**Exhibit 99.1**

 

**AMENDMENT NO. 6 TOLOAN AGREEMENT**

 

This AMENDMENT NO. 6 TO LOANAGREEMENT (this “Sixth Amendment”), effective as of August 5, 2004 uponthe satisfaction of the conditions set forth herein, is hereby entered intoamong WELLS FARGO FOOTHILL, INC., a California corporation formerly known asFOOTHILL CAPITAL CORPORATION (“Lender”), and American Restaurant Group,Inc., a Delaware corporation (“ARG”), ARG Enterprises, Inc., aCalifornia corporation (“Enterprises”), ARG Property ManagementCorporation, a California corporation (“Property Management”), and ARGTerra, Inc., a Delaware corporation (“Terra”).  ARG, Enterprises, Property Management, andTerra are collectively referred to herein as “Borrowers” andindividually as a “Borrower”.

 

**RECITALS**

 

**WHEREAS**,Borrowers and Lender have executed and delivered that certain Loan Agreement,dated as of  December 17, 2001 (asamended, modified, or supplemented from time to time, the “Loan Agreement”);

 

**WHEREAS**,Borrowers have requested Lender to agree to (1) amend the Advance availabilityfor a limited period of time, (2) amend the definitions of EBITDA and MaximumRevolver Amount in the Loan Agreement, (3) add a definition of “RestructuringExpense Add Back,” (4) amend the financial covenants and (5) permit extensionsof credit notwithstanding the occurrence and continuation of the SpecifiedDefaults.  Lender has agreed to suchamendments, subject to the terms and conditions of this Sixth Amendment.

 

**NOW,THEREFORE**, for good and valuable consideration, thereceipt and adequacy of which are hereby acknowledged, Borrowers and Lender dohereby agree as follows:

 

**SECTION 1.         RELATION TO THELOAN AGREEMENT; DEFINITIONS.**

 

**1.1 Relation to Loan Agreement.**  This Sixth Amendment constitutes an integralpart of the Loan Agreement and shall be deemed to be a Loan Document for allpurposes.  Upon the effectiveness of thisSixth Amendment, on and after the date hereof each reference in the LoanAgreement to “this Agreement,” “hereunder,” “hereof,” or words of like importreferring to the Loan Agreement, and each reference in the other Loan Documentsto “the Loan Agreement,” “thereunder,” “thereof,” or words of like importreferring to the Loan Agreement, shall mean and be a reference to the LoanAgreement as amended hereby.

 

**1.2 Capitalized Terms.**  For all purposes of this Sixth Amendment,capitalized terms used herein without definition shall have the meaningspecified in the Loan Agreement.

 

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**SECTION 2.         AMENDMENTS TOLOAN AGREEMENT.**

 

**2.1 Addition of Definition of“Restructuring Expense Add Back”.**

 

Commencing on the date hereof,a definition of  “Restructuring ExpenseAdd Back” is added to Section 1, Definitions and Construction, Section 1.1,Definitions, of the Loan Agreement as follows:

 

“Restructuring Expense AddBack” means all fees and expenses paid or accrued (without duplication)relating to professional fees, legal fees, advisory fees, administrative fees,court-related costs, consultant fees, and other similar fees paid or accrued(without duplication) in connection with a restructuring of the Borrowers’obligations under the Loan Documents, Eligible Credit Facility, andIndenture.  

 

**2.2 Amendment to Definition of“EBITDA”.**

 

The definition of “EBITDA”contained in Section 1.1 of the Loan Agreement is hereby amended from and afterthe date hereof by deleting such definition and replacing it with thefollowing:

 

“EBITDA”means, with respect to any fiscal period being measured, Borrowers’ andSubsidiary Guarantors’ consolidated net earnings (or loss) from operations,minus (a) to the extent included in computing net earnings (loss) fromoperations, extraordinary gains; plus (b) without duplication, to the extentdeducted in computing net earnings (loss) from operations, interest expense(net of interest income), income taxes, extraordinary losses, depreciation,amortization, and non-cash charges for the following items incurred byBorrowers or Subsidiary Guarantors in connection with changes to Borrowers’ andSubsidiary Guarantors’ financial statements because of GAAP requirements:  vacation accrual, store-closing reserves,gift-certificate accrual, and litigation accrual; provided, however, that suchnon-cash charges shall not exceed (w) $62,500 for the first fiscal quarter ofany fiscal year, (x) $62,500 for the second fiscal quarter of any fiscal year,(y) $187,500 for the third fiscal quarter of any fiscal year, and (z) $187,500for the fourth fiscal quarter of any fiscal year; plus (c) the loss onimpairment and store closures not to exceed $3,889,000 for the fiscal quarterending September 29, 2003 and not to exceed $5,478,000 for the fiscal quarterending December 29, 2003; plus (d) a reserve for the SRG bankruptcy not toexceed $10,010,000 for the fiscal quarter ending September 29, 2003 and acredit to the SRG bankruptcy reserve not to exceed $1,596,000 for the fiscalquarter ending December 29, 2003; plus (e) a reserve for the discontinuedgift-certificate program not to exceed $400,000 for the fiscal quarter endingSeptember 29, 2003 and a reserve for the discontinued gift-certificate programnot to exceed $2,400,000 for the fiscal quarter ending December 29, 2003; plus(f) the Restructuring Expense Add Back not to exceed $5,000,000; plus(g) expenses related to store closures in an amount not to exceed $900,000;plus (h) lease settlement fees actually paid to

 

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Huntley,Mullaney & Spargo by Borrowers in connection with any Borrower’s realproperty leases in an amount not to exceed $1,850,000; plus (i) to the extentdeducted in computing net earnings (loss) from operations, the amount of anylease termination payments made to landlords under real property leases underwhich leases any Borrower was a lessee, an indemnitor or a guarantor of alessee’s obligations; plus (j) non-cash asset impairment or writedown chargesrelating to the real properties identified on Schedule E-1 (as such Schedule isamended or updated from time to time with the prior written consent of Agent,which shall not be unreasonably withheld) in aggregate amount not to exceed$7,217,000; plus (k) non-cash net losses (defined as proceeds from sales minusnet book value of assets sold) in connection with the sale of certainproperties identified on Schedule E-2 in aggregate amount not to exceed $1,000,000.  All of the foregoing shall, in each case andfor each aspect of this calculation, be determined in accordance with GAAP withrespect only to the applicable fiscal period. 

 

**2.3 Amendment to Definition of“Maximum Revolver Amount”.**

 

The definition of “MaximumRevolver Amount” contained in Section 1.1 of the Loan Agreement is herebyamended from and after the date hereof by deleting such definition andreplacing it with the following:

 

“MaximumRevolver Amount” means $17,500,000.

 

**2.4 Amendment to Section 2.1(a).**

 

From and after the date hereof,Section 2.1(a) of the Loan Agreement is hereby amended by deleting *clauses (ii) and (iii)* thereof in their entirety andreplacing them with the following: 

(ii) as of any date of calculation, fromAugust 5, 2004 to and including January 31, 2005, one hundred thirty-fivepercent (135%) of the trailing twelve-month EBITDA, and as of any other dateseventy-five percent (75%) of the trailing twelve-month EBITDA, in each case ascalculated monthly in accordance with Section 6.3(a)(ii)(A), less the Letter ofCredit Usage and (iii) twenty five percent (25%) of the Enterprise Value lessthe Letter of Credit Usage (the “Borrowing Base”).

 

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**2.5 Amendment to Section 2.1(a).**

 

From and after the date hereof,Section 2.1(a) of the Loan Agreement is hereby amended by adding the followingsentence at the end thereof:

 

For so long asthe forbearance provided by that certain Forbearance Agreement, dated andeffective as of August 5, 2004, by and among Lender and Borrowers (the “ForbearanceAgreement”), including any extensions thereto, is in full force and effect,Lender agrees to continue to make Advances hereunder, in each case subject tothe terms and provisions of such Forbearance Agreement and this Agreement. 

 

**2.6 Amendment to Section 7.20.**

 

From and after the date hereof,Section 7.20 of the Loan Agreement is hereby amended by deleting such Sectionand replacing it with the following: 

 

**7.20 Financial Covenants**.

 

(a)           **Fail to****Maintain Minimum EBITDA**.  EBITDA, measured at fiscal quarter-end on atrailing-twelve-month basis, of not less than the required amount set forth inthe following table for the fiscal quarter ending on the date set forthopposite thereto.

 
| **Applicable  Amount** | ** ** | **For the Fiscal Quarter Ending** |
|------------------------|------------|-----------------------------------|
| $                      | 14,500,000 |                              | June 28,  2004 |
| $                      | 14,000,000 |                              | September 27,  2004 |
| $                      | 14,500,000 |                              | December 27,  2004 |
| $                      | 15,000,000 |                              | March 28,  2005 and thereafter |

 

(b)           **Restrict Capital Expenditures**.  Capital Expenditures in any fiscal quarter maynot be in excess of the amount set forth in the following table for theapplicable period; provided, however, if less than the maximum amount isutilized within a fiscal quarter, the unused portion shall increase the ceilingavailable in the next-succeeding fiscal quarter and subsequent periods untilapplied.  The intention is that theBorrowers have available the cumulative, unutilized amount.

 
| **Maximum  Amount** | ** ** | **For the Fiscal Quarters Ending** |
|---------------------|------------|------------------------------------|
| $                   | 1,250,000  |                               | June 28,  2004 |
| $                   | 2,500,000  |                               | September 27,  2004 |
| $                   | 2,750,000  |                               | December 27,  2004 |
| $                   | 1,250,000  |                               | March 28,  2005 and thereafter |

 

 

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**2.7 Addition of Schedule E-1.**

 

Exhibit 1hereto is hereby added as Schedule E-1 to the Loan Agreement.****

 

**2.8 Addition of Schedule E-2.**

 

Exhibit 2hereto is hereby added as Schedule E-2 to the Loan Agreement.

 

**SECTION 3.         REPRESENTATIONSAND WARRANTIES OF BORROWERS.**

 

**3.1 Corporate Organization and Authority.**

 

(a)           Each Borrower is a corporation dulyorganized and existing and in good standing under the laws of its jurisdictionof formation and is duly qualified to do business and in good standing in everyjurisdiction in which the nature of the business done or the property owned byit would make such qualification necessary.

 

(b)           Each Borrower has all requisite powerand authority to own and operate its properties, and to conduct its business ascurrently conducted and as currently proposed to be conducted.  Each Borrower has all requisite power andauthority necessary to enter into this Sixth Amendment and to perform itsobligations under this Sixth Amendment.

 

**3.2 Corporate Proceedings; Validity of Amendment.**  Each Borrower has taken all corporate actionnecessary to be taken by it to authorize the execution and delivery of thisSixth Amendment.   This Sixth Amendmenthas been duly executed and delivered by each Borrower and constitutes thelegal, valid, and binding obligation of each Borrower, enforceable against eachBorrower in accordance with its terms, except as enforcement may be limited byequitable principles or by bankruptcy, insolvency, reorganization, moratorium,or similar laws relating to or limiting creditors’ rights generally.

 

**3.3 No Violations, Consents, or Approvals.**  The execution, delivery, and performance byeach Borrower of this Sixth Amendment, and the consummation of the transactionscontemplated hereby, do not and will not (i) violate any provision of federal,state, or local law or regulation applicable to such Borrower, the GoverningDocuments of such Borrower, or any order, judgment, or decree of any court orother Governmental Authority binding on such Borrower, (ii) conflict with,result in a breach of, or constitute (with due notice or lapse of time or both)a default under any material contractual obligation of such Borrower,including, without limitation, the Indenture and Eligible Credit Facility, or(iii) require any

 

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approval of such Borrower’s stockholders or any approval or consent ofany Person under any material contractual obligation of such Borrower.

 

**3.4 Ratification and Confirmation of Loan Documents.**  The Loan Agreement and all other LoanDocuments and all representations, warranties, terms, and conditions thereinremain in full force and effect, and each Borrower hereby confirms and ratifieseach of the provisions of the Loan Agreement and the other Loan Documents. 

 

**3.5 Bank Debt.**Upon theconsummation of the transactions contemplated hereby, the Maximum Bank DebtPrincipal (as defined in the definition of “Bank Debt” set forth within theIntercreditor Agreement) shall not exceed $25,000,000.

** **

**SECTION 4.         MISCELLANY.**

** **

**4.1 Conditions to Effectiveness**.  This Sixth Amendment shall not becomeeffective until Lender has received each of the following:

 

(a)           duly executed and deliveredcounterparts of this Sixth Amendment by Lender and Borrowers; 

 

(b)           evidence that the execution,delivery, and performance of this Sixth Amendment have been duly authorized byall necessary corporate action on the part of Borrowers, including certifiedcopies of resolutions adopted in connection therewith; 

 

(c)           copies of executed consents, if any,required by the Indenture, any Eligible Credit Facility, or any other agreementto which any Borrower is a party;

 

(d)           an amendment to the Eligible CreditFacility permitting at any time outstanding Advances and Letter of Credit Usagein an aggregate amount equal to $17,500,000; and

 

(e)           a legal opinion of Borrowers’counsel, in form and substance satisfactory to Lender, that (i) each Borrowerhas the power and authority to enter into this Sixth Amendment, (ii) theexecution, delivery, and performance of this Sixth Amendment has been dulyauthorized by each Borrower, (iii) this Sixth Amendment is enforceable againsteach Borrower in accordance with its terms, and (iv) the execution and deliveryby each Borrower of this Sixth Amendment and the performance by it of itsobligations hereunder shall not constitute a breach by such Borrower of, orconstitute a default by such Borrower under the Indenture or the EligibleCredit Facility.

 

**4.2 Successors and Assigns.**  This Sixth Amendment shall be binding uponand inure to the benefit of the parties hereto and their respective successorsand assigns.

 

**4.3 Counterparts.**  This Sixth Amendment may be executedsimultaneously in two or more counterparts, each of which shall be deemed to bean original but all of which shall constitute together but one and the sameinstrument.  Delivery of an executedcounterpart hereof by facsimile or electronic transmission shall be aseffective as delivery of a manually executed counterpart of this SixthAmendment.

 

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**4.4 GOVERNING LAW. THE VALIDITY OF THIS SIXTH AMENDMENT,THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THEPARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETOSHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THELAWS OF THE STATE OF CALIFORNIA.**

 

**4.5 Expenses.**  Borrowers agree to pay the expenses of Lenderin connection with the transactions contemplated by this Sixth Amendment(including, without limitation, the fees and expenses of counsel for theLender).  

 

**4.6 Release. **

** **

(a)           Each Borrower, theirrespective successors-in-title, legal representatives, and assignees and, tothe extent the same is claimed by right of, through, or under any Borrower, fortheir past, present, and future employees, agents, representatives, officers,directors, shareholders, and trustees, do hereby forever remise, release, anddischarge Lender, and Lender’s respective successors-in-title, legalrepresentatives, and assignees, past, present, and future officers, directors,shareholders, trustees, agents, employees, consultants, experts, advisors,attorneys and other professionals, and all other persons and entities to whomLender would be liable if such persons or entities were found to be liable toBorrowers, or any of them (collectively hereinafter the “Lender Parties”), fromany and all manner of action and actions, cause and causes of action,counterclaims, suits, debts, dues, sums of money, accounts, reckonings, bonds,bills, specialties, covenants, contracts, controversies, damages, judgments,expenses, executions, liens, claims of liens, claims of costs, penalties,attorneys’ fees, or any other compensation, recovery, or relief on account ofany loss, liability, obligation, demand, or cause of action of whatever naturerelating to, arising out of, or in connection with the Loan Agreement or anyother Loan Document, including, but not limited to, acts, omissions to act,actions, negotiations, discussions, and events resulting in the finalizationand execution of this Sixth Amendment, as, among, and between the Borrowers andthe Lender Parties, such claims whether now accrued and whether now known orhereafter discovered, from the beginning of time through the date hereof, andspecifically including, without any limitation, any claims of liabilityasserted or that could have been asserted with respect to, arising out of, orin any manner whatsoever connected directly or indirectly with any “lenderliability-type” claim. 

 

(b)           As to each and every claim releasedhereunder, Borrowers represent that they have received the advice of legalcounsel with regard to the releases contained herein, and having been soadvised, each of them specifically waives the benefit of the provisions ofSection 1542 of the Civil Code of California:

 

A GENERALRELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECTTO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BYHIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

**4.7 ****Effect of this Sixth Amendment****.** Except as expresslyamended hereby, any conditions of the Loan Documents shall remain unamended andunwaived.  The amendments set forthherein shall be limited precisely as provided for herein to the provisionsexpressly amended herein and shall not (i) be deemed to be a waiver of,amendment of, consent to, or modification of any other term or provision of anyother document or of any transaction or further action on

 

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the part of the Borrowers that would require the consent of Lenderunder the Loan Agreement or (ii) create a course of conduct or dealing amongthe parties hereto.

 

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**IN WITNESS WHEREOF**, each of the parties heretohas caused this Sixth Amendment to be executed and delivered as of the datefirst written above by a duly authorized representative.

 
| ** ** | **AMERICAN  RESTAURANT GROUP, INC.,**     |
|------------|-------------------------------------------|
|       | a Delaware  corporation                   |
|       |                                      |
|       | By:                                       | /s/ Patrick  J. Kelvie |   |
|       |                                      | Patrick J.  Kelvie |
|       |                                      | Vice  President |
|       |                                      |   |
| ** ** | **ARG  ENTERPRISES, INC.,**               |
|       | a California  corporation                 |
|       |                                      |   |
|       | By:                                       | /s/ Patrick  J. Kelvie |   |
|       |                                      | Patrick J.  Kelvie |
|       |                                      | Vice  President |
|       |                                      |   |
| ** ** | **ARG  PROPERTY MANAGEMENT CORPORATION,** |
|       | a California  corporation                 |
|       |                                      |   |
|       | By:                                       | /s/ Patrick  J. Kelvie |   |
|       |                                      | Patrick J.  Kelvie |
|       |                                      | Vice  President |
|       |                                      |   |
| ** ** | **ARG  TERRA, INC.,**                     |
|       | a Delaware  corporation                   |
|       |                                      |   |
|       | By:                                       | /s/ Patrick  J. Kelvie |   |
|       |                                      | Patrick J.  Kelvie |
|       |                                      | Vice  President |
|       |                                      |   |
| ** ** | **WELLS  FARGO FOOTHILL, INC.**,          |
|       | a California  corporation                 |
|       |                                      |   |
|       | By:                                       |   |   |
|       | Title:                                    |   |   |
|            |                                           |  |  |  |

 

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