FORBEARANCE AGREEMENT

FORBEARANCE AGREEMENT

Dated January 2, 2004

This FORBEARANCE AGREEMENT (this "Agreement") dated January 2, 2004 is

entered into by and among AVADO BRANDS, INC. (the "Borrower"), each of financial

institutions listed on the signature pages hereof under the heading "Lenders"

and their respective successors and assigns (individually, a "Lender" and,

collectively, the "Lenders"), HILCO CAPITAL LP, in its capacity as

administration agent for the Lenders (in such capacity, together with its

successors in such capacity, the "Administrative Agent") and DRAWBRIDGE SPECIAL

OPPORTUNITIES FUND LP, in its capacity as collateral agent for the Lenders (in

such capacity, together with its successors in such capacity, the "Collateral

Agent"). Capitalized terms used herein and not otherwise defined herein shall

have the meanings ascribed to such terms in the Credit Agreement (defined

below).

W I T N E S E T H:

WHEREAS, the Borrower, the Lenders, the Administrative Agent and the

Collateral Agent are parties to that certain Third Amended and Restated Credit

Agreement dated as of March 21, 2003, as amended and otherwise modified from

time to time (as so amended and modified, the "Credit Agreement"), pursuant to

which the Lenders have made certain loans to the Borrower and, to secure the

performance of the obligations thereunder, the Borrower has granted security

interests in the Collateral owned by the Borrower to the Collateral Agent, for

the benefit of the Agents and the Lenders; and

WHEREAS, each of Don Pablo's Holding Corp., a Delaware corporation, Don

Pablo's Operating Corp., an Ohio corporation, Don Pablo's Limited, Inc., an Ohio

corporation, Don Pablo's of Texas, LP, a Texas limited partnership, Canyon Cafe

Operating Corp., a Georgia corporation, Canyon Cafe TX General, Inc., a Georgia

corporation, Canyon Cafe Limited, Inc., a Georgia corporation, Canyon Cafe of

Texas, LP, a Texas limited partnership, Hops of the Ohio Valley, Inc., a Florida

corporation, Hops of Southwest Florida, Inc., a Florida corporation, Hops Grill

& Bar, Inc., a Florida corporation, Cypress Coast Construction Corporation, a

Florida corporation, Hops Marketing, Inc., a Florida corporation, Hops of

Southeast Florida, Ltd., a Florida limited partnership, Hops of Coral Springs,

Ltd., a Florida limited partnership, Hops of Boynton Beach, Ltd., a Florida

limited partnership, Hops of South Florida, Ltd., a Florida limited partnership,

Hops of Stuart, Ltd., a Florida limited partnership, Hops of the Gold Coast,

Ltd., a Florida limited partnership, Hops of the Ohio Valley, Ltd., a Florida

limited partnership, Hops of Bowling Green, Ltd., a Florida limited partnership,

Hops of Greater Orlando, Ltd., a Florida limited partnership, Hops of Florida

Mall, Ltd., a Florida limited partnership, Hops of Altamonte Springs, Ltd., a

Florida limited partnership, Hops of Greater Orlando II, Ltd., a Florida limited

partnership, Hops of Lakeland, Ltd., a Florida limited partnership, Hops of

Southwest Florida, Ltd., a Florida limited partnership, Hops of Bradenton, Ltd.,

a Florida limited partnership, HNEF Area Manager II, Ltd., a Florida limited

partnership, The Hops Northeast Florida Joint Venture No. I, a Florida general

partnership, The Hops Northeast Florida Joint Venture No. II, a Florida general

partnership, The Hops Northeast Florida Joint Venture No. III, a Florida general

partnership, Hops of South Carolina, Ltd., a Florida limited partnership, Hops

of the Carolinas, Ltd., a Florida limited partnership, Hops of Matthews, Ltd., a

Florida limited partnership, Hops of the Carolinas II, Ltd., a Florida limited

partnership, Hops of Atlanta, Ltd., a Florida limited partnership, Hops of Ohio,

Ltd., a Florida limited partnership, Hops of Greater Detroit, Ltd., a Florida

limited partnership, Hops of Kansas, Ltd., a Florida limited partnership, Hops

of Missouri, LLC, a Florida limited liability company, Hops of Indiana, Ltd., a

Florida limited partnership, Hops of Greater Boston, Ltd., a Florida limited

partnership, and Hops of Rhode Island, LLC, a Rhode Island limited liability

company,(collectively, the "Guarantors") have guaranteed the payment and

performance of the Obligations pursuant to the Guaranties, and have secured

their obligations thereunder pursuant to the Security Agreements;

WHEREAS, the Borrower has notified the Agents that the Borrower is not in

compliance with certain financial covenants under the Credit Agreement and, as a

result thereof, the Administrative Agent, the Collateral Agent and the Lenders

are entitled to enforce their rights and remedies under the Credit Agreement and

the other Loan Documents;

WHEREAS, the Borrower has also advised the Agents and the Lenders that the

Borrower's failure to comply with its financial covenants may continue;

WHEREAS, the Borrower and the Guarantors have requested that the

Administrative Agent, the Collateral Agent and the Lenders forbear from

enforcing certain of their rights and remedies in connection with such defaults

for a short period of time, to provide additional liquidity during such period

and to assist them in connection with a possible refinancing or

debtor-in-possession financing in the event of a bankruptcy filing; and

WHEREAS, the Administrative Agent, the Collateral Agent and the Lenders are

willing to grant such forbearance and to provide additional liquidity on the

terms and conditions set forth herein.

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NOW, THEREFORE, in consideration of the facts set forth in the foregoing

recitals, which the parties hereto agree are true and correct, and for other

good and valuable consideration, including their mutual promises contained in

this Agreement, the Borrower, each Guarantor, the Administrative Agent and the

Collateral Agent agree as follows:

1. Acknowledgments by the Loan Parties. Each Loan Party hereby acknowledges

that:

(a) Events of Default have occurred and presently exist under the Credit

Agreement as a result of (i) the failure by the Borrower to give the notice

required under Section 7.10 of the Credit Agreement, (ii) the breach of the

covenant set forth in Section 10.02 of the Credit Agreement for period ending on

September 28, 2003, (iii) the breach of the covenant set forth in Section 10.03

of the Credit Agreement for the period ending on September 28, 2003, (iv) the

breach of the covenant set forth in Section 10.04 of the Credit Agreement for

the period ending on September 28, 2003, and (v) a default under the Senior Note

Documents and the Senior Subordinated Documents that may arise from the

nonpayment of interest under such documents or, with respect to the present

value calculations for the sale and leaseback transaction entered into by the

Borrower or its Subsidiaries in August 2003, the breach of the indebtedness

covenant under such documents . The Events of Default specified in this

subsection (a) are collectively referred to as the "Existing Defaults"; provided

that the Event of Default specified in clause (iv) above shall constitute an

Existing Default only so long as no holder of a Senior Note or holder of Senior

Subordinated Note accelerates the obligations thereunder or exercises any other

remedy such holder may have under the Senior Note Documents, the Senior

Subordinated Documents or otherwise with respect thereto.

(b) Pursuant to Section 4.01(c) of the Credit Agreement, interest has been

accruing on the principal balance of the Loans and all other Obligations since

September 28, 2003 at a rate which is three percent (3.0%) per annum in excess

of the Applicable Interest Rate in effect from time to time. Pursuant to Section

4.02(b) of the Credit Agreement, the Letter of Credit Fee is being calculated at

a rate which is three percent (3.0%) per annum in excess of the rate otherwise

applicable thereunder since September 28, 2003. In consideration of the Lenders

entering into this Agreement, the Borrower agrees that interest shall continue

to accrue, and the Letter of Credit Fee shall continue to be calculated, at such

rates.

(c) The Collateral Agent has the right pursuant to Section 5 of the

Depository Account Agreement among Royal Bank of Canada, the Borrower and the

Collateral Agent to deliver a Notice that an Event of Default has occurred and

is continuing under the Credit Agreement. The Loan Parties hereby consent to the

Collateral Agent delivering such Notice to Royal Bank of Canada simultaneously

with the execution and delivery of this Agreement.

2. Agreement to Forbear; Nature of Forbearance.

(a) Upon the satisfaction of the conditions precedent set forth in Section

4 hereof, the Administrative Agent, the Collateral Agent and the Lenders hereby

agree not to take any of the following actions as a result of the occurrence and

continuance of the Existing Defaults, for the period beginning on the date this

Agreement becomes effective and ending immediately upon the earlier of the

occurrence of an "Other Default" (as defined below) and January 31, 2004 (such

period being hereinafter referred to as the "Forbearance Period"): (1)

accelerate the maturity of the Obligations pursuant to Section 11.01 of the

Credit Agreement, or (2) commence any nonjudicial foreclosure or seizure of all

or any portion of the Collateral other than wiring all collected funds in the

Master Account to the Administrative Agent's account after the Notice referred

to in Section 4(c) below is sent to Royal Bank of Canada. For purposes of this

Agreement, "Other Default" shall mean any Event of Default other than the

Existing Defaults.

(b) The Agents and the Lenders expressly reserve the right to exercise all

rights and remedies under the Loan Documents and applicable law immediately with

respect to the occurrence of any Other Default and, immediately upon the

expiration of the Forbearance Period, with respect to the Existing Defaults.

(c) Except as expressly provided in Section 2(a), the Agents and the

Lenders reserve each and every right and remedy they may have under any of the

Loan Documents or under applicable law. Nothing in this Agreement or in the

decision by the Lenders to make additional Loans as contemplated in Section 3,

shall be deemed to constitute a waiver by any Agent or any Lender of any Event

of Default, whether now existing or hereafter arising, or of any right or remedy

the Agents and the Lenders may have under any of the Loan Documents or

applicable law, except to the extent expressly provided in Section 2(a).

3. Amendment to the Credit Agreement. Upon the satisfaction of the

conditions precedent set forth in Section 4 hereof, the Credit Agreement is

hereby amended as follows:

(a) Section 1.01 of the Credit Agreement is hereby amended by inserting the

following new defined terms in proper alphabetical order:

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"Assets Held For Sale Fee" has the meaning ascribed to such term in Section

4.02(f).

"Existing Defaults" has the meaning ascribed to such term in the

Forbearance Agreement.

"Forbearance Agreement" means the Forbearance Agreement dated January 2,

2004 entered into by and among the Borrower, the Lenders, the Administrative

Agent and the Collateral Agent, as such agreement may be amended, supplemented

or otherwise modified from time to time.

"Forbearance Effective Date" has the meaning ascribed to such term in the

Forbearance Agreement.

"Forbearance Period" has the meaning ascribed to such term in the

Forbearance Agreement.

(b) The definition of "Commitment" in Section 1.01 of the Credit Agreement

is hereby amended by deleting such definition in its entirety and substituting

therefor the following:

"Commitment" means, with respect to any Lender, the obligation of such

Lender to make Loans pursuant to the terms and conditions of this Agreement, and

which shall not exceed the principal amount set forth opposite such Lender's

name on the signature pages hereof or the signature page of the Assignment and

Acceptance by which it became (or becomes) a Lender, as such may be modified

from time to time pursuant to the terms of this Agreement or to give effect to

any applicable Assignment and Acceptance; "Commitments" means the aggregate

principal amount of the Commitments of all the Lenders, which amount shall not

exceed $39,000,000. The amount of the Commitments may be reduced from time to

time in accordance with the terms of this Agreement.

(c) The definition of "Commitment Reduction Amount" in Section 1.01 of the

Credit Agreement is hereby amended by deleting such definition in its entirety

and substituting therefor the following:

"Commitment Reduction Amount" means an amount equal to $10,000,000.

(d) The definition of "EBITDA" in Section 1.01 of the Credit Agreement is

hereby amended by deleting such definition in its entirety and substituting

therefor the following:

"EBITDA" means, with respect to any Person for any period, the Net Income

of such Person for such period, plus, without duplication, the sum of the

following amounts of such Person for such period and to the extent deducted in

determining Net Income of such Person for such period: (A) Net Interest Expense,

(B) income tax expense, (C) depreciation expense, (D) amortization expense, (E)

restructuring charges, asset revaluation and other special charges (excluding

legal fees and expenses), (F) extraordinary (on an after tax basis) or

non-recurring losses, (G) net losses attributable to Dispositions, (H) all other

non cash items (