EXHIBIT 10.1

Execution Copy

 

 

 

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SECOND AMENDED AND RESTATED CREDIT AGREEMENT

by and

between

PICCADILLY CAFETERIAS, INC.

as Borrower,

 

and

FOOTHILL CAPITAL CORPORATION

as Lender

 

Dated as of December 11, 2001

 

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SECOND AMENDED AND RESTATED CREDIT AGREEMENT

            THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT

(this "Agreement"), is entered into as of December 11, 2001, between FOOTHILL
CAPITAL CORPORATION, a California corporation ("Lender"), and PICCADILLY
CAFETERIAS, INC., a Louisiana corporation ("Borrower").

W

I T N E S S E T H :

            WHEREAS, Hibernia National Bank ("Hibernia") is the agent for a
group of lenders (the "Prior Lenders") that have provided a working capital line
of credit for Borrower pursuant to the terms of the Prior Credit Agreement (as
hereafter defined); and

            WHEREAS, pursuant to Borrower's request Hibernia and the Prior
Lenders have assigned to Lender and Lender has purchased from Hibernia and the
Prior Lenders all of Hibernia's and the Prior Lenders' rights, title and
interests under the Prior Credit Agreement and the Prior Notes (as defined
below), pursuant to the Master Assignment Agreement (as hereafter defined),
together with Hibernia's and the Prior Lenders' rights in the related documents
and agreements to the extent set forth therein; and

            WHEREAS, Borrower and Lender have agreed to amend and restate the
Prior Credit Agreement and the Prior Notes in their entirety as set forth
herein; and

            WHEREAS, each of the parties hereto acknowledges and agrees that the
Obligations (as defined herein) represent, among other things, the amendment,
restatement, renewal, extension, consolidation and modification of the
obligations of Borrower under the Prior Credit Agreement and the Prior Notes;
and

            WHEREAS, each of the parties hereto acknowledges and agrees that
this Agreement supercedes and replaces the Prior Credit Agreement and the Prior
Notes but does not extinguish the obligations thereunder and that by entering
into and performing its obligations hereunder, this transaction shall not
constitute a novation; and

            WHEREAS, each of the parties hereto acknowledges and agrees that the
security interests granted to Collateral Agent (as defined herein) for the
benefit of itself and the parties entitled to the benefits of the Intercreditor
Agreement (including, without limitation, Lender as assignee of the "Banks" and
"Administrative Agent" under the Prior Credit Agreement and Prior Notes) shall
remain outstanding and in full force and effect in accordance with the terms
hereof and of the other Loan Documents and shall continue to secure the
Obligations (as defined herein) without interruption or impairment of any kind
and all such security interests are hereby ratified, confirmed and continued;
and

            WHEREAS, Lender has become a party to the Intercreditor Agreement,
as the sole "Bank" thereunder, and is entitled to all of the benefits provided
to, and available for, the "Banks" and the "Administrative Agent" for the
"Banks" as such terms are defined in the Intercreditor Agreement; and

            WHEREAS, Hibernia serves as Collateral Agent under the Intercreditor
Agreement and has agreed to resign as Collateral Agent and Lender, as the sole
Bank under the Intercreditor Agreement, intends to appoint itself to serve as
Collateral Agent under the Intercreditor Agreement within the time provided for
pursuant to Section 3.2;

            NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties hereby amend and restate
the Prior Credit Agreement and the Prior Notes in their entirety as follows:

1.        DEFINITIONS AND CONSTRUCTION.

            1.1    Definitions. As used in this Agreement, the following terms
shall have the following definitions:

"Account Debtor" means any Person who is or who may become obligated under, with
respect to, or on account of, an Account, Chattel Paper, or a General
Intangible.

"Accounts" means all of Borrower's now owned or hereafter acquired right, title,
and interest with respect to "accounts" (as that term is defined in the Code),
and any and all supporting obligations in respect thereof.

"Additional Real Property Collateral" means the parcels of Real Property listed
on Schedule A-1, which parcels of Real Property are owned by Borrower as of the
Closing Date.

"Advances" has the meaning set forth in Section 2.1.

"Affiliate" means, as applied to any Person, any other Person who, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, in any event: (a) any Person which owns directly or
indirectly ten percent (10%) or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or ten percent (10%) or more of the partnership or other ownership
interests of a Person (other than as a limited partner of such Person) shall be
deemed to control such Person, (b) each director (or comparable manager) of a
Person shall be deemed to be an Affiliate of such Person; and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed to be an Affiliate of such Person; provided, however, that
Lender shall not be deemed an "Affiliate" of Borrower for purposes of this
definition.

"Agreement" has the meaning set forth in the preamble hereto.

"Applicable Prepayment Premium" means, as of any date of determination, an
amount equal to one tenth of one percent (0.10%) multiplied by (a) Twenty
Million Dollars ($20,000,000) less the Real Property Reserve, multiplied by (b)
the number of months (or any portion of a month) remaining until the Maturity
Date.

"Assignee" has the meaning set forth in Section 14.1(a).

"Authorized Person" means any officer or other employee of Borrower.

"Availability" means, as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day,
without double counting, the aggregate amount that Borrower is entitled to
borrow as Advances under Section 2.1 and to request as Letters of Credit under
Section 2.12 (in each case, after giving effect to all then outstanding
Obligations and all sublimits and reserves applicable hereunder).

"Bankruptcy Code" means the United States Bankruptcy Code, as in effect from
time to time.

"Base Rate" means, the rate of interest announced within Wells Fargo at its
principal office in San Francisco as its "prime rate," with the understanding
that the "prime rate" is one of Wells Fargo's base rates (not necessarily the
lowest of such rates) and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto and is
evidenced by the recording thereof after its announcement in such internal
publication or publications as Wells Fargo may designate.

"Base Rate Margin" means two percent (2.0%).

"Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35) of
ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of Borrower has
been an "employer" (as defined in Section 3(5) of ERISA) within the past six (6)
years.

"Blocked Account Agreement" means that certain restricted account agreement, in
form and substance satisfactory to Lender, among Borrower, Collateral Agent and
the Concentration Account Bank.

"Board of Directors" means the board of directors of Borrower or any committee
thereof duly authorized to act on behalf of the board.

"Books" means Borrower's now owned or hereafter acquired books and records
(including all of its Records indicating, summarizing, or evidencing its assets
(including the Collateral) or liabilities, all of its Records relating to its
business operations or financial condition, and all of its goods or General
Intangibles related to such information).

"Borrower" has the meaning set forth in the preamble to this Agreement.

"Borrowing" means a borrowing hereunder of an Advance.

"Borrowing Base" has the meaning set forth in Section 2.1.

"Borrowing Base Certificate" means a certificate in the form of Exhibit B-1.

"Business Day" means any day that is not a Saturday, Sunday, or other day on
which national banks are authorized or required to close.

"Capital Lease" means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

"Capitalized Lease Obligation" means any Indebtedness represented by obligations
under a Capital Lease.

"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one (1) year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within one (1) year from the date of acquisition thereof and, at the
time of acquisition, having the highest rating obtainable from either S&P or
Moody's, (c) commercial paper maturing no more than one (1) year from the date
of acquisition thereof and, at the time of acquisition, having a rating of A-1
or P-1, or better, from S&P or Moody's, (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Moody's, or (ii) certificates of deposit less than or equal to One Hundred
Thousand Dollars ($100,000) in the aggregate issued by any other bank insured by
the Federal Deposit Insurance Corporation, and (e) overnight investments with
such financial institutions having a short term deposit rating of P2 or A2, or
better, from Moody's or S&P.

"Change of Control" means (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of twenty
percent (20%), or more, of the Stock of Borrower having the right to vote for
the election of members of the Board of Directors, or (b) a majority of the
members of the Board of Directors do not constitute Continuing Directors, or (c)
except as specifically permitted under Sections 7.3(a) and (b), Borrower ceases
to directly own and control one hundred percent (100%) of the outstanding
capital Stock of each of its Subsidiaries, if any, created pursuant to Section
7.3(d).

"Chattel Paper" means all of Borrower's now owned or hereafter acquired right,
title and interest with respect to "chattel paper" as that term is defined in
the Code including, without limitation, tangible and electronic chattel paper.

"Closing Date" means December 11, 2001.

"Closing Date Business Plan" means the set of Projections of Borrower for the
three (3) year period following the Closing Date (on a month by month basis for
each month from the Closing Date until June 30, 2002 and on a quarterly basis
for each fiscal year thereafter), in form and substance (including as to scope
and underlying assumptions) satisfactory to Lender.

"Code" means the Uniform Commercial Code, as in effect from time to time in the
State of California.

"Collateral" means all of Borrower's now owned or hereafter acquired right,
title, and interest in and to each of the following:

                        (a)    Accounts,

                        (b)    Books,

                        (c)    Chattel Paper,

                        (d)    Deposit Accounts, including any DDA,

                        (e)    Equipment,

                        (f)    Financial Assets,

                        (g)    General Intangibles,

                        (h)    Inventory,

                        (i)    Investment Property,

                        (j)    Negotiable Collateral,

                        (k)    Real Property Collateral,

                        (l)    Supporting Obligations,

                        (m)    money or other assets of Borrower that now or
hereafter come into the possession, custody, or control of Lender,

                        (n)    the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance or
commercial tort claims covering any or all of the foregoing, and any and all
Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, Financial Assets,
General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real
Property, Supporting Obligations, money, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof, and

                        (o)    to the extent not included in the foregoing, all
other personal property of any kind or description.

"Collateral Access Agreement" means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Equipment or Inventory, in each case, in form and substance satisfactory
to Lender.

"Collateral Agent" means the Collateral Agent under and as defined in the
Intercreditor Agreement, which initially shall be Hibernia and which, following
the Collateral Agent Change Date, shall be Lender.

"Collateral Agent Change Date" means the date on which Lender becomes the
Collateral Agent.

"Collateral Agent's Liens" means the Liens granted by Borrower to Collateral
Agent under this Agreement or the other Loan Documents.

"Collections" means all cash, checks, notes, instruments, and other items of
payment (including insurance proceeds, proceeds of cash sales, rental proceeds,
and tax refunds) of Borrower.

"Compliance Certificate" means a certificate substantially in the form of
Exhibit C-1 delivered by the chief financial officer of Borrower to Lender.

"Concentration Account" means the account of Borrower maintained at Hibernia, or
such other bank acceptable to Lender, into which cash received in the other
deposit accounts of Borrower is wire transferred as provided in Section 2.7.

"Concentration Account Bank" means the financial institution at which the
Concentration Account is maintained.

"Continuing Director" means (a) any member of the Board of Directors who was a
director (or comparable manager) of Borrower on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing Date
if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted from such contest or the settlement
thereof.

"Control Agreement" means a control agreement, in form and substance
satisfactory to Lender, executed and delivered by Borrower, Collateral Agent,
and the applicable securities intermediary with respect to a Securities Account
or a bank with respect to a deposit account and shall include, without
limitation, the Pledge Agreement.

"Credit Card Agreements" means those certain agreements between Collateral Agent
and the credit card clearinghouses and processors of Borrower pursuant to which
such credit card clearinghouses and processors agree to transfer on a daily
basis all credit card receipts of Borrower or other amounts payable by such
clearinghouses or processors, into the Concentration Account. All Credit Card
Agreements shall be in form and substance satisfactory to Agent.

"Daily Balance" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.

"DDA" means any checking or other demand deposit account maintained by Borrower.

"Default" means an event, condition, or default that, with the giving of notice,
the passage of time, or both, would be an Event of Default.

"Deposit Account" means all of Borrower's now owned or hereafter acquired right,
title, and interest with respect to any "deposit account" as that term is
defined in the Code.

"Designated Account" means account number 882-308-405 of Borrower maintained
with the Designated Account Bank, or such other deposit account of Borrower
(located within the United States) that has been designated as such, in writing,
by Borrower to Lender.

"Designated Account Bank" means Hibernia National Bank, whose office is located
at P.O. Box 61540, New Orleans, Louisiana 70161, and whose ABA number is 065
000090.

"Disbursement Letter" means an instructional letter executed and delivered by
Borrower to Lender regarding the extensions of credit to be made on the Closing
Date, the form and substance of which is satisfactory to Lender.

"Dollars" or "$" means United States dollars.

"Due Diligence Letter" means the due diligence letter sent by Lender's counsel
to Borrower, together with Borrower's completed responses to the inquiries set
forth therein, the form and substance of such responses to be satisfactory to
Lender.

"EBITDA" means, with respect to any fiscal period, Borrower's and its
Subsidiaries' consolidated net earnings (or loss), minus (a) to the extent
included in computing net earnings (or loss), extraordinary gains, plus, (b)
without duplication, to the extent deducted in computing net earnings (or loss),
(i) interest expense, (ii) income taxes, (iii) depreciation and amortization for
such period, (iv) extraordinary losses (except that with respect to any period
that includes (A) the month of March 2001, such amount shall not exceed
$2,467,000 for such month, (B) the month of April 2001, such amount shall not
exceed $53,834 for such month, and (C) July 2001, such amount shall not exceed
$1,102,468 for such month), (v) non-cash cafeteria impairment and closing
charges (except that with respect to any period that includes (A) the month of
March 2001, such amount shall not exceed $9,867,628 for such month, and (B) the
month of June 2001, such amount shall not exceed $3,480,292 for such month), and
(vi) with respect to any period that includes the fiscal month of May 2001,
non-recurring adjustments totaling$1,500,000, in each case, as determined in
accordance with GAAP.

"EBITDAR" means, with respect to any fiscal period, Borrower's and its
Subsidiaries' EBITDA plus, to the extent deducted in computing net earnings
(loss) for such period and to the extent not added back to net earnings (loss)
in the calculation of EBITDA, Rent Obligation Expense, in each case, as
determined in accordance with GAAP.

"Enterprise Valuation" means the most recent appraised distressed sale valuation
of Borrower's business and its assets acceptable to Lender and determined at the
direction or request of Lender by a third party appraiser acceptable to Lender.

"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials from (a) any assets, properties, or businesses
of Borrower or any predecessor in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by Borrower or any predecessor in interest.

"Environmental Law" means any applicable federal, state, provincial, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrower, relating
to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. §
1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the
Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
§ 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. §
11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et
seq.; and the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to
the extent it regulates occupational exposure to Hazardous Materials); any state
and local or foreign counterparts or equivalents, in each case as amended from
time to time.

"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.

"Environmental Lien" means any Lien in favor of any Governmental Authority for
Environmental Liabilities and Costs.

"Equipment" means all of Borrower's now owned or hereafter acquired right,
title, and interest with respect to equipment, machinery, machine tools,
furniture, furnishings, fixtures, vehicles (including motor vehicles), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto.

"ERISA Affiliate" means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of Borrower under IRC
Section 414(b), (b) any trade or business subject to ERISA whose employees are
treated as employed by the same employer as the employees of Borrower under IRC
Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412
of the IRC, any organization subject to ERISA that is a member of an affiliated
service group of which Borrower is a member under IRC Section 414(m), or (d)
solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
Person subject to ERISA that is a party to an arrangement with Borrower and
whose employees are aggregated with the employees of Borrower under IRC Section
414(o).

"ERISA Event" means (a) a Reportable Event with respect to any Benefit Plan or
Multiemployer Plan, (b) the withdrawal of Borrower, any of Borrower's
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041 (c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of Borrower's Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any plan under Section
401(a)(29) of the IRC by Borrower or any of its Subsidiaries or any of their
ERISA Affiliates.

"Event of Default" has the meaning set forth in Section 8.

"Excess Availability" means the amount, as of the date any determination thereof
is to be made, equal to Availability minus the aggregate amount, if any, of all
trade payables of Borrower aged in excess of historical levels with respect
thereto and all book overdrafts in excess of historical practices with respect
thereto, in each case as determined by Lender in its Permitted Discretion.

"Excess Cash Flow" has the meaning ascribed thereto in the Indenture as it
exists on the date hereof.

"Exchange Act" means the Securities Exchange Act of 1934, as in effect from time
to time.

"Fee Letter" means that certain fee letter, dated as of even date herewith,
between Borrower and Lender, in form and substance satisfactory to Lender.

"FEIN" means Federal Employer Identification Number.

"Financial Asset" means all of Borrower's now owned or hereafter acquired right,
title, and interest with respect to any "financial asset" as that term is
defined in the Code.

"Fixed Charge Ratio" means, with respect to any fiscal period of calculation,
the ratio of EBITDAR for such period to Fixed Charges for such period.

"Fixed Charges" means, with respect to any fiscal period for Borrower and its
Subsidiaries on a consolidated basis, the sum (without duplication) of the
following for such period: (a) cash interest expense, plus (b) mandatory,
permanent principal repayments with respect to Indebtedness (excluding (i)
mandatory payments made on the Senior Secured Notes from Excess Cash Flow solely
to the extent required by the Indenture as it exists on the date hereof and (ii)
all principal payments, to the extent not exceeding $3,400,000 in the aggregate,
made on the Senior Secured Notes and the Term Facility Notes on the Closing Date
or during the month preceding the Closing Date), plus (c) income taxes paid (net
of income tax refunds received), plus (d) the amount of any permitted dividends
or other distributions, direct or indirect, with respect to Borrower's capital
stock, plus (e) Rent Obligation Expense, plus (f) the amount of any permitted
payments to Affiliates (other than payments to directors in an amount not to
exceed $250,000 in the aggregate during any fiscal year).

"Funding Date" means the date on which a Borrowing occurs.

"Funding Losses" has the meaning set forth in Section 2.13(b)(ii).

"GAAP" means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied.

"General Intangibles" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to general intangibles (including
payment intangibles, contract rights, rights to payment, rights arising under
common law, statutes, or regulations, choses or things in action, goodwill,
patents, trade names, trademarks, servicemarks, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing agreements, infringement claims, computer programs, information
contained on computer disks or tapes, software, literature, reports, catalogs,
money, deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), and any and all Supporting Obligations in respect thereof, and any
other personal property other than goods, Accounts, Investment Property, and
Negotiable Collateral.

"Governing Documents" means, with respect to any Person, the certificate or
articles of incorporation, by-laws, or other organizational documents of such
Person.

"Governmental Authority" means any federal, state, local, or other governmental
or administrative body, instrumentality, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.

"Hazardous Materials" means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty (50) parts per million.

"Hibernia" means Hibernia National Bank, a national banking association.

"Hibernia Term Loan Agreement" means that certain Term Loan Credit Agreement
dated as of December 21, 2000 among Borrower, Hibernia, as agent, and Hibernia,
as lender.

"Indebtedness" means (a) all obligations of Borrower for borrowed money, (b) all
obligations of Borrower evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations of Borrower in respect of
letters of credit, bankers acceptances, interest rate swaps, or other financial
products, (c) all obligations of Borrower under Capital Leases, (d) all
obligations or liabilities of others secured by a Lien on any asset of Borrower,
irrespective of whether such obligation or liability is assumed, (e) all
obligations of Borrower for the deferred purchase price of assets (other than
trade debt incurred in the ordinary course of Borrower's business and repayable
in accordance with customary trade practices), and (f) any obligation of
Borrower guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse to Borrower)
any obligation of the type described in any of clauses (a) through (e) of this
definition of any other Person.

"Indemnified Liabilities" has the meaning set forth in Section 11.3.

"Indemnified Person" has the meaning set forth in Section 11.3.

"Indenture" means that certain Indenture dated as of December 21, 2000 executed
by Borrower, The Bank of New York, as trustee and the other parties thereto in
connection with the issuance of up to Seventy-One Million Dollars ($71,000,000)
Senior Secured Notes and up to Four Million Five Hundred Thousand Dollars
($4,500,000) Term B Notes.

"Indenture Documents" means the Indenture and the other documents and
instruments executed in connection therewith.

"Insolvency Proceeding" means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.

"Intangible Assets" means, with respect to any Person, that portion of the book
value of all of such Person's assets that would be treated as intangibles under
GAAP.

"Intellectual Property Security Agreement" means that certain intellectual
property security agreement dated as of the Closing Date between Borrower and
Collateral Agent, the form and substance of which is satisfactory to Lender.

"Intercreditor Agreement" means that certain Intercreditor and Collateral Agency
Agreement among Borrower, Lender, as successor to the banks party to the Prior
Credit Agreement, the lenders under the Hibernia Term Loan Agreement, Hibernia
(as administrative agent and collateral agent) and The Bank of New York, as
trustee, dated as of December 21, 2000.

"Inventory" means all Borrower's now owned or hereafter acquired right, title,
and interest with respect to inventory, including goods held for sale or lease
or to be furnished under a contract of service, goods that are leased by
Borrower as lessor, goods that are furnished by Borrower under a contract of
service, and raw materials, work in process, or materials used or consumed in
Borrower's business.

"Investment" means, with respect to any Person, any investment by such Person in
any other Person (including Affiliates) in the form of loans, guarantees,
advances, or capital contributions (excluding (a) commission, travel, and
similar advances to officers and employees of such Person made in the ordinary
course of business, and (b) bona fide Accounts arising from the sale of goods or
rendition of services in the ordinary course of business consistent with past
practice), purchases or other acquisitions for consideration of Indebtedness or
Stock, and any other items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP.

"Investment Property" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "investment property" as that term is
defined in the Code, and any and all Supporting Obligations in respect thereof.

"IRC" means the Internal Revenue Code of 1986, as in effect from time to time.

"L/C" has the meaning set forth in Section 2.12(a).

"L/C Disbursement" means a payment made by Lender pursuant to a Letter of
Credit.

"L/C Undertaking" has the meaning set forth in Section 2.12(a).

"Lender" means Foothill Capital Corporation, a California corporation, in its
capacity as Lender, and/or following the Collateral Agent Change Date, in its
capacity as Collateral Agent.

"Lender's Account" means an account at a bank designated by Lender from time to
time as the account into which Borrower shall make all payments to Lender under
this Agreement and the other Loan Documents; unless and until Lender notifies
Borrower, Lender's Account shall be that certain deposit account bearing account
number 323-266193 and maintained by Lender with The Chase Manhattan Bank, 4 New
York Plaza, 15th Floor, New York, New York 10004, ABA #021000021.

"Lender Expenses" means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by Lender, (b) fees or charges paid or
incurred by Lender in connection with Lender's transactions with Borrower,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals or business valuations to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement), real estate
surveys, real estate title policies and endorsements, and environmental audits,
(c) costs and expenses incurred by Lender in the disbursement of funds to
Borrower (by wire transfer or otherwise), (d) charges paid or incurred by Lender
resulting from the dishonor of checks, (e) reasonable costs and expenses paid or
incurred by Lender to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) audit fees and expenses of Lender related to audit examinations
of the Books to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, (g) reasonable costs and expenses of
third party claims or any other suit paid or incurred by Lender in enforcing or
defending the Loan Documents or in connection with the transactions contemplated
by the Loan Documents or Lender's relationship with Borrower or any guarantor of
the Obligations, (h) Lender's reasonable fees and expenses (including attorneys
fees) incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents, and (i) Lender's reasonable fees and expenses
(including attorneys fees) incurred in terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.

"Lender-Related Person" means Lender, Lender's Affiliates, and the officers,
directors, employees, and agents of Lender.

"Letter of Credit" means an L/C or an L/C Undertaking, as the context requires.

"Letter of Credit Usage" means, as of any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit plus one hundred percent
(100%) of the amount of outstanding time drafts accepted by an Underlying Issuer
as a result of drawings under Underlying Letters of Credit, all of the foregoing
not to exceed $15,000,000 in the aggregate at any one time.

"Lien" means any interest in an asset securing an obligation owed to, or a claim
by, any Person other than the owner of the asset, whether such interest shall be
based on the common law, statute, or contract, whether such interest shall be
recorded or perfected, and whether such interest shall be contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances, including the lien or security interest arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, security agreement, conditional sale or trust receipt, or
from a lease, consignment, or bailment for security purposes and also including
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Real Property.

"Loan Account" has the meaning set forth in Section 2.10.

"Loan Documents" means this Agreement, the Master Assignment Agreement, the
Security Agreement, the Control Agreements, the Intellectual Property Security
Agreement, the Disbursement Letter, the Due Diligence Letter, the Fee Letter,
the Letters of Credit, the Mortgages, the Modifications to Mortgages, the
Officers' Certificate, the Intercreditor Agreement, any note or notes executed
by Borrower in connection with this Agreement and payable to Lender, and any
other agreement entered into, now or in the future, by Borrower and Lender in
connection with this Agreement.

"Master Assignment Agreement" means that certain Master Assignment Agreement
dated as of the Closing Date pursuant to which Hibernia and the Prior Lenders
assign and sell to Lender all of their rights, title and interests under the
Prior Loan Documents and all of their rights, title and interests, other than
the Reserved Rights (as defined in the Master Assignment Agreement) in the
Security Documents (as defined in the Master Assignment Agreement) and the
Intercreditor Agreement.

"Material Adverse Change" means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Borrower and its Subsidiaries (taken as a whole),
(b) a material impairment of Borrower's or any Subsidiary of Borrower's ability
to perform its obligations under the Loan Documents to which it is a party or of
Lender's ability to enforce the Obligations or realize upon the Collateral, or
(c) a material impairment of the enforceability or priority of Collateral
Agent's Liens with respect to the Collateral or any other collateral granted by
a Subsidiary of the Borrower, as a result of an action or failure to act on the
part of Borrower.

"Material Contracts" means those contracts identified on Schedule M-1.

"Maturity Date" has the meaning set forth in Section 3.4.

"Maximum Revolver Amount" means Twenty Million Dollars ($20,000,000).

"Modifications to Mortgages" means those certain modifications to the Mortgages
in form and substance satisfactory to Lender.

"Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its
successors.

"Mortgages" means, individually and collectively, the mortgages, deeds of trust,
or deeds to secure debt, executed and delivered by Borrower in favor of
Collateral Agent listed on Schedule R-1, that encumber the Real Property
Collateral and the related improvements thereto.

"Mortgage Policy Endorsements" has the meaning set forth in Section 3.2.

"Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
(6) years.

"Negotiable Collateral" means all of Borrower's now owned and hereafter acquired
right, title, and interest with respect to letters of credit, letter of credit
rights, instruments, promissory notes, drafts and documents, as such terms may
be defined in the Code, and any and all Supporting Obligations in respect
thereof.

"Net Funded Debt" means, as of any date of calculation, the face value of the
Senior Secured Notes plus Term Facility Notes less any unamortized bond
discount, plus the amount of outstanding Advances, less average unrestricted
cash and Cash Equivalents for the immediately preceding five (5) days.

"Obligations" means all loans, Advances, debts, principal, interest (including
any interest that, but for the provisions of the Bankruptcy Code, would have
accrued), contingent reimbursement obligations with respect to outstanding
Letters of Credit, premiums, liabilities (including all amounts charged to
Borrower's Loan Account pursuant hereto), obligations, fees (including the fees
provided for in the Fee Letter), charges, costs, Lender Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), guaranties, covenants, and duties of any kind and description owing by
Borrower to Lender pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
by law, or otherwise. Any reference in this Agreement or in the Loan Documents
to the Obligations shall include all amendments, changes, extensions,
modifications, renewals replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding.

"Officers' Certificate" means the representations and warranties of officers
form submitted by Lender to Borrower, together with Borrower's completed
responses to the inquiries set forth therein, the form and substance of such
responses to be satisfactory to Lender.

"Organizational I.D. Number" means with respect to any Person, the
organizational identification number assigned to such Person by the applicable
governmental unit or agency of the jurisdiction of organization of such Person.

"Originating Lender" has the meaning set forth in Section 14.1(d).

"Overadvance" has the meaning set forth in Section 2.5.

"Participant" has the meaning set forth in Section 14.1(d).

"PBGC" means the Pension Benefit Guaranty Corporation as defined in Title IV of
ERISA, or any successor thereto.

"Permitted Discretion" means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.

"Permitted Dispositions" means (a) sales or other dispositions by Borrower to
buyers of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of Borrower's business, (b) sales by Borrower of Inventory to
buyers in the ordinary course of business, (c) the use or transfer of money or
Cash Equivalents by Borrower in a manner that is not prohibited by the terms of
this Agreement or the other Loan Documents, (d) the licensing by Borrower to any
Person, on a non-exclusive basis, of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of Borrower's business, (e)
the sale or other disposition of equipment by Borrower to buyers from closed
restaurant locations in an aggregate amount not to exceed $250,000 per calendar
year, (f) the sale of Real Property and the Equipment located thereon to any
Person with respect to four (4) of the original fourteen (14) parcels of Real
Property Collateral (other than the Additional Real Property Collateral) as of
the Closing Date and the four (4) parcels of Additional Real Property Collateral
so long as the net cash proceeds from the proposed sale shall be paid to Lender
to repay outstanding Obligations, and (g) Borrower may contribute intangible
assets to a wholly-owned Subsidiary of Borrower so long as Borrower has complied
with Sections 6.16 and 7.3(d).

"Permitted Investments" means (a) investments in Cash Equivalents, (b)
investments in negotiable instruments for collection, and (c) advances made in
connection with purchases of goods or services in the ordinary course of
business.

"Permitted Liens" means (a) Liens held by Lender and the Collateral Agent, (b)
Liens for unpaid taxes that either (i) are not yet delinquent, or (ii) do not
constitute an Event of Default hereunder and are the subject of Permitted
Protests, (c) Liens set forth on Schedule P-1, (d) the interests of lessors
under operating leases, (e) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure Permitted
Purchase Money Indebtedness and so long as such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, (f) Liens arising by operation
of law in favor of warehousemen, landlords, carriers, mechanics, materialmen,
laborers, or suppliers, incurred in the ordinary course of Borrower's business
and not in connection with the borrowing of money, and which Liens either (i)
are for sums not yet delinquent, or (ii) are the subject of Permitted Protests,
(g) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (h) Liens or deposits to secure
performance of bids, tenders, or leases incurred in the ordinary course of
business of Borrower and not in connection with the borrowing of money, (i)
Liens granted as security for surety or appeal bonds in connection with
obtaining such bonds in the ordinary course of business of Borrower, (j) Liens
resulting from any judgment or award that is not an Event of Default hereunder,
(k) Liens with respect to the Real Property Collateral that are exceptions to
the commitments for title insurance issued in connection with the Mortgages, as
accepted by Lender, and (l) with respect to any Real Property that is not part
of the Real Property Collateral, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof by Borrower.

"Permitted Protest" means the right of Borrower to protest any Lien (other than
any such Lien that secures the Obligations), taxes (other than payroll taxes or
taxes individually or in an aggregate amount exceeding $250,000 that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on the Books in
such amount as is required under GAAP, (b) any such protest is instituted
promptly and prosecuted diligently by Borrower in good faith, and (c) Lender is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of Collateral Agent's Liens.

"Permitted Purchase Money Indebtedness" means, as of any date of determination,
Purchase Money Indebtedness incurred by Borrower after the Closing Date in an
aggregate principal amount outstanding at any one time not in excess of
$2,000,000.

"Person" means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.

"Personal Property Collateral" means all Collateral other than Real Property.

"Pledge Agreement" means that certain Pledge and Collateral Account Agreement
between Collateral Agent, the depository bank named therein, and Borrower dated
as of December 21, 2000.

"Prior Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of December 21, 2000 by and among Borrower, the Banks, (as
defined therein), and Hibernia as administrative agent and collateral agent, as
modified and amended by that certain First Amendment to Amended and Restated
Credit Agreement dated as of June 15, 2001, as further modified and amended by
that certain Second Amendment to Amended and Restated Credit Agreement dated as
of July 31, 2001.

"Prior Lenders" has the meaning set forth in the recitals hereof.

"Prior Loan Documents" means, collectively, the Prior Credit Agreement and the
Prior Notes.

"Prior Notes" means the promissory notes evidencing Borrower's obligations under
the Prior Credit Agreement.

"Prior Security Agreement" means that certain Security Agreement dated as of
December 17, 1999 between Borrower and Hibernia, as collateral agent, as amended
by that certain First Amendment to Security Agreement dated as of December 21,
2000.

"Projections" means Borrower's forecasted (a) balance sheets, (b) profit and
loss statements, and (c) cash flow statements, all prepared on a basis
consistent with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.

"Purchase Money Indebtedness" means Indebtedness (other than the Obligations,
but including Capitalized Lease Obligations), incurred at the time of, or within
twenty (20) days after, the acquisition of any fixed assets for the purpose of
financing all or any part of the acquisition cost thereof.

"Quick Sale Valuation" means the most recent forced liquidation valuation of the
Real Property Collateral (other than the Additional Real Property Collateral)
acceptable to Lender and determined at the direction or request of Lender by a
third party appraiser acceptable to Lender.

"Real Property" means any estates or interests in real property now owned or
hereafter acquired by Borrower and the improvements thereto.

"Real Property Availability" means, as of any date of determination,
seventy-five percent (75%) of the Quick Sale Valuation.

"Real Property Collateral" means the fourteen (14) parcels of Real Property
identified on Schedule R-1, together with the Additional Real Property
Collateral and any Real Property hereafter acquired by Borrower.

"Real Property Reserve" means, as of any date of determination, a reserve in the
amount by which Real Property Availability is less than Required Real Property
Availability.

"Record" means information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in perceivable form.

"Remedial Action" means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (d) conduct any other
actions authorized by 42 USC § 9601.

"Rent Obligation Expense" means, with respect to any period, regularly scheduled
payments made by Borrower and its Subsidiaries under all real property operating
leases and rental agreements for such period (including, without limitation, any
and all payment obligations of Borrower and its Subsidiaries with respect to
minimum and contingent rent expenses and common area maintenance charges, but
expressly excluding any and all prepayments under any real property operating
leases or rental agreements).

"Report" has the meaning set forth in Section 16.17.

"Reportable Event" means any of the events described in Section 4043(c) of ERISA
or the regulations thereunder other than a Reportable Event as to which the
provision of thirty (30) days notice to the PBGC is waived under applicable
regulations.

"Required Availability" means Excess Availability and unrestricted cash and Cash
Equivalents in an amount of not less than $3,000,000.

"Required Real Property Availability" means Real Property Availability in an
amount of not less than $10,000,000.

"Retiree Health Plan" means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.

"Revolver Usage" means, as of any date of determination, the sum of (a) the then
extant amount of outstanding Advances, plus (b) the then extant amount of the
Letter of Credit Usage.

"S&P" means Standard & Poor's Rating Service, a division of The McGraw-Hill
Companies, Inc., a New York corporation, and its successors.

"Sale/Leaseback Properties" means the Real Estate listed on Schedule S-1.

"SEC" means the United States Securities and Exchange Commission and any
successor thereto.

"Securities Account" means a "securities account" as that term is defined in the
Code.

"Security Agreement" means that certain Amended and Restated Security Agreement
dated as of the Closing Date between Borrower and Collateral Agent which amends
the Prior Security Agreement, the form and substance of which are satisfactory
to Lender.

"Senior Secured Notes" means the Senior Secured Notes and Term B Notes, in each
case, as defined in, and as issued pursuant to the terms of, the Indenture
Documents.

"Solvent" means, with respect to any Person on a particular date, that such
Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).

"Stock" means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).

"Subsidiary" of a Person means a corporation, partnership, limited liability
company, or other entity in which that Person directly or indirectly owns or
controls the shares of Stock having ordinary voting power to elect a majority of
the board of directors (or appoint other comparable managers) of such
corporation, partnership, limited liability company, or other entity.

"Supporting Obligation" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to any "supporting obligation" as that
term is defined in the Code.

"Taxes" has the meaning set forth in Section 16.5.

"Term Facility Notes" means the term notes issued pursuant to the terms of, the
Hibernia Term Loan Agreement.

"Triggering Event" means a "Triggering Event" as such term is defined in the
Intercreditor Agreement.

"Trustee" means The Bank of New York, as "Trustee" under the Indenture
Documents, and any successor "Trustee" thereunder.

"Underlying Issuer" means a third Person which is the beneficiary of an L/C
Undertaking and which has issued a letter of credit at the request of Lender for
the benefit of Borrower.

"Underlying Letter of Credit" means a letter of credit that has been issued by
an Underlying Issuer.

"Voidable Transfer" has the meaning set forth in Section 16.8.

"Wells Fargo" means Wells Fargo Bank, National Association, a national banking
association.

            1.2    Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower and its Subsidiaries
on a consolidated basis unless the context clearly requires otherwise.

            1.3    Code. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.

            1.4    Construction. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in the other Loan
Documents to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to any Person
shall be construed to include such Person's successors and assigns. Any
requirement of a writing contained herein or in the other Loan Documents shall
be satisfied by the transmission of a Record and any Record transmitted shall
constitute a representation and warranty as to the accuracy and completeness of
the information contained therein.

            1.5    Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.

2.        LOAN AND TERMS OF PAYMENT.

            2.1    Revolver Advances

.

                        (a)    Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, Lender agrees to make advances
("Advances") to Borrower in an amount at any one time outstanding not to exceed
an amount equal to the lesser of (i) the Maximum Revolver Amount less the Letter
of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage;
provided, however, that cash Advances hereunder shall not exceed $10,000,000 in
the aggregate at any one time outstanding. For purposes of this Agreement,
"Borrowing Base," as of any date of determination, shall mean the lesser of:

> > > (y) sixty percent (60%) of EBITDA for the immediately preceding
> > > twelve-month period not to exceed $12,000,000 plus seventy-five percent
> > > (75%) of the Quick Sale Valuation, minus the aggregate amount of reserves,
> > > if any, established by Lender under Section 2.1(b); or
> > > 
> > > (z) thirty-five percent (35%) of the Enterprise Valuation, minus the
> > > aggregate amount of reserves, if any, established by Lender under Section
> > > 2.1(b).

                        (b)    Anything to the contrary in this Section 2.1
notwithstanding, Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves with respect to (i) sums that Borrower is required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, (ii) Section 7.20(c),
(iii) except with respect to any determination of Availability in connection
with an Advance to be used to pay accrued interest under the Senior Secured
Notes and the Term Facility Notes, the amount of accrued and unpaid interest
under the Senior Secured Notes and the Term Facility Notes, and (iv) amounts
owing by Borrower to any Person to the extent secured by a Lien on, or trust
over, any of the Collateral (other than any existing Permitted Lien set forth on
Schedule P-1 which is specifically identified thereon as entitled to have
priority over Collateral Agent's Liens), which Lien or trust, in the Permitted
Discretion of Lender likely would have a priority superior to Collateral Agent's
Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under applicable
law) in and to such item of the Collateral. In addition to the foregoing, Lender
shall have the right to have the Real Property Collateral (other than the
Additional Real Property Collateral) and the Borrower's business reappraised by
a qualified appraisal company selected by Lender from time to time after the
Closing Date for the purpose of redetermining the Enterprise Valuation and the
Quick Sale Valuation, and, as a result, redetermining the Borrowing Base;
provided, however, that so long as no Default or Event of Default exists,
Borrower shall reimburse Lender for no more than one (1) Enterprise Valuation
and one (1) Quick Sale Valuation per calendar year.

                        (c)    Lender shall have no obligation to make
additional Advances hereunder to the extent such additional Advances would cause
the Revolver Usage to exceed the Maximum Revolver Amount.

                        (d)    Amounts borrowed pursuant to this Section may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.

                        (e)    Borrower shall pay to Lender, as a mandatory
repayment of the Obligations (to be applied to the Obligations in the manner set
forth in Section 2.4), an amount equal to the net cash proceeds of the sale by
Borrower of any of its Equipment or Real Property as permitted under Section 7.4
hereof. So long as no Default or Event of Default exists, the Maximum Revolver
Amount shall not be reduced by the amount of any such payment.

            2.2    [Intentionally Omitted]

            2.3    Borrowing Procedures and Settlements.

                        (a)    Procedure for Borrowing. Each Borrowing shall be
made by a request by an Authorized Person delivered to Lender (which notice must
be received by Lender no later than 10:00 a.m. (California time)) on the
Business Day that is the requested Funding Date specifying (i) the amount of
such Borrowing, which shall be in the amount of Five Hundred Thousand Dollars
($500,000) or an integral multiple thereof and (ii) the requested Funding Date,
which shall be a Business Day. At Lender's election, in lieu of delivering the
above-described request in writing, any Authorized Person may give Lender
telephonic notice of such request by the required time, with such telephonic
notice to be confirmed in writing within twenty four (24) hours of the giving of
such notice.

                       

(b)    Making of Advances.

If Lender has received a timely request for a Borrowing in accordance with the
provisions hereof, and subject to the satisfaction of the applicable terms and
conditions set forth herein, Lender shall make the proceeds of such Advance
available to Borrower on the applicable Funding Date by transferring immediately
available funds equal to such proceeds to Borrower's Designated Account. Each
Advance shall be in the amount of Five Hundred Thousand Dollars ($500,000) or an
integral multiple thereof.

            2.4    Payments.

                        (a)    Payments by Borrower

. Except as otherwise expressly provided herein, all payments by Borrower shall
be made to Lender's Account and shall be made in immediately available funds, no
later than 11:00 a.m. (California time) on the date specified herein. Any
payment received by Lender later than 11:00 a.m. (California time), shall be
deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue until such following Business Day.

                        (b)    Application and Reversal of Payments.

> > >     (i)    All payments shall be remitted to Lender and all such payments
> > > (other than payments received while no Default or Event of Default has
> > > occurred and is continuing and which relate to the payment of principal or
> > > interest of specific Obligations or which relate to the payment of
> > > specific fees), and all proceeds of Accounts or other Collateral received
> > > by Lender, shall be applied as follows:
> > > 
> > > >     A.    first, to pay any Lender Expenses then due to Lender under the
> > > > Loan Documents, until paid in full,
> > > > 
> > > >     B.    second, to pay any fees then due to Lender under the Loan
> > > > Documents, until paid in full,
> > > > 
> > > >     C.    third, ratably to pay interest due in respect of the Advances
> > > > until paid in full,
> > > > 
> > > >     D.    fourth, to pay the principal of all Advances until paid in
> > > > full,
> > > > 
> > > >     E.    fifth, if an Event of Default has occurred and is continuing,
> > > > to be held by Lender, as cash collateral in an amount up to one hundred
> > > > and five percent (105%) of the then extant Letter of Credit Usage until
> > > > paid in full,
> > > > 
> > > >     F.    sixth, to pay any other Obligations until paid in full, and
> > > > 
> > > >     G.    seventh, to Borrower (to be wired to the Designated Account)
> > > > or such other Person entitled thereto under applicable law.

In each instance, so long as no Default or Event of Default has occurred and is
continuing, Section 2.4(b) shall not be deemed to apply to any payment by
Borrower specified by Borrower to be for the payment of specific Obligations
then due and payable (or prepayable) under any provision of this Agreement.

For purposes of the foregoing, "paid in full" means payment of all amounts owing
under the Loan Documents according to the terms thereof, including loan fees,
service fees, professional fees, interest (and specifically including interest
accrued after the commencement of any Insolvency Proceeding), default interest,
interest on interest, and expense reimbursements, whether or not the same would
be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.

In the event of a direct conflict between the priority provisions of this
Section 2.4 and other provisions contained in any other Loan Document, it is the
intention of the parties hereto that such priority provisions in such documents
shall be read together and construed, to the fullest extent possible, to be in
concert with each other. In the event of any actual, irreconcilable conflict
that cannot be resolved as aforesaid, the terms and provisions of the
Intercreditor Agreement shall control and govern and, to the extent not
addressed in the Intercreditor Agreement, the terms and provisions of this
Section 2.4 shall control and govern.

            2.5    Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Lender pursuant to Sections 2.1 and 2.12 is
greater than either the Dollar or percentage limitations set forth in Sections
2.1 or 2.12, (an "Overadvance"), Borrower immediately shall pay to Lender, in
cash, the amount of such excess, which amount shall be used by Lender to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrower hereby promises to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full to Lender as
and when due and payable under the terms of this Agreement and the other Loan
Documents.

            2.6    Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations

                        (a)    Interest Rates

. Except as provided in clause (c) below, all Obligations (except for undrawn
Letters of Credit) that have been charged to the Loan Account pursuant to the
terms hereof shall bear interest on the Daily Balance thereof at a per annum
rate equal to the Base Rate plus the Base Rate Margin.

                        (b)    Letter of Credit Fee. Borrower shall pay Lender a
Letter of Credit fee (in addition to the charges, commissions, fees, and costs
set forth in Section 2.12(e)) which shall accrue at a rate equal to two and
three-quarters of one percent (2.75%

per annum times the Daily Balance of the undrawn amount of all outstanding
Letters of Credit.

                        (c)    Default Rate. Upon the occurrence and during the
continuation of an Event of Default,

> > >     (i)    all Obligations (except for undrawn Letters of Credit ) that
> > > have been charged to the Loan Account pursuant to the terms hereof shall
> > > bear interest on the Daily Balance thereof at a per annum rate equal to
> > > four percent (4.0%) per annum above the rate otherwise applicable
> > > hereunder, and
> > > 
> > >     (ii)    the Letter of Credit fee provided for above shall be increased
> > > to four percent (4.0%) per annum above the rate otherwise applicable
> > > hereunder.

                        (d)    Payment. Interest, Letter of Credit fees, and all
other fees payable hereunder shall be due and payable, in arrears, on the first
day of each month at any time that Obligations or obligation to extend credit
hereunder are outstanding. Borrower hereby authorizes Lender, from time to time,
without prior notice to Borrower, to charge such interest and fees, all Lender
Expenses (as and when incurred), the charges, commissions, fees, and costs
provided for in Section 2.12(e) (as and when accrued or incurred), the fees and
costs provided for in Section 2.11 (as and when accrued or incurred), and all
other payments as and when due and payable under any Loan Document to Borrower's
Loan Account, which amounts thereafter constitute Advances hereunder and shall
accrue interest at the rate then applicable to Advances hereunder. Any interest
not paid when due shall be charged to Borrower's Loan Account and shall
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances.

                        (e)    Computation. All interest and fees chargeable
under the Loan Documents shall be computed on the basis of a three hundred sixty
(360) day year for the actual number of days elapsed. In the event the Base Rate
is changed from time to time hereafter, the rates of interest hereunder based
upon the Base Rate automatically and immediately shall be increased or decreased
by an amount equal to such change in the Base Rate.

                        (f)    Intent to Limit Charges to Maximum Lawful Rate.
In no event shall the interest rate or rates payable under this Agreement, plus
any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. Borrower and Lender, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto, as of the date of this Agreement, Borrower is and shall
be liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.

            2.7    Collection of Accounts.

                        (a)    Borrower shall, and shall cause each of its
Subsidiaries to, immediately but not later than thirty (30) days after the
Closing Date, instruct all Account Debtors or other obligors (including credit
card processors) to remit all Collections directly to the Concentration Account
via electronic funds transfer (including, but not limited to ACH transfers) on
each Business Day. Borrower shall use its commercially reasonable best efforts
to cause all cash received by Borrower or any such Subsidiary at any restaurant
location and all other Collections and other amounts received directly by
Borrower or any such Subsidiary from any Account Debtor or any other source on
any day to be deposited on the next Business Day into any bank account,
thereupon to be deposited to or sent by electronic funds transfer (including,
but not limited to, ACH transfers) on the Business Day following the date of
deposit to the Concentration Account. With respect to the Concentration Account,
Borrower, Collateral Agent and the Concentration Account Bank shall enter into a
Blocked Account Agreement. The Blocked Account Agreement shall not be modified
by Borrower without the prior written consent of Lender. Upon the terms and
subject to the conditions set forth in the Blocked Account Agreement, all
amounts received in the Concentration Account shall be under the dominion and
control of Borrower unless and until the occurrence and continuance of an Event
of Default, whereupon amounts deposited in the Concentration Account shall be
under the dominion and exclusive control of Collateral Agent and Borrower shall
not have any right to withdraw amounts in the Concentration Account.

                        (b)    Notwithstanding the foregoing, all proceeds from
the sale of assets permitted hereunder, to the extent required by the
Intercreditor Agreement, shall be deposited into the DDA that is subject to the
Pledge Agreement, and shall be distributed in accordance with the Intercreditor
Agreement and this Agreement.

                        (c)    Schedule 2.7 sets forth all arrangements to which
Borrower or any Subsidiary of Borrower is a party with respect to the payment to
it of the proceeds of all credit card charges for sales by it. With respect to
each such arrangement, Borrower shall, and shall cause each of its Subsidiaries
to, enter into a Credit Card Agreement with the applicable credit card
processor. Borrower shall not, and shall not permit any of its Subsidiaries to,
attempt to change any direction or designation set forth in the Credit Card
Agreements regarding payment or charges without the prior written consent of
Lender, and it will not establish any other arrangement with respect to credit
card charges unless, contemporaneously with such establishment, it delivers to
Lender a Credit Card Agreement with respect thereto in form and substance
satisfactory to Lender.

                        (d)    Borrower shall not, and shall not permit any of
its Subsidiaries to, open or maintain any DDA or other bank account or
investment account with any bank or other financial institution other than the
Designated Account, the Concentration Account and the other accounts listed on
Schedule 2.7, which schedule includes the name and address of each such
financial institution and the account number of each DDA or other bank account
or investment account maintained at such financial institution; provided,
however, that Borrower may open new retail deposit accounts in the ordinary
course of business; provided further, however, that Borrower shall update
Schedule 2.7 reflecting any such new retail deposit account on a quarterly basis
so long as no Event of Default has occurred and is continuing, and on a monthly
basis thereafter or more frequently as reasonably requested by Lender; provided
further, however, that Borrower shall close the Concentration Account (and
establish a replacement account at a new Concentration Account Bank subject to a
Blocked Account Agreement) promptly and in any event within (30) days following
notice from Lender that the creditworthiness of Hibernia or any subsequent
Concentration Account Bank is no longer acceptable to Lender in its Permitted
Discretion. All DDAs and other deposit accounts and investment accounts of
Borrower are listed on Schedule 2.7, as such schedule may be amended from time
to time as set forth in the preceding sentence of this Section 2.7.

            2.8    Crediting Payments

. The receipt of any payment item by Lender shall not be considered a payment on
account unless such payment item is a wire transfer of immediately available
federal funds made to the Lender's Account or unless and until such payment item
is honored when presented for payment. Should any payment item not be honored
when presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Lender only if it is received into the Lender's Account on a Business Day on or
before 11:00 a.m. (California time). If any payment item is received into the
Lender's Account on a non-Business Day or after 11:00 a.m. (California time) on
a Business Day, it shall be deemed to have been received by Lender as of the
opening of business on the immediately following Business Day.

            2.9    Designated Account

. Lender is authorized to make the Advances, and Lender is authorized to issue
the Letters of Credit, under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to Section 2.6(d). Borrower agrees to establish
and maintain the Designated Account with the Designated Account Bank for the
purpose of receiving the proceeds of the Advances, requested by Borrower and
made by Lender hereunder. Unless otherwise agreed by Lender and Borrower, any
Advance, requested by Borrower and made by Lender hereunder shall be made to the
Designated Account.

            2.10    Maintenance of Loan Account; Statements of Obligations

. Lender shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances made by
Lender to Borrower or for Borrower's account, the Letters of Credit issued by or
at the request of Lender for Borrower's account, and with all other payment
Obligations hereunder or under the other Loan Documents, including, accrued
interest, fees and expenses, and Lender Expenses. In accordance with Section
2.8, the Loan Account will be credited with all payments received by Lender from
Borrower or for Borrower's account, including all amounts received in the
Lender's Account from any Blocked Account Bank. Lender shall render statements
regarding the Loan Account to Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrower and Lender
unless, within thirty (30) days after receipt thereof by Borrower, Borrower
shall deliver to Lender written objection thereto describing the error or errors
contained in any such statements.

            2.11    Fees

. Borrower shall pay to Lender the following fees and charges, which fees and
charges shall be non-refundable when paid (irrespective of whether this
Agreement is terminated thereafter):

                        (a)    Unused Line Fee. On the first day of each month
during the term of this Agreement, an unused line fee in an amount equal to
three-eighths of one percent (0.375%) per annum times the result of (a) the
Maximum Revolver Amount less (b) the Real Estate Reserve, less (c) the sum of
(i) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, plus (ii) the average Daily Balance of the Letter
of Credit Usage during the immediately preceding month,

                        (b)    Fee Letter Fees. As and when due and payable
under the terms of the Fee Letter, Borrower shall pay to Lender the fees set
forth in the Fee Letter, and

                        (c)    Audit, Appraisal, and Valuation Charges. Audit,
appraisal, and valuation fees and charges as follows, (i) a fee of Eight Hundred
Fifty Dollars ($850) per day, per auditor, plus out-of-pocket expenses for each
financial audit of Borrower performed by personnel employed by Lender, (ii) a
fee of Fifteen Hundred Dollars ($1,500) per day per appraiser, plus
out-of-pocket expenses, for each appraisal of the Collateral performed by
personnel employed by Lender, and (iii) the actual charges paid or incurred by
Lender if it elects to employ the services of one or more third Persons to
perform financial audits of Borrower, to appraise the Collateral, or any portion
thereof, or to assess Borrower's business valuation; provided, however, that so
long as no Default or Event of Default exists, Borrower shall reimburse Lender
for no more than three (3) audits per calendar year and no more than one (1)
Enterprise Valuation and one (1) Quick Sale Valuation per calendar year.

            2.12    Letters of Credit

                        (a)    Subject to the terms and conditions of this
Agreement, Lender agrees to issue letters of credit for the account of Borrower
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, such issuing bank to be Wells Fargo) for the account of Borrower. To
request the issuance of an L/C or an L/C Undertaking (or the amendment, renewal,
or extension of an outstanding L/C or L/C Undertaking), Borrower shall hand
deliver or telecopy (or transmit by electronic communication, if arrangements
for doing so have been approved by Lender) to Lender and Lender (reasonably in
advance of the requested date of issuance, amendment, renewal, or extension) a
notice requesting the issuance of an L/C or L/C Undertaking, or identifying the
L/C or L/C Undertaking to be amended, renewed, or extended, the date of
issuance, amendment, renewal, or extension, the date on which such L/C or L/C
Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name
and address of the beneficiary thereof (or the beneficiary of the Underlying
Letter of Credit, as applicable), and such other information as shall be
necessary to prepare, amend, renew, or extend such L/C or L/C Undertaking. If
requested by Lender, Borrower also shall be an applicant under the application
with respect to any Underlying Letter of Credit that is to be the subject of an
L/C Undertaking. Lender shall have no obligation to issue a Letter of Credit if
any of the following would result after giving effect to the requested Letter of
Credit:

> > >     (i)    the Letter of Credit Usage would exceed the Borrowing Base less
> > > the amount of outstanding Advances, or
> > > 
> > >     (ii)    the Letter of Credit Usage would exceed Fifteen Million
> > > Dollars ($15,000,000), or
> > > 
> > >     (iii)    the Letter of Credit Usage would exceed the Maximum Revolver
> > > Amount less the amount of outstanding Advances.

Borrower and Lender acknowledge and agree that certain Underlying Letters of
Credit may be issued to support letters of credit that already are outstanding
as of the Closing Date. Each Letter of Credit (and corresponding Underlying
Letter of Credit) shall have an expiry date no later than fifteen (15) days
prior to the Maturity Date and all such Letters of Credit (and corresponding
Underlying Letter of Credit) shall be in form and substance acceptable to Lender
(in the exercise of its Permitted Discretion), including the requirement that
the amounts payable thereunder must be payable in Dollars. If Lender is
obligated to advance funds under a Letter of Credit, Borrower immediately shall
reimburse such L/C Disbursement to Lender by paying to Lender an amount equal to
such L/C Disbursement not later than 11:00 a.m., California time, on the date
that such L/C Disbursement is made, if Borrower shall have received written or
telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time,
on such date, or, if such notice has not been received by Borrower prior to such
time on such date, then not later than 11:00 a.m., California time, on the
Business Day that Borrower receives such notice, if such notice is received
prior to 10:00 a.m., California time, on the date of receipt, and, in the
absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances. To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrower's obligation to
reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance.

                        (b)    Each Borrower hereby agrees to indemnify, save,
defend, and hold Lender harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by Lender arising out of or in connection
with any Letter of Credit; provided, however, that Borrower shall not be
obligated hereunder to indemnify for any loss, cost, expense, or liability that
is caused by the gross negligence or willful misconduct of Lender. Borrower
agrees to be bound by the Underlying Issuer's regulations and interpretations of
any Underlying Letter of Credit or by Lender's interpretations of any L/C issued
by Lender to or for Borrower's account, even though this interpretation may be
different from Borrower's own, and Borrower understands and agrees that Lender
shall not be liable for any error, negligence, or mistake, whether of omission
or commission, in following Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Borrower understands that the L/C Undertakings may require Lender to indemnify
the Underlying Issuer for certain costs or liabilities arising out of claims by
Borrower against such Underlying Issuer. Borrower hereby agrees to indemnify,
save, defend, and hold Lender harmless with respect to any loss, cost, expense
(including reasonable attorneys fees), or liability incurred by Lender under any
L/C Undertaking as a result of Lender's indemnification of any Underlying
Issuer; provided, however, that Borrower shall not be obligated hereunder to
indemnify for any loss, cost, expense, or liability that is caused by the gross
negligence or willful misconduct of Lender.

                        (c)    Borrower hereby authorizes and directs any
Underlying Issuer to deliver to Lender all instruments, documents, and other
writings and property received by such Underlying Issuer pursuant to such
Underlying Letter of Credit and to accept and rely upon Lender's instructions
with respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.

                        (d)    Any and all charges, commissions, fees, and costs
incurred by Lender relating to Underlying Letters of Credit shall be Lender
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrower to Lender for the account of Lender; it being acknowledged and agreed
by Borrower that, as of the Closing Date, the issuance charge imposed by the
prospective Underlying Issuer is eight hundred and twenty-five one-thousandths
of one percent (0.825%) per annum times the face amount of each Underlying
Letter of Credit, that such issuance charge may be changed from time to time,
and that the Underlying Issuer also imposes a schedule of charges for
amendments, extensions, drawings, and renewals.

                        (e)    If by reason of (i) any change in any applicable
law, treaty, rule, or regulation or any change in the interpretation or
application thereof by any Governmental Authority, or (ii) compliance by the
Underlying Issuer or Lender with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental Authority
or monetary authority including, Regulation D of the Federal Reserve Board as
from time to time in effect (and any successor thereto):

> > >     (i)    any reserve, deposit, or similar requirement is or shall be
> > > imposed or modified in respect of any Letter of Credit issued hereunder,
> > > or
> > > 
> > >     (ii)    there shall be imposed on the Underlying Issuer or Lender any
> > > other condition regarding any Underlying Letter of Credit or any Letter of
> > > Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit
or to reduce the amount receivable in respect thereof by Lender, then, and in
any such case, Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts as Lender may specify to be
necessary to compensate Lender for such additional cost or reduced receipt,
together with interest on such amount from the date of such demand until payment
in full thereof at the rate then applicable to Advances hereunder. The
determination by Lender of any amount due pursuant to this Section, as set forth
in a certificate setting forth the calculation thereof in reasonable detail,
shall, in the absence of manifest or demonstrable error, be final and conclusive
and binding on all of the parties hereto.

            2.13    [Intentionally Omitted]

            2.14    Capital Requirements

. If, after the date hereof, Lender determines that (i) the adoption of or
change in any law, rule, regulation or guideline regarding capital requirements
for banks or bank holding companies, or any change in the interpretation or
application thereof by any Governmental Authority charged with the
administration thereof, or (ii) compliance by Lender or its parent bank holding
company with any guideline, request or directive of any such entity regarding
capital adequacy (whether or not having the force of law), the effect of
reducing the return on Lender's or such holding company's capital as a
consequence of Lender's obligations hereunder to a level below that which Lender
or such holding company could have achieved but for such adoption, change, or
compliance (taking into consideration Lender's or such holding company's then
existing policies with respect to capital adequacy and assuming the full
utilization of such entity's capital) by any amount deemed by Lender to be
material, then Lender may notify Borrower thereof. Following receipt of such
notice, Borrower agrees to pay Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within
ninety (90) days after presentation by Lender of a statement in the amount and
setting forth in reasonable detail Lender's calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error). In determining such amount,
Lender may use any reasonable averaging and attribution methods.

3.        CONDITIONS; POST CLOSING COVENANTS; TERM OF AGREEMENT

            3.1    Conditions Precedent to the Initial Extension of Credit

. The obligation of Lender to make the initial Advance (or otherwise to extend
any credit provided for hereunder), is subject to the fulfillment, to the
satisfaction of Lender, of each of the conditions precedent set forth below:

                        (a)    the Closing Date shall occur on or before
December 14, 2001;

                        (b)    Lender shall have received all financing
statements required by Lender, duly executed by Borrower, and Lender shall have
received searches reflecting the filing of all such financing statements;

                        (c)    Lender shall have received each of the following
documents, in form and substance satisfactory to Lender, duly executed, and each
such document shall be in full force and effect:

> > >     (i)    the Control Agreements, including the Pledge Agreement,
> > > 
> > >     (ii)    the Intellectual Property Security Agreement,
> > > 
> > >     (iii)    the Disbursement Letter,
> > > 
> > >     (iv)    the Due Diligence Letter,
> > > 
> > >     (v)    the Fee Letter,
> > > 
> > >     (vi)    the Master Assignment Agreement,
> > > 
> > >     (vii)    the Officers' Certificate,
> > > 
> > >     (viii)    such documentation evidencing the assignments under the
> > > Master Assignment Agreement as are requested by Lender,
> > > 
> > >     (ix)    the Security Agreement, and
> > > 
> > >     (x)    a Borrowing Base Certificate dated as of the Closing Date;

                        (d)    Lender shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same;

                        (e)    Lender shall have received copies of Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Borrower;

                        (f)    Lender shall have received a certificate of
status with respect to Borrower, dated within ten (10) days of the Closing Date,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;

                        (g)    Lender shall have received certificates of status
with respect to Borrower, such certificates to be issued by the appropriate
officer of the jurisdictions (other than the jurisdiction of organization of
Borrower) in which its failure to be duly qualified or licensed would constitute
a Material Adverse Change, which certificates shall indicate that Borrower is in
good standing in such jurisdictions and which certificates (i) from the States
of Louisiana and Alabama shall be dated within thirty (30) days of the Closing
Date and (ii) from all other states shall be dated on or after September 15,
2001;

                        (h)    Lender shall have received a certificate of
insurance and a copy of the certificate of insurance issued in favor of the
Collateral Agent, together with the endorsements thereto, as are required by
Section 6.8, the form and substance of which shall be satisfactory to Lender;

                        (i)    Lender shall have received satisfactory evidence
that Hibernia has delivered its notice of resignation as Collateral Agent;

                        (j)    Lender shall have received an opinion of
Borrower's counsel in form and substance satisfactory to Lender;

                        (k)    Lender shall have received satisfactory evidence
(including a certificate of the chief financial officer of Borrower) that all
tax returns required to be filed by Borrower have been timely filed and all
taxes upon Borrower or its properties, assets, income, and franchises (including
Real Property taxes and payroll taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest;

                        (l)    Borrower shall have the Required Availability
after giving effect to the initial extensions of credit hereunder;

                        (m)    Lender shall have completed its business, legal,
and collateral due diligence, including (i) a collateral audit and review of
Borrower's books and records and verification of Borrower's representations and
warranties to Lender, the results of which shall be satisfactory to Lender, and
(ii) satisfactory review by Lender of the Intercreditor Agreement, the Indenture
Documents and the Hibernia Term Loan Agreement;

                        (n)    Lender shall have received completed reference
checks with respect to Borrower's senior management, the results of which are
satisfactory to Lender in its sole discretion;

                        (o)    Lender shall have received appraisals of the
Enterprise Valuation and the Quick Sale Valuation (including Borrower's
corporate headquarters and Baton Rouge, Louisiana locations) acceptable to
Lender;

                        (p)    Lender shall have received Borrower's Closing
Date Business Plan;

                        (q)    Borrower shall have paid all fees that are
required to be paid on the Closing Date pursuant to the terms of the Fee Letter,
plus all Lender Expenses incurred in connection with the transactions evidenced
by this Agreement;

                        (r)    To the extent requested by Lender, Lender shall
have received a phase 1 environmental report and a real estate survey with
respect to each parcel composing the Real Property Collateral; the environmental
consultants and surveyors retained for such reports or surveys, the scope of the
reports or surveys, and the results thereof shall be acceptable to Lender;

                        (s)    Lender shall have received copies of each of the
Borrower's Material Contracts, together with a certificate of the Secretary of
Borrower certifying each such document as being a true, correct, and complete
copy thereof;

                        (t)    Borrower shall have received all licenses,
approvals or evidence of other actions required by any Governmental Authority in
connection with the execution and delivery by Borrower of this Agreement or any
other Loan Document or with the consummation of the transactions contemplated
hereby and thereby; and

                        (u)    Lender shall have received the unqualified annual
audited financial statements of Borrower prepared by Ernst & Young (without
explanatory paragraphs) and such financial statements shall be satisfactory to
Lender;

                        (v)    all other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance satisfactory
to Lender.

            3.2    Post Closing Covenants.

Borrower shall, on or before the date applicable thereto, satisfy or cause to be
satisfied each of the following post closing covenants (the failure by Borrower
to so perform or cause to be performed constituting an Event of Default):

                        (a)    within thirty (30) days of the Closing Date,
deliver to Lender certified copies of the policies of insurance, together with
the endorsements thereto, as are required by Section 6.8, the form and substance
of which shall be in accordance with the requirements of Section 6.8 and
otherwise satisfactory to Lender and its counsel;

                        (b)    within thirty (30) days of the Closing Date,
establish a cash management system satisfying the requirements of Section 2.7
and Section 7.13 and deliver to Lender the fully executed Blocked Account
Agreement, Credit Card Agreements, Control Agreements and an updated Schedule
2.7;

                        (c)    On or before the date thirty (30) days following
the Closing Date, provide to Lender evidence satisfactory to Lender that the
public record in East Baton Rouge, Louisiana reflects that the $900,000 judgment
in favor of Parish Graves et al. has been satisfied or otherwise removed from
the public record.

                        (d)    cause the Collateral Agent Change Date to occur
no later than sixty (60) days after the Closing Date;

                        (e)    promptly following the Collateral Agent Change
Date, but in no event later than thirty (30) days following the Collateral Agent
Change Date, the parties hereto shall enter into an amendment to this Agreement
extending the Maturity Date to December 11, 2004, all financing statements,
Mortgages, and other filed or recorded documents shall be amended (or assigned
by Hibernia to the extent an amendment is insufficient to reflect Lender in its
capacity as Collateral Agent) to the extent required by Lender to reflect Lender
in its capacity as Collateral Agent and to address such other matters as Lender
shall deem necessary in its reasonable discretion (including, without
limitation, to reflect the amendment and restatement of the Prior Credit
Agreement pursuant to this Agreement and the extension of the Maturity Date to
December 11, 2004) and any such amendments (or assignments) shall be recorded or
filed, and Lender shall have received in its own name as Collateral Agent all
such certificates of insurance, loss payable endorsements, and other items
required under this Section 3 with respect to the Collateral Agent, together
with such other items as may be requested by Lender in its capacity as
Collateral Agent, including, without limitation, Modifications to Mortgages and
an acknowledgment and agreement by all of the parties to the Intercreditor
Agreement that Lender is the Collateral Agent, together with such other
acknowledgments and agreements as shall be reasonably requested by Lender in its
capacity as Collateral Agent; and

                        (f)    promptly following the Collateral Agent Change
Date, but in no event later than thirty (30) days following the Collateral Agent
Change Date, Lender shall have received endorsements to the existing mortgagee
title insurance policies (or marked commitments to issue the same) for the Real
Property Collateral (other than the Additional Real Property Collateral) which
were issued in connection with the Mortgages (each a "Mortgage Policy
Endorsement" and, collectively, the "Mortgage Policy Endorsements") in amounts
satisfactory to Lender assuring Lender that the Mortgages, as assigned and as
modified by the Modifications to Mortgages, on such Real Property Collateral are
valid and enforceable first priority mortgage Liens on such Real Property
Collateral free and clear of all defects and encumbrances except Permitted
Liens, and the mortgage policies otherwise shall be in form and substance
satisfactory to Lender.

            3.3    Conditions Precedent to all Extensions of Credit

. The obligation of Lender to make all Advances (or to extend any other credit
hereunder) shall be subject to the following conditions precedent:

                        (a)    the representations and warranties contained in
this Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the date of such extension of credit, as though
made on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date),

                        (b)    no Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof,

                        (c)    no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental Authority
against Borrower, Lender, or any of their Affiliates, and

                        (d)    no Material Adverse Change shall have occurred.

            3.4    Term

. This Agreement shall become effective upon the execution and delivery hereof
by Borrower and Lender and shall continue in full force and effect for a term
ending on December 21, 2003 (the "Maturity Date"). The foregoing
notwithstanding, Lender, shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.

            3.5    Effect of Termination

. On the date of termination of this Agreement, all Obligations (including
contingent reimbursement obligations of Borrower with respect to outstanding
Letters of Credit) immediately shall become due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or discharge
Borrower of its duties, Obligations, or covenants hereunder and Collateral
Agent's Liens in the Collateral shall remain in effect until all Obligations
have been fully and finally discharged (or, with respect to contingent
reimbursement obligations of Borrower with respect to outstanding Letters of
Credit, Borrower shall have delivered to Lender (i) letters of credit, in form
and substance and from issuing banks acceptable to Lender, naming Lender as the
beneficiary thereof and in an aggregate face amount equal to one hundred five
percent (105%) of the then extant Letter of Credit Usage or (ii) cash collateral
in an amount equal to one hundred five percent (105%) of the then extant Letter
of Credit Usage, in each case, together with such other documentation as shall
be required by Lender in connection therewith) and Lender's obligations to
provide additional credit hereunder have been terminated. When this Agreement
has been terminated and all of the Obligations have been fully and finally
discharged (or, with respect to contingent reimbursement obligations of Borrower
with respect to outstanding Letters of Credit, Borrower shall have delivered to
Lender (i) letters of credit, in form and substance and from issuing banks
acceptable to Lender, naming Lender as the beneficiary thereof and in an
aggregate face amount equal to one hundred five percent (105%) of the then
extant Letter of Credit Usage or (ii) cash collateral in an amount equal to one
hundred five percent (105%) of the then extant Letter of Credit Usage, in each
case, together with such other documentation as shall be required by Lender in
connection therewith) and Lender's obligations to provide additional credit
under the Loan Documents have been terminated irrevocably, Lender will request
that Collateral Agent, at Borrower's sole expense, execute and deliver any UCC
termination statements, lien releases, mortgage releases, re-assignments of
trademarks, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, Collateral Agent's Liens and all notices of
security interests and liens previously filed by Collateral Agent with respect
to the Obligations.

            3.6    Early Termination by Borrower

. Borrower has the option, at any time upon thirty (30) days prior written
notice by Borrower to Lender, to terminate this Agreement by paying to Lender,
in cash, the Obligations (including either (i) providing cash collateral to be
held by Lender in an amount equal to one hundred and five percent (105%) of the
then extant Letter of Credit Usage, (ii) causing the original Letters of Credit
to be returned to Lender, or (iii) providing letters of credit, in form and
substance and from issuing banks acceptable to Lender, naming Lender as the
beneficiary thereof and in an aggregate face amount equal to one hundred five
percent (105%) of the then extant Letter of Credit Usage), in full, together
with the Applicable Prepayment Premium. If Borrower has sent a notice of
termination pursuant to the provisions of this Section, then Lender's
obligations to extend credit hereunder shall terminate and Borrower shall be
obligated to repay the Obligations (including either (i) providing cash
collateral to be held by Lender in an amount equal to one hundred and five
percent (105%) of the then extant Letter of Credit Usage, (ii) causing the
original Letters of Credit to be returned to Lender, or (iii) providing letters
of credit, in form and substance and from issuing banks acceptable to Lender,
naming Lender as the beneficiary thereof and in an aggregate face amount equal
to one hundred five percent (105%) of the then extant Letter of Credit Usage),
in full, together with the Applicable Prepayment Premium, on the date set forth
as the date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of Lender to terminate after the occurrence of an Event of Default, (b)
foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency
Proceeding, or (iv) restructure, reorganization or compromise of the Obligations
by the confirmation of a plan of reorganization, or any other plan of
compromise, restructure, or arrangement in any Insolvency Proceeding, then, in
view of the impracticability and extreme difficulty of ascertaining the actual
amount of damages to Lender or profits lost by Lender as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of Lender, Borrower
shall pay the Applicable Prepayment Premium to Lender, measured as of the date
of such termination.

4.        COLLATERAL.

            4.1    Collateral Security

. Repayment of each Advance and performance of all other Obligations and duties
owed by Borrower to Lender under this Agreement, is secured by all property and
rights of Borrower in which Borrower has granted, or in the future grants, a
security interest of any nature to Collateral Agent as security for the
Borrower's obligations as described in, and subject to, the Intercreditor
Agreement, including, without limitation, pursuant to the Security Agreement,
the Pledge Agreement, the Intellectual Property Security Agreement and the
Mortgages, and Borrower hereby grants to Collateral Agent, for the benefit of
the Creditors (as defined in the Intercreditor Agreement and including, without
limitation, Lender), a security interest in all Collateral and such other
property and rights as described in the Loan Documents to secure the
"Obligations" (as defined in the Intercreditor Agreement and including, without
limitation, the Obligations hereunder). The security interests granted shall be
continuing liens and shall include the rents, proceeds and products of the
Collateral, including without limitation the proceeds of any insurance. Borrower
agrees not to transfer or further encumber any of the interests in the
Collateral, and agrees not to allow any other person or entity granting security
interests in the Collateral to transfer or encumber any of the Collateral,
except for Permitted Liens and as otherwise may be permitted under this
Agreement or with the written consent of Lender.

            4.2    Existing Collateral

. Borrower hereby acknowledges and agrees that all security interests granted by
Borrower to secure the indebtedness under the Prior Credit Agreement secures the
Obligations under this Agreement, the Indenture Documents and the Hibernia Term
Loan Agreement.

            4.3    Perfection of Security Interests.

Borrower agrees to execute such documents and agreements and to take whatever
other actions as are reasonably requested by Lender and Collateral Agent to
perfect and continue the security interests in the Collateral.

            4.4    Right to Inspect

. Lender and its officers, employees or agents shall have the right, from time
to time hereafter, to inspect the Books and check, test and appraise the
Collateral in order to verify Borrower's and its Subsidiaries' financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral.

5.        REPRESENTATIONS AND WARRANTIES.

            In order to induce Lender to enter into this Agreement, Borrower
makes the following representations and warranties to Lender which shall be
true, correct, and complete, in all material respects, as of the date hereof,
and shall be true, correct, and complete, in all material respects, as of the
Closing Date, and at and as of the date of the making of each Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
such Advance (or other extension of credit) (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:

            5.1    No Encumbrances

. Borrower has good and indefeasible title to the Collateral and the Real
Property, free and clear of Liens except for Permitted Liens.

            5.2    [Intentionally Omitted]

            5.3    [Intentionally Omitted]

            5.4    Equipment

. All of the Equipment material to Borrower's business is fit for use in
Borrower's business.

            5.5    Location of Inventory and Equipment

. Except for Equipment with a fair market value of not more than $100,000 in the
aggregate, the Inventory and Equipment are not stored with a bailee,
warehouseman, or similar party and are located only at the locations identified
on Schedule 5.5.

            5.6    Inventory Records

. Borrower keeps correct and accurate records in all material respects itemizing
and describing the type, quality, and quantity of its Inventory and the book
value thereof.

            5.7    Location of Chief Executive Office; FEIN

. The chief executive office of and other locations of Borrower are (and have
been for the last five (5) years) located at the addresses indicated in Schedule
5.7 and Borrower's FEIN and Organizational I.D. Number are identified in
Schedule 5.7; the Borrower's state of formation and exact legal name are set
forth on Schedule 5.7, and Borrower has not been known by any other name during
the past five (5) years other than those specified in Schedule 5.7.

            5.8    Due Organization and Qualification; Subsidiaries

.

                        (a)    Borrower is duly organized and existing and in
good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.

                        (b)    Set forth on Schedule 5.8(b), is a complete and
accurate description of the authorized capital Stock of Borrower, by class, and,
as of the Closing Date, and except as provided for in Schedule 5.8(b), a
description of the number of shares of each such class that are issued and
outstanding. Other than as described on Schedule 5.8(b), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.

                        (c)    Except as disclosed to Lender in writing pursuant
to Section 7.3(d), Borrower has no Subsidiaries.

            5.9    Due Authorization; No Conflict

.

                        (a)    The execution, delivery, and performance by
Borrower of this Agreement and the Loan Documents to which it is a party have
been duly authorized by all necessary action on the part of Borrower.

                        (b)    The execution, delivery, and performance by
Borrower of this Agreement and the Loan Documents to which it is a party do not
and will not (i) violate any provision of federal, state, or local law or
regulation applicable to Borrower, the Governing Documents of Borrower, or any
order, judgment, or decree of any court or other Governmental Authority binding
on Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of Borrower, (iii) result in or require the creation or imposition of
any Lien of any nature whatsoever upon any properties or assets of Borrower,
other than Permitted Liens, or (iv) require any approval of Borrower's
interestholders or any approval or consent of any Person under any material
contractual obligation of Borrower.

                        (c)    Other than the filing of financing statements,
fixture filings, and Modifications to Mortgages, the execution, delivery, and
performance by Borrower of this Agreement and the Loan Documents to which
Borrower is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any Governmental
Authority or other Person.

                        (d)    This Agreement and the other Loan Documents to
which Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by Borrower will be the legally valid and
binding obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.

                        (e)    Liens granted in favor of Collateral Agent
pursuant to the Loan Documents are validly created, perfected, and first
priority Liens (other than Liens on motor vehicles), subject only to Permitted
Liens.

            5.10    Litigation

. Other than those matters disclosed on Schedule 5.10, there are no actions,
suits, or proceedings pending or, to the best knowledge of Borrower, threatened
against Borrower, or any of its Subsidiaries, as applicable, except for (a)
matters that are fully covered by insurance (subject to customary deductibles),
(b) matters arising after the Closing Date that reasonably could not be expected
to result in a Material Adverse Change, and (c) matters existing as of the
Closing Date that reasonably could not be expected to give rise to any liability
to Borrower or any Subsidiary of Borrower (after giving effect to any insurance
covering such liabilities) in excess of $250,000 (with respect to each such
action, suit or proceeding) or $1,000,000 in the aggregate.

            5.11    No Material Adverse Change

. All financial statements relating to Borrower and its Subsidiaries that have
been delivered by Borrower to Lender have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly in
all material respects, Borrower's financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to Borrower since the date of the latest financial
statements submitted to Lender on or before the Closing Date.

            5.12    Fraudulent Transfer

.

                        (a)    Borrower is Solvent.

                        (b)    No transfer of property is being made by Borrower
and no obligation is being incurred by Borrower in connection with the
transactions contemplated by this Agreement or the other Loan Documents with the
intent to hinder, delay, or defraud either present or future creditors of
Borrower.

            5.13    Employee Benefits

. None of Borrower, any of its Subsidiaries, or any of their ERISA Affiliates
maintains or contributes to any Benefit Plan, other than those listed on
Schedule 5.13. Borrower, each of its Subsidiaries and each of their ERISA
Affiliates have satisfied the minimum funding standards of ERISA and the IRC
with respect to each Benefit Plan to which it is obligated to contribute. No
ERISA Event has occurred nor has any other event occurred that may result in an
ERISA Event that reasonably could be expected to result in a Material Adverse
Change. None of Borrower, any of its Subsidiaries, any of their ERISA
Affiliates, or any fiduciary of any Benefit Plan is subject to any direct or
indirect liability with respect to any Benefit Plan under any applicable law,
treaty, rule, regulation, or agreement. None of Borrower, any of its
Subsidiaries or any of their ERISA Affiliates is required to provide security to
any Benefit Plan under Section 401(a)(29) of the IRC.

            5.14    Environmental Condition

. Except as set forth on Schedule 5.14, (a) to Borrower's knowledge, none of
Borrower's or any Subsidiary of Borrower's assets has ever been used by
Borrower, any such Subsidiary, or by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, where such production, storage, handling, treatment,
release or transport was in violation, in any material respect, of applicable
Environmental Law, (b) to Borrower's knowledge, none of Borrower's or any
Subsidiary of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) neither Borrower nor any Subsidiary of
Borrower has received notice that a Lien arising under any Environmental Law has
attached to any revenues or to any Real Property owned or operated by Borrower
or any Subsidiary of Borrower, and (d) or otherwise disclosed to Lender in
writing prior to the Closing Date, Borrower hereby represents that to its
knowledge neither Borrower nor any Subsidiary of Borrower has received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency prior to the Closing Date
concerning any action or omission by Borrower or any Subsidiary of Borrower
resulting in the releasing or disposing of Hazardous Materials into the
environment and Borrower hereby warrants that no matter identified in any
summons, citation, notice or directive from the Environmental Protection Agency
or any federal or state governmental agency prior to the Closing Date concerning
any action or omission by Borrower or any Subsidiary of Borrower resulting in
the releasing or disposing of Hazardous Materials into the environment is
reasonably expected to give rise to any liability to Borrower or any Subsidiary
of Borrower in excess of $50,000 individually or in the aggregate. In addition,
Borrower hereby represents and warrants that, except as disclosed to Lender in
writing from time to time, neither Borrower nor any Subsidiary of Borrower has
received a summons, citation, notice or directive from the Environmental
Protection Agency or any other federal or state governmental agency on or after
the Closing Date concerning any action or omission by Borrower or any Subsidiary
of Borrower resulting in the releasing or disposing of Hazardous Materials into
the environment and no matter identified in any such summons, citation, notice
or directive is reasonably expected to give rise to any liability to Borrower or
any Subsidiary of Borrower in excess of $50,000 individually or in the
aggregate.

            5.15    Brokerage Fees

. Except for a finder's fee due to Jeffries & Company, Inc. from Borrower in an
amount not to exceed $200,000, Borrower has not utilized the services of any
broker or finder in connection with Borrower's obtaining financing from Lender
under this Agreement and no brokerage commission or finders fee is payable by
Borrower in connection herewith.

            5.16    Intellectual Property

. Borrower owns, or holds licenses in, all trademarks, trade names, copyrights,
patents, patent rights, and licenses that are necessary to the conduct of its
business as currently conducted. Attached hereto as Schedule 5.16 is a true,
correct, and complete listing of all material patents, patent applications,
trademarks, trademark applications, copyrights, and copyright registrations as
to which Borrower or any Subsidiary of Borrower is the owner or is an exclusive
licensee.

            5.17    Leases

. Borrower enjoys peaceful and undisturbed possession under all leases material
to the business (taken as a whole) of Borrower and to which it is a party or
under which it is operating. Except for defaults arising in connection with the
closing of restaurants in the ordinary course of business consistent with
historical practices, all of such leases are valid and subsisting and no
material default by Borrower exists under any of them.

            5.18    Intentionally Omitted

.

            5.19    Complete Disclosure

. All factual information (taken as a whole) furnished by or on behalf of
Borrower in writing to Lender (including all information contained in the
Schedules hereto or in the other Loan Documents) for purposes of or in
connection with this Agreement, the other Loan Documents or any transaction
contemplated herein or therein is, and all other such factual information (taken
as a whole) hereafter furnished by or on behalf of Borrower in writing to Lender
will be, true and accurate, in all material respects, on the date as of which
such information is dated or certified and not incomplete by omitting to state
any fact necessary to make such information (taken as a whole) not misleading in
any material respect at such time in light of the circumstances under which such
information was provided. On the Closing Date, the Closing Date Projections
represent, and as of the date on which any other Projections are delivered to
Lender, such additional Projections represent Borrower's good faith best
estimate of its future performance for the periods covered thereby.

            5.20    Indebtedness

. Set forth on Schedule 5.20 is a true and complete list of all Indebtedness of
Borrower outstanding immediately prior to the Closing Date that is to remain
outstanding after the Closing Date and such Schedule accurately reflects the
aggregate principal amount of such Indebtedness.

            5.21    Amendment and Restatement of Prior Loan Agreement and Prior
Notes; Intercreditor Agreement

. This Agreement constitutes an amendment and restatement of the Prior Credit
Agreement and the Prior Notes. Each of the parties hereto acknowledges and
agrees that the Obligations represent, among other things, the amendment,
restatement, renewal, extension, consolidation and modification of the
obligations of Borrower under the Prior Credit Agreement and the Prior Notes.
Each of the Parties hereto further acknowledges and agrees that this Agreement
supercedes and replaces the Prior Credit Agreement and the Prior Notes but does
not extinguish the obligations thereunder and that by entering into and
performing its obligations hereunder, this transaction shall not constitute a
novation. Each of the parties hereto further acknowledges and agrees that the
security interests granted to Collateral Agent for the benefit of itself and the
parties entitled to the benefits of the Intercreditor Agreement (including,
without limitation, Lender, as assignee of the "Banks" and the "Administrative
Agent" under the Prior Credit Agreement and Prior Notes) shall remain
outstanding and in full force and effect in accordance with the terms hereof and
the other Loan Documents and shall continue to secure the Obligations without
interruption or impairment of any kind and all such security interests are
hereby ratified, confirmed and continued. Lender is entitled to all of the
rights, remedies and benefits available to "Banks" and the "Administrative
Agent" for the "Banks" under the Intercreditor Agreement. The Borrower has
obtained all necessary consents, if any, to entitle Lender to become a party, as
a "Bank" and "Administrative Agent" for the "Banks" and, on the Collateral Agent
Change Date, "Collateral Agent," under the Intercreditor Agreement. No
Triggering Event has occurred or is continuing.

6.        AFFIRMATIVE COVENANTS

            Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall and shall cause each of its Subsidiaries to do all of the following:

            6.1    Accounting System

. Maintain a system of accounting that enables Borrower to produce financial
statements in accordance with GAAP and maintain records pertaining to the
Collateral that contain information as from time to time reasonably may be
requested by Lender.

            6.2    Collateral Reporting

.

                        (a)    Provide Lender with the following documents on a
monthly basis (not later than the tenth (10th) day of each month) in form
satisfactory to Lender a summary aging, by vendor, of Borrower's accounts
payable and any book overdraft.

                        (b)    Provide to Lender, upon the delivery of any
updated Quick Sale Valuation or Enterprise Valuation and on each date monthly
financial statements are delivered to Lender, a new Borrowing Base Certificate.

            6.3    Financial Statements, Reports, Certificates

. Deliver to Lender:

                        (a)    as soon as available, but in any event within
thirty (30) days (or forty-five (45) days in the case of a month that is the end
of one of the first three (3) fiscal quarters in a fiscal year) after the end of
each month during each of Borrower's fiscal years,

> > >     (i)    a company prepared consolidated balance sheet, income
> > > statement, and statement of cash flow covering Borrower's and its
> > > Subsidiaries' operations during such period,
> > > 
> > >     (ii)    a certificate signed by the chief financial officer of
> > > Borrower to the effect that:
> > > 
> > > >     A.    the financial statements delivered hereunder have been
> > > > prepared in accordance with GAAP (except for the lack of footnotes and
> > > > being subject to quarter-end and year-end audit adjustments) and fairly
> > > > present in all material respects the financial condition of Borrower and
> > > > its Subsidiaries,
> > > > 
> > > >     B.    (i) with respect to any such certificate delivered at the end
> > > > of any fiscal quarter, the representations and warranties of Borrower
> > > > contained in this Agreement and the other Loan Documents are true and
> > > > correct in all material respects on and as of the date of such
> > > > certificate, as though made on and as of such date (except to the extent
> > > > that such representations and warranties relate solely to an earlier
> > > > date), and (ii) with respect to any such certificate delivered at the
> > > > end of any month that is not a quarter end, to the knowledge of such
> > > > chief financial officer, the representations and warranties of Borrower
> > > > contained in this Agreement and the other Loan Documents are true and
> > > > correct in all material respects on and as of the date of such
> > > > certificate, as though made on and as of such date (except to the extent
> > > > that such representations and warranties relate solely to an earlier
> > > > date), and
> > > > 
> > > >     C.    (i) with respect to any such certificate delivered at the end
> > > > of any fiscal quarter, there does not exist any condition or event that
> > > > constitutes a Default or Event of Default (or, to the extent of any
> > > > non-compliance, describing such non-compliance as to which he or she may
> > > > have knowledge and what action Borrower has taken, is taking, or
> > > > proposes to take with respect thereto), and (ii) with respect to any
> > > > such certificate delivered at the end of any month that is not a quarter
> > > > end, to the knowledge of such chief financial officer, there does not
> > > > exist any condition or event that constitutes a Default or Event of
> > > > Default (or, to the extent of any non-compliance, describing such
> > > > non-compliance as to which he or she may have knowledge and what action
> > > > Borrower has taken, is taking, or proposes to take with respect
> > > > thereto), and
> > > 
> > >     (iii)    for each month that is the date on which a financial covenant
> > > in Section 7.20 is to be tested, a Compliance Certificate demonstrating,
> > > in reasonable detail, compliance at the end of such period with the
> > > applicable financial covenants contained in Section 7.20, together with an
> > > updated Schedule 2.7 to the extent required by Section 2.7(d); provided,
> > > however, that, so long as no Event of Default has occurred and is
> > > continuing, Borrower may report capital expenditures under Section
> > > 7.20(b)(i)(x) and (y) on a combined basis, and

                        (b)    as soon as available, but in any event within
ninety (90) days after the end of each of Borrower's fiscal years,

> > >     (i)    financial statements of Borrower and its Subsidiaries for each
> > > such fiscal year, audited by independent certified public accountants
> > > reasonably acceptable to Lender and certified, without any qualifications,
> > > by such accountants to have been prepared in accordance with GAAP (such
> > > audited financial statements to include a balance sheet, income statement,
> > > and statement of cash flow and, if prepared, such accountants' letter to
> > > management),
> > > 
> > >     (ii)    a certificate of such accountants addressed to Lender stating
> > > that such accountants do not have knowledge of the existence of any
> > > Default or Event of Default under Section 7.20,

                        (c)    as soon as available, but in any event within
thirty (30) days prior to the start of each of Borrower's fiscal years,

> > >     (i)    copies of Borrower's Projections, in form and substance
> > > (including as to scope and underlying assumptions) satisfactory to Lender,
> > > in its sole discretion, for the forthcoming three (3) years (on a month by
> > > month basis for the following fiscal year and on a quarterly basis for
> > > each fiscal year thereafter), certified by the chief financial officer of
> > > Borrower as being such officer's good faith best estimate of the financial
> > > performance of Borrower during the period covered thereby,

                        (d)    if and when filed or provided to a Person (other
than Lender) by Borrower (in any event no later than five (5) days following the
date of filing or the date of delivery to such Person),

> > >     (i)    10-Q quarterly reports, Form 10-K annual reports, and Form 8-K
> > > current reports,
> > > 
> > >     (ii)    any other filings made by Borrower with the SEC,
> > > 
> > >     (iii)    copies of Borrower's federal income tax returns, and any
> > > amendments thereto, filed with the Internal Revenue Service, and
> > > 
> > >     (iv)    any other information that is provided by Borrower to its
> > > shareholders or the holders of the Senior Secured Notes or the Term
> > > Facility Notes, and the monthly management financial reporting material
> > > provided to members of the Board of Directors,

                        (e)    if and when filed by Borrower and as requested by
Lender, satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) Borrower conducts business or is required to pay any
such excise tax, (ii) where Borrower's failure to pay any such applicable excise
tax would result in a Lien on the properties or assets of Borrower, or (iii)
where Borrower's failure to pay any such applicable excise tax reasonably could
be expected to result in a Material Adverse Change,

                        (f)    as soon as Borrower has knowledge of any event or
condition that constitutes a Default or an Event of Default, notice thereof and
a statement of the curative action, if any, that Borrower proposes to take with
respect thereto, and

                        (g)    upon the request of Lender, any other report
reasonably requested relating to the financial condition of Borrower.

In addition to the financial statements referred to above, Borrower agrees to
deliver financial statements prepared on both a consolidated and consolidating
basis and agrees that no Subsidiary of Borrower will have a fiscal year
different from that of Borrower. Borrower agrees that its independent certified
public accountants are authorized to communicate with Lender and to release to
Lender whatever financial information concerning Borrower Lender reasonably may
request. Borrower agrees that Lender may contact directly any such accounting
firm or service bureau in order to obtain such information.

            6.4    [Intentionally Omitted]

            6.5    [Intentionally Omitted]

            6.6    Maintenance of Properties

. Maintain and preserve all of its properties which are necessary or useful in
the proper conduct to its business in good working order and condition, ordinary
wear and tear excepted, and comply at all times with the provisions of all
leases to which it is a party as lessee, so as to prevent any loss or forfeiture
thereof or thereunder.

            6.7    Taxes

. Cause all assessments and taxes, whether real, personal, or otherwise, due or
payable by, or imposed, levied, or assessed against Borrower, any Subsidiary of
Borrower or any of their respective assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. Borrower will, and will cause each of its Subsidiaries to,
make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Lender with proof satisfactory to Lender indicating
that Borrower has made such payments or deposits. Borrower shall, and shall
cause each of its Subsidiaries to, deliver satisfactory evidence of payment of
applicable excise taxes in each jurisdictions in which Borrower or any such
Subsidiary is required to pay any such excise tax.

            6.8    Insurance

.

                        (a)    At Borrower's expense, maintain insurance
respecting its and its Subsidiaries' property and assets wherever located,
covering loss or damage by fire, theft, explosion, and all other hazards and
risks as ordinarily are insured against by other Persons engaged in the same or
similar businesses. Borrower also shall, and shall cause each of its
Subsidiaries to, maintain business interruption, public liability, and product
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation. All such policies of insurance shall be in such
amounts and with such insurance companies as are reasonably satisfactory to
Lender. Borrower shall, and shall cause each of its Subsidiaries to, deliver
copies of all such policies to Lender with a satisfactory lender's loss payable
endorsement naming Collateral Agent as sole loss payee with respect to all
Collateral or additional insured, as appropriate, and also naming Lender as
additional insured. Each policy of insurance or endorsement shall contain a
clause requiring the insurer to give not less than thirty (30) days prior
written notice to Collateral Agent and Lender in the event of cancellation of
the policy for any reason whatsoever.

                        (b)    Borrower shall give Lender and Collateral Agent
prompt notice of any loss (or, prior to the occurrence of a Default or Event of
Default, any loss in excess of $250,000) with respect to any Collateral covered
by such insurance. Collateral Agent shall have the exclusive right to adjust any
such losses payable under any such insurance policies in excess of Two Hundred
Fifty Thousand Dollars ($250,000), without any liability to Borrower whatsoever
in respect of such adjustments. Any monies received as payment for any loss
under any insurance policy mentioned above (other than liability insurance
policies) or as payment of any award or compensation for condemnation or taking
by eminent domain with respect to any Collateral, shall be paid over to
Collateral Agent to be applied at the option of Collateral Agent either to the
prepayment of the Obligations or shall be disbursed to Borrower under staged
payment terms reasonably satisfactory to Collateral Agent for application to the
cost of repairs, replacements, or restorations. Any such repairs, replacements,
or restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items of property destroyed prior to
such damage or destruction.

                        (c)    Borrower will not, nor will it permit any of its
Subsidiaries to, take out separate insurance concurrent in form or contributing
in the event of loss with that required to be maintained under this Section 6.8,
unless Collateral Agent is included thereon as named insured with the loss with
respect to any Collateral payable to Collateral Agent under a lender's loss
payable endorsement or its equivalent. Borrower immediately shall notify
Collateral Agent whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Collateral Agent.

            6.9    Location of Inventory and Equipment

. Keep the Inventory and Equipment only at the locations identified on Schedule
5.5; provided, however, that Borrower may amend Schedule 5.5 so long as such
amendment occurs by written notice to Lender not less than thirty (30) days
prior to the date on which Inventory or Equipment is moved to such new location,
so long as such new location is within the continental United States, and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Collateral Agent's Liens on such assets and, upon request by Lender,
also provides to Collateral Agent a Collateral Access Agreement; provided
further, however, that notwithstanding the foregoing and without the necessity
of updating Schedule 5.5 or otherwise complying with the immediately preceding
proviso, Borrower may store Equipment with a fair market value of not more than
$100,000 in the aggregate with bailees, warehousemen or similar parties.

            6.10    Compliance with Laws

. Comply with the requirements of all applicable laws, rules, regulations, and
orders of any Governmental Authority, including the Fair Labor Standards Act and
the Americans With Disabilities Act, other than laws, rules, regulations, and
orders the non-compliance with which, individually or in the aggregate, would
not result in and reasonably could not be expected to result in a Material
Adverse Change.

            6.11    Leases

. Pay when due all rents and other amounts payable under any leases to which
Borrower is a party or by which Borrower's properties and assets are bound,
unless such payments are the subject of a Permitted Protest.

            6.12    Brokerage Commissions

. Pay any and all brokerage commission or finders fees incurred in connection
with or as a result of Borrower's obtaining financing from Lender under this
Agreement. Borrower agrees and acknowledges that payment of all such brokerage
commissions or finders fees shall be the sole responsibility of Borrower, and
Borrower agrees to indemnify, defend, and hold Lender harmless from and against
any claim of any broker or finder arising out of Borrower's obtaining financing
from Lender under this Agreement.

            6.13    Existence

. At all times preserve and keep in full force and effect Borrower's valid
existence and good standing and any rights and franchises material to Borrower's
businesses.

            6.14    Environmental

.

            Keep any property either owned or operated by Borrower or any
Subsidiary of Borrower free of any Environmental Liens or post bonds or other
financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material respects,
with Environmental Laws and provide to Lender documentation of such compliance
which Lender reasonably requests, (c) promptly notify Lender of any release of a
Hazardous Material in any reportable quantity from or onto property owned or
operated by Borrower or any Subsidiary of Borrower and take any Remedial Actions
required to abate said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Lender with written
notice within ten (10) days of the receipt of any of the following: (i) notice
that an Environmental Lien has been filed against any of the real or personal
property of Borrower or any Subsidiary of Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against Borrower or any Subsidiary of Borrower, and (iii) notice of a violation,
citation, or other administrative order which reasonably could be expected to
result in a Material Adverse Change.

            6.15    Disclosure Updates

. Promptly and in no event later than five (5) Business Days after obtaining
knowledge thereof, (a) notify Lender if any written information, exhibit, or
report furnished to Lender contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made, and (b)
correct any defect or error that may be discovered therein or in any Loan
Document or in the execution, acknowledgement, filing, or recordation thereof.

            6.16    Further Assurances.

                        (a)    At the time of the formation of any Subsidiary of
Borrower which is permitted under this Agreement, Borrower and such Subsidiary,
as appropriate, shall (a) provide to Lender a subsidiary guaranty, subsidiary
security agreement, and such other security documents together with appropriate
UCC-1 financial statements, all in form and substance satisfactory to Lender as
shall be requested by Lender, (b) a stock or other pledge agreement and
appropriate stock powers or UCC-1 financing statements, pledging Borrower's
direct or beneficial ownership interest in such Subsidiary, in form and
substance satisfactory to Lender, and (c) provide all other documentation,
including one or more opinions of counsel satisfactory to Lender which in
Lender's reasonable opinion is appropriate with respect to such formation. Any
such document, agreement or instrument executed or issued pursuant to this
Section 6.16 shall be a "Loan Document" for purposes of this Agreement.

                        (b)    Borrower authorizes Lender and Collateral Agent
to file, transmit, or communicate, as applicable, Uniform Commercial Code
financing statements, in-lieu financing statements and amendments describing the
Collateral as "all personal property of debtor" or "all assets of debtor" or
words of similar effect, in order to perfect Collateral Agent's Liens on the
Collateral without Borrower's signature to the extent permitted by applicable
law. Notwithstanding the foregoing, at any time upon the request of Lender,
Borrower shall execute (or cause to be executed) and deliver to Lender or
Collateral Agent, any and all financing statements, original financing
statements in lieu of continuation statements, fixture filings, security
agreements, pledges, assignments, endorsements of certificates of title, and all
other documents (the "Additional Documents") upon which Borrower's signature may
be required and that Lender may request in its Permitted Discretion, in form and
substance satisfactory to Lender, to perfect and continue perfected or better
perfect Collateral Agent's Liens in the Collateral (whether now owned or
hereafter arising or acquired but excluding any leasehold mortgage on the
Sale/Leaseback Properties), to create and perfect Liens in favor of Collateral
Agent in any Real Property acquired after the Closing Date, and in order to
fully consummate all of the transactions contemplated hereby and under the other
Loan Documents. Without limiting the foregoing, with respect to any fee interest
in Real Estate acquired after the Closing Date, Borrower shall deliver to Lender
a policy of title insurance, a flood zone certificate, financing statements,
fixture filings, surveys, appraisals, opinions and such other documentation as
shall be reasonably requested by Lender. To the maximum extent permitted by
applicable law, Borrower authorizes Lender and Collateral Agent to execute any
such Additional Documents in Borrower's name and authorizes Lender or Collateral
Agent, as applicable, to file such executed Additional Documents in any
appropriate filing office. Borrower also hereby ratifies its authorization for
Lender and Collateral Agent to have filed in any jurisdiction any financing
statements or amendments thereto if filed prior to the date hereof. Borrower
shall not terminate, amend or file a correction statement with respect to any
Uniform Commercial Code financing statement filed pursuant to this Section
6.16(b) without Lender's prior written consent.

            6.17    Employee Benefits.

                        (a)    Promptly, and in any event within ten (10)
Business Days after Borrower or any Subsidiary of Borrower knows or should know
that an ERISA Event has occurred that reasonably could be expected to result in
a Material Adverse Change, a written statement of the chief financial officer of
Borrower describing such ERISA Event and any action that is being taking with
respect thereto by Borrower, any such Subsidiary or ERISA Affiliate, and any
action taken or threatened by the Internal Revenue Service ("IRS"), Department
of Labor, or PBGC, and Borrower or such Subsidiary, as applicable, shall be
deemed to know all facts known by the administrator of any Benefit Plan of which
it is the plan sponsor, (ii) promptly, and in any event within three (3)
Business Days after the filing thereof with the IRS, a copy of each funding
waiver request filed with respect to any Benefit Plan and all communications
received by Borrower, any Subsidiary of Borrower or, to the knowledge of
Borrower, any ERISA Affiliate with respect to such request, and (iii) promptly,
and in any event within three (3) Business Days after receipt by Borrower, any
Subsidiary of Borrower or, to the knowledge of Borrower, any ERISA Affiliate, of
the PBGC's intention to terminate a Benefit Plan or to have a trustee appointed
to administer a Benefit Plan, copies of each such notice.

                        (b)    Cause to be delivered to Lender, upon Lender's
request, each of the following: (i) a copy of each Benefit Plan (or, where any
such plan is not in writing, complete description thereof) (and if applicable,
related trust agreements or other funding instruments) and all amendments
thereto, all written interpretations thereof and written descriptions thereof
that have been distributed to employees or former employees of Borrower or its
Subsidiaries; (ii) the most recent determination letter issued by the IRS with
respect to each Benefit Plan; (iii) for the three (3) most recent plan years,
annual reports on Form 5500 Series required to be filed with any governmental
agency for each Benefit Plan; (iv) all actuarial reports prepared for the last
three (3) plan years for each Benefit Plan; (v) a listing of all Multiemployer
Plans, with the aggregate amount of the most recent annual contributions
required to be made by Borrower, any Subsidiary of Borrower, or any ERISA
Affiliate to each such plan and copies of the collective bargaining agreements
requiring such contributions; (vi) any information that has been provided to
Borrower, any Subsidiary of Borrower or any ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan; and (vii) the aggregate amount of the
most recent annual payments made to former employees of Borrower or its
Subsidiaries under any Retiree Health Plan.

7.        NEGATIVE COVENANTS

            Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not and will not permit any of its Subsidiaries to do any of the following:

            7.1    Indebtedness

. Create, incur, assume, permit, guarantee, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness, except:

                        (a)    Indebtedness evidenced by this Agreement and the
other Loan Documents, together with Indebtedness owed to Underlying Issuers with
respect to Underlying Letters of Credit,

                        (b)    Indebtedness of Borrower set forth on Schedule
5.20, including, without limitation, Indebtedness in an aggregate principal
amount not to exceed $51,164,000 under the Senior Secured Notes and the Term
Facility Notes,

                        (c)    Permitted Purchase Money Indebtedness, and

                        (d)    refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not, in Lender's judgment, materially impair the prospects of repayment of the
Obligations by Borrower or materially impair Borrower's creditworthiness, (ii)
such refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to Borrower, and (iv) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the terms and conditions of the refinancing, renewal, or extension
Indebtedness must include subordination terms and conditions that are at least
as favorable to Lender as those that were applicable to the refinanced, renewed,
or extended Indebtedness.

            7.2    Liens.

Create, incur, assume, or permit to exist, directly or indirectly, any Lien on
or with respect to any of its assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is refinanced, renewed, or extended under Section
7.1(d) and so long as the replacement Liens only encumber those assets that
secured the refinanced, renewed, or extended Indebtedness).

            7.3    Restrictions on Fundamental Changes

                        (a)    Enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Stock; provided, however,
that a Subsidiary of Borrower may merge into Borrower so long as Borrower is the
surviving entity and so long as Borrower contemporaneously complies with Section
4.4 of the Security Agreement; provided further, however, that a Subsidiary of
Borrower may merge into another Subsidiary of Borrower so long as the surviving
Subsidiary contemporaneously complies with Section 4.4 of the Security
Agreement.

                        (b)    Liquidate, wind up, or dissolve itself (or suffer
any liquidation or dissolution); provided, however, that any Subsidiary of
Borrower may dissolve itself so long as all of its assets are distributed to
Borrower or another Subsidiary of Borrower and so long as Borrower or such other
Subsidiary contemporaneously complies with Section 4.4 of the Security
Agreement.

                        (c)    Convey, sell, lease, license, assign, transfer,
or otherwise dispose of, in one transaction or a series of transactions, all or
any substantial part of its assets;

                        (d)    Create or acquire any Subsidiary; provided,
however, that Borrower may create any wholly-owned Subsidiary so long as
Borrower provides to Lender ten (10) days' prior written notice of the creation
of any such Subsidiary and complies with Section 6.16; or

                        (e)    change its fiscal year end from June 30.

            7.4    Disposal of Assets

. Other than Permitted Dispositions, convey, sell, lease, license, assign,
transfer, or otherwise dispose of any of Borrower's assets.

            7.5    Change Name

. Change Borrower's or any Subsidiary of Borrower's name, FEIN, corporate
structure or identity, or add any new fictitious name; provided, however, that
Borrower or any Subsidiary of Borrower may change its name upon at least thirty
(30) days prior written notice to Lender of such change and so long as, at the
time of such written notification, Borrower or any such Subsidiary of Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Collateral Agent's Liens.

            7.6    Guarantee

. Guarantee or otherwise become in any way liable with respect to the
obligations of any third Person except by endorsement of instruments or items of
payment for deposit to the account of Borrower or which are transmitted or
turned over to Lender.

            7.7    Nature of Business

. Engage in any type of business other than the restaurant business conducted by
Borrower on the Closing Date.

            7.8    Prepayments and Amendments

.

                        (a)    Except in connection with a refinancing permitted
by Section 7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of Borrower or any Subsidiary of Borrower, other than the
Obligations in accordance with this Agreement; provided, however, that (i)
Borrower may make repurchases of the Senior Secured Notes and the Term Facility
Notes on or before the Closing Date in an aggregate amount not to exceed
[$3,400,000], and (ii) Borrower may make repurchases of the Senior Secured Notes
in an amount not to exceed the amount of Excess Cash Flow required by the
Indenture, as it exists on the date hereof, to be used for the mandatory
repurchase of the Senior Secured Notes.

                        (b)    Except in connection with a refinancing permitted
by Section 7.1(d), directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b) or (c) which (i) increases the principal amount of such
Indebtedness, (ii) increases the interest rate with respect to such
Indebtedness, (iii) increases the frequency or amount or shortens the maturity
of any payments of principal or interest thereof, or (iv) makes such agreement,
instrument, document, indenture or other writing more restrictive on Borrower or
adversely affects Borrower's or Lender's rights or interest thereunder or
hereunder or under the Loan Documents or Borrower's ability to fulfill its
obligations hereunder or under the Loan Documents.

            7.9    Change of Control

. Cause, permit, or suffer, directly or indirectly, any Change of Control.

            7.10    Consignments

. Consign any Inventory or sell any Inventory on bill and hold, sale or return,
sale on approval, or other conditional terms of sale.

            7.11    Distributions

. Make any distribution or declare or pay any dividends (in cash or other
property, other than common Stock) on, or purchase, acquire, redeem, or retire
any of Borrower's Stock, of any class, whether now or hereafter outstanding.

            7.12    Accounting Methods

. Modify or change its method of accounting (other than as may be required to
conform to GAAP) or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party accounting
firm or service bureau for the preparation or storage of Borrower's accounting
records without said accounting firm or service bureau agreeing to provide
Lender information regarding the Collateral or Borrower's financial condition.

            7.13    Investments

. Except for Permitted Investments, directly or indirectly, make or acquire any
Investment, or incur any liabilities (including contingent obligations) for or
in connection with any Investment; provided, however, that Borrower shall not
have Permitted Investments (other than in the Blocked Accounts and the DDA that
is subject to the Pledge Agreement) at any time unless Borrower and the
applicable securities intermediary or bank have entered into a Control Agreement
governing such Permitted Investments, as Lender shall determine in its Permitted
Discretion, to perfect (and further establish) Collateral Agent's Liens in such
Permitted Investments.

            7.14    Transactions with Affiliates

. Directly or indirectly enter into or permit to exist any transaction with any
Affiliate of Borrower except for transactions that are in the ordinary course of
Borrower's business, upon fair and reasonable terms, that are fully disclosed to
Lender, and that are no less favorable to Borrower than would be obtained in an
arm's length transaction with a non-Affiliate.

            7.15    Suspension

. Suspend or go out of a substantial portion of its business; provided, however,
that Borrower may close restaurants in the ordinary course of business
consistent with historical practices.

            7.16    [Intentionally Omitted]

            7.17    Use of Proceeds

. Use the proceeds of the Advances for any purpose other than (a) on the Closing
Date, (i) to repay in full the outstanding principal, accrued interest, and
accrued fees and expenses owing to Prior Lenders, and (ii) to pay transactional
fees, costs, and expenses incurred in connection with this Agreement, the other
Loan Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, for working capital needs of Borrower; provided, however, that
Borrower may not use proceeds of the Advances to repurchase the Senior Secured
Notes and Term Facility Notes except to the extent permitted by Section 7.8(a).

            7.18    Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees

. Relocate its chief executive office to a new location without Borrower
providing thirty (30) days prior written notification thereof to Lender and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Collateral Agent's Liens and also provides to Collateral Agent a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Lender's prior written consent; provided,
however, that Borrower may store Equipment with a fair market value of not more
than $100,000 in the aggregate with bailees, warehousemen or similar parties
without the prior written consent of Lender.

            7.19    Securities Accounts

. Establish or maintain any Securities Account unless Lender shall have received
a Control Agreement in respect of such Securities Account. Borrower shall not
transfer assets out of any Securities Account; provided, however, that, so long
as no Event of Default has occurred and is continuing or would result therefrom,
Borrower may use such assets (and the proceeds thereof) to the extent not
prohibited by this Agreement.

            7.20    Financial Covenants

.

                        (a)    Fail to maintain:

> > >     (i)    Minimum EBITDA. EBITDA, measured on a fiscal quarter-end basis,
> > > of at least the required amount set forth in the following table for the
> > > twelve (12) fiscal month period ending on the date set forth opposite
> > > thereto:

 

Required Amount

For the Twelve (12) Fiscal Month Period Ending

$16,500,000

9/30/01

$18,500,000

12/31/01

$17,000,000

3/31/02

$15,000,000

6/30/02, 9/30/02, 12/31/02, 3/31/03

$16,000,000

6/30/03 and each fiscal quarter end thereafter

> > > ; provided, however, that, if at any time during any fiscal month which is
> > > not the last month of a fiscal quarter, Revolver Usage shall exceed
> > > $15,000,000 in the aggregate, Borrower shall not fail to maintain EBITDA
> > > for the twelve (12) fiscal month period ending as of the last day of such
> > > fiscal month of at least the amount set forth in the table above for the
> > > period ending on the last day of the immediately preceding fiscal quarter.
> > > 
> > >     (ii)    Ratio of the Maximum Revolver Amount to EBITDA. A ratio of the
> > > Maximum Revolver Amount to EBITDA, measured on a fiscal quarter-end basis,
> > > of not more than the maximum amount set forth in the following table for
> > > the twelve (12) fiscal month period ending on the date set forth opposite
> > > thereto:

 

Maximum Amount

For the Twelve (12) Fiscal Month Period Ending

1.20 to 1

9/30/01

1.10 to 1

12/31/01

1.20 to 1

3/31/02

1.30 to 1

6/30/02, 9/30/02, 12/31/02, 3/31/03

1.25 to 1

6/30/03 and each fiscal quarter end thereafter

> > > ; provided, however, that, if at any time during any fiscal month which is
> > > not the last month of a fiscal quarter, Revolver Usage shall exceed
> > > $15,000,000 in the aggregate, Borrower shall not fail to maintain a ratio
> > > of Maximum Revolver Amount to EBITDA for the immediately preceding twelve
> > > (12) fiscal month period ending as of the last day of such fiscal month of
> > > not more than the ratio set forth above for the period ending on the last
> > > day of the immediately preceding fiscal quarter.
> > > 
> > >     (iii)    Ratio of Net Funded Debt to EBITDA. Ratio of Net Funded Debt
> > > to EBITDA, measured on a fiscal quarter-end basis, of not more than the
> > > maximum amount set forth in the following table for the twelve (12) fiscal
> > > month period ending on the date set forth opposite thereto:

Maximum Amount

For the Twelve (12) Fiscal Month Period Ending

3.00 to 1

9/30/01, 12/31/01, 3/31/02, 6/30/02, 9/30/02

2.75 to 1

12/31/02, 3/31/03, 6/30/03

2.50 to 1

9/30/03 and each fiscal quarter end thereafter

> > > ; provided, however, that, if at any time during any fiscal month which is
> > > not the last month of a fiscal quarter, Revolver Usage shall exceed
> > > $15,000,000 in the aggregate, Borrower shall not fail to maintain a ratio
> > > of Net Funded Debt to EBITDA for the immediately preceding twelve (12)
> > > fiscal month period ending as of the last day of such fiscal month of not
> > > more than the ratio set forth above for the period ending on the last day
> > > of the immediately preceding fiscal quarter.
> > > 
> > >     (iv)    Fixed Charge Ratio. Fixed Charge Ratio, measured on a fiscal
> > > quarter-end basis, of not less than the minimum amount set forth in the
> > > following table for the twelve (12) fiscal month period ending on the date
> > > set forth opposite thereto:

Minimum Amount

For the Twelve (12) Fiscal Month Period Ending

1.25

9/30/01, 12/31/01

1.22

3/31/02

1.17

6/30/02, 9/30/02, 12/31/02, 3/31/03

1.20

6/30/03 and each fiscal quarter end thereafter

> > > ; provided, however, that, if at any time during any fiscal month which is
> > > not the last month of a fiscal quarter, Revolver Usage shall exceed
> > > $15,000,000 in the aggregate, Borrower shall not fail to maintain a Fixed
> > > Charge Ratio for the immediately preceding twelve (12) fiscal month period
> > > ending as of the last day of such fiscal month of not less than the ratio
> > > set forth above for the period ending on the last day of the immediately
> > > preceding fiscal quarter.

                        (b)    Make:

> > >     (i)    Capital Expenditures. Capital expenditures in any fiscal year
> > > in excess of: (x) with respect to all assets, other than newly constructed
> > > or acquired cafeterias (and fixtures related thereto), $8,000,000 and (y)
> > > with respect to newly constructed or acquired cafeterias (and fixtures
> > > related thereto), $6,000,000.

                        (c)    Fail to maintain at all times the Required Real
Property Availability. To the extent that Borrower fails to maintain the
Required Real Property Availability as of any date of determination, in addition
to the other remedies available to Lender hereunder, Lender shall be entitled to
create a reserve against the Borrowing Base in an amount sufficient to offset
any such deficiency.

            7.21    No Prohibited Transactions Under ERISA. Directly or
indirectly:

                        (a)    engage, or permit any Subsidiary of Borrower to
engage, in any prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
IRC for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;

                        (b)    permit to exist with respect to any Benefit Plan
any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412
of the IRC), whether or not waived;

                        (c)    fail, or permit any Subsidiary of Borrower to
fail, to pay timely required contributions or annual installments due with
respect to any waived funding deficiency to any Benefit Plan;

                        (d)    terminate, or permit any Subsidiary of Borrower
to terminate, any Benefit Plan where such event would result in any liability of
Borrower, any Subsidiary of Borrower or any ERISA Affiliate under Title IV of
ERISA;

                        (e)    fail, or permit any Subsidiary of Borrower to
fail, to make any required contribution or payment to any Multiemployer Plan;

                        (f)    fail, or permit any Subsidiary of Borrower to
fail, to pay any required installment or any other payment required under
Section 412 of the IRC on or before the due date for such installment or other
payment;

                        (g)    amend, or permit any Subsidiary of Borrower to
amend, a Plan resulting in an increase in current liability for the plan year
such that any of Borrower, any Subsidiaries of Borrower or ERISA Affiliates is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or

                        (h)    withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;

which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any Subsidiary
of Borrower or any ERISA Affiliate in excess of $25,000.

8.        EVENTS OF DEFAULT.

            Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:

            8.1    If Borrower fails to pay when due and payable or when
declared due and payable, all or any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Lender, reimbursement of Lender Expenses, or other amounts constituting
Obligations);

            8.2    (a) If Borrower fails or neglects to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Sections 6.2 (Collateral Reporting), 6.3 (Financial Statements, Reports,
Certificates), 6.9 (Location of Inventory and Equipment), 6.10 (Compliance with
Laws), or 6.11 (Leases), of this Agreement and such failure continues for a
period of five (5) Business Days; (b) if Borrower fails or neglects to perform,
keep, or observe any term, provision, condition, covenant, or agreement
contained in Sections 6.1 (Accounting System) or 6.6 (Maintenance of Properties)
of this Agreement and such failure continues for a period of fifteen (15)
Business Days; or (c) if Borrower or any Subsidiary of Borrower fails or
neglects to perform, keep, or observe any other term, provision, condition,
covenant, or agreement contained in this Agreement, or in any of the other Loan
Documents (after giving effect to any grace periods, if any, expressly provided
for in such Loan Documents) or in any other present or future agreement between
Borrower or any Subsidiary of Borrower and Lender, (after giving effect to any
grace periods, if any, expressly provided for in such agreements); in each case,
other than any such term, provision, condition, covenant, or agreement that is
the subject of another provision of this Section 8, (in which event such other
provision of this Section 8 shall govern); provided that, during any period of
time that any such failure or neglect of Borrower referred to in this paragraph
exists, even if such failure or neglect is not yet an Event of Default by virtue
of the existence of a grace period, if any, Lender shall not be required during
such period to make Advances to Borrower;

            8.3    If any material portion of Borrower's or any of its
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;

            8.4    If an Insolvency Proceeding is commenced by Borrower or any
of its Subsidiaries;

            8.5    If an Insolvency Proceeding is commenced against Borrower, or
any of its Subsidiaries, and any of the following events occur: (a) Borrower or
the Subsidiary consents to the institution of the Insolvency Proceeding against
it, (b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within sixty (60) calendar days of the date of the filing thereof;
provided, however, that, during the pendency of such period, Lender shall be
relieved of its obligations to extend credit hereunder, (d) an interim trustee
is appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, Borrower or any of its Subsidiaries, or (e) an order for relief
shall have been entered therein;

            8.6    If Borrower or any of its Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;

            8.7    If a notice of Lien, levy, or assessment in respect of a
claim in excess of $250,000, individually or in the aggregate, is filed of
record with respect to any of Borrower's or any of its Subsidiaries' assets by
the United States, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
in excess of $250,000, individually or in the aggregate, owing at any time
hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any of Borrower's or any of its Subsidiaries' assets and the
same is not paid before such payment is delinquent; provided, however, that
Lender may create a reserve in the amount of any such claim, taxes or debts
regardless of the amount of any such claim, taxes or debts;

            8.8    If a judgment or other claim in excess of $250,000,
individually or in the aggregate, becomes a Lien or encumbrance upon any
material portion of Borrower's or any of its Subsidiaries' assets; provided,
however, that Lender may create a reserve in the amount of any such judgment or
claim regardless of the amount of such judgment or claim.

            8.9    (a) If there is a default in any material agreement (other
than a default referred to in clause (b) of this Section 8.9) to which Borrower
or any of its Subsidiaries is a party, including without limitation any Material
Contract, and such default (i) occurs at the final maturity of the obligations
thereunder, or (ii) results in a right by the other party thereto, irrespective
of whether exercised, to accelerate the maturity of Borrower's or its
Subsidiaries' obligations thereunder, to terminate such agreement, or to refuse
to renew such agreement pursuant to an automatic renewal right therein or (b) if
there is a default under any real property operating lease or rental agreement
of Borrower or any of its Subsidiaries resulting from the closure of a
restaurant that has not produced positive EBITDA for the immediately preceding
four fiscal quarters and such default results in accelerated liability to
Borrower or any such Subsidiary in excess of $500,000 with respect to any such
lease or rental agreement or $3,000,000 with respect to all such leases or
rental agreements in any fiscal year;

            8.10    If Borrower or any of its Subsidiaries makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;

            8.11    If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to Lender
by Borrower, its Subsidiaries, or any officer, employee, agent, or director of
Borrower or any of its Subsidiaries;

            8.12    [Intentionally Omitted]

            8.13    If this Agreement or any other Loan Document that purports
to create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby; or

            8.14    If any provision of any Loan Document shall at any time for
any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Borrower or any Subsidiary of Borrower, or a
proceeding shall be commenced by Borrower, any Subsidiary of Borrower, or by any
Governmental Authority having jurisdiction over Borrower or any Subsidiary of
Borrower, seeking to establish the invalidity or unenforceability thereof, or
Borrower or any Subsidiary shall deny that it has any liability or obligation
purported to be created under any Loan Document.

            8.15    If there shall occur a Triggering Event, or an event which
with the giving of notice or passage of time would constitute a Triggering
Event, or if Lender for any reason is determined not to be entitled to the
benefits of the Intercreditor Agreement or if a claim is asserted by any Person,
whether or not reasonable or valid, that Lender is not entitled to the benefits
of the Intercreditor Agreement or any of the "Security Documents" or "Liens" as
defined therein.

9.        THE LENDER'S RIGHTS AND REMEDIES

            9.1    Rights and Remedies

. Upon the occurrence, and during the continuation, of an Event of Default,
Lender (at its election but without notice of its election and without demand)
may do or direct the Collateral Agent to do (subject to the terms and provisions
of the Intercreditor Agreement) any one or more of the following, all of which
are authorized by Borrower:

                        (a)    Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;

                        (b)    Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrower and Lender;

                        (c)    Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of Lender, but without
affecting any of the Collateral Agent's Liens in the Collateral and without
affecting the Obligations;

                        (d)    Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Lender considers
advisable, and in such cases, Lender will credit the Loan Account with only the
net amounts received by Lender in payment of such disputed Accounts after
deducting all Lender Expenses incurred or expended in connection therewith;

                        (e)    Without notice to or demand upon Borrower, make
such payments and do such acts as Lender or Collateral Agent considers necessary
or reasonable to protect Collateral Agent's security interests in the
Collateral. Borrower agrees to assemble the Personal Property Collateral if
Lender or Collateral Agent so requires, and to make the Personal Property
Collateral available to Lender or Collateral Agent at a place that Lender or
Collateral Agent may designate which is reasonably convenient to both parties.
Borrower authorizes Lender and Collateral Agent to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of the
Personal Property Collateral, or any part of it, and to pay, purchase, contest,
or compromise any Lien that in Lender's determination appears to conflict with
the Collateral Agent's Liens and to pay all expenses incurred in connection
therewith and to charge Borrower's Loan Account therefor. With respect to any of
Borrower's owned or leased premises, Borrower hereby grants Lender a license to
enter into possession of such premises and to occupy the same, without charge,
in order to exercise any of Lender's rights or remedies provided herein, at law,
in equity, or otherwise;

                        (f)    Without notice to Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Lender (including any amounts received in the Blocked Accounts and the DDA
that is the subject of the Pledge Agreement), or (ii) Indebtedness at any time
owing to or for the credit or the account of Borrower held by Lender;

                        (g)    Hold, as cash collateral, any and all balances
and deposits of Borrower held by Lender, and any amounts received in the Blocked
Accounts and the DDA that is the subject of the Pledge Agreement, to secure the
full and final repayment of all of the Obligations;

                        (h)    Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Borrower hereby grants to Lender
and Collateral Agent a license or other right to use, without charge, Borrower's
labels, patents, copyrights, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's and Collateral Agent's benefit;

                        (i)    Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as Lender or Collateral Agent determines is commercially
reasonable. If Lender or Collateral Agent sells any Personal Property Collateral
on credit terms, Borrower's Loan Account shall be credited only with, and at the
time of, the net amount of the payments actually made by the purchaser, received
by Lender or Collateral Agent and applied to the indebtedness of purchaser. In
the event that the purchaser fails to pay for the Personal Property Collateral,
Lender or Collateral Agent may resell the Personal Property Collateral, and
Borrower's Loan Account shall be credited with the proceeds of such sale in
accordance with the immediately preceding sentence. In the event Lender or
Collateral Agent purchases any of the Collateral being sold, Lender or
Collateral Agent, as the case may be, may pay for the Collateral by crediting
some or all of the Obligations. Lender or Collateral Agent may comply with any
applicable state or federal law requirements in connection with a disposition of
the Collateral and compliance therewith will not be considered adversely to
affect the commercial reasonableness of any sale of the Collateral. Lender or
Collateral Agent may sell the Collateral without giving any warranties as to the
Collateral. Lender or Collateral Agent may specifically disclaim any warranties
of title or the like. The foregoing will not be considered adversely to affect
the commercial reasonableness of any sale of the Collateral. It is not necessary
that the Personal Property Collateral be present at any such sale;

                        (j)    Lender or Collateral Agent shall give notice of
the disposition of the Personal Property Collateral as follows:

> > >     (i)    Lender or Collateral Agent shall give Borrower a notice in
> > > writing of the time and place of public sale, or, if the sale is a private
> > > sale or some other disposition other than a public sale is to be made of
> > > the Personal Property Collateral, then the time on or after which the
> > > private sale or other disposition is to be made; and
> > > 
> > >     (ii)    The notice shall be personally delivered or mailed, postage
> > > prepaid, to Borrower as provided in Section 12, at least ten (10) days
> > > before the earliest time of disposition set forth in the notice; no notice
> > > needs to be given prior to the disposition of any portion of the Personal
> > > Property Collateral that is perishable or threatens to decline speedily in
> > > value or that is of a type customarily sold on a recognized market;

                        (k)    Lender or Collateral Agent may credit bid and
purchase at any public sale; and

                        (l)    Lender or Collateral Agent may seek the
appointment of a receiver or keeper to take possession of all or any portion of
the Collateral or to operate same and, to the maximum extent permitted by law,
may seek the appointment of such a receiver without the requirement of prior
notice or a hearing;

                        (m)    Lender or Collateral Agent, as applicable, shall
have all other rights and remedies available at law or in equity or pursuant to
any other Loan Document; and

                        (n)    Any deficiency that exists after disposition of
the Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Lender or Collateral Agent to Borrower.

            9.2    Remedies Cumulative

. The rights and remedies of Lender under this Agreement, the other Loan
Documents, and all other agreements shall be cumulative. Lender shall have all
other rights and remedies not inconsistent herewith as provided under the Code,
by law, or in equity. No exercise by Lender of one right or remedy shall be
deemed an election, and no waiver by Lender of any Event of Default shall be
deemed a continuing waiver. No delay by Lender shall constitute a waiver,
election, or acquiescence by it.

10.        TAXES AND EXPENSES

            If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Lender, in its sole discretion
and without prior notice to Borrower, may do any or all of the following: (a)
make payment of the same or any part thereof, (b) set up such reserves in
Borrower's Loan Account as Lender deems necessary to protect Lender from the
exposure created by such failure, or (c) in the case of the failure to comply
with Section 6.8 hereof, obtain and maintain insurance policies of the type
described in Section 6.8 and take any action with respect to such policies as
Lender deems prudent. Any such amounts paid by Lender shall constitute Lender
Expenses and any such payments shall not constitute an agreement by Lender to
make similar payments in the future or a waiver by Lender of any Event of
Default under this Agreement. Lender need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.

11.        WAIVERS; INDEMNIFICATION.

            11.1    Demand; Protest

. Each Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments, chattel
paper, and guarantees at any time held by Lender on which Borrower may in any
way be liable. Borrower waives any right it may have to require Lender to pursue
any third party for any of the Obligations.

            11.2    Lender's Liability for Collateral

. Borrower hereby agrees that: (a) so long as Lender complies with its
obligations, if any, under the Code, Lender shall not in any way or manner be
liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss
or damage thereto occurring or arising in any manner or fashion from any cause,
(iii) any diminution in the value thereof, or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all
risk of loss, damage, or destruction of the Collateral shall be borne by
Borrower.

            11.3    Indemnification

. Borrower shall pay, indemnify, defend, and hold Lender-Related Persons, each
Participant, and each of their respective officers, directors, employees,
agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the
fullest extent permitted by law) from and against any and all claims, demands,
suits, actions, investigations, proceedings, and damages, and all reasonable
attorneys fees and disbursements and other costs and expenses actually incurred
in connection therewith (as and when they are incurred and irrespective of
whether suit is brought), at any time asserted against, imposed upon, or
incurred by any of them (a) in connection with or as a result of or related to
the execution, delivery, enforcement, performance, or administration of this
Agreement, any of the other Loan Documents, or the transactions contemplated
hereby or thereby, and (b) with respect to any investigation, litigation, or
proceeding related to this Agreement, any other Loan Document, or the use of the
proceeds of the credit provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act, omission, event, or
circumstance in any manner related thereto (all the foregoing, collectively, the
"Indemnified Liabilities"). The foregoing to the contrary notwithstanding,
Borrower shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrower
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

12.        NOTICES

            Unless otherwise provided in this Agreement, all notices or demands
by Borrower or Lender to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as the Borrower or Lender, as applicable, may designate to each
other in accordance herewith), or telefacsimile to Borrower or Lender, as the
case may be, at its address set forth below:

If to Borrower:   

PICCADILLY CAFETERIAS, INC.   

   

3232 Sherwood Forest Blvd.

   

Baton Rouge, Louisiana 70816

   

Attn: Mark L. Mestayer

   

Fax No. (225) 296-8332

with copies to:   

JONES, WALKER, WAECHTER, POITEVENT, CARRÈRE & DENÈGRE, LLP

   

201 St. Charles Ave.

   

New Orleans, Louisiana 70170

   

Attn: Thomas Y. Roberson, Jr., Esq.

   

Fax No. (504) 582-8583

If to Lender:   

FOOTHILL CAPITAL CORPORATION

   

2450 Colorado Avenue

   

Suite 3000 West

   

Santa Monica, California 90404

   

Attn: Structured Finance Group Manager

   

Fax No. (310) 453-7442

with copies to:   

PAUL, HASTINGS, JANOFSKY & WALKER LLP

   

600 Peachtree Street, NE, Suite 2400

   

Atlanta, Georgia 30308-2222

   

Attn: Jesse H. Austin, III, Esq.

   

Fax No. (404) 815-2424

            Lender and Borrower may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other party. All notices or demands sent in accordance with this Section 12,
other than notices by Lender in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or three (3) Business Days after the
deposit thereof in the mail. Borrower acknowledges and agrees that notices sent
by Lender in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.

13.        CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

                         (a)    THE VALIDITY OF THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN
DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

                        (b)    THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF
CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S OPTION, IN THE COURTS
OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND LENDER WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).

                        (c)    BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

 14.        ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS

            14.1    Assignments and Participations

                       

(a)    Lender may assign and delegate to one or more assignees (each an
"Assignee") all or, upon consent of Borrower (which consent shall not be
unreasonably withheld and shall be required only prior to the occurrence of an
Event of Default) any ratable part of all of the Obligations and the other
rights and obligations of Lender hereunder and under the other Loan Documents;
provided, however, that Borrower may continue to deal solely and directly with
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses, and related information with respect to the Assignee, have been given
to Borrower by Lender and the Assignee, and (ii) Lender and its Assignee have
delivered to Borrower an appropriate assignment and acceptance agreement.

                       

(b)    From and after the date that Lender provides Borrower with such written
notice and executed assignment and acceptance agreement, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such assignment and
acceptance agreement, shall have the assigned and delegated rights and
obligations of Lender under the Loan Documents, and (ii) Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned and delegated by it pursuant to such assignment and
acceptance agreement, relinquish its rights (except with respect to Section 11.3
hereof) and be released from its obligations under this Agreement (and in the
case of an assignment and acceptance covering all or the remaining portion of
Lender's rights and obligations under this Agreement and the other Loan
Documents, Lender shall cease to be a party hereto and thereto), and such
assignment shall affect a novation between Borrower and the Assignee.

                       

(c)    Immediately upon Borrower's receipt of such fully executed assignment and
acceptance agreement, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the rights and duties of Lender arising
therefrom.

                       

(d)    Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons not Affiliates of such Lender (a "Participant")
participating interests in the Obligations and the other rights and interests of
Lender hereunder and under the other Loan Documents; provided, however, that (i)
Lender shall remain the "Lender" for all purposes of this Agreement and the
other Loan Documents and the Participant receiving the participating interest in
the Obligations and the other rights and interests of Lender shall not
constitute a "Lender" hereunder or under the other Loan Documents and Lender's
obligations under this Agreement shall remain unchanged, (ii) Lender shall
remain solely responsible for the performance of such obligations, (iii)
Borrower and Lender shall continue to deal solely and directly with each other
in connection with Lender's rights and obligations under this Agreement and the
other Loan Documents, (iv) Lender shall not transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such Participant is
participating, (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating, (C) release all or a
material portion of the Collateral or guaranties (except to the extent expressly
provided herein or in any of the Loan Documents) supporting the Obligations
hereunder in which such Participant is participating, (D) postpone the payment
of, or reduce the amount of, the interest or fees payable to such Participant
through Lender, or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums, and (v) all amounts payable by Borrower
hereunder shall be determined as if Lender had not sold such participation,
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as Lender under this Agreement. The rights of any
Participant only shall be derivative through Lender and no Participant shall
have any rights under this Agreement or the other Loan Documents or any direct
rights as to Borrower, the Collections, the Collateral, or otherwise in respect
of the Obligations. No Participant shall have the right to participate directly
in the making of decisions by Lender.

                       

(e)    In connection with any such assignment or participation or proposed
assignment or participation, subject to a reasonable and customary
confidentiality undertaking by the proposed assignee or participant, a Lender
may disclose all documents and information which it now or hereafter may have
relating to Borrower or Borrower's business.

                       

(f)    Any other provision in this Agreement notwithstanding, Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge
or security interest in any manner permitted under applicable law.

            14.2    Successors

. This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties; provided, however, that Borrower
may not assign this Agreement or any rights or duties hereunder without Lender's
prior written consent and any prohibited assignment shall be absolutely void ab
initio. No consent to assignment by Lender shall release Borrower from its
Obligations. Lender may assign this Agreement and the other Loan Documents and
its rights and duties hereunder and thereunder pursuant to Section 14.1 hereof
and, except as expressly required pursuant to Section 14.1 hereof, no consent or
approval by Borrower is required in connection with any such assignment.

15.        AMENDMENTS; WAIVERS

            15.1    Amendments and Waivers.

No amendment or waiver of any provision of this Agreement or any other Loan
Document, and no consent with respect to any departure by Borrower therefrom,
shall be effective unless the same shall be in writing and signed by Lender and
Borrower and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

            15.2    No Waivers; Cumulative Remedies.

No failure by Lender to exercise any right, remedy, or option under this
Agreement or, any other Loan Document, or delay by Lender in exercising the
same, will operate as a waiver thereof. No waiver by Lender will be effective
unless it is in writing, and then only to the extent specifically stated. No
waiver by Lender on any occasion shall affect or diminish Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Lender's rights under this Agreement and the other Loan Documents
will be cumulative and not exclusive of any other right or remedy that Lender
may have.

16.        GENERAL PROVISIONS

            16.1    Effectiveness

. This Agreement shall be binding and deemed effective when executed by Borrower
and Lender.

            16.2    Section Headings

. Headings and numbers have been set forth herein for convenience only. Unless
the contrary is compelled by the context, everything contained in each Section
applies equally to this entire Agreement.

            16.3    Interpretation

. Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed against Lender or Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to accomplish fairly the purposes and intentions of all parties
hereto.

            16.4    Severability of Provisions

. Each provision of this Agreement shall be severable from every other provision
of this Agreement for the purpose of determining the legal enforceability of any
specific provision.

            16.5    Withholding Taxes

. All payments made by Borrower hereunder or under any note will be made without
setoff, counterclaim, or other defense, except as required by applicable law
other than for Taxes (as defined below). All such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction (other than the United States) or
by any political subdivision or taxing authority thereof or therein (other than
of the United States) with respect to such payments (but excluding, any tax
imposed by any jurisdiction or by any political subdivision or taxing authority
thereof or therein (i) measured by or based on the net income or net profits of
Lender, or (ii) to the extent that such tax results from a change in the
circumstances of Lender, including a change in the residence, place of
organization, or principal place of business of Lender, or a change in the
branch or lending office of Lender participating in the transactions set forth
herein) and all interest, penalties or similar liabilities with respect thereto
(all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due under this Agreement or under any note, including any amount paid pursuant
to this Section 16.5 after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein; provided, however,
that Borrower shall not be required to increase any such amounts payable to
Lender if the increase in such amount payable results from Lender's own willful
misconduct or gross negligence. Borrower will furnish to Lender as promptly as
possible after the date the payment of any Taxes is due pursuant to applicable
law certified copies of tax receipts evidencing such payment by Borrower.

            16.6    Amendments in Writing

. This Agreement only can be amended by a writing signed by Lender and Borrower.

            16.7    Counterparts; Telefacsimile Execution

. This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Loan
Document mutatis mutandis.

            16.8    Revival and Reinstatement of Obligations

. If the incurrence or payment of the Obligations by Borrower or the transfer to
Lender of any property should for any reason subsequently be declared to be void
or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrower automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.

            16.9    Integration

. This Agreement, together with the other Loan Documents, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof.

 

            IN WITNESS WHEREOF

, the parties hereto have caused this Agreement to be executed and delivered as
of the date first above written.

   

PICCADILLY CAFETERIAS, INC.,

   

a Louisiana corporation

   

By:        /S/ MARK L. MESTAYER                 

   

Title: Executive Vice President

   

FOOTHILL CAPITAL CORPORATION,

   

a California corporation

   

By:        /S/ AMELIE YEHROS                         

  

Title:  Vice President

 

1.   

   

 DEFINITIONS AND CONSTRUCTION.   

 2

   

1.1   

 Definitions   

 2

   

1.2   

 Accounting Terms   

 21

   

1.3   

 Code   

 21

   

1.4   

 Construction   

 21

   

1.5   

 Schedules and Exhibits   

 21

2.   

   

 LOAN AND TERMS OF PAYMENT   

 21

   

2.1   

 Revolver Advances   

 21

   

2.2   

 [Intentionally Omitted]   

 23

   

2.3   

 Borrowing Procedures and Settlements   

 23

   

2.4   

 Payments   

 23

   

2.5   

 Overadvances   

 25

   

2.6   

 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations   

 25

   

2.7   

 Collection of Accounts   

 26

   

2.8   

 Crediting Payments   

 27

   

2.9   

 Designated Account   

 28

   

2.10   

 Maintenance of Loan Account; Statements of Obligations   

 28

   

2.11   

 Fees   

 28

   

2.12   

 Letters of Credit   

 29

   

2.13   

 [Intentionally Omitted   

 31

   

2.14   

 Capital Requirements   

 31

3.     CONDITIONS; POST CLOSING COVENANTS; TERM OF AGREEMENT  32

   

3.1   

 Conditions Precedent to the Initial Extension of Credit   

 32

   

3.2   

 Post Closing Covenants   

 34

   

3.3   

 Conditions Precedent to all Extensions of Credit   

 36

   

3.4   

 Term   

 36

   

3.5   

 Effect of Termination   

 36

   

3.6   

 Early Termination by Borrower   

 37

4.   

   

 COLLATERAL   

 37

   

4.1   

 Collateral Security   

 37

   

4.2   

 Existing Collateral   

 38

   

4.3   

 Perfection of Security Interests   

 38

   

4.4   

 Right to Inspect   

 38

5.   

   

 REPRESENTATIONS AND WARRANTIES   

 39

   

5.1   

 No Encumbrances   

 39

   

5.2   

 [Intentionally Omitted]   

 39

   

5.3   

 [Intentionally Omitted]   

 39

   

5.4   

 Equipment   

 39

   

5.5   

 Location of Inventory and Equipment   

 39

   

5.6   

 Inventory Records   

 39

   

5.7   

 Location of Chief Executive Office; FEIN   

 39

   

5.8   

 Due Organization and Qualification; Subsidiaries   

 39

   

5.9   

 Due Authorization; No Conflict   

 40

   

5.10   

 Litigation   

 41

   

5.11   

 No Material Adverse Change   

 41

   

5.12   

 Fraudulent Transfer   

 41

   

5.13   

 Employee Benefits   

 41

   

5.14   

 Environmental Condition   

 42

   

5.15   

 Brokerage Fees   

 42

   

5.16   

 Intellectual Property   

 42

   

5.17   

 Leases   

 43

   

5.18   

 Intentionally Omitted   

 43

   

5.19   

 Complete Disclosure   

 43

   

5.20   

 Indebtedness   

 43

   

5.21   

 Amendment and Restatement of Prior Loan Agreement and Prior Notes;
Intercreditor Agreement   

 43

6.   

   

 AFFIRMATIVE COVENANTS   

 44

   

6.1   

 Accounting System   

 44

   

6.2   

 Collateral Reporting   

 44

   

6.3   

 Financial Statements, Reports, Certificates   

 44

   

6.4   

 [Intentionally Omitted]   

 47

   

6.5   

 [Intentionally Omitted]   

 47

   

6.6   

 Maintenance of Properties   

 47

   

6.7   

 Taxes   

 47

   

6.8   

 Insurance   

 47

   

6.9   

 Location of Inventory and Equipment   

 48

   

6.10   

 Compliance with Laws   

 49

   

6.11   

 Leases   

 49

   

6.12   

 Brokerage Commissions   

 49

   

6.13   

 Existence   

 49

   

6.14   

 Environmental   

 49

   

6.15   

 Disclosure Updates   

 49

   

6.16   

 Further Assurances   

 50

   

6.17   

 Employee Benefits   

 51

7.   

   

 NEGATIVE COVENANTS   

 51

   

7.1   

 Indebtedness   

 51

   

7.2   

 Liens   

 52

   

7.3   

 Restrictions on Fundamental Changes   

 52

   

7.4   

 Disposal of Assets   

 53

   

7.5   

 Change Name   

 53

   

7.6   

 Guarantee   

 53

   

7.7   

 Nature of Business   

 53

   

7.8   

 Prepayments and Amendments   

 54

   

7.9   

 Change of Control   

 54

   

7.10   

 Consignments   

 54

   

7.11   

 Distributions   

 54

   

7.12   

 Accounting Methods   

 54

   

7.13   

 Investments   

 54

   

7.14   

 Transactions with Affiliates   

 55

   

7.15   

 Suspension   

 55

   

7.16   

 [Intentionally Omitted]   

 55

   

7.17   

 Use of Proceeds   

 55

   

7.18   

 Change in Location of Chief Executive Office; Inventory and Equipment with
Bailees   

 55

   

7.19   

 Securities Accounts   

 55

   

7.20   

 Financial Covenants   

 55

   

7.21   

 No Prohibited Transactions Under ERISA   

 58

8.   

   

 EVENTS OF DEFAULT   

 59

9.   

   

 THE LENDER'S RIGHTS AND REMEDIES   

 61

   

9.1   

 Rights and Remedies   

 62

   

9.2   

 Remedies Cumulative   

 64

10.   

   

 TAXES AND EXPENSES   

 64

11.   

   

 WAIVERS; INDEMNIFICATION   

 65

   

11.1   

 Demand; Protest   

 65

   

11.2   

 Lender's Liability for Collateral   

 65

   

11.3   

 Indemnification   

 65

12.   

   

 NOTICES   

 66

13.   

   

 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER   

 67

14.   

   

 ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS   

 68

   

14.1   

 Assignments and Participations   

 68

   

14.2   

 Successors   

 69

15.   

   

 AMENDMENTS; WAIVERS   

 70

   

15.1   

 Amendments and Waivers   

 70

   

15.2   

 No Waivers; Cumulative Remedies   

 70

16.   

   

 GENERAL PROVISIONS   

 70

   

16.1   

 Effectiveness   

 70

   

16.2   

 Section Headings   

 70

   

16.3   

 Interpretation   

 70

   

16.4   

 Severability of Provisions   

 70

   

16.5   

 Withholding Taxes   

 70

   

16.6   

 Amendments in Writing   

 71

   

16.7   

 Counterparts; Telefacsimile Execution   

 71

   

16.8   

 Revival and Reinstatement of Obligations   

 71

   

16.9   

 Integration   

 72

EXHIBITS AND SCHEDULES

Exhibit B-1   

 Form of Borrowing Base Certificate

Exhibit C-1   

 Form of Compliance Certificate

Schedule A-1   

 Additional Real Property Collateral

Schedule M-1   

 Material Contracts

Schedule P-1   

 Permitted Liens

Schedule R-1   

 Real Property Collateral; Mortgages' Phase I Reports

Schedule S-1   

 Sale/Leaseback Properties

Schedule 2.7   

 DDA and other Bank and Investment Accounts; Credit Card Arrangements

Schedule 5.5   

 Locations of Inventory and Equipment

Schedule 5.7   

 Chief Executive Office; FEIN; State of Formation; Exact Legal Name

Schedule 5.8(b)   

 Capitalization of Borrower

Schedule 5.10   

 Litigation

Schedule 5.13   

 ERISA

Schedule 5.14   

 Environmental Matters

Schedule 5.16   

 Intellectual Property

Schedule 5.20   

 Permitted Indebtedness