LIMITED
FORBEARANCE AGREEMENT


        This
LIMITED FORBEARANCE AGREEMENT (this
“Agreement”), dated as of October 1, 2002
(the “Effective Date”), by and between
Furr’s Restaurant Group, Inc. (“Furrs”);
Cafeteria Operators, L.P. (“Cafeteria
Operators”); Cavalcade Holdings, Inc.
(“Holdings”); Cavalcade Foods, Inc.
(“Foods”); Furrs’/Bishop’s Cafeterias,
L.P. (“Bishop’s”) and Cavalcade Development,
L.P. (“Development” and collectively, the
“Borrowers”), Fleet National Bank, in its
individual capacity as a lender (“Fleet”) and in
its capacity as Administrative Agent (the
“Agent”), and certain other undersigned lenders
(the Agent, together with such lenders, the
“Lenders”). 


RECITALS


        
A.        
      The Financing  Documents.  Borrowers are indebted to the Lenders as evidenced by (i) that  certain  Revolving  Credit and Term
Loan  Agreement  dated as of April 10,  2001 (the “Credit  Agreement”),  (ii) those  certain  Revolving  Credit Notes dated on or about
                                                 April 10,  2001 executed by Borrowers and payable to the order of certain  Lenders in the aggregate  principal  amount of  $20,000,000,
(iii) those  certain Term A Loan Notes dated on or about  April 10,  2001 executed by Borrowers  and payable to certain  Lenders in the
aggregate  principal  amount of  $30,000,000  and  (iv) that  certain Term B Loan Note dated  April 13,  2001 executed by Borrowers and
payable to the order of Textron  Financial  Corporation  in the principal  amount of  $5,000,000,  such  indebtedness  being secured by
perfected,  first  priority  security  interests  in and liens on  substantially  all assets of  Borrowers  as provided in the Security
Documents.


        
B.        
         Existing  Defaults.   Borrowers  acknowledge  that certain  Defaults and Events of Default of Company under the Loan  Documents

have occurred and are continuing as more specifically described in Exhibit “A” attached hereto (the “Specified Defaults”).



        
C.          
         Forbearance  Request by Borrowers.  Borrowers have requested that the Lenders forbear until December 31,  2002 from exercising

their  rights and remedies  arising as a result of the  occurrence  of the  Specified  Defaults.  The Lenders are willing to grant such
forbearance subject to the terms and conditions of this Agreement.


        NOW,
THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows: 


AGREEMENTS:


        
1.         
  Definitions.  Capitalized  terms  used and not  otherwise  defined  herein  shall have the same  meanings  as set forth in the

Credit Agreement.  In addition, the following terms, for the purposes of this Agreement, shall have the following meanings:


                
(a)         
  “     Budget” means the thirteen-week cash flow budget attached as Exhibit "B" hereto.


                
(b)         
  “    CRP” means Corporate Revitalization Partners, LLC.



 






                
(c)         “CRP
Agreement” means the agreement pursuant to which Borrowers
have engaged CRP, as the same may be amended, modified, or supplemented from
time to time as permitted hereunder. 


                
(d)         “Forbearance
Period” means the period commencing on the Effective Date
and continuing through and including the Termination Date, unless earlier
terminated pursuant to the terms and provisions of this Agreement. 


                

(e)            “Termination Date” means 5:00 p.m. (Eastern Standard Time) on December 31, 2002.
  


                
(f)          “Termination
Event” means the occurrence of any of the following:
(i) any representation or warranty made or deemed made by any Borrower in
this Agreement shall be false, misleading or erroneous in any material respect
when made or deemed to have been made, (ii) any Borrower shall fail to
perform, observe or comply timely with any covenant, agreement or term contained
in this Agreement, (iii) any default, event of default, Default or Event of
Default, other than the Specified Defaults, shall occur under this Agreement or
the Loan Documents, (iv) any Borrower shall commence a voluntary proceeding
seeking liquidation, reorganization, or other relief with respect to itself or
its debts under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official of it or a substantial part of
its property or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for the
benefit of creditors or shall take any corporate action to authorize any of the
foregoing, (v) an involuntary proceeding shall be commenced against any
Borrower seeking liquidation, reorganization, or other relief with respect to it
or its debts under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official for it or a substantial part of
its property, or (vi) any event or condition shall occur after the
Effective Date which shall have a Material Adverse Effect; provided that no
Termination Event shall occur as a result of any Borrower issuing an unsecured
note payable to a vendor in the course of compromising and settling amounts owed
to such vendor even though such note may constitute Indebtedness. 


        
2.         
  Forbearance by Lenders.



                
(a)        
Forbearance. Subject to the terms of this Agreement and only so long
as no Termination Event shall have occurred, the Lenders hereby agree to forbear
until the Termination Date from exercising their rights and remedies arising as
a result of the occurrence of the Specified Defaults. Notwithstanding the
foregoing, the forbearance granted by the Lenders pursuant hereto shall not
constitute and shall not be deemed to constitute a waiver of any of the
Specified Defaults or of any other Default or Event of Default under the Loan
Documents. On and after the Termination Date, or such earlier date on which a
Termination Event occurs, the Lenders’ agreement hereunder to forbear shall
terminate automatically without further act or action by the Agent or any
Lender, and the Lenders shall be entitled to exercise any and all rights and
remedies available to them under the Loan Documents and this Agreement, at law,
in equity, or otherwise without any further lapse of time, expiration of
applicable grace periods, or requirements of notice, all of which are hereby
expressly waived by each Borrower other than


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 any notice of acceleration required
by the Loan Documents and any notice required by applicable law. 


                
(b)        
Interest Charges. During the Forbearance Period all of the Loans
shall be Base Rate Loans and shall bear interest at the rates applicable thereto
under Section 6.10 of the Credit Agreement. So long as the Borrowers make
weekly interest payments on the Loans on Tuesday of each week commencing
October 8, 2002 in the minimum amount of $50,000, no Termination Event
shall be deemed to have occurred as a result of Borrowers’ failure to make
interest payments as provided in the Credit Agreement. Lenders’ acceptance
of the weekly partial payments of interest provided in this Section 2(b)
shall not constitute a waiver of any interest accruing but not paid during the
Forbearance Period. 


        
3.          
  Representations  and Warranties.  To induce the Lenders to enter into this Agreement,  Borrowers  jointly and severally hereby
represent and warrant to the Lenders that:



                
(a)         Duly Organized.
Each Borrower is duly organized, validly existing and in good standing under the
laws of the state in which it was organized and formed, whether by
incorporation, partnership, limited liability company, or otherwise, without
limitation, and has the power and authority to perform its obligations under
this Agreement and the other Loan Documents. 


                
(b)         Authority.
The execution, delivery and performance of this Agreement have been duly authorized
by all requisite action on the part of each Borrower and do not and will not
violate the articles of incorporation or bylaws, partnership agreement, or other
governance document or agreement of any Borrower, any other material agreement
to which any Borrower is a party, or any law, rule or regulation, or any order
of any court, governmental authority or arbitrator by which it or any of them or
its properties is bound. 


                
(c)          No Defenses.
 The
outstanding principal balance of the Loans is $41,925,000.00 as of the Effective
Date, accrued and unpaid interest on the Loans was $1,188,276.31 as of October
1, 2002 and interest continues to accrue on the Loans at the rates applicable
thereto under Section 6.10 of the Credit Agreement. The Administrative
Agent has issued Letters of Credit for the account of one or more Borrowers in
the aggregate Maximum Drawing Amount of $3,280,000.00 as of the Effective Date.
No Borrower has any (i) defenses to payment, (ii) counterclaim, or
(iii) rights of setoff, in each case with respect to any Obligations to the
Agent or any Lender existing as of the Effective Date. 


                
(d)                No Other Defaults.
  Except for the Specified Defaults, no Default or Event of Default has occurred and is continuing.



                
(e)         Taxes.
All
payments due to all taxing authorities with respect to the Collateral are
current at the present time except as otherwise disclosed to the Lenders in
writing by Borrowers. 


        
4.           
  Covenants.  Notwithstanding  any provisions to the contrary  contained in the Loan Documents,  each Borrower hereby  covenants

and  agrees  that,  from and after the  Effective  Date,  each of them will  perform,  observe  and comply  with each of the  following
covenants:


3





                
(a)         Compliance with Loan Documents and this Agreement. Each Borrower will perform, observe and comply
with each covenant, agreement and term contained in this Agreement and each of
the Loan Documents, except for the Specified Defaults. 


                
(b)              No New Loans or Letters of Credit.  During  the  Forbearance  Period  none of the  Borrowers  will be  entitled  to obtain any
additional Loans or the issuance of any additional Letters of Credit. 


                
(c)         Reporting by CRP. Borrowers will cause CRP to deliver promptly to Lenders any written
report, analysis, forecast, recommendations or other information delivered to
any Borrower by CRP (excluding any internal management report or correspondence
prepared by any officer, director or employee of CRP in the ordinary performance
of his duties to any Borrower pursuant to the CRP Agreement) and to provide
written progress reports concerning CRP’s activities no less frequently
than monthly on the 15th day of each month. The CRP Agreement shall not be
terminated, amended, modified or supplemented without the prior written consent
of Required Lenders. 


                
(d)         Certain Leasehold Mortgages and Landlord Waivers. Borrowers will promptly execute and deliver
to Agent such leasehold mortgages or leasehold deeds of trust as Agent may
request covering one or more Units not currently the subject of a leasehold
mortgage or leasehold deed of trust in favor of Agent. Borrowers will exert
reasonable efforts to obtain landlord waivers, in a form approved by Agent, from
any landlord specified by Agent. 


                
(e)         Cash Flow.
Tested weekly during the Forbearance Period on Tuesday of each week, the
Borrowers will not permit any of the following (such performance to be
calculated in a manner consistent with the Budget): (i) gross cash receipts for
the prior three week period ending on such date to be less than 90% of the
aggregate amount shown in the Budget for such weeks; (ii) the average of the
ending book cash balances for the prior three weeks ending on such date to be
less than 80% of the average of the amounts shown in the Budget for such weeks;
and (iii) a deficit ending book cash balance that exceeds negative $1,200,000 on
such date. Any fees and expenses paid to the Administrative Agent or the
Administrative Agent’s Special Counsel, including the retainer contemplated
by subsection (f) below, will be excluded from the calculation of the covenants
set forth in clauses (ii) and (iii) of this subsection (e). 


                
(f)         Retainer for Expenses. On the Effective Date, Borrowers will deliver to the Agent a
retainer for expenses in the amount of $50,000.00. Fees and expenses of the
Administrative Agent’s Special Counsel will be payable monthly promptly
after receipt of summary description invoices therefor in addition to such
retainer amount. 


                
(g)         Information.
Not later than close of business on Tuesday of each week, the Borrowers will provide
the Lenders with a rolling thirteen week cash flow forecast as of close of
business on Tuesday of the prior week in sufficient detail for ready analysis
and in the format set forth in the Budget. In addition to any notices required
to be given under Section 9.5 of the Credit Agreement, Borrowers agree to
provide Lenders with such other information as may be reasonably requested by
the Lenders from time to time, within five (5) Business Days of such
request (unless it is not reasonably practicable for the Borrowers to provide
such


4






 information within such time period, in which case such information will
provided as soon as it is reasonably practicable to do so), including, without
limitation, copies of any bank or other financial institution statements;
financial statements; transactional documentation; litigation pleadings,
depositions, related documents and transcripts; letters of intent or offers to
purchase, lease or license part, all or substantially all of the assets of any
Borrower; and letters of intent or commitments for any capital investment, loan
or other financing of any Borrower. 


                
(h)         Business Plan.
Not later than December 2, 2002, the Borrowers shall submit to the Agent
for review and distribution to the Lenders a business plan covering the period
from January 1, 2003 through December 31, 2003. 


                
(i)         Access. The
Agent and Lenders and their respective agents shall have reasonable access
during normal business hours to each Borrower’s business premises and to
the Collateral to review, appraise and evaluate the physical condition of the
Collateral and to inspect the financial records and other records of the
Borrowers concerning the operation of Borrowers’ businesses,
Borrowers’ financial conditions, the transfers and expenditures of funds
generated therefrom, the accrual of expenses relating thereto, and any and all
other records relating to the operations of Borrowers. Each Borrower will fully
cooperate with the Agent and Lenders regarding such reviews, evaluations, and
inspections, and the Borrowers shall make their employees, CRP, other
consultants and professionals reasonably available to the Agent, the Lenders and
the Agent’s and Lenders’ professionals and consultants in conducting
such reviews, evaluations, and inspections. Such inspections will include
appraisals performed by appraisers selected by the Agent of the Real Estate
owned or ground leased by Borrowers, and Borrowers will promptly reimburse Agent
for all costs incurred in connection therewith. 


                
(j)         Other Terms. No
act committed or action taken by any of the Lenders under this Agreement or the
Loan Documents will be used, construed, or deemed to hold any Lender to be in
control of any Borrower, or the governance, management or operations of any
Borrower for any purpose, without limitation, or to be participating in the
management of any Borrower or acting as a “responsible person” or
“owner or operator” or a person in “control” with respect to
the governance, management or operation of any Borrower or its business (as such
terms, or any similar terms, are used in the Bankruptcy Code, or the Internal
Revenue Code, Comprehensive Environmental Response, Compensation and Liability
Act, each as may be amended from time to time, or any other federal or state
statute, at law, in equity, or otherwise) by virtue of the interests, rights,
and remedies granted to or conferred upon the Lenders under this Agreement or
the Loan Documents. 


        
5.           

Closing Deliveries. Unless otherwise provided herein, simultaneously
with the execution and delivery hereof, and as a condition to the effectiveness
hereof, Borrowers will deliver (or deposit with), or cause the delivery to (or
deposit with) Agent: (a)  such certificates of duly authorized officers of
each Borrower, certificates of governmental authorities, certified copies of
resolutions of the Board of Directors of each Borrower, and such other
documents, instruments and agreements as Agent or any Lender shall require to
evidence the due authorization, execution and delivery of this Agreement,
(b) a retainer for expenses in the amount of $50,000.00, (c) all
reasonable fees and expenses of Administrative Agent’s Special Counsel due
and payable under the Credit Agreement or incurred in connection with the
preparation, negotiation and execution of this Agreement, all related documents
and the


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 transactions contemplated hereby and thereby, (d) an assignment
from Furr’s to Cafeteria Operators, executed in proper form for recording
in the U.S. Patent and Trademark Office, of all trademark applications owned by
Furr’s, and (e) the original certificates of title for all motor
vehicles owned by any of the Borrowers, together with signed applications or any
other documents required to note Agent’s lien thereon. 


        
6.        Ratification of Credit Agreement Loan Documents and Collateral. Each
Borrower hereby acknowledges that this Agreement constitutes receipt from the
Agent and the Lenders of proper notice of default, notice of intent to
accelerate and opportunity to cure, and demand for payment. The Borrowers each
hereby waive (a) any further notice of default, notice of intent to
accelerate, or demand for payment and (b) any further opportunity to cure
any of the Specified Defaults. Except as modified by this Agreement, the
Borrowers each hereby acknowledge, ratify, reaffirm, and agree that each of the
Credit Agreement and the first priority, perfected liens and security interests
created thereby in favor of the Agent in the Collateral, are and will remain in
full force and effect and binding on each Borrower, and are enforceable in
accordance with their respective terms and applicable law. The Borrowers each
hereby grant the Agent for the ratable benefit of Lenders liens and security
interests in the Collateral and acknowledge, ratify, and reaffirm all of the
terms and provisions of the Loan Documents, except as modified herein, which are
incorporated by reference as of the Effective Date as if set forth herein
including, without limitation, all promises, agreements, warranties,
representations, covenants, releases, and indemnifications contained therein.
The Borrowers hereby acknowledge, ratify, and confirm the Credit Agreement and
all of their respective debts and obligations to the Lenders thereunder. 


        
7.        Remedies Upon Termination Event. Upon the occurrence of a Termination
Event, (a) the Forbearance Period will terminate without further act or
action by Agent or any Lender, and (b) Agent and Lenders will be entitled
immediately to accelerate the Obligations, institute foreclosure proceedings
against the Collateral and to exercise any and all of the Lenders’ rights
and remedies available to them under the Loan Documents and this Agreement, at
law, in equity, or otherwise, without further opportunity to cure, demand,
presentment, notice of dishonor, notice of default, notice of intent to
accelerate, notice of intent to foreclose, notice of protest or other
formalities of any kind, all of which are hereby expressly waived by each
Borrower, other than any notice of acceleration required by the Loan Documents
and any notice required by applicable law. 


        
8.           Acknowledgment  of Defaults.  Each  Borrower  specifically  acknowledges  the  existence  and  continuation  of the  Specified

Defaults.



        
9.        Release and Covenant Not to Sue. EACH BORROWER (EACH IN ITS OWN RIGHT
AND ON BEHALF OF ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT
CONTRACTORS, ATTORNEYS AND AGENTS) (THE “RELEASING
PARTIES”), JOINTLY AND SEVERALLY RELEASE, ACQUIT, AND
FOREVER DISCHARGE AGENT AND EACH OF THE LENDERS AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS, ACCOUNTANTS, ADVISORS
AND AGENTS (THE “RELEASED PARTIES”), TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE STATE AND FEDERAL LAW, FROM ANY AND ALL
ACTS AND OMISSIONS OF ANY OF THE RELEASED PARTIES, AND


6






 FROM ANY AND ALL CLAIMS,
CAUSES OF ACTION, COUNTERCLAIMS, DEMANDS, CONTROVERSIES, COSTS, DEBTS, SUMS OF
MONEY, ACCOUNTS, RECKONINGS, BONDS, BILLS, DAMAGES, OBLIGATIONS, LIABILITIES,
OBJECTIONS, AND EXECUTIONS OF ANY NATURE, TYPE, OR DESCRIPTION WHICH ANY OF THE
RELEASING PARTIES HAVE AS OF THE DATE HEREOF AGAINST ANY OF THE RELEASED
PARTIES, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, USURY, FRAUD, DECEIT,
MISREPRESENTATION, CONSPIRACY, UNCONSCIONABILITY, INEQUITABLE CONDUCT, CONTROL,
DURESS, ECONOMIC DURESS, DEFAMATION, CONTROL, INTERFERENCE WITH CONTRACTUAL AND
BUSINESS RELATIONSHIPS, CONFLICTS OF INTEREST, MISUSE OF INSIDER INFORMATION,
CONCEALMENT, DISCLOSURE, SECRECY, MISUSE OF COLLATERAL, WRONGFUL RELEASE OF
COLLATERAL, FAILURE TO INSPECT, ENVIRONMENTAL DUE DILIGENCE, NEGLIGENT LOAN
PROCESSING AND ADMINISTRATION, WRONGFUL SETOFF, VIOLATIONS OF STATUTES AND
REGULATIONS OF GOVERNMENTAL ENTITIES, INSTRUMENTALITIES AND AGENCIES (BOTH CIVIL
AND CRIMINAL), RACKETEERING ACTIVITIES, SECURITIES AND ANTITRUST LAWS
VIOLATIONS, TYING ARRANGEMENTS, DECEPTIVE TRADE PRACTICES, BREACH OR ABUSE OF
ANY ALLEGED FIDUCIARY DUTY, BREACH OF ANY ALLEGED SPECIAL RELATIONSHIP, COURSE
OF CONDUCT OR DEALING, ALLEGED OBLIGATION OF FAIR DEALING, ALLEGED OBLIGATION OF
GOOD FAITH, AND ALLEGED OBLIGATION OF GOOD FAITH AND FAIR DEALING, WHETHER OR
NOT IN CONNECTION WITH OR RELATED TO THE CREDIT FACILITY DOCUMENTS AND THIS
AGREEMENT, AT LAW OR IN EQUITY, IN CONTRACT IN TORT, OR OTHERWISE, KNOWN OR
UNKNOWN, SUSPECTED OR UNSUSPECTED (THE “RELEASED
CLAIMS”). THE RELEASING PARTIES FURTHER AGREE TO LIMIT ANY
DAMAGES THEY MAY SEEK IN CONNECTION WITH ANY CLAIM OR CAUSE OF ACTION, IF ANY,
TO EXCLUDE ALL PUNITIVE AND EXEMPLARY DAMAGES, DAMAGES ATTRIBUTABLE TO LOST
PROFITS OR OPPORTUNITY, DAMAGES ATTRIBUTABLE TO MENTAL ANGUISH, AND DAMAGES
ATTRIBUTABLE TO PAIN AND SUFFERING, AND THE RELEASING PARTIES DO HEREBY WAIVE
AND RELEASE ALL SUCH DAMAGES WITH RESPECT TO ANY AND ALL CLAIMS OR CAUSES OF
ACTION WHICH MAY ARISE AT ANY TIME AGAINST ANY OF THE RELEASED PARTIES. THE
RELEASING PARTIES REPRESENT AND WARRANT THAT NO FACTS EXIST WHICH COULD
PRESENTLY OR IN THE FUTURE COULD SUPPORT THE ASSERTION OF ANY OF THE RELEASED
CLAIMS AGAINST THE RELEASED PARTIES. THE RELEASING PARTIES FURTHER COVENANT NOT
TO SUE ANY OF THE RELEASED PARTIES ON ACCOUNT OF ANY OF THE RELEASED CLAIMS, AND
EXPRESSLY WAIVE ANY AND ALL DEFENSES THEY MAY HAVE IN CONNECTION WITH ANY DEBTS
AND OBLIGATIONS UNDER THE CREDIT FACILITY DOCUMENTS AND THIS AGREEMENT. THIS
PARAGRAPH IS IN ADDITION TO ANY OTHER RELEASE OF THE RELEASED PARTIES BY THE
RELEASING PARTIES AND SHALL NOT IN ANY WAY LIMIT ANY OTHER RELEASE, COVENANT NOT
TO SUE, OR WAIVER BY THE RELEASING PARTIES IN FAVOR OF THE RELEASED PARTIES. 


        
10.         No
Obligation of Lenders. Each Borrower hereby acknowledges and understands
that upon the expiration or termination of the Forbearance Period, if all the
Specified Defaults have not been cured or waived by written agreement in
accordance with the Credit


7






 Agreement, or if there shall at such time exist a
Default or Event of Default, then the Agent or the Lenders shall have the right
to proceed to exercise any or all available rights and remedies, which may
include foreclosure on the Collateral and/or institution of legal proceedings.
The Lenders shall have no obligation whatsoever to extend the maturity of the
Notes, waive any events of default or defaults, defer any payments, or further
forbear from exercising their rights and remedies. 


        
11.         No
Implied Waivers. No failure or delay on the part of the Agent or the
Lenders in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement, the Credit Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement, the Credit
Agreement or any other Loan Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. 


        
12.        Indemnification. In addition to, and without limitation of, any and
all indemnities provided in the Loan Documents, each Borrower shall and does,
jointly and severally, hereby indemnify and hold each of the Agent , the
Lenders, and their respective employees, agents, independent contractors,
attorneys, officers, and directors harmless from and against any and all claims,
liability, losses, damages, causes of action, suits, judgments, costs, and
expenses, including, without limitation, attorneys’ fees, arising out of or
from or related to the Credit Agreement Loan Documents. If any action, suit, or
proceeding is brought against the Agent or the Lenders or their respective
employees, agents, independent contractors, attorneys, officers, or directors,
each Borrower shall, at the Agent’s or Lenders’ request, defend the
same at each Borrower’s sole cost and expense, such cost and expense to be
a joint and several liability of all of the Borrowers, by counsel selected by
the Agent or Lenders. 


        
13.        Survival of Representations and Warranties. All representations and
warranties made in this Agreement or any other Loan Document will survive the
execution and delivery of this Agreement, and no investigation by the Lenders or
any closing will affect the representations and warranties or the right of any
Lender to rely upon them. 


        
14.        Review and Construction of Documents. The Borrowers hereby
acknowledge, and represent and warrant to the Lenders that (a) the
Borrowers have had the opportunity to consult with legal counsel of their own
choice and have been afforded an opportunity to review this Agreement with their
legal counsel, (b) the Borrowers have reviewed this Agreement and fully
understand the effects thereof and all terms and provisions contained herein,
and (c) the Borrowers have executed this Agreement of their own free will
and volition. The recitals contained in this Agreement shall be construed to be
part of the operative terms and provisions of this Agreement. 


        
15.        ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT AND THE LOAN DOCUMENTS AS
INCORPORATED HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT BETWEEN THE PARTIES
HERETO REGARDING THE LENDERS’ FORBEARANCE WITH RESPECT TO THEIR RIGHTS AND
REMEDIES ARISING AS A RESULT OF THE SPECIFIED DEFAULTS AND SUPERSEDES ANY AND
ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND


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 MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by Borrowers, Agent and Required
Lenders. The Loan Documents, as modified by this Agreement, continue to evidence
the agreement of the parties with respect to the subject matter thereof. 


        
16.         Notices.  All notices,  requests,  demands and other  communications under this Agreement will be given in accordance with the
provisions of the Credit Agreement.


        
17.        Successors and Assigns. This Agreement will be binding upon, and will
inure to the benefit of, the parties hereto and their respective heirs, legal
representatives, successors and assigns, provided that the Borrowers may not
assign any rights or obligations under this Agreement without the prior written
consent of the Required Lenders. 


        
18.           Tolling of Statutes of Limitation.  The parties hereto agree that all applicable  statutes of limitations  with respect to the
Loan Documents shall be tolled and not begin running until the Termination Date.


        
19.            Arms-Length/Good Faith.  This Agreement has been negotiated at arms-length and in good faith by the parties hereto.


        
20.            Governing Law.  This Agreement will be subject to the laws of the Commonwealth of Massachusetts.



        
21.        Interpretation. Wherever the context hereof will so require, the
singular shall include the plural, the masculine gender shall include the
feminine gender and the neuter and vice versa. The headings, captions and
arrangements used in this Agreement are for convenience only and shall not
affect the interpretation of this Agreement. All agreements, warranties,
representations and covenants made herein by the Borrowers are made jointly and
severally. 


        
22.        Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein. 


        
23.        Counterparts. This Agreement may be executed and delivered in any
number of counterparts, and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts taken together shall constitute one
and the same instrument; provided that no party shall be bound by this Agreement
until the Borrowers, the Agent and the Required Lenders have executed a
counterpart hereof. Execution of this Agreement via facsimile shall be
effective, and signatures received via facsimile shall be binding upon the
parties hereto and shall be effective as originals. 


        
24.        Further Assurances. The Borrowers agree to execute, acknowledge,
deliver, file and record such further certificates, instruments and documents,
and to do all other acts and


9






 things, as may be reasonably requested by the Agent
on behalf of the Lenders as necessary or advisable to carry out the intents and
purposes of this Agreement. 


        
25.         Loan Document.  This Agreement is a Loan Document for all purposes of the Credit Agreement and the other Loan Documents.



        
26.        WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, LENDERS AND AGENT HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EACH BORROWER (a) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR AGENT WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(b) ACKNOWLEDGES THAT AGENT AND LENDERS HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN. AGENT AND EACH LENDER (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY BORROWER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
BORROWER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (b) ACKNOWLEDGES THAT BORROWERS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN. 


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10







        
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.




	
 BORROWERS:	
     FURR'S RESTAURANT GROUP, INC.






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        






	
  	
     CAFETERIA OPERATORS, L.P.






	
  	
 By:	
     Furr's Restaurant Group, Inc.
	
  	
  	
     its General Partner





	
  	
 By:	
                     
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        





	
  	
     CAVALCADE HOLDINGS, INC.






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        





	
  	
     CAVALCADE FOODS, INC.






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        





1





	
  	
     FURR'S/BISHOP'S CAFETERIAS, L.P.






	
  	
 By:	
     Furr's Restaurant Group, Inc.
	
  	
  	
     its General Partner





	
  	
 By:	
                     
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        





	
  	
     CAVALCADE DEVELOPMENT, L.P.





	
  	
 By:	
     Furr's Restaurant Group, Inc.
	
  	
  	
     its General Partner





	
  	
 By:	
                     
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        







	
 LENDERS:	
     FLEET NATIONAL BANK,
	
  	
     individually and as Administrative Agent






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        






	
  	
     THE PROVIDENT BANK






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        






	
  	
     WASHINGTON MUTUAL BANK






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        





2






	
  	
     ORIX FINANCIAL SERVICES, INC.






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        






	
  	
     TEXTRON FINANCIAL CORPORATION






	
  	
 By:	
                     
                        
                        
                        
                        
	
  	
 Name:	
                     
                        
                        
                        
                        
	
  	
 Title:	
                     
                        
                        
                        
                        















3





EXHIBIT A


SPECIFIED DEFAULTS



The Borrowers  disclose the following  Defaults and Events of Default which have occurred and are  continuing  under the Loan Documents
(Section references are to the Credit Agreement):






	
 Section	
     Description


	
 14.1(a)	
     Borrowers  did not pay  principal due on July 2, 2002 and will not pay principal due on October 1,
                   2002


	
 14.1(b) 	
     Borrowers have not paid interest due at various times on and after July 2, 2002.


	
 14.1(c) 	
     Borrowers have failed to comply with covenants  contained in the following  Sections of the Credit
                   Agreement:




     9.4(e) - Borrowers have not accompanied  financial statements delivered pursuant to Section 9.4(a)
                   and (b) with a compliance statement in the form of Exhibit E, which will continue.




      9.5.1 - Borrowers have not provided the specified notices to the Administrative  Agent and each of
                   the Lenders.




     9.5.3 - See 14.1(j) below.




     9.5.4  -Borrowers have not provided notice of threatened  litigation with respect to approximately
                   $900,000 in unpaid charges relating to media usage.




     9.7.2 - Proceeds of casualty  insurance in the amount of  $661,953.41  relating to loss of an oven
                   at Dynamic Foods were received by Borrowers in August of 2002 after the  occurrence of an Event of
                   Default and retained to reimburse the Borrowers' costs of a replacement oven.




     10.8  -Borrowers  have failed to make periodic  payments due to the  Cavalcade  Pension Plan in an
                   aggregate  amount  not to  exceed  $1  million.  The Plan has  incurred  an  "accumulated  funding
                   deficiency"  and the  projected  benefit  obligations  of the Plan,  as  determined  for financial
                   accounting purposes, are in excess of $6,428,000.




     10.12 - The  Borrowers are and will continue to be in breach of this covenant due to a larger than
                   projected number of Unprofitable Units.




     11.1,  11.2,  11.3,  11.4 - Borrowers are and will continue to be in violation of these  covenants
                   due to recent and continuing failure of their financial performance to attain projected levels.








1











	
 14.1(d)	
     Borrowers have failed to comply with covenants and agreements  contained in the following Sections
                   of the Credit Agreement:




     9.10 - Borrowers  are past due in the  payment of  approximately  $3,000,000  of vendor and lessor
                   claims which  individually or in the aggregate could have a Material  Adverse Effect.  Termination
                   of the Swap Agreement referenced in Section 9.15 below has resulted in a termination  liability on
                   behalf Borrowers which Borrowers will not satisfy during the Forebearance Period.




     9.13 - As a consequence of the rejection by Kmart  Corporation of its obligations under the Master
                   Lease between it and Cafeteria  Operators,  LP with respect to 10 properties owned by an affiliate
                   of Aken  Leasing  Corp.,  Cafeteria  Operators LP has entered into new leases with Aken which have
                   terms in excess of ten years.  No  leasehold  mortgage  has been  obtained  with  respect to these
                   properties.




     9.15 - Fleet has given notice to Borrowers of the  termination of the Swap Agreement  entered into
                   by Borrowers to satisfy the  requirements  of this covenant;  as a consequence,  Borrowers are and
                   will continue to be in violation of this covenant.





	
 14.1(j)	
     Kmart  Corporation  has  made  filings  in its  bankruptcy  proceedings  pursuant  to which it has
                   purported to reject,  or provide for rejection  upon written  notice to  Borrowers,  of the Master
                   Lease Agreement between Cafeteria Operators,  LP and Kmart covering  approximately 35 restaurants,
                   and also to reject or abandon the lease  agreements  between Kmart  Corporation  and the owners or
                   lessors of these  properties.  The rejection of the Master Lease was completed  with respect to 10
                   of these  properties,  and is pending with respect to the remainder.  Such  rejections may have an
                   adverse effect on the  perfection  and priority of the Liens created by the Security  Documents as
                   to these properties.





	
 14.1(k)	
     See disclosures above at 14.1(c).





	
 14.1(q)	
     The  resignation of Craig Miller has created a Default under this Section due to his status as the
                   CEO and CFO of Borrowers  which would  become an Event of Default if there were not a  replacement
                   officer reasonably acceptable to the Required Lenders within 120 days after such resignation.

















2












EXHIBIT B



BUDGET


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1











  Forbearance Agreement     Plan     Start5a5     Plan       Plan       Plan       Plan       Plan       Plan      End5a5      Plan       Plan       Plan       Plan
Week Ending               10/08/02   10/15/02   10/22/02   10/29/02   11/05/02   11/12/02   11/19/02   11/26/02   12/03/02   12/10/02   12/17/02   12/24/02   12/31/02
       Sales Info
--------------------------
Unit count               85         85         85         85         82         82         82         82         82         79         79         79         79
Guest count              5,236      5,839      5,717      5,558      5,719      5,671      5,859      5,768      5,841      5,480      5,599      5,444      5,165
Average sale             6.15       5.85       5.85       5.85       5.85       5.85       5.85       5.85       6.35       6.15       6.15       6.15       6.15
Sales tax                0.44       0.42       0.42       0.42       0.42       0.42       0.42       0.42       0.46       0.44       0.44       0.44       0.44
Total ticket             6.59       6.27       6.27       6.27       6.27       6.27       6.27       6.27       6.81       6.59       6.59       6.59       6.59
Food sales               2,737,119  2,903,343  2,842,629  2,763,865  2,743,356  2,720,139  2,810,370  2,767,101  3,041,409  2,662,434  2,720,080  2,645,089  2,509,391
Sales tax                197,073    209,041    204,669    198,998    197,522    195,850    202,347    199,231    218,981    191,695    195,846    190,446    180,676
        Cash Flow
--------------------------
Store deposits           2,934,192  3,112,384  3,047,298  2,962,863  2,940,878  2,915,989  3,012,717  2,966,333  3,260,390  2,854,129  2,915,926  2,835,535  2,690,067
A/R collections          100,000    100,000    100,000    100,000    100,000    100,000    100,000    100,000    100,000    100,000    100,000    100,000    100,000
Credit card adj and other                                            40,000
                         -----------------------------------------------------------------------------------------------------------------------------------------------
Total deposits           3,034,192  3,212,384  3,147,298  3,062,863  3,080,878  3,015,989  3,112,717  3,066,333  3,360,390  2,954,129  3,015,926  2,935,535  2,790,067
                         -----------------------------------------------------------------------------------------------------------------------------------------------
Food vendors             741,491    819,373    803,598    783,132    777,804    771,771    795,216    783,973    793,022    723,032    737,280    718,746    685,207
Net payroll checks       607,058    1,148,533  586,268    1,147,941  565,581    1,125,489  565,885    1,125,689  565,847    1,097,310  539,041    1,124,895  634,801
Payroll taxes            353,721    161,949    348,457    161,762    343,218    154,687    343,295    154,749    343,286    145,806    336,498    154,499    360,747
Bonus/Deferred Comp                 80,000                300,000    80,000                                      80,000
Employee benefits                              60,000                                                 60,000     -                                60,000
Utility payments         300,000    150,000    150,000    150,000    150,000               300,000    150,000    150,000    150,000    150,000    150,000    150,000
Insurance payments       260,000    200,000    200,000    200,000    190,000    190,000    190,000    190,000    190,000    185,000    185,000    185,000    185,000
Rent payments            300,000    200,000    60,000                150,000    150,000    200,000    60,000                300,000    200,000    60,000
Advertising              272,350    137,583    57,083     44,083     289,083    132,333    47,333     42,333     42,333     68,333     33,833     33,833     33,833
Sales tax payment        205,215    197,073    209,041    204,669    198,998               393,372    202,347    199,231    218,981    191,695    195,846    190,446
Professional fees        60,000     40,000     40,000     40,000     40,000     40,000     40,000     40,000     40,000     40,000     40,000     40,000     40,000
Other expenses           333,750    333,750    333,750    333,750    325,500    325,500    325,500    325,500    325,500    317,250    317,250    317,329    317,408
                         -----------------------------------------------------------------------------------------------------------------------------------------------
Total expense            3,433,586  3,468,260  2,848,196  3,365,338  3,110,184  2,889,780  3,200,601  3,134,591  2,729,219  3,245,713  2,730,597  3,040,147  2,597,443
                         -----------------------------------------------------------------------------------------------------------------------------------------------
Operating cash flow      (399,394)  (255,876)  299,103    (302,475)  (29,306)   126,209    (87,884)   (68,258)   631,171    (291,584)  285,329    (104,612)  192,624
Sale of assets           27,000     153,000                                                415,000
Holiday gift books                                                                                                          250,000    250,000    250,000
Other payments                                                       (580,000)
PBGC/Insurance pmts                                                                                                                                          (600,000)
Maint Capex              (32,692)   (32,692)   (32,692)   (32,692)   (31,538)   (31,538)   (31,538)   (31,538)   (31,538)   (30,385)   (30,385)   (30,385)   (30,385)
Borrowing                                                            580,000
Debt service             (131,433)  (50,000)   (50,000)   (50,000)   (50,000)   (50,000)   (50,000)   (50,000)   (50,000)   (50,000)   (50,000)   (50,000)   (50,000)
                         -----------------------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow            (536,519)  (185,569)  216,410    (385,167)  (110,844)  44,670     245,578    (149,797)  549,633    (121,968)  454,944    65,003     (487,760)
Begin Cash-Book          (101,037)  (637,556)  (823,125)  (606,715)  (991,882)  (1,102,727)(1,058,056)(812,479)  (962,275)  (412,643)  (534,611)  (79,667)   (14,664)
                         -----------------------------------------------------------------------------------------------------------------------------------------------
Ending Cash-Book         (637,556)  (823,125)  (606,715)  (991,882)  (1,102,727)(1,058,056)(812,479)  (962,275)  (412,643)  (534,611)  (79,667)   (14,664)   (502,424)
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