**EXHIBIT 1**

 

**Loan Agreement**

 

This is anagreement between Boston Restaurant Associates, Inc., a Delaware corporationwith its headquarters in Saugus, Massachusetts (“Borrower”), and Commerce Bank& Trust Company, a Massachusetts trust company with its headquarters inWorcester, Massachusetts (“Lender”).

 

1.             ***Circumstances of the agreement*.** Borrower and Lender enter into this agreement in the followingcircumstances.

 

A.            Through wholly-owned subsidiaries,Borrower operates a chain of sixteen restaurants.  Borrower has openedseveral of the restaurants in recent years, and in certain  cases Borrower has borrowed from a bank aportion of the money needed to build the restaurant.  Borrower’s long-term plan is to open additional restaurants.

 

B.            Borrower has requested that Lender(1) consolidate Borrower’s existing loans into a single term loan(“Consolidation Loan”) and (2) establish a new credit facility that willfinance the build-out costs of new restaurants.  Lender has approved Borrower’s requests on the terms andconditions stated in this agreement and in certain other legal documents signedon this date.

 

2.             ***Certain definitions.***** The following defined terms are used in thisagreement.

 

A.            “Loan Documents” means thisagreement and all other legal documents signed and delivered to Lender byBorrower on or after the date of this agreement in connection with any aspectof the transactions contemplated by this agreement, including without impliedlimitation (1) the promissory note that evidences the Consolidation Loan, (2) asecurity agreement, (3) a collateral assignment of a life insurance policy, (4)all future promissory notes that evidence Lender’s future loans to Borrowerpursuant to this agreement, and (5) any and all other promissory notes,security agreements, pledge agreements, and collateral assignments, togetherwith all amendments, restatements, 

 

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modifications, replacements,renewals, supplements, and substitutions. A list of the Loan Documents as of the date of this agreement isattached to this agreement as Schedule 1.

 

B.            “Related Documents” means allagreements and all other legal documents signed and delivered between or among Lender and any thirdparty or parties on or after the date of this agreement in connection with thetransactions contemplated by this agreement, together with all amendments,restatements, modifications, replacements, renewals, supplements, andsubstitutions.  Among the RelatedDocuments are (1) a certain Multi-Party Guaranty Agreement of even date betweenLender and Borrower’s subsidiaries and affiliates (“Guaranty Agreement”), (2) acertain Multi-Party Security Agreement between Lender and Borrower’s corporatesubsidiaries and affiliates, and (3) a mortgage granted to Lender by a trust ofwhich Borrower is the sole beneficiary. A list of the Related Documents as of the date of this agreement isattached to this agreement as Schedule 2.

 

C.            “Obligations” means all monetary andnon-monetary obligations of payment, performance, observance, or otherwise,owed to Lender by Borrower in connection with the transactions contemplated bythis agreement and/or by the other Loan Documents, regardless of whether suchobligations are now existing or hereafter arising, due or to become due,matured or unmatured, contingent or absolute, liquidated or unliquidated, orjoint, several, or joint and several.

 

D.            “Subsidiaries” means the entitiesidentified on the list attached to this agreement as Schedule 3.  The term shall include any new “OperatingCompany,” as defined below, that is created after the date of this agreement.

 

E.             “Obligors” means collectivelyBorrower and the Subsidiaries.

 

3.             ***Consolidation Loan*.** On the date of this agreement, Lender shall lend Borrower the amountnecessary to pay off the loans that are identified on the list attached to thisagreement as Schedule 4.  Borrower’sindebtedness for such loan shall be evidenced by a note of even date(“Consolidation Note”).  Simultaneouslywith the payoff, Borrower shall terminate the credit facilities 

 

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that gave rise to thedischarged indebtedness.  Promptlythereafter Borrower shall provide Lender with all documents requested by Lenderto evidence the release of all mortgages, security interests, and other liens thatsecured directly or indirectly the discharged indebtedness.

 

4.             ***Revolver*.** Subject to the terms and conditions of this agreement, Lender shall makeavailable to Borrower a revolving credit facility (“Revolver”) in the maximumprincipal amount of Three Million Five Hundred Thousand Dollars($3,500,000).  The Consolidation Loanwill be treated as Borrower’s first drawing on the Revolver.  The amount available to be drawn on theRevolver shall be a variable amount, calculated as follows:  on any given date, such amount shall be thedifference between (i) $3,500,000 and (ii) the sum of the principal balancesoutstanding, as of the date of the determination, on the Consolidation Note andall Project Notes (defined below).  Allprincipal paid by Borrower may be reborrowed, subject to all applicableprovisions of this agreement.  TheRevolver shall be administered as follows.

 

A.            ***Use of proceeds*.**  After using theproceeds of the Consolidation Loan as specified above, Borrower shall use fundsdrawn on the Revolver only to finance the capital expenditures incurred in  building out and equipping new restaurantsin accordance with the provisions of this agreement.  The term “capital expenditures” shall be interpreted in accordance with generally accepted accountingprinciples (“GAAP”), provided that no funds drawn on the Revolver shall be usedto pay any costs that are not within the categories identified on the attachedSchedule 4A.

 

B.            ***Eligibility of projects*.**  Borrower may draw onthe Revolver only for projects that satisfy all of the criteria set forth below(“Eligible Projects”).

 

(1)           ***Location*.**  The new restaurant shall be located inMaine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, NewYork, New Jersey, or Pennsylvania.

 

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(2)           ***Ownership*.**  Borrower shall own, directly or indirectly,a majority of the voting equity interests of the  legal entity which Borrower designates to operate the newrestaurant (“Operating Company”).

 

(3)           ***Standard Projects. ***Theproject shall be either a Standard Polcari’s Project (defined below) or aStandard Regina Project (defined below). For purposes of this agreement, a Standard Polcari’s Project has all ofthe characteristics listed on the attached Schedule 5, and a Standard ReginaProject has all of the characteristics listed on the attached Scheduled 6. Fromtime to time Borrower may revise either or both of such schedules to accountfor (a) changes in the standard design of the restaurants and/or (b) changes inthe cost of construction and/or the cost of equipment.  No revision of such schedules shall apply toan ongoing project, and no revision shall take effect until Borrower hasdelivered to Lender a copy of the revised schedule or schedules.

 

(4)           ***Preliminary budget. ***Borrowershall have submitted to Lender a preliminary project budget, together with suchsupporting documents and information relevant to such budget as Lenderreasonably requests, showing that the total cost of the project, including  costs that are ineligible for financingunder Section 4A, is not more than ten percent (10%) greater than the totalcost shown on Schedule 5 or 6, as revised, whichever is applicable.  The submission of the preliminary projectbudget shall constitute a representation by Borrower as to the reasonablyanticipated costs of the project.  Thesum of all costs that are eligible for financing under Section 4A, as shown onthe preliminary project budget, shall not exceed the amount then available tobe drawn on the Revolver.

 

(5)           ***Final budget. ***Beforemaking its first drawing on the Revolver for the project, Borrower shall submitto Lender a final project budget showing that the total cost of the project,including costs that are ineligible for financing under Section 4A, does notexceed the comparable total

 

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cost shown on the preliminaryproject budget.  The submission of thefinal project budget shall constitute a representation by Borrower as to thereasonably anticipated costs of the project.

 

(6)           ***Documents relating to Operating Company***.  Before Borrower first draws on the Revolverfor the project, the Operating Company shall have signed and delivered toLender and shall have obtained and delivered to Lender such agreements, certificates,opinions (except that Lender shall not require any legal opinion to besubstantially different from the ones it accepts in connection with the signingof this agreement), and other documents, all of which shall be satisfactory toLender in form and in substance, as Lender requests in good faith to ensure toLender’s satisfaction (i) that the Operating Company has undertakensubstantially the same obligations to Lender as have been undertaken by theother Subsidiaries in connection with the transactions contemplated by thisagreement and (ii) that Lender has a perfected senior security interest in allof the Operating Company’s tangible and intangible personal property associatedwith the new restaurant, except for property leased from third parties orfinanced by third parties.   A list ofcertain documents to be signed and/or delivered by the Operating Company andthe other Obligors in connection with each Eligible Project is attached asSchedule  7, but such list shall not beconstrued to limit the generality of this subsection.

 

(7)           ***Documents relating to other Obligors. ***Before Borrower first draws on the Revolver for the project, the Obligors other than theOperating Company shall have signed and delivered to Lender such agreements,certificates,  opinions (except that theLender shall not require any legal opinion to be substantially different fromthe ones it accepts in connection with the signing of this agreement), andother documents, all of which shall be satisfactory to Lender in form and substance,as Lender requests in good faith to ensure to Lender’s  satisfaction that Lender’s then-existingrights and remedies with respect to the Obligors will not be impaired ordiminished by the transactions associated with the project.  Without limiting the generality of thepreceding sentence, each of the Subsidiaries shall have signed and delivered toLender the applicable documents listed on Schedule 7, including an 

 

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affirmation of the GuarantyAgreement (in any case where the Operating Company is a pre-existingSubsidiary) or an amendment of the Guaranty Agreement to add the OperatingCompany as a party (in any case where the Operating Company is a newSubsidiary).

 

(8)           ***Lender’s expenses.*** Before making its first drawing on the Revolver for the project,Borrower shall have reimbursed Lender for all fees and expenses incurred ingood faith by Lender, including reasonable professional fees and reasonablelegal fees, in connection with the foregoing matters.  Such reimbursement shall be made within ten days after Lender’swritten request.

 

C.            ***Project******Notes***. Borrower’s indebtedness for Lender’s advances on each Eligible Projectshall be evidenced by a note in the form attached as Exhibit A (“Project Note”).  Before Lender makes its first advance withrespect to an Eligible Project, Borrower shall sign and deliver to Lender aProject Note prepared by Lender.  Theface amount of each Project Note shall be the sum of all of the costs of theproject that are eligible for financing under Section 4A, as shown on  the final project budget submitted byBorrower to Lender.  The term of eachProject Note shall be four years or five years, depending upon Lender’sgood-faith judgment regarding the location of the new restaurant, the type ofrestaurant, and Borrower’s projections for the overall financial performance ofthe new restaurant (including the required cash flow analysis and paybackanalysis).  Each Project Note shall callfor monthly payments of interest only until the first monthly payment dateafter the earlier of (i) the opening of the new restaurant or (ii) six monthsafter the commencement of construction; thereafter the Project Note shall callfor monthly payments of interest and for equal monthly payments of principal inthe amount necessary to pay the principal balance in full on the maturitydate.  Together with the Project Note,Borrower shall deliver to Lender such corporate authorizations, certificates,legal opinions (except that Lender shall not require any legal opinion to besubstantially different from the ones it accepts in connection with the signingof this agreement), and related documents, all of which shall be satisfactory

 

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to Lender in form andsubstance, as Lender requests in good faith to ensure that the Project Note hasbeen duly authorized, executed, and issued.

 

D.            ***Construction.***  The following provisions govern drawings on the Revolver duringthe course of an Eligible Project.

 

(1)           ***Adherence to project criteria.***  Borrower (a) shall not allow the total cost of an EligibleProject to exceed the total cost set forth on the final project budget and (b) shall adhere to the applicable non-financialcriteria set forth on Schedule 5 or 6, as revised, whichever is  applicable.

 

(2)           ***Performance of lease obligations.***  Borrower shall perform and observe allapplicable material terms and conditions of the lease (and any relatedagreements) pertaining to the new location.

 

(3)           ***Compliance with law.*** Borrower shall comply in allmaterial respects with all laws, codes, and regulations that apply to theproject.

 

(4)           ***Insurance.*** Borrower shall purchase and keep in force appropriate insurance for theproject, shall arrange for Lender to be named as loss payee and additionalinsured, and shall deliver to Lender satisfactory evidence of such insurance.

 

(5)           ***Requisitions.**** *Each request by Borrower for  an advance on the Revolver shall include  (a) a requisitionin a form satisfactory to Lender, (b) copies of the invoices to be paid withthe requisitioned funds, and (c) any additional documents reasonably requestedby Lender relating to the invoices to be paid with the requisitionedfunds.  Lender agrees to treat as an invoice(i) a copy of any construction contract that requires Borrower to make a downpayment for materials and supplies, provided that the amount advanced for thatpurpose shall not exceed one-third (1/3) of the total construction contractprice, and (ii) any certificate of partial completion or substantial completionthat entitles the contractor to another one-third (1/3), or any lesserfraction, of the contract price.

 

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(6)           ***Total borrowing.*** The sum of all advances requested by Borrower for an Eligible Projectshall not exceed the face amount of the applicable Project Note.

 

(7)           ***Progress reports.*** Within ten days after Lender’s request from time to time during anEligible Project, Borrower shall provide Lender with a reasonably detailed anddocumented report concerning the progress of such aspects of the project asLender reasonably designates.

 

(8)           ***Inspection.*** Lender or its designees shall have the right from time to time toinspect any Eligible Project in progress on oral notice of at least twenty-fourhours.

 

(9)           ***Completion.*** Within six months after the commencement ofconstruction  of an Eligible Project,Borrower (a) shall have demonstrated to Lender’s reasonable satisfaction thatthe project has been completed, (b) shall have obtained all licenses,approvals, and permits that are necessary for the new restaurant, and (c) shallhave caused the new restaurant to be opened for business.

 

(10)         ***Other financing.**** *Neither Borrower nor the Operating Company shallborrow money from anyone other than Lender to finance any part of an EligibleProject, except for loans (or capital leases) expressly approved in writing byLender.

 

(11)         ***Involuntary liens.*** Neither Borrower nor the Operating Company shall permit to arise againstany of the property associated with an Eligible Project any lien or otherencumbrance, except for liens permitted by the terms of the Related Documentsor the other Loan Documents.

 

(12)         ***Lender’s expenses.**** *Borrower shall reimburse Lender for all fees andexpenses incurred in good faith by Lender, including reasonable professionalfees and reasonable legal fees, in connection with the actions contemplated bySection 4C or by this Section 4D.   Such reimbursement shall be made within ten days after Lender’s writtenrequest.

 

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E.             ***Conditions.***  Lender’s obligation to make advances on theRevolver shall be subject to the satisfaction on the occasion of each suchadvance of all of the following conditions:

 

(1)           ***Documents.**** *Uponthe signing of this agreement, and to the extent specified in Sections 4Athrough 4D, and on such other occasions as Lender reasonably requests, receiptby Lender of such of the following items, each in form and substancesatisfactory to Lender and each duly signed and delivered:

 

(a)           Certificates as to the absence of anEvent of Default (defined below) signed by a senior officer of Obligors;

 

(b)           Certified copies of votes byObligors’ Boards of Directors (or in the case of BRA Nominee Trust, the Trusteeand the beneficiary), evidencing such matters relating to the authority of thesignatory to execute such documents as Lender reasonably specifies;

 

(c)           A certificate signed by Borrower’sClerk regarding the incumbency and signatures of the officers who areauthorized to request advances on the Revolver and to sign all relatedcertificates, instruments, and other documents;

 

(d)           Certificates of insurance evidencingcompliance with the relevant provisions of this agreement and the other LoanDocuments;

 

(e)           Such opinions of the Obligors’counsel as Lender reasonably requests, provided that Lender shall not requirelegal opinions for Pizzeria Regina of Florida, Inc., Pizzeria Regina of NewJersey, Inc., and Pizzeria Regina of Virginia, Inc. unless after the date ofthis agreement Borrower and/or the other Obligors invest more than $100,000 inany of such three corporations; in that case, Borrower shall deliver to Lenderwithin thirty (30) days after Lender’s request a legal opinion for thecorporation in which such investment has been made.  Such opinion shall be substantially the same in form and insubstance as those accepted by Lender in connection with the execution of thisagreement;

 

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(f)            Such certifications as Lender reasonablyrequests from governmental officials evidencing the Obligors’ legal existence,organizational good standing, and tax good standing.

 

(2)           ***Reports.**** *Receiptby Lender from the Obligors of all financial reports and other reports requiredby this agreement.

 

(3)           ***Payment of Fees.**** *Paymentto Lender of such fees and expenses as are required by other provisions of thisagreement and by any of the other Loan Documents or Related Documents.

 

(4)           ***Representations and Warranties.***** The continuing truthfulness and accuracy ofall then-applicable representations and warranties set forth in this agreement,in the other Loan Documents, and in the Related Documents except to the extentof (a) changes resulting from transactions contemplated or permitted hereunder,(b) changes occurring in the ordinary course of business that singly or in theaggregate are not materially adverse, and (c) to the extent that suchrepresentations and warranties are inherently limited to the date of thisagreement.

 

(5)           ***Covenants and agreements.**** *The Obligors’ full compliance with all covenants, agreements,and other undertakings set forth in this agreement, in the other LoanDocuments, and in the Related Documents.

 

(6)           ***No adverse change.**** *Theabsence of any material adverse change in the financial condition of theObligors as a whole.

 

(7)           ***No Default.**** *Theabsence of any Event of Default or any event which would, with the passage oftime or the giving of notice, constitute an Event of Default.

 

(8)           ***Further assurances.***** The delivery to Lender of such additional opinions (except thatLender shall not require any legal opinion to be substantially different fromthe ones it accepts in connection with the signing of this agreement),certificates, instruments, and other documents

 

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as Lender reasonably requestsconcerning any topics, circumstances, or occurrences not specifically addressedin this agreement

 

F.             ***Implied certification.**** *Each request by Borrower for an advance on the Revolver shallconstitute a certification by Borrower that all conditions recited in Section4E have been satisfied.  No advance oradvances by Lender shall constitute a waiver of any condition, nor shall anycourse of conduct by Lender constitute such a waiver.  No waiver shall be valid unless made in writing, and no waiver onone occasion shall oblige Lender to grant a waiver in the future.

 

G.            ***Reliance on authority.***** With regard to all aspects of the administration of thisagreement, Lender may accept information, requests, and instructionstransmitted by electronic mail, by telephone, and/or by fax.   Lender shall have no duty to inquire as tothe authority of the person who initiates any such communication, and Lendershall have no liability for any action which it takes in reliance upon anycommunication which Lender in good faith believes to have originated fromBorrower.

 

H.            ***Facility fee.**** *Forthe unused portion of the Revolver, Borrower shall pay a facility fee to Lendermonthly in arrears (“Facility Fee”). Payments shall be made on the same dates when payments of interest aredue to Lender on the Consolidation Note. Each payment of the Facility Fee shall be in an amount equal toone-twelfth of one-quarter of one percent of the average monthly unused dailybalance of the Revolver.  For purposesof this Section 4H, the average monthly unused daily balance of the Revolvershall be the difference between (i) $3,500,000 and (ii) the daily average principal balance outstanding on the Revolver(including, without implied limitation, the Consolidation Loan) during themonth preceding the date of the calculation. Each payment of the Facility Fee shall be made by Lender’s withdrawal ofthe amount due from the Operating Account (defined below).  Borrower irrevocably authorizes Lender tomake such withdrawals without prior notice.

 

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I.              ***Commitment fee. ***Atthe signing of this agreement Borrower shall pay Lender a non-refundablecommitment fee of $35,000.

 

J.             ***Field audits***.  Borrower agrees that Lender may conduct audits of the Obligors’collateral, books, and records from time to time during regular business hours,with advance notice of at least three business days (“Audits”).  Absent an Event of Default, Lender shallconduct Audits not more than twice annually. Borrowers shall reimburse Lender for the cost of the Audits at the rateof $500.00 per person per day, to a maximum of $2,000.00 per Audit, absent anEvent of Default.  Such reimbursementshall be made by Lender’s deduction of the amount due from the OperatingAccount.  During the Audits, Borrowershall allow Lender and its representatives to inspect and copy any and allbooks, records, and other documents and information (including informationstored electronically) concerning the Obligors’ businesses and finances.  Borrower shall cooperate with Lender duringthe Audits and shall instruct its representatives, employees, bookkeepers, andaccountants also to cooperate with Lender. If any item that Lender wishes to review belongs to one of theSubsidiaries and is not in Borrower’s possession, then Borrower promptly shallcause the item (or a copy thereof) to be made available to Lender at a time andplace satisfactory to Lender.

 

K.            ***Cash Management System***. Borrower shall establish with Lender and shall maintain as long as thisagreement remains in effect a cash management system..

 

5.             ***Term.**** *Subjectto all other applicable provisions of this agreement, the term of the Revolvershall be as follows.

 

A.            ***Initial term***. Except as otherwise expressly provided in this agreement, the term ofthe Revolver shall expire on the second anniversary of the date of thisagreement.  After the expiration of theterm Borrower shall have no right to request or receive advances, and noadvance by Lender thereafter shall constitute a waiver.

 

B.            ***Extension***.  IfBorrower wishes to extend the term of the Revolver, Borrower shall so notifyLender in writing at least one year before the term is due to expire.  Lender will use

 

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reasonable efforts to respondto an extension request within thirty (30) days after receiving Borrower’srequest, but Lender shall have no liability for any failure to respond on atimely basis.  If Lender approves theextension request, it may do so on such terms and conditions as in its solediscretion it decides advisable.

 

C.            ***Writing requirement***. No agreement for extension of the term of the Revolver shall be bindingunless it is reduced to writing and signed by Lender and Borrower.  No action or inaction by Lender shall beconstrued as a constructive extension, regardless of any course of dealingbetween the parties.

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6.             ***Termination.***  TheRevolver may be terminated before the expiration of its term under thecircumstances described in this Section 6.

 

A.            ***Immediate termination by Lender***.  Lender may terminate the Revolverimmediately upon written notice to Borrower following an Event of Default thatconsists of (1)  a fradulentmisrepresentation  in the Loan Documentsor the Related Documents  or (2)Borrower’s failure to make any payment due to Lender under any of the LoanDocuments on or before the expiration of any expressly applicable grace periodor cure period.  As to payments that areintended to be made by automatic deduction from the Operating Account or anyother account, Borrower shall be considered to have failed to make such apayment if the available funds in the account are insufficient on the date thepayment is due.

 

B.            ***Delayed termination by Lender***.  Lender may terminate the Revolver upon written notice to Borrowerthirty (30) days after Lender has notified Borrower in writing of any Event ofDefault that is not within the scope of Section 6A.

 

C.            ***Termination by Borrower***.  Borrower may terminate the Revolver at any time following theexpiration of thirty (30) days after written notice to Lender.

 

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D.            ***Acceleration.***  AtLender’s election the Consolidated Note and all Project Notes shall becomeimmediately due and payable in full (1) if Lender terminates the Revolver pursuant to Section 6A or 6B of thisagreement or (2) if Borrower obtains from another lender a credit facility that is not permitted under theterms of Section 13.  Neither (i)Lender’s failure or refusal to extend the term of the Revolver pursuant toSection 5B, nor (ii) the expiration of the term of the Revolver, shallconstitute a termination pursuant to Section 6A or 6B.

 

E.             ***Termination fee***.  In case of any acceleration by Lender pursuant to Section  6D, Borrower shall pay Lender a terminationfee (“Termination Fee”) in an amount equal to one percent (1%) of the sum ofthe principal balances that are outstanding on the Consolidation Note and theProject Notes on the date the termination fee is payable.  The Termination Fee shall be payable on theearlier of (1) the effective date of the acceleration, or (2) the date on whichBorrower pays in full the outstanding principal balances of the notes.

 

F.             ***Cumulative rights***.  Nothing in this Section 6 shall be construed to limit or restrictany other provision in this agreement or in any of the other Loan Documents,including without implied limitation (1) the acceleration provisions of theConsolidated Note or any Project Note, (2) the provisions of Section 13 of thisagreement, pertaining to “New Indebtedness,” or (3) the provisions of Section20 of this agreement, pertaining to Events of Default.

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7.             ***Status of commitment letter.**** *Lender’s commitment letter datedNovember 26, 2001, is terminated by this agreement.

 

8.             ***Key person life insurance.**** *At all times while any of theObligations remain outstanding, Borrower shall keep in full force and effect,through one or more insurers reasonably satisfactory to Lender, one or morepolicies of insurance (“Policies”) on the life of Borrower’s President, who isnow George R. Chapdelaine (“Executive”). At all times the Policies (1) shall be owned by Borrower, (2) shallidentify Borrower as the beneficiary, (3) shall provide death benefitsaggregating not less than One

 

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Million Dollars ($1,000,000),net of policy loans, payable to Borrowerupon the death of the Executive, and(4) shall be collaterally assigned to Lender in the net amount of $1,000,000 assecurity for the Obligations on terms and conditions satisfactory toLender.  No such collateral assignmentshall be considered complete until it has been acknowledged by theinsurer.  Upon the death of theExecutive or any successor Executive, Lender may apply the proceeds of thePolicies to payment of the Obligations in such a manner as Lender decidesadvisable, even if no Event of Default is then outstanding.  The insurance coverage required by thisSection 8 shall be in addition to the insurance coverage referenced in Section10.

 

9.             ***Prohibition regarding cash dividendsand distributions.**** *Borrowercovenants and agrees with Lender that it will not pay any cash dividends to anyof its stockholders or make any other cash distribution to any of itsstockholders on account of the stock held by such stockholder.

 

10.           ***Debentures.***

 

A.            Debtor represents to Lender (a) thatthe list attached as Schedule 8 identifies correctly all of Debtor’soutstanding convertible debentures (“Debentures”) and (b) that all of theDebentures are in the form attached as Exhibit B.   Borrower shall make no payments of principal on the Debentureswhile any of the Obligations remain outstanding, except as provided in Section10B, but may make regularly scheduled payments of interest on the Debentures aslong as (i) no Event of Default  hasoccurred,  is outstanding, and has notbeen cured, waived, or ceased to exist, and (ii) the payment of interest wouldnot cause an Event of Default to occur. Borrower shall not voluntarily convert any of the Debentures if anyEvent of Default is outstanding.

 

B.            Subject to the provisions of Section8 of this agreement, Borrower may use up to $1,000,000 of the proceeds of keyman life insurance policy number 75119693 to permit the holders of theDebentures to redeem, on a pro rata basis amongst themselves, pursuant to anagreement dated as of December 31, 1996, up to $1,000,000 in principal amountof the Debentures.

 

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11.           ***Redemption of stock***.  Borrower shall not redeem any shares of itsstock without Lender’s prior express written approval, which shall not beunreasonably withheld or delayed.

 

12.           ***Prohibition regarding loans, investments, andacquisitions. ***WithoutLender’s prior express written approval, Borrower shall not Invest in orAcquire (as defined below) any other business organization, except thatBorrower may Invest in (a) a new Operating Company for an Eligible Project or(b) a Subsidiary.  In this Section 12,“Invest in or Acquire” means (i) to lend money, (ii) to guaranty another’sobligations (except to Lender), (iii) to purchase securities or debt, (iv) toacquire directly or indirectly any equity interest, and (v) to acquire all orsubstantially all of the assets of an organization.

 

13.           ***New Indebtedness; Renovation Projects.***

 

A.            ***New Indebtedness***. Borrower shall not incur any New Indebtedness without Lender’s priorexpress written consent.  “NewIndebtedness” includes any actual or contingent liability arising after thedate of this agreement from (1) an extension of credit, (2) a guaranty by anyof the Obligors of another’s indebtedness or obligations, or (3) any otherconsensual transaction which creates in any of the Obligors a direct orindirect obligation of future payment; New Indebtedness does not include,however, (i) indebtedness incurred in financing a Renovation  Project, as defined below, provided thatsuch financing is permissible under Section 13B, (ii)   indebtedness tovendors incurred in the ordinary course of business to the extent that (a)  the invoice is payable within ninety (90)days after the delivery of the goods or services, and (b) payment is not morethan thirty (30) days overdue,  (iii)indebtedness owed to Lender, and (iv) guarantees of others’ indebtedness toLender.

 

B.            ***Renovation Projects.***  IfBorrower and/or one of the Subsidiaries wishes to renovate one or more of itsexisting restaurants, Borrower shall notify Lender of the scope and cost of theproject (“Renovation Project”) and of the amount of financing desired (“RenovationFinancing”).  Lender shall usereasonable efforts to notify Borrower within thirty (30) days thereafter as tothe terms and conditions, if any, on which Lender is willing to provideRenovation Financing.  If Lender makes

 

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any offer to provide RenovationFinancing (“Offer”) then Borrower shall not proceed with the Renovation Projectunless Borrower either accepts the Offer or elects to proceed with theRenovation Project without any Renovation Financing.  If Lender fails to make an Offer, then Borrower shall (i) proceedwith the Renovation Project without any Renovation Financing, (ii) cancel theRenovation Project, or (ii) with Lender’s prior express written consent, obtainRenovation Financing from a third party.

 

14.           ***Existing debt.**** * Borrowerrepresents to Lender that the list attached as Schedule 9  (“Other Debt”) identifies correctly allindebtedness of the Obligors, including capital leases, other than (a) the debtto be discharged through the Consolidation Loan, (b) the debt represented bythe Debentures, and (c) trade debt to vendors.

 

15.           ***Financial covenants.***** Borrower covenants and agrees with Lender as follows:

 

A.            ***Profitability*.*** *Asof the end of each fiscal year,**Borrower shall have annual net after-taxincome of at least one dollar ($1.00).

 

B.            ***Losses*.**  Borrower shall not have negative netafter-tax income  in more than twoconsecutive fiscal quarters, even  ifthe quarters span two fiscal years.

 

C.            ***Debt service coverage.**** *As of the end of each fiscal quarter of each fiscal year ofBorrower, beginning with the quarter ending in July, 2002, the ratio of (1)Borrower’s Adjusted Operating Cash Flow for the four most recent quarters, to(2) its Debt Service Liability for such four quarters, shall be (3) at leastone and one-half to one (1.50:1.00). “Adjusted Operating Cash Flow” means (a)the sum of (i) Borrower’s net income before corporate income taxes, (ii)interest payable by Borrower on loans, modified to exclude interestattributable to the Regina Ventures, LLC settlement reserve, (iii) depreciationexpense, and (iv) amortization expense, less (b) Borrower’s capitalexpenditures, plus (c)  Borrower’sexternally financed capital expenditures, plus (d) the proceeds of Borrower’s issuance of any subordinated debtsecurities expressly approved by Lender in advance in

 

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writing (for which purpose,Lender hereby approves the Debentures), plus (e)  the proceeds of Borrower’s issuance of any equity securitiesexpressly approved by Lender in advance in writing, all for the four mostrecent quarters, and all on a consolidated basis.  “Debt Service Liability” means the sum of all principal andinterest (modified to exclude interest attributable to the Regina Ventures, LLCsettlement reserve) payable by Borrower and the Subsidiaries during such fourquarters on all loans and capital leases. A copy of the formula to be used for calculation of the foregoing covenantis attached to this agreement as Exhibit C.

 

D.            ***Capital expenditures.**** *Inno fiscal year shall Borrower’s aggregate capital expenditures, calculated asprescribed below, exceed Five Hundred Thousand Dollars ($500,000).  In calculating its capital expenditures,Borrower (a) shall include all payments due to be made by any of the Obligorsduring the year on capital leases to the extent that the payment obligationswere created during the year (whether through renewal, extension, orsupplementation of a previously existing lease or through execution of a newlease) but (b) shall exclude (i) the costs of any Eligible Project and (ii) thecosts of  any Renovation Project if suchcosts are expressly approved in writing by Lender in advance.  For purposes of the foregoing clause(b)(ii), Lender hereby approves the capital expenditures associated with therenovation of the restaurant owned by Polcari’s of Salem, New Hampshire, Inc.in an amount not to exceed $350,000; such approval, however, does notconstitute approval of any Renovation Financing for purposes of Section13B.  A list of the Obligors’ currentcapital leases, including annual payment obligations, is attached to thisagreement as Schedule 10.

 

E.             ***Tangible net worth.**** *At all times the sum of (1) Borrower’s tangible net worth, asdefined by GAAP, and (2) the outstanding principal balance of any indebtednessthat is subordinated to Lender’s claims against Borrower on terms that aresatisfactory to Lender (including the Debentures), shall be at least OneMillion Five Hundred Thousand Dollars ($1,500,000).

 

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F.*           **Consolidation. ***In determining Borrower’s compliance with thecovenants set forth in this Section 15, Borrower’s financial performance andcondition shall be consolidated  withthat of the Subsidiaries.

 

16.           ***Methodology for determining compliance with covenants.***  Compliance with all financial covenants inthis agreement shall be determined from the financial statements andcertificates submitted to Lender pursuant to this agreement, together with suchother information as Lender obtains. Borrower shall ensure that such financial statements and certificatespermit the ready and accurate calculation of all ratios and other components ofthe covenants.  If Lender determines toits satisfaction that such documents do not fully or accurately report theinformation necessary to calculate such items, then Borrower shallappropriately revise or supplement the documents within ten business days afterLender’s written request.

 

17.           ***Reporting.***

 

A.            Borrower agrees todeliver to Lender the following reports and information on the followingconditions and terms:

 

(1)           Within thirty days before the end ofeach of Borrower’s fiscal years: A business operating plan for the upcomingfiscal year, prepared internally on a consolidated and consolidating basis,including monthly cash flow projections, and also including any projected newrestaurant;

 

(2)           Within forty-five days after the endof each fiscal quarter of Borrower: An internally prepared financial statementof Borrower, such statement to include a balance sheet, a statement of profitand loss, and a statement of cash flow, on both a consolidated and anunconsolidated basis;

 

(3)           Within ninety days after the end ofeach of Borrower’s fiscal years: consolidating and consolidated financialstatements of Borrower for the fiscal year most recently ended,

 

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including a statement of profitand loss, a balance sheet, and a statement of cash flow, such consolidatedfinancial statements (but not such consolidating financial statements) to beaudited by an independent certified public accountant reasonably satisfactoryto Lender (for which purpose, Lender approves BDO Seidman), together with anymanagement letter and all other letters, reports, and other documents given bysuch accountant to Borrower;

 

(4)           At the same times when reports aredue to be delivered to Lender pursuant to the preceding subsections (2) and(3): A Covenant Compliance Certificate in one of the forms attached to thisagreement as Exhibit D, duly executed by the President or Treasurer ofBorrower, together with a reasonably detailed explanation and documentation ofthe calculations made in preparing the certificate; and

 

(5)           Within fifteen days after theirfiling: Copies of all documents filed by Borrower with the Securities andExchange Commission.

 

B.            All financialstatements, certificates, and reports submitted to Lender shall be in such formas Lender from time to time requests in good faith.  If Lender in good faith requests additional information and/ordocuments pertaining to the business or financial affairs of Borrower, thenBorrower shall deliver such information and documents to Lender in a formreasonably satisfactory to Lender within ten days after Lender’s request.

 

C.            In addition to theAudits, Borrower agrees to allow Lender and its representatives to inspect andcopy any and all books, records, and other documents and information (includinginformation stored electronically) concerning the Obligors’ business andfinances.  Lender shall be given suchaccess to such documents and information during business hours, upon reasonablenotice, and with such frequency as Lender reasonably  decides advisable. Borrower shall cooperate with Lender during such inspections and shallinstruct its representatives, employees, bookkeepers, and accountants also tocooperate with Lender.  If any item thatLender wishes to review belongs to one of the Subsidiaries and

 

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is not in Borrower’spossession, then Borrower promptly shall cause the item (or a copy thereof) tobe made available to Lender at a time and place satisfactory to Lender.  Lender’s activities under this Section 17Cshall be conducted at Lender’s expense unless such activities are undertaken inresponse to an Event of Default, in which case Borrower shall reimburse Lendertherefor within ten days after Lender’s written request.

 

D.            From time to timewithin ten days after a written request by Lender, one or more senior officersof Borrower shall meet with Lender to assess Borrower’s operating performanceand such other issues as Lender designates. Such meetings shall be held at times and places reasonably selected byLender.  At such meetings Borrower (1)shall provide Lender with all documents and information requested in good faithby Lender and (2) shall make available for consultation any employees, agents,and consultants whose attendance is reasonably requested in good faith byLender.

 

18.           ***Standard representations and warranties.**** *This Section 18 includesprovisions pertaining not only to Borrower but also to the Subsidiaries.  Borrower acknowledges and agrees with Lenderthat any violation of such a provision will constitute an Event of Default evenif Borrower bears no direct responsibility for the violation.  On that basis, Borrower warrants andrepresents to Lender as follows with respect to itself and the Subsidiaries.

 

A.            ***Organization.**** *Each of the Obligors has beenduly organized under the laws of the state of its organization and is in goodstanding under the laws of such states and under the laws of every otherjurisdiction in which it does business and in which the failure to be soqualified would have a material adverse effect upon its operations.  Each of the Obligors has the power andauthority to own its assets, (ii) to operate its business as presentlyconducted, (iii) to enter into (a) this agreement and the other Loan Documents(in the case of Borrower) or (b) the Related Documents (in the case of theSubsidiaries) (all collectively “Principal Agreements”) and (iv) to perform andobserve its obligations under the Principal Agreements.

 

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B.            ***Authorization.**** *The signing, delivery, andperformance of the Principal Agreements (1) have been duly authorized by allrequired votes and other actions of the Obligors and their stockholders,directors, or beneficiaries (2) do not and will not contravene any law orregulation  in any material respect,(3)are in accord with the Obligors’ organizational documents and all othergoverning documents, and (4) do not and will not in any material respectconstitute a violation of, or a default under, any agreement, instrument,judgment, order, decree, permit, license, or other restriction or undertakingbinding upon any of the Obligors or any of their assets, nor will the sameresult in the creation (other than in favor of Lender) of any mortgage, pledge,security interest, lien, encumbrance, or charge upon any of the Obligors’assets.

 

C.            ***Valid and binding obligations.**** *The Principal Agreements and all of their terms andconditions are valid and binding obligations of the Obligors and areenforceable in accordance with such terms, except as limited by applicablebankruptcy, insolvency, reorganization, moratorium, or similar laws affectingthe rights of creditors generally.

 

D.            ***Approvals.**** *Except as set forth in Schedule11, attached, the Obligors’ signing and delivery of the Principal Agreementsand their performance of their obligations under the Principal Agreements donot require any approval, consent, filing, or registration with (1) anygovernment or governmental agency or authority, or (2) any nongovernmentalentity or person.

 

E.             ***Ownership of collateral.***** At the time the Obligors mortgage, pledge, assign, or otherwisetransfer to Lender as collateral any interest in any property (1) each of theObligors is and shall remain the lawful owner of such interest; (2) each of theObligors now has and always shall retain the right to mortgage, pledge, assign,or otherwise transfer such interest; (3) except to the extent expresslypermitted by another provision of this agreement or any of the other LoanDocuments or Related Documents no such interest now is, or in the future shallbe, mortgaged, pledged, assigned, or otherwise transferred to any person otherthan Lender, or in any way encumbered, without Lender’s prior 

 

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express written consent, and(4) the Obligors will defend the same against the claims and demands of allpersons.

 

F.**             *Initial******financial statements.** *Inentering into this agreement Lender has relied upon Borrower’s auditedfinancial statements for the period ending April 29, 2001, and unauditedfinancial statements for the period ending January 27, 2002 (“Initial FinancialStatements”).  The Initial FinancialStatements (a) were prepared in accordance with GAAP and (b) fairly presented(i) the financial condition of the Obligors and (ii) the operation of theObligors’ businesses.  As of the date ordates of the Initial Financial Statements, the Obligors had no materialindebtedness or other material liabilities, debts, or obligations whetheraccrued, absolute, contingent, or otherwise, whether due or to become due,including but not limited to liabilities or obligations on account of taxes orother governmental charges, other than those reflected in the Initial FinancialStatements.

 

G.            ***Changes.***** Since the date or dates of the Initial FinancialStatements there have been no changes in the assets, liabilities, financialcondition, operations, prospects, or business of the Obligors, the effects ofwhich have been materially adverse, individually or in the aggregate as to anyone or all of the Obligors.  Each of theObligors (1) owns assets having a fair salable value in excess of the amountrequired to pay the probable liability on its existing and anticipated debtsand other obligations, and (2) has access to adequate capital for the conduct ofits business and the discharge of its debts as such debts mature.

 

H.            ***Accuracy of Other Financial and Business Information.***** In addition to the Initial FinancialStatements, Borrower has  providedLender various documents concerning its financial position, businessoperations, business prospects, and related matters, all of which areidentified on the attached Schedule 12  (“Initial BusinessInformation”).  All the Initial BusinessInformation is true and accurate in all material respects.  Borrower has disclosed to Lender allinformation which is reasonably

 

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necessary to make the InitialBusiness Information, together with the Initial Financial Statements, notmisleading as to the Obligors’ finances, businesses, and prospects.

 

I.              ***Events of Default.**** *As of the date of this agreement, no Event of Default(defined below) exists, and no circumstance or condition exists which, but forthe passage of time or the giving of notice, or both, would constitute an Eventof Default.

 

J.             ***Taxes.**** *The Obligors have filed allfederal, state, and other tax returns which are required and either have paidin full all required taxes, assessments, and other governmental charges or haveestablished adequate reserves for any taxes which they are contesting.  The Obligors have established adequatereserves for the payment of all federal, state, and other tax liabilities notyet due and payable.

 

K.            ***Litigation.**** *There is neither pending nor, tothe best of Borrower’s knowledge, threatened, any litigation, proceeding, orgovernmental investigation, administrative or judicial, which if decidedadversely might have a materially adverse effect on any of the Obligors’businesses, properties, or condition (whether financial or otherwise) or ontheir ability to perform their obligations under the Principal Agreements.

 

L.             ***Margin rules.**** *No monies advanced by Lender will be used to purchase orcarry any “margin security” or “margin stock” as such terms are used inRegulations G and U of the Board of Governors of the Federal Reserve System, orto extend credit to others for such purposes. The Obligors are not engaged principally in, or have one of theirimportant activities, the business of extending credit to purchase or carry anysuch margin security or margin stock. If requested by Lender, the Obligors will furnish Lender with astatement in conformity with the requirements of Federal Reserve Form U-1referred to in such regulations.

 

M.           ***ERISA.***  (1) No “Employee Benefit Plan” assuch term is defined in the Employee Retirement Income Security Act of 1974 andregulations thereunder (“ERISA”), as the same

 

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have been and shall be amendedfrom time to time and maintained by the Obligors (individually a “Plan” andcollectively the “Plans”) or any related trust or any trustee or administratorthereof, has engaged in a “prohibited transaction” (as such term is defined inSection 406 of ERISA) which would subject any party, including the Obligors,the Plans themselves, or any trustee, administrator or service provider to anymaterial tax or penalty on prohibited transactions imposed by Section 4972 ofthe Internal Revenue Code (“Code”); (2) no Pension Plan subject to Title IV ofERISA or to the minimum funding standards of Section 302 of Title I of ERISAhas ever been sponsored by the Obligors or terminated, nor have there been anyreportable events (as that term is defined Section 4043 of ERISA) with respectto any such Pension Plan since the effective date of ERISA, nor has any suchPension Plan incurred any “accumulated funding deficiency” (as such term isdefined in Section 422(a) of the Code) whether or not waived, since theeffective date of ERISA; and (3) the Obligors are not now and never have been aparty to any multi-employer pension or benefit plan nor have they participatedin any unfunded plan providing for post-retirement health insurance except forcoverage as may be required by ERISA.

 

N.            ***Compliance.***  TheObligors possess all necessary and material permits, approvals, authorizations,consents, licenses, franchises, registrations, and other rights and privileges(including patents, trademarks, trade names, and copyrights) to allow them toown and operate their businesses without any material violation of law or ofthe rights of others.  The Obligors areduly authorized, qualified, licensed under, and in compliance with, allmaterial laws, regulations, authorizations, and orders of public authorities tothe extent that the same are necessary or applicable to the ownership andoperation of their businesses.

 

O.            ***Hazardous materials.***  Tothe best of Borrower’s knowledge, the Obligors have not violated in anymaterial respect any local, state, or federal law or regulation relating to thestorage, generation, use, transportation, treatment, or disposal of solidwastes, and no such material violation has

 

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occurred at any time at, on, orfrom any real estate ever owned by the Obligors or any predecessor in interestof the Obligors.  There has occurred nomaterial spill, discharge, leak, emission, injection, escape, dumping, orrelease of any kind of any toxic or hazardous substances as defined under anyapplicable local, state, or federal laws or regulations on any such real estateor into the environment surrounding any such real estate other than thosereleases of waste water or air emissions permissible under such laws orregulations or allowable under valid permits held by the Obligors or any predecessorin interest.  The Obligors have noknowledge of any facts which could form a basis for any liabilities, damages,obligations, losses, or expenses relating to any such environmental conditions.The Obligors have received no notice of responsibility or other notice ordemand relating to any alleged violation of any law or regulation relating tohazardous substances or environmental conditions.

 

P.             ***Accuracy of books and records.***** All books and records of the Obligorsaccurately reflect in all material respects all matters and transactionsreported or recorded  therein.

 

Q.            ***Subsidiaries.**** *Exceptas set forth in Schedule 3, the Obligors (1) have no wholly owned subsidiariesand (2) have no investments in the stock or securities of any other corporation,firm, partnership, trust, or other entity. Borrower represents (1) that it owns all the issued and outstandingstock of all of the corporate Subsidiaries except Fantail Restaurant, Inc., (2)that Ocean, Inc. owns all the issued and outstanding stock of FantailRestaurant, Inc., and (3) that Borrower owns the entire beneficial interest inBRA Nominee Trust.

 

R.            ***Insurance.**** *The Obligors now maintain andalways have maintained insurance coverage against such risks and in suchamounts as  they reasonably believenecessary to protect against all reasonably foreseeable claims for propertydamage, personal injury, and other risks.

 

19.           ***Standard Covenants and Warranties.**** *This Section 19 includesprovisions pertaining to the Subsidiaries as well as to Borrower.  Borrower agrees with Lender that anyviolation of such a

 

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provision will constitute anEvent of Default even if Borrower bears no direct responsibility for theviolation.  On this basis, Borrowercovenants with Lender and warrants to Lender as follows.

 

A.            ***Legal existence and good standing.**** *Each of the Obligors will maintain its legal existence andgood standing in the state of its organization and will maintain itsqualification to do business in every other state in which it is currentlyqualified if the failure to maintain such qualification would have a materialadverse effect upon its operations, except that if Borrower elects to close theSubsidiaries’ current restaurants located in Florida, New Jersey, and/orVirginia,  then the corporationoperating each such closed restaurant may be dissolved.  Each of the Obligors will qualify to dobusiness in every other state in which such qualification becomes required bylaw and thereafter will maintain such qualification, unless a failure to soqualify would not have any material adverse effect.

 

B.            ***Conduct of Business.**** *Eachof the Obligors will duly observe and comply in all material respects with allapplicable laws and all requirements of any governmental authorities relativeto its assets and to the conduct of its business. Each of the Obligors willobtain, maintain, and keep in full force and effect, all materialauthorizations, approvals, consents, franchises, licenses, permits and otherrights and privileges necessary to the conduct of its business.

 

C.            ***Losses and disputes regarding collateral.**** *Borrower immediately will notifyLender of any event materially adversely affecting any material part of anytangible or intangible property in which Lender has a security interest,whether the property is owned by Borrower or by one of the Subsidiaries.

 

D.            ***Maintenance and insurance of assets, other insurance.**** *Each of the Obligors will insureits assets against such hazards and liabilities, in such form and amounts, andwith such insurers, as may be reasonably satisfactory to Lender. Each of theObligors will maintain insurance against such other risks and liabilities,including liability for property damage and personal injury, in such form andamounts, and with such insurers, as may be reasonably satisfactory toLender.  From time

 

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to time on Lender’s request,and without any request at least thirty days before any insurance policy is dueto expire, Borrower will provide Lender with certificates of the foregoinginsurance policy or policies.

 

E.             ***Taxes.***  Each of the Obligors will pay orcause to be paid:

 

(1)           All taxes, assessments, and othergovernmental charges on or against it or its properties prior to such taxesbecoming delinquent, unless such tax, assessment, or charge is being contestedin good faith by proper legal proceedings and adequate reserves have beenestablished and maintained therefor;

 

(2)           All excise, sales, and other taxes orcharges which become due and payable with respect to any sale or othertransaction giving rise to any account receivable or other right to the paymentof money or with respect to the collection thereof.

 

F.             [Intentionallyomitted ]

 

G.            [Intentionallyomitted ]

 

H.            [Intentionallyomitted]

 

I.              ***ERISA Compliance.**** *Neither the Obligors nor anyPension Plan of the Obligors will:

 

(1)           engage in any prohibited transaction(as defined in ERISA);

 

(2)           incur any “accumulated fundingdeficiency” (as defined in Section 412(a) of the Code or Section 302 of ERISA),whether or not waived; or

 

(3)           terminate any Pension Plan in amanner which could result in the imposition of a lien on any property of any ofthe Obligors.

 

J.             ***Pension Plans. ***With respect to any PensionPlan the benefits under which are guaranteed in whole or in part by the PensionBenefit Guaranty Corporation (the “PBGC”), each of the Obligors shall:

 

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(1)           Fund each Pension Plan as required bythe provisions of Section 412 of the Code and Section 302 of ERISA;

 

(2)           Cause each Pension Plan to pay allbenefits when due in accordance with applicable law; and

 

(3)           Furnish to Lender (i) written noticeof the occurrence of a Reportable Event (as such term is defined in Section 4043of ERISA), such notice to be given promptly, but in any event within five (5)days of the occurrence of a Reportable Event with respect to a Pension Plan;(ii) a copy of any request for a waiver of the funding standards or anextension of the amortization periods required under Section 4122 of the Codeand Section 302 of ERISA, such copy to be furnished not later than the date ofsubmission of the request to the Department of Labor or to the Internal RevenueService (the “IRS”), as the case may be; (iii) a copy of any notice of intentto terminate any Pension Plan, such copy to be furnished no later than the dateof submission to the PBGC; and (iv) notice that the Obligor will or may incurany liability to or on account of a Pension Plan under Section 4062, 4063,4064, 4201 or 4204 of ERISA, such notice to be given within the ten (10) daysafter the Obligor knows or has reason to know thereof.  Any notice to be provided to Lender underthis Section shall include a certificate of the Obligor’s chief financialofficer setting forth details as to such occurrence and the action, if any,which is required or proposed to be taken, together with any notices requiredor proposed to be filed with or by the Obligor, the PBGC, the IRS, the trustee,or the plan administrator with respect thereto.

 

K.            ***Notification of default.***  Within five (5) business days after becoming aware of theexistence of any circumstance or occurrence which with or without the giving ofnotice or the passage of time, or both, would cause or constitute an Event ofDefault, Borrower will give Lender written notice thereof, specifying thenature of the matter and the action being taken or proposed to be taken withrespect thereto.

 

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L.             ***Notification of litigation.**** *Borrower will notify Lender inwriting of any litigation commenced against any of the Obligors and of anyproceeding commenced against any of the Obligors by any governmental agency orauthority, if there is any reasonable likelihood that such litigation orproceeding, singly or in combination with others, reasonably might be expectedto have a material adverse effect upon any or all of the Obligors.  Such notice will be given within fivebusiness days after the commencement of the action or proceeding.

 

M.           ***Notification of material adverse change.**** *Borrower will notify Lenderwithin five business days after there occurs or arises any circumstance oroccurrence which might reasonably be expected to constitute or cause either amaterial adverse change in the financial or business condition of any or all ofthe Obligors or a material diminution in the value of any material part of itstangible or intangible property of any or all of the Obligors.

 

N.            ***Maintenance of books and records.**** * Each of the Obligors will keep adequate records and books ofaccount, in which true and complete entries will be made reflecting all of thematerial business and financial transactions relating to its business and itsassets.

 

O.            ***Inspection******by Lender.** *Borrowers will permit Lender from time to time on reasonableoral notice (and not, in any case, less than twenty-four hours) to inspect itsfacilities and tangible assets.

 

P.             ***Further assurances.***  Borrower will sign and deliver such additional documents,instruments, and other papers, and will take all such actions, as Lenderreasonably requires to assure to Lender its rights under this agreement and theother Loan Documents and to carry into effect the provisions  of this agreement.

 

Q.            ***Environmental regulations and hazardous materials.**** *Each of the Obligors will complyin all material respects at all times with any and all applicable federal,state, and local laws, rules, orders, and regulations governing hazardousmaterials, hazardous wastes, or oil as defined in any

 

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local, state, or federal laws,rules, orders, and regulations and will otherwise comply in all materialrespects with all laws and regulations relating to pollution control in alljurisdictions in which it operates.

 

R.            ***Merger and consolidation.**** *Without Lender’s prior express written consent, none of theObligors will consolidate with or merge with or into any other corporation orother entity, even if the Obligor would be the survivor.

 

S.             ***Performance of Other Contracts.**** *Each of the Obligors will performand observe all of its material duties and obligations under its present andfuture material contracts and agreements with vendors, lenders, lessors,lessees, and other persons and organizations.

 

T.            ***Operating Account; autocharge*.** Borrower will maintain all of its principal depository accounts andinvestment accounts with Lender.  Onesuch account (“Operating Account”) shall be designated as the source ofBorrower’s payments of the Facility Fee and its payments on Borrower’snotes.  Borrower may maintain accountsat other banks for payroll transactions and for the daily depositing ofrevenue, but the balance of any such deposit accounts shall be transferred dailyto Lender.  Borrower shall ensure thatthe balance of immediately available funds in the Operating Account issufficient to enable Lender to withdraw from the account when due every paymentcalled for by this agreement, by the Consolidation  Note, and by the Project Notes. Borrower irrevocably authorizes Lender to make such withdrawals withoutprior notice.

 

19.1.        ***Additional representatives, warranties, covenants, andagreements.***

 

A.            ***Ownership of the Subsidiaries.***  In entering into this agreement, Lender relies upon (1)Borrower’s absolute and unencumbered ownership and control of all beneficialinterests in BRA Nominee Trust, (2) Borrower’s absolute and unencumberedownership and control of all shares of stock in all of the corporateSubsidiaries except Fantail, and (3) Ocean’s absolute and unencumbered

 

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ownership and control of allshares of stock of Fantail.  The purposeof this Section 19.1A is to ensure that the foregoing ownership and controlcontinue as long as any of the Obligations remain outstanding.

 

(1)           ***Representations and warranties*.** Borrower warrants and represents to Lender (a) that the ownership of theSubsidiaries is accurately and completely set forth in Section 19.1A, (b) thatall information set forth in Schedule 3 is true and complete, and (c) that noinformation omitted from Schedule 3 is reasonably necessary to make theincluded information not materially misleading.  Borrower further warrants and represents to Lender that its interestsin the Subsidiaries (collectively “Interests”) are subject to no agreement,warrant, trust, encumbrance, lien, or other obligation of any kind whatsoeverwhich could result in the voluntary or involuntary transfer to any person orentity of all or any portion of such Interests.

 

(2)           ***Covenants*.**  Borrower covenants and agrees with Lender tomaintain exclusive and unencumbered ownership and control of theInterests.  Without limiting thegenerality of the preceding sentence, Borrower covenants and agrees with Lenderas follows:

 

(a)                                  Notto sell, pledge, encumber, or otherwise transfer or agree to transfer in anymanner whatsoever any of the Interests;

 

(b)                                 Notto cause or permit the issuance or sale of any additional capital stock of thecorporate Subsidiaries; and

 

(c)                                  Notto take any actions contrary to the stated purposes of this Section 19.1A.  The corporate dissolutions referenced inSection 19A shall not be considered a violation of the foregoing provisions.

 

(3)           ***Involuntary transfers.**** *Borrower agrees with Lender thatfor the purposes of this Section 19.1A any involuntary transfer of any interestin any of the Interests shall constitute a breach of these covenants andagreements.

 

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B.            ***Trademarks, franchises, and liquor licenses. ***Borrower represents to Lender (1) that the listattached as Schedule 13 identifies all liquor licenses in which any of theObligors has an interest, (2) that the list attached as Schedule 14 identifiesall franchise agreements in which any of the Obligors acts as a franchisor, and(3) that the list attached as Schedule 15 identifies all trademarks and servicemarks in which any of theObligors has an interest.

 

C.            ***Leases. ***All ofthe Obligors’ retail locations operate in leased premises.   The continuation of such leases(“Restaurant Leases”) is vital to the Obligors’ success.  Accordingly,  Borrower shall ensure that none of the corporate Obligorsmaterially defaults on any of the Restaurant Leases and that each such lease isrenewed or extended before it expires.  Theterm “Restaurant Leases” includes all future leases as well as existing leases.

 

20.           ***Events of Default.**** *For purposes of this agreement an “Event of Default” shall beany of the following:

 

(a)           any violation, breach,non-compliance, or failure with respect to any duty, obligation, agreement,covenant, warranty, representation, or other undertaking of Borrower set forthin this agreement (collectively “Breach”), unless either (i) the Breach is cured within an  expressly applicable cure period or grace period,  or (ii) if this agreement provides noexpressly applicable cure  period orgrace period, then  (A) the Breach isreadily curable,  and (B) Borrowerpromptly commences  a cure, and (C)  Borrower completes the cure within theshortest reasonable period, which shall not exceed thirty days after theBreach  first arose or occurred;

 

(b)           any other event, circumstance, oroccurrence that is specifically designated in this agreement as an Event ofDefault;

 

(c)           any event, circumstance, oroccurrence that is defined as an “event of default” in any of the other LoanDocuments or in any of the Related Documents, if the same has continued beyondthe expiration of any expressly applicable cure period or grace period;

 

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(d)           any event, circumstance, oroccurrence that is defined as an “event of default” in any legal document that sets forth, evidences, or secures(i) any other loan or credit facility made or extended to any of the Obligorsby Lender after the date of this agreement, (ii) any loan or other creditfacility extended to any of the Obligors by any person or entity other thanLender, including not only loans and credit facilities in existence on the dateof this agreement but also loans and credit facilities extended in the future;

 

(e)           any material default not cured withinany expressly applicable grace period or due period on any lease of equipmentor real estate in which any of the Obligors is the lessee, whether such leasenow exists or comes into existence in the future;

 

(f)            the termination or expiration,within any twelve months, of more than thirty-five percent of the RestaurantLeases that were in force at the beginning of the twelve-month period; or

 

(g)                                 any material adverse change in the financialcondition of the Obligors as a whole.

 

21.           ***Certain waivers.**** *LENDER AND BORROWER HEREBY WAIVE AND RELEASE IRREVOCABLYTHEIR RIGHTS (1) TO HAVE A TRIAL BY JURY IN ANY ACTION TO WHICH BOTH LENDER ANDBORROWER ARE PARTIES, WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE, AND (2) TOASSERT IN ANY SUCH ACTION ANY CLAIM FOR PUNITIVE DAMAGES, EXEMPLARY DAMAGES,CONSEQUENTIAL DAMAGES, AND ANY OTHER DAMAGES WHATSOEVER OTHER THAN ACTUALDAMAGES.  In this section the terms “Lender”and “Borrower” include the parties’ stockholders, directors, trustees,beneficiaries, officers, employees, attorneys, and agents.  This section is intended by Lender andBorrower to apply with full force and effect to all of the Loan Documents as ifit were set forth in full in each one of the Loan Documents.

 

22.           ***Indemnity.**** *Borrowershall indemnify Lender against, and hold Lender harmless from, any and alllosses, damages (whether compensatory, punitive, or otherwise), liabilities,claims, causes of

 

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action (whether legal,equitable, or administrative), judgments, court costs, and other expenses(including reasonable professional fees and reasonable legal fees) which Lendersuffers or incurs as a direct or indirect consequence of: (a) Lender’sperformance of this agreement, any of the other Loan Documents, or any of theRelated Documents, including without implied limitation Lender’s exercise orfailure to exercise any rights, remedies, or powers; (b) Borrower’s failure toperform any of Borrowers’ obligations as and when required by this agreement,by any of the other Loan Documents, or by any of the Related Documents,including without implied limitation any failure at any time of anyrepresentation or warranty of Borrower to be true and correct and any failureby Borrower to satisfy any condition; (c) any claim or cause of action of anykind by any person or entity to the effect that Lender is in any wayresponsible or liable for any act or omission of Borrower or of any of theSubsidiaries, whether on account of any theory of derivative liability orotherwise; or (d) any claim or cause of action of any kind by any person orentity that would have the effect of denying Lender the full benefit orprotection of any provision of the Loan Documents or the RelatedDocuments.  Lender’s rights of indemnityshall not be directly or indirectly limited, prejudiced, impaired, oreliminated in any way by any finding or allegation that Lender’s conduct isactive, passive, or subject to any other classification, or that Lender isdirectly or indirectly responsible under any theory of any kind, character, ornature for any act or omission by Borrower, by one of the Subsidiaries, or byany other person or entity except Lender. Notwithstanding the foregoing provisions, Borrower shall not beobligated to indemnify Lender to the extent that the foregoing arises fromLender’s gross negligence or willful misconduct.  which Lender is determined by a court of competent jurisdictionto have committed.  Borrower shall payany indebtedness arising under this Section 22 to Lender within ten daysfollowing  demand by Lender.  Borrower’s obligations under this Section 22shall survive the expiration of the Revolver and the termination of thisagreement.

 

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23.           ***Miscellaneous.***

 

A.            ***Costs.**** *Exceptto the extent expressly otherwise provided in this agreement, Borrowers shallreimburse Lender on demand for all costs and expenses, including withoutlimitation Lender’s reasonable professional fees and reasonable legal fees,incurred by or on behalf of Lender in connection with (1) the closing of thetransactions contemplated by this agreement, (2) the future amendment,restatement, or replacement, of this agreement or any of the other LoanDocuments or Related Documents, (3) the negotiation or other resolution of anyuncertainty, dispute, or controversy arising from or connected with thetransactions contemplated by this agreement, and (4) the enforcement of anyrights or remedies that are made available to Lender by law, by the specificterms of this agreement, by any of the other Loan Documents, or by any of theRelated Documents.  The costs andexpenses covered by this Section 23A shall include, without implied limitation,all costs and expenses incurred by Lender (including reasonable professionalfees and reasonable legal fees) in connection with any bankruptcy case,bankruptcy proceeding, or other bankruptcy matter in which Borrower is adebtor, regardless of the capacity or capacities in which Lender is involved inany such bankruptcy.  Nothing in thisSection 23A shall be construed to limit Lender’s rights or Borrower’sobligations under any other provision of this agreement.

 

B.            ***Termination.*****This agreement shall terminate when allof the Obligations have been paid and performed in full, but Sections 22 and23A shall survive termination.  Neitherthe expiration of the term of the Revolver nor a termination of the Revolvershall terminate this agreement, except for those provisions that govern themaking of new loans; this agreement shall remain in force as long as any of theObligations remain outstanding.

 

C.            ***Modification.*****This agreement may be amended only in awriting that is signed by both parties to this agreement.

 

D.            ***Governing law; choice of forum.***  This agreement has been negotiated andsigned in the Commonwealth of Massachusetts, and all parties have relied uponthe applicability of the laws of

 

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the Commonwealth of Massachusetts.  Accordingly, this agreement shall beinterpreted and enforced in accordance with the internal laws of Massachusetts,disregarding any law or doctrine that would dictate application of the law ofanother state.  Borrower covenants andagrees (1) not to commence any action against Lender, or involving Lender, inany court that sits outside Massachusetts and (2) not to seek to transfer toany court that sits outside Massachusetts any action commenced by Lender inMassachusetts.

 

E.             ***Binding effect.**** *This agreement is binding upon the successors and assigns ofboth parties and it inures to the benefit of such successors and assigns.

 

F.             ***Severability.**** *Even if one or more provisions of this agreement aredetermined by a court   to be invalid orunenforceable, the remaining provisions of this agreement nevertheless shallcontinue in effect.

 

G.            ***Remedies cumulative.**** *Allrights and remedies afforded Lender by this agreement are cumulative; noneshall be construed to limit or impair any rights or remedies afforded Lender bythe other Loan Documents, by the Related Documents, or by law.

 

H.            ***No waiver.**** *Nofailure to act, omission, or forbearance by Lender to exercise its rights orremedies under any or all of the Loan Documents or Related Documents shall constitutea waiver by Lender of such rights or remedies, regardless of how long suchfailure to act, omission, or forbearance continues, unless Lender expresslywaives such right in writing.  No waiverby Lender in any in one instance shall constitute a waiver in any otherinstance unless Lender expressly so states in writing.

 

I.              ***No assignment.**** *None of Borrower’s rights under this agreement may beassigned, pledged, or otherwise transferred, nor may any of Borrower’s dutiesbe delegated.

 

J.             ***No Third Parties Benefited.**** *This agreement is entered intofor the sole protection and benefit of Lender and Borrower and their permittedsuccessors and assigns.  No other personor entity shall have any right of action under this agreement.

 

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K.            ***Notices.***  Exceptas otherwise expressly provided herein, all notices given under this agreementshall be given in writing and shall be deemed given upon (1) actual delivery tothe office of the addressee or (2) if mailed, upon the third business day  after deposit in United States PostalService by certified mail, postage prepaid, addressed to the addresses ofBorrower or Lender appearing below or to such other address as a party designatesby written notice:

 
| BORROWER:        |   | LENDER:                             |
|------------------|--------|-------------------------------------|
| 999 Broadway     |   | 390 Main Street                     |
| Suite 400        |   | Worcester, MA 01608                 |
| Saugus, MA 01906 |   | Attn:    Roger F. Allard, |
| Attn: President  |   | Senior Vice President               |

 

Copies of all notices shall besent to the addressee’s counsel as follows, but the failure to send such a noticeshall not affect its validity.

 
| Andrew P. Strehle, Esq. |   | Dale R. Harger, Esq.                 |
|-------------------------|--------|--------------------------------------|
| Brown Rudnick           |   | Mountain, Dearborn & Whiting LLP |
| Berlack Israels LLP     |   | 370 Main Street                      |
| 1 Financial Center      |   | Worcester, MA 01608                  |
| Boston, MA 02111        |   |                                 |

 

M.           ***Relationship of Parties.***** The relationship of Borrower and Lender does not constitute ajoint venture, partnership, or agency relationship, but is and shall at alltimes remain a relationship of borrower and lender, depositor and depositarybank, assignor and assignee, pledgor and pledgee, and debtor and secured party.

 

N.            ***Entire agreement.**** *Thisagreement, the other Loan Documents, and the Related Documents set forth theparties’ entire understanding, superseding all prior negotiations, promises,and agreements.

 

O.            ***Construction.**** *Becauseboth parties have participated in the drafting of this agreement, the partiesagree that any rule of construction to the effect that an agreement should beconstrued against the drafter shall be inapplicable.

 

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Signed as a sealedinstrument as of April 30, 2002.

 
| Witnesses: | Parties:                                                      |
|------------|---------------------------------------------------------------|
|       | Commerce Bank & Trust Company                             |
|       |                                                          |
|       |                                                          | By: |   |   |
|       | Roger F. Allard,                                              |   |
|       | Senior Vice  President                                        |   |
|       |                                                          |   |   |
|       | Boston  Restaurant Associates, Inc.                           |
|       |                                                          |   |   |
|       |                                                          | By: |   |   |   |
|       | George R. Chapdelaine, President  and Chief Executive Officer |   |
|            |                                                               |  |  |  |  |  |

 

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