UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended July 4, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission File Number: 0-19542
AVADO BRANDS, INC.
(Exact name of registrant as specified in its charter)
Georgia 59-2778983
- ---------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Hancock at Washington, Madison, GA 30650
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
706-342-4552
------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
As of August 17, 1999, there were 25,339,342 shares of common stock of the
Registrant outstanding.
<PAGE>
AVADO BRANDS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JULY 4, 1999
INDEX
Part I - Financial Information Page
Item 1 - Consolidated Financial Statements:
Consolidated Statements of Earnings..........................3
Consolidated Balance Sheets..................................4
Consolidated Statements of Shareholders' Equity and
Comprehensive Income.........................................5
Consolidated Statements of Cash Flows........................6
Notes to Consolidated Financial Statements...................7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations...............12
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk.................................................16
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K............................17
Signature ............................................................18
Page 2
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except per share data)
<CAPTION>
Quarter Ended Six Months Ended
- ------------------------------------------------------------------------------------------------------------------------
July 4, June 28, July 4, June 28,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales:
Canyon Cafe $ 11,179 11,882 23,078 23,863
Don Pablo's 84,083 66,416 158,455 125,679
Hops 35,173 25,560 67,705 48,887
McCormick & Schmick's 30,577 25,361 58,382 46,703
Applebee's 3,709 110,624 21,176 236,387
- ------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 164,721 239,843 328,796 481,519
- ------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 47,336 67,380 92,980 134,697
Payroll and benefits 50,346 77,327 101,533 155,975
Depreciation and amortization 4,791 4,184 9,683 8,388
Other operating expenses 38,220 55,899 74,922 112,357
- ------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 140,693 204,790 279,118 411,417
- ------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 9,014 12,281 18,854 25,196
- ------------------------------------------------------------------------------------------------------------------------
Operating income 15,014 22,772 30,824 44,906
- ------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense, net (4,293) (7,214) (9,234) (14,353)
Distributions on preferred securities (2,013) (2,013) (4,025) (4,025)
Gain (loss) on disposal of assets held for sale 920 (2,303) 2,270 46,697
Income (loss) from investments carried at equity (97) 84 (230) 787
Other, primarily goodwill amortization (888) (1,901) (1,860) (3,223)
- ------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (6,371) (13,347) (13,079) 25,883
- ------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of change in accounting principle 8,643 9,425 17,745 70,789
Income taxes 2,675 3,100 5,825 25,925
- ------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
change in accounting principle 5,968 6,325 11,920 44,864
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
principle, net of tax benefit - - - 1,461
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 5,968 6,325 11,920 43,403
========================================================================================================================
Basic earnings per common share:
Basic earnings before cumulative effect of
change in accounting principle $ 0.21 0.17 0.40 1.18
Cumulative effect of change in accounting principle - - - (0.04)
- ------------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.21 0.17 0.40 1.14
========================================================================================================================
Diluted earnings per common share:
Diluted earnings before cumulative effect of
change in accounting principle $ 0.20 0.17 0.39 1.03
Cumulative effect of change in accounting principle - - - (0.03)
- ------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.20 0.17 0.39 1.00
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
July 4, Jan. 3,
1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,121 7,216
Short-term investments - 27
Accounts receivable 7,754 9,124
Inventories 9,167 8,599
Prepaid expenses and other 11,811 3,205
Assets held for sale 2,339 72,814
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 32,192 100,985
Premises and equipment, net 398,878 367,587
Goodwill, net 136,309 138,005
Investments in and advances to unconsolidated affiliates 17,505 16,106
Other assets 46,061 47,914
- ------------------------------------------------------------------------------------------------------------------------------------
$ 630,945 670,597
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 33,285 28,474
Accrued liabilities 30,821 42,053
Current installments of long-term debt 22 140,500
Income taxes 29,519 28,091
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 93,647 239,118
Long-term debt 286,509 116,978
Deferred income taxes 8,200 8,200
Other long-term liabilities 7,883 8,177
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 396,239 372,473
- ------------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities
of Avado Financing I, a subsidiary holding solely Avado
Brands, Inc. 7% convertible subordinated debentures
due March 1, 2027 115,000 115,000
Temporary equity, net - 71,095
Shareholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares;
none issued - -
Common stock, $0.01 par value. Authorized 75,000,000 shares;
40,478,760 issued in 1999 and 1998 405 405
Additional paid-in capital 144,941 63,431
Retained earnings 173,516 162,411
Accumulated other comprehensive income (491) 24
Treasury stock at cost; 15,139,418 shares in 1999 and 8,910,174
shares in 1998 (198,665) (114,242)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 119,706 112,029
- ------------------------------------------------------------------------------------------------------------------------------------
$ 630,945 670,597
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
(Unaudited)
(In thousands, except per share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other Total
Common Stock Paid-in Retained Comprehensive Treasury Shareholders'
Shares Amount Capital Earnings Income Stock Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 3, 1999 40,479 $405 $63,431 $162,411 $24 ($114,242) $112,029
Comprehensive income:
Net earnings - - - 5,952 - - 5,952
Foreign currency translation adjustment - - - - (341) - (341)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - 5,952 (341) - 5,611
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock - - - - - (32,435) (32,435)
Common stock issued to ESOP and ESPP - - (264) - - 849 585
Settlement of equity forward contracts - - 31,421 - - - 31,421
Cash dividends ($0.0125 per share) - - - (378) - - (378)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at April 4, 1999 40,479 405 94,588 167,985 (317) (145,828) 116,833
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings - - - 5,968 - - 5,968
Foreign currency translation adjustment - - - - (174) - (174)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - 5,968 (174) - 5,794
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock - - - - - (52,902) (52,902)
Common stock issued to ESOP and ESPP - - (35) - - 65 30
Settlement of equity forward contracts - - 50,388 - - - 50,388
Cash dividends ($0.015 per share) - - - (437) - - (437)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at July 4, 1999 40,479 $405 $144,941 $173,516 ($491) ($198,665) $119,706
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>
Avado Brands, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<CAPTION>
Six Months Ended
- ---------------------------------------------------------------------------------------------------------------------
July 4, June 28,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 11,920 43,403
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 12,555 12,051
Deferred income taxes - 2,469
Gain on disposal of assets (2,270) (46,697)
Loss (income) from investments carried at equity 230 (787)
(Increase) decrease in assets:
Accounts receivable 1,366 (5,703)
Inventories (1,395) (995)
Prepaid expenses and other (8,949) (4,124)
Increase (decrease) in liabilities:
Accounts payable 4,519 5,524
Accrued liabilities (12,348) (98)
Income taxes 1,428 16,043
Other long-term liabilities (294) 954
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 6,762 22,040
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (45,928) (74,078)
Acquisition of businesses, net of cash acquired - (2,325)
Proceeds from disposal of assets, net 85,445 101,420
Decrease in short-term investments 27 10
Investments in and advances to unconsolidated affiliates (2,144) (9,518)
Additions to other assets (778) (9,769)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 36,622 5,740
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from (repayment of) revolving credit agreements (69,487) 4,765
Proceeds from issuance of long-term debt, net 95,467 -
Principal payments on long-term debt (21) -
Dividends declared and paid (815) (911)
Purchase of treasury stock (85,337) (30,431)
Net collateral payments on equity forward contracts 10,714 -
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (49,479) (26,577)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (6,095) 1,203
Cash and cash equivalents at the beginning of the period 7,216 2,503
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period $ 1,121 3,706
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
AVADO BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 4, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for annual financial statement
reporting purposes. However, there has been no material change in the
information disclosed in the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended January 3, 1999, except
as disclosed herein. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, considered necessary for a fair presentation
have been included. Operating results for the six-month period ended July 4,
1999 are not necessarily indicative of the results that may be expected for the
year ending January 2, 2000.
NOTE 2 - ASSET DIVESTITURES
In 1999, the Company completed the divestiture of its 279 Applebee's
restaurants, including the divestiture of 21 restaurants for proceeds of $35.1
million completed during the first quarter and the divestiture of the final 25
locations for proceeds of $43.8 million completed during the second quarter.
Gross proceeds related to the Applebee's divestiture were $514.0 million
including $10.9 million in notes outstanding at July 4, 1999.
NOTE 3 - LONG-TERM DEBT
In June 1999, the Company completed the private placement of $100 million of
11.75% senior subordinated notes due June 15, 2009. The notes were priced at
98.561 to yield 12.0%. Subsequent to July 4, 1999, the notes were registered
under the Securities Act of 1933. Simultaneously with the notes offering, a new,
three-year $125 million bank revolving credit facility was executed. The
Company's existing credit facilities were refinanced with proceeds from the
notes offering and the new credit facility. At July 4, 1999, approximately $56
million was available under revolving credit agreements.
NOTE 4 - SHAREHOLDERS' EQUITY
Cash dividends declared and paid in the quarter ended July 4, 1999 totaled
$0.015 per share. On August 4, 1999, the Company declared a cash dividend of
$0.015 per share, payable on August 31, 1999 to shareholders of record on August
16, 1999.
In 1998, third parties purchased a total of 8.3 million shares of the Company's
common stock at an average price per share of $13.36 (or a total acquisition
cost of $110.9 million) pursuant to four equity forward contracts. One of these
contracts for 2.0 million shares was settled in December 1998, and the Company
acquired the related shares for $29.9 million. An additional contract for 2.5
million shares was settled in March 1999, and the Company acquired the related
Page 7
<PAGE>
shares for $32.4 million. During the second quarter of 1999, the Company settled
its two final equity forward contracts and acquired the related 3.8 million
shares for $52.9 million.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
For the six-month periods ended July 4, 1999 and June 28, 1998, the following
supplements the consolidated statements of cash flows (amounts in thousands):
1999 1998
------------------------
Interest paid (net of amounts capitalized) $ 9,313 14,580
Distributions paid on preferred securities $ 4,025 4,025
Income taxes paid $ 4,397 6,660
Net cash used for acquisitions $ - 2,325
As discussed in Note 2, during the first six months of 1999 the Company sold 46
Applebee's restaurants. The accompanying consolidated balance sheet reflects
changes in asset and liability accounts related to the divestiture of these
restaurants as follows: decrease in assets held for sale of $68.7 million,
decreases in assets not classified as held for sale of $6.2 million and
increases in accrued liabilities of $0.5 million.
NOTE 6 - INCOME TAXES
Income tax expense as a percent of earnings before income taxes was 32.8% in the
first six months of 1999 compared to 36.6% in the corresponding period of 1998.
Income tax reflects, for each period, taxes on the gain on disposal of assets
held for sale provided at 38.0%. Taxes on continuing operations were provided at
32.1% in 1999 compared to 34.0% in 1998. The lower tax rate on 1999 continuing
operations primarily reflects an increase in the impact of FICA tip credits and
permanent tax planning strategies to reduce state income taxes.
NOTE 7 - CONTINGENCIES
During 1997, two lawsuits were filed by persons seeking to represent a class of
shareholders of the Company who purchased shares of the Company's common stock
between May 26, 1995 and September 24, 1996. Each plaintiff named the Company
and certain of its officers and directors as defendants. The complaints alleged
acts of fraudulent misrepresentation by the defendants which induced the
plaintiffs to purchase the Company's common stock and alleged illegal insider
trading by certain of the defendants, each of which allegedly resulted in losses
to the plaintiffs and similarly situated shareholders of the Company. The
complaints each sought damages and other relief. During 1998, one of these suits
was dismissed. Although the ultimate outcome of the remaining lawsuit cannot be
determined at this time, the Company believes that the allegations therein are
without merit and intends to vigorously defend itself.
NOTE 8 - GUARANTOR SUBSIDIARIES
The Company's senior notes and revolving credit facilities are fully and
unconditionally guaranteed on a joint and several basis by substantially all of
its wholly owned subsidiaries. The Company's indebtedness is not guaranteed by
its non-wholly owned subsidiaries. These non-guarantor subsidiaries primarily
Page 8
<PAGE>
include certain partnerships of which the Company is typically a 90% owner. At
July 4, 1999 and January 3, 1999, these partnerships in the non-guarantor
subsidiaries operated 44 and 36, respectively, of the Company's restaurants.
Accordingly, condensed consolidated balance sheets as of July 4, 1999 and
January 3, 1999, and condensed consolidated statements of earnings and cash
flows for the six-month periods ended July 4, 1999 and June 28, 1998 are
provided for such guarantor and non-guarantor subsidiaries. Separate financial
statements and other disclosures concerning the guarantor and non-guarantor
subsidiaries are not presented because management has determined that they are
not material to investors. There are no contractual restrictions on the ability
of the guarantor subsidiaries to make distributions to the Company.
<TABLE>
Condensed Consolidated Statement of Earnings
Six Months Ended July 4, 1999
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales $ 277,940 50,856 - 328,796
Restaurant operating expenses 234,536 44,582 - 279,118
General and administrative expenses 16,328 2,526 - 18,854
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 27,076 3,748 - 30,824
- ----------------------------------------------------------------------------------------------------------------------------
Other income (expense) (11,470) (1,609) - (13,079)
Earnings before income taxes 15,606 2,139 - 17,745
Income taxes 5,150 675 - 5,825
============================================================================================================================
Net earnings $ 10,456 1,464 - 11,920
============================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Statement of Earnings
Six Months Ended June 28, 1998
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales $ 446,660 34,859 - 481,519
Restaurant operating expenses 381,707 29,710 - 411,417
General and administrative expenses 23,529 1,667 - 25,196
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 41,424 3,482 - 44,906
- ----------------------------------------------------------------------------------------------------------------------------
Other income (expense) 26,522 (639) - 25,883
Earnings before income taxes and cumulative effect
of change in accounting principle 67,946 2,843 - 70,789
Income taxes 24,950 975 - 25,925
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in
accounting principle 42,996 1,868 - 44,864
Cumulative effect of change in accounting principle,
net of tax benefit 1,461 - - 1,461
============================================================================================================================
Net earnings $ 41,535 1,868 - 43,403
============================================================================================================================
</TABLE>
Page 9
<PAGE>
<TABLE>
Condensed Consolidated Balance Sheet
July 4, 1999
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 30,532 1,660 - 32,192
Premises and equipment, net 335,506 63,372 - 398,878
Goodwill, net 114,541 21,768 - 136,309
Investments carried at equity 17,505 - - 17,505
Other assets 45,239 822 - 46,061
Intercompany investments 47,687 - (47,687) -
Intercompany advances 35,882 - (35,882) -
============================================================================================================================
$ 626,892 87,622 (83,569) 630,945
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 89,948 3,699 - 93,647
Long-term liabilities 302,238 354 - 302,592
Intercompany payables - 35,882 (35,882) -
Convertible preferred securities 115,000 - - 115,000
Shareholders' equity 119,706 47,687 (47,687) 119,706
============================================================================================================================
$ 626,892 87,622 (83,569) 630,945
============================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Balance Sheet
January 3, 1999
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 99,129 1,856 - 100,985
Premises and equipment, net 309,919 57,668 - 367,587
Goodwill, net 116,014 21,991 - 138,005
Investments carried at equity 16,106 - - 16,106
Other assets 47,588 326 - 47,914
Intercompany investments 44,699 - (44,699) -
Intercompany advances 33,103 - (33,103) -
============================================================================================================================
$ 666,558 81,841 (77,802) 670,597
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 235,497 3,621 - 239,118
Long-term liabilities 132,937 418 - 133,355
Intercompany payables - 33,103 (33,103) -
Convertible preferred securities 115,000 - - 115,000
Temporary equity, net 71,095 - - 71,095
Shareholders' equity 112,029 44,699 (44,699) 112,029
============================================================================================================================
$ 666,558 81,841 (77,802) 670,597
============================================================================================================================
</TABLE>
Page 10
<PAGE>
<TABLE>
Condensed Consolidated Statement of Cash Flows
Six Months Ended July 4, 1999
(In thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 1,225 5,537 - 6,762
Cash flows from investing activities:
Capital expenditures (38,120) (7,808) - (45,928)
Proceeds from disposal of assets, net 85,445 - - 85,445
Other investing activities (2,399) (496) - (2,895)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 44,926 (8,304) - 36,622
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from (repayment of) revolving
credit agreements (69,487) - - (69,487)
Proceeds from issuance of long-term debt, net 95,467 - - 95,467
Purchase of treasury stock (85,337) - - (85,337)
Proceeds from (payment of) intercompany advances (2,779) 2,779 - -
Other financing activities 9,878 - - 9,878
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (52,258) 2,779 - (49,479)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (6,107) 12 - (6,095)
Cash and cash equivalents at the beginning of the period 7,162 54 - 7,216
=========================================================================================================================
Cash and cash equivalents at the end of the period $ 1,055 66 - 1,121
=========================================================================================================================
</TABLE>
<TABLE>
Condensed Consolidated Statement of Cash Flows
Six Months Ended June 28, 1998
(In thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 19,062 2,978 - 22,040
Cash flows from investing activities:
Capital expenditures (62,490) (11,588) - (74,078)
Proceeds from disposal of assets, net 101,420 - - 101,420
Other investing activities (19,973) (1,629) - (21,602)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 18,957 (13,217) - 5,740
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from (repayment of) revolving
credit agreements 4,765 - - 4,765
Purchase of treasury stock (30,431) - - (30,431)
Proceeds from (payment of) intercompany advances (10,252) 10,252 - -
Other financing activities (911) - - (911)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (36,829) 10,252 - (26,577)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,190 13 - 1,203
Cash and cash equivalents at the beginning of the period 2,471 32 - 2,503
=========================================================================================================================
Cash and cash equivalents at the end of the period $ 3,661 45 - 3,706
=========================================================================================================================
</TABLE>
Page 11
<PAGE>
Item 2.
AVADO BRANDS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Second Quarter and Six Months Ended July 4, 1999
Consolidated Overview
In 1999, the Company completed the divestiture of its 279 Applebee's
restaurants, including the divestiture of 21 restaurants for proceeds of $35.1
million completed during the first quarter and the divestiture of the final 25
locations for proceeds of $43.8 million completed during the second quarter.
Gross proceeds related to the Applebee's divestiture were $514.0 million
including $10.9 million in notes outstanding at July 4, 1999.
Consolidated restaurant sales for the second quarter and six months ended July
4, 1999 were $164.7 million and $328.8 million, respectively, compared to $239.8
million and $481.5 million for the same respective periods of 1998. The sales
decrease reflects fewer units in the Applebee's brand which comprised 6% of
revenues in the first six months of 1999 compared to 49% in the first six months
of 1998. Restaurant operating expenses for the first six months of 1999
decreased to 84.9% of sales compared to 85.4% for the corresponding period of
1998. The decrease was primarily a result of a decrease in payroll and benefits
generated by the declining impact of increased payroll and benefits incurred at
Applebee's during 1998 and 1999 as a result of performance-based, pay-to-stay
bonus programs implemented to control management turnover and operating costs
during the divestiture period. This decrease was partially offset by an increase
in depreciation and amortization due primarily to a decrease in the impact of
Applebee's fixed assets which were not depreciated due to their "held for sale"
status.
Core Brands
During the first six months of 1999, the Company opened 24 "Core" brand
restaurants including 13 opened during the second quarter. Core brands include
Canyon Cafe, Don Pablo's, Hops and McCormick & Schmick's. In addition, the
Company has opened one restaurant with each of its joint venture partners Belgo
Group PLC and PizzaExpress PLC and closed five core brand restaurants during
1999. The following table presents core brand restaurants open as of the end of
the second quarters of 1999 and 1998:
1999 1998
----------------------------------------------------------------------------
Canyon Cafe 17 17
Don Pablo's 137 110
Hops 55 39
McCormick & Schmick's 22 21
============================================================================
Total 231 187
============================================================================
Page 12
<PAGE>
The following table sets forth the percentages which certain items of income and
expense bear to total restaurant sales for the quarter and six-month periods
ended July 4, 1999 and June 28, 1998 on a pro forma basis (assuming sale of the
Applebee's brand was completed by December 28, 1997):
<TABLE>
Core Brands:
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pro Forma Pro Forma Pro Forma Pro Forma
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
July 4, 1999 June 28, 1998 July 4, 1998 June 28,1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales:
Canyon Cafe 6.9% 9.2% 7.5% 9.7%
Don Pablo's 52.2% 51.4% 51.5% 51.3%
Hops 21.8% 19.8% 22.0% 19.9%
McCormick & Schmick's 19.0% 19.6% 19.0% 19.1%
- --------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 100.0% 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 28.8% 27.9% 28.3% 28.0%
Payroll and benefits 30.5% 30.1% 30.6% 30.2%
Depreciation and amortization 3.0% 3.2% 3.1% 3.4%
Other operating expenses 23.5% 23.0% 23.0% 23.0%
- --------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 85.7% 84.2% 85.1% 84.6%
- --------------------------------------------------------------------------------------------------------------------------
Income from restaurant operations 14.3% 15.8% 14.9% 15.4%
General and administrative expenses 5.6% 6.9% 5.9% 7.3%
==========================================================================================================================
Operating income 8.7% 8.9% 9.0% 8.1%
==========================================================================================================================
</TABLE>
Core brand restaurant sales for the second quarter and six-month period ended
July 4, 1999 increased by 25% over the results of the comparable, prior-year
periods. Increased core brand revenues were primarily attributable to sales from
59 restaurants opened in 1998 and 24 more restaurants in 1999. Sales increases
attributable to new restaurant openings were somewhat offset by the closing of
five core brand restaurants during 1999. On a consolidated core brand basis,
same-store sales for the second quarter of 1999 were 1% positive compared to the
same period of 1998 (same-store-sales comparisons include all restaurants open
for 18 months as of the beginning of the quarter).
Core brand restaurant operating expenses for the second quarter of 1999
increased to 85.7% of sales compared to 84.2% in the corresponding period of the
prior year. The increase was primarily attributable to (i) a 0.9% increase in
food and beverage expenses primarily generated by higher cost menu items
associated with a new Don Pablo's summer promotional menu which began in June,
(ii) a 0.4% increase in payroll and benefit costs also associated primarily with
Don Pablo's summer promotional menu, and (iii) a 0.5% increase in other
operating expenses primarily attributable to an increase in preopening expenses.
General and administrative expenses for the pro forma quarter ended July 4, 1999
decreased to 5.6% from 6.9% in the corresponding pro forma period of 1998. The
decrease was primarily attributable to staff reductions and other actions taken
in the fourth quarter of 1998 as well as leverage gained from increased sales in
core brands.
Page 13
<PAGE>
Interest and Other Expenses
Interest expense for the second quarter and six-month period ended July 4, 1999
was $4.3 million and $9.2 million, respectively, compared to $7.2 million and
$14.4 million for the corresponding periods of the prior year. The decrease was
primarily attributable to lower average borrowings under revolving credit
agreements, somewhat offset by higher average borrowing rates.
Income (loss) from investments carried at equity for the second quarter of 1999
primarily reflects income from the Company's 20% equity interest in Belgo Group
PLC which was more than offset by preopening expenses associated with the new
San Marzano restaurant in Philadelphia under the Company's joint venture
agreement with PizzaExpress PLC.
Income tax expense as a percent of earnings before income taxes was 32.8% in the
first six months of 1999 compared to 36.6% in the corresponding period of 1998.
Income tax reflects, for each period, taxes on the gain on disposal of assets
held for sale provided at 38.0%. Taxes on continuing operations were provided at
32.1% in 1999 compared to 34.0% in 1998. The lower tax rate on 1999 continuing
operations primarily reflects an increase in the impact of FICA tip credits and
permanent tax planning strategies to reduce state income taxes.
Net earnings for the six-month period ended July 4, 1999 was $11.9 million and
included an after-tax gain on disposal of assets held for sale of $1.4 million.
Net earnings for the corresponding period of 1998 was $43.4 million and included
an after-tax gain on disposal of assets held for sale of $29.0 million and a
$1.5 million after-tax charge related to a change in accounting principle
requiring the expensing of preopening costs as incurred.
Liquidity and Capital Resources
The Company's historical and projected growth and its preference to own its real
estate cause it to be a net user of cash, even after a significant amount of
expansion financing is internally generated from operations. Principal sources
of funds in the first six months of 1999 consisted of proceeds from disposal of
assets of $85.4 million, proceeds from issuance of long-term debt of $95.5
million and cash generated from operations of $6.8 million. The primary uses of
funds consisted of treasury stock acquired through settlement of equity forward
agreements of $74.6 million (net of collateral payments on equity forward
contracts), repayment of revolving credit agreements of $69.5 million and
capital expenditures of $45.9 million.
Since substantially all sales in the Company's restaurants are for cash and
accounts payable are generally due in 15 to 45 days, the Company operates with
negative working capital. Increases in accounts receivable, prepaid expenses and
other, inventory, accounts payable and accrued liabilities occurred during the
first half of 1999 primarily as a result of new restaurant openings. In some
instances, these increases were more than offset by decreases resulting from
divested Applebee's restaurants. Further increases in current asset and
liability accounts are expected as the Company continues its restaurant
development program.
Capital expenditures during the first six months of 1999 provided for the
opening of 15 Don Pablo's and nine Hops restaurants in addition to ongoing
refurbishments of existing restaurants. Capital requirements for the
Page 14
<PAGE>
construction of new core restaurants are expected to approximate $35 million for
the remainder of 1999 and $100 million in 2000, over half of which is expected
to be generated internally.
In June 1999, the Company completed the private placement of $100 million of
11.75% senior subordinated notes due June 15, 2009. The notes were priced at
98.561 to yield 12.0%. Subsequent to July 4, 1999, the notes were registered
under the Securities Act of 1933. Simultaneously with the notes offering, a new,
three-year $125 million bank revolving credit facility was executed. The
proceeds of the notes offering, the new bank facility and the final Applebee's
divestiture transactions were used to refinance existing credit facilities,
settle the remaining equity forward contracts and to provide for future working
capital and other corporate purposes. Management believes that credit
availability from the new revolving credit facility and cash flow from
operations and liquidation of other assets will provide funding sufficient to
satisfy expansion plans through fiscal 2000.
In 1998, third parties purchased a total of 8.3 million shares of the Company's
common stock at an average price per share of $13.36 (or a total acquisition
cost of $110.9 million) pursuant to four equity forward contracts. One of these
contracts for 2.0 million shares was settled in December 1998, and the Company
acquired the related shares for $29.9 million. An additional contract for 2.5
million shares was settled in March 1999, and the Company acquired the related
shares for $32.4 million. During the second quarter of 1999, the Company settled
its two final equity forward contracts and acquired the related 3.8 million
shares for $52.9 million.
Effect of Inflation
Management believes that inflation has not had a material effect on earnings
during the past several years. Inflationary increases in the cost of labor, food
and other operating costs could adversely affect the Company's restaurant
operating margins. In the past, however, the Company generally has been able to
modify its operations, including raising prices, to offset increases in its
operating costs.
Forward-Looking Information
Certain information contained in this Form 10-Q, particularly information
regarding future economic performance and finances, restaurant development
plans, capital requirements and objectives of management, is forward looking. In
some cases, information regarding certain important factors that could cause
actual results to differ materially from any such forward-looking statement
appear together with such statement. Furthermore, the following factors, in
addition to other possible factors not listed, could affect the Company's actual
results and cause such results to differ materially from those expressed in
forward-looking statements. These factors include competition within the casual
dining restaurant industry, which remains intense; changes in economic
conditions such as inflation or a recession; consumer perceptions of food
safety; weather conditions; changes in consumer tastes; labor and benefit costs;
legal claims; the continued ability of the Company to obtain suitable locations
and financing for new restaurant development; government monetary and fiscal
policies; laws and regulations and governmental initiatives such as minimum wage
rates and taxes. Other factors that may cause actual results to differ from the
forward-looking statements contained in this release and that may affect the
Company's prospects in general are described in Exhibit 99.1 to the Company's
Form 10-Q for the fiscal quarter ended June 29, 1997, and the Company's other
filings with the Securities and Exchange Commission.
Page 15
<PAGE>
Year 2000
Historically, certain computer programs were written and certain computer chips
were designed using two-digit year designations. These programs and chips may
experience problems handling dates beyond 1999. Incomplete or untimely
resolution of these problems by the Company, by its critical suppliers, or by
governmental entities could have a material adverse effect on the Company's
consolidated financial position or results of operations. Work on Year 2000
related issues began in 1997 with executive awareness programs and the
engagement of outside consultants to assist in developing a consistent Year 2000
methodology, time line and project plan. An inventory and assessment of
information technology ("IT") systems as well as non-IT systems was completed
during 1998, and the solution implementation and testing phases have been
substantially completed. As the Company has invested primarily in licensed
software rather than developing it internally, remediation efforts and related
expenditures have not been material. An evaluation of key suppliers to determine
the status of their Year 2000 compliance programs is also in process. Currently,
management does not anticipate any material adverse effects related to the Year
2000. Contingency plans, however, are being developed to address all aspects of
operation level functionality and vendor management in the event unforeseen
circumstances arise.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." As amended by SFAS No. 137, "Deferral of
the Effective Date of FASB Statement No. 133", SFAS 133 will be effective for
the Company's first quarter financial statements in fiscal 2001. The Company has
not completed its evaluation of the impact, if any, that adoption of this
statement will have on its consolidated financial position or results of
operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates and changes
in commodity prices. Exposure to interest rate risk relates primarily to
variable rate U.S. LIBOR obligations on revolving credit agreements. Interest
rate swap agreements are utilized to manage overall borrowing costs and reduce
exposure to adverse fluctuations in interest rates. Two interest rate swap
agreements are currently in place under which the Company pays an average of
certain foreign LIBOR-based variable rates. These agreements also contain
interest rate caps which further limit interest rate exposures. If interest
rates related to the Company's U.S. LIBOR obligations increased by 100 basis
points over the rates in effect at July 4, 1999, interest expense for the
remainder of fiscal 1999, after considering the effects of interest rate swap
agreements, would increase by approximately $0.4 million. If an additional 100
basis point interest rate increase occurred in the Company's foreign LIBOR-based
obligations, interest expense in 1999 would increase by an additional $0.6
million. These amounts were determined by considering the impact of hypothetical
interest rates on the Company's borrowing cost and interest rate swap
agreements. In the event of a change of such magnitude, management would likely
take actions to further mitigate interest rate exposures.
The Company purchases certain commodities such as beef, chicken, flour and
cooking oil. Purchases of these commodities are generally based on vendor
agreements which often contain contractual features that limit the price paid by
establishing price floors or caps. As commodity price aberrations are generally
short term in nature and have not historically had a significant impact on
operating performance, financial instruments are not used to hedge commodity
price risk.
Page 16
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4.1 Indenture, dated as of June 22, 1999, among the Company, certain
guaranteeing subsidiaries and SunTrust Bank, Atlanta, as Trustee (including the
form of Note).**
4.2 Registration Rights Agreement, dated as of June 22, 1999, among the
Company, certain guaranteeing subsidiaries and the initial purchasers of the
Notes.**
10.1 $125 million Credit Agreement, dated as of June 22, 1999, among Avado
Brands, Inc. as borrower and Wachovia Bank, National Association and BankBoston,
N.A.
11.1 Computation of earnings per common share
27.1 Financial Data Schedule (EDGAR version only)
99.1 Safe Harbor Under the Private Securities Litigation Reform Act of
1995*
*Incorporated by reference to the corresponding exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, as amended by
a Form 10-Q/A filed on August 27, 1997
**Incorporated by reference to the corresponding exhibit to the Company's
Registration Statement on Form S-4, File No. 333-82345, filed on July 6, 1999.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K, dated June 4, 1999, which
disclosed, pursuant to Item 5 of Form 8-K, the completion of a Second
Supplemental Indenture to its 9.75% Senior Notes due 2006.
The Company filed a Current Report on Form 8-K, dated June 23, 1999, which
disclosed, pursuant to Item 5 of Form 8-K, the pricing of a private placement of
$100 million, 11.75% senior subordinated notes.
Page 17
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Avado Brands, Inc.
(Registrant)
Date: August 17, 1999 By:/s/ Erich J. Booth
--------------------------------
Erich J. Booth
Chief Financial Officer and
Corporate Treasurer
/s/ Louis J. Profumo
--------------------------------
Louis J. Profumo
Senior Vice President of Finance
and Chief Accounting Officer
Page 18
$125,000,000
CREDIT AGREEMENT
DATED AS OF
JUNE 22, 1999
AMONG
AVADO BRANDS, INC.,
AS BORROWER,
WACHOVIA BANK, NATIONAL ASSOCIATION,
BANKBOSTON, N.A.
AND
ANY OTHER FINANCIAL INSTITUTION(S) LISTED ON THE
SIGNATURE PAGE(S) HEREOF,
AS BANKS,
WACHOVIA BANK, NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT,
BANK BOSTON, N.A.,
AS SYNDICATION AGENT,
WACHOVIA SECURITIES, INC.,
AS ARRANGER,
AND
BANCBOSTON ROBERTSON
STEPHENS, INC.,
AS CO-ARRANGER
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS........................................................1
SECTION 1.1. Definitions.............................................1
SECTION 1.2. Accounting Terms and Determinations....................17
SECTION 1.3. References.............................................17
SECTION 1.4. Use of Defined Terms...................................17
SECTION 1.5. Terminology............................................17
ARTICLE 2. THE CREDIT........................................................17
SECTION 2.1. Commitments to Lend....................................17
SECTION 2.2. Method of Borrowing....................................18
SECTION 2.3. Notes..................................................21
SECTION 2.4. Maturity of Revolving Loans and Swing Loans............22
SECTION 2.5. Interest Rates.........................................23
SECTION 2.6. Fees...................................................24
SECTION 2.7. Termination or Reduction of Commitments................25
SECTION 2.8. Optional Prepayments...................................26
SECTION 2.9. Mandatory Prepayments..................................26
SECTION 2.10. General Provisions as to Payments.....................27
SECTION 2.11. Computation of Interest and Fees......................27
ARTICLE 3. CONDITIONS TO BORROWINGS..........................................27
SECTION 3.1. Conditions to First Borrowing..........................27
SECTION 3.2. Conditions to All Borrowings...........................29
ARTICLE 4. REPRESENTATIONS AND WARRANTIES....................................29
SECTION 4.1. Corporate Existence and Power..........................29
SECTION 4.2. Corporate and Governmental Authorization;
No Contravention.......................................30
SECTION 4.3. Binding Effect.........................................30
SECTION 4.4. Financial Information; No Material Adverse Effect......30
SECTION 4.5. No Litigation..........................................31
SECTION 4.6. Compliance with Laws Generally; Compliance with ERISA..31
SECTION 4.7. Taxes..................................................31
SECTION 4.8. Subsidiaries...........................................31
SECTION 4.9. Not a Public Utility, Holding Company, Investment
Company or Investment Adviser..........................32
SECTION 4.10. Ownership of Property; Liens..........................32
SECTION 4.11. No Default............................................32
SECTION 4.12. Full Disclosure.......................................32
SECTION 4.13. Environmental Matters.................................32
SECTION 4.14. Capital Stock.........................................33
SECTION 4.15. Margin Stock..........................................33
SECTION 4.16. Solvency..............................................33
SECTION 4.17. Possession of Franchises, Licenses, Etc...............33
SECTION 4.18. Insurance.............................................34
SECTION 4.19. Y2K Plan..............................................34
ARTICLE 5. COVENANTS.........................................................34
SECTION 5.1. Information............................................34
SECTION 5.2. Inspection of Property, Books and Records..............36
SECTION 5.3. Y2K....................................................36
SECTION 5.4. Adjusted Total Debt/Adjusted Total Capital Ratio.......36
SECTION 5.5. Fixed Charge Coverage Ratio............................36
SECTION 5.6. Total Debt/EBITDA Ratio................................37
SECTION 5.7. Total Senior Debt/EBITDA Ratio.........................37
SECTION 5.8. Negative Pledge........................................37
SECTION 5.9. Maintenance of Existence...............................38
SECTION 5.10. Dissolution...........................................38
SECTION 5.11. Consolidations, Mergers and Sales of Assets...........39
SECTION 5.12. Use of Proceeds.......................................39
SECTION 5.13. Compliance with Laws; Payment of Taxes................40
SECTION 5.14. Insurance.............................................40
SECTION 5.15. Change in Fiscal Year.................................40
SECTION 5.16. Maintenance of Property...............................40
SECTION 5.17. Environmental Notices.................................40
<PAGE>
SECTION 5.18. Environmental Matters.................................40
SECTION 5.19. Environmental Releases................................41
SECTION 5.20. Investments...........................................41
SECTION 5.21. Debt..................................................44
SECTION 5.22. Dividends and Distributions............................44
SECTION 5.23. Transactions With Affiliates...........................44
SECTION 5.24. Subsidiary Guaranties..................................45
SECTION 5.25. Stock Purchases, Etc...................................45
SECTION 5.26. No Prepayment of Senior Notes..........................46
SECTION 5.27. Subordinated Debt......................................46
ARTICLE 6. DEFAULTS..........................................................46
SECTION 6.1. Events of Default......................................46
SECTION 6.2. Notice of Default......................................49
ARTICLE 7. THE ADMINISTRATIVE AGENT..........................................49
SECTION 7.1. Appointment; Powers and Immunities.....................49
SECTION 7.2. Reliance by Administrative Agent.......................50
SECTION 7.3. Defaults...............................................50
SECTION 7.4. Rights of Administrative Agent as a Bank...............50
SECTION 7.5. Indemnification........................................51
SECTION 7.6. Payee of Note Treated as Owner.........................51
SECTION 7.7. Nonreliance on Administrative Agent and Other Banks....51
SECTION 7.8. Failure to Act.........................................52
SECTION 7.9. Resignation of Administrative Agent....................52
ARTICLE 8. CHANGE IN CIRCUMSTANCES; COMPENSATION.............................53
SECTION 8.1. Basis for Determining Interest Rate Inadequate
or Unfair..............................................53
SECTION 8.2. Illegality.............................................53
SECTION 8.3. Increased Cost and Reduced Return......................54
SECTION 8.4. Base Rate Loans Substituted for Affected
Euro-Dollar Rate Loans.................................55
SECTION 8.5. Replacement of a Lender................................55
SECTION 8.6. Compensation...........................................55
ARTICLE 9. MISCELLANEOUS.....................................................56
SECTION 9.1. Notices................................................56
SECTION 9.2. No Waivers.............................................56
SECTION 9.3. Expenses; Documentary Taxes............................57
SECTION 9.4. Indemnification........................................57
SECTION 9.5. Sharing of Setoffs.....................................57
SECTION 9.6. Amendments and Waivers.................................58
SECTION 9.7. No Margin Stock Collateral.............................59
SECTION 9.8. Successors and Assigns.................................59
SECTION 9.9. Confidentiality........................................61
SECTION 9.10. Representation by Banks...............................61
SECTION 9.11. Obligations Several...................................61
SECTION 9.12. GEORGIA LAW...........................................62
SECTION 9.13. Interpretation........................................62
SECTION 9.14. CONSENT TO JURISDICTION...............................62
SECTION 9.15. Counterparts..........................................62
SECTION 9.16. Survival..............................................63
SECTION 9.17. Entire Agreement; Amendment; Severability.............63
SECTION 9.18. TIME OF THE ESSENCE...................................63
SECTION 9.19. No Joint Venture .....................................63
SECTION 9.20. Certain Designations..................................63
<PAGE>
EXHIBITS
EXHIBIT A Form of Assignment and Acceptance
EXHIBIT B Form of Revolving Loan Note
EXHIBIT C Form of Notice of Borrowing
EXHIBIT D Form of Opinion of Counsel for Borrower
EXHIBIT E Form of Closing Certificate
EXHIBIT F Form of Secretary's Certificate
EXHIBIT G Form of Compliance Certificate
EXHIBIT H Form of Subsidiary Guaranty
SCHEDULES
SCHEDULE 1.1 Non-Core Assets
SCHEDULE 1.2 Hops Subsidiaries
SCHEDULE 4.5 Existing Litigation
SCHEDULE 4.8 Existing Subsidiaries
SCHEDULE 5.8 Existing Permitted Liens
SCHEDULE 5.20 Existing and Committed Investments in Hops
Subsidiaries
- -------------
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 22, 1999, is made among AVADO
BRANDS, INC., as Borrower; WACHOVIA BANK, NATIONAL ASSOCIATION, BANKBOSTON,
N.A., and any other party or parties listed as a "Bank" or the "Banks" on the
signature page(s) hereof, as Banks; WACHOVIA BANK, NATIONAL ASSOCIATION, as
Administrative Agent for the Banks, the Syndication Agent, the Arranger, the
Co-Arranger and itself; BANKBOSTON, N.A., as Syndication Agent for the Banks;
WACHOVIA SECURITIES, INC., as Arranger; and BANCBOSTON ROBERTSON STEPHENS, INC.,
as Co-Arranger.
The parties hereto agree as follows:
DEFINITIONS
SECTION 1.1. Definitions.
The terms as defined in this Section 1.1 shall for all purposes of this
Agreement and any amendment hereto (except as herein otherwise expressly
provided or unless the context otherwise requires), have the meanings set forth
herein:
"Adjusted Total Debt" shall mean and include the sum (without duplication)
of the following, at any Fiscal Quarter end, for the Borrower 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 Borrower 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 Borrower and its Consolidated
Subsidiaries at any date bears to (ii) the Adjusted Total Capital of the
Borrower and its Consolidated Subsidiaries at such date.
"Adjusted LIBOR Rate," applicable to any Interest Period, means that
interest rate per annum determined by the Administrative Agent to be equal to
the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th
of 1%) by dividing (i) the applicable LIBOR Rate for such Interest Period by
(ii) 1.00 minus the then applicable Euro-Dollar Reserve Percentage (if any).
"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.
"Administrative Agent" means Wachovia Bank, National Association, a
national banking association organized under the laws of the United States of
America, in its capacity as administrative agent for the Banks, the Syndication
Agent, the Arranger, the Co-Arranger and itself, and its successors and
permitted assigns in such capacity.
1
<PAGE>
"Administrative Agent's Address" means the address of Administrative Agent
referred to or specified in Section 9.1.
"Affiliate" means, as to any Person (i) any other Person that directly, or
indirectly through one or more intermediaries, controls such Person (a
"Controlling Person"), (ii) any other Person which is controlled by or is under
common control with such Person or a Controlling Person, or (iii) any other
Person of which such Person owns, directly or indirectly, twenty percent (20%)
or more of the common stock or equivalent equity interests. As used herein, the
term "control" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement, together with all amendments and
modifications hereto.
"Applicable Margin" means: (i) initially, for any Base Rate Loan, one and
one-fourth of one percent (1 1/4%) per annum and for any Euro-Dollar Rate Loan,
three percent (3%) per annum, and (ii) from and after the first Pricing
Determination Date occurring subsequent to the Fiscal Quarter of Borrower ending
on June 30, 1999, for any Base Rate Loan or Euro-Dollar Rate Loan, the
percentage determined on each Pricing Determination Date by reference to the
table set forth below as to each such type of Loan and the Total Debt/EBITDA
Ratio, as determined as of the end of the Fiscal Quarter ending immediately
prior to such Pricing Determination Date; provided, however, that,
notwithstanding the foregoing, no decrease in interest rate below those in
effect on the Closing Date shall be instituted until the first Pricing
Determination Date occurring subsequent to the Fiscal Quarter of Borrower ending
on September 30, 1999:
- ------------------------------------- ----------------------- ------------------
Total Debt/EBITDA Applicable Margin for Applicable Margin
Ratio Euro-Dollar Rate for Base Rate
Loans Loans
- ------------------------------------- ----------------------- ------------------
Level I 1.750% 0%
If the Total Debt/EBITDA Ratio is
equal to or less than 2.00:1.00
- ------------------------------------- ----------------------- ------------------
Level II 2.125% .375%
If the Total Debt/EBITDA Ratio is
greater than 2.00:1.00 but less than
or equal to 2.50:1.00
- ------------------------------------- ----------------------- ------------------
2
<PAGE>
Level III 2.500% .750%
If the Total Debt/EBITDA Ratio is
greater than 2.50:1.00, but less than
or equal to 3.00:1.00
- ------------------------------------- ----------------------- ------------------
Level IV 2.750% 1.000%
If the Total Debt/EBITDA Ratio is
greater than 3.00:1.00 but less than
or equal to 3.50:1.00
- ------------------------------------- ----------------------- ------------------
Level V 3.000% 1.250%
If the Total Debt/EBITDA Ratio is
greater than 3.50:1.00 but less than
or equal to 3.75:1.00
- ------------------------------------- ----------------------- ------------------
Level VI 3.250% 1.500%
If the Total Funded Debt/EBITDA Ratio
is greater than 3.75:1.00
- ------------------------------------- ----------------------- ------------------
The Applicable Margin shall be subject to reduction or increase, as
applicable, as set forth in the table above, on a quarterly basis according to
the performance of the Borrower and its Consolidated Subsidiaries as measured by
the Total Debt/EBITDA Ratio, beginning with the Fiscal Quarter ending on June
30, 1999, subject to the proviso contained at the end of the preceding
paragraph. Except as set forth in the last sentence hereof, any such increase or
reduction in the Applicable Margin provided for herein shall be effective on the
Pricing Determination Date with respect to the applicable Fiscal Quarter. If the
financial statements and the Compliance Certificate of the Borrower and its
Consolidated Subsidiaries setting forth the Total Debt/EBITDA Ratio are not
received by the Administrative Agent and the Banks by the dates required
pursuant to Sections 5.1.2 and 5.1.3 of this Agreement, the Applicable Margin
shall be determined as if the Total Debt/EBITDA Ratio exceeds the ratio set
forth as Level VI in the foregoing table until such time as such financial
statements and Compliance Certificate are received and any Event of Default
resulting from a failure to timely deliver such financial statements or
Compliance Certificate is waived in writing by the Administrative Agent and the
Required Banks. For the final Fiscal Quarter of any Fiscal Year, the Borrower
shall provide the unaudited financial statements of the Borrower and its
Consolidated Subsidiaries, subject only to year-end audit adjustments, for the
3
<PAGE>
purpose of determining the Applicable Margin; provided, however, if, upon
delivery of the annual audited financial statements required to be submitted by
the Borrower to the Administrative Agent and the Banks pursuant to Section 5.1.1
of this Agreement, the Applicable Margin, as determined therefrom, is different
from the Applicable Margin so determined from such quarterly financial
statements, then (a) the then existing Applicable Margin shall be terminated
and, effective on the first day of the month following receipt by the
Administrative Agent and the Banks of such audited financial statements, the
Applicable Margin shall be the Applicable Margin based upon the audited
financial statements of the Borrower for the Fiscal Year then ended, and (b) on
the first day of the first calendar month following receipt by the
Administrative Agent of such audited financial statements, an amount equal to
the difference between the amount of interest that would have been paid on the
principal amount of the Obligations using the Applicable Margin determined based
upon such audited financial statements and the amount of interest actually paid
during the period in which the reduction or increase, as applicable, of the
Applicable Margin was in effect based upon the unaudited financial statements of
such final Fiscal Quarter of the Fiscal Year then ended shall be paid (i) if the
amount of interest that should have been paid is greater than the amount of
interest actually paid, by the Borrower to the Administrative Agent, for the
benefit of the Banks or (ii) if the amount of interest that should have been
paid is less than the amount of interest actually paid, to the Borrower by the
Administrative Agent, from funds received from the Banks.
"Arranger" means Wachovia Securities, Inc., a North Carolina corporation,
in its capacity as arranger hereunder, and its successors and permitted assigns
in such capacity.
"Asset Sale" shall mean the sale by the Borrower or any of its Subsidiaries
of any of their Properties, excluding inventory sold in the ordinary course of
business.
"Assignee" has the meaning set forth in Section 9.8.3.
"Assignment and Acceptance" means an Assignment and Acceptance executed in
accordance with Section 9.8.3 in the form attached hereto as Exhibit A.
"Authority" has the meaning set forth in Section 8.2.
"Bank" means each bank or other financial institution listed on the
signature pages hereof and identified therein as a "Bank."
"Base Rate" means for any Base Rate Loan for any day, the rate per annum
equal to the higher as of such day of (i) the Prime Rate, and (ii) one-half of
one percent (1/2%) per annum above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate or the Federal
Funds Rate, as the case may be, shall be effective on the date of each such
change.
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"Base Rate Loan" means either (i) a Revolving Loan made at the Base Rate
pursuant to Section 2.1 or (ii) a Swing Loan made at the Base Rate pursuant to
Section 2.1 (unless another rate is mutually agreed between the Swing Bank and
the Borrower from time to time).
"Borrower" means Avado Brands, Inc., a Georgia corporation, and its
successors and permitted assigns.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans made
to the Borrower at the same time by the Banks pursuant to Article II or a Swing
Loan made to the Borrower by the Swing Bank pursuant to Article II. A Borrowing
is a "Base Rate Borrowing" if such Revolving Loans are Base Rate Loans or a
"Euro-Dollar Rate Borrowing" if such Revolving Loans are Euro-Dollar Rate Loans.
All Borrowings consisting of Swing Loans are "Base Rate Borrowings" (unless
otherwise mutually agreed between the Swing Bank and the Borrower from time to
time).
"Capital Stock" means any nonredeemable capital stock of the Borrower or
any Consolidated Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"Capitalized Lease Obligations" shall mean those liabilities of the
Borrower and its Consolidated Subsidiaries under any leases that are required to
be capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such liabilities shall be the capitalized amount of such liabilities
as determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C.ss. 9601 et seq. and its implementing regulations and
amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation and
Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 8.2.
"Closing Certificate" has the meaning set forth in Section 3.1.3.
"Closing Date" means the date of this Agreement, as first inscribed
hereinabove.
"Co-Arranger" means BancBoston Robertson Stephens Inc., acting in its
capacity as co-arranger hereunder, and its successors and permitted assigns in
such capacity.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
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"Commitment" means (i) the amount indicated beneath each Bank's signature
hereinbelow as its "Commitment Amount," as to each Bank, and (ii) One Hundred
Twenty-Five Million Dollars ($125,000,000), in the aggregate, as to all Banks;
as each such amount may be reduced from time to time pursuant to Section 2.7 or
Section 8.5.
"Compliance Certificate" has the meaning set forth in Section 5.1.3.
"Consolidated Net Income," for any period, means the net income of the
Borrower 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
Borrower 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.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which, in accordance with GAAP, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Debt" of any Person means 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.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured and waived, become an Event of Default.
"Default Rate" means, with respect to any Revolving Loan or Swing Loan, on
any day, the sum of two percent (2%) per annum in excess of the interest rate
otherwise then or thereafter payable on such Revolving Loan or Swing Loan, but,
in any event, not less than two percent (2%) per annum in excess of the Base
Rate.
"Dollars" or "$" means dollars in lawful currency of the United States of
America.
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"Domestic Business Day" means 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.
"EBITDA" shall mean, for any fiscal period of the Borrower and its
Consolidated Subsidiaries, that amount equal to the sum, determined in
accordance with GAAP, of the Consolidated Net Income of the Borrower 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 Borrower's business operations as conducted on the Closing
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 Borrower ending closest to June 30, 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 Borrower's
general and administrative expenses.
"EBITDAR" shall mean, for any fiscal period of the Borrower and its
Consolidated Subsidiaries, that amount equal to the sum of EBITDA for such
period plus operating lease expense of Borrower and its Consolidated
Subsidiaries for such period.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or orders
arising from or in any way associated with any Environmental Requirements,
whether or not entered upon consent or pursuant to written agreements with an
Environmental Authority or any other entity, arising from or in any way
associated with any Environmental Requirement, whether or not incorporated in a
judgment, decree or order.
"Environmental Liabilities" means any liabilities whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority or by
any other Person, of possible or alleged noncompliance with or liability under
any Environmental Requirement, including, without limitation, any complaints,
citations, demands or requests from any Environmental Authority or from any
other Person for correction of any violation of any Environmental Requirement or
any investigations concerning any violation of any Environmental Requirement.
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<PAGE>
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means "releases" as defined in CERCLA or under any
applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or any Property, including, but not limited to, any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"Equity Forward Contract" shall mean any contract, whether now or hereafter
existing, whereby the Borrower or any of its Consolidated Subsidiaries agrees,
directly or indirectly, to purchase Capital Stock of the Borrower on any future
date at a fixed price (including any contract, howsoever denominated, having
substantially the same or similar effect or result).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day in which
dealings in Dollar deposits are carried out in the London interbank Euro-Dollar
market.
"Euro-Dollar Rate," applicable to any Interest Period, means that interest
rate per annum equal to the sum of (i) the Adjusted LIBOR Rate for such Interest
Period, plus (ii) the Applicable Margin.
"Euro-Dollar Rate Loan" means a Revolving Loan made at the Euro-Dollar Rate
pursuant to Section 2.1.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Rate Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United States
office of any Bank to United States residents). The Adjusted LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
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"Event of Default" has the meaning set forth in Section 6.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Administrative Agent on such
day on such transactions, as determined by the Administrative Agent.
"Fee Letter" means the letter agreement, dated May 21, 1999, among the
Borrower, the Arranger, the Co-Arranger, the Administrative Agent and the
Syndication Agent, as it may be amended or modified from time to time.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"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; in each case, for the
Borrower and its Consolidated Subsidiaries for the same such period; all as
determined under GAAP.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with Section 1.2, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.
"Guarantee" or "Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The terms "Guarantee" or "Guaranty" used as a verb has a
corresponding meaning.
9
<PAGE>
"Hazardous Materials" includes, without limitation, (a) solid or hazardous
waste, as defined in the Resource Conservation and Recovery Act of 1980, 42
U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in
any applicable state or local law or regulation, (b) "hazardous substance,"
"pollutant," or "contaminant" as defined in CERCLA, or in applicable state or
local law or regulation, (c) gasoline, or any other petroleum product or
by-product, including, crude oil or any fraction thereof, (d) "toxic
substances", as defined in the Toxic Substances Control Act of 1976, or in any
applicable state or local law or regulation, and (e) insecticides, fungicides,
or rodenticides, as defined in the Federal Insecticide, Fungicide, and
Rodenticide Act of 1975, or in any applicable state or local law or regulation,
as each such Act, statute or regulation may be amended from time to time.
"Hops Subsidiaries" means 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.
"Interest Period" means:
(1) with respect to each Euro-Dollar Rate Borrowing, the period commencing
on the date of such Borrowing and ending on the numerically corresponding date
in the first, second, third or sixth calendar month thereafter, as the Borrower
may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period determined pursuant
to paragraph (c) below) which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall, subject to paragraph
(c) below, end on the last Euro-Dollar Business Day of the appropriate
subsequent calendar month; and
(c) any Interest Period which begins before the Termination Date and would
otherwise end after the Termination Date shall end on the Termination Date.
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(2) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending on the date on which such Base Rate Borrowing
is fully paid or converted to a Euro-Dollar Rate Borrowing; provided that:
(a) any Interest Period (other than an Interest Period determined pursuant
to paragraph (b) below) which would otherwise end on a day which is not a
Domestic Business Day shall be extended to the next succeeding Domestic Business
Day;
(b) any Interest Period which begins before the Termination Date and would
otherwise end after the Termination Date shall end on the Termination Date.
"Lending Office" means, as to each Bank, its office located at its address
set forth on the signature pages hereof (or identified on the signature pages
hereof as its Lending Office) or such other office in the United States as such
Bank may hereafter designate as its Lending Office by notice to the Borrower and
the Administrative Agent.
"LIBOR Rate" means, for any Euro-Dollar Rate Loan for the Interest Period
of such Euro-Dollar Rate Loan, the rate per annum determined by the
Administrative Agent on the basis of the offered rate for deposits in Dollars of
amounts equal or comparable to the principal amount of such Euro-Dollar Rate
Loan offered for a term comparable to such Interest Period, which rate appears
on the display designated as page "3750" of the Dow Jones Market Service (or
such other page as may replace page 3750 of that service or such other service
or services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar deposits),
determined as of 11:00 A.M., London time, two (2) Euro-Dollar Business Days
prior to the first day of such Interest Period, provided that (i) if more than
one such offered rate appears on such page, the "LIBOR Rate" will be the
arithmetic average (rounded upward, if necessary, to the next higher 1/100th of
1%) of such offered rates; (ii) if no such offered rates appear on such page,
the "LIBOR Rate" for such Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted
by not less than two (2) major banks in New York City, selected by the
Administrative Agent, at approximately 10:00 A.M., New York City time, two (2)
Euro-Dollar Business Days prior to the first day of such Interest Period, for
deposits in Dollars offered to leading European banks for a period comparable to
such Interest Period in an amount comparable to the principal amount of such
Euro-Dollar Rate Loan.
"Lien" means, with respect to any asset, any mortgage, deed to secure debt,
deed of trust, lien, pledge, charge, security interest, security title or other,
preferential arrangement, which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law. For
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
11
<PAGE>
"Loan Documents" means this Agreement, the Notes, each Subsidiary Guaranty,
any other document evidencing or relating to the Revolving Loans or the Swing
Loans, and any other document, instrument, certificate or agreement delivered in
connection with this Agreement, the Notes, the Revolving Loans or the Swing
Loans, as such documents, instruments, certificates and agreements may be
amended or modified from time to time.
"Margin Stock" means "margin stock" as defined in Regulations G, T, U or X.
"Material Adverse Effect" means, 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 Borrower and its Consolidated Subsidiaries taken as a whole, (b)
the rights and remedies of the Administrative Agent, the Syndication Agent, the
Arranger, the Co-Arranger or the Banks under the Loan Documents, or the ability
of the Borrower to perform its obligations under the Loan Documents to which it
is a party, as applicable, or (c) the legality, validity or enforceability of
this Agreement, any Note or any Loan Document.
"Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3)
of ERISA.
"Net Cash Proceeds" shall mean, the total cash proceeds received by the
Borrower 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 Borrower 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" means those assets so identified on Schedule 1.1.
"Notes" means, collectively, the promissory notes of the Borrower
evidencing the Revolving Loans (and, in the case of the Swing Bank, the Swing
Loans), each to be substantially in the form of Exhibit B, together with all
amendments, consolidations, modifications, renewals, and supplements thereto.
"Notice of Borrowing" has the meaning set forth in Section 2.2.1.
"Participant" has the meaning set forth in Section 9.8.2.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of any member of the Controlled Group or (ii) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which a member of the Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
"Pricing Determination Date" shall mean, as to any Fiscal Quarter, the
first day of the first calendar month after receipt by the Administrative Agent
and the Banks of Borrower's and its Consolidated Subsidiaries' financial
statements for such Fiscal Quarter pursuant to Section 5.1.2 and a Compliance
Certificate for such Fiscal Quarter pursuant to Section 5.1.3.
"Prime Rate" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several interest rate bases used by Wachovia. Wachovia lends
at interest rates at, above and below the Prime Rate.
"Properties" means all property owned, leased or otherwise used, operated
or occupied by the Borrower or any Subsidiary, wherever located, and whether
real property or personal property.
"Purchase Money Liens" means Liens securing the repayment of any Debt
permitted pursuant to Section 5.21 incurred to finance the purchase of any
Property hereafter acquired by the Borrower 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 means any preferred stock issued
by such Person which is at any time prior to the Termination Date 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.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
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"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Required Banks" means any Bank or Banks having (i) more than fifty percent
(50%) of the aggregate amount of the Commitments or (ii), if the Commitments are
no longer in effect, more than fifty percent (50%) of the aggregate outstanding
principal amount of the Notes.
"Revolving Loan" means, as to any Bank, a Base Rate Loan or a Euro-Dollar
Rate Loan made by such Bank pursuant to Section 2.1.1.
"Solvent" means as to any Person, that such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of such
Person's total debts, direct or indirect, contingent or otherwise, (ii) is able
to pay all of such debts as and when such debts mature and (iii) has capital
sufficient to carry on the business and transactions in which it is engaged and
all business and transactions in which it is about to engage.
"Stockholders' Equity" means, at any time, the stockholders' equity of the
Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding (i) any Redeemable
Preferred Stock of the Borrower 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.
"Subordinated Debt" shall mean Debt of Borrower incurred on or prior to the
Closing Date pursuant to an indenture and other documents satisfactory in all
respects to the Banks, including, without limitation, with respect to the
subordination provisions thereof, the covenants included therein, the repayment
terms thereof and the interest rate payable thereon.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
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"Subsidiary Guarantor" shall mean any Subsidiary of Borrower which has
executed a Subsidiary Guaranty pursuant to Section 3.1.3 or Section 5.24.
"Subsidiary Guaranty" shall mean a guaranty, in substantially the form of
Exhibit H attached hereto, pursuant to which a Subsidiary of Borrower shall
guarantee all debts, liabilities and obligations of the Borrower hereunder, all
in accordance with Section 3.1.3 or Section 5.24.
"Swing Bank" means Wachovia and any other Bank which, hereafter, at the
request or with the consent of Wachovia, shall agree to act as "Swing Bank" for
purposes hereof.
"Swing Loan" mean any Base Rate Loan made to the Borrower by the Swing Bank
from time to time pursuant to Section 2.1.2.
"Syndication Agent" means BankBoston, N.A., a national banking association,
in its capacity as syndication agent for the Banks hereunder, and its successors
and permitted assigns in such capacity.
"Synthetic Lease" shall mean any agreement, or series of related
agreements, between the Borrower and one or more other parties which are
intended to be treated, for accounting purposes, as an operating lease with the
Borrower as lessee and, for tax purposes, as a financing arrangement with the
Borrower as debtor.
"Tangible Net Worth" shall mean the difference at any time between (i) the
sum of (A) Stockholders' Equity of the Borrower and its Consolidated
Subsidiaries at such time plus (B) the TECONS and (ii) the sum of all those
assets of the Borrower 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.
"TECONS" means the Borrower-obligated mandatorily redeemable preferred
securities of Avado Financing I, as in existence on the Closing Date.
"Termination Date" has the meaning set forth in Section 2.7.1.
"Third Parties" means all lessees, sublessees, licensees and other users of
the Properties, excluding those users of the Properties in the ordinary course
of the Borrower's business and on a temporary basis.
"Total Debt" shall mean that portion of the Debt of the Borrower 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 Borrower 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.
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"Total Debt/EBITDA Ratio" shall have the meaning given to such term in
Section 5.6.
"Total Senior Debt" shall mean, at any date, Total Debt of Borrower and its
Consolidated Subsidiaries minus the then outstanding principal balance of the
Subordinated Debt.
"Transferee" has the meaning set forth in Section 9.8.4.
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested nonforfeitable
benefits under such Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Unused Commitment" means at any date, with respect to any Bank, an amount
equal to its Commitment less the aggregate outstanding principal amount of its
Revolving Loans and, in the case of the Swing Bank, Swing Loans.
"Wachovia" means Wachovia Bank, National Association, a national banking
association, and its successors.
"Y2K Plan" has the meaning set forth in Section 4.19.
"Y2K Plan Milestones" has the meaning set forth in Section 4.19.
"Year 2000 Compliant and Ready" means that (a) the Borrower'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 Borrower has developed alternative plans
to ensure business continuity in the event of the failure of any or all of items
(i) through (iii) above.
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SECTION 1.2. Accounting Terms and Determinations.
Unless otherwise specified herein, all terms of an accounting character
used herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder shall
be prepared in accordance with GAAP, applied on a basis consistent (except for
changes concurred with by the Borrower's independent public accountants or
otherwise required by a change in GAAP) with the then most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided, however, that upon any change in
GAAP material to Borrower occurring hereafter, the Banks shall have the right to
require either that conforming adjustments be made to any financial covenants
hereafter set forth, or the components thereof, affected by such change or that
the Borrower report its financial condition based on GAAP as in effect
immediately prior to such change occurring. In determining compliance of the
Borrower with the financial covenants set forth in Sections 5.4 through 5.7
hereof, and, in making such calculations for any other purposes hereunder,
including, without limitation, the determination of the Applicable Margin
pursuant to the definition thereof and the determination of the unused
commitment fee pursuant to Section 2.6.2, (i) 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 Applebee's
Neighborhood Grill & Bar restaurants which were sold prior to the Closing Date,
and for the Fiscal Quarters of Borrower 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; e.g., for the four (4)
Fiscal Quarters ending closest to each such date, interest expense shall be
computed by multiplying interest expense for the Fiscal Quarter ending closest
to such date, and multiplying by four (4).
SECTION 1.3. References.
Unless otherwise indicated, references in this Agreement to "Articles,"
"Exhibits," "Schedules," "Sections" and other Subdivisions are references to
articles, exhibits, schedules, sections and other subdivisions hereof.
SECTION 1.4. Use of Defined Terms.
All terms defined in this Agreement shall have the same defined meanings
when used in any of the other Loan Documents, unless otherwise defined therein
or unless the context shall require otherwise.
SECTION 1.5. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and the plural shall include the singular.
Titles of Articles and Sections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
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ARTICLE 2. THE CREDIT
SECTION 2.1. Commitments to Lend.
2.1.1 Revolving Loans. Each Bank severally agrees, on the terms and
conditions set forth herein, to make Revolving Loans to the Borrower from time
to time before the Termination Date; provided that, immediately after each such
Revolving Loan is made, (i) the aggregate principal amount of Revolving Loans
and, in the case of the Swing Bank, Swing Loans, by such Bank shall not exceed
the amount of its Commitment, and (ii) the aggregate principal amount of
Revolving Loans and Swing Loans by all Banks shall not exceed One Hundred Twenty
Five Million Dollars ($125,000,000). Each Borrowing under this Section shall be
in an aggregate principal amount of One Million Dollars ($1,000,000) or any
larger multiple of Five Hundred Thousand Dollars ($500,000), in the case of Base
Rate Loans, and in an aggregate principal amount of Five Million Dollars
($5,000,000) or any larger multiple of One Million Dollars ($1,000,000), in the
case of Euro-Dollar Rate Loans (except that any such Borrowing may be in the
aggregate amount of the Unused Commitments), and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, repay or, to the
extent permitted by Section 2.8, prepay Revolving Loans and reborrow under this
Section at any time or from time to time before the Termination Date.
2.1.2 Swing Loans. The Swing Bank severally agrees, on the terms and
conditions set forth herein, to make Swing Loans to the Borrower, in the Swing
Bank's sole discretion, at any time and from time to time before the Termination
Date; provided, however, that,
(i) immediately after such Swing Loan is made, (A) the sum of (1) all Swing
Loans then outstanding, plus (2) the Revolving Loans outstanding of the Swing
Bank, will not exceed the Swing Bank's Commitment, and (B) the total amount of
all Swing Loans and Revolving Loans then outstanding will not exceed the
aggregate Commitments of all Banks; and
(ii) total Swing Loans then outstanding will not exceed, in any event, Ten
Million Dollars ($10,000,000).
Each Swing Loan shall be a Base Rate Loan, and shall be in a principal
amount of Two Hundred Fifty Thousand Dollars ($250,000) or any larger multiple
of Fifty Thousand Dollars ($50,000) (except that any Swing Loan may be in the
amount of the Unused Commitments) and shall be made in accordance with Section
2.2.5. Within the foregoing limits, the Borrower may borrow under this Section,
repay or, to the extent permitted in Section 2.2.5, prepay Swing Loans and
borrow under this Section at any time before the Termination Date. The proceeds
of each Swing Loan shall be used by the Borrower for the purposes permitted in
Section 5.12.
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SECTION 2.2. Method of Borrowing.
2.2.1. Notice to Administrative Agent. The Borrower shall give the
Administrative Agent notice (a "Notice of Borrowing"), which shall be
substantially in the form of Exhibit C, not later than 11:00 a.m. (Atlanta,
Georgia time) on the Domestic Business Day of each Base Rate Borrowing and not
later than 11:00 a.m. (Atlanta, Georgia time) at least three (3) Euro-Dollar
Business Days before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day in
the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Revolving Loans comprising such Borrowing are to be Base
Rate Loans or Euro-Dollar Rate Loans, and
(d) the duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
2.2.2 Notice to Banks. Upon receipt of a Notice of Borrowing, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such Borrowing and such Notice of Borrowing
shall not thereafter be revocable by the Borrower.
2.2.3 When Revolving Loans Made. Not later than 1:00 P.M. (Atlanta, Georgia
time) on the date of each Base Rate Borrowing and not later than 11:00 A.M.
(Atlanta, Georgia time) on the date of each Euro-Dollar Borrowing, each Bank
shall (except as provided in Section 2.2.4) make available its ratable share of
such Borrowing, in federal or other funds immediately available in Atlanta,
Georgia, to the Administrative Agent at the Administrative Agent's address.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Banks available to the Borrower at the
Administrative Agent's Address. Unless the Administrative Agent receives notice
from a Bank, at the Administrative Agent's Address, no later than 12:00 noon
(Atlanta, Georgia time) on the date of a Base Rate Borrowing and no later than
4:00 P.M. (Atlanta, Georgia time) on the Domestic Business Day before the date
of a Euro-Dollar Rate Borrowing stating that such Bank will not make a Revolving
Loan in connection with such Borrowing, the Administrative Agent shall be
entitled to assume that such Bank will make a Revolving Loan in connection with
such Borrowing and, in reliance on such assumption, the Administrative Agent may
(but shall not be obligated to) make available such Bank's ratable share of such
Borrowing to the Borrower for the account of such Bank on the date of such
Borrowing. If the Administrative Agent makes such Bank's ratable share available
to the Borrower and such Bank does not in fact make its ratable share of such
Borrowing available on such date, the Administrative Agent shall be entitled to
recover such Bank's ratable share from such Bank or the Borrower (and for such
purpose shall be entitled to charge such amount to any account of the Borrower
maintained with the Administrative Agent), together with interest thereon for
each day during the period from the date of such Borrowing until such sum shall
be paid in full at a rate per annum equal to the rate at which the
Administrative Agent determines that it obtained (or could have obtained)
overnight Federal funds to cover such amount for each such day during such
period, provided that any such payment by the Borrower of such Bank's ratable
share and interest thereon shall be without prejudice to any rights that the
Borrower may have against such Bank. If the Administrative Agent does not
exercise its option to advance funds for the account of such Bank, it shall
forthwith notify the Borrower of such decision.
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2.2.4 Application of Certain Proceeds. If any Bank makes a Revolving Loan
hereunder on a day on which the Borrower is to repay all or any part of an
outstanding Revolving Loan from such Bank, such Bank shall apply the proceeds of
its new Revolving Loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be made available by such Bank to the Administrative Agent as
provided in Section 2.2.3, or remitted by the Borrower to the Administrative
Agent, as the case may be.
2.2.5 Borrowing of Swing Loans.
a. The Borrower shall give the Administrative Agent written notice in the
form of a Notice of Borrowing (or notice by telephone or telecopy followed
immediately by a Notice of Borrowing; provided, however, that the failure by the
Borrower to confirm any notice by telephone or telecopy with a Notice of
Borrowing shall not invalidate any notice so given) no later than 11:00 a.m.
(Atlanta, Georgia time) on the Domestic Business Day on which the Borrower
wishes to receive any Swing Loan. If the Swing Bank, in its sole discretion,
elects to make the requested Swing Loan, the Swing Loan shall be made on the
Domestic Business Day specified in the Notice of Borrowing and such Notice of
Borrowing shall specify the amount of the requested Swing Loan. Each Swing Loan
shall be made as a Base Rate Loan (unless otherwise mutually agreed between the
Swing Bank and the Borrower from time to time) and interest thereon shall be
payable in accordance with Section 2.5.1 hereof. The Swing Bank shall have no
duty or obligation to make any Swing Loans hereunder and the Swing Bank shall
not make any Swing Loans unless, on the date of the requested advance thereof,
the Borrower satisfies each of the conditions precedent to a Revolving Loan set
forth in Article 3 hereof. In the event the Swing Bank, in its sole and absolute
discretion, elects to make any requested Swing Loan, the Swing Bank shall make
the proceeds of such Swing Loan available to the Borrower by deposit of U.S.
dollars in same day funds by wire transfer in accordance with the applicable
Notice of Borrowing.
b. The Borrower shall have the right and from time to time to prepay any
Swing Loan, in whole or in part, upon giving written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to the Swing
Bank and to the Administrative Agent before 12:00 (noon), Atlanta time, on the
date of prepayment. Swing Loans not prepaid in full as provided herein shall be
payable as provided in Section 2.4. All prepayments and payments of Swing Loans
shall be made to the Administrative Agent for the account of the Swing Bank.
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c. The Swing Bank may, by written notice given to the Administrative Agent
not later than 10:00 a.m., Atlanta, Georgia time, on any Business Day, require
the Banks to acquire participations on such Business Day in all or a portion of
the Swing Loans outstanding. Such notice shall specify the aggregate amount of
Swing Loans in which the Banks will participate. The Administrative Agent will,
promptly upon receipt of such notice, give notice to each Bank, specifying in
such notice such Bank's pro rata share of such Swing Loan or Loans, based on its
pro rata share of the Commitments. In furtherance of the foregoing, each Bank
hereby irrevocably, absolutely and unconditionally agrees, upon receipt of
notice as provided above, to pay the Administrative Agent, for the account of
the Swing Bank, such Bank's pro rata share of such Swing Loan or Loans. Each
Bank acknowledges and agrees that its obligation to acquire participations in
Swing Loans pursuant to this paragraph is irrevocable, absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default or
the termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever. Each Bank
shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.2.3
with respect to Revolving Loans made by such Bank (and Section 2.2.3 shall
apply, mutatis mutandis, to the payment obligations of the Banks) and the
Administrative Agent shall promptly pay to the Swing Bank the amounts so
received by it from the Banks. The Administrative Agent shall notify the
Borrower of any participations in any Swing Loan acquired pursuant to this
paragraph and thereafter payments in respect of such Swing Loan shall be made to
the Administrative Agent, for the account of the Banks, rather than for the
account of the Swing Bank. Any amount received by the Swing Bank from the
Borrower in respect of a Swing Loan after receipt by the Swing Bank of the
proceeds of a sale of participations therein shall be promptly remitted to the
Administrative Agent; any such amounts received by the Administrative Agent
shall be promptly remitted by the Administrative Agent to the Banks that shall
have made their payments pursuant to this paragraph and to the Swing Bank, as
their interests may appear. The purchase of participations in a Swing Loan
pursuant to this paragraph shall not relieve the Borrower of any default in the
payment thereof.
2.2.6 No Borrowing Upon Default. Notwithstanding anything to the contrary
contained in this Agreement, no Borrowing may be made if there shall have
occurred a Default, which Default shall not have been cured or waived.
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2.2.7 Certain Payments Deemed Made. If the Borrower is otherwise entitled
under this Agreement to repay any Revolving Loans maturing at the end of an
Interest Period applicable thereto with the proceeds of a new Borrowing, and the
Borrower fails to repay such Revolving Loans using its own moneys and fails to
give a Notice of Borrowing in connection with such new Borrowing, the Banks, at
their election (and without obligation) may deem that a new Base Rate Borrowing
shall have been made on the date such Revolving Loans mature in an amount equal
to the principal amount of the Revolving Loans so maturing, with an Interest
Period of not greater than one (1) month.
2.2.8 Limitation on Borrowings. Notwithstanding anything to the contrary
contained herein, there shall not be more than eight (8) Euro-Dollar Rate
Borrowings outstanding at any given time.
SECTION 2.3. Notes.
2.3.1 Single Notes. The Revolving Loans of each Bank (and, in the case of
the Swing Bank, the Swing Loans) shall be evidenced by a single Revolving Loan
Note payable to the order of such Bank for the account of its Lending Office in
an amount equal to the original principal amount of such Bank's Commitment.
2.3.2 Endorsements to Notes. Upon receipt of each Bank's Note pursuant to
Section 3.1.3, the Administrative Agent shall deliver such Note to such Bank.
Each Bank may record and, prior to any transfer of its Note shall, endorse on
the schedule forming a part thereof appropriate notations to evidence the date,
amount and maturity of each Revolving Loan and, in the case of the Swing Bank,
each Swing Loan, made by it, the date and amount of each payment of principal
made by the Borrower with respect thereto and whether such Revolving Loan is a
Base Rate Loan or Euro-Dollar Rate Loan, and such schedule shall constitute
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Bank's Note; provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligation of the Borrower hereunder or
under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so
to endorse its Notes and to attach to and make a part of any Note a continuation
of any such schedule as and when required.
SECTION 2.4. Maturity of Revolving Loans and Swing Loans.
Each Revolving Loan and Swing Loan included in any Borrowing shall mature,
and the principal amount thereof shall be due and payable, on the last day of
the Interest Period applicable to such Borrowing. In any event, all Revolving
Loans and Swing Loans shall be due and payable in full on the Termination Date,
if not sooner due and payable pursuant to any other provision of this Agreement.
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SECTION 2.5. Interest Rates.
Subject to the terms of Section 8.1:
2.5.1 Base Rate Loans. Each Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the Base Rate, as it may change from time
to time during such Interest Period, plus the Applicable Margin. Such interest
on all Base Rate Loans other than Swing Loans shall be payable monthly, in
arrears, on the last day of each calendar month, in respect of interest accrued
in such month (or portion thereof), commencing on June 30, 1999 (with the first
payment date to cover the period from the Closing Date until June 30, 1999),
until maturity and thereafter on demand. Such interest on all Swing Loans shall
be payable as provided in Section 2.2.5(b) and otherwise monthly, in arrears, on
the last day of each calendar month, in respect of interest accrued in such
month (or portion thereof), commencing on June 30, 1999 (with the first payment
date to cover the period from the Closing Date until June 30, 1999), until
maturity and thereafter on demand. Any overdue principal of and, to the extent
permitted by applicable law, overdue interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the Default Rate.
2.5.2 Euro-Dollar Rate Loans. Each Euro-Dollar Rate Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at the Euro-Dollar Rate for such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof;
provided, however, if any Interest Period is for a period of more than three (3)
months, accrued interest shall also be due and payable at the end of each
consecutive three (3) month period within such Interest Period, commencing with
the first day thereof, as well as on the last day thereof. Any overdue principal
of and, to the extent permitted by law, overdue interest on any Euro-Dollar Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the Default Rate; provided that the mere application of the
Default Rate to these Revolving Loans shall not give rise to the breakage of an
Interest Period, but only an increased margin applicable to these Revolving
Loans.
2.5.3 Administrative Agent to Determine. The Administrative Agent shall
determine each interest rate applicable to the Revolving Loans and Swing Loans
hereunder. The Administrative Agent shall give prompt notice to the Borrower and
the Banks by telecopier of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
2.5.4 Savings Clause. In no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof or otherwise, shall the amount paid
or agreed to be paid to the Banks for the use, forbearance or detention of money
advanced hereunder exceed the highest lawful rate permissible under any law
which a court of competent jurisdiction may deem applicable hereto. In the event
that such a court determines that any Bank has charged or received interest
hereunder in excess of the highest applicable rate, such rate shall
automatically be reduced to the maximum rate permitted by applicable law and
such Bank shall promptly refund to the Borrower any interest received by such
Bank in excess of the maximum lawful rate or, if so requested by the Borrower,
shall apply such excess to the principal balance of that Bank's Note. It is the
intent hereof that the Borrower not pay or contract to pay, and that the Banks
not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by the Borrower under
applicable law.
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SECTION 2.6. Fees.
2.6.1 Unused Commitment Fees. The Borrower shall pay to the Administrative
Agent for the account of each Bank an unused commitment fee calculated at the
per annum rate described below on the average daily amount of such Bank's Unused
Commitment. Such unused commitment fees shall accrue from and including the
Closing Date and be due and payable quarterly in arrears, commencing on June 30,
1999, and continuing on each succeeding September 30, December 31, March 31 and
June 30 thereafter. The per annum rate applicable to the payment of the
foregoing unused commitment fees shall be one-half of one percent (.500%) per
annum initially. From and after the first Pricing Determination Date occurring
subsequent to the Fiscal Quarter of Borrower ending on September 30, 1999, the
unused commitment fee shall be subject to reduction or increase, as applicable
and as set forth in the table below (with references to Levels I through VI
below corresponding to the same Levels I through VI set forth in the definition
of "Applicable Margin" contained in Section 1.1):
Level I .300%
Level II .400%
Level III .500%
Level IV .500%
Level V .500%
Level VI .500%
The unused commitment fee shall be subject to reduction or increase, as
applicable, as set forth in the table above, on a quarterly basis according to
the performance of the Borrower as measured by the Total Debt/EBITDA Ratio,
beginning with the Fiscal Quarter ending on September 30, 1999. Except as set
forth in the last sentence hereof, any such increase or reduction in the unused
commitment fee provided for herein shall be effective on the Pricing
Determination Date for the applicable Fiscal Quarter. If the financial
statements and the Compliance Certificate of the Borrower setting forth the
Total Funded Debt/EBITDA Ratio for the applicable Fiscal Quarter are not
received by the Administrative Agent and the Banks by the date required pursuant
to Sections 5.1.2 and 5.1.3 of this Agreement, the unused commitment fee shall
be determined as if the Total Funded Debt/EBITDA Ratio exceeds the ratio set
forth as Level VI in the foregoing table until such time as such financial
statements and Compliance Certificate are received and any Event of Default
resulting from a failure to timely deliver such financial statements or
Compliance Certificate is waived in writing by the Administrative Agent and the
Required Banks. For the final Fiscal Quarter of any Fiscal Year, the Borrower
may provide the unaudited financial statements of Borrower and its Consolidated
Subsidiaries, subject only to year-end adjustments, for the purpose of
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determining the unused commitment fee; provided, however, if, upon delivery of
the annual audited financial statements required to be submitted by the Borrower
to the Administrative Agent and the Banks pursuant to Section 5.1.1 of this
Agreement, the unused commitment fee, as determined therefrom, is different from
the unused commitment fee determined from such quarterly financial statements,
then (a) the then existing unused commitment fee shall be terminated and,
effective on the first day of the month following receipt by the Administrative
Agent and the Banks of such audited financial statements, the unused commitment
fee shall be the unused commitment fee based upon the audited financial
statements of the Borrower and its Consolidated Subsidiaries for the Fiscal Year
then ended, and (b) on the first day of the first calendar month following
receipt by the Administrative Agent and the Banks of such audited financial
statements, an amount equal to the difference between the amount of the unused
commitment fee that would have been paid using the unused commitment fee
determined based upon such audited financial statements and the amount of unused
commitment fee actually paid during the period in which the reduction or
increase, as applicable, of the unused commitment fee was in effect based upon
the unaudited financial statements for such final Fiscal Quarter of the Fiscal
Year then ended shall be paid (i) if the amount of the unused commitment fee
that should have been paid is greater than the amount of the unused commitment
fee actually paid, by the Borrower to the Administrative Agent, for the benefit
of the Banks or (ii) if the amount of the unused commitment fee that should have
been paid is less than the amount of the unused commitment fee actually paid to
the Borrower, by the Administrative Agent, from funds received from the Banks.
2.6.2 Upfront Fees. The Borrower shall pay to the Administrative Agent for
distribution to the Banks their respective upfront fees, as previously arranged
between the Borrower and each Bank.
2.6.3 Other Fees. The Borrower shall pay to the Administrative Agent such
fees and other amounts at such times as set forth in the Fee Letter, to be
shared, as appropriate, among the Administrative Agent, the Syndication Agent,
the Arranger and the Co-Arranger in the manner and to the extent specified
therein.
SECTION 2.7. Termination or Reduction of Commitments.
2.7.1 Termination of Commitments. The Commitments shall terminate the third
(3rd) anniversary of the Closing Date (the "Termination Date").
2.7.2 Voluntary Ratable Reductions of Commitments. The Borrower shall have
the further right to reduce ratably the Commitments of the Banks at any time or
from time to time, in the minimum amount of Ten Million Dollars ($10,000,000)
per reduction and integral multiples of Five Million Dollars ($5,000,000) beyond
such minimum amount, provided that (i) the Borrower shall have given the
Administrative Agent at least three (3) Domestic Business Days' advance written
notice of such election, (ii) as necessary, the Borrower shall have reduced, by
repayment or prepayment in accordance with the terms of Section 2.9.1, as the
case may be, its Borrowings by that amount necessary to cause total Borrowings
then outstanding not to exceed the aggregate amount of the reduced Commitments
and (iii) any Commitments once so reduced shall not be reinstated by the Banks.
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2.7.3 Mandatory Ratable Reductions in Commitments. The Commitments of the
Banks shall reduce ratably in the amount of any mandatory prepayment of
Borrowings pursuant to Section 2.9.2. Any Commitments once so reduced shall not
be reinstated by the Banks.
SECTION 2.8. Optional Prepayments.
In addition to the Borrower's right to prepay Swing Loans as set forth in
Section 2.2.5, the Borrower may, on any Business Day, upon giving notice to the
Administrative Agent by not later than 11:00 A.M. (Atlanta, Georgia time) on
such Business Day, and making payment to the Administrative Agent, for the
ratable benefit of the Banks, on such Business Day of any compensation required
by Section 8.6, prepay any Base Rate Borrowing in whole at any time, or from
time to time in part in amounts aggregating at least One Million Dollars
($1,000,000) and integral multiples of Five Hundred Thousand Dollars ($500,000),
by paying the principal amount to be prepaid together with accrued interest
thereon to the date of prepayment. Each such optional prepayment shall be
applied to prepay ratably the Revolving Loans of the several Banks included in
such Borrowing. Upon receipt of a notice of prepayment pursuant to this Section
2.8, the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
SECTION 2.9. Mandatory Prepayments.
2.9.1 Reductions in Commitments. On each date, if any, on which the
Commitments are terminated or reduced pursuant to Section 2.7, the Borrower
shall repay or prepay such principal amount of the outstanding Revolving Loans
and Swing Loans, if any, as may be necessary so that after such payment the
aggregate unpaid principal amount of the Revolving Loans and Swing Loans is
reduced to zero, in the case of any termination, or does not exceed the
aggregate amount of the Commitments as then reduced, in the case of any
reduction, plus, in each case, accrued interest thereon to the date of
prepayment and any compensation required by Section 8.6.
2.9.2 Asset Sales. To the extent that, in accordance with the provisions of
Section 5.11, the Borrower or any of its Subsidiaries consummates an Asset Sale
(except of Non-Core Assets) and (i) after giving effect to such Asset Sale, the
Net Cash Proceeds from all Asset Sales (except of Non-Core Assets) consummated
to date during the then current Fiscal Year exceed Ten Million Dollars
($10,000,000) and (ii) as of the Borrower's most recently ended Fiscal Quarter,
the Borrower's and its Consolidated Subsidiaries' Total Debt/EBITDA was greater
than or equal to 2.0:1.0, the Borrower shall apply an amount equal to seventy
five percent (75%) of the Net Cash Proceeds from such Asset Sale (other than any
thereof which, together with Net Sale Proceeds from Asset Sales (except of
Non-Core Assets) previously consummated in such Fiscal Year, do not exceed Ten
Million Dollars ($10,000,000)), to repay or prepay outstanding Revolving Loans
and, if Revolving Loans are reduced to zero, Swing Loans, plus, in each case,
accrued interest thereon to the date of prepayment and any compensation required
by Section 8.6. In each such case, the Commitments of the Banks shall also be
simultaneously reduced as provided in Section 2.7.3.
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SECTION 2.10. General Provisions as to Payments.
2.10.1 Timing. The Borrower shall make each payment of principal of, and
interest on, the Revolving Loans and the Swing Loans and of unused commitment
and other fees hereunder, not later than 11:00 A.M. (Atlanta, Georgia time) on
the date when due, in federal or other funds immediately available in Atlanta,
Georgia, to the Administrative Agent's Address. The Administrative Agent will
promptly distribute to each Bank its ratable share of each such payment received
by the Administrative Agent for the account of the Banks.
2.10.2 Next Banking Day. Whenever any payment of principal of, or interest
on, any Base Rate Loans or of unused commitment or other fees shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of or interest on, the Euro-Dollar Rate Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case the date for payment
thereof shall be the next preceding Euro-Dollar Business Day.
SECTION 2.11. Computation of Interest and Fees.
Interest on the Revolving Loans and Swing Loans shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period from and including the first day thereof
to but excluding the last day thereof. Unused commitment fees and any other fees
payable hereunder on a per annum basis shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed (including the first
day but excluding the last day).
ARTICLE 3. CONDITIONS TO BORROWINGS
SECTION 3.1. Conditions to First Borrowing.
The obligation of each Bank to make a Revolving Loan on the occasion of the
first Borrowing is subject to the satisfaction of the conditions set forth in
Section 3.2 and each of the following conditions precedent:
3.1.1 Subordinated Debt. The Borrower shall have obtained cash proceeds in
the amount of at least Ninety-Five Million Dollars ($95,000,000), from the
issuance of Subordinated Debt, on terms acceptable to the Banks.
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3.1.2 First Union Line of Credit. Borrower shall have terminated its line
of credit with First Union National Bank and shall have paid in full its
obligations thereunder.
3.1.3 Documents. The Administrative Agent shall have received each of the
following in a sufficient number of counterparts (except as to the Notes) for
delivery of a counterpart to each Bank and retention of one counterpart by the
Administrative Agent:
(A) This Agreement. From each of the parties hereto of either (i) a duly
executed counterpart of this Agreement signed by such party or (ii) a facsimile
transmission stating that such party has duly executed a counterpart of this
Agreement and sent such counterpart to the Administrative Agent;
(B) Notes. A duly executed Note for the account of each Bank complying with
the provisions of Section 2.3;
(C) Subsidiary Guaranty. A Subsidiary Guaranty, duly executed by each
Consolidated Subsidiary of the Borrower which is a wholly-owned Subsidiary of
the Borrower (excepting therefrom any having total assets of less than Ten
Thousand Dollars ($10,000) on the Closing Date and any which, as a result of
planned transfers of Capital Stock to store managers, will be wholly-owned
Subsidiaries of the Borrower for a period of less than ninety (90) days after
the Closing Date).
(D) Opinion. An opinion (together with any opinions of local counsel relied
on therein) of legal counsel for the Borrower and the Subsidiary Guarantors,
dated as of the Closing Date, substantially in the form of Exhibit D and
covering such additional matters relating to the transactions contemplated
hereby as the Administrative Agent or any Bank may reasonably request;
(E) Closing Certificate. A certificate ("Closing Certificate"), dated as of
the Closing Date, substantially in the form of Exhibit E, signed by the chief
financial officer of the Borrower, to the effect that (i) no Default has
occurred and is continuing on the date of the first Borrowing and (ii) the
representations and warranties of the Borrower contained in Article 4 are true
on and as of the Closing Date;
(F) Other Documents. All documents which the Administrative Agent or any
Bank may reasonably request relating to the existence of the Borrower and each
Subsidiary Guaranty, the corporate authority for and the validity of this
Agreement, the Notes, the Subsidiary Guaranty executed on the Closing Date and
the other Loan Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Administrative Agent, including, without
limitation, certificates of incumbency of the Borrower and each Subsidiary
Guarantor, signed by the Secretary or an Assistant Secretary of the Borrower and
each Subsidiary Guarantor, in substantially the form of Exhibit F, certifying as
to the names, true signatures and incumbency of the officer or officers of the
Borrower and each Subsidiary Guarantor authorized to execute and deliver the
Loan Documents and the action taken by the Board of Directors of the Borrower
and each Subsidiary Guarantor authorizing the Borrower's execution, delivery and
performance of this Agreement and the other Loan Documents to which it is party
and each Subsidiary Guarantor's execution, delivery and performance of the
Subsidiary Guaranty to be executed and delivered on the Closing Date and the
other Loan Documents to which it is party.
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(G) Borrowing Notice. A Notice of Borrowing.
SECTION 3.2. Conditions to All Borrowings.
The obligation of each Bank to make a Revolving Loan on the occasion of
each Borrowing is subject to the satisfaction of the following conditions:
3.2.1 Notice. Receipt by the Administrative Agent of a Notice of Borrowing;
3.2.2 No Default. The fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
3.2.3 Truth of Representations. The fact that the representations and
warranties of the Borrower contained in Article 4 of this Agreement shall be
true on and as of the date of such Borrowing; and
3.2.4 No Overadvance. The fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Revolving Loans of each Bank (and,
in the case of the Swing Bank, the Swing Loans) will not exceed the amount of
its Commitment.
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts specified
in Sections 3.2.2, 3.2.3 and 3.2.4.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.1. Corporate Existence and Power.
Each of the Borrower 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.
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SECTION 4.2. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Borrower of this Agreement,
the Notes and the other Loan Documents to which it is party and by each
Subsidiary Guarantor of the Subsidiary Guaranty and the other Loan Documents to
which it is party (i) are within the Borrower'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 Borrower or any Subsidiary Guarantor or, to
the best of the Borrower's knowledge, of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Borrower or any
of its Subsidiaries, and (v) do not result in the creation or imposition of any
Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.3. Binding Effect.
This Agreement constitutes a valid and binding agreement of the Borrower
enforceable in accordance with its terms, and the Notes, the Subsidiary Guaranty
and the other Loan Documents, when executed and delivered in accordance with
this Agreement, will constitute valid and binding obligations of the Borrower,
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.
SECTION 4.4. Financial Information; No Material Adverse Effect.
The audited balance sheet of the Borrower 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 Borrower and its Consolidated Subsidiaries for the Fiscal Year then
ended, and the unaudited balance sheet of the Borrower 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 Borrower and its Consolidated Subsidiaries for the Fiscal
Quarter then ended, copies of which have been delivered to each of the Banks,
fairly present, in conformity with GAAP, the financial position of the Borrower
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 Closing 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 5.1.1 and 5.1.2. 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 Closing 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 Borrower pursuant to Section 5.1.1.
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SECTION 4.5. No Litigation.
There is no action, suit or proceeding pending, or to the knowledge of the
Borrower threatened, against or affecting the Borrower 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
Schedule 4.5, or which in any manner draws into question the validity of, or
could impair the ability of the Borrower or any Subsidiary Guarantor to perform
its obligations under, this Agreement, the Notes, the Subsidiary Guaranty or any
of the other Loan Documents.
SECTION 4.6. Compliance with Laws Generally; Compliance with ERISA.
The Borrower 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 Borrower's knowledge, (i)
the Borrower 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 Borrower nor any member of the Controlled Group is or ever has been
obligated to contribute to any Multiemployer Plan.
SECTION 4.7. Taxes.
There have been filed on behalf of the Borrower 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 Borrower 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 Borrower and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate.
SECTION 4.8. Subsidiaries.
As of the Closing Date, the Borrower has no Subsidiaries, except for the
Subsidiaries set forth on Schedule 4.8, all of which are Consolidated
Subsidiaries.
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SECTION 4.9. Not a Public Utility, Holding Company, Investment Company or
Investment Adviser.
Neither the Borrower 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.
SECTION 4.10. Ownership of Property; Liens.
The Borrower 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.
SECTION 4.11. No Default.
Neither the Borrower 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 Default has occurred and is continuing.
SECTION 4.12. Full Disclosure.
All written information and, to the best of the Borrower's knowledge, all
other information, heretofore furnished by the Borrower to the Administrative
Agent, the Syndication Agent, the Arranger, the Co-Arranger or any Bank for
purposes of or in connection with this Agreement or any transaction contemplated
hereby is, and all such information hereafter furnished by the Borrower to the
Administrative Agent, the Syndication Agent, the Arranger, the Co-Arranger or
any Bank 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 Borrower has disclosed in its offering circular dated June 2,
1999, a copy of which has been delivered to each of the Banks, or otherwise in a
writing delivered to the Banks, any and all facts which could reasonably be
expected to have or cause a Material Adverse Effect.
SECTION 4.13. Environmental Matters.
To the best of the Borrower's knowledge, (i) neither the Borrower nor any
Subsidiary is subject to any Environmental Liability which could have or cause a
Material Adverse Effect and neither the Borrower nor any Subsidiary has been
designated as a potentially responsible party under CERCLA or under any state
statute similar to CERCLA. None of the Properties located in the United States,
owned by either the Borrower 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; (ii) to the
best of the Borrower'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
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from the Properties or are otherwise present at, in or under the Properties,
owned or operated by either the Borrower or a Subsidiary, or, to the best of the
knowledge of the Borrower, 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 (iii) to the best
of the Borrower's knowledge, the Borrower and its Subsidiaries are in compliance
with all Environmental Requirements in connection with the ownership, use and
operation of the Properties and the Borrower's and such Subsidiary's respective
businesses.
SECTION 4.14. Capital Stock.
All Capital Stock, debentures, bonds, notes and all other securities of the
Borrower 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.
SECTION 4.15. Margin Stock.
Neither the Borrower 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 Revolving Loan or Swing
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.
SECTION 4.16. Solvency.
After giving effect to the execution and delivery of the Loan Documents,
the making of the Revolving Loans and Swing Loans under this Agreement and the
incurrence of the Subordinated Debt described in Section 3.1.1, the Borrower
will be Solvent.
SECTION 4.17. Possession of Franchises, Licenses, Etc.
The Borrower 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 Borrower 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.
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SECTION 4.18. Insurance.
The Borrower 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.
SECTION 4.19. Y2K Plan.
By the Closing Date, the Borrower 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 Borrower and such Subsidiaries will be Year 2000 Compliant and
Ready.
ARTICLE 5. COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder
or any amount payable hereunder or under any Note remains unpaid:
SECTION 5.1. Information.
The Borrower will deliver to the Administrative Agent and each of the
Banks:
5.1.1 Annual Audit. 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
Borrower 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 5.1.5 or Section 5.1.6;
5.1.2 Interim Statements. 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 Borrower 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 Borrower; provided that the
information required by this paragraph may be satisfied by delivery of
information pursuant to Section 5.1.5 or Section 5.1.6;
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5.1.3 Compliance Certificates. Simultaneously with the delivery of each set
of financial statements referred to in Sections 5.1.1 and 5.1.2, a certificate,
substantially in the form of Exhibit G (a "Compliance Certificate"), of the
chief financial officer of the Borrower (i) setting forth in reasonable detail
the calculations required to establish whether the Borrower was in compliance
with the requirements of Sections 5.4, 5.5, 5.6, 5.7 and 5.20 on the date of
such financial statements and (ii) stating whether any Default exists on the
date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
5.1.4 Default Notice. Promptly (and, in any event, within five (5) Domestic
Business Days) after the Borrower becomes aware of the occurrence of any
Default, a certificate of the chief financial officer of the Borrower setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
5.1.5 Proxy. Promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
5.1.6 Registration Statements. Promptly upon the filing thereof, copies of
all registration statements and annual, quarterly or monthly reports which the
Borrower shall have filed with the Securities and Exchange Commission;
5.1.7 ERISA Notices. 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; and
5.1.8 Y2K Plan. Simultaneously with the delivery of each set of annual and
quarterly financial statements referred to in Section 5.1.1 and Section 5.1.2
until such time as Borrower is Year 2000 Compliant and Ready, a statement of the
chief executive officer, chief financial officer, or chief technology officer of
the Borrower 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 Borrower'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 Borrower becomes aware of any material deviations from the Y2K
Plan or any Y2K Plan Milestones which would be reasonably likely to cause the
Borrower 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 Borrower setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto shall be
delivered to each of the Banks promptly thereafter.
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5.1.9 Other Reports. From time to time such additional information
regarding the financial position or business of the Borrower and its
Subsidiaries as the Administrative Agent, at the request of any Bank, may
reasonably request.
SECTION 5.2. Inspection of Property, Books and Records.
The Borrower 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 Bank at such Bank's expense prior
to the occurrence of a Default and at the Borrower's expense after the
occurrence and during the continuance of a 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 Borrower agrees to cooperate and assist in such visits and
inspections in each case at such reasonable times and as often as may reasonably
be desired.
SECTION 5.3. Y2K. The Borrower 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.
SECTION 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.
SECTION 5.5. Fixed Charge Coverage Ratio.
Borrower'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.
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SECTION 5.6. Total Debt/EBITDA Ratio.
The ratio which (i) the Total Debt of the Borrower 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 Borrower
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 Borrower 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 Borrower 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 Borrower shall determine, but subject to
prior review with, and approval by, the Administrative Agent.
SECTION 5.7. Total Senior Debt/EBITDA Ratio. The ratio which (i) the Total
Senior Debt of the Borrower 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 Borrower 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
SECTION 5.8. Negative Pledge.
The Borrower will not, nor will the Borrower 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 Borrower, 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
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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 Borrower 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 Borrower or any
Subsidiary subsequent to the Closing Date, 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 Borrower 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 Borrower 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 Borrower or
its Subsidiaries under operating leases.
SECTION 5.9. Maintenance of Existence.
Except as permitted in Section 5.10 and 5.11, the Borrower 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.
SECTION 5.10. Dissolution.
Neither the Borrower 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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SECTION 5.11. Consolidations, Mergers and Sales of Assets.
The Borrower 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 5.20, the Borrower or any Subsidiary may merge with another Person
(which is not the Borrower 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
Borrower or such Subsidiary (as the case may be) is the corporation surviving
such merger and (C) immediately after giving effect to such merger, no Default
shall have occurred and be continuing, (ii) any Subsidiaries of the Borrower may
(A) merge or consolidate with each other or with the Borrower (so long as the
Borrower is the corporation surviving such merger), or (B) sell assets to each
other or to the Borrower and (iii) in connection with acquisitions permitted
pursuant to clause (xii) of Section 5.20, the Borrower 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 Borrower may
consummate Asset Sales so long as, unless otherwise approved in writing by the
Required Banks, 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,
to the extent required thereby, and to the extent not so required, to make
optional prepayments of the Revolving Loans pursuant to Section 2.8 hereof and
for working capital in Borrower's business, but for no other purpose, and (v) no
Default has occurred which is then continuing or otherwise would result from
such sale occurring.
SECTION 5.12. Use of Proceeds.
The proceeds of the initial Revolving Loans will be used by the Borrower to
refinance all indebtedness then outstanding under its Credit Agreement, dated as
of April 1, 1998, with the banks named therein and Wachovia, as Agent, as
amended to date, and to refinance any other Debt which, pursuant to the terms of
this Agreement, is required to be paid in full and refinanced as of the Closing
Date. The proceeds of all subsequent Revolving Loans and all Swing Loans will be
used by the Borrower solely for working capital, and for no other purpose except
that Borrower may use such proceeds to settle any Equity Forward Contracts then
permitted to exist hereunder. Without limitation of the foregoing, no portion of
the proceeds of the Revolving Loans or Swing Loans will be used by the Borrower
(i) in connection with, whether directly or indirectly, any tender offer for, or
other acquisition of, stock of any corporation with a view towards obtaining
control of such other corporation even if such acquisition is otherwise
permitted hereunder, (ii) directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any Margin Stock,
(iii) generally, to finance investments, even if such investments are otherwise
permitted hereunder, or (iv) for any other purpose in violation of any term of
this Agreement or of any applicable law or regulation.
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SECTION 5.13. Compliance with Laws; Payment of Taxes.
The Borrower 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 Borrower 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 Borrower or any
Subsidiary, except liabilities being contested in good faith and against which,
if requested by the Administrative Agent, the Borrower will set up reserves in
accordance with GAAP.
SECTION 5.14. Insurance.
The Borrower will maintain, and will cause each of its Subsidiaries to
maintain (either in the name of the Borrower 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.
SECTION 5.15. Change in Fiscal Year.
The Borrower will not change its Fiscal Year without the consent of the
Required Banks.
SECTION 5.16. Maintenance of Property.
The Borrower shall, and shall cause each Subsidiary to, maintain all of its
Properties in good condition, repair and working order, ordinary wear and tear
excepted.
SECTION 5.17. Environmental Notices.
The Borrower shall furnish to the Administrative Agent, promptly after the
Borrower 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.
SECTION 5.18. Environmental Matters.
The Borrower 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.
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SECTION 5.19. Environmental Releases.
The Borrower 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.
SECTION 5.20. Investments.
The Borrower will not make (nor will the Borrower 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 Borrower of
its Capital Stock in exchange for cash consideration), provided, however, that,
notwithstanding the foregoing, the Borrower (or any Subsidiary) may, from time
to time, undertake the following, without the necessity of obtaining the
Required Banks' prior written consent thereto:
(i) 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);
(ii) Capital Expenditures. Make capital expenditures in the ordinary course
of its business;
(iii) Franchise Fees. Pay franchisee fees and royalties to its franchisors
in the ordinary course of its business;
(iv) 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;
(v) 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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(vi) Surplus Cash. Consistent at all times with the Borrower'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 Bank
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 Moody's, and (D) fixed or adjustable
rate corporate debt securities with a credit rating of at least double A (Aa/AA)
by either Moody's or Standard & Poors, provided that any fixed rate debt
securities have a maturity of one year or less;
(vii) Subsidiaries. Have investments in Consolidated Subsidiaries of the
Borrower in the ordinary course of, and pursuant to the reasonable requirements
of, the Borrower'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 Closing Date, or has been committed to be invested as
of the Closing Date, as set forth on Schedule 5.20 attached hereto (without
credit for any reductions thereof which may occur subsequent to the Closing
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 Closing Date, not to exceed Two Million Five Hundred Thousand Dollars
($2,500,000) per annum, measured from the Closing 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 (x) of this
Section 5.20, ten percent (10%) of the sum of (A) Borrower'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 Borrower; i.e., as a Capitalized
Lease Obligation owing to Borrower as lessor or sublessor.
(viii) Travel Advances. Make travel and similar advances to employees from
time to time in the ordinary course of business;
(ix) Special Life Insurance Program. The Borrower 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 Tom E. DuPree,
Jr. and his spouse Anne DuPree, 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) Borrower 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;
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(x) Restaurant Concepts. So long as no 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 (vii) of
this Section 5.20, ten percent (10%) of the sum of (A) Borrower's Stockholders
Equity at any time plus (B) the amount of the TECONS at such time;
(xi) Other Advances. Make loans or advances to Affiliates (excluding
therefrom, however, Subsidiaries), shareholders, directors, officers or
employees in addition to those described in clauses (i) through (x) 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 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);
(xii) 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 Borrower 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 Closing 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 Borrower and its Consolidated Subsidiaries and (2) Fifty Million
Dollars ($50,000,000) , (ii) after giving effect to all such acquisitions, no
Default has occurred and is continuing and (iii) after giving effect to all such
acquisitions, Borrower'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 Borrower for which financial
statements have been delivered to the Administrative Agent and the Banks
pursuant to Section 5.1.2, 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 Closing Date, any of
the terms or conditions set forth in this Section 5.20 (or in Section 5.21 or
Section 5.22 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 Borrower or any other
Consolidated Subsidiary, (ii) pay any indebtedness or other obligation owed to
the Borrower or any other Consolidated Subsidiary, (iii) make loans or advances
to the Borrower or any other Consolidated Subsidiary, or (iv) transfer any of
its property or assets to Borrower 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 Borrower'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.
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SECTION 5.21. Debt.
The Borrower 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 4.4; (ii) Debt and
Guarantees incurred pursuant to this Agreement or the other Loan Documents;
(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 Event of Default or 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 (vii)
and (x) of Section 5.20; (ix) Debt arising under or in connection with interest
rate protection contracts entered into by the Borrower with a Bank in the
ordinary course of business, and not for speculation; (x) in the case of the
Borrower and Subsidiary Guarantors, Capitalized Lease Obligations;(xi) other
Debt for Borrowed Money in respect of letters of credit issued in conjunction
with debts, liabilities and obligations arising from time to time in the
ordinary course of, and pursuant to the customary operation of, Borrower's
business; and (xii) the Subordinated Debt.
SECTION 5.22. Dividends and Distributions.
The Borrower will not, nor will the Borrower 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 5.25); 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 Default has
occurred and is continuing or would be caused thereby, the Borrower 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 Borrower or another Consolidated Subsidiary which is a Subsidiary
Guarantor and (C) Borrower may make Distributions on the TECONS.
SECTION 5.23. Transactions with Affiliates.
The Borrower 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 Borrower or said Subsidiary than
would be obtained in a comparable arm's length transaction with a Person not an
Affiliate.
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SECTION 5.24. Subsidiary Guarantees.
The Borrower shall cause each Consolidated Subsidiary of the Borrower
acquired or coming into existence after the Closing Date which is a wholly-owned
Subsidiary, directly or indirectly, of Borrower (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 Borrower which, as a
result of planned transfers of Capital Stock to store managers, (A) will be a
wholly-owned Subsidiary of the Borrower 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 Borrower 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 5.20(vii), as if such Subsidiaries
were not wholly-owned Subsidiaries. The requirements of this Section 5.24 shall
likewise apply to any Subsidiary as to which the Borrower is not required to
deliver a Subsidiary Guaranty pursuant to one of the exceptions set forth in the
parenthetical to Section 3.1.3(C) as and when such exception no longer applies.
In addition to the foregoing, the Borrower may, at its option, at any time,
cause 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.
SECTION 5.25.Stock Purchases, Etc.
The Borrower will not, and will not permit any Consolidated Subsidiary of
the Borrower, to purchase any Capital Stock of the Borrower, 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
Closing Date, and (ii) so long as no Default has occurred and is continuing or
would be caused thereby, other purchases of Borrower'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 Borrower 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 Closing 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 Closing Date.
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SECTION 5.26. No Prepayment of Senior Notes.
The Borrower will not prepay, and will not permit any Subsidiary to prepay,
the principal amount of any of the Borrower's 9-3/4% Senior Notes, due 2006,
heretofore issued by the Borrower in the aggregate principal amount of
$125,000,000, nor will Borrower repurchase or permit any Subsidiary to
repurchase, such Notes.
SECTION 5.27. Subordinated Debt.
The Borrower will not, and will to 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.
ARTICLE 6. DEFAULTS
SECTION 6.1. Events of Default.
If one or more of the following events ("Events of Default") shall have
occurred and be continuing:
6.1.1 Non-Payment. The Borrower (i) shall fail to pay when due any
principal of any Revolving Loan or Swing Loan or (ii) shall fail to pay any
interest on any Revolving Loan or Swing Loan within five (5) Domestic Business
Days after such interest shall become due, or (iii) shall fail to pay any fee or
other amount payable hereunder or under any Loan Document within five (5)
Domestic Business Days after such fee or other amount becomes due; or
6.1.2 Failure to Observe Certain Covenants. The Borrower shall fail to
observe or perform any covenant contained in Sections 5.3 through 5.12, 5.14,
5.15, or 5.20 through 5.28, inclusive; or
6.1.3 Failure to Observe Covenants Generally. The Borrower shall fail to
observe or perform any covenant or agreement contained or incorporated by
reference in this Agreement (other than those covered by Sections 6.1.1 and
6.1.2) and such failure shall not have been cured within ten (10) days after the
earlier to occur of (i) written notice thereof has been given to the Borrower by
the Administrative Agent at the request of any Bank or (ii) an executive, senior
financial or accounting officer of the Borrower otherwise becomes aware of any
such failure; or
6.1.4 Misrepresentation. Any representation, warranty, certification or
statement made by the Borrower in Article IV of this Agreement or in any
certificate, financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect or misleading in any material
respect when made (or deemed made); or
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6.1.5 Cross-Default. The Borrower or any Subsidiary shall fail to make any
payment in respect of any debt, liability or obligation outstanding individually
or in the aggregate with all other such debts, liabilities or obligations, equal
to or in excess of Five Hundred Thousand Dollars ($500,000), other than the
Notes, when due or within any applicable grace period; or any event or condition
shall occur which results in the acceleration of the maturity of any such debt,
liability or obligation outstanding of the Borrower or any Subsidiary
individually or in the aggregate with all other such debts, liabilities or
obligations equal to or in excess of Five Hundred Thousand Dollars ($500,000) or
the mandatory prepayment or purchase of any such debt, liability or obligation
by the Borrower (or its designee) or such Subsidiary (or its designee)
individually or in the aggregate with all other such debts, liabilities or
obligations equal to or in excess of Five Hundred Thousand Dollars ($500,000)
prior to the scheduled maturity thereof, or enables (or, with the giving of
notice or lapse of time or both, would enable) the holders of any such debt,
liability or obligation individually or in the aggregate with all other such
debts, liabilities or obligations equal to or in excess of Five Hundred Thousand
Dollars ($500,000) or any Person acting on such holders' behalf to accelerate
the maturity thereof or require the mandatory prepayment or purchase thereof
prior to the scheduled maturity thereof, without regard to whether such holders
or other Person shall have exercised or waived their right to do so; or
6.1.6 Voluntary Bankruptcy. The Borrower or any Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
6.1.7 Involuntary Bankruptcy. An involuntary case or other proceeding shall
be commenced against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days; or an order for relief shall be entered against the
Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter
in effect; or
6.1.8 ERISA. The Borrower or any member of the Controlled Group shall fail
to pay when due any material amount which it shall have become liable to pay to
the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate
a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any
member of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall
not have been dismissed within thirty (30) days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or
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6.1.9 Judgments. One or more judgments or orders for the payment of money
in an aggregate amount equal to or greater than Five Hundred Thousand Dollars
($500,000) shall be rendered against the Borrower or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of thirty
(30) days; or
6.1.10 Tax Liens. A federal tax Lien shall be filed against the Borrower
under Section 6323 of the Code or a Lien of the PBGC shall be filed against the
Borrower or any Subsidiary under Section 4068 of ERISA and in either case such
Lien shall remain undischarged for a period of thirty (30) days after the date
of filing; or
6.1.11 Change of Control. Tom E. DuPree, Jr. shall cease to own and
control, beneficially and with power to vote, at least fifteen percent (15%) of
the outstanding shares of the voting common stock of the Borrower; or any Person
(other than Tom E. DuPree, Jr.) or two or more Persons acting in concert shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934) of
twenty percent (20%) or more of the outstanding shares of the voting common
stock of the Borrower; or as of any date, a majority of the Board of Directors
of the Borrower consists of individuals who were not either (A) directors of the
Borrower as of the corresponding date of the previous year, (B) selected or
nominated to become directors by a Board of Directors of the Borrower of which a
majority consisted of individuals described in clause (A), or (C) selected or
nominated to become directors by the Board of Directors of the Borrower of which
a majority consisted of individuals described in clause (A) and individuals
described in clause (B); or
6.1.12 Material Adverse Effect. The occurrence of any event, act,
occurrence, or condition which the Required Banks determine either does or has a
reasonable probability of causing, or resulting in, a Material Adverse Effect;
or then, and in every such event, the Administrative Agent shall (i) if
requested by the Required Banks, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate, and (ii) if requested by the
Required Banks, by notice to the Borrower declare the Notes (together with
accrued interest thereon) to be, and the Notes shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower, together with
interest at the Default Rate accruing on the principal amount thereof from and
after the date of such Event of Default; provided that if any Event of Default
specified in Sections 6.1.6 or 6.1.7 above occurs with respect to the Borrower
or any Subsidiary, without any notice to the Borrower or any other acts by the
Administrative Agent or the Banks, the Commitments shall thereupon terminate and
the Notes (together with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower, together with interest thereon
at the Default Rate accruing on the principal amount thereof from and after the
date of such Event of Default. Notwithstanding the foregoing, the Administrative
Agent shall have available to it all other remedies at law or equity, and shall
exercise any one or all of them at the request of the Required Banks.
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SECTION 6.2. Notice of Default.
The Administrative Agent shall give notice to the Borrower of any Default
under Section 6.1.3 promptly upon being requested to do so by any Bank and shall
thereupon notify all the Banks thereof.
ARTICLE 7. THE ADMINISTRATIVE AGENT
SECTION 7.1. Appointment; Powers and Immunities.
Each Bank, the Syndication Agent, the Arranger and the Co-Arranger hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Administrative Agent by the terms hereof and
thereof, together with such other powers as are reasonably incidental thereto.
The Administrative Agent: (a) shall have no duties or responsibilities except as
expressly set forth in this Agreement and the other Loan Documents, and shall
not by reason of this Agreement or any other Loan Document be a trustee for any
Bank, the Syndication Agent, the Arranger or the Co-Arranger; (b) shall not be
responsible to the Banks, the Arranger or the Co-Arranger for any recitals,
statements, representations or warranties contained in this Agreement or any
other Loan Document, or in any certificate or other document referred to or
provided for in, or received by any Bank, the Arranger or the Co-Arranger under,
this Agreement or any other Loan Document, or for the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or any other document referred to or provided for herein or therein or
for any failure by the Borrower to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and then only on terms and conditions
satisfactory to the Administrative Agent; and (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document or instrument referred to or provided for herein
or therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care. The
provisions of this Article VII are solely for the benefit of the Administrative
Agent and the Banks, the Syndication Agent, the Arranger and the Co-Arranger,
and the Borrower shall not have any rights as a third party beneficiary of any
of the provisions hereof. In performing its functions and duties under this
Agreement and under the other Loan Documents, the Administrative Agent shall act
solely as agent of the Banks, the Syndication Agent, the Arranger and the
Co-Arranger and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for the Borrower.
The duties of the Administrative Agent shall be ministerial and administrative
in nature, and the Administrative Agent shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship in respect of any
Bank, the Syndication Agent, the Arranger or the Co-Arranger.
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SECTION 7.2. Reliance by Administrative Agent.
The Administrative Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telefax,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent and accountants or other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Required
Banks, and such instructions of the Required Banks in any action taken or
failure to act pursuant thereto shall be binding on all of the Banks.
SECTION 7.3. Defaults.
The Administrative Agent shall not be deemed to have knowledge of the
occurrence of a Default or an Event of Default (other than the nonpayment of
principal of or interest on the Revolving Loans or Swing Loans) unless the
Administrative Agent has received notice from a Bank or the Borrower specifying
such Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives such a notice of
the occurrence of a Default or an Event of Default, the Administrative Agent
shall give prompt notice thereof to the Banks. The Administrative Agent shall
give each Bank prompt notice of each nonpayment of principal of or interest on
the Revolving Loans or Swing Loans whether or not it has received any notice of
the occurrence of such nonpayment. The Administrative Agent shall (subject to
Section 9.6) take such action hereunder with respect to such Default or Event of
Default as shall be directed by the Required Banks, provided that, unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks.
SECTION 7.4. Rights of Administrative Agent as a Bank.
With respect to the Revolving Loans and Swing Loans made by it, Wachovia in
its capacity as a Bank hereunder shall have the same rights and powers hereunder
as any other Bank and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include Wachovia in its individual capacity. The
Administrative Agent may (without having to account therefor to any Bank) accept
deposits from, lend money to and generally engage in any kind of banking, trust
or other business with the Borrower (and any of its Affiliates) as if it were
not acting as the Administrative Agent, and the Administrative Agent may accept
fees and other consideration from the Borrower (in addition to any agency fees
and arrangement fees heretofore agreed to between the Borrower and the
Administrative Agent) for services in connection with this Agreement or any
other Loan Document or otherwise without having to account for the same to the
Banks.
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SECTION 7.5. Indemnification.
Each Bank severally agrees to indemnify the Administrative Agent, to the
extent the Administrative Agent shall not have been reimbursed by the Borrower,
ratably in accordance with its Commitment, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, counsel fees and disbursements) or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of this Agreement or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (excluding, unless an Event of Default has
occurred and is continuing, the normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however that no Bank shall be liable for any of the foregoing to the extent they
arise from the gross negligence or willful misconduct of the Administrative
Agent. If any indemnity furnished to the Administrative Agent for any purpose
shall, in the opinion of the Administrative Agent, be insufficient or become
impaired, the Administrative Agent may call for additional indemnity and cease,
or not commence, to do the acts indemnified against until such additional
indemnity is furnished.
SECTION 7.6. Payee of Note Treated as Owner.
The Administrative Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent and the provisions of Section 9.8 have been satisfied. Any requests,
authority or consent of any Person who at the time of making such request or
giving such authority or consent is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee or assignee of that Note or of
any Note or Notes issued in exchange therefor or replacement thereof.
SECTION 7.7. Nonreliance on Administrative Agent and Other Banks.
Each Bank agrees that it has, independently and without reliance on the
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Loan Documents. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or any of the other
Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Borrower or any other
Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Administrative Agent
hereunder or under the other Loan Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any other Person (or any of their Affiliates) which may come into
the possession of the Administrative Agent.
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SECTION 7.8. Failure to Act.
Except for action expressly required of the Administrative Agent hereunder
or under the other Loan Documents, the Administrative Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction by the Banks of their
indemnification obligations under Section 7.5 against any and all liability and
expense which may be incurred by the Administrative Agent by reason of taking,
continuing to take, or failing to take any such action.
SECTION 7.9. Resignation of Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, the Administrative Agent may resign at any time by
giving notice thereof to the Banks. Upon any such resignation, the Required
Banks shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Banks and shall have accepted such appointment within thirty (30) days after the
retiring Administrative Agent's notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Article 7
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent
hereunder.
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ARTICLE 8. CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period, the Administrative
Agent determines that deposits in Dollars (in the applicable amounts) are not
being offered in the relevant market for such Interest Period, or the Required
Banks advise the Administrative Agent that the Adjusted LIBOR Rate, as
determined by the Administrative Agent, will not adequately and fairly reflect
the cost to such Banks of funding the relevant Euro-Dollar Rate Loans for such
Interest Period, then, the Administrative Agent shall forthwith give notice
thereof to the Borrower and the Banks, whereupon until the Administrative Agent
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, the obligations of the Banks to make the Euro-Dollar Rate Loans
specified in such notice shall be suspended. Unless the Borrower notifies the
Administrative Agent at least two (2) Domestic Business days before the date of
any Borrowing of such Euro-Dollar Rate Loans for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, such Borrowing
shall instead be made as a Base Rate Borrowing.
SECTION 8.2. llegality.
If, after the date hereof, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof (any such
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for any Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Rate Loans and such Bank shall
so notify the Administrative Agent, the Administrative Agent shall forthwith
give notice thereof to the other Banks and the Borrower, whereupon until such
Bank notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Rate Loans shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Lending Office if such designation will avoid the need for giving such
notice and will not, in the judgment of such Bank, be otherwise disadvantageous
to such Bank, in any respect deemed material by such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Rate Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each Euro-Dollar Rate Loan of such Bank, together with
accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Rate
Loan, the Borrower shall borrow, pursuant to Section 2.2.3, a Base Rate Loan in
an equal principal amount from such Bank (on which interest and principal shall
be payable contemporaneously with the related Euro-Dollar Rate Loans of the
other Banks), and such Bank shall make such a Base Rate Loan.
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SECTION 8.3. Increased Cost and Reduced Return.
8.3.1 Change of Law. If after the date hereof, a Change of Law or
compliance by any Bank (or its Lending Office) with any request or directive
(whether or not having the force of law) of any Authority either: (i) shall
subject any Bank (or its Lending Office) to any tax, duty or other charge with
respect to its Revolving Loans (or, in the case of the Swing Bank, Swing Loans),
its Note or its obligation to make Revolving Loans, or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the principal of or
interest on its Revolving Loans (or in the case of the Swing Banks, the Swing
Loans) or any other amounts due under this Agreement in respect of its Revolving
Loans (or, in the case of the Swing Bank, Swing Loans) or its obligation to make
Revolving Loans (except for changes in the rate of tax on the overall net income
of such Bank or its Lending Office imposed by the jurisdiction in which such
Bank's principal executive office or Lending Office is located); or (ii) shall
impose, modify or deem applicable any reserve, special deposit insurance or
similar requirement (including, without limitation, any such requirement imposed
by the Board of Governors of the Federal Reserve System, but excluding any such
requirement included in an applicable Euro-Dollar Reserve Percentage) against
assets of, deposits with or for the account of, or credit extended by, any Bank
(or its Lending Office); or (iii) shall impose on any Bank (or its Lending
Office) or the London Interbank Market any other similar condition affecting its
Revolving Loans (or, in the case of the Swing Bank, Swing Loans), its Notes or
its obligation to make Revolving Loans; and the result of any of the foregoing
is to increase the cost to such Bank (or its Lending Office) of making or
maintaining any Revolving Loan (or, in the case of the Swing Bank, Swing Loan),
or to reduce the amount of any such received or receivable by such Bank (or its
Lending Office) under this Agreement or under its Notes with respect thereto, by
an amount deemed by such Bank to be material, then, within fifteen (15) days
after demand by such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
8.3.2 Capital Adequacy. If any Bank shall have determined that after the
date hereof the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any Authority, has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
with respect to capital adequacy), by an amount deemed by such Bank to be
material, then from time to time, within fifteen (15) days after demand by such
Bank, the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction.
8.3.3 Notice of Determination. Each Bank will promptly notify the Borrower
and the Administrative Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank to compensation pursuant to
this Section and will designate a different Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank, in
any respect deemed material by such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
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8.3.4 Assignees Covered. The provisions of this Section 8.3 shall be
applicable with respect to any Assignee or other Transferee (excluding any
Participants), and any calculations required by such provisions shall be made
based upon the circumstances of such Assignee or other Transferee.
SECTION 8.4. Base Rate Loans Substituted for Affected Euro-Dollar Rate
Loans.
If (i) the obligation of any Bank to make or maintain Euro-Dollar Rate
Loans has been suspended pursuant to Section 8.2 or (ii) any Bank has demanded
compensation under Section 8.3.1, and the Borrower shall, by at least five (5)
Euro-Dollar Business Days' prior notice to such Bank through the Administrative
Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply: (i) all Revolving Loans which would otherwise be made by such Bank
as Euro-Dollar Rate Loans, shall be made instead as Base Rate Loans (in all
cases interest and principal on such Revolving Loans shall be payable
contemporaneously with the related Euro-Dollar Rate Loans of the other Banks),
and (ii) after each of its Euro-Dollar Rate Loans has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar Rate
Loans shall be applied to repay its Base Rate Loans instead.
SECTION 8.5. Replacement of a Lender.
In addition to the foregoing, if (i) the obligation of any Bank (but not
all Banks) to make or maintain Euro-Dollar Rate Loans has been suspended
pursuant to Section 8.2 or (ii) any Bank (but not all Banks) has demanded
compensation under Section 8.3, then, in either such case, the Borrower shall
have the right, at its option, upon giving at least five (5) Euro-Dollar
Business Days' prior notice to such Bank through the Administrative Agent,
either: (i) notwithstanding any term of Section 2.7.2 to the contrary, to reduce
the Commitment of such Bank to zero, in which case the Borrower shall reduce, by
repayment or prepayment, as the case may be, its Borrowings from such Bank to
zero effective upon such Commitment reduction becoming effective, and the
Commitment of each remaining Bank shall remained unchanged; or (ii) to obtain
one or more Banks or Assignees willing to replace such Bank, in which case the
Bank which is being replaced shall execute and deliver to such Bank or Assignee
an Assignment and Acceptance in accordance with Section 9.8.3 with respect to
such Bank's entire interest under this Agreement and the Notes.
SECTION 8.6. Compensation.
Upon the request of any Bank, delivered to the Borrower and the
Administrative Agent, the Borrower shall pay to such Bank such amount or amounts
as shall compensate such Bank for any loss, cost or expense incurred by such
Bank (in connection with the relevant Interest Period) as a result of: (i) any
payment or prepayment (whether pursuant to Section 8.2 or otherwise) of a
Euro-Dollar Rate Loan on a date other than the last day of an Interest Period
for such Euro-Dollar Rate Loan; or (ii) any failure by the Borrower to prepay a
Euro-Dollar Rate Loan on the date for such prepayment specified in the relevant
notice of prepayment hereunder; or (iii) any failure by the Borrower to borrow a
Euro-Dollar Rate Loan on the date for the Euro-Dollar Borrowing of which such
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Euro-Dollar Rate Loan is a part specified in the applicable Notice of Borrowing
delivered pursuant to Section 2.2. Such compensation shall include, without
limitation, an amount equal to the excess, if any, of (x) the amount of interest
which would have accrued on the amount so paid or prepaid or not prepaid or
borrowed for the period from the date of such payment, prepayment or failure to
prepay or borrow to the last day of the then current Interest Period for such
Euro-Dollar Rate Loan (or, in the case of a failure to prepay or borrow, the
Interest Period for such Euro-Dollar Rate Loan which would have commenced on the
date of such failure to prepay or borrow) at the applicable rate of interest for
such Euro-Dollar Rate Loan provided for herein (excluding, however, therefrom
the amount thereof attributable to the imposition of the Applicable Margin) over
(y) the amount of interest (as reasonably determined by such Bank) such Bank
would have paid on deposits in Dollars of comparable amounts having terms
comparable to such period placed with it by leading banks in the London
Interbank Market.
ARTICLE 9. MISCELLANEOUS
SECTION 9.1. Notices.
All notices, requests and other communications to any party hereunder or
under any Loan Document shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate confirmation is
received, (ii) if given by mail, seventy-two (72) hours after such communication
is deposited in the United States mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the
Administrative Agent under Article 2 or Article 8 shall not be effective until
received.
SECTION 9.2. No Waivers.
No failure or delay by the Administrative Agent or any Bank in exercising
any right, power or privilege hereunder or under any Note shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
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SECTION 9.3. Expenses; Documentary Taxes.
The Borrower shall pay (i) all out-of-pocket expenses of the Administrative
Agent, including fees and disbursements of special counsel for the Banks and the
Administrative Agent, in connection with the preparation of this Agreement and
the other Loan Documents, any waiver or consent hereunder or thereunder or any
amendment hereof or thereof or any Default or alleged Default hereunder or
thereunder and (ii) if a Default occurs, all out-of-pocket expenses incurred by
the Administrative Agent and any Bank, including fees and disbursements of
counsel (including a reasonable allocation of the cost of internal counsel), in
connection with such Default and collection and other enforcement proceedings
resulting therefrom, including out-of-pocket expenses incurred in enforcing this
Agreement, the Notes and other Loan Documents. The Borrower shall indemnify the
Administrative Agent and each Bank against any transfer taxes, documentary
taxes, assessments or charges made by any Authority by reason of the execution
and delivery of this Agreement, the Notes or the other Loan Documents.
SECTION 9.4. Indemnification.
The Borrower shall indemnify the Administrative Agent, the Syndication
Agent, the Arranger, the Co-Arranger, the Banks and each affiliate thereof and
their respective directors, officers, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities, claims or damages to
which any of them may become subject, insofar as such losses, liabilities,
claims or damages arise out of or result from any actual or proposed use by the
Borrower of the proceeds of any extension of credit by any Bank hereunder or
breach by the Borrower of this Agreement, the Notes or any other Loan Document
or from any investigation, litigation or other proceeding (including any
threatened investigation or proceeding) relating to the foregoing, and the
Borrower shall reimburse the Administrative Agent, the Syndication Agent, the
Arranger, the Co-Arranger and each Bank, and each affiliate thereof and their
respective directors, officers, employees and agents, upon demand for any
expenses (including, without limitation, legal fees) incurred in connection with
any such investigation or proceeding; but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified. The
indemnification provisions (including, without limitation, provisions for
default interest, to the extent that this Section 9.4 might be construed as
duplicating the Borrower's obligation to pay interest at the Default Rate as
required elsewhere in this Agreement) set forth in this Section 9.4 are meant to
be without duplication of any other indemnification provisions set forth in this
Agreement.
SECTION 9.5. Sharing of Setoffs.
Each Bank agrees that if it shall, by exercising any right of setoff or
counterclaim or otherwise, receive payment of a proportion of the aggregate
amount of principal and interest owing with respect to the Note held by it which
is greater than the proportion received by any other Bank in respect of the
aggregate amount of all principal and interest owing with respect to the Note
held by such other Bank, the Bank receiving such proportionately greater payment
shall purchase such participations in the Notes held by the other Banks owing to
such other Banks, and such other adjustments shall be made, as may be required
so that all such payments of principal and interest with respect to the Notes
held by the Banks owing to such other Banks shall be shared by the Banks pro
rata; provided that (i) nothing in this Section shall impair the right of any
Bank to exercise any right of setoff or counterclaim it may have and to apply
the amount subject to such exercise to the payment of indebtedness of the
Borrower other than its indebtedness under the Notes, and (ii) if all or any
57
<PAGE>
portion of such payment received by the purchasing Bank is thereafter recovered
from such purchasing Bank, such purchase from each other Bank shall be rescinded
and such other Bank shall repay to the purchasing Bank the purchase price of
such participation to the extent of such recovery together with an amount equal
to such other Bank's ratable share (according to the proportion of (x) the
amount of such other Bank's required repayment to (y) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note, acquired pursuant to the
foregoing arrangements, may exercise rights of setoff or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.6. Amendments and Waivers.
Any provision of this Agreement, the Notes or any other Loan Documents may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed by the Borrower and the Required Banks (and, if the rights or duties
of the Administrative Agent are affected thereby, by the Administrative Agent);
provided that, no such amendment or waiver shall, unless signed by all Banks,
(i) except as otherwise provided in Section 8.5, increase the Commitment of any
Bank or subject any Bank to any additional obligation, (ii) change the principal
of, or decrease the rate of interest on any Revolving Loan or Swing Loan or on
any fees or other amounts payable hereunder, (iii) extend the date fixed for any
payment of principal of or interest on any Revolving Loan or Swing Loan or any
fees hereunder, (iv) change the percentage of the Commitments or of the
aggregate unpaid amount of the Notes, or the percentage of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement, (v) change the manner of application of
any payments made under this Agreement or the Notes, (vi) release or substitute
all or any substantial part of the collateral (if any) held as security for the
Revolving Loans and Swing Loans, or (vii) release any Guarantee given to support
payment of the Revolving Loans and Swing Loans. In connection with the
foregoing, the Borrower will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement unless each Bank shall be informed thereof by the Borrower or the
Administrative Agent and shall be afforded an opportunity of considering the
same and shall be supplied by the Borrower with sufficient information to enable
it to make an informed decision with respect thereto. Executed or true and
correct copies of any waiver or consent effected pursuant to the provisions of
this Agreement shall be delivered by the requisite percentage of Banks.
58
<PAGE>
SECTION 9.7. No Margin Stock Collateral.
Each of the Banks represents to the Administrative Agent, the Borrower and
each of the other Banks that it in good faith is not, (i) directly or indirectly
(by negative pledge or otherwise), relying upon any Margin Stock as collateral
in the extension or maintenance of the credit provided for in this Agreement or
(ii) entering into this Agreement with an immediate intention to resell its
Commitment or Revolving Loans.
SECTION 9.8. Successors and Assigns.
9.8.1 No Assignment by Borrower. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that the Borrower may not assign or otherwise
transfer any of its rights under this Agreement.
9.8.2 Participation. Any Bank may, without the consent of the Borrower, at
any time sell to one or more Persons (each a "Participant") participating
interests in any Revolving Loan owing to such Bank (or, in the case of the Swing
Bank, and Swing Loan), any Note held by such Bank, any Commitment of such Bank
hereunder or any other interest of such Bank hereunder. In the event of any such
sale by a Bank of a participating interest to a Participant, such Bank's
obligations under this Agreement shall remain unchanged, such Bank shall remain
solely responsible for the performance thereof, such Bank shall remain the
holder of any such Note for all purposes under this Agreement, and the Borrower
and the Administrative Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement. In no event shall a Bank that sells a participation be obligated to
the Participant to take or refrain from taking any action hereunder except that
such Bank may agree that it will not (except as provided below), without the
consent of the Participant, agree to (i) an extension of any date fixed for the
payment of principal of or interest on the related Revolving Loan or Revolving
Loans or Swing Loan or Swing Loans, (ii) the change of the amounts of any
principal of, or the decrease of any interest or fees due on any date fixed for
the payment thereof with respect to the related Revolving Loan or Revolving
Loans or Swing Loan or Swing Loans, (iii) the change of the principal or the
related Revolving Loan or Revolving Loans or Swing Loan or Swing Loans, (iv) any
decrease in the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof), a commitment fee is payable
hereunder from the rate at which the Participant is entitled to receive interest
or a commitment fee (as the case may be) in respect of such participation, (v)
the release or substitution of all or any substantial part of the collateral (if
any) held as security for the Revolving Loans and Swing Loans, or (vi) the
release of any Guarantee given to support payment of the Revolving Loans and
Swing Loans. Each Bank selling a participating interest in any Revolving Loan,
Swing Loan, Note, Commitment or other interest under this Agreement shall,
within ten (10) Domestic Business Days of such sale, provide the Borrower and
the Administrative Agent with written notification stating that such sale has
occurred and identifying the Participant and the interest purchased by such
Participant. Except as otherwise expressly provided in Article 8, the
Administrative Agent, the Banks and the Borrower agree that each Participant
shall be entitled to the benefits of Article 8 with respect to its participation
in Revolving Loans and Swing Loans outstanding from time to time, but only to
the extent that such Bank which sold the relevant participation would have been
entitled thereto pursuant to the terms of this Agreement.
59
<PAGE>
9.8.3 Assignments. Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of all,
of its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume all such rights and obligations, pursuant to an Assignment
and Acceptance, executed by such Assignee, such transferor Bank and the
Administrative Agent (and, in the case of an Assignee that is not then a Bank,
by the Borrower); provided that (i) no interest may be sold by a Bank pursuant
to this Section unless the Assignee shall agree to assume ratably equivalent
portions of the transferor Bank's Commitment, (ii) the amount of the Commitment
of the transferor Bank subject to such assignment (determined as of the
effective date of the assignment), if less than the entirety of such Commitment,
shall be equal to at least Five Million Dollars ($5,000,000), (iii) no interest
may be sold by a Bank pursuant to this Section to any Assignee that is not then
a Bank or an Affiliate of a Bank without the consent of the Borrower and the
Administrative Agent (which consent shall not be unreasonably withheld), except
after the occurrence of, and during the continuance of, an Event of Default.
Upon (A) execution of the Assignment and Acceptance by such transferor Bank,
such Assignee, the Administrative Agent and (if applicable) the Borrower, (B)
delivery of an executed copy of the Assignment and Acceptance of the Borrower
and the Administrative Agent, (C) payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, and (D) payment of a processing and recordation fee of
Three Thousand Five Hundred Dollars ($3,500) to the Administrative Agent (which
fee shall be reduced to One Thousand Five Hundred Dollars ($1,500) if the
Assignee is an existing Bank or an Affiliate of a Bank, such Assignee shall for
all purposes be a Bank party to this Agreement and shall have all the rights and
obligations of a Bank under this Agreement to the same extent as if it were an
original party hereto with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its future
obligations hereunder to a corresponding extent, and no further consent or
action by the Borrower, the Banks or the Administrative Agent shall be required.
Upon the consummation of any transfer to an Assignee pursuant to this Section
9.8.3, the transferor Bank, the Administrative Agent and the Borrower shall make
appropriate arrangements so that, if required, a new Note is issued to such
Assignee.
9.8.4 Disclosures. Subject to the provisions of Section 9.9, the Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
information in such Bank's possession concerning the Borrower which has been
delivered to such Bank by the Borrower pursuant to this Agreement or which has
been delivered to such Bank by the Borrower in connection with such Bank's
credit evaluation prior to entering into this Agreement.
9.8.5 Status of Transferee. No Transferee shall be entitled to receive any
greater payment under Section 8.3 than the transferor Bank would have been
entitled to receive with respect to the rights transferred, unless such transfer
is made with the Borrower's prior written consent or by reason of the provisions
of Section 8.2 or 8.3 requiring such Bank to designate a different Lending
Office under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
60
<PAGE>
SECTION 9.9. Confidentiality.
Each Bank, the Administrative Agent, the Syndication Agent, the Arranger
and the Co-Arranger agrees to exercise its best efforts (and, in any event, with
at least the same degree of care as it ordinarily exercises with respect to
confidential information of its other customers) to keep any information
delivered or made available by the Borrower to it, including, without
limitation, information obtained by the Administrative Agent or such Bank by
reason of a visit or investigation by any Person contemplated in Section 5.2,
confidential from any one other than persons employed or retained by such Bank
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Revolving Loans and, in the case of the Swing Bank, the
Swing Loans; provided, however that nothing herein shall prevent the
Administrative Agent, the Syndication Agent, the Arranger, the Co-Arranger or
any Bank from disclosing such information (i) to the any other such Person, (ii)
upon the order of any court or administrative agency, (iii) upon the request or
demand of any regulatory agency or authority having jurisdiction over such
Person, (iv) which has been publicly disclosed other than by an act or omission
of any such Person except as permitted herein, (v) to the extent reasonably
required in connection with any litigation (with respect to this Agreement, any
of the other Loan Documents, in connection with any of the foregoing, or any
other obligations of the Borrower or any Subsidiary owing to any such Person) to
which any such Person or their respective Affiliates may be a party, (vi) to the
extent reasonably required in connection with the exercise of any remedy
hereunder, (vii) to such Person's legal counsel and independent auditors and
(viii) to any actual or proposed Participant, Assignee or other Transferee of
all or part of any Bank's rights hereunder which has agreed in writing to be
bound by the provisions of this Section 9.9.
SECTION 9.10. Representation by Banks.
Each Bank hereby represents that it is a commercial lender or financial
institution which makes Revolving Loans in the ordinary course of its business
and that it will make its Revolving Loans hereunder for its own account in the
ordinary course of such business; provided, however that, subject to Section
9.8, the disposition of a Note or the Notes held by that Bank shall at all times
be within its exclusive control.
SECTION 9.11. Obligations Several.
The obligations of each Bank hereunder are several, and no Bank shall be
responsible for the obligations or commitment of any other Bank hereunder.
Nothing contained in this Agreement and no action taken by Banks pursuant hereto
shall be deemed to constitute the Banks to be a partnership, an association, a
joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Bank shall be a separate and independent debt, and each Bank
shall be entitled to protect and enforce its rights arising out of this
Agreement or any other Loan Document and it shall not be necessary for any other
Bank to be joined as an additional party in any proceeding for such purpose.
61
<PAGE>
SECTION 9.12. GEORGIA LAW.
THIS AGREEMENT, EACH NOTE AND EACH OTHER LOAN DOCUMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF GEORGIA.
SECTION 9.13. Interpretation.
No provision of this Agreement or any of the other Loan Documents shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or dictated such provision.
SECTION 9.14. CONSENT TO JURISDICTION.
EACH OF THE BORROWER, EACH BANK, THE ADMINISTRATIVE AGENT, THE SYNDICATION
AGENT, THE ARRANGER AND THE CO-ARRANGER IRREVOCABLY (A) SUBMITS TO THE
NONEXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF GEORGIA, THE COURTS THEREOF
AND THE UNITED STATES DISTRICT COURTS SITTING THEREIN, FOR THE ENFORCEMENT OF
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, (B) WAIVES ANY AND ALL
PERSONAL RIGHTS UNDER THE LAW OF ANY JURISDICTION TO OBJECT ON ANY BASIS
(INCLUDING, WITHOUT LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE
WITHIN THE STATE OF GEORGIA FOR THE PURPOSE OF LITIGATION TO ENFORCE THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, AND (C) AGREES THAT SERVICE OF
PROCESS MAY BE MADE UPON IT IN THE MANNER PRESCRIBED IN SECTION 9.1 FOR THE
GIVING OF NOTICE TO THE BORROWER. NOTHING HEREIN CONTAINED, HOWEVER, SHALL
PREVENT THE ADMINISTRATIVE AGENT FROM BRINGING ANY ACTION OR EXERCISING ANY
RIGHTS AGAINST ANY SECURITY AND AGAINST THE BORROWER PERSONALLY, AND AGAINST ANY
ASSETS OF THE BORROWER, WITHIN ANY OTHER STATE OR JURISDICTION.
SECTION 9.15. Counterparts.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
62
<PAGE>
SECTION 9.16. Survival.
All representations, warranties and covenants made herein shall survive the
execution and delivery of all of the Loan Documents. The terms and provisions of
this Agreement shall continue in full force and effect until the payment of the
Notes and termination of the Commitments.
SECTION 9.17. Entire Agreement; Amendment; Severability.
This Agreement shall constitute the entire agreement among the parties
hereto with respect to the subject matter hereof. Neither this Agreement nor any
provision hereof may be changed, waived, discharged, modified or terminated
orally, but only by an instrument in writing in accordance with Section 9.6. If
any provision of any of the Loan Documents or the application thereof to any
party thereto or circumstances shall be invalid or unenforceable to any extent,
the remainder of such Loan Documents and the application of such provisions to
any other party thereto or circumstance shall not be affected thereby and shall
be enforced to the greatest extent permitted by law.
SECTION 9.18. TIME OF THE ESSENCE.
TIME IS OF THE ESSENCE IN THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS.
SECTION 9.19. No Joint Venture .
Neither this Agreement nor any agreements, instruments, documents or
transactions contemplated hereby (including the Loan Documents), shall in any
respect be interpreted, deemed or construed as making any Bank, the
Administrative Agent, the Syndication Agent, the Arranger or the Co-Arranger a
partner or joint venturer with the Borrower or as creating any similar
relationship or entity.
SECTION 9.20. Certain Designations.
The designations "Syndication Agent," "Arranger" and "Co-Arranger," as used
herein and in any other Loan Document, are honorary designations and shall have
no substantive effect; nor shall any parties so designated have any other or
additional duties, powers or responsibilities hereunder or under any other Loan
Document as a result of such designation.
63
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers, as of the
day and year first above written.
"BORROWER"
AVADO BRANDS, INC.
(SEAL)
By:_________________________________
Louis J. Profumo
Senior Vice President of Finance
Attest:_____________________________
John G. McLeod, Jr.
Secretary
Avado Brands, Inc.
Corporate Headquarters
Hancock at Washington
Madison, Georgia 30650
Attn: Erich J. Booth,
Chief Financial Officer
Telecopier Number: (706) 342-4057
64
<PAGE>
"BANKS"
WACHOVIA BANK, NATIONAL
ASSOCIATION, as the Administrative Agent and as a Bank (SEAL)
By:________________________________
W. Tompkins Rison, Vice President
Lending Office:
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
30th Floor
Atlanta, Georgia 30303-1757
Attention: Georgia Corporate Commercial Group
Telecopier Number: (404) 332-6920
Commitment Amount: $35,000,000
65
<PAGE>
BANKBOSTON, N.A., as Syndication Agent
and as a Bank
(SEAL)
By:________________________________
Name:__________________________
Title:___________________________
Lending Office:
BankBoston, N.A.
Large Corporate -- Restaurant Division
100 Federal Street
Mail Stop 01-09-05
Boston, Massachusetts 02110
Telecopier Number: (617) 434-0637
Commitment Amount: $25,000,000
66
<PAGE>
SUNTRUST BANK, ATLANTA,
as a Bank
By:________________________________
Name:___________________________
Title:____________________________
By:________________________________
Name:___________________________
Title:____________________________
Lending Office:
SunTrust Bank, Atlanta
303 Peachtree Street, N.E.
2nd Floor
Atlanta, Georgia 30308
Telecopier Number: (404) 588-8833
Commitment Amount: $20,000,000
67
<PAGE>
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK INTERNATIONAL,"
NEW YORK BRANCH
By:________________________________
Name:___________________________
Title:____________________________
By:________________________________
Name:___________________________
Title:____________________________
Lending Office:
Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A.,
"Rabobank International,"
New York Branch
245 Park Avenue
36th Floor
New York, New York 10167
Telecopier Number (404) 877-9150
Commitment Amount: $25,000,000
68
<PAGE>
COMERICA BANK,
as a Bank
(SEAL)
By:________________________________
Name:___________________________
Title:____________________________
Lending Office:
Comerica Bank
500 Woodward Avenue
9th Floor, MC 3280
Detroit, Michigan 48226
Telecopier Number (313) 222-3330
Commitment Amount: $10,000,000
69
<PAGE>
SOUTHTRUST BANK, NATIONAL ASSOCIATION, as a Bank
(SEAL)
By:________________________________
Name:___________________________
Title:____________________________
Lending Office:
SouthTrust Bank, N.A.
27th Floor
Mail Code PT007
One Georgia Center
600 West Peachtree Street
Atlanta, Georgia 30308
Telecopier Number (404) 853-5766
Commitment Amount: $10,000,000
70
<PAGE>
"ARRANGER"
WACHOVIA SECURITIES, INC.
By:________________________________
Name:___________________________
Title:____________________________
Lending Office:
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
26th Floor
Atlanta, Georgia 30303-1757
Telecopier Number (404) 332-4005
71
<PAGE>
"CO-ARRANGER"
BANCBOSTON ROBERTSON
STEPHENS, INC.
By:________________________________
Name:___________________________
Title:____________________________
Lending Office:
BancBoston Robertson Stephens, Inc.
100 Federal Street
Boston, Massachusetts 02110
Telecopier Number (617) 434-0637
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-Q, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
72
<TABLE>
Exhibit 11.1
Computation of Earnings Per Common Share
(In thousands, except per share data)
<CAPTION>
Quarter Ended Six Months Ended
- -----------------------------------------------------------------------------------------------------------------------------------
July 4, June 28, July 4, June 28,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average number of common shares used in basic calculation 28,756 37,513 29,824 38,167
Net additional shares issuable pursuant to employee stock
option plans at period-end market price 1 80 1 34
Shares issuable on assumed conversion of convertible
preferred securities 7,774 7,774 7,774 7,774
===================================================================================================================================
Average number of common shares used in diluted calculation 36,531 45,367 37,599 45,975
===================================================================================================================================
Earnings before cumulative effect of change in accounting principle $ 5,968 6,325 11,920 44,864
Cumulative effect of change in accounting principle, net of tax benefit - - - (1,461)
- -----------------------------------------------------------------------------------------------------------------------------------
Net earnings 5,968 6,325 11,920 43,403
Distribution savings on assumed conversion of convertible
preferred securities, net of income taxes 1,407 1,328 2,733 2,656
===================================================================================================================================
Net earnings for computation of diluted earnings per common share $ 7,375 7,653 14,653 46,059
===================================================================================================================================
Basic earnings before cumulative effect of change in accounting principle $ 0.21 0.17 0.40 1.18
Cumulative effect of change in accounting principle - - - (0.04)
===================================================================================================================================
Basic earnings per common share $ 0.21 0.17 0.40 1.14
===================================================================================================================================
Diluted earnings before cumulative effect of change in accounting principle $ 0.20 0.17 0.39 1.03
Cumulative effect of change in accounting principle - - - (0.03)
===================================================================================================================================
Diluted earnings per common share $ 0.20 0.17 0.39 1.00
===================================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q FOR THE PERIOD ENDING JULY 4, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS).
</LEGEND>
<CIK> 0000849101
<NAME> Avado Brands, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Jan-02-2000
<PERIOD-START> Jan-04-1999
<PERIOD-END> Jul-04-1999
<CASH> 1,121
<SECURITIES> 0
<RECEIVABLES> 7,754
<ALLOWANCES> 0
<INVENTORY> 9,167
<CURRENT-ASSETS> 32,192
<PP&E> 398,878
<DEPRECIATION> 0
<TOTAL-ASSETS> 630,945
<CURRENT-LIABILITIES> 93,647
<BONDS> 215,061
115,000
0
<COMMON> 405
<OTHER-SE> 119,301
<TOTAL-LIABILITY-AND-EQUITY> 630,945
<SALES> 328,796
<TOTAL-REVENUES> 328,796
<CGS> 92,980
<TOTAL-COSTS> 297,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,234
<INCOME-PRETAX> 17,745
<INCOME-TAX> 5,825
<INCOME-CONTINUING> 11,920
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,920
<EPS-BASIC> 0.40
<EPS-DILUTED> 0.39
</TABLE>
