the Consolidated Net Income of the Lessee and its
Consolidated Subsidiaries for such period (considered without regard to (i) any
extraordinary gains or losses, (ii) any gains or losses arising from the sale of
assets, and (iii) any gains or losses arising from any activities outside the
normal course of Lessee's business operations as conducted on the Fifth
Amendment Date); plus, without duplication, and to the extent deducted from
revenue in determining Consolidated Net Income, depreciation and amortization
expense and any other non-cash charges for such period, interest expense for
such period, and taxes for such period; provided, however, that in computing
EBITDA for the four (4) Fiscal Quarters of Lessee ending closest to June 30,
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1999, September 30, 1999, December 31, 1999 and March 31, 2000, there shall be
added the following sums, respectively, $6,140,000, $2,883,000, $621,000 and
$117,000, respecting certain agreed upon adjustments reflecting improvements in
Lessee's general and administrative expenses.
"Equity Forward Contract" shall mean any contract, whether now or hereafter
existing, whereby the Lessee or any of its Consolidated Subsidiaries agrees,
directly or indirectly, to purchase Capital Stock of the Lessee on any future
date at a fixed price (including any contract, howsoever denominated, having
substantially the same or similar effect or result).
"Fixed Charge Coverage Ratio" shall mean, for any fiscal period, the ratio
which (A) the sum of (i) EBITDAR for such period; plus (ii) the sum (without
duplication) of (a) any dividends paid in respect of Redeemable Preferred Stock
during such period, plus (b) any payments made (howsoever denominated or
construed) in respect of any TECONS in such period, regardless of maturity or
the timing of any redemption or repurchase rights granted in regard thereto (the
sum of (a) and (b) above being called, collectively, "Investment Costs" herein);
bears to (B) the sum (without duplication) of: (i) all Investment Costs; plus
(ii) operating lease expense; plus (iii) interest expense provided, however,
that for the Fiscal Quarters of Lessee ending closest to June 30, 1999,
September 30, 1999, December 31, 1999 and March 31, 2000, interest expense shall
be "annualized," rather than presented historically; that is, computed as
follows: (i) for the Fiscal Quarter ending closest to June 30, 1999, multiply
interest expense for such Fiscal Quarter by four (4); (ii) for the Fiscal
Quarter ending closest to September 30, 1999, add together interest expense for
such Fiscal Quarter and the preceding Fiscal Quarter, divide the sum obtained by
two (2), and multiply the quotient resulting by four (4); (iii) for the Fiscal
Quarter ending closest to December 31, 1999, add together interest expense for
such Fiscal Quarter and the two (2) preceding Fiscal Quarters, divide the sum
obtained by three (3), and multiply the quotient resulting by four (4); and (iv)
for the Fiscal Quarter ending closest to March 31, 2000, add together interest
expense for such Fiscal Quarter and the three (3) preceding Fiscal Quarters,
divide the sum obtained by four (4) and multiply the quotient resulting by four
(4).
"GAAP" shall mean generally accepted accounting principles which, with
respect to Lessee, shall be applied on a basis consistent (except for changes
concurred with by Lessee's independent public accountants or otherwise required
by a change in GAAP) with the then most recent audited consolidated financial
statements of Lessee and its Consolidated Subsidiaries delivered to the
Administrative Agent; provided, however, that upon any change in GAAP material
to Lessee occurring hereafter, the Holders and the Lenders shall have the right
to require either that conforming adjustments be made to any financial covenants
set forth in the Participation Agreement, or the components thereof, affected by
such change or that Lessee report its financial condition based on GAAP as in
effect immediately prior to such change occurring. In determining compliance of
the Lessee with the financial covenants set forth in Section 5.4 through 5.7
hereof, and in making such calculations for any purposes hereunder, there shall
be excluded from the calculations of Consolidated Net Income, depreciation and
amortization expense and operating lease and rent expense any amounts
attributable to ▇▇▇▇▇▇▇▇'▇ Neighborhood Grill & Bar restaurants which were sold
prior to the Fifth Amendment Date.
"Material Adverse Effect" shall mean, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, that
such event or events, act or acts, condition or conditions, and/or occurrence or
occurrences results in a material adverse change in, or has a material adverse
effect upon, any of (a) the financial condition, operations, business, or
properties of Lessee and its Consolidated Subsidiaries taken as a whole, (b) the
rights and remedies of the Owner Trustee, the Holders, the Lenders or the
Administrative Agent under the Operative Agreements, or the ability of the
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Lessee to perform its obligations under the Operative Agreements to which it is
a party, as applicable, (c) the legality, validity or enforceability of this
Agreement, the Lease or any Operative Agreement, (d) the validity, priority or
enforceability of any Lien on or other rights of Lessor or the Administrative
Agent in the Equipment, taken as a whole, created by any of the Operative
Agreements or (vi) the value, utility or useful life of the Equipment or the
use, or ability of Lessee to use, the Equipment, taken as a whole, for the
purpose for which it was intended.
"Purchase Money Liens" shall mean Liens securing the repayment of any Debt
permitted pursuant to Section 5.20 incurred to finance the purchase of any
Property hereafter acquired by the Lessee or any Consolidated Subsidiary, so
long as such Liens are limited solely to the Property so acquired, secure only
the purchase money debt so incurred and are terminated upon payment in full of
such purchase money debt.
"Redeemable Preferred Stock" of any Person shall mean any preferred stock
issued by such Person which is at any time prior to June 22, 2002, either (i)
mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof; but excluding the TECONS.
"Stockholders' Equity" shall mean, at any time, the stockholders' equity of
the Lessee and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Lessee and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding (i) any Redeemable
Preferred Stock of the Lessee or any of its Consolidated Subsidiaries and (ii)
the TECONS; and, pending settlement, any Debts, liabilities or obligations under
any Equity Forward Contracts. Shareholders' Equity generally would include, but
not be limited to (i) the par or stated value of all outstanding Capital Stock,
(ii) capital surplus and (iii) retained earnings, and would reflect various
deductions such as (A) purchases of treasury stock, (B) valuation allowances,
(C) receivables due from an employee stock ownership plan, and (D) employee
stock ownership plan debt Guarantees.
"Subsidiary Guarantor" shall mean any Subsidiary of Lessee which has
executed a Subsidiary Guaranty pursuant to Section 5.23.
"Subsidiary Guaranty" shall mean a guaranty, in substantially the form of
Exhibit A attached hereto, pursuant to which a Subsidiary of Lessee shall
guarantee all debts, liabilities and obligations of the Lessee hereunder, all in
accordance with Section 5.23.
"Synthetic Lease" shall mean any agreement, or series of related
agreements, between the Lessee and one or more other parties which are intended
to be treated, for accounting purposes, as an operating lease with the Lessee as
lessee and, for tax purposes, as a financing arrangement with the Lessee as
debtor.
"Tangible Net Worth" shall mean the difference at any time between (i) the
sum of (A) Stockholders' Equity of the Lessee and its Consolidated Subsidiaries
at such time plus (B) the TECONS and (ii) the sum of all those assets of the
Lessee and its Consolidated Subsidiaries at such time constituting (A) goodwill,
patents, copyrights, trademarks, trade names and other intangible assets, as
determined under GAAP, plus (B) write-ups of any assets occurring subsequent to
December 31, 1998, plus (C) unamortized debt discount and expense, as determined
under GAAP, plus (D) deferred charges, as determined under GAAP, plus (E) any
indebtedness owing to such Person by any Affiliate of such Person.
5. Amendment to Attachment "B". Attachment "B" to the Participation
Agreement is hereby deleted and Attachment "B" attached hereto is substituted
therefor.
6. Amendment to Schedule 3.2(h). Schedule 3.2(h) to the Participation
Agreement is hereby deleted and Schedule 3.2(h)attached hereto is substituted
therefor.
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7. Amendment to Schedule 5.7. Schedule 5.7 to the Participation Agreement
is hereby deleted and Schedule 5.8 attached hereto is substituted therefor.
8. Addition of Schedules. The Participation Agreement is hereby amended by
adding Schedules 1.1, 1.2, 3.2(e) and 5.19 attached hereto as Schedules 1.1,
1.2, 3.2(e) and 5.19 to the Participation Agreement.
C. MISCELLANEOUS
1. Upon the Administrative Agent's receipt of executed signature pages from
all parties to this Amendment, all amendments to the Participation Agreement
made herein shall become effective as of June 22, 1999, unless expressly stated
to become effective as of any other date. Pursuant to Section 10.1 (a) of the
Trust Agreement, the Holder authorizes and request that the Owner Trustee
execute this Amendment.
2. Except as expressly set forth herein, this Amendment shall be deemed not
to waive or modify any provision of the Participation Agreement or the other
Operative Agreements, and all terms of the Participation Agreement, as amended
hereby, and all other Operative Agreements shall be and remain in full force and
effect and shall constitute a legal, valid, binding and enforceable obligations
of the Lessee. All references to the Participation Agreement shall hereinafter
be references to the Participation Agreement as amended by this Amendment. To
the extent any terms and conditions in any of the Operative Agreements shall
contradict or be in conflict with any terms or conditions of the Participation
Agreement, after giving effect to this Amendment, such terms and conditions are
hereby deemed modified and amended accordingly to reflect the terms and
conditions of the Participation Agreement as modified and amended hereby. It is
not intended by the parties that this Amendment constitute, and this Amendment
shall not constitute, a novation or accord and satisfaction.
3. To induce the Owner Trustee, the Holder, the Lenders and the
Administrative Agent to enter into this Amendment (A) Lessee hereby represents
and warrants that the representations and warranties set forth in Section 3.2 of
the Participation Agreement as amended hereby are true and correct, (B) Lessee
hereby restates, ratifies and reaffirms each and every term and condition set
forth in the Participation Agreement, as amended hereby, and in the Operative
Agreements as amended hereby, and in the Operative Agreements, effective as of
the date hereof; and (C) Lessee hereby certifies that no Lease Event of Default
has occurred and is continuing.
4. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF GEORGIA AND ALL APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.
5. This Amendment 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 document.
6. This Amendment shall be binding on, and shall inure to the benefit of,
the successors and assigns of the parties hereto.
7. In the event that any part of this Agreement shall be found to be
illegal or in violation of public policy, or for any reason unenforceable at
law, such finding shall not invalidate any other part thereof.
8. TIME IS OF THE ESSENCE UNDER THIS AGREEMENT.
9. The parties agree that their signatures by telecopy or facsimile shall
be effective and binding upon them as though executed in ink on paper but that
the parties shall exchange original ink signatures promptly following any such
delivery by telecopy or facsimile.
10. Lessee agrees to pay all costs and expenses of Administrative Agent
incurred in connection with the preparation, execution, delivery and enforcement
20
of this Amendment and all other Operative Agreements executed in connection
herewith, including the reasonable fees and out-of-pocket expenses of
Administrative Agent's counsel.
11. This Amendment shall constitute an Operative Agreement for all purposes
of the Participation Agreement and shall be governed accordingly.
[Signatures appear on next page]
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IN WITNESS WHEREOF, the Lessee, the Owner Trustee, the Holder, each
Lender and the Administrative Agent have set their hands as of the day and year
first above written.
"LESSEE"
AVADO BRANDS, INC. formerly known as
Apple South, Inc.
By:_________________________________
Name:
Title:
Attest:_____________________________
Name:
Title:
22
[SIGNATURE PAGE TO FIFTH AMENDMENT TO
PARTICIPATION AGREEMENT]
"OWNER TRUSTEE"
FIRST SECURITY BANK, N.A.
By:_________________________________
Name:____________________________
Title:_____________________________
23
"HOLDER"
STI CREDIT CORPORATION
By:_________________________________
Name:____________________________
Title:_____________________________
24
"LENDERS"
SUNTRUST BANK, ATLANTA, as the
Administrative Agent and as a Lender
By:_________________________________
Name:____________________________
Title:_____________________________
25
BANCBOSTON LEASING, INC.
By:_________________________________
Name:____________________________
Title:_____________________________
26
SOUTHTRUST BANK, N.A.
By:_________________________________
Name:____________________________
Title:_____________________________
27
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 10-K, the Registrant
hereby agrees to furnish supplementally a copy of any ommitted exhibit or
schedule to the Commission upon request.
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