EXHIBIT 10.1
 
Execution Counterpart

 
AMENDMENT NO. 3 TO FIRST LIEN CREDIT AGREEMENT dated as of December 12, 2005
(this “Amendment Agreement”) among KRISPY KREME DOUGHNUT CORPORATION, a North
Carolina corporation (the “Borrower”), the GUARANTORS (as defined in the Credit
Agreement referred to below) signatory hereto and the LENDERS (as defined in the
Credit Agreement referred to below) signatory hereto.
 
The Borrower is party to a First Lien Credit Agreement dated as of April 1, 2005
(as amended, amended and restated, supplemented or otherwise modified up to the
date hereof, the “Credit Agreement”) among the Borrower, the Parent Guarantor,
the Subsidiary Guarantors, the Lenders, Credit Suisse (formerly known as Credit
Suisse First Boston), as Administrative Agent and Issuing Lender, and Wells
Fargo Foothill, Inc., as Collateral Agent, Issuing Lender and Swingline Lender.
 
The Borrower has requested that the Required Lenders agree to amend certain
provisions of the Credit Agreement, and the Required Lenders have agreed,
subject to the terms and conditions hereinafter set forth to such amendments.
 
Accordingly, in consideration of the premises and for other good and valuable
consideration, the sufficiency and receipt of all of which are hereby
acknowledged, the parties hereto hereby agree as follows:
 
SECTION 1. Defined Terms. Capitalized terms used but not herein shall be used
herein as defined in the Credit Agreement.
 
SECTION 2. Amendments. As of the Amendment Effective Date (as defined below):
 
(a) Section 1.01 of the Credit Agreement is hereby amended by inserting the
following new defined term therein in the appropriate alphabetical location:
 
“Amendment No. 3 Effective Date” means the date that the amendments to this
Agreement effected by Amendment No. 3 hereto become effective.
 
(b) The definition of “Applicable Margin” in Section 1.01 of the Credit
Agreement is hereby amended to read as follows:
 
“Applicable Margin” means: (a) with respect to any ABR Loan, (i) 2.25% per annum
on or prior to the last day of the 2007 Fiscal Year and (ii) 1.75% per annum
thereafter; and (b) with respect to any Eurodollar Loan, (i) 3.25% per annum on
or prior to the last day of the 2007 Fiscal Year and (ii) 2.75% per annum
thereafter; provided that, with respect to any date on or prior to the last day
of the 2007 Fiscal Year, the Applicable Margin for each Type of Loan shall be
reduced by 0.50% per annum if, on the last day of each of any two consecutive
Fiscal Quarters falling in the 2007 Fiscal Year (each such day being referred to
as a “Test Date”) (w) Consolidated EBITDA for the period for four consecutive
Fiscal Quarters ending on such Test Date shall be at least $55,000,000, (x) the
Consolidated Leverage Ratio on such Test Date shall not exceed the ratio
required to have been maintained on such Test Date by Section 7.09(a) of this
Agreement as in effect before the Amendment No. 3 Effective Date, (y) the
Consolidated Interest Coverage Ratio on such Test Date shall not be less than
the ratio required to have been maintained
 

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on such Test Date by Section 7.09(b) of this Agreement as in effect before the
Amendment No. 3 Effective Date and (z) the Borrower shall have furnished to the
Administrative Agent its financial statements as at and for the periods ending
on the Test Dates as required by Section 6.01(a) or 6.01(b), together with a
certificate of a Financial Officer of the Parent Guarantor certifying that the
conditions set forth in the preceding clauses (w), (x) and (y) have been
satisfied and setting forth reasonably detailed calculations demonstrating such
satisfaction. The reduction of the Applicable Margin pursuant to the proviso in
the preceding sentence shall take effect from and after the second Business Day
following receipt by the Administrative Agent of the financial statements and
certificate referred to in clause (z) of said sentence for the second Test Date
(such second Business Day being referred to herein as the “Rate Reduction
Date”).
 
(c) The definition of “Consolidated EBITDA” in Section 1.01 of the Credit
Agreement is hereby amended to add the following sentence at the end thereof:
 
“Notwithstanding anything contained herein to the contrary, the amount of
Consolidated EBITDA attributable to the third Fiscal Quarter of Fiscal Year 2006
shall not be deemed to exceed $6,800,000, and, if the amount of Consolidated
EBITDA attributable to such Fiscal Quarter would otherwise exceed $6,800,000,
such amount shall be reduced to $6,800,000 for purposes of this Agreement.”
 
(d) The definition of “Investment” in Section 1.01 of the Credit Agreement is
hereby amended by adding the following sentence at the end thereof:
 
“For the avoidance of doubt, the forgiveness by the Borrower of receivables
owing from New England Dough, LLC not to exceed $3,000,000 in connection with
the contemplated restructuring of New England Dough, LLC shall not be deemed to
be an Investment for purposes of this Agreement.”
 
(e) Clause (f) of the definition of “Net Liquidity” in Section 1.01 of the
Credit Agreement is hereby amended to read as follows:
 
“(f) the lesser of (A) $15,000,000 and (B) the aggregate cash balances of the
Concentration Accounts and the Depositary Account (i) determined at 1:30 p.m.,
New York City time, on such date or if such date is not a Business Day, at 1:30
p.m., New York City time, on the Business Day next occurring (in each case,
after giving effect to any prepayments that the Borrower is required to make
pursuant to Section 2.10(b)(iii)) and (ii) not subject to any Lien other than
(x) the Liens created by the Loan Documents and the Second Lien Loan Documents
and (y) set-off rights”
 
(f) The first sentence of Section 2.11(a) of the Credit Agreement is hereby
amended to read as follows:
 
“The Borrower agrees to pay to the Administrative Agent for the account of each
Lender a commitment fee, which shall accrue at a rate per annum equal to 3/4 of
1% on the average daily unused amount of the Commitment of such Lender during
the period from and including the date hereof to but excluding the earlier of
the date such Commitment terminates and the Commitment Termination Date;
provided that such rate shall be reduced by ¼ of 1% per annum from and after the
earlier of (x) the first day of the 2008
 

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Fiscal Year and (y) the Rate Reduction Date (as defined in the definition of
“Applicable Margin” in Section 1.01 hereof).”
 
(g) Section 2.08(d) of the Credit Agreement is hereby amended by substituting
“August 1, 2006” for “the first anniversary of the “Effective Date”.
 
(h) Section 5.02 of the Credit Agreement is hereby amended by deleting “and” at
the end of paragraph (d) thereof, substituting “; and” for the period at the end
of paragraph (e) thereof and adding a new paragraph (f) thereto reading as
follows:
 
“(f) In connection with any requested Loan, the aggregate cash balances in all
deposit accounts (including, without limitation, the Concentration Accounts and
the Depository Account) of the Obligors, determined at 1:30 p.m., New York City
time, on the date of such Loan (including, without duplication, the proceeds of
such Loan) shall not exceed $15,000,000 after giving effect to all cash
disbursements (including the use of the proceeds of such Loan) permitted
hereunder to be made on such date.”
 
(i) The table in Section 7.09(a) of the Credit Agreement is amended to read as
follows:

 
Period
 
Ratio
Second, Third and Fourth Fiscal Quarters of 2006 Fiscal Year
 
 
4.50 to 1.00
 
First Fiscal Quarter of 2007 Fiscal Year
 
 
5.40 to 1.00
 
Second Fiscal Quarter of 2007 Fiscal Year
 
 
5.00 to 1.00
 
Third Fiscal Quarter of 2007 Fiscal Year
 
 
4.80 to 1.00
 
Fourth Fiscal Quarter of 2007 Fiscal Year
 
 
4.70 to 1.00
 
First Fiscal Quarter of 2008 Fiscal Year and Thereafter
 
 
3.70 to 1.00
 

 
(j) The table in Section 7.09(b) of the Credit Agreement is amended to read as
follows:
 

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Period
 
 
Ratio
Second and Third Fiscal Quarters of 2006 Fiscal Year
 
 
3.15 to 1.00
 
Fourth Fiscal Quarter of 2006 Fiscal Year
 
 
2.50 to 1.00
 
First Fiscal Quarter of 2007 Fiscal Year
 
 
2.10 to 1.00
 
Second Fiscal Quarter of 2007 Fiscal Year
 
 
2.05 to 1.00
 
Third Fiscal Quarter of 2007 Fiscal Year
 
 
2.05 to 1.00
 
Fourth Fiscal Quarter of 2007 Fiscal Year
 
 
2.05 to 1.00
 
First Fiscal Quarter of 2008 Fiscal Year and Thereafter
 
 
3.40 to 1.00
 

 
(k) Paragraph (t) of Article VIII of the Credit Agreement is hereby amended to
read as follows:
 
“(t) the Restatement Date shall not have occurred on or before April 30, 2006;
or”
 
(l) The paragraph of Section D of Exhibit B of the Credit Agreement that refers
to the aggregate cash balances of the Concentration Accounts and the Depositary
Account is hereby amended to read as follows:
 
“The lesser of $15,000,000 and the aggregate cash balances of the Concentration
Accounts and the Depositary Account determined at 1:30 pm NYC time (after giving
effect to any prepayment on such date).”
 
(m) Exhibit H of the Credit Agreement is hereby amended by deleting “and” at the
end of paragraph 3(c) thereof, substituting “; and” for the period at the end of
paragraph (d) thereof and adding a new paragraph (e) thereto reading as follows:
 
“(e) The aggregate cash balances in all deposit accounts (including, without
limitation, the Concentration Accounts and the Depository Account) of the
Obligors, determined at 1:30 p.m., New York City time, on the above-referenced
requested date for such Loan (including, without duplication, the proceeds of
such Loan), shall not exceed $15,000,000 after giving effect to all cash
disbursements (including the use of the proceeds of such Loan) permitted by the
Credit Agreement to be made on such date.”
 
(n) Amendment and Waiver No. 2 to the First Lien Credit Agreement dated as of
October 25, 2005 among the Borrower, the Guarantors signatory thereto and the
Lenders signatory thereto is hereby amended as follows:
 

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(A) The ninth “Whereas” clause thereof is hereby amended to read as follows:
 
“WHEREAS, Krispy Kreme International Ltd. (“KKI”), one of the Borrower’s
Included Subsidiaries, desires to sell to KKA Holdings Pty Ltd (as trustee for
the KKA Holdings Unit Trust) (the “Australia Sale”) all of its equity interests
in Krispy Kreme Australia Pty Limited (“KKA”) for approximately AUD 3,500,000 in
cash and KKI and the Borrower desire to sell to said trustee loans made to KKA
for approximately AUD 5,075,000 in cash, but the Borrower’s existing Guarantee
of Indebtedness of KKA will not be reduced or cancelled concurrently with such
sale;”
 

(B)  
Clause (ii) of Section 1(c) thereof is hereby amended to read as follows:

 
“(ii) agree that the sale by KKI and the Borrower of their loans made to KKA as
part of the Australia Sale shall be deemed to be a sale by KKI of equity
interests in KKA for purposes of said Section 7.03(f) and that said Section
7.03(f) shall not be deemed to prohibit the sale of such loans in a separate
transaction from, and on a different date than, the sale of the equity interests
in KKA”
 
SECTION 3. Conditions to Effectiveness. The amendments set forth in Section 2
hereof shall become effective when, and only when, and as of the date (the
“Amendment Effective Date”) on which (a) the Administrative Agent shall have
received counterparts of this Amendment Agreement executed by the Borrower, each
of the Guarantors (other than Freedom Rings, LLC) and the Required Lenders (b)
all the conditions to the effectiveness of the Amendment No. 3 to the Second
Lien Credit Agreement of even date herewith, substantially in the form
heretofore delivered to the Lenders, shall have occurred other than the
effectiveness of this Amendment Agreement, (c) the Administrative Agent shall
have received payment of all accrued fees and expenses of the Administrative
Agent (including the reasonable and accrued fees of counsel to the
Administrative Agent invoiced on or prior to the date hereof) and (d) the
Borrower shall have paid to the Administrative Agent for the account of each
Lender that shall have executed and delivered to the Administrative Agent a
counterpart of this Amendment Agreement on or before the Amendment Effective
Date the amendment fee payable to such Lender under Section 4 hereof.
 
SECTION 4. Fees. The Borrower shall pay to the Administrative Agent for the
account of each Lender that executes and delivers to the Administrative Agent a
counterpart of this Amendment Agreement on or before December 15, 2005 (New York
time) an amendment fee equal to 0.25% of the Commitment of such Lender, such fee
to be payable (i) in the case of Lenders that execute and deliver this Amendment
Agreement on or before the Amendment Effective Date, on the Amendment Effective
Date and (ii) in the case of all other Lenders entitled to receive such fee, not
later than December 19, 2005.
 
SECTION 5. Reference to and Effect on the Financing Documents.
 
(a)  On and after the Amendment Effective Date, each reference in the Credit
Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to “the Credit Agreement”, “thereunder”, “thereof”, or words of like
import referring to the Credit Agreement shall mean and be a reference to the
Credit Agreement as modified hereby.
 

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(b) The Credit Agreement and each of the other Loan Documents, as specifically
modified by this Amendment Agreement, are and shall continue to be in full force
and effect and are hereby in all respects ratified and confirmed.
 
(c) The execution, delivery and effectiveness of this Amendment Agreement shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Credit Agreement or the other Loan Documents, nor
constitute a waiver of any provision of the Credit Agreement or the other Loan
Documents.
 
SECTION 6. Affirmation of Guarantors. Each Guarantor signatory hereto hereby
consents to the amendments to the Credit Agreement effected hereby, and hereby
confirms and agrees that, notwithstanding the effectiveness of the amendments
set forth in Section 2 hereof (and notwithstanding the failure of Freedom Rings,
LLC to be a party hereto), the obligations of such Guarantor contained in
Article III of the Credit Agreement or in any other Loan Documents to which it
is a party are, and shall remain, in full force and effect and are hereby
ratified and confirmed in all respects, except that, on and after the
effectiveness of such amendments, each reference in Article III of the Credit
Agreement and in each of the other Loan Documents to “the Credit Agreement”,
“thereunder”, “thereof” or words of like import shall mean and be a reference to
the Credit Agreement as modified by this Amendment Agreement.
 
SECTION 7. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
 
SECTION 8. Execution in Counterparts. This Amendment Agreement may be executed
by one or more of the parties to this Amendment Agreement on any number of
separate counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Amendment Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Amendment
Agreement.
 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
 
KRISPY KREME DOUGHNUT CORPORATION
 
By: /s/ Michael C. Phalen
Name: Michael C. Phalen
Title: CFO
 
GUARANTORS:
 
KRISPY KREME DOUGHNUTS, INC.
 
KRISPY KREME DISTRIBUTING COMPANY, INCORPORATED
 
KRISPY KREME MOBILE STORE COMPANY
 
KRISPY KREME CANADA, INC.
 
HD CAPITAL CORPORATION
 
HDN DEVELOPMENT CORPORATION
 
KRISPY KREME COFFEE COMPANY, LLC
 

   
By:
KRISPY KREME DOUGHNUT CORPORATION, an authorized Member

 
GOLDEN GATE DOUGHNUTS, LLC
 

   
By:
KRISPY KREME DOUGHNUT CORPORATION, an authorized Member

 
PANHANDLE DOUGHNUTS, LLC
 

   
By:
KRISPY KREME DOUGHNUT CORPORATION, an authorized Member

 
NORTH TEXAS DOUGHNUTS, L.P.
 

   
By:
KRISPY KREME DOUGHNUT CORPORATION, its General Partner

 

 
By: /s/ Michael C. Phalen
Name: Michael C. Phalen
Title: Authorized Officer
 

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LENDER
 
Consent of Required Lenders Received