Document:

Exhibit
10.14

 

CREDIT AGREEMENT

 

dated as of

 

January 31,
2008

 

among

 

STAR BUFFET, INC. and its

 

SUBSIDIARIES PARTY HERETO, as Borrowers,

 

THE LENDERS PARTY HERETO,

 

WELLS FARGO BANK, N.A., as Administrative Agent,

 

WELLS FARGO BANK, N.A., as Syndication Agent

 

and

 

WELLS FARGO BANK, N.A., as Lead Arranger

 

Loan Nos. 93-0908116 and 93-0908117

 

 

	
  SECTION I DEFINITIONS

  	
  1

  
	
  1.1 Definitions

  	
  1

  
	
  1.2 Rules of Interpretation

  	
  23

  
	
  SECTION II DESCRIPTION OF
  CREDIT

  	
  24

  
	
  2.1 Loans

  	
  24

  
	
  2.2 The Notes

  	
  28

  
	
  2.3 Notice and Manner of Borrowing or Conversion of Loans

  	
  28

  
	
  2.4 Funding of Loans

  	
  29

  
	
  2.5 Interest Rates and Payments of Interest

  	
  30

  
	
  2.6 Fees

  	
  31

  
	
  2.7 Repayment of Loans

  	
  32

  
	
  2.8 Prepayments

  	
  32

  
	
  2.9 Method and Allocation of Payments

  	
  34

  
	
  2.10 LIBOR Indemnity

  	
  36

  
	
  2.11 Computation of Interest and Fees

  	
  37

  
	
  2.12 Changed Circumstances; Illegality

  	
  37

  
	
  2.13 Increased Costs

  	
  38

  
	
  2.14 Capital Requirements

  	
  38

  
	
  2.15 Taxes

  	
  39

  
	
  2.16 Parent as Agent for Borrowers; Contribution

  	
  41

  
	
  SECTION III LETTERS OF CREDIT

  	
  42

  
	
  3.1 Issuance

  	
  42

  
	
  3.2 Reimbursement Obligation of the Borrowers

  	
  42

  
	
  3.3 Letter of Credit Payments

  	
  43

  
	
  3.4 Obligations Absolute

  	
  43

  
	
  3.5 Reliance by the LC Issuer and the Administrative Agent

  	
  44

  
	
  SECTION IV CONDITIONS OF LOANS
  AND LETTERS OF CREDIT

  	
  44

  
	
  4.1 Conditions Precedent to Initial Loans and Letters of
  Credit

  	
  44

  
	
  4.2 Conditions Precedent to all Revolving Credit Loans and
  Letters of Credit after the Closing Date

  	
  49

  
	
  SECTION V REPRESENTATIONS AND
  WARRANTIES

  	
  51

  
	
  5.1 Existence, Qualification and Power

  	
  51

  
	
  5.2 Authorization; No Contravention

  	
  51

  
	
  5.3 Governmental Authorization; Other Consents

  	
  51

  
	
  5.4 Binding Effect

  	
  51

  
	
  5.5 Financial Statements; No Material Adverse Effect

  	
  52

  
	
  5.6 Litigation

  	
  53

  
	
  5.7 No Default

  	
  53

  
	
  5.8 Ownership of Property; Encumbrances; Investments

  	
  53

  
	
  5.9 Environmental Compliance

  	
  54

  
	
  5.10 Insurance

  	
  54

  
	
  5.11 Taxes

  	
  54

  
	
  5.12 ERISA Compliance

  	
  55

  
	
  5.13 Subsidiaries; Equity Interests; Loan Parties

  	
  55

  
	
  5.14 Margin Regulations; Investment Company Act

  	
  56

  
	
  5.15 Disclosure

  	
  56

  

 

i

 

	
  5.16 Compliance with Laws

  	
  56

  
	
  5.17 Intellectual Property; Licenses, Etc

  	
  56

  
	
  5.18 Solvency

  	
  56

  
	
  5.19 Casualty, Etc

  	
  57

  
	
  5.20 Labor Matters

  	
  57

  
	
  5.21 Security Documents

  	
  57

  
	
  5.22 Intentionally Deleted

  	
  57

  
	
  5.23 Compliance with OFAC Rules and Regulations

  	
  57

  
	
  5.24 Foreign Assets Control Regulations, Etc

  	
  57

  
	
  5.25 Parent Public Filings

  	
  57

  
	
  SECTION VI AFFIRMATIVE
  COVENANTS

  	
  58

  
	
  6.1 Financial Statements

  	
  58

  
	
  6.2 Conduct of Business

  	
  59

  
	
  6.3 Maintenance and Insurance

  	
  59

  
	
  6.4 Taxes

  	
  60

  
	
  6.5 Inspection Rights; Lender Meeting

  	
  60

  
	
  6.6 Maintenance of Books and Records

  	
  61

  
	
  6.7 Use of Proceeds

  	
  61

  
	
  6.8 Further Assurances

  	
  61

  
	
  6.9 Notification Requirements

  	
  61

  
	
  6.10 ERISA Reports

  	
  62

  
	
  6.11 Environmental Compliance

  	
  62

  
	
  6.12 Covenant to Guarantee Obligations and Give Security

  	
  63

  
	
  6.13 Interest Rate Protection

  	
  65

  
	
  6.14 Cash Accounts

  	
  65

  
	
  6.15 Post-Closing Deliveries

  	
  65

  
	
  SECTION VII FINANCIAL
  COVENANTS

  	
  66

  
	
  7.1 Total Lease Adjusted Leverage Ratio

  	
  66

  
	
  7.2 Consolidated Pre-Distribution Fixed Charge Coverage
  Ratio

  	
  66

  
	
  7.3 Consolidated Post-Distribution Fixed Charge Coverage
  Ratio

  	
  66

  
	
  7.4 Consolidated EBITDA

  	
  67

  
	
  7.5 Growth Capital Expenditures

  	
  67

  
	
  SECTION VIII NEGATIVE
  COVENANTS

  	
  67

  
	
  8.1 Indebtedness

  	
  67

  
	
  8.2 Contingent Liabilities

  	
  68

  
	
  8.3 Encumbrances

  	
  68

  
	
  8.4 Merger; Dispositions; Liquidation

  	
  69

  
	
  8.5 Subsidiaries

  	
  69

  
	
  8.6 Restricted Payments

  	
  70

  
	
  8.7 Investments; Purchases of Assets

  	
  70

  
	
  8.8 ERISA Compliance

  	
  71

  
	
  8.9 Transactions with Affiliates

  	
  71

  
	
  8.10 Fiscal Year

  	
  71

  
	
  8.11 Payments on Junior Subordinated Debt

  	
  71

  
	
  SECTION IX DEFAULTS

  	
  71

  
	
  9.1 Events of Default

  	
  71

  

 

 

	
  9.2 Remedies upon Event of Default

  	
  74

  
	
  9.3 Application of Funds

  	
  74

  
	
  9.4 Remedies Cumulative

  	
  75

  
	
  SECTION X ASSIGNMENT AND
  PARTICIPATION

  	
  76

  
	
  10.1 Successors and Assigns

  	
  76

  
	
  10.2 Replacement of Lenders

  	
  79

  
	
  SECTION XI THE ADMINISTRATIVE
  AGENT

  	
  80

  
	
  11.1 Appointment of Administrative Agent

  	
  80

  
	
  11.2 Exculpatory Provisions

  	
  81

  
	
  11.3 Rights as a Lender

  	
  82

  
	
  11.4 Actions by Administrative Agent

  	
  82

  
	
  11.5 Reliance by Administrative Agent

  	
  82

  
	
  11.6 Delegation of Duties

  	
  82

  
	
  11.7 Indemnification

  	
  83

  
	
  11.8 Reimbursement

  	
  83

  
	
  11.9 Non-Reliance on Administrative Agent and New Lenders

  	
  83

  
	
  11.10 Resignation of Administrative Agent

  	
  84

  
	
  11.11 No Other Duties, etc

  	
  84

  
	
  SECTION XII GENERAL

  	
  84

  
	
  12.1 Notices; Effectiveness of Signatures

  	
  84

  
	
  12.2 Expenses

  	
  86

  
	
  12.3 Indemnification

  	
  86

  
	
  12.4 Survival of Covenants, Etc

  	
  87

  
	
  12.5 Set-Off

  	
  87

  
	
  12.6 No Waivers

  	
  88

  
	
  12.7 Amendments, Waivers, etc.

  	
  88

  
	
  12.8 Treatment of Certain Information; Confidentiality

  	
  90

  
	
  12.9 Lost Note, Etc

  	
  91

  
	
  12.10 Captions; Counterparts

  	
  91

  
	
  12.11 Entire Agreement, Etc

  	
  91

  
	
  12.12 Waiver of Jury Trial

  	
  91

  
	
  12.13 Governing Law

  	
  92

  
	
  12.14 Jurisdiction; Consent to Service of Process

  	
  92

  
	
  12.15 USA PATRIOT Act Notice

  	
  93

  
	
  12.16 Severability

  	
  93

  

 

EXHIBITS

 

Form of

 

	
  A-1

  	
   

  	
  Revolving Credit Note

  
	
  A-2

  	
   

  	
  Term Note

  
	
  B

  	
   

  	
  Notice of Borrowing or
  Conversion

  
	
  C

  	
   

  	
  Commitment Increase
  Supplement

  
	
  D

  	
   

  	
  Additional Lender
  Supplement

  

 

 

	
  E

  	
   

  	
  Assignment and
  Assumption

  
	
  F

  	
   

  	
  Compliance Certificate

  
	
  G-1

  	
   

  	
  Security Agreement

  
	
  G-2

  	
   

  	
  Collateral Assignment
  of Contracts

  
	
  G-3

  	
   

  	
  Fee Property Security
  Documents

  
	
  G-4

  	
   

  	
  Form of
  Mortgage/Deed of Trust

  
	
  G-5

  	
   

  	
  Form of Collateral
  Assignment of Leases and Rents

  
	
  G-6

  	
   

  	
  Intellectual Property
  Security Agreement

  
	
  H

  	
   

  	
  Pledge Agreement by
  Parent

  
	
  I

  	
   

  	
  Opinion Matters –
  Counsel to Loan Parties

  
	
  J-1

  	
   

  	
  Term Loan Payment
  Request

  
	
  J-2

  	
   

  	
  Revolving Loan Payment
  Request

  

 

SCHEDULES

 

	
  1

  	
   

  	
  Commitments and Applicable Percentages

  
	
  4.1(e)

  	
   

  	
  Sources and Uses

  
	
  5.3

  	
   

  	
  Consents

  
	
  5.5

  	
   

  	
  Material Liabilities and Indebtedness

  
	
  5.8(b)

  	
   

  	
  Encumbrances

  
	
  5.8(c)

  	
   

  	
  Owned Real Property

  
	
  5.8(d)(i)

  	
   

  	
  Leased Real Property (Lessee)

  
	
  5.8(d)(ii)

  	
   

  	
  Leased Real Property (Lessor)

  
	
  5.8(e)

  	
   

  	
  Existing Investments

  
	
  5.13

  	
   

  	
  Subsidiaries and Other Equity Investments; Loan
  Parties

  
	
  5.17

  	
   

  	
  Intellectual Property Matters

  
	
  6.15

  	
   

  	
  Post-Closing Deliveries

  
	
  8.1(e)

  	
   

  	
  Existing Indebtedness

  
	
  8.3(h)

  	
   

  	
  Existing Encumbrances

  
	
  12.1

  	
   

  	
  Administrative Agent’s
  Office, Certain Addresses for Notices

  

 

 

CREDIT AGREEMENT

 

THIS
CREDIT AGREEMENT is made as of January 31, 2008, by and among STAR BUFFET, INC., STAR BUFFET MANAGEMENT,
INC., SUMMIT FAMILY RESTAURANTS, INC., HTB RESTAURANTS, INC. and NORTHSTAR
BUFFET, INC., each a Delaware corporation (each individually, a “Borrower”,
and collectively, the “Borrowers”), WELLS FARGO BANK, N.A., a national
banking association (“Wells Fargo”), and the other financial
institutions from time to time parties hereto as Lenders (together with Wells
Fargo, each individually, a “Lender”, and collectively, the “Lenders”),
WELLS FARGO BANK, N.A., as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”) and in its capacity as LC Issuer
(as hereinafter defined), WELLS FARGO BANK, N.A., as Syndication Agent (in such capacity, the “Syndication
Agent”), and WELLS FARGO BANK, N.A., as Lead Arranger (in such capacity,
the “Lead Arranger”).

 

WHEREAS,
the Borrowers, other than Parent, are direct or indirect wholly owned
Subsidiaries of the Parent;

 

WHEREAS,
the relationship of the other Borrowers to the Parent provides numerous
benefits, including shared purchasing strength and other economies of scale,
which benefits will be increased by the Acquisition;

 

WHEREAS,
the Borrowers have requested that the Lenders provide a term loan facility and
a revolving credit facility, and the Lenders have indicated their willingness
to lend and the LC Issuer has indicated its willingness to issue Letters of
Credit, in each case, on the terms and subject to the conditions set forth
herein;

 

WHEREAS,
each Borrower is jointly and severally liable for the Obligations arising
hereunder and under the other Loan Documents; and

 

WHEREAS,
by virtue of the foregoing and after giving effect to the probable liability of
each Borrower hereunder and under the Loan Documents, each Borrower considers
that it is receiving at least fair consideration and reasonably equivalent
value from the Lenders for the Obligations.

 

NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:

 

SECTION I

 

DEFINITIONS

 

1.1           Definitions.

 

All capitalized terms used in this Agreement or in the
Notes or in any certificate, report or other document made or delivered
pursuant to this Agreement (unless otherwise defined therein) shall have the
meanings assigned to them below:

 

1

 

Acquisition.  The transactions contemplated by the Asset
Purchase Agreement.

 

Additional
Lender.  See Section 2.1(a)(iii).

 

Additional
Lender Supplement.  See
Section 2.1(a)(iii).

 

Administrative
Agent.  See Preamble.

 

Administrative
Questionnaire.  An
administrative questionnaire in a form supplied by the Administrative Agent to
any Lender.

 

Affected
Loans.  See Section 2.12(a).

 

Affiliate.  With reference to any Person (i) any
director or officer of that Person, (ii) any other Person controlling,
controlled by or under direct or indirect common control of that Person, (iii) any
other Person directly or indirectly holding 5% or more of any class of the
capital stock or other equity interests (including options, warrants,
convertible securities and similar rights) of that Person and (iv) any
other Person 5% or more of any class of whose capital stock or other equity
interests (including options, warrants, convertible securities and similar
rights) is held directly or indirectly by that Person.

 

Agreement.  This Credit Agreement, including the Exhibits
and Schedules hereto, as the same may be supplemented or amended or restated
from time to time.

 

Alternate
Base Rate.  The greater
of (i) the rate of interest announced from time to time by the
Administrative Agent at its head office as its “Base Rate” or “Prime Rate”, and
(ii) the Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded
upwards, if necessary, to the next 1/8 of 1%). 
The Base Rate is a reference rate and does not necessarily represent the
lowest or best rate being charged to any customer.  Any change in the Base Rate or the Federal
Funds Effective Rate shall be effective from and including the effective date
of such change.

 

Anti-Terrorism
Order.  The Executive
Order 13224 issued on September 24, 2001.

 

Applicable
Percentage.   With
respect to (a) any Term Lender at any time, the percentage (carried out to
the ninth decimal place) of the Total Term Loan Commitment represented by such
Term Lender’s Term Commitment at such time, and (b) any Revolving Credit
Lender at any time, the percentage (carried out to the ninth decimal place) of
the Total Revolving Credit Commitment represented by such Revolving Credit
Lender’s Revolving Credit Commitment at such time.  If the commitment of each Revolving Credit
Lender to make Revolving Credit Loans and the obligation of the LC Issuer to
issue Letters of Credit have been terminated pursuant to Section 9.2, or
if the Revolving Credit Commitments have expired, then the Applicable Percentage
of each Revolving Credit Lender shall be determined based on the Applicable
Percentage of such Revolving Credit Lender most recently in effect, giving
effect to any subsequent assignments. 
The initial Applicable Percentage of each Lender in respect of each
credit facility hereunder is set forth opposite the name of such Lender on Schedule
1 or in the Assignment and Assumption pursuant to which such Lender becomes
a party hereto, as applicable.

 

2

 

Approved
Fund.  Any Fund that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender
or (c) an entity or an Affiliate of an entity that administers or manages
a Lender.

 

Asset
Purchase Agreement. 
The Asset Purchase Agreement, dated as of December 2, 2007, between
the Parent and Barnhill’s Buffet, Inc., as amended on January 21,
2008.

 

Assignee
Group.  Two or more
Eligible Assignees that are Affiliates of one another or two or more Approved
Funds managed by the same investment advisor.

 

Assignment
and Assumption.  An
assignment and assumption entered into by a Lender and an Eligible Assignee
(with the consent of any party whose consent is required by Section 10.1(b)(iii)),
and accepted by the Administrative Agent, in substantially the form of Exhibit E
or any other form approved by the Administrative Agent.

 

Attributable
Indebtedness.  On any
date, (a) in respect of any Capitalized Lease of any Person, the
capitalized amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, (b) in respect of any
Synthetic Lease Obligation, the capitalized amount of the remaining lease or
similar payments under the relevant lease or other applicable agreement or
instrument that would appear on a balance sheet of such Person prepared as of
such date in accordance with GAAP if such lease or other agreement or
instrument were accounted for as a Capitalized Lease and (c) all Synthetic
Debt of such Person.

 

Bankruptcy
Court.  The United States Bankruptcy
Court for the Middle District of Tennessee, Nashville Division.

 

Base
Rate Loan.  Any Loan
bearing interest determined with reference to the Alternate Base Rate.

 

Borrowers.  See Preamble.

 

Borrowers’
Accountants.  Mayer
Hoffman McCann P.C., or such other independent certified public accountants as
are selected by the Borrowers and are reasonably acceptable to the
Administrative Agent.

 

Business
Day. (i) For all purposes other than as covered by
clause (ii) below, any day other than a Saturday, Sunday or legal holiday
on which banks in Boston, Massachusetts and 
Los Angeles, California are open for the conduct of a substantial part
of their commercial banking business; and (ii) with respect to all notices
and determinations in connection with, and payments of principal and interest
on, LIBOR Loans, any day that is a Business Day described in clause (i) and
that is also a day on which dealings in U.S. dollar deposits are also carried
on in the London interbank market and banks are open for business in London.

 

Capital
Expenditures.  With
respect to any Person for any period, any expenditure in respect of the
purchase or other acquisition of any fixed or capital asset (excluding normal
replacements and maintenance which are properly charged to current operations).

 

3

 

Capitalized Leases.  All leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.

 

Cash
Collateralize.   To
pledge and deposit with or deliver to the Administrative Agent, for the benefit
of the LC Issuer and the Lenders, as collateral for the Maximum Drawing Amount,
cash or deposit account balances pursuant to documentation in form and
substance reasonably satisfactory to the Administrative Agent and the LC
Issuer.

 

Cash
Management Agreement.  
Any agreement to provide cash management services, including treasury,
depository, overdraft, credit or debit card, electronic funds transfer and
other cash management arrangements.

 

Cash
Management Bank.  Any
Person that, at the time it enters into a Cash Management Agreement, is a
Lender or an Affiliate of a Lender, in its capacity as a party to such Cash
Management Agreement.

 

CFC.  A Person that is a controlled foreign
corporation under Section 957 of the Code.

 

Change of Control.   An event or series of events by which:  (a) Robert E. Wheaton shall have ceased
to hold the office, and engage in the duties and have the responsibilities
thereof, in the Parent that he holds as of the Closing Date and a successor
reasonably satisfactory to the Majority Lenders shall not have been appointed
within 30 days thereafter; (b) Robert E. Wheaton shall have ceased to hold
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of at least 40% of the fully diluted equity interests of the Parent; or (c) any
Person or two or more Persons acting in concert (other than Robert E. Wheaton
(or Persons of which Robert E. Wheaton would be deemed to have beneficial
ownership)) shall have acquired beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of more than 10% of the fully diluted equity interests
of the Parent outstanding on the date hereof.

 

Closing
Date.  The first date
on which the conditions set forth in Sections 4.1 have been satisfied and the
initial Loans are to be made hereunder.

 

Code.  The Internal Revenue Code of 1986 and the rules and
regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.

 

Collateral.  All of the property, rights and interests of
the Borrowers, their Subsidiaries and any other Person that are or are intended
to be subject to the security interests and liens created by the Security
Documents.

 

Communications.  See Section 12.1.

 

Commitment
Fee.  See Section 2.6(a).

 

Commitment
Increase Supplement. 
See Section 2.1(a)(iii).

 

Commitments.  In relation to any particular Lender, the
Revolving Credit Commitment and/or the Term Loan Commitment of such Lender.

 

4

 

Consolidated
EBITDA.  At any date of
determination for any fiscal period, an amount equal to Consolidated Net Income
of the Borrowers and their Subsidiaries for such fiscal period plus (a) the
following to the extent excluded or deducted in calculating such Consolidated
Net Income:  (i) Consolidated
Interest Charges, (ii) the provision for Federal, state, local and foreign
income taxes paid or payable, (iii) depreciation (including, without
limitation, depreciation of leasehold improvements) and amortization expense, (iv) other
non-recurring expenses reducing such Consolidated Net Income which do not
represent a cash item in such period or any future period (in each case of or
by the Borrowers and their Subsidiaries for such fiscal period), (v) Consolidated
Restaurant Pre-Opening Expenses and (vi) fees and expenses incurred by the
Borrowers in connection with the transactions contemplated by this Agreement
and the Asset Purchase Agreement, including, without limitation, attorneys’
fees, minus (b) the following to the extent included in calculating
such Consolidated Net Income:  (i) Federal,
state, local and foreign income tax credits and (ii) all non-recurring
items increasing Consolidated Net Income (in each case of or by the Borrowers
and their Subsidiaries for such fiscal period).

 

Consolidated
EBITDAR.  For any
fiscal period, the sum of (i) the Consolidated EBITDA for such fiscal
period, plus (ii) the Consolidated Rent Expense for such fiscal period,
but only to the extent such Consolidated Rent Expense was excluded or deducted
in computing such Consolidated EBITDA.

 

Consolidated
Funded Indebtedness. 
As of any date of determination, for the Borrowers and their
Subsidiaries on a consolidated basis and without duplication, the sum of (a) the
outstanding principal amount of all obligations, whether current or long-term,
for borrowed money (including Obligations hereunder) and all obligations
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments, (b) all purchase money Indebtedness, (c) all direct
obligations arising under letters of credit, bankers’ acceptances, bank
guaranties, surety bonds and similar instruments, (d) all monetary
obligations secured by any mortgage, pledge, security interest or other
Encumbrance on property owned or acquired by the Borrowers or any Subsidiary,
whether or not the obligations secured thereby shall have been assumed, (e) all
obligations in respect of the deferred purchase price of property or services
(other than trade accounts payable in the ordinary course of business), (f) all
Attributable Indebtedness, (g) without duplication, all Guarantees with
respect to outstanding Indebtedness of the types specified in clauses (a) through
(f) above of Persons other than the Borrowers or any Subsidiary, and (h) all
Indebtedness of the types referred to in clauses (a) through (g) above
of any partnership or joint venture (other than a joint venture that is itself
a corporation or limited liability company) in which the Borrowers or a
Subsidiary is a general partner or joint venturer, unless such Indebtedness is
expressly made non-recourse to such Borrower or such Subsidiary.

 

Consolidated
Interest Charges.   For
any fiscal period, the sum of (a) all interest, premium payments, debt
discount, fees, charges and related expenses in connection with borrowed money
(including capitalized interest) or in connection with the deferred purchase
price of assets, in each case to the extent treated as interest in accordance
with GAAP, (b) all interest paid or payable with respect to discontinued
operations and (c) the portion of rent expense under Capitalized Leases
that is treated as interest in accordance with GAAP, in each case, of or by the
Borrowers and their Subsidiaries on a Consolidated basis for such fiscal
period.

 

5

 

Consolidated
Net Income.  At any
date of determination for any fiscal period, the net income (or loss) of the
Borrowers and their Subsidiaries on a Consolidated basis for such fiscal
period; provided that Consolidated Net Income shall exclude, without duplication:
(a) extraordinary gains and extraordinary losses for such fiscal period; (b) the
net income of any Subsidiary during such fiscal period to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
of such income is not permitted by operation of the terms of its organization
documents or any agreement, instrument or law applicable to such Subsidiary
during such fiscal period, except that the Borrowers’ equity in any net loss of
any such Subsidiary for such fiscal period shall be included in determining
Consolidated Net Income; (c) any income (or loss) for such Period of any
Person if such Person is not a Subsidiary, except that the Borrowers’ equity in
the net income of any such Person for such fiscal period shall be included in
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such Period to the Borrowers or a Subsidiary as a
dividend or other distribution (and in the case of a dividend or other
distribution to a Subsidiary, such Subsidiary is not precluded from further
distributing such amount to the Borrowers as described in clause (b) of
this proviso); (d) any gain or loss arising from any write-up of assets,
except to the extent inclusion thereof shall be approved in writing by the
Administrative Agent; (e) earnings of any Subsidiary accrued prior to the
date it became a Subsidiary; (f) any non-cash stock based compensation
income or expense related to restricted stock or stock options; (g) any
deferred or other credit representing any excess of the equity of any
Subsidiary at the date of acquisition thereof over the amount invested in such
Subsidiary; and (h) the proceeds of any life insurance policy.

 

Consolidated
Pre-Distribution Fixed Charge Coverage Ratio.   At any date of determination for any fiscal
period, the ratio of (a) the total of (i) Consolidated EBITDAR
for such fiscal period, less (ii) the aggregate amount of Federal,
state, local and foreign income taxes paid in cash, in each case, of or by the
Borrowers and their Subsidiaries for such fiscal period, and less (iii) the
aggregate amount of all Maintenance Capital Expenditures made during such
fiscal period to (b) the sum of (i) Consolidated Interest Charges for
such fiscal period, plus (ii) the aggregate principal amount of all
regularly scheduled principal payments or redemptions or similar acquisitions
for value of outstanding debt for borrowed money during such fiscal period
(excluding, however, the repayment of the Indebtedness under the Existing
Credit Agreement on the Closing Date), plus (iii) the Consolidated
Rent Expense for such fiscal period.

 

Consolidated
Post-Distribution Fixed Charge Coverage Ratio.   At any date of determination for any fiscal
period, the ratio of (a) the total of (i) Consolidated EBITDAR
for such fiscal period, less (ii) the aggregate amount of Federal,
state, local and foreign income taxes paid in cash, in each case, of or by the
Borrowers and their Subsidiaries for such fiscal period, and less (iii) the
aggregate amount of all Maintenance Capital Expenditures made during such
fiscal period to (b) the sum of (i) Consolidated Interest Charges for
such fiscal period, plus (ii) the aggregate principal amount of all
regularly scheduled principal payments or redemptions or similar acquisitions
for value of outstanding debt for borrowed money during such fiscal period
(excluding, however, the repayment of the Indebtedness under the Existing
Credit Agreement on the Closing Date), plus (iii) the Consolidated
Rent Expense for such fiscal period, and plus (iv) any dividend,
distribution, loan, advance, guaranty, extension of credit or other payment,
whether in cash or property, made by any Borrower to or for the benefit of any
Person (other 

 

6

 

than another Borrower) who holds an Equity Interest in
any Borrower or any of their Subsidiaries, whether or not such interest is
evidenced by a security, and any purchase, redemption, retirement or other
acquisition for value of any Equity Interest of the Borrower or any of its
Subsidiaries, whether now or hereafter outstanding, or of any options, warrants
or similar rights to purchase such Equity Interest or any security convertible
into or exchangeable for such Equity Interest.

 

Consolidated
Rent Expense.   For any
fiscal period, the sum of all rental obligations (payable in cash) incurred by
the Borrowers or any Subsidiary during such fiscal period with respect to all
operating leases (not Capitalized Leases) of real and personal property,
calculated in accordance with GAAP on a Consolidated basis.

 

Consolidated
Restaurant Pre-Opening  Expenses.  “Start-up Costs” (as defined in SOP 98-5
published by the American Institute of Certified Public Accountants) of the
Borrowers related to the acquisition, opening and organizing of New Operating
Units, such costs including, without limitation, the cost of feasibility
studies, initial marketing costs, construction period rents, staff training,
and recruiting and travel costs for employees engaged in such start-up
activities.

 

Default.  An Event of Default or event or condition
that, but for the requirement that time elapse or notice be given, or both,
would constitute an Event of Default.

 

Defaulting
Lender.  Any Lender
that (a) has failed to fund any portion of the Term Loans, Revolving
Credit Loans, participations in LC Disbursements required to be funded by it
hereunder within one Business Day of the date required to be funded by it
hereunder, (b) has otherwise failed to pay over to the Administrative
Agent or any other Lender any other amount required to be paid by it hereunder
within one Business Day of the date when due, unless the subject of a good
faith dispute, or (c) has been deemed insolvent or become the subject of a
bankruptcy or insolvency proceeding.

 

Disposition
or Dispose.  The sale, transfer,
license, lease or other disposition (including any sale and leaseback
transaction) of any property by any Person (or the granting of any option or
other right to do any of the foregoing), including any sale, assignment,
transfer or other disposal, with or without recourse, of any notes or accounts
receivable or any rights and claims associated therewith.

 

Drawdown
Date.  The Business Day
on which any Loan is made or is to be made.

 

Eligible
Assignee.   Any Person
that meets the requirements to be an assignee under Section 10.1(b)(iii), (v) and
(vi) (subject to such consents, if any, as may be required under Section 10.1(b)(iii)).

 

Eligible
Swap Agreements.  Swap
Agreements purchased by the Borrowers from a Lender.

 

Encumbrances.  See Section 8.3.

 

7

 

Environmental
Laws.  Any and all
applicable federal, state and local environmental, health or safety statutes,
laws, regulations, rules and ordinances (whether now existing or hereafter
enacted or promulgated), and all applicable judicial, administrative and
regulatory decrees, judgments, orders and interpretations, including common law
rulings and determinations, relating to injury to, or the protection of, human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of such
Hazardous Materials.

 

Equity
Interests.  With
respect to any Person, all of the shares of capital stock of, or membership,
partnership or other ownership or profits interest in, such Person, all of the
warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of, or membership, partnership or other
ownership or profits interest in, such Person, all of the securities
convertible into or exchangeable for shares of capital stock of, or membership,
partnership or other ownership or profits interest in, such Person or warrants,
rights or options for the purchase or acquisition from such Person of such
shares or such other interests, and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of
determination.

 

ERISA.  The Employee Retirement Income Security Act
of 1974 and the rules and regulations thereunder, collectively, as the
same may from time to time be supplemented or amended and remain in effect.

 

ERISA
Affiliate.  Any trade
or business, whether or not incorporated, that is treated as a single employer
with the Borrowers under Section 414(b), (c), (m) or (o) of the
Code and Section 4001(a)(14) of ERISA.

 

ERISA
Event.  (a) Any “reportable
event,” as defined in Section 4043 of ERISA or the regulations issued
thereunder, with respect to a Plan unless the 30-day notice requirement with
respect to such event has been waived by the PBGC; (b) the adoption of any
amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29)
of the Code or Section 307 of ERISA; (c) the existence with respect
to any Plan of an “accumulated funding deficiency” (as defined in Section 412
of the Code or Section 302 of ERISA), whether or not waived; (d) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of
ERISA with respect to the termination of any Plan or the withdrawal or partial
withdrawal of the Borrowers or any ERISA Affiliate from any Plan or
Multiemployer Plan; (f) the receipt by the Borrowers or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to the
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (g) the receipt by the Borrowers or any ERISA Affiliate of any
notice concerning the imposition of Withdrawal Liability (as defined in Part I
of Subtitle E of Title IV of ERISA) with respect to any Multiemployer Plan or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; (h) the
occurrence of a Prohibited Acquisition with respect to which the Borrowers or
any of their Subsidiaries is a “disqualified person” (within the meaning of Section 

 

8

 

4975 of the Code) or with respect to which the
Borrowers or any such Subsidiary could otherwise be liable; and (i) any
other event or condition with respect to a Plan or Multiemployer Plan that
could reasonably be expected to result in material liability of the Borrowers.

 

Event
of Default.  Any event
described in Section 9.1.

 

Excess
Cash Flow.  For any
Fiscal Year of the Borrowers, the excess (if any) of (a) the sum of
Consolidated EBITDA for such Fiscal Year, over (b) the sum (for
such Fiscal Year) of (i) Consolidated Interest Charges actually paid in
cash by the Borrowers and their Subsidiaries, (ii) the aggregate principal
amount of all principal payments, redemptions and acquisitions for value of
Consolidated Funded Indebtedness actually made during such Fiscal Year to the
extent permitted by this Agreement, including principal payments of Term Loans,
but excluding principal payments of Revolving Loans except to the extent that
the Total Revolving Credit Commitment is permanently reduced in connection with
any such payment of Revolving Loans, (iii) all income taxes actually paid
in cash by the Borrowers and their Subsidiaries, and (iv) Capital
Expenditures (including Growth Capital Expenditures) actually made by the
Borrowers and their Subsidiaries in such Fiscal Year to the extent permitted by
this Agreement (net of the proceeds of Indebtedness other than Loans permitted
by this Agreement or of contributions to the capital of the Borrowers, to the
extent such proceeds are applied to fund such Capital Expenditures).

 

Exchange Act.  The Securities Exchange Act of 1934,
as amended.

 

Excluded
Taxes.  With respect to
the Administrative Agent, any Lender, the LC Issuer or any other recipient of
any payment to be made by or on account of any obligation of the Borrowers
hereunder, (a) taxes imposed on or measured by its overall net income
(however denominated), and franchise taxes imposed on it (in lieu of net income
taxes), by the jurisdiction (or any political subdivision thereof) under the
laws of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States or any
similar tax imposed by any other jurisdiction in which the Borrowers are
located and (c) in the case of a Foreign Lender (other than an assignee
pursuant to a request by the Borrowers under Section 10.2), any
withholding tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party hereto (or designates a new lending
office) or is attributable to such Foreign Lender’s failure or inability (other
than as a result of a change in law) to comply with Section 2.15(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrowers with respect to such
withholding tax pursuant to Section 2.15(a).

 

Existing
Credit Agreement.  The
Credit Agreement dated as of October 28, 2003, as amended, between the
Parent and M&I Marshall & Ilsley Bank.

 

Extraordinary
Receipt.  Any cash
received by or paid to or for the account of any Person not in the ordinary
course of business, including tax refunds, pension plan reversions, proceeds of
insurance (other than proceeds of business interruption insurance),
condemnation and eminent domain awards (and payments in lieu thereof), and
indemnity payments.

 

9

 

Facility.  The Term Facility or the Revolving Credit
Facility, as the context may require.

 

Federal
Funds Effective Rate. 
For any day, a fluctuating interest rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average of the quotations
for such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent.

 

Fee
Letter.  See Section 12.11.

 

Fee
Property.  The
properties listed on Schedule 5.8(c) hereto and such other real
property assets in which Borrower or a Subsidiary may acquire fee simple title
from and after the date hereof .

 

Fee
Property Security Documents. 
The documents listed on Exhibit G-3 hereto.

 

Financial
Statements.  See Section 5.5(b)

 

Fiscal
Month.  Any of the
thirteen periods of time, having approximately the same number of days, which
comprise the Fiscal Year of the Borrowers.

 

Fiscal
Quarter.  Any of the
four periods of time, three of which consist of three Fiscal Months and one of
which consists of four Fiscal Months, which comprise the Fiscal Year of the
Borrowers.

 

Fiscal
Year.  The 52-53 week
fiscal period of the Borrowers ending on the last Monday in January of
each calendar year.

 

Fixed
Rate Election.  The
Interest Period selected for a particular LIBOR Loan pursuant to Section 2.3.

 

Foreign
Lender.  Any Lender
that is organized under the laws of a jurisdiction other than that in which any
Borrower is resident for tax purposes. 
For purposes of this definition, the United States, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

FRB.  See Section 2.5(d).

 

Fund.  Any Person (other than a natural person) that
is (or will be) engaged in making, purchasing, holding or otherwise investing
in commercial loans and similar extensions of credit in the ordinary course of
its business.

 

GAAP.  Generally accepted accounting principles,
consistently applied.

 

Governmental
Authority.  The
government of the United States of America or any other nation, or of any
political subdivision thereof, whether state or local, and any agency,
authority, 

 

10

 

instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

 

Growth
Capital Expenditures. 
Capital Expenditures for growth, including, but not limited to,
expenditures for remodeling or re-imaging any Operating Unit that is not a New
Operating Unit, New Construction and the acquisition of restaurants.

 

Guarantees.  As applied to the Borrowers and their
Subsidiaries, all guarantees, endorsements or other contingent or surety
obligations with respect to obligations of others whether or not reflected on
the consolidated balance sheet of the Borrowers and their Subsidiaries,
including any obligation to furnish funds, directly or indirectly (whether by
virtue of partnership arrangements, by agreement to keep-well or otherwise),
through the purchase of goods, supplies or services, or by way of stock
purchase, capital contribution, advance or loan, or to enter into a contract
for any of the foregoing, for the purpose of payment of obligations of any
other Person.

 

Hazardous
Material.  Any
substance (i) the presence of which requires or then requires
notification, investigation, a removal or remediation under any Environmental
Law; (ii) which is or becomes defined as a “hazardous waste”, “hazardous
material” or “hazardous substance” or “pollutant” or “contaminant” under any
present or future Environmental Law or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) and any applicable
local statutes and the regulations promulgated thereunder; (iii) which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is or becomes regulated pursuant to
any Environmental Law by any Governmental Authority, agency, department,
commission, board, agency or instrumentality of the United States, any state of
the United States, or any political subdivision thereof; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls (“PCB’s”).

 

Hazardous
Materials Indemnity Agreement.  The Hazardous Materials Indemnity Agreement,
dated as of the date hereof, made by the Borrowers in favor of the
Administrative Agent, as amended and in effect from time to time.

 

Increasing
Lender.  See Section 2.1(a)(iii).

 

Indebtedness.  As to any Person at a particular time,
without duplication, all of the following, whether or not included as
indebtedness or liabilities in accordance with GAAP: (a) all
obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar
instruments; (b) the maximum amount of all
direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds and similar instruments; (c) net
obligations of such Person under any Swap Agreement; (d) all
obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business
and not past due for more than 60
days 

 

11

 

after the date on which such trade account was
created); (e) indebtedness (excluding prepaid
interest thereon) secured by an Encumbrance on property owned or being
purchased by such Person (including indebtedness arising under conditional
sales or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; (f) all Attributable Indebtedness in respect of Capitalized
Leases and Synthetic Lease Obligations of such Person and all Synthetic Debt of
such Person; (g) all obligations of such Person
to purchase, redeem, retire, defease or otherwise make any payment in respect
of any Equity Interest in such Person or any other Person or any warrant, right
or option to acquire such Equity Interest, valued, in the case of a redeemable
preferred interest, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends; and (h) all
Guarantees of such Person in respect of any of the foregoing. For all purposes
hereof, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which such Person is a general
partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person.  The amount
of any net obligation under any Swap Agreement on any date shall be deemed to
be the Swap Termination Value thereof as of such date.

 

Indemnified Taxes.  All Taxes other than Excluded Taxes.

 

Interest
Period.  With respect
to each LIBOR Loan, the period commencing on the date of the making or
continuation of or conversion to such LIBOR Loan and ending one (1) month,
two (2) months or three (3) months thereafter, as the Borrowers may
elect in the applicable Notice of Borrowing or Conversion; provided
that:

 

(i)  any
Interest Period (other than an Interest Period determined pursuant to clause (ii) below)
that would otherwise end on a day that is not a Business Day shall be extended
to the next succeeding Business Day;

 

(ii)  any
Interest Period that would otherwise end after the Maturity Date, shall end on
the Maturity Date;

 

(iii) 
notwithstanding clause (ii) above, no Interest Period shall have a
duration of less than one (1) month, and if any Interest Period applicable
to a Loan would be for a shorter period, such Interest Period shall not be
available hereunder; and

 

(iv)  the
Borrowers may not select any Interest Period for a Term Loan, if, after giving
effect to such selection, the aggregate principal amount of all Term Loans
having Interest Periods ending after any date on which an installment of the
Term Loans is scheduled to be repaid would exceed the aggregate principal
amount of the Term Loans scheduled to be outstanding after giving effect to
such repayment.

 

Investment.  As applied to the Borrowers and their
Subsidiaries, the purchase or acquisition of any share of capital stock,
partnership interest, evidence of indebtedness or other equity security of any
other Person (including any Subsidiary), any loan, advance or extension of
credit (excluding accounts receivable arising in the ordinary course of
business) to, or contribution to the capital of, any other Person (including
any Subsidiary), any real estate held 

 

12

 

for sale or investment, any securities or commodities
futures contracts held, any other investment in any other Person (including any
other Subsidiary of the Borrowers), and the making of any commitment or
acquisition of any option to make an Investment.

 

IP
Rights.  See Section 5.17.

 

Junior
Subordinated Debt.  All
Indebtedness and other obligations of the Parent under or in respect of the
Junior Subordinated Note and the Junior Subordinated Debt Documents.

 

Junior
Subordinated Debt Documents. 
The Junior Subordinated Note, the Loan Agreement dated June 15,
2007 between the Parent and the Junior Subordinated Lender, as amended as of the
date hereof, and any other agreements evidencing, securing or otherwise made
pursuant to or in connection with the Junior Subordinated Note, in each case as
in effect on the Closing Date without any amendment to or modification thereof,
except as permitted by the Subordination Agreement.

 

Junior
Subordinated Lender. 
Collectively, Robert E. Wheaton and Suzanne H. Wheaton.

 

Junior
Subordinated Note. 
That certain Note, dated as of June 15, 2007, in the original
principal amount of $1,400,000 made by the Parent payable to the Junior
Subordinated Lender.

 

LC
Disbursement.  A
payment made by the LC Issuer pursuant to a Letter of Credit.

 

LC
Exposure.   At any
time, the sum of (a) the Maximum Drawing Amount at such time, and (b) the
aggregate LC Disbursements that at such time have not been reimbursed by or on
behalf of the Borrowers to the LC Issuer. 
The LC Exposure of any Revolving Credit Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.

 

LC
Issuer.  Wells Fargo.

 

Landlord
Waivers.  Landlord’s
consent and estoppel certificates (in form reasonably acceptable to the
Administrative Agent) in favor of the Administrative Agent specified therein
and covering those leased real properties as specified on Schedule 5.8(d)(i) and
any leased real properties that are acquired by the Borrowers or any Subsidiary
after the date hereof.

 

Lead
Arranger.  See
Preamble.

 

Lenders.  Wells Fargo, the other financial institutions
parties hereto and listed on Schedule 1 attached hereto and each other
Person that may after the date hereof become an assignee of a Lender pursuant
to Section 10.1 and, thereby a party to this Agreement as a “Lender”
hereunder, but from and after the effective date that any Person shall have
assigned its entire Commitment pursuant to Section 10.1, “Lenders” shall
no longer include such Person.

 

Letter
of Credit Applications. 
Applications for Letters of Credit in such form as may be required by
the LC Issuer from time to time which are executed and delivered by the Borrowers
to the LC Issuer pursuant to Section 3.1, as the same may be amended or
supplemented from time to time.

 

13

 

Letter
of Credit Fee.  See Section 2.6(b).

 

Letter
of Credit Participation. 
See Section 3.1(b).

 

Letter
of Credit Sublimit. 
$500,000.

 

Letters
of Credit.  See Section 3.1(a).

 

LIBOR
Loan.  Any Loan bearing
interest at a rate determined with reference to the LIBOR Rate.

 

LIBOR
Rate.  With respect to
any LIBOR Loan for any Interest Period, the rate per annum as determined by the
Administrative Agent on the basis of the offered rates for deposits in U.S.
dollars, for a period of time comparable to such Interest Period, which appears
on Reuters page LIBOR01 (formerly Telerate page 3750) as of 11:00 a.m.
London time on the day that is two Business Days preceding the Drawdown Date of
such LIBOR Loan (or, if for any reason
such rate is unavailable from Reuters, from any other similar company or
service that provides rate quotations comparable to those currently provided by
Reuters); provided, however, that if the rate described above is not
provided by Reuters or such other similar company or service on any applicable
interest determination date, the LIBOR Rate shall be the rate (rounded upward,
if necessary, to the nearest one hundred-thousandth of a percentage point)
determined on the basis of the offered rates for deposits in U.S. dollars for a
period of time comparable to such Interest Period which are offered by four
major banks in the London interbank market at approximately 11:00 a.m.
London time, on the day that is two (2) Business Days preceding the first
day of such Interest Period as selected by the Administrative Agent.  The principal London office of each of the
four major London banks will be requested to provide a quotation of its U.S.
dollar deposit offered rate.  If at least
two such quotations are provided, the LIBOR Rate for that date will be the
arithmetic mean of the quotations.  If
fewer than two quotations are provided as requested, the rate for that date
will be determined on the basis of the rates quoted for loans in U.S. dollars
to leading European banks for a period of time comparable to such Interest
Period offered by major banks in New York City at approximately 11:00 a.m.
New York City time, on the day that is two Business Days preceding the first
day of such Interest Period.

 

Loan
Documents.  This
Agreement, the Notes, the Letter of Credit Applications, any Subsidiary
Guaranty, the Eligible Swap Agreements, Secured Cash Management Agreements, the
Fee Letter and the Security Documents, together with any agreements,
instruments or documents executed and delivered pursuant to or in connection
with any of the foregoing; provided that for purposes of the definition
of “Material Adverse Effect” and Sections V through IX, “Loan Documents” shall
not include Eligible Swap Agreements or Secured Cash Management Agreements.

 

Loan
Parties.  Collectively,
the Borrowers and each
Subsidiary Guarantor.

 

Loans.  The loans made or to be made by the Lenders
to the Borrowers pursuant to this Agreement, including Revolving Credit Loans
and Term Loans.

 

14

 

Maintenance
Capital Expenditures. 
Any Capital Expenditure that is not a Growth Capital Expenditure.

 

Majority
Lenders.  As of any
date, one (1) or more Lenders (that are not Defaulting Lenders) holding
more than fifty percent (50%) of the Total Commitments, or if the Total
Revolving Credit Commitments shall have terminated, one (1) or more
Lenders (that are not Defaulting Lenders) holding more than fifty percent (50%)
of the outstanding principal amount of the Loans and Letter of Credit
Participations; provided that the portion of the Total Commitments, or
the outstanding principal amount of the Loans and Letter of Credit
Participations, as the case may be, that are held or deemed held by, any
Defaulting Lender will be excluded for purposes of making a determination of
Majority Lenders.

 

Majority
Revolving Credit Lenders. 
As of any date of determination, one (1) or more Lenders holding
more than fifty percent (50%) of the Total Revolving Credit Outstandings; provided
that the portion of the Total Revolving Credit Outstandings held or deemed held
by, any Defaulting Lender shall be excluded for purposes of making a
determination of Majority Revolving Credit Lenders.

 

Majority
Term Lenders.  As of
any date of determination, one (1) or more Lenders holding more than fifty
percent (50%) of the outstanding principal amount of Term Loans on such date; provided
that the portion of the outstanding principal amount of Term Loans held by any
Defaulting Lender shall be excluded for purposes of making a determination of
the Majority Term Lenders.

 

Material
Adverse Effect.  Any of
(a) a material adverse change in, or a material adverse effect upon, the
operations, business, properties, liabilities (actual or contingent), condition
(financial or otherwise) of the Borrowers and their Subsidiaries taken as a
whole; (b) a material impairment of the rights and remedies of the
Administrative Agent or any Lender under any Loan Document or of the ability of
any Loan Party to perform its obligations under any Loan Document to which it
is a party; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against any Loan Party of any Loan Document
(including with respect to the lien priority of any Security Document), to
which it is a party.

 

Maturity
Date.  January 31,
2012.

 

Maximum
Drawing Amount.  At any
time, the aggregate undrawn amount of all then outstanding Letters of Credit.

 

Measurement
Period.  At any date of
determination, the most recently completed four Fiscal Quarters of the Borrower.

 

Multiemployer
Plan.  Any Plan which
is a Multiemployer Plan as defined in Section 4001(a)(3) of ERISA.

 

Net
Cash Proceeds.  With
respect to:

 

15

 

(a)           any Disposition by the Borrowers or any of their Subsidiaries, or any Extraordinary Receipt
received or paid to the account of the Borrowers or any of their Subsidiaries,
the excess, if any, of (i) the sum of cash and cash equivalents received
in connection with such transaction (including any cash or cash equivalents
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) over (ii) the
sum of (A) the amount of any Indebtedness that is secured by the
applicable asset and that is required to be repaid in connection with such
transaction (other than Indebtedness under the Loan Documents), (B) the
reasonable and customary out-of-pocket expenses incurred by the Borrowers or a Subsidiary
in connection with such transaction and (C) income taxes reasonably
estimated to be actually payable within two years of the date of the relevant
transaction as a result of any gain recognized in connection therewith; provided
that, if the amount of any estimated taxes pursuant to subclause (C) exceeds
the amount of taxes actually required to be paid in cash in respect of such
Disposition, the aggregate amount of such excess shall constitute Net Cash
Proceeds; and

 

(b)           the sale or issuance of any Equity Interest
by the Borrowers or any of their Subsidiaries, or the incurrence or issuance of
any Indebtedness by the Borrower or any of their Subsidiaries, the excess of (i) the
sum of the cash and cash equivalents received in connection with such transaction
over (ii) the underwriting discounts and commissions, and other reasonable
and customary out-of-pocket expenses, incurred by the Borrowers or such
Subsidiaries in connection therewith.

 

New
Construction. Construction by the Borrowers or any of their
Subsidiaries related to the opening of a New Operating Unit or the meaningful
expansion of capacity at an Operating Unit which is not a New Operating Unit.

 

New
Lender.  See Section 2.1(a)(ii).

 

New
Operating Unit.  A
restaurant owned or operated by the Borrowers or any of their Subsidiaries
whose ownership or operation by the Borrowers or any of their Subsidiaries
starts on a date after the Closing Date.

 

Note
Record.  Any internal
record, including a computer record, maintained by any Lender with respect to
any Loan.

 

Notes.  Collectively, the Revolving Credit Notes and
the Term Notes.

 

Notice
of Borrowing or Conversion. 
The notice, substantially in the form of Exhibit B hereto,
to be given by the Borrowers to the Administrative Agent to request a Loan or
to convert an outstanding Loan of one Type into a Loan of another Type, in
accordance with Section 2.3.

 

Obligations.  The following:

 

(a)           the due and punctual
payment by the Borrowers of (i) the principal of and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, 

 

16

 

upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made by
the Borrowers in respect of any Letter of Credit, when and as due, including
the unreimbursed amount of any LC Disbursement, interest thereon (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) and obligations to provide cash collateral, and (iii) all
other monetary obligations of the Borrowers under this Agreement and under the
other Loan Documents (including, without limitation, under each Eligible Swap
Agreement and Secured Cash Management Agreement), including obligations to pay
fees, expense reimbursement obligations and indemnification obligations,
whether primary, secondary, direct, contingent, fixed or otherwise, arising
under the Loan Documents (including monetary obligations incurred during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), and

 

(b)           the due and punctual
payment of all the monetary obligations of each other Loan Party under or
pursuant to this Agreement and each of the other Loan Documents.

 

OFAC.  The U.S. Department of the Treasury’s Office
of Foreign Assets Control.

 

Operating
Units.   All
restaurants operated by the Borrowers or any of their Subsidiaries, which for
avoidance of doubt, shall include all New Operating Units.

 

Other
Taxes.  All present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies arising from any payment made hereunder or under any
other Loan Document or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement or any other Loan Document.

 

Overpaying
Borrower.  See Section 2.16(b).

 

Parent.  Star Buffet, Inc., a Delaware
corporation.

 

Parent
Financial Statements. 
See Section 5.25.

 

Parent
SEC Documents.  The
Parent’s (a) Annual Report on Form 10-K for its most recent fiscal
year for which such a report has been filed, (b) Quarterly Report on Form 10-Q
for its most recent fiscal quarter for which such a report has been filed, (c) most
recent Proxy Statement on Schedule 14A, and (d) all Current Reports on Form 8-K
filed since the end of the most recent fiscal year for which it has filed its
Annual Report on Form 10-K.

 

Participant.  See Section 10.1(d).

 

Patriot
Act.  See Section 12.15.

 

Payment
Date.  The first
Business Day of each calendar quarter.

 

PBGC.  The Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.

 

17

 

Pension
Plan.  Any Plan which
is an “employee pension benefit plan” (as defined in ERISA).

 

Permitted
Encumbrances.  See Section 8.3.

 

Person.  Any individual, corporation, partnership,
trust, unincorporated association, business or other legal entity, and any
government or governmental agency or political subdivision thereof.

 

Plan.  Any “employee pension benefit plan” or “employee
welfare benefit plan” (each as defined in ERISA) maintained by the Borrowers or
any Subsidiary of the Borrowers.

 

Platform.  An electronic delivery
system (which may be provided by the Administrative Agent, an Affiliate of the
Administrative Agent or any Person that is not an Affiliate of the
Administrative Agent), such as IntraLinks or a substantially similar electronic
system.

 

Pledge
Agreement.  See Section 4.1(a)(iii).

 

Pro
Forma Financial Statements. 
See Section 4.1(h).

 

Prohibited
Acquisition.  Any “prohibited
transaction” within the meaning of Section 406 of ERISA or Section 4975
of the Code.

 

Qualified
Investments.  As
applied to the Borrowers and their Subsidiaries, investments in (i) notes,
bonds or other obligations of the United States of America or any agency
thereof that as to principal and interest constitute direct obligations of or
are guaranteed by the United States of America and that have maturity dates not
more than one year from the date of acquisition, (ii) certificates of
deposit, demand deposit accounts or other deposit instruments or accounts
maintained in the ordinary course of business with banks or trust companies
organized under the laws of the United States or any state thereof that have
capital and surplus of at least $500,000,000 which certificates of deposit and
other deposit instruments, if not payable on demand, have maturities of not
more than one year from the date of acquisition, (iii) commercial paper
that is rated not less than prime-one or A-1 or their equivalents by Moody’s
Investors Service, Inc. or Standard & Poor’s Corporation,
respectively, or their successors, and in each case maturing not more than one
year from the date of acquisition, (iv) any repurchase agreement secured
by any one or more of the foregoing.

 

Register.  See Section 10.1(c).

 

Related
Parties.  With respect
to any Person, such Person’s Affiliates and the partners, directors, officers,
employees, agents and advisors of such Person and of such Person’s Affiliates.

 

Reserve
Percentage.  For any
Interest Period, the aggregate of the maximum reserve percentages (including
all basic, marginal, special, emergency and supplemental reserves), expressed
as a decimal, established by the Board of Governors of the Federal Reserve
System and any other banking authority, domestic or foreign, to which any
Lender is subject with respect to “Eurocurrency Liabilities” (as defined in
regulations issued from time to time by such Board 

 

18

 

of
Governors).  The Reserve Percentage shall
be adjusted automatically on and as of the effective date of any change in any
such reserve percentage.

 

Responsible
Officer.  The chief
executive officer, president, chief financial officer, treasurer or controller
of a Loan Party.  Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party.

 

Restricted
Payment.  Any of the
following: (a) any dividend, distribution, loan, advance, guaranty,
extension of credit or other payment, whether in cash or property to or for the
benefit of any Person who holds an Equity Interest in the Borrowers or any of
their Subsidiaries, whether or not such interest is evidenced by a security,
and any purchase, redemption, retirement or other acquisition for value of any
Equity Interest of the Borrowers or any of their Subsidiaries, whether now or
hereafter outstanding, or of any options, warrants or similar rights to
purchase such Equity Interest or any security convertible into or exchangeable
for such Equity Interest and (b) any payment or prepayment of any kind,
whether in cash or property, to or for the benefit of any Person that is an
Affiliate of (i) the Borrowers or any of their Subsidiaries or (ii) any
holder of an Equity Interest in or any beneficiary of the Parent.

 

Revolving
Credit Commitment.  In
relation to any particular Revolving Credit Lender, the maximum dollar amount
which such Lender has agreed to loan to the Borrowers as Revolving Credit Loans
or to make available to the Borrowers pursuant to Letter of Credit
Participations upon the terms and subject to the conditions of this Agreement,
initially as set forth on Schedule 1 attached hereto, as such Lender’s
Revolving Credit Commitment may be modified pursuant hereto and in effect from
time to time.  Schedule 1 shall be
amended from time to time to reflect any changes in the Revolving Credit
Commitments of the Revolving Credit Lenders, and the Administrative Agent shall
promptly provide copies of revised Schedule 1 to the Lenders.

 

Revolving
Credit Facility.  The
credit facility provided under Section 2.1(a).

 

Revolving
Credit Lender.  Each
Lender having a Revolving Credit Commitment.

 

Revolving
Credit Loans.  See Section 2.1(a)(i).

 

Revolving
Credit Note.  See Section 2.2(a).

 

Sanctioned Country.  A country subject to a sanctions program
identified on the list maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/ index.html, or as otherwise
published from time to time.

 

Sanctioned Person.  Any of the following:  (i) a Person named on the list of “Specially
Designated Nationals and Blocked Persons” maintained by OFAC available at
http://www.treas.gov/offices/ eotffc/ofac/sdn/index.html, or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization 

 

19

 

controlled
by a Sanctioned Country, or (C) a person resident in a Sanctioned Country,
to the extent subject to a sanctions program administered by OFAC.

 

SEC.  United States Securities and Exchange
Commission.

 

Secured
Cash Management Agreement. 
Any Cash Management Agreement entered into between or among any Borrower
and any Cash Management Bank.

 

Secured
Parties.  Collectively,
the Administrative Agent, the Lenders, the LC Issuer, the Swap Banks, the Cash
Management Banks, and the other Persons the Obligations owing to which are or
are purported to be secured by the Collateral under the terms of the Security
Documents.

 

Securities
Act.  The Securities
Act of 1933, as amended.

 

Security
Agreement.  See Section 4.1(a)(iii).

 

Security
Documents.  The
Security Agreement, the Hazardous Materials Indemnity Agreement, the Fee
Property Security Documents, the Landlord Waivers, and the deposit account
control agreements referenced in Section 4.1(a)(iii)(E), each in favor of
the Administrative Agent to secure Obligations, in each case as amended and/or
restated and in effect from time to time, and any additional documents
evidencing or perfecting the Administrative Agent’s lien on the Collateral.

 

Solvent
and Solvency.  With respect to any
Person on any date of determination, that on such date (a) the fair value
of the property of such Person is greater than the total amount of liabilities,
including contingent liabilities pursuant to GAAP, of such Person, (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured, (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person’s ability to pay such debts and liabilities as they mature, (d) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person’s property would constitute
an unreasonably small capital, and (e) such Person is able to pay its
debts and liabilities, contingent obligations and other commitments as they mature
in the ordinary course of business.  The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

 

Subordinated
Debt.  Indebtedness of
the Borrowers or any of their Subsidiaries, including, without limitation, the
Junior Subordinated Debt, which is expressly subordinated and made junior to
the payment and performance in full of the Obligations on terms and conditions
reasonably satisfactory to the Majority Lenders.

 

Subordination Agreement.  The Subordination Agreement, dated the
Closing Date, by and among the Administrative Agent, the Junior Subordinated
Lender and the Parent, as amended, restated, supplemented or modified from time
to time.

 

Subordination
Provisions.  See Section 9.1(m).

 

20

 

Subsidiary.  With respect to any Person means a
corporation, partnership, joint venture, limited liability company or other
business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references
herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of the
Borrower.

 

Subsidiary
Guarantor.  Each
Subsidiary of any Borrower required to execute and deliver a Subsidiary
Guaranty pursuant to Section 6.12.

 

Subsidiary
Guaranty.  See Section 6.12.

 

Summary
of Sources and Uses. 
The summary of sources and uses of funds set forth on Schedule 4.1(e) attached
hereto.

 

Swap
Agreement.   Any and
all (a) rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or
bond price or bond index swaps or options or forward bond or forward bond price
or forward bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) transactions of
any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International
Foreign Exchange Master Agreement, or any other master agreement (any such
master agreement, together with any related schedules, a “Master Agreement”),
including any such obligations or liabilities under any Master Agreement.

 

Swap
Bank.  Any Person that
at the time it entered into a Swap Agreement was a Lender, an Affiliate of a
Lender, or a bank or trust company organized under the laws of the United
States or any state thereof that has capital and surplus of at least
$1,000,000,000.

 

Swap
Termination Value.   In
respect of any one or more Swap Agreements, after taking into account the
effect of any legally enforceable netting agreement relating to such Swap
Agreements, (a) for any date on or after the date such Swap Agreements
have been closed out and termination value(s) determined in accordance
therewith, such termination value(s), and (b) for any date prior to the
date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Agreements, as determined based upon
one or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Agreements (which may include a Lender or any
Affiliate of a Lender).

 

Syndication
Agent.  See Preamble.

 

21

 

Synthetic
Debt.  With respect to
any Person as of any date of determination thereof, all obligations of such
Person in respect of transactions entered into by such Person that are intended
to function primarily as a borrowing of funds (including any minority interest
transactions that function primarily as a borrowing) but are not otherwise
included in the definition of “Indebtedness” or as a liability on the
consolidated balance sheet of such Person and its Subsidiaries in accordance
with GAAP.

 

Synthetic
Lease Obligation.   The
monetary obligation of a Person under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use
or possession of property (including sale and leaseback transactions), in each
case, creating obligations that do not appear on the balance sheet of such
Person but which, upon the application of any bankruptcy or similar law to such
Person, would be characterized as the indebtedness of such Person (without
regard to accounting treatment).

 

Taxes  All present or future taxes, levies, imposts,
duties, deductions, withholdings, assessments, fees or other charges imposed by
any Governmental Authority, including any interest, additions to tax or
penalties applicable thereto.

 

Term
Lender.  Each Lender
having a Term Loan Commitment.

 

Term
Loans.  See Section 2.1(b).

 

Term
Loan Commitment.  With
respect to any Lender, the maximum dollar amount which such Lender has agreed
to loan to the Borrower as a Term Loan upon the terms and subject to the
conditions of this Agreement, initially as set forth on Schedule 1
attached hereto and as such Lender’s Term Loan Commitment may be modified
pursuant hereto from time to time.  Schedule
1 shall be amended from time to time to reflect any changes in the Term
Loan Commitments of the Term Lenders, and the Administrative Agent shall
promptly provide copies of revised Schedule 1 to the Lenders.

 

Term
Facility.  The credit
facility provided under Section 2.1(b).

 

Term
Notes.  See Section 2.2(b).

 

Title Company.  LandAmerica Title Insurance Company.

 

Title
Policy.  For each Fee
Property, an ALTA 1992 loan policy of title insurance providing coverage for
each such property at least in the amount set forth on Schedule 5.8(c) hereto,
issued by the Title Company to Administrative Agent and its successors and
assigns, insuring the Fee Property Security Documents for such Fee Property in
accordance with the requirements of Section 4.1(a)(v).

 

Total
Commitment.  The sum of
the Total Revolving Credit Commitment and the Total Term Loan Commitment.

 

Total
Lease Adjusted Leverage Ratio.  As of the end of any fiscal period, the ratio
of (a) the sum of (i) Consolidated Funded Indebtedness as of the end
of such fiscal period, plus (ii) the 

 

22

 

product
of eight (8) times the Consolidated Rent Expense for such fiscal
period, to (b) Consolidated EBITDAR for such fiscal period.

 

Total
Revolving Credit Commitment. 
The sum of the Revolving Credit Commitments of the Revolving Credit
Lenders as in effect from time to time, which as of the Closing Date shall be
$2,000,000.

 

Total
Revolving Credit Outstandings.  At any time, the sum of (i) the
aggregate outstanding principal balance of the Revolving Credit Loans at the
time and (ii) the LC Exposure at the time.

 

Total
Term Loan Commitment. 
The sum of the Term Loan Commitments of the Term Lenders as in effect
from time to time, which as of the Closing Date shall be $7,000,000.

 

Type.  A LIBOR Loan or a Base Rate Loan.

 

Wells
Fargo.  See Preamble.

 

Working
Capital.  As of any
date of determination, the excess of consolidated current assets over
consolidated current liabilities of the Borrowers and their Subsidiaries.

 

1.2           Rules of
Interpretation.

 

(a)           All
terms of an accounting character used herein but not defined herein shall have
the meanings assigned thereto by GAAP. 
All calculations for the purposes of Section VII hereof shall be
made in accordance with GAAP.

 

(b)           A
reference to any document or agreement shall include such document or agreement
as amended, modified or supplemented and in effect from time to time in
accordance with its terms and the terms of this Agreement.

 

(c)           The
singular includes the plural and the plural includes the singular.  A reference to “Borrowers” shall include any
single Borrower.  Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine
and neuter forms.

 

(d)           A
reference to any Person includes its permitted successors and permitted
assigns.

 

(e)           The
words “include”, “includes” and “including” are not limiting.

 

(f)            The
words “herein”, “hereof”, “hereunder” and words of like import shall refer to
this Agreement as a whole and not to any particular section or subdivision of
this Agreement.

 

(g)           All
terms not specifically defined herein or by GAAP, which terms are defined in
the Uniform Commercial Code as in effect in the State of New York, shall have
the meanings assigned to them in such Uniform Commercial Code.

 

23

 

SECTION II

 

DESCRIPTION OF CREDIT

 

2.1           Loans.

 

(a)           Revolving
Credit Loans.

 

(i)            Upon the terms and
subject to the conditions of this Agreement, and in reliance upon the
representations, warranties and covenants of the Borrowers herein, each of the
Lenders agrees, severally and not jointly, to make revolving credit loans (the “Revolving
Credit Loans”) to the Borrowers and to acquire Letter of Credit
Participations at the Borrowers’ request from time to time from and after the
Closing Date and prior to the Maturity Date, provided that the Total
Revolving Credit Outstandings (after giving effect to all requested Revolving
Credit Loans and Letters of Credit) shall not exceed $250,000 on the Closing
Date and shall not at any time exceed the Total Revolving Credit Commitment,
and provided, further that the sum of the aggregate principal
amount of outstanding Revolving Credit Loans made by each Lender and all
outstanding Letter of Credit Participations of such Lender shall not at any
time (after giving effect to all requested Revolving Credit Loans) exceed such
Lender’s Revolving Credit Commitment. 
Subject to the terms and conditions of this Agreement, the Borrowers may
borrow, repay, prepay and reborrow amounts, up to the limits imposed by this Section 2.1,
from time to time between the Closing Date and the Maturity Date upon request
given to the Administrative Agent pursuant to Section 2.3.  Each request for a Revolving Credit Loan or a
Letter of Credit hereunder shall constitute a representation and warranty by the
Borrowers that the conditions set forth in Sections 4.1 or 4.2 (as the case may
be) have been satisfied as of the date of such request.

 

(ii)           The Borrowers may (A) request
any of one or more of the Revolving Credit Lenders to increase the amount of
its Revolving Credit Commitment (which request shall be in writing and sent to
the Administrative Agent to forward to such Lender) and/or (B) request the
Administrative Agent to arrange for any of one or more banks or financial
institutions not a party hereto (a “New Lender”) to become a party to
and a Lender under this Agreement, provided that the identification and
arrangement of such New Lender to become a party hereto and a Lender under this
Agreement shall be reasonably acceptable to the Administrative Agent and will
be made by the Administrative Agent in consultation with the Borrowers, and provided
further that such New Lender is an Eligible Assignee, and provided
further that in no event shall the amount of the Total Revolving Credit
Commitment as increased pursuant to this Section 2.1(a) exceed
$3,000,000.  In no event may any Lender’s
Revolving Credit Commitment be increased without the prior written consent of
such Lender, and the failure of any Lender to respond to the Borrowers’ request
for an increase shall be deemed a rejection by such Lender of the Borrowers’
request.  The Total Revolving Credit
Commitment may not be increased if, at the time of any proposed increase
hereunder, a Default has occurred and is continuing.  Upon any request by the Borrowers to increase
the Total Revolving Credit Commitment, the Borrowers shall be deemed to have
represented and warranted on and as of the date of such request that no Default
has occurred and is 

 

24

 

continuing, giving effect to such increase.  Notwithstanding anything contained in this
Agreement to the contrary, no Lender shall have any obligation whatsoever to
increase the amount of its Revolving Credit Commitment, and each Lender may at
its option, unconditionally and without cause, decline to increase its
Revolving Credit Commitment.

 

(iii)          If any Lender is
willing, in its sole and absolute discretion, to increase the amount of its
Revolving Credit Commitment hereunder (such a Lender hereinafter referred to as
an “Increasing Lender”), it shall enter into a written agreement to that
effect with the Borrowers and the Administrative Agent, substantially in the
form of Exhibit C (a “Commitment Increase Supplement”),
which agreement shall specify, among other things, the amount of the increased
Revolving Credit Commitment of such Increasing Lender.  Upon the effectiveness of such Increasing
Lender’s increase in its Revolving Credit Commitment, Schedule 1 shall,
without further action, be deemed to have been amended appropriately to reflect
the increased Revolving Credit Commitment and of such Increasing Lender.  Any New Lender which is willing to become a
party hereto and a Lender hereunder shall enter into a written agreement with
the Borrowers and the Administrative Agent, substantially in the form of Exhibit D
(an “Additional Lender Supplement”), which agreement shall specify,
among other things, its Revolving Credit Commitment hereunder.  When such New Lender becomes a Lender
hereunder as set forth in the Additional Lender Supplement, Schedule 1
shall, without further action, be deemed to have been amended as appropriate to
reflect the Revolving Credit Commitment of such New Lender.  Upon the execution by the Administrative
Agent, the Borrowers and such New Lender of such Additional Lender Supplement,
such New Lender shall become and be deemed a party hereto and a “Lender”
hereunder for all purposes hereof and shall enjoy all rights and assume all
obligations on the part of the Lenders set forth in this Agreement, and its
Revolving Credit Commitment shall be the amount specified in its Additional
Lender Supplement.  Each New Lender which
executes and delivers an Additional Lender Supplement and becomes a party
hereto and a “Lender” hereunder pursuant to such Additional Lender Supplement
is hereinafter referred to as an “Additional Lender.”

 

(iv)          In no event shall an
increase in a Lender’s Revolving Credit Commitment or the Revolving Credit
Commitment of a New Lender which results in the Total Revolving Credit Commitment
exceeding the amount which is authorized at such time in resolutions previously
delivered to the Administrative Agent become effective until the Administrative
Agent shall have received a copy of the resolutions, in form and substance
reasonably satisfactory to the Administrative Agent, of the boards of directors
of the Borrowers authorizing the borrowings contemplated pursuant to such
increase, certified by the secretary or an assistant secretary of such
Borrower.  Upon the effectiveness of the
increase in a Lender’s Revolving Credit Commitment or the Revolving Credit
Commitment of a New Lender pursuant to the preceding sentence and execution by
an Increasing Lender of a Commitment Increase Supplement or by an Additional
Lender of an Additional Lender Supplement, the Borrowers shall make such
borrowing from such Increasing Lender or Additional Lender, and/or shall make
such prepayment of outstanding Revolving Credit Loans, as applicable, as shall
be required to cause the aggregate outstanding principal amount of such Loans
owing to each Lender (including 

 

25

 

each such Increasing Lender and Additional Lender) to
be proportional to such Lender’s share of the relevant Total Revolving Credit
Commitment after giving effect to any increase thereof.

 

(v)           Notwithstanding
anything herein to the contrary, in no event may the Total Revolving Credit
Commitment be increased hereunder unless (A) after giving effect to such
increase (and assuming the Total Revolving Credit Commitment, as so increased,
is fully utilized by the Borrowers), no Default will have occurred and be
continuing and the Borrowers will be in compliance on a pro forma basis with
all financial covenants under Section VII and (B) the Administrative
Agent shall have received a certificate of a Responsible Officer of each
Borrower certifying that the condition in clause (A) has been satisfied
(with calculations demonstrating compliance with such financial covenants on a
pro forma basis, in reasonable detail).

 

(vi)          No New Lender may become
an Additional Lender unless an Additional Lender Supplement (or counterparts
thereof) has been signed by such bank or financial institution and which
Additional Lender Supplement has been agreed to and acknowledged by the
Borrowers and acknowledged by the Administrative Agent.  No consent of any Lender or acknowledgment of
any of the other Lenders hereunder shall be required therefor.  In no event shall the Revolving Credit
Commitment of any Lender be increased by reason of any bank or financial
institution becoming an Additional Lender, or otherwise, but the Total
Revolving Credit Commitment shall be increased by the amount of each Additional
Lender’s Revolving Credit Commitment. 
Upon any Lender entering into a Commitment Increase Supplement or any
Additional Lender becoming a party hereto, the Administrative Agent shall
notify each other Lender thereof and shall deliver to each Lender a copy of the
Additional Lender Supplement executed by such Additional Lender, agreed to and
acknowledged by the Borrowers and acknowledged by the Administrative Agent, and
the Commitment Increase Supplement executed by such Increasing Lender, agreed
to and acknowledged by the Borrowers and acknowledged by the Administrative
Agent.

 

(b)           Term
Loans.  Upon the terms and subject to
the conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Borrowers herein, each of the Lenders having a
Term Loan Commitment agrees, severally and not jointly, to make a term loan
(individually, a “Term Loan”, and collectively, the “Term Loans”)
to the Borrowers on the Closing Date in the principal amount equal to such
Lender’s Term Loan Commitment, provided that the aggregate outstanding
principal amount of the Term Loans shall not at any time exceed the Total Term
Loan Commitment.

 

(c)           Limitations.  Each LIBOR Loan shall be in a minimum
principal amount of $100,000 or in integral multiples of $25,000 in excess of
such minimum amount, and each Base Rate Loan shall be in a minimum principal
amount of $100,000 or in integral multiples of $25,000 in excess of such
minimum amount.  No more than five (5) LIBOR
Loans may be outstanding at any time.

 

(d)           Conversions
of Loans.  Upon the terms and subject
to the conditions and limitations of this Agreement, the Borrowers may convert
all or any part of any outstanding Loan 

 

26

 

into a Loan of another
Type on any Business Day (which, in the case of a conversion of an outstanding LIBOR
Loan shall be the last day of the Interest Period applicable to such LIBOR
Loan).  The Borrowers shall give the
Administrative Agent prior notice of each such conversion (which notice shall
be effective upon receipt) in accordance with Section 2.3.  Notwithstanding the foregoing, the Borrowers
may not convert any Loan into a LIBOR Loan or continue a LIBOR Loan if there is
a continuing Default.

 

(e)           Termination
or Reduction of Commitments.

 

(i)            The Total Revolving
Credit Commitment shall terminate on the Maturity Date.

 

(ii)           The Total Term Loan
Commitment shall be reduced upon and by the amount of each mandatory or
optional payment or prepayment of the Term Loan.

 

(iii)          The Borrowers shall have
the right at any time and from time to time upon five (5) Business Days’
prior written notice to the Administrative Agent to reduce by $100,000, and in
integral multiples of $50,000 if in excess thereof, the Total Revolving Credit
Commitment or to terminate entirely the Lenders’ Commitments to make Revolving
Credit Loans hereunder, whereupon the Revolving Credit Commitments of the
Lenders shall be reduced pro rata in accordance with their respective
Applicable Percentages by the aggregate amount specified in such notice or
shall, as the case may be, be terminated entirely.

 

(iv)          Any mandatory payment of
Revolving Credit Loans made pursuant to the provisions of Section 2.8(b) shall
permanently reduce the Total Revolving Credit Commitment (allocated ratably to
each Lender based on each Lender’s Revolving Credit Commitment) by the amount
of such payment.

 

(v)           If, as a result of any
such reduction of the Total Revolving Credit Commitment, the LC Exposure at the
time would exceed the Total Revolving Credit Commitment or the amount of
Letters of Credit permitted to be outstanding under Sections 2.1(a) and
3.1(a), the Borrowers shall, in connection with any such reduction, deposit
with and pledge to the Administrative Agent for the benefit of the Lenders and
the LC Issuer cash in an amount equal to 105% of such excess.  If any Letters of Credit would remain
outstanding after the effective date of any such termination of the Total
Revolving Credit Commitment, in addition to satisfaction of all other
applicable terms and conditions of this Agreement, the Borrowers shall deposit
with and pledge to the Administrative Agent for the benefit of the Lenders and
the LC Issuer cash in an amount equal to 105% of the Maximum Drawing Amount of
under all Letters of Credit at the effective date of such termination.

 

(vi)          No such reduction or
termination of any Commitment may be reinstated.

 

27

 

2.2           The Notes.

 

(a)           The
Revolving Credit Loans shall be evidenced by a separate promissory note for
each Revolving Credit Lender, each such note to be in substantially the form of
Exhibit A-1 hereto, dated as of the Closing Date and completed with
appropriate insertions (each such note being referred to herein as a “Revolving
Credit Note” and collectively as the “Revolving Credit Notes”).  One Revolving Credit Note shall be payable to
the order of each Revolving Credit Lender in a principal amount equal to such
Lender’s Revolving Credit Commitment.

 

(b)           The Term
Loans shall be evidenced by a separate promissory note for each Term Lender in
the principal amount equal to such Lender’s Term Loan Commitment, each such
note to be in substantially the form of Exhibit A-2 hereto, dated
as of the Closing Date and completed with appropriate insertions (each such
note being referred to as a “Term Note” and collectively as the “Term
Notes”).

 

(c)           The
Borrowers irrevocably authorize each of the Lenders to make or cause to be
made, at or about the time of the Drawdown Date of any Loan or at the time of
receipt of any payment of principal on any Note, an appropriate notation on its
Note Record reflecting (as the case may be) the making of such Loan or the
receipt of such payment.  The outstanding
amount of the Loans set forth on the Note Records shall be prima facie
evidence of the principal amount thereof owing and unpaid to such Lenders,
absent manifest error, but the failure to record, or any error in so recording,
any such amount on any Lender’s Note Record shall not limit or otherwise affect
the obligations of the Borrowers hereunder or under any Note to make payments of
principal of or interest on any Note when due.

 

2.3           Notice
and Manner of Borrowing or Conversion of Loans.

 

(a)           Whenever
the Borrowers desire to obtain or continue a Loan hereunder or convert an
outstanding Loan into a Loan of another Type, the Borrowers shall give the
Administrative Agent a telephonic notice promptly confirmed by a written Notice
of Borrowing or Conversion, which telephonic notice shall be irrevocable and
which must be received no later than 11:00 a.m. Pacific time on the date (i) one
Business Day before the day on which the requested Loan is to be made as or
converted to a Base Rate Loan, and (ii) three Business Days before the day
on which the requested Loan is to be made or continued as or converted to a
LIBOR Loan.  Such Notice of Borrowing or
Conversion shall specify (i) the effective date and amount of each Loan or
portion thereof requested to be made, continued or converted, subject to the
limitations set forth in Section 2.1, (ii) the interest rate option
requested to be applicable thereto, and (iii) the duration of the
applicable Interest Period, if any (subject to the provisions of the definition
of the term “Interest Period”).  If such
Notice fails to specify the interest rate option to be applicable to the
requested Loan, then the Borrowers shall be deemed to have requested a Base
Rate Loan.  If the written confirmation
of any telephonic notification differs in any material respect from the action
taken by the Administrative Agent, the records of the Administrative Agent
shall be prima facie evidence of terms of the Loan requested absent
manifest error.

 

(b)           Subject
to the provisions of the definition of the term “Interest Period” herein, the
duration of each Interest Period for a LIBOR Loan shall be as specified in the
applicable Notice of Borrowing or Conversion. 
If no Interest Period is specified in a Notice of Borrowing or
Conversion with respect to a requested LIBOR Loan, then the Borrowers shall be 

 

28

 

deemed to have selected
an Interest Period of one month’s duration. 
If the Administrative Agent receives a Notice of Borrowing or Conversion
after the time specified in subsection (a) above, such Notice shall not be
effective.  If the Administrative Agent
does not receive an effective Notice of Borrowing or Conversion with respect to
an outstanding LIBOR Loan, or if, when such Notice must be given prior to the
end of the Interest Period applicable to such outstanding Loan, the Borrowers
shall have failed to satisfy any of the conditions hereof, the Borrowers shall
be deemed to have elected to convert such outstanding Loan in whole into a Base
Rate Loan on the last day of the then current Interest Period with respect
thereto.

 

2.4           Funding
of Loans.

 

(a)           Loans
shall be made by the Lenders pro rata in accordance with their
respective Applicable Percentages for such Loans, provided, however
that the failure of any Lender to make any Loan required to be made by it
hereunder shall not relieve any other Lender of its obligation to lend hereunder
(it being understood, however, that no Lender shall be responsible for the
failure of any other Lender to make any Loan required to be made by such other
Lender).

 

(b)           The
Administrative Agent shall notify the Term Lenders or Revolving Credit Lenders,
as the case may be, of each requested Loan and of the Drawdown Date thereof and
the amount of each Term Lender’s or Revolving Credit Lender’s pro  rata
share of such Loan.  If such notice is
given by the close of the Administrative Agent’s business on the Business Day
on which the Administrative Agent receives an effective Notice of Borrowing or
Conversion as provided in Section 2.3, each Lender will, not later than
1:00 p.m. Pacific time on the proposed Drawdown Date of such Loan, make
available to the Administrative Agent, at its head office, in immediately
available funds, the amount of such Lender’s pro  rata share of
the amount of such requested Loan.  Upon
receipt by the Administrative Agent of such amount, and upon the satisfaction
of the conditions set forth in Section 4.1 or 4.2 (to the extent
applicable), the Administrative Agent will make available to the Borrowers the
aggregate amount of such Loan.

 

(c)           The
Administrative Agent may, unless notified to the contrary by any Term Lender or
Revolving Credit Lender, as the case may be, prior to a Drawdown Date, assume
that each Term Lender or Revolving Credit Lender, as the case may be, has made
available to the Administrative Agent on such Drawdown Date the amount of such
Lender’s Applicable Percentage of the Loans to be made on such Drawdown Date,
and the Administrative Agent may (but it shall not be required to), in reliance
upon such assumption, make available to the Borrowers a corresponding
amount.  If any such Lender makes
available to the Administrative Agent such amount on a date after such Drawdown
Date, such Lender shall pay to the Administrative Agent on demand an amount
equal to the product of (i) the average, computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by
the Administrative Agent for federal funds acquired by the Administrative Agent
during each day included in such period, times (ii) the amount of
such Lender’s Applicable Percentage of any such Loans times (iii) a
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Lender’s
Applicable Percentage of such Revolving Credit Loans shall become immediately
available to the Administrative Agent, and the denominator of which is
365.  A statement of the 

 

29

 

Administrative Agent
submitted to such Lender with respect to any amounts owing under this paragraph
shall be prima  facie evidence of the amount due and owing to the
Administrative Agent by such Lender absent manifest error.  If the amount of such Lender’s Applicable
Percentage of such Loans is not made available to the Administrative Agent by
such Lender within three (3) Business Days following such Drawdown Date,
the Administrative Agent shall be entitled to recover such amount from the
Borrowers on demand, with interest thereon at the rate per annum applicable to
the Loans made on such Drawdown Date.

 

2.5           Interest
Rates and Payments of Interest.

 

(a)           Each
Loan which is a Base Rate Loan shall bear interest on the outstanding principal
amount thereof at a rate per annum equal to the Alternate Base Rate plus 0.25%,
which rate shall change contemporaneously with any change in the Alternate Base
Rate.  Such interest shall be payable
monthly in arrears on the first Business Day of each calendar month following
the Closing Date.

 

(b)           Each
Loan which is a LIBOR Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate per
annum equal to the LIBOR Rate plus 2.00%. 
Such interest shall be payable for such Interest Period on the last day
thereof.

 

(c)           (i)            If an Event of Default
shall occur, then (x) the unpaid balance of Loans shall bear interest, to
the extent permitted by law, compounded daily at an interest rate equal to 2%
per annum above the interest rate applicable to such Loans (determined pursuant
to subsections (a) and (b) above) in effect on the day such Event of
Default occurs, until such Event of Default is cured or waived, and (y) the
Letter of Credit Fees shall be increased by 2.00% per annum until such Event of
Default is cured or waived, and such interest shall be payable upon the demand
of the Administrative Agent.

 

(d)           So
long as any Lender shall be required under regulations of the Board of
Governors of the Federal Reserve System (“FRB”) (or any other banking
authority, domestic or foreign, to which such Lender is subject) to maintain
reserves with respect to liabilities or assets consisting of or including “Eurocurrency
Liabilities” (as defined in regulations issued from time to time by such Board
of Governors), the Borrowers shall pay to the Administrative Agent for the
account of each such Lender additional interest on the unpaid principal amount
of each LIBOR Loan made by such Lender from the date of such Loan until such
principal amount is paid in full, at an interest rate per annum equal at all
times to the remainder (rounded upwards, if necessary, to the next higher 1/100
of 1%) obtained by subtracting (i) the LIBOR Rate for the Interest Period
for such LIBOR Loan from (ii) the rate obtained by dividing such LIBOR
Rate by a percentage equal to 100% minus the Reserve Percentage of such Lender
for such Interest Period.  Such additional
interest shall be determined by such Lender and notified to the Borrowers
through the Administrative Agent, and shall be payable on each date on which
interest is payable on such LIBOR Loan.

 

(e)           All
agreements between or among the Borrowers and the Lenders are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Obligations or otherwise, shall the amount paid
or agreed to be 

 

30

 

paid to the Lenders for
the use or the forbearance of the Obligations exceed the maximum permissible
under applicable law.  As used herein,
the term “applicable law” shall mean the law in effect as of the date hereof
provided, however, that in the event there is a change in the law which results
in a higher permissible rate of interest, then the Loan Documents shall be
governed by such new law as of its effective date.  In this regard, it is expressly agreed that
it is the intent of the Borrowers and the Lenders in the execution, delivery
and acceptance of the Loan Documents to contract in strict compliance with the
laws of the State of New York from time to time in effect.  If, under or from any circumstances whatsoever,
fulfillment of any provision of any of the Loan Documents at the time of
performance of such provision shall be due, shall involve transcending the
limit of such validity prescribed by applicable law, then the Obligation to be
fulfilled shall automatically be reduced to the limits of such validity, and if
under or from circumstances whatsoever the Lenders should ever receive as
interest an amount which would exceed the highest lawful rate, such amount
which would be excessive interest shall be applied to the reduction of the
principal balance of the Obligations and not to the payment of interest.  This provision shall control every other
provision of all Loan Documents.

 

2.6           Fees.

 

(a)           The
Borrowers shall pay to the Administrative Agent for the benefit of the Lenders
a commitment fee (the “Commitment Fee”), computed on the basis of a
360-day year and payable quarterly in arrears on each Payment Date following
the Closing Date and on the Maturity Date, at a rate per annum equal to 0.50%
multiplied by the average obtained by dividing (i) the excess of (A) the
Total Revolving Credit Commitment for each day in the calendar quarter
immediately preceding such Payment Date over (B) the Total Revolving
Credit Outstandings for each day in the calendar quarter immediately preceding
such Payment Date, by (ii) the number of days in such period.

 

(b)           The
Borrowers shall pay to the Administrative Agent for the benefit of the Lenders
a fee (the “Letter of Credit Fee”) at a rate per annum equal to (i) the
Maximum Drawing Amount under each Letter of Credit multiplied by (ii) 2.00%.  The Letter of Credit Fee shall be paid
quarterly in arrears on each Payment Date following the Closing Date.

 

(c)           Without
limiting any of the Lenders’ other rights hereunder or by law, if any Loan or
any portion thereof or any interest thereon or any other amount payable
hereunder or under any other Loan Document is not paid within ten (10) days
after its due date, the Borrowers shall pay to the Administrative Agent for the
benefit of the Lenders on demand a late payment charge equal to 5% of the
amount of the payment due.

 

(d)           The
Borrowers shall pay to the Administrative Agent, such other fees as the
Borrowers and the Administrative Agent shall agree in writing.

 

(e)           The
Borrowers authorize the Administrative Agent and the Lenders to charge to their
Note Records or to any deposit account which the Borrowers may maintain with
any of them the interest, fees, charges, taxes and expenses provided for in
this Agreement, the other Loan Documents or any other document executed or
delivered in connection herewith or therewith. 
The Administrative Agent or the Lenders (with respect to any deposit
account held by 

 

31

 

any Lender) shall provide
to the Borrowers written notice of any such charge promptly following such
charge.

 

2.7           Repayment of Loans.

 

(a)           Term
Loans.  The Borrowers shall repay the
principal amount of the Term Loans in equal quarterly installments of $150,000
for the first six full calendar quarters after the Closing Date and equal quarterly
installments of $200,000 for the next nine full calendar quarters, payable on
each Payment Date commencing April 1, 2008, and the aggregate principal
amount of all Term Loans outstanding on the Maturity Date shall be paid on such
date.

 

(b)           Revolving
Credit Loans.  The Borrowers shall
repay to the Revolving Credit Lenders on the Maturity Date the aggregate
principal amount of all Revolving Credit Loans outstanding on such date.

 

2.8           Prepayments.

 

(a)           Optional.  The Borrowers may, upon notice to the Administrative
Agent in substantially the form of Exhibits J-1 or J-2, as the
case may be, at any time or from time to time voluntarily prepay Term Loans and
Revolving Credit Loans in whole or in part without premium or penalty (except
as provided in Section 2.10); provided that (A) such notice
must be received by the Administrative Agent not later than 11:00 a.m.
Pacific time (1) three Business Days prior to any date of prepayment of
LIBOR Loans and (2) on the date of prepayment of Base Rate Loans; (B) any
prepayment of LIBOR Loans shall be in a principal amount of $500,000 or a whole
multiple of $500,000 in excess thereof; and (C) any prepayment of Base
Rate Loans shall be in a principal amount of $100,000 or a whole multiple of
$25,000 in excess thereof or, in each case, if less, the entire principal
amount thereof then outstanding.  Each
such notice shall specify the date and amount of such prepayment and the Type(s) of
Loans to be prepaid and, if LIBOR Loans are to be prepaid, the Interest Period(s) of
such Loans.  The Administrative Agent
will promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s ratable portion of such prepayment (based on such
Lender’s Applicable Percentage in respect of the relevant Facility).  If such notice is given by the Borrowers, the
Borrowers shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein.  Any prepayment of a Loan shall be accompanied
by all accrued interest on the amount prepaid, and if such Loan is a LIBOR
Loan, any additional amounts required pursuant to Section 2.10.  Each prepayment of Term Loans pursuant to
this Section 2.8(a) shall be applied to the principal repayment
installments of the Term Loans (including, without limitation, the installment
due on the Maturity Date) in inverse order of maturity.

 

(b)           Mandatory.

 

(i)            Within the earlier of (x) 95
days after the end of each Fiscal Year (commencing with the Fiscal Year ending
on January 26, 2009), or (y) five Business Days after financial
statements have been delivered pursuant to Section 6.1(a) and the
related certificate has been delivered pursuant to Section 6.1(d) for
such Fiscal Year, the Borrowers shall prepay an aggregate principal amount of
Loans equal to fifty percent 

 

32

 

(50%) of Excess Cash Flow for the Fiscal Year covered
by such financial statements (such prepayments to be applied as set forth in
clauses (vi) and (viii) below).

 

(ii)           If the Borrowers or any
of their Subsidiaries Dispose of any property (other than any Disposition of
any property permitted by Section 8.4(b)) which results in the realization
by such Person of Net Cash Proceeds, the Borrowers shall prepay an aggregate
principal amount of Loans equal to 100% of such Net Cash Proceeds on the fifth
Business Day following the receipt thereof by such Person (such prepayments to
be applied as set forth in clauses (vi) and viii) below).

 

(iii)          Upon the sale or
issuance by the Borrowers of any of their Equity Interests, unless otherwise
agreed in writing by the Majority Lenders, the Borrowers shall prepay an
aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds
received therefrom promptly upon receipt thereof by the Borrowers (such
prepayments to be applied as set forth in clauses (vi) and (viii) below).

 

(iv)          Upon the incurrence or
issuance by the Borrowers or any of their Subsidiaries of any Indebtedness
(other than Indebtedness expressly permitted to be incurred or issued pursuant
to clauses (a) through (f) and (i) of Section 8.1), the
Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of
all Net Cash Proceeds received therefrom promptly upon receipt thereof by the
Borrowers or such Subsidiaries (such prepayments to be applied as set forth in
clauses (vi) and (viii) below).

 

(v)           Upon any Extraordinary
Receipt received by or paid to or for the account of the Borrowers or any of
their Subsidiaries, and not otherwise included in clause (ii), (iii) or (iv) of
this Section 2.8(b), the Borrowers shall prepay an aggregate principal
amount of Loans equal to 100% of all Net Cash Proceeds received therefrom
promptly upon receipt thereof by the Borrowers or such Subsidiaries (such
prepayments to be applied as set forth in clauses (vi) and (viii) below);
provided, however, that with respect to any proceeds of casualty
insurance or condemnation or eminent domain awards (or payments in lieu
thereof), at the election of the Borrowers (as notified by the Borrowers to the
Administrative Agent on or prior to the date of receipt of such insurance
proceeds, condemnation awards or indemnity payments), and so long as no Default
shall have occurred and be continuing, the Borrowers or such Subsidiaries may
apply such cash proceeds within one year after the receipt thereof to replace
or repair the equipment, fixed assets or real property in respect of which such
Net Cash Proceeds were received; and provided, further, however,
that any Net Cash Proceeds not so applied shall be promptly applied to the
prepayment of the Loans as set forth above in this Section 2.8(b)(v).

 

(vi)          Each prepayment of Loans
pursuant to the foregoing provisions of this Section 2.8(b) shall be
applied, first, to payment of the unpaid installments of principal of
the Term Loans in inverse order of maturity, until the Term Loans are paid in
full; and second, to the Revolving Credit Facility in the manner set
forth in clause (viii) of this Section 2.8(b).

 

33

 

(vii)         If for any reason the
Total Revolving Credit Outstandings at any time exceed the Total Revolving
Credit Commitment at such time, the Borrowers shall immediately prepay
Revolving Credit Loans and LC Disbursements and/or Cash Collateralize the
Maximum Drawing Amount, in an aggregate amount equal to such excess.

 

(viii)        Prepayments of the
Revolving Credit Facility made pursuant to this Section 2.8(b), first,
shall be applied ratably to any unpaid LC Disbursements, second, shall
be applied ratably to the outstanding Revolving Credit Loans, and, third,
shall be used to Cash Collateralize the remaining Maximum Drawing Amount; and,
in the case of prepayments of the Revolving Credit Facility required pursuant
to clauses (i), (ii), (iii), (iii) and (iv) of this Section 2.8(b),
the amount remaining, if any, after the prepayment in full of all LC
Disbursements and Revolving Credit Loans outstanding at such time and the cash
collateralization of the remaining Maximum Drawing Amount in full may be
retained by the Borrowers for use in the ordinary course of its business.  Upon a drawing under any Letter of Credit
that has been cash collateralized, the funds held as Cash Collateral shall be
applied (without any further action by or notice to or from the Borrowers or any
other Loan Party) to reimburse the LC Issuer or the Revolving Credit Lenders,
as applicable.

 

2.9           Method and
Allocation of Payments.

 

(a)           All
payments by the Borrowers hereunder and under any of the other Loan Documents
shall be made in lawful money of the United States in immediately available
funds, and shall be deemed to have been made only when made in compliance with
this Section 2.9.  All such payments
shall be made without set-off or counterclaim and free and clear of and without
deduction for any taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any nature (other
than Excluded Taxes) now or hereafter imposed or levied by any jurisdiction or
any political subdivision thereof or taxing or other authority therein unless
the Borrowers are compelled by law to make such deduction or withholding.  If any such obligation is imposed upon the
Borrowers with respect to any amount payable by it hereunder or under any of
the other Loan Documents, the Borrowers will pay to each Lender such additional
amount in U.S. Dollars as shall be necessary to enable such Lender to receive
the same net amount which such Lender would have received on such due date had
no such obligation been imposed upon the Borrowers.  The Borrowers will deliver promptly to each
Lender certificates or other valid vouchers or other evidence of payment
reasonably satisfactory to the Administrative Agent for all taxes or other
charges deducted from or paid with respect to payments made by the Borrowers
hereunder or under such other Loan Document. 
The Lenders may, and the Borrowers hereby authorize the Lenders to,
debit the amount of any payment not made by such time to the demand deposit
accounts of the Borrowers with the Lenders or to their Note Records.

 

(b)           Subject
to the provisions of Section 2.9(c), all payments hereunder shall be made
and allocated as follows:

 

(i)            all payments of
principal of and interest in respect of Revolving Credit Loans shall be made to
the Administrative Agent for the benefit of the Revolving Credit 

 

34

 

Lenders, pro rata in accordance with the
outstanding principal balance of Revolving Credit Loans made by each;

 

(ii)           all payments of
principal of and interest in respect of Term Loans shall be made to the
Administrative Agent for the benefit of the Term Lenders, pro rata in
accordance with the outstanding principal balance of Term Loans made by each
such Term Lender;

 

(iii)          all payments of Commitment
Fees and Letter of Credit Fees shall be made to the Administrative Agent for
the benefit of the Revolving Credit Lenders, pro rata in accordance with
their Revolving Credit Commitments; and

 

(iv)          payments of any other
amounts due hereunder shall be made to the Administrative Agent to be allocated
among the Administrative Agent, the Lenders and the LC Issuer as their
respective interests appear.

 

All such payments shall
be made at the Administrative Agent’s head office or at such other location
that the Administrative Agent may from time to time designate, in each case in
immediately available funds.

 

(c)           If the
Commitments shall have been terminated or the Obligations shall have been
declared immediately due and payable pursuant to Section 9.2, proceeds of
Collateral and all other funds received from or on behalf of the Borrowers by
any Lender or the LC Issuer in respect of Obligations (except funds received by
any Lender as a result of a purchase of a participant interest pursuant to Section 2.9(d) below)
shall be remitted to the Administrative Agent, and all such funds, together
with all other funds received by the Administrative Agent from or on behalf of
the Borrowers (including proceeds of Collateral) in respect of Obligations,
shall be applied by the Administrative Agent in the following manner and
order:  (i) first, to reimburse the
Administrative Agent, the LC Issuer and the Lenders, in that order, for any
amounts payable pursuant to Sections 12.2 and 12.3 hereof; (ii) second, to
the payment of Commitment Fees, Letter of Credit Fees, and any other fees
payable to the Administrative Agent or the Lenders hereunder; (iii) third,
to the payment of interest due on the Loans and the LC Disbursements; (iv) fourth,
to the payment of the outstanding principal balance of the Loans; (v) fifth,
to the payment of any other Obligations payable by the Borrowers, pro rata
to the outstanding principal balance of each; and (vi) any remaining funds
shall be paid to whoever shall be entitled thereto or as a court of competent
jurisdiction shall direct.

 

(d)           Each of
the Lenders hereby agrees that if it should receive any amount (whether by
voluntary payment, by realization upon security, by the exercise of the right
of set-off or banker’s lien, by counterclaim or cross action, by the
enforcement of any right under the Loan Documents, or otherwise) in respect of
principal of, or interest on, the Loans or any fees which are to be shared pro
rata among the Lenders, which, as compared to the amounts theretofore
received by the other Lenders with respect to such principal, interest or fees,
is in excess of such Lender’s Applicable Percentage of such principal, interest
or fees, such Lender shall share such excess, less the costs and expenses
(including, reasonable attorneys’ fees and disbursements) incurred by such
Lender in connection with such realization, exercise, claim or action, pro
rata with all other Lenders in proportion to their respective Applicable
Percentage for 

 

35

 

such Loans, and such
sharing shall be deemed a purchase (without recourse) by such sharing party of
participant interests in such Loans or such fees, as the case may be, owed to
the recipients of such shared payments to the extent of such shared payments; provided,
however, that (i) if all or any portion of such excess amount is
thereafter recovered from such Lender, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest
and (ii) the provisions of this paragraph shall not be construed to apply
to (x) any payment made by the Borrowers pursuant to and in accordance
with the express terms of this Agreement or (y) any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Loans or Letter of Credit Participations to any assignee or participant,
other than to the Borrowers or any Subsidiary thereof (as to which the
provisions of this paragraph shall apply). 
The Borrowers consent to the foregoing and agree, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrowers rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrowers in the
amount of such participation.

 

2.10         LIBOR
Indemnity.  If the Borrowers for any
reason make any payment of principal with respect to any LIBOR Loan on any day
other than the last day of an Interest Period applicable to such LIBOR Loan, or
fail to borrow or continue or convert to a LIBOR Loan after giving a Notice of
Borrowing or Conversion thereof pursuant to Section 2.3, or fail to prepay
a LIBOR Loan after having given notice thereof, the Borrowers shall pay to the
Administrative Agent for the benefit of the Lenders any amount required to
compensate the Lenders for any additional losses, costs or expenses which they
may reasonably incur as a result of such payment or failure, including, without
limitation, any loss (including loss of anticipated profits), costs or expense
incurred by reason of the liquidation or re-employment of deposits or other
funds required by the Lenders to fund or maintain such LIBOR Loan.  Without limiting the foregoing, the Borrowers
shall pay to the Administrative Agent a “yield maintenance fee” for the benefit
of the Lenders in an amount computed as follows:  the current rate for United States Treasury
securities (bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the term chosen pursuant to the
Fixed Rate Election as to which the prepayment is made, shall be subtracted
from the interest rate applicable (pursuant to Section 2.5(b)) to each
LIBOR Loan in effect at the time of prepayment. 
If the result is zero or a negative number, there shall be no yield
maintenance fee.  If the result is a
positive number, then the resulting percentage shall be multiplied by the
amount of the principal balance being prepaid. 
The resulting amount shall be divided by 360 and multiplied by the
number of days remaining in the term chosen pursuant to the Fixed Rate Election
as to which the prepayment is made.  Said
amount shall be reduced to present value calculated by using the above referenced
United States Treasury securities rate and the number of days remaining in the
term chosen pursuant to the Fixed Rate Election as to which prepayment is
made.  The resulting amount shall be the
yield maintenance fee due to the Lenders upon the payment of a LIBOR Loan under
the circumstances described in the first sentence of this Section.  The Borrowers shall pay such amount upon
presentation by the Administrative Agent of a statement setting forth the
amount and the Administrative Agent’s (or the affected Lenders’) calculation
thereof pursuant hereto, which statement shall be prima facie evidence
of the amounts owed hereunder absent manifest error.  If the Obligations are declared immediately
due and payable pursuant to Section 8.2, then any 

 

36

 

amount provided for in
this Section shall be due and payable in the same manner as though the
Borrowers had made a prepayment of the LIBOR Loans.

 

2.11         Computation
of Interest and Fees.  All
computations of interest for Base Rate Loans when the Alternate Base Rate is
determined by Wells Fargo’s “Base Rate” shall be made on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more fees or interest, as applicable, being paid than if computed on
the basis of a 365-day year).  If the due
date for any payment of principal is extended by operation of law, interest
shall be payable for such extended time. 
If any payment required by this Agreement becomes due on a day that is
not a Business Day such payment may be made on the next succeeding Business Day
(subject to the definition of the term “Interest Period”), and such extension
shall be included in computing interest in connection with such payment.

 

2.12         Changed
Circumstances; Illegality.

 

(a)           Notwithstanding
any other provision of this Agreement, in the event that:

 

(i)            on any date on which
the LIBOR Rate would otherwise be set the Administrative Agent shall have
determined in good faith (which determination shall be final and conclusive)
that adequate and fair means do not exist for ascertaining the LIBOR Rate, or

 

(ii)           at any time the
Administrative Agent or any Lender shall have determined in good faith (which
determination shall be final and conclusive and, if made by any Lender, shall
have been communicated to the Administrative Agent in writing) that:

 

(A)          the making or
continuation of or conversion of any Loan to a LIBOR Loan has been made
impracticable or unlawful by (1) the occurrence of a contingency that
materially and adversely affects the interbank LIBOR market or (2) compliance
by the Administrative Agent or such Lender in good faith with any applicable
law or governmental regulation, guideline or order or interpretation or change
thereof by any Governmental Authority charged with the interpretation or
administration thereof or with any request or directive of any such
Governmental Authority (whether or not having the force of law); or

 

(B)           the LIBOR Rate shall no
longer represent the effective cost to the Administrative Agent or such Lender
for U.S. dollar deposits in the interbank market for deposits in which it
regularly participates;

 

then,
and in any such event, the Administrative Agent shall forthwith so notify the
Borrowers thereof.  Until the
Administrative Agent notifies the Borrowers that the circumstances giving rise
to such notice no longer apply, the obligation of the Lenders to allow
selection by the Borrowers of the Type of Loan affected by the contingencies
described in this Section (herein called “Affected Loans”) shall be
suspended.  If at the time the
Administrative Agent so notifies the Borrowers, the Borrowers have previously given
the Administrative Agent a Notice of 

 

37

 

Borrowing
or Conversion with respect to one or more Affected Loans but such Loans have
not yet gone into effect, such notification shall be deemed to be a request for
Base Rate Loans.

 

(b)           In
the event of a determination of illegality pursuant to Section 2.12(a)(ii)(A) above,
the Borrowers shall, with respect to the outstanding Affected Loans, prepay the
same, together with interest thereon and any amounts required to be paid
pursuant to Section 2.9, on such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given) and may,
subject to the conditions of this Agreement, borrow a Loan of another Type in
accordance with Section 2.1 by giving a Notice of Borrowing or Conversion
pursuant to Section 2.3.

 

2.13         Increased
Costs.  In case any change made after
the Closing Date in any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any Governmental
Authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other Governmental Authority
(whether or not having the force of law):

 

(i)  subjects any
Lender or the LC Issuer to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by the Borrowers or otherwise
with respect to the transactions contemplated hereby (except for Indemnified
Taxes or Other Taxes covered by Section 2.15 and the imposition of, or any
change in the rate of, and Excluded Tax payable by such Lender or the LC
Issuer), or

 

(ii)  imposes,
modifies or deems applicable any deposit insurance, reserve, special deposit or
similar requirement against assets held by, or deposits in or for the account
of, or credit extended or participated in by, any Lender (other than such
requirements as are already included in the determination of the LIBOR Rate) or
the LC Issuer, or

 

(iii)  imposes upon
any Lender or the LC Issuer any other condition with respect to its obligations
or performance under this Agreement or in respect of any Letter of Credit,

 

and
the result of any of the foregoing is to increase the cost to such Lender or
the LC Issuer, reduce the income receivable by such Lender or the LC Issuer or
impose any expense upon such Lender or the LC Issuer with respect to any Loans
or its obligations under this Agreement or in respect of any Letter of Credit,
such Lender or the LC Issuer shall notify the Borrowers and the Administrative
Agent thereof.  The Borrowers agree to
pay to such Lender or the LC Issuer the amount of such increase in cost,
reduction in income or additional expense as and when such cost, reduction or
expense is incurred or determined, upon presentation by such Lender or the LC
Issuer of a statement in the amount and setting forth in reasonable detail such
Lender’s or the LC Issuer’s calculation thereof and the assumptions upon which
such calculation was based, which statement shall be prima facie evidence
of the amounts owing hereunder absent manifest error.

 

2.14         Capital
Requirements.  If after the date
hereof any Lender reasonably determines that (i) the adoption of or change
in any law, rule, regulation or guideline regarding capital requirements for
banks or bank holding companies, or any change in the interpretation or
application thereof by any Governmental Authority charged with the
administration thereof, or 

 

38

 

(ii) compliance by
such Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender’s or
such holding company’s capital as a consequence of such Lender’s Commitment to
make Loans hereunder or its obligations in respect of any Letter of Credit to a
level below that which such Lender or such holding company could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender’s or such holding company’s then existing policies with respect to
capital adequacy and assuming the full utilization of such entity’s capital) by
any amount deemed by such Lender to be material, then such Lender shall notify the
Borrowers and the Administrative Agent thereof. 
The Borrowers agree to pay to such Lender the amount of such reduction
of return on capital as and when such reduction is determined, payable within
90 days after presentation by such Lender of a statement in the amount and
setting forth in reasonable detail such Lender’s calculation thereof and the
assumptions upon which such calculation was based (which statement shall be prima
facie evidence of amounts payable hereunder absent manifest error) unless
within such 90 day period the Borrowers shall have prepaid in full all
Obligations to such Lender, in which event no amount shall be payable to such
Lender under this Section.  In
determining such amount, such Lender may use any reasonable averaging and attribution
methods.

 

2.15         Taxes.  (a)  Payments Free of Taxes.  Any and all payments by or on account of any
obligation of the Borrowers hereunder or under any other Loan Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes or Other Taxes, provided that if the Borrowers shall be required
by applicable law to deduct any Indemnified Taxes (including any Other Taxes)
from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, any Lender or the LC Issuer, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions and (iii) the Borrowers shall timely
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.

 

(b)           Payment
of Other Taxes by the Borrowers. 
Without limiting the provisions of subsection (a) above, the
Borrowers shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

 

(c)           Indemnification
by the Borrowers.  The Borrowers
shall indemnify the Administrative Agent, each Lender and the LC Issuer, within
10 days after demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section) paid by the
Administrative Agent, such Lender or the LC Issuer, as the case may be, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to the Borrowers by a Lender or the LC Issuer
(with a copy to the Administrative Agent), or by the Administrative Agent on
its own behalf or on behalf of a Lender or the LC Issuer, shall be conclusive
absent manifest error.

 

39

 

(d)           Evidence
of Payments.  Upon request of the
Administrative Agent, as soon as reasonably practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority,
the Borrowers shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

 

(e)           Status
of Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which the Borrowers are resident for tax purposes, or
any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrowers (with
a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrowers or the Administrative
Agent, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or
at a reduced rate of withholding.  In
addition, any Lender, if requested by the Borrowers or the Administrative
Agent, shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrowers or the Administrative Agent as will
enable the Borrowers or the Administrative Agent to determine whether or not
such Lender is subject to backup withholding or information reporting
requirements.

 

Without
limiting the generality of the foregoing, if any Borrower is resident for tax
purposes in the United States, any Foreign Lender shall deliver to the
Borrowers and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Borrowers or the Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), whichever of the following is
applicable:

 

(i)            duly completed copies
of Internal Revenue Service Form W-8BEN claiming eligibility for benefits
of an income tax treaty to which the United States is a party,

 

(ii)           duly completed copies
of Internal Revenue Service Form W-8ECI,

 

(iii)          in the case of a Foreign
Lender claiming the benefits of the exemption for portfolio interest under
section 881(c) of the Code, (A) a certificate to the effect that such
Foreign Lender is not (1) a “bank” within the meaning of section 881(c)(3)(A) of
the Code, (2) a “10 percent shareholder” of any Borrower within the
meaning of section 881(c)(3)(B) of the Code, or (3) a “controlled
foreign corporation” described in section 881(c)(3)(C) of the Code and (B) duly
completed copies of  Internal Revenue
Service Form W-8BEN, or

 

(iv)          any other form
prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with
such supplementary documentation as may be prescribed by applicable law to
permit the Borrowers to determine the withholding or deduction required to be
made.

 

40

 

(f)            Treatment
of Certain Refunds.  If the
Administrative Agent, any Lender or the LC Issuer determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrowers or with respect to which the
Borrowers have paid additional amounts pursuant to this Section, it shall pay
to the Borrowers an amount equal to such refund (but only to the extent of
indemnity payments made, or additional amounts paid, by the Borrowers under
this Section with respect to the Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent, such
Lender or the LC Issuer, as the case may be, and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrowers upon the request of the
Administrative Agent, such Lender or the LC Issuer, shall repay the amount paid
over to the Borrowers (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Administrative Agent,
such Lender or the LC Issuer if the Administrative Agent, such Lender or the LC
Issuer is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to
require the Administrative Agent, any Lender or the LC Issuer to make available
its tax returns (or any other information relating to its taxes that it deems
confidential) to the Borrowers or any other Person.

 

2.16         Parent as Agent for
Borrowers; Contribution.

 

(a)           Each
Borrower (other than Parent) hereby appoints Parent as its agent with respect
to the receiving and giving of any notices, requests, instructions, reports,
schedules, revisions, financial statements or any other written or oral
communications hereunder.  Parent shall
keep complete, correct and accurate records of all Loans and the application of
proceeds thereof, and all payments in respect of Loans and other amounts due
hereunder.  The Lenders are hereby
entitled to rely on any communications given or transmitted by Parent as if
such communication were given or transmitted by each and every Borrower; provided,
however, that any communication given or transmitted by any Borrower
other than Parent shall be binding with respect to such Borrower.  Any communication given or transmitted by the
Administrative Agent or any Lender to Parent shall be deemed given and transmitted
to each and every Borrower.

 

(b)           The
Borrowers hereby agree that, as among themselves, the ultimate responsibility
for repayment of the Obligations in the event of a Default by any or all of the
Borrowers on their respective Obligations shall be equitably apportioned among
the Borrowers in the proportion that each has benefited from the making by the
Lenders of the Loans, or if such equitable apportionment cannot reasonably be
determined, then in proportion to their respective net worths, determined in a
manner such that none of the Obligations of any Borrower would be subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Code or any comparable provisions of applicable
state law.  If any Borrower shall pay an
amount with respect to the Obligations in excess of its proportionate share,
determined as set forth in this subparagraph (b) (an “Overpaying
Borrower”), each other Borrower shall make a payment to such Overpaying
Borrower in an amount such that the aggregate amount of each Borrower’s
payments hereunder and in respect of the Obligations reflects its proportionate
share of the Obligations, as so determined. 
The foregoing agreement is intended to set forth only the rights and
obligations of the Borrowers among themselves and shall in no way affect the
obligations of any Borrower to the Lenders in respect of the Obligations.  Until the Obligations have been indefeasibly
paid in full (except for contingent indemnification and expense 

 

41

 

reimbursement obligations
for which a claim has not yet been made) and the Commitments shall have
terminated and all Letters of Credit shall have expired or been canceled, each
Borrower shall withhold exercise of any right of contribution hereunder against
any other Borrower.

 

SECTION III

 

LETTERS OF CREDIT

 

3.1           Issuance.

 

(a)           Upon the
terms and subject to the conditions hereof, the LC Issuer in reliance upon the
representations, warranties and covenants of the Borrowers contained herein,
agrees to issue letters of credit (the “Letters of Credit”) for the
account of the Borrowers in such form as may be requested from time to time by
the Borrowers and agreed to by the LC Issuer, provided that the Maximum
Drawing Amount (after giving effect to all requested Letters of Credit) shall
not at any time exceed the Letter of Credit Sublimit, provided, further
that the Total Revolving Credit Outstandings (after giving effect to all
requested Revolving Credit Loans and Letters of Credit) shall not at any time
exceed the Total Revolving Credit Commitment, and provided further that
no Letter of Credit shall have an expiration date later than five (5) Business
Days prior to the Maturity Date.  At
least three (3) Business Days prior to the proposed issuance date of any
Letter of Credit, the Borrowers shall deliver to the LC Issuer a Letter of
Credit Application setting forth the Maximum Drawing Amount of all Letters of
Credit (including the requested Letter of Credit), the requested language of
the requested Letter of Credit and such other information as the LC Issuer
shall require.  Each request for the
issuance of a Letter of Credit hereunder shall constitute a representation and
warranty by the Borrowers that the conditions set forth in Sections 4.1 or 4.2
(as the case may be) have been satisfied as of the date of such request.

 

(b)           Effective
upon the issuance of each Letter of Credit and without any further action on
the part of the LC Issuer or the Lenders in respect thereof, the LC Issuer
hereby grants to each Lender, and each Lender hereby acquires from the LC
Issuer, a participating interest in such Letter of Credit in an amount equal to
the product of (i) the amount of such Letter of Credit, times (ii) the
quotient of (A) such Lender’s Revolving Credit Commitment, divided by
(B) the Total Revolving Credit Commitment (the amount so calculated, the “Letter
of Credit Participation”), and each Lender severally agrees that it shall
be absolutely liable, without regard to the occurrence of any Default or Event
of Default, to the extent of such Lender’s pro rata share thereof, to
reimburse the LC Issuer on demand for the amount of each draft paid by the LC
Issuer under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrowers.

 

3.2           Reimbursement
Obligation of the Borrowers.  In
order to induce the LC Issuer to issue, extend and renew each Letter of Credit,
the Borrowers shall reimburse or pay to the Administrative Agent, for the
account of the LC Issuer or (as the case may be) the Lenders, with respect to
each Letter of Credit issued, extended or renewed by the LC Issuer hereunder as
follows:

 

42

 

(a)           on each
date that any draft presented under any Letter of Credit is honored by the LC
Issuer or the LC Issuer otherwise makes payment with respect thereto, (i) the
amount paid by the LC Issuer under or with respect to such Letter of Credit,
and (ii) the amount of any taxes, fees, charges or other costs and
expenses whatsoever incurred by the LC Issuer or any Lender in connection with
any payment made by the LC Issuer under, or with respect to, such Letter of
Credit; and

 

(b)           upon the
Maturity Date or the acceleration of the Maximum Drawing Amount pursuant to Section 9.2,
an amount equal to 105% of the then Maximum Drawing Amount of all Letters of
Credit, which amount shall be held by the LC Issuer as cash collateral for all
LC Disbursements.

 

Each
such payment shall be made to the Administrative Agent at its head office in
immediately available funds.  Interest on
any and all amounts remaining unpaid by the Borrowers under this Section 3.2
at any time from the date such amounts become due and payable (whether as
stated in this Section 3.2, by acceleration or otherwise) until payment in
full (whether before or after judgment) shall be payable to the Administrative
Agent, for the account of LC Issuer or (as the case may be) the Lenders, on
demand at a rate per annum equal to 2% above the Alternate Base Rate.

 

3.3           Letter of Credit
Payments.  If any draft shall be
presented or other demand for payment shall be made under any Letter of Credit,
the LC Issuer shall notify the Borrowers of the date and amount of the draft
presented or demand for payment and of the date and time when it expects to pay
such draft or honor such demand for payment. 
The responsibility of the LC Issuer to the Borrowers shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit. 
On the date that such draft is paid or other payment is made by the LC
Issuer, the LC Issuer shall promptly notify the Lenders of the amount of any
unpaid LC Disbursement.  All such unpaid
LC Disbursements with respect to Letters of Credit shall be deemed to be
Revolving Credit Loans.  No later than
1:00 p.m. Pacific time on the Business Day next following the receipt of
such notice, each Lender shall make available to the Administrative Agent, at
the Administrative Agent’s head office, in immediately available funds, such
Lender’s pro  rata share of such unpaid LC Disbursements, together
with an amount equal to the product of (i) the average, computed for the
period referred to in clause (iii) below, of the weighted average interest
rate paid by the Administrative Agent for federal funds acquired by the
Administrative Agent during each day included in such period, times (ii) the
amount equal to such Lender’s pro  rata share of such unpaid LC
Disbursement, times (iii) a fraction, the numerator of which is the
number of days that have elapsed from and including the date the LC Issuer paid
the draft presented for honor or otherwise made payment until the date on which
such Lender’s pro  rata share of such unpaid LC Disbursement shall
become immediately available to the Administrative Agent, and the denominator
of which is 365.

 

3.4           Obligations Absolute.

 

(a)           The Borrowers’
obligations to reimburse the LC Issuer for all LC Disbursements shall be
absolute and unconditional under any and all circumstances and irrespective of
the occurrence of any Default or Event of Default or any condition precedent 

 

43

 

whatsoever or any set
off, counterclaim or defense to payment which the Borrowers may have or have
had against the LC Issuer, the Administrative Agent, the Lenders or any
beneficiary of a Letter of Credit.  The
Borrowers further agree that the LC Issuer, the Administrative Agent and the
Lenders shall not be responsible for, and the Borrowers’ obligations in respect
of the LC Disbursements shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even if
such documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrowers, the
beneficiary of any Letter of Credit or any financing institution or other party
to which any Letter of Credit may be transferred or any claims or defenses
whatsoever of the Borrowers, against the beneficiary of any Letter of Credit or
any such transferee.

 

(b)           The LC
Issuer, the Administrative Agent and the Lenders shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit.  The Borrowers agree that any
action taken or omitted by the LC Issuer, the Administrative Agent or the
Lenders under or in connection with each Letter of Credit and the related
drafts and documents, if done in good faith, shall be binding upon the
Borrowers and shall not result in any liability on the part of the LC Issuer,
the Administrative Agent or the Lenders to the Borrowers.

 

(c)           Notwithstanding
the foregoing, this Section 3.4 shall not be construed to excuse the LC
Issuer from liability to the Borrowers to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrowers to the extent permitted by applicable law) suffered by the
Borrowers that are caused by the LC Issuer’s gross negligence or willful
misconduct.

 

3.5           Reliance by the LC
Issuer and the Administrative Agent. 
To the extent not inconsistent with Section 3.4, the LC Issuer and
the Administrative Agent shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit, draft writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the LC Issuer or the Administrative
Agent.

 

SECTION IV

 

CONDITIONS OF LOANS AND LETTERS OF CREDIT

 

4.1           Conditions
Precedent to Initial Loans and Letters of Credit.  The obligation of the Lenders to make the
initial Loans and of the LC Issuer to issue the initial Letter of Credit is
subject to the satisfaction of the following conditions precedent on or prior
to the Closing Date:

 

(a)           The
Administrative Agent’s receipt of the following, each of which shall be
originals, ‘PDF’ format or telecopies (followed promptly by originals), each
properly executed by a Responsible Officer of the signing Loan Party unless
otherwise specified, each dated the Closing Date (or, in the case of certificates
of governmental officials, a recent date 

 

44

 

before the Closing Date)
and each in form and substance satisfactory to the Administrative Agent:

 

(i)            executed counterparts
of this Agreement, sufficient in number for distribution to the Administrative
Agent, each Lender and the Borrowers;

 

(ii)           Notes executed by the
Borrowers in favor of each Lender requesting Notes;

 

(iii)          a security agreement in
substantially the form of Exhibit G-1, a collateral assignment of
contracts in the form of Exhibit G-2 and an intellectual property
security agreement in the form of Exhibit G-6 (together with each
other security agreement and security agreement supplement delivered pursuant
to Section 6.12, in each case as amended, collectively, the “Security
Agreement”), duly executed by each Loan Party, and a pledge agreement (the “Pledge
Agreement”) duly executed by the Parent in substantially the form of Exhibit H,
together with (subject to the provisions of Section 4.1(m)):

 

(A)          certificates
representing the pledged Equity Interests referred to in the Pledge Agreement
(if certificated) accompanied by undated stock powers executed in blank,

 

(B)           stamped receipt copies
of proper financing statements, duly filed on or before the Closing Date under
the Uniform Commercial Code of all jurisdictions that the Administrative Agent
may deem reasonably necessary or desirable in order to perfect the Encumbrances
created under the Security Agreement and the Pledge Agreement, covering the
Collateral described in the Security Agreement, and the Pledge Agreement,

 

(C)           completed requests for
information, dated on or before the date of the initial Credit Extension,  listing the financing statements referred to
in clause (B) above and all other effective financing
statements filed in the jurisdictions referred to in clause (B) above
that name any Loan Party as debtor, together with copies of such other
financing statements,

 

(D)          evidence of the
completion of all other actions, recordings and filings of or with respect to
the Security Agreement that the Administrative Agent may deem reasonably
necessary or desirable in order to perfect the Encumbrances created thereby,

 

(E)           account control
agreements, duly executed by the appropriate parties, with respect to all bank
accounts of the Loan Parties, other than bank accounts with Wells Fargo,

 

(F)           copies of the assigned
agreements subject to the collateral assignment of contracts referred to above,
together with any reasonably necessary 

 

45

 

consents to such assignment, duly executed by each
party to such assigned agreements other than the Loan Parties, and

 

(G)           evidence that all other
action that the Administrative Agent may deem reasonably necessary or desirable
in order to perfect the Encumbrances created under the Security Agreement has
been taken (including receipt of duly executed payoff letters and UCC-3
termination statements);

 

(iv)          the Fee Property
Security Documents;

 

(v)           Title Policies, issued
by the Title Company, insuring the liens of the Fee Property Security Documents
as a valid first liens upon the fee interests of each of the Fee Properties,
subject only to the Permitted Encumbrances. 
Each Title Policy when issued shall be reasonably acceptable to
Administrative Agent following a review of all title exception documents cited
in therein and shall specifically include by endorsement or affirmative
coverage (if permitted by Administrative Agent in its discretion), an ALTA 9
comprehensive endorsement, a deletion of creditors’ rights exception (if
available), and such other endorsements and coverages as Administrative Agent
may reasonably require, provided such endorsements and coverages are available;

 

(vi)          the Subordination
Agreement;

 

(vii)         Landlord Waivers as
required by and in form and substance satisfactory to the Administrative Agent,
executed by each of the Borrowers’ lessors, unless waived by the Administrative
Agent;

 

(viii)        such certificates of
resolutions or other action, incumbency certificates and/or other certificates
of Responsible Officers of each Loan Party as the Administrative Agent may
require evidencing the authority of each Loan Party to consummate the
transactions contemplated hereby and the identity, authority and capacity of
each Responsible Officer thereof authorized to act as a Responsible Officer in
connection with this Agreement and the other Loan Documents to which such Loan
Party is a party or is to be a party;

 

(ix)           such documents and
certifications as the Administrative Agent may reasonably require to evidence
that each Loan Party is duly organized or formed, is validly existing, in good
standing and qualified to engage in business in each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect;

 

(x)            an opinion of
Kilpatrick Stockton LLP counsel to the Loan Parties addressed to the Administrative
Agent and each Lender, as to the matters set forth in Exhibit I and
such other matters concerning the Loan Parties and the Loan Documents as the
Majority Lenders may reasonably request;

 

46

 

(xi)           opinion(s) of
local counsel to the Loan Parties (as applicable) with respect to the
enforceability of the Fee Property Security Documents in their local
jurisdictions and such other matters as the Administrative Agent may reasonably
require;

 

(xii)          a certificate of a
Responsible Officer of each Loan Party either (A) attaching copies of all
consents, licenses and approvals required in connection with the execution,
delivery and performance by such Loan Party and the validity against such Loan
Party of the Loan Documents to which it is a party, and such consents, licenses
and approvals shall be in full force and effect, or (B) stating that no
such consents, licenses or approvals are so required;

 

(xiii)         a certificate signed by a
Responsible Officer of each Borrower certifying that the conditions specified
in paragraphs (d), (e), (f), (g), (i), (k), (l), (m) and (n) and
clause (A) of paragraph (h) of this Section 4.1 have been
satisfied;

 

(xiv)        certificates attesting to
the Solvency of each Loan Party before and after giving effect to the
Acquisition, from its chief financial officer;

 

(xv)         evidence that all
insurance required to be maintained pursuant to the Loan Documents has been
obtained and is in effect, together with the certificates of insurance, naming
the Administrative Agent, on behalf of the Lenders, as an additional insured or
loss payee, as the case may be, under all insurance policies maintained with
respect to the assets and properties of the Loan Parties that constitute
Collateral;

 

(xvi)        evidence that the Existing
Credit Agreement and all outstanding Indebtedness for money borrowed of the
Borrowers, other than the Indebtedness set forth on Schedule 8.1(e) attached
hereto, has been, or concurrently with the transactions contemplated hereby is
being, paid and all Encumbrances securing such Indebtedness have been, or
concurrently with the transactions contemplated hereby are being, released or
assigned to the Administrative Agent, which requirement may be satisfied by
delivery of payoff letters in form and substance reasonably satisfactory to the
Administrative Agent;

 

(xvii)       a certificate of a
Responsible Officer of the Parent certifying that the Parent has previously
delivered to the Administrative Agent true and correct copies of the Asset
Purchase Agreement and all schedules, documents and agreements ancillary
thereto as in effect on the Closing Date;

 

(xviii)      with respect to any Fee
Property, such other, papers, instructions, documents, instruments or
certificates as the Title Company may reasonably require for the issuance of
Title Policies;

 

(xix)         such other assurances,
certificates, documents, consents or opinions as the Administrative Agent, the
LC Issuer or any Lender reasonably may require;

 

(xx)          a certificate reasonably
satisfactory to Administrative Agent, for benefit of itself and the Lenders,
provided by the Borrowers that sets forth information required by 

 

47

 

the Patriot Act including the identity of each
Borrower, the name and address of each Borrower and other information that will
allow the Administrative Agent or any Lender, as applicable, to identify each
Borrower in accordance with the Patriot Act; and

 

(xxi)         all amendments to the
Junior Subordinated Debt Documents necessary to replace references to M&I
Marshall & Ilsley Bank with references to the Administrative Agent,
and any other amendments reasonably requested by the Administrative Agent.

 

(b)           All fees
required to be paid to the Administrative Agent, the Lead Arranger and the
Lenders on or before the Closing Date shall have been paid or will be paid on
the Closing Date from the proceeds of the Loans pursuant to a closing statement
directive from the Borrowers to the Administrative Agent.

 

(c)           The
Borrowers shall have paid all fees, charges and disbursements of counsel to the
Administrative Agent (directly to such counsel if requested by the
Administrative Agent) to the extent invoiced prior to or on the Closing Date,
plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such fees, charges and disbursements
incurred or to be incurred by it through the closing proceedings (provided
that such estimate shall not thereafter preclude a final settling of accounts
between the Borrowers and the Administrative Agent) or will be paid on the
Closing Date from the proceeds of the Loans pursuant to a closing statement
directive from the Borrowers to the Administrative Agent.

 

(d)           There
shall not have occurred, since December 2, 2007, any change, effect or
circumstance that would constitute a “Material Adverse Effect” as that term is
defined in the Asset Purchase Agreement.

 

(e)           The
Borrowers shall have delivered to the Administrative Agent (i) a certified
copy of the final order by the Bankruptcy Court approving the Acquisition on
the Closing Date, in form reasonably satisfactory to counsel to the
Administrative Agent, and (ii) a certificate of no appeal issued by the
clerk of such court.

 

(f)            The
Acquisition shall have been consummated (or substantially simultaneously with
the borrowing of the initial Loans on the Closing Date shall be consummated) (i) substantially
in accordance with the Summary of Sources and Uses and (ii) in accordance
with the terms of the Asset Purchase Agreement without giving effect to (x) any
amendments or waivers to the Asset Purchase Agreement or (y) the delivery
of any updated disclosure schedules to the Asset Purchase Agreement, in any
case to the extent that such amendments, waivers or updated disclosure schedules
(taken as a whole) are material and adverse to the interests of the Lenders and
not consented to in writing by the Administrative Agent.

 

(g)           After
giving effect to the Acquisition, the Borrowers will have outstanding no
Indebtedness for money borrowed other than the Loans, the Junior Subordinated
Debt and the Indebtedness set forth on Schedule 8.1(e).

 

48

 

(h)           The
Administrative Agent shall have received the Borrowers’ projections for each of
the five Fiscal Years following the Closing Date, including consolidated
balance sheets and statements of income, retained earnings and cash flows in
form and substance satisfactory to the Administrative Agent.

 

(i)            After
giving effect to the consummation of the Acquisition, the making of any Loans,
the issuance of any Letters of Credit, and the application of proceeds of the
foregoing (including the payment of all fees and expenses in connection
therewith) on the Closing Date, substantially in accordance with the Summary of
Sources and Uses, the sum of (x) the Borrowers’ unrestricted cash and
Qualified Investments, plus (y) the excess of the Total Revolving
Credit Commitment over Total Revolving Credit Outstandings shall be at least
$2,000,000.

 

(j)            The
Administrative Agent shall not have become aware, after November 30, 2007,
of any new or inconsistent information or other matter not previously disclosed
to it relating to the Borrowers or the transactions contemplated by the
Commitment Letter dated as of January 3, 2008 addressed to the Parent that
the Administrative Agent, in its reasonable business judgment, deems material
and adverse relative to the information or other matters disclosed to it prior
to such date, including matters covered by any third-party diligence reports,
background checks or other financial, accounting, insurance or legal review.

 

(k)           The
representations made by the Barnhill’s Buffet, Inc. in the Asset Purchase
Agreement shall be true and accurate on and as of the Closing Date (but without
giving effect to the delivery of any amendments, waivers or updated disclosure
schedules pursuant to the Asset Purchase Agreement to the extent that such
amendments, waivers or Updated Schedules are not consented to in writing by the
Administrative Agent).

 

(l)            The
representations and warranties contained in Section IV and all other
representations and warranties made by the Borrowers under any other Loan
Document shall be true and accurate on and as of the Closing Date as though
made at and as of the Closing Date.

 

(m)          All
documents and instruments required to perfect the Administrative Agent’s
security interest in the Collateral shall have been executed and delivered and,
if applicable, be in proper form for filing, in each case as contemplated by
the foregoing provisions of this Section 4.1, and none of the Collateral
will be subject to any other pledges, security interests or liens except for
Permitted Encumbrances.

 

(n)           No
litigation, arbitration, proceeding or investigation shall be pending or, to
the Borrowers’ knowledge, threatened which questions the validity or legality
of the transactions contemplated by any Loan Document or the Asset Purchase
Agreement or seeks a restraining order, injunction or damages in connection
therewith, or which, in the reasonable judgment of the Administrative Agent,
might adversely affect the transactions contemplated hereby or thereby or might
reasonably be expected to have a Material Adverse Effect.

 

4.2           Conditions
Precedent to all Revolving Credit Loans and Letters of Credit after the Closing
Date.  The obligation of the Lenders
to make any Revolving Credit Loan, to continue LIBOR Loans or to convert Loans
of one Type to Loans of another Type, and of the LC Issuer to 

 

49

 

issue any Letter of
Credit, in each case after the Closing Date, is further subject to the
following conditions:

 

(a)           timely
receipt by the Administrative Agent of the Notice of Borrowing or Conversion
with respect to any Revolving Credit Loan, or by the LC Issuer of the Letter of
Credit Application with respect to any Letter of Credit;

 

(b)           the
outstanding Loans and Letters of Credit do not and, after giving effect to any
requested Revolving Loan, will not exceed the limitations set forth in Sections
2.1 and 3.1 hereof;

 

(c)           the
representations and warranties contained in Section V hereof and all
representations and warranties made by the Borrowers and each other Loan Party
under any other Loan Document shall be true and accurate in all material
respects on and as of the date of such Notice of Borrowing or Conversion or
Letter of Credit Application and on the effective date of the making,
continuation or conversion of each Revolving Credit Loan or issuance of each
Letter of Credit as though made at and as of each such date (except to the
extent that such representations and warranties expressly relate to an earlier
date in which case such representations and warranties shall be true and
correct as of such earlier date);

 

(d)           no
Default or Event of Default shall have occurred and be continuing at the time
of, and immediately after, the making of such requested Revolving Credit Loan
or the issuance of such requested Letter of Credit;

 

(e)           no
litigation, arbitration, proceeding or investigation shall be pending or threatened
which questions the validity or legality of the transactions contemplated by
any Loan Document or seeks a restraining order, injunction or damages in
connection therewith, or which, in the judgment of the Administrative Agent,
might adversely affect the transactions contemplated hereby or thereby or might
have a Material Adverse Affect on the Borrowers; and

 

(f)            no
change shall have occurred in any law or regulation or interpretation thereof
that, in the opinion of counsel for any Lender, would make it illegal or
against the policy of any governmental agency or authority for such Lender to
make Loans hereunder or, in the opinion of counsel for the LC Issuer, for the
LC Issuer to issue Letters of Credit hereunder (as the case may be).

 

The
making, continuation or conversion of each Loan and the issuance of each Letter
of Credit shall be deemed to be a representation and warranty by the Borrowers
on the date of the making, continuation or conversion of such Loan as to the
accuracy of the facts referred to in subsection (c) of this Section 4.2
and of the satisfaction of all of the conditions set forth in this Section 4.2.

 

50

 

SECTION V

 

REPRESENTATIONS
AND WARRANTIES

 

The Borrowers,
jointly and severally, represent and warrant to the Administrative Agent and
the Lenders that:

 

5.1           Existence,
Qualification and Power.  Each Loan
Party and each of its Subsidiaries (a) is duly organized or formed,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, organization or formation, (b) has all requisite power and
authority and all requisite governmental licenses, authorizations, consents and
approvals to (i) own or lease its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents and the Senior
Debt Documents to which it is a party, and (c) is duly qualified and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification or license; except in each case referred to in
clause (b)(i) or (c), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

5.2           Authorization; No
Contravention.  The execution,
delivery and performance by each Loan Party of each Loan Document to which such
Person is or is to be a party have been duly authorized by all necessary
corporate or other organizational action, and do not and will not (a) contravene
the terms of any of such Person’s organization documents; (b) conflict
with or result in any breach or contravention of, or the creation of any
Encumbrance under, or require any payment to be made under (i) any
contractual obligation to which such Person is a party or affecting such Person
or the properties of such Person or any of its Subsidiaries or (ii) any
order, injunction, writ or decree of any Governmental Authority or any arbitral
award to which such Person or its property is subject; or (c) violate any
law, rule or regulation.

 

5.3           Governmental
Authorization; Other Consents. 
Except as set forth on Schedule 5.3, no approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with (a) the execution, delivery or performance by, or
enforcement against, any Loan Party of this Agreement or any other Loan
Document, or for the consummation of the Acquisition, (b) the grant by any
Loan Party of the Encumbrances granted by it pursuant to the Security
Documents, (c) the perfection or maintenance of the Encumbrances created
under the Security Documents (including with respect to the lien priority
thereof) or (d) the exercise by the Administrative Agent or any Lender of
its rights under the Loan Documents or the remedies in respect of the
Collateral pursuant to the Security Documents. 
All applicable waiting periods in connection with the Acquisition have
expired without any action having been taken by any Governmental Authority
restraining, preventing or imposing materially adverse conditions upon the
Acquisition or the rights of the Loan Parties or its Subsidiaries freely to
transfer or otherwise dispose of, or to create any Encumbrance on, any
properties now owned or hereafter acquired by any of them.

 

5.4           Binding Effect.  This Agreement has been, and each other Loan
Document, when delivered hereunder, will have been, duly executed and delivered
by each Loan Party that is party thereto. 
This Agreement constitutes, and each other Loan Document when so
delivered will constitute, a legal, valid and binding obligation of such Loan
Party, enforceable against each 

 

51

 

Loan Party that is party
thereto in accordance with its terms except as limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors’ rights generally, and except as the remedy of specific
performance or of injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.

 

5.5           Financial
Statements; No Material Adverse Effect. 
(a)  The audited consolidated balance sheet of the Borrowers as of
the end of, and the related consolidated statements of operations, retained
earnings and cash flows for, the Fiscal Year ended January 29, 2007 (i) were
prepared in accordance with GAAP consistently applied throughout the period
covered thereby; (ii) fairly present the financial condition of the
Borrowers and their Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, in each case except as otherwise
expressly noted therein; (iii) show all material indebtedness and other
liabilities, direct or contingent, of the Borrowers and their Subsidiaries as
of the date thereof, including liabilities for taxes, material commitments and
Indebtedness; and (iv) have been delivered to the Administrative Agent.

 

(b)           The unaudited
consolidated balance sheet of the Borrowers and their Subsidiaries as of the
end of, and the related consolidated statements of operations, retained
earnings and cash flows for, the Fiscal Month ended  November 5, 2007 and for the 13 Fiscal
Months then ended (the “Financial Statements”) (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby; (ii) fairly present the financial
condition of the Borrowers and their Subsidiaries as of the date thereof and
their results of operations for the period covered thereby in accordance with
GAAP consistently applied throughout the period covered thereby, in each case
except as otherwise expressly noted therein and subject to normal, recurring
year-end adjustments that shall not in the aggregate be material in amount and
the absence of notes thereto; and (iii) have been delivered to the
Administrative Agent.  Schedule 5.5 sets forth all material
Indebtedness and other liabilities, direct or contingent, of the Borrowers and
their consolidated Subsidiaries as of the date of such Financial Statements,
including liabilities for taxes, material commitments and Indebtedness, not set
forth in such Financial Statements.

 

(c)           Since the
date of the Financial Statements, there has been no event or circumstance,
either individually or in the aggregate, that has had or could reasonably be
expected to have a Material Adverse Effect.

 

(d)           The Pro
Forma Financial Statements, copies of which have been furnished to the
Administrative Agent, fairly present the consolidated pro forma financial
condition of the Borrowers and their Subsidiaries as at the date thereof and
the consolidated pro forma results of operations of the Borrowers and their
Subsidiaries for the period ended on such date, in each case giving effect to
the Acquisition, all in accordance with GAAP.

 

(e)           The
projected financial information of the Borrowers and their Subsidiaries that
has been provided by the Borrowers to the Lenders prior to the date hereof was
prepared in good faith on the basis of the assumptions stated therein, which
assumptions were reasonable in light of the conditions known to the Borrowers
at the time of delivery of such forecasts, and represented, at the time of
delivery, the reasonable estimate by the Borrowers of 

 

52

 

the Borrowers’ future
financial condition and performance with respect to the time periods stated
therein.

 

5.6           Litigation.  There are no actions, suits, proceedings,
claims or disputes pending or, to the knowledge of the Borrowers, overtly
threatened or contemplated, at law, in equity, in arbitration or before any
Governmental Authority, by or against the Borrowers or any of their
Subsidiaries or against any of their properties or revenues that (a) purport
to affect or pertain to this Agreement, any other Loan Document or the
consummation of the Acquisition, or (b) either individually or in the
aggregate, if determined adversely, could reasonably be expected to have a
Material Adverse Effect.

 

5.7           No Default.  No Loan Party or any Subsidiary thereof is in
default under or with respect to, or a party to, any contractual obligation
that could, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  No
Default has occurred and is continuing or would result from the consummation of
the transactions contemplated by this Agreement, any other Loan Document or the
Junior Subordinated Debt Documents.

 

5.8           Ownership of
Property; Encumbrances; Investments. 
(a)  Each Loan Party and each of its Subsidiaries has good record
and marketable title in fee simple to, or valid leasehold interests in all real
property necessary or used in the ordinary conduct of its business, except for
Permitted Encumbrances and such defects in title as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)           Schedule
5.8(b) sets forth a complete and accurate list of all Encumbrances on
the property or assets of each Loan Party and each of its Subsidiaries, showing
as of the date hereof the lienholder thereof, the principal amount of the
obligations secured thereby and the property or assets of such Loan Party or
such Subsidiary subject thereto.  The
property of each Loan Party and each of its Subsidiaries is subject to no
Encumbrances, other than Permitted Encumbrances and Encumbrances set forth on Schedule
5.8(b).

 

(c)           Schedule
5.8(c) sets forth a complete and accurate list of all real property
owned in fee by each Loan Party and each of its Subsidiaries (each a “Fee
Property”), showing as of the date hereof the street address, county or
other relevant jurisdiction, state, record owner and book and estimated fair
value thereof and noting any contractual obligations, whether contingent or
otherwise, to sell such Fee Property. 
Each Loan Party and each of its Subsidiaries has good, marketable and
insurable fee simple title to each Fee Property owned by such Loan Party or
such Subsidiary, free and clear of all Encumbrances, other than Encumbrances
created or permitted by the Loan Documents or set forth on such Schedule.

 

(d)           (i) Schedule
5.8(d)(i) sets forth a complete and accurate list of all leases of
real property under which any Loan Party or any Subsidiary of a Loan Party is
the lessee, showing as of the date hereof the street address, county or other
relevant jurisdiction, state, lessor, lessee and expiration date thereof.  Each such lease is the legal, valid and
binding obligation of the lessor thereof, enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors’ rights generally, and
except as the remedy of specific performance or of injunctive 

 

53

 

relief is subject to the
discretion of the court before which any proceeding therefor may be brought.

 

(ii)  Schedule
5.8(d)(ii) sets forth a complete and accurate list of all leases of
real property under which any Loan Party or any Subsidiary of a Loan Party is
the lessor, showing as of the date hereof the street address, county or other
relevant jurisdiction, state, lessor, lessee and expiration date thereof.  Each such lease is the legal, valid and
binding obligation of the lessee thereof, enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors’ rights generally, and
except as the remedy of specific performance of injunctive relief is subject to
the discretion of the court before which any proceeding therefore may be
brought.

 

(e)           Schedule
5.8(e) sets forth a complete and accurate list of all Investments held
by any Loan Party or any Subsidiary of a Loan Party on the date hereof, showing
as of the date hereof the amount, obligor or issuer and maturity, if any,
thereof.

 

5.9           Environmental
Compliance.  The Borrowers and its
Subsidiaries have obtained all permits, licenses and other authorizations and
have made all filings, registrations and other submittals which are required
under all Environmental Laws, except to the extent failure to have any such permit,
license or authorization would not have a Material Adverse Effect.  The Borrowers and its Subsidiaries are in
compliance with the terms and conditions of all such permits, licenses and
authorizations, and are also in compliance with all applicable orders, decrees,
judgments and injunctions issued, entered, promulgated or approved under any
Environmental Law, except to the extent failure to comply would not have a
Material Adverse Effect.  The Loan
Parties and their respective Subsidiaries conduct in the ordinary course of
business a review of claims they receive alleging potential liability or
responsibility for violation of any Environmental Law on their respective
businesses, operations and properties, and as a result thereof the Borrowers
have reasonably concluded that such Environmental Laws and claims could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  The Borrowers and their
Subsidiaries have made available to Administrative Agent copies of all existing
environmental reports, reviews and audits and all documents pertaining to
actual or potential environmental liabilities, in each case to the extent such
reports, reviews, audits and documents are in their possession, custody or
control.

 

5.10         Insurance.  The properties of the Borrowers and their
Subsidiaries are insured with financially sound and reputable insurance
companies not Affiliates of the Borrowers, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the applicable Borrower or Subsidiary operates.

 

5.11         Taxes.  The Borrowers and their Subsidiaries have
filed all Federal, state and other material tax returns and reports required to
be filed, and have paid all Federal, state and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except those
which are being contested in good faith by appropriate proceedings diligently
conducted and for which adequate reserves have been provided in accordance with
GAAP.  There is no proposed tax 

 

54

 

assessment against the
Borrowers or any Subsidiary that would, if made, have a Material Adverse
Effect.  No Loan Party or any Subsidiary
thereof is party to any tax sharing agreement.

 

5.12         ERISA Compliance.  (a)  Each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Federal or state laws.  Each Plan that is
intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS or an application for such a letter
is currently being processed by the IRS with respect thereto and, to the
best knowledge of the Borrowers, nothing has occurred which would prevent, or
cause the loss of, such qualification. 
The Borrowers and each ERISA Affiliate have made all required
contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any
Plan.

 

(b)           There are
no pending or, to the best knowledge of the Borrowers, overtly threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material
Adverse Effect.  There has been no prohibited
transaction or violation of the fiduciary responsibility rules with
respect to any Plan that has resulted or could reasonably be expected to result
in a Material Adverse Effect.

 

(c)           (i) No
ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) neither the
Borrowers nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
the Borrowers nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the
Borrowers nor any ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.

 

5.13         Subsidiaries; Equity
Interests; Loan Parties.  The Borrowers
have no Subsidiaries other than those specifically disclosed in Part (a) of
Schedule 5.13.  All of the
outstanding Equity Interests in such Subsidiaries have been validly issued, are
fully paid and non-assessable and are owned by a Loan Party in the amounts
specified on Part (a) of Schedule 5.13 free and clear of all
Encumbrances except those created under the Security Documents.  The Borrowers have no equity investments in
any other corporation or entity other than those specifically disclosed in Part (b) of
Schedule 5.13.  All of the
outstanding Equity Interests in the Borrowers have been validly issued, are
fully paid and non-assessable and, except with respect to the Parent’s Equity
Interests, are owned by the Persons in the amounts specified on Part (c) of
the Schedule 5.13 free and clear of all Encumbrances except those
created under the Security Documents.  Schedule
5.13 is a complete and accurate list of all Loan Parties, showing as of the
Closing Date (as to each Loan Party) the jurisdiction of its incorporation or
formation, the address of its principal place of business and its U.S. taxpayer
identification number or, in the case of any non-U.S. Loan Party that does not
have a U.S. taxpayer identification number, its unique identification number
issued to it by the jurisdiction of its incorporation.  The copy of the charter or other
organizational document of each Loan Party and each amendment thereto provided
pursuant to Section 4.1(a)(ix) is a true and correct copy of each
such document, each of which is valid and in full force and effect.

 

55

 

5.14         Margin Regulations;
Investment Company Act.  (a) 
The Borrowers are not engaged and will not engage, principally or as one of its
important activities, in the business of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the FRB), or extending credit for
the purpose of purchasing or carrying margin stock.

 

(b)           None of
the Borrowers, any Person controlling of the Borrowers, or any Subsidiary is or
is required to be registered as an “investment company” under the Investment
Company Act of 1940.

 

5.15         Disclosure.  The Borrowers have disclosed to the
Administrative Agent and the Lenders all agreements, instruments and corporate
or other restrictions to which they or any of their Subsidiaries is subject,
and all other matters known to it, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate
or other information furnished (whether in writing or orally) by or on behalf
of any Loan Party to the Administrative Agent or any Lender in connection with
the transactions contemplated hereby and the negotiation of this Agreement or
delivered hereunder or under any other Loan Document (in each case as modified
or supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrowers represent only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.

 

5.16         Compliance with Laws.  Each Loan Party and each Subsidiary thereof
is in compliance in all material respects with the requirements of all laws, rules and
regulations and all orders, writs, injunctions and decrees applicable to it or
to its properties, except in such instances in which (a) such requirement
of law or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

 

5.17         Intellectual Property;
Licenses, Etc.  Each Loan Party and
each of its Subsidiaries owns, or possesses the right to use, all of the
trademarks, service marks, trade names, copyrights, patents, patent rights,
franchises, licenses and other intellectual property rights (collectively, “IP
Rights”) that are reasonably necessary for the operation of their
respective businesses, without conflict with the rights of any other Person,
and Schedule 5.17 sets forth a complete and accurate list of all such IP
Rights owned, licensed to or used by each Loan Party and each of its
Subsidiaries (other than “off the shelf” software products used in the ordinary
course of business).  To the knowledge of
the Borrowers, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by any Loan Party or any of its Subsidiaries infringes upon any
rights held by any other Person.  No
claim or litigation regarding any of the foregoing is pending or, to the
knowledge of the Borrowers, threatened, which, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.18         Solvency.  Each Loan Party is, individually and together
with its Subsidiaries on a consolidated basis, Solvent.

 

56

 

5.19         Casualty, Etc.  Neither the businesses nor the properties of
any Loan Party or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.20         Labor Matters.  There are no collective bargaining agreements
or Multiemployer Plans covering the employees of the Borrowers or any of their
Subsidiaries as of the Closing Date and neither the Borrowers nor any of their
Subsidiaries has suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.

 

5.21         Security Documents.  The provisions of the Security Documents are
effective to create in favor of the Administrative Agent for the benefit of the
Secured Parties a legal, valid and enforceable first priority Encumbrance
(subject to Permitted Encumbrances) on all right, title and interest of the
respective Loan Parties in the Collateral described therein.  Except for filings completed prior to the
Closing Date as contemplated hereby and by the Security Documents or addressed
in Section 4.1(m), no filing will be necessary to perfect or protect such
Encumbrances.

 

5.22         Intentionally Deleted.

 

5.23         Compliance with OFAC Rules and
Regulations.  Neither the Borrowers,
nor any Subsidiary nor any Affiliate of the Borrowers (i) is a Sanctioned
Person, (ii) has any assets in Sanctioned Countries, or (iii) derives
any of its operating income from investments in, or transactions with
Sanctioned Persons or Sanctioned Countries. 
No part of the proceeds of any Loan hereunder will be used directly or
indirectly to fund any operations in, finance any investments or activities in or
make any payments to, a Sanctioned Person or a Sanctioned Country.

 

5.24         Foreign Assets Control
Regulations, Etc.  Neither the
Borrowers nor any of their Subsidiaries is an “enemy” or an “ally of the enemy”
within the meaning of Section 2 of the Trading with the Enemy Act of the
United States of America (50 U.S.C. App. §§ 1 et seq.), as amended.  Neither the Borrowers nor any of their
Subsidiaries is in violation of (a) the Trading with the Enemy Act, as
amended, (b) any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto or (c) the
Patriot Act.  Neither the Borrowers nor
any of their Subsidiaries (i) is a blocked person described in Section 1
of the Anti-Terrorism Order or (ii) to the best of the Borrowers’
knowledge, engages in any dealings or transactions, or is otherwise associated,
with any such blocked person.

 

5.25         Parent Public Filings.  As of the respective dates thereof, the
Parent SEC Documents were prepared in all material respects in accordance with
the Exchange Act and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.  Parent has timely
filed all forms, reports and documents with the SEC required to be filed by it
pursuant to the Securities Act and the Exchange Act.  The Parent SEC Documents complied as to form,
at the time such form, document or report was filed, in all material respects
with the applicable requirements of the Securities Act and the 

 

57

 

Exchange Act.  The consolidated financial statements of
Parent included in the Parent SEC Documents (the “Parent Financial
Statements”), including in each case the notes thereto, have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods covered
thereby, except as otherwise noted therein, are true, accurate and complete in
all material respects, and fairly present the consolidated financial condition
and the consolidated results of operations and cash flow of Parent, on the
bases therein stated, as of the respective dates thereof, and for the
respective periods covered thereby subject, in the case of unaudited financial
statements, to normal nonmaterial year-end audit adjustments and accruals.

 

SECTION VI

 

AFFIRMATIVE COVENANTS

 

The
Borrowers covenant that so long as any Loan, Letter of Credit or other
Obligation, remains outstanding or the Lenders or the LC Issuer have any
obligation to lend or to issue any Letter of Credit hereunder:

 

6.1           Financial
Statements.  The Borrowers shall
furnish to the Administrative Agent and each Lender:

 

(a)           as
soon as available to the Borrowers, but in any event within 90 days after the
end of each Fiscal Year, the consolidated balance sheet of the Borrowers and
all of their Subsidiaries as of the end of such year and related consolidated
statements of income, retained earnings and cash flow of the Borrowers and all
of their Subsidiaries for such year, prepared in accordance with GAAP and
audited and certified without qualification by the Borrowers’ Accountants; and
concurrently with such financial statements, a copy of the Borrowers’
Accountants management report and a written statement by the Borrowers’
Accountants that, in the making of the audit necessary for their report and
opinion upon such financial statements they have obtained no knowledge of any
Default or, if in the opinion of such accountants any such Default exists, they
shall disclose in such written statement the nature and status thereof;

 

(b)           as
soon as available to the Borrowers, but in any event within 45 days after the
end of each Fiscal Quarter of each Fiscal Year, a consolidated balance sheet of
the Borrowers and all their Subsidiaries as of the end of, and related
consolidated statements of income, retained earnings and cash flow of the Borrowers
and all of their Subsidiaries for, the Fiscal Quarter then ended and portion of
the Fiscal Year then ended, prepared in accordance with GAAP and certified on
behalf of the Borrowers by the chief financial officer of the Parent, subject
to normal, recurring year-end adjustments that shall not in the aggregate be
material in amount;

 

(c)           as
soon as available to the Borrowers, but in any event within 30 days following
the end of each Fiscal Month, a restaurant by restaurant statement of revenue,
cash flow and Consolidated EBITDA, for such Fiscal Month, for all restaurants
owned or operated by the Borrowers or their Subsidiaries (including a statement
of revenue, cash flow and Consolidated EBITDA comparing year over year
performance for all restaurants operated for more than one year), prepared in
accordance with GAAP and certified on behalf of the Borrowers by the chief
financial officer of the Parent;

 

58

 

(d)           concurrently
with the delivery of each financial statement pursuant to subsections (a) and
(b) of this Section 6.1, a report in substantially the form of Exhibit F
hereto signed on behalf of the Borrowers by the chief financial officer of the
Parent;

 

(e)           at
least fifteen (15) days prior to the first day of each Fiscal Year, the
Borrowers’ projections for such Fiscal Year, prepared on a Fiscal Month basis
and including consolidated balance sheets and statements of income, retained
earnings and cash flows;

 

(f)            concurrently
with their filing, true and correct copies of the Borrowers’ federal and
material state income tax returns and each amendment thereto;

 

(g)           promptly
after the receipt thereof by the Borrowers, copies of any reports (including
any so-called management letters) submitted to the Borrowers by independent
public accountants in connection with any annual or interim audit or review of
the accounts of the Borrowers and/or their Subsidiaries made by such
accountants;

 

(h)           promptly
after the same are delivered to its equity holders or the SEC, copies of all
proxy statements, financial statements and reports as the Borrowers shall send
to their equity holders, or as the Borrowers may file with the SEC or any
Governmental Authority at any time having jurisdiction over the Borrowers or
their Subsidiaries, or, in lieu of such delivery, prompt notice after the same
are made publicly available on the Internet; and

 

(i)            from
time to time, such other financial data and information about the Borrowers,
their Subsidiaries and their businesses and properties as the Administrative
Agent or the Lenders may reasonably request, including, without limitation,
periodic sales reports relating to restaurants and any accounts receivables
information (including aging).

 

6.2           Conduct
of Business.  (a)  The Borrowers
and their Subsidiaries shall duly observe and comply in all material respects
with all material contracts and with all applicable laws, regulations, decrees,
orders, judgments and valid requirements of any Governmental Authorities
applicable to their corporate existence, rights and franchises, to the conduct
of their business and to their property and assets (including without
limitation all Environmental Laws and ERISA), except in any case where the
failure to observe and comply would not have a Material Adverse Effect, and
shall maintain and keep in full force and effect and comply in all material
respects with all licenses and permits reasonably necessary to the proper
conduct of their business.

 

(b)           The
Borrowers and their Subsidiaries shall, except as otherwise permitted by this
Agreement, maintain their corporate or other entity type existence, comply with
their respective charters, by-laws, operating agreements and other
organizational documents, and remain or engage substantially in the same
business as that in which they are now engaged and in no unrelated business.

 

6.3           Maintenance
and Insurance.

 

(a)           The
Borrowers and each of their Subsidiaries shall maintain (i) their
properties and the Collateral in good repair, working order and condition as
required for the 

 

59

 

normal conduct of their
business, and (ii) all material rights, permits, licenses, approvals and
privileges necessary in the conduct of its business, whether because of its
ownership, lease, sublease or other operation or occupation of a property or
other conduct of its business, and shall make all reasonably necessary or
appropriate filings with, and give all required notices to, Governmental
Authorities.

 

(b)           The
Borrowers and each of their Subsidiaries shall at all times maintain liability,
casualty and business interruption insurance on their properties (including all
Collateral) with financially sound and reputable insurers in such amounts and
with such coverages, endorsements, deductibles and expiration dates as the
officers of the Borrowers, in the exercise of their reasonable judgment deem to
be adequate, as are customary in the industry for companies of established
reputation engaged in the same or similar business and owning or operating
similar properties and as shall be reasonably satisfactory to the
Administrative Agent.  The Administrative
Agent shall be named as loss payee, additional insured and/or mortgagee under
such insurance as the Administrative Agent shall reasonably require from time
to time, and the Borrowers shall provide to the Administrative Agent lender’s
loss payable endorsements in form and substance reasonably satisfactory to the
Administrative Agent.  In addition, the
Administrative Agent shall be given thirty (30) days advance notice of any
cancellation of insurance.  In the event
of failure to provide and maintain insurance as herein provided, the
Administrative Agent may, at its option, obtain such insurance and charge the
amount thereof to the Borrowers as a Revolving Credit Loan.  The Borrowers shall furnish to the
Administrative Agent certificates or other evidence satisfactory to the
Administrative Agent of compliance with the foregoing insurance provisions.  The Administrative Agent shall not, by the
fact of approving, disapproving or accepting any such insurance, incur any
liability for the form or legal sufficiency of insurance contracts, solvency of
insurance companies or payment of law suits, and the Borrowers hereby expressly
assumes full responsibility therefor and liability, if any, thereunder.

 

6.4           Taxes.  Each Borrower shall pay or cause to be paid
all taxes, assessments or governmental charges on or against it or any of its
Subsidiaries or their properties on or prior to the time when they become
delinquent; except for any tax, assessment or charge that is being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves have been established and are being maintained in accordance with GAAP
if no Encumbrance shall have been filed (the enforcement of which shall not
have been stayed) to secure such tax, assessment or charge.

 

6.5           Inspection Rights;
Lender Meeting.

 

(a)           Each
Borrower shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect any of
the properties of such Borrower or of any of its Subsidiaries (i) to
inspect, copy and take extracts from their books and records, and to
discuss their affairs, finances and accounts with their officers and
independent public accountants, and (ii) to inspect, review, evaluate and
make physical verifications and appraisals of any improvements, inventory and
other Collateral in any manner that such Lender considers reasonably advisable,
all at the expense of the Borrowers and all upon reasonable notice
and at such reasonable times during normal business hours and as often as may 

 

60

 

reasonably be requested,
but at any time or from time to time following the occurrence and during the
continuation of an Event of Default.

 

(b)           The
Borrowers will, upon the request of the Administrative Agent or Majority
Lenders, participate in a meeting of the Administrative Agent and Lenders once
during each Fiscal Year to be held at the Borrowers’ principal offices (or at
such other location as may be agreed to by the Borrowers and Administrative
Agent) at such time as may be agreed to by the Borrowers and the Administrative
Agent.

 

6.6           Maintenance
of Books and Records.  The Borrowers
and each of their Subsidiaries shall keep adequate books and records of
account, in which true and complete entries will be made reflecting all of
their business and financial transactions, and such entries will be made in
accordance with GAAP consistently applied and applicable law.

 

6.7           Use of
Proceeds.

 

(a)           The
Borrowers will use the proceeds of the Term Loans to finance the Acquisition,
to repay all outstanding Indebtedness under the Existing Credit Agreement and
to pay fees and expenses associated with the Acquisition and the other
transactions contemplated hereby. 
Thereafter, the remainder of the Term Loans and the Revolving Credit
Loans shall be available, subject to the terms of the Loan Documents, for
working capital, to finance Capital Expenditures and for other general
corporate or limited liability company purposes.

 

(b)           No
portion of any Loan shall be used for the “purpose of purchasing or carrying”
any “margin stock” or “margin security” as such terms are used in Regulations
T, U and X of the Board of Governors of the Federal Reserve System, or
otherwise in violation of such regulations.

 

6.8           Further
Assurances.  At any time and from
time to time, promptly following the written request of the Administrative
Agent, the Borrowers shall, and shall cause each of their Subsidiaries to,
execute and deliver such further documents and take such further action as may
reasonably be requested by the Administrative Agent (a) to obtain the full
benefits of this Agreement and the other Loan Documents, (b) to protect,
preserve, maintain and enforce the Lenders’ rights in (and the priority of the
Lenders’ lien on) any Collateral or (c) to enable the Administrative Agent
and each Lender to exercise all or any of the rights, remedies and powers
granted herein or in any other Loan Document.

 

6.9           Notification
Requirements.  The Borrowers shall
furnish to the Administrative Agent:

 

(a)           promptly
upon becoming aware of the existence of any condition or event that constitutes
a Default, written notice thereof specifying the nature and duration thereof
and the action being or proposed to be taken with respect thereto;

 

(b)           promptly
upon becoming aware of (i) any litigation or (ii) of any
investigative proceedings by a Governmental Authority commenced or threatened
against the Borrowers or any of their Subsidiaries or any of the Collateral of
which either has notice, the 

 

61

 

outcome of which could
reasonably be expected to have a Materially Adverse Effect, written notice
thereof and the action being or proposed to be taken with respect thereto; and

 

(c)           promptly
after becoming aware of any occurrence or any condition affecting the Borrowers
or any of their Subsidiaries or any of the Collateral which could reasonably be
expected to have a Material Adverse Effect, written notice thereof.

 

6.10         ERISA
Reports.

 

(a)           Each
Plan shall comply in all material respects with ERISA and the Code, except to
the extent failure to comply in any instance would not have a Material Adverse
Effect on Borrowers and their Subsidiaries.

 

(b)           With
respect to any Plan, the Borrowers shall, or shall cause their Affiliates to,
furnish to the Administrative Agent promptly (i) as soon as possible and
in any event within 10 days after the Borrowers or any of their ERISA
Affiliates know that any ERISA Event has occurred or is expected to occur, a
statement of a Responsible Officer of the Borrowers, describing such ERISA
Event, including copies of any notice concerning an ERISA Event received from
PBGC, a plan administrator, or from a Multiemployer Plan sponsor, and the
action, if any, the Borrowers or such ERISA Affiliate proposes to take with
respect thereto; and (ii) promptly after filing thereof, a copy of the
annual report of each Pension Plan (Form 5500 or comparable form) required
to be filed with the IRS and/or the Department of Labor.  Promptly after the adoption of any Pension
Plan, the Borrowers shall notify the Administrative Agent of such adoption.

 

6.11         Environmental
Compliance.

 

(a)           Each
Borrower and its Subsidiaries shall comply in all material respects with all
applicable Environmental Laws in all jurisdictions in which any of them
operates now or in the future, and each Borrower and its Subsidiaries shall
comply in all material respects with all such Environmental Laws that may in
the future be applicable to such Borrower’s or any of its Subsidiaries’
business, properties and assets.

 

(b)           If
any Borrower or any Subsidiary shall (i) receive notice that any material
violation of any Environmental Law may have been committed or is about to be
committed by a Borrower or any Subsidiary, (ii) receive notice that any
administrative or judicial complaint or order has been filed or is about to be
filed against a Borrower or any Subsidiary alleging a material violation of any
Environmental Law requiring a Borrower or any Subsidiary to take any action in
connection with the release of Hazardous Materials into the environment, (iii) receive
any notice from a federal, state or local government agency or private party
alleging that a Borrower or any Subsidiary may be liable or responsible for any
material amount of costs associated with a response to or cleanup of a release
of Hazardous Materials into the environment or any damages caused thereby, (iv) become
aware of any investigative proceedings by a governmental agency or authority
commenced or threatened against a Borrower or any Subsidiary regarding any
potential material violation of Environmental Laws or any spill, release,
discharge or disposal of any Hazardous Material or (v) notify any
Governmental Authority regarding any potential material violation of
Environmental Laws or any spill, release, 

 

62

 

discharge or disposal of
any Hazardous Material by a Borrower or a Subsidiary, the Borrower shall
promptly notify the Administrative Agent thereof (together with a copy of any
such notice) and of any action being or proposed to be taken with respect thereto
and thereafter shall continue to furnish to the Administrative Agent all
further notices, demands, reports and other information regarding the
foregoing.

 

6.12         Covenant to Guarantee
Obligations and Give Security.  (a) Upon
the formation or acquisition of any new direct or indirect Subsidiary by any
Loan Party, the Borrowers shall, at the Borrowers’ expense:

 

(i)            within 10 days
after such formation or acquisition, cause such Subsidiary (other than any CFC
or a Subsidiary that is held directly or indirectly by a CFC), and cause each
direct and indirect parent of such Subsidiary (if it has not already done so),
to duly execute and deliver to the Administrative Agent a guaranty or guaranty
supplement, in form and substance reasonably satisfactory to the Administrative
Agent, guaranteeing the other Loan Parties’ obligations under the Loan
Documents (each such guaranty or guaranty supplement, a “Subsidiary  Guaranty”);

 

(ii)           within 10 days after
such formation or acquisition, furnish to the Administrative Agent a description
of the real and personal properties of such Subsidiary, in detail reasonably
satisfactory to the Administrative Agent;

 

(iii)          within 15 days after
such formation or acquisition, cause such Subsidiary (other than any CFC or a
Subsidiary that is held directly or indirectly by a CFC) and each direct and
indirect parent of such Subsidiary (if it has not already done so) to execute
and deliver to the Administrative Agent a joinder to the Security Agreement and
the other security agreements and pledge agreements, as specified by and in
form and substance reasonably satisfactory to the Administrative Agent
(including delivery of all Pledged Collateral (as defined in the Pledge
Agreement) in and of such Subsidiary (except that the Pledged Collateral shall
be limited to 65% of the equity of such Subsidiary in the case of a CFC or a
Subsidiary that is held directly or indirectly by a CFC), and other instruments
of the type specified in Section 4.1(a)(iii)), securing payment of all the
Obligations of such Subsidiary or such parent, as the case may be, under the
Loan Documents and constituting Encumbrances on all such personal properties;

 

(iv)          deliver to the
Administrative Agent, within 15 days after such formation or acquisition,
Landlord Waivers, executed by each of the lessors of any of the leased real
properties of such Subsidiary (other than any CFC or a Subsidiary that is held
directly or indirectly by a CFC), unless waived by the Administrative Agent;

 

(v)           within 30 days after
such formation or acquisition, cause such Subsidiary (other than any CFC or a
Subsidiary that is held directly or indirectly by a CFC) and each direct and
indirect parent of such Subsidiary (if it has not already done so) to take
whatever additional action (including the filing of Uniform Commercial Code
financing statements and the giving of notices) as may be reasonably necessary
or advisable in the reasonable opinion of the Administrative Agent to vest in
the Administrative Agent (or in any representative of the Administrative Agent
designated by it) valid and subsisting 

 

63

 

Encumbrances on the properties purported to be subject
to the Security Agreement and the other security agreements and pledge
agreements delivered pursuant to this Section 6.12(a), enforceable against
all third parties in accordance with their terms;

 

(vi)          within 45 days after
such formation or acquisition, cause such Subsidiary (other than any CFC or a
Subsidiary that is held directly or indirectly by a CFC) to comply with the
requirements of Sections 4.1(a)(iv), (v), (xi) and (xviii) with respect to any
Fee Property held thereby; and

 

(vii)         within 60 days after such
formation or acquisition, deliver to the Administrative Agent, upon the request
of the Administrative Agent in its sole discretion, a signed copy of one or
more opinions, in form and substance reasonably acceptable to the
Administrative Agent, addressed to the Administrative Agent and the other
Secured Parties, of counsel for the Loan Parties acceptable to the
Administrative Agent as to the matters contained in clauses (i), (ii) and
(v) above, and as to such other matters set forth on Exhibit I
attached hereto as the Administrative Agent may reasonably request.

 

(b)           Upon the
acquisition of any property by any Borrower or any Subsidiary, if such
property, in the reasonable judgment of the Administrative Agent, shall not
already be subject to a perfected first priority security interest in favor of
the Administrative Agent for the benefit of the Secured Parties, then such
Borrower shall, at the Borrowers’ expense:

 

(i)            within 10 days after
such acquisition, furnish to the Administrative Agent a description of the
property so acquired in detail satisfactory to the Administrative Agent,

 

(ii)           within 15 days after
such acquisition, deliver to the Administrative Agent Landlord Waivers,
executed by each of the lessors of any newly acquired leased real properties,
unless waived by the Administrative Agent,

 

(iii)          within 15 days after
such acquisition, cause the applicable Loan Party to duly execute and deliver
to the Administrative Agent, a joinder to the Security Agreement and the other
security agreements and pledge agreements, as specified by and in form and
substance satisfactory to the Administrative Agent, securing payment of all the
Obligations of the applicable Loan Party under the Loan Documents and
constituting Encumbrances on all such properties,

 

(iv)          within 30 days after
such acquisition, cause the applicable Loan Party to take whatever action
(including the filing of Uniform Commercial Code financing statements and the
giving of notices) may be reasonably necessary or advisable in the reasonable
opinion of the Administrative Agent to vest in the Administrative Agent (or in
any representative of the Administrative Agent designated by it) valid and
subsisting Encumbrances on the properties purported to be subject to the
Security Agreement and the other security agreements and pledge agreements
delivered pursuant to this Section 6.12(b), enforceable against all third
parties in accordance with their terms, and

 

64

 

(v)           if the acquired
property is a Fee Property, within 45 days after such acquisition, cause the
applicable Loan Party to comply with the requirements of Sections 4.1(a)(iv),
(v), (xi) and (xviii) with respect thereto; and

 

(vi)          within 60 days after
such acquisition, deliver to the Administrative Agent, upon the request of the
Administrative Agent in its sole discretion, a signed copy of one or more opinions,
in form and substance reasonably acceptable to the Administrative Agent,
addressed to the Administrative Agent and the other Secured Parties, of counsel
for the Loan Parties reasonably acceptable to the Administrative Agent as to
the matters contained in clauses (iii) and (iv) above and as to
such other matters set forth on Exhibit I attached hereto as the
Administrative Agent may reasonably request.

 

(c)           At any
time upon request of the Administrative Agent, the Borrowers shall promptly
execute and deliver any and all further instruments and documents and take all
such other action as the Administrative Agent may reasonably deem necessary or
desirable in obtaining the full benefits of, or (as applicable) in perfecting
and preserving the Encumbrances of, the Security Documents.

 

6.13         Interest
Rate Protection.  The Borrowers shall
obtain on or before the tenth (10) Business Day after the Closing Date,
and maintain in effect at all times until the third anniversary of the Closing
Date, Swap Agreements between themselves and a Swap Bank with respect to not
less than fifty percent (50.00%) of the Term Loans outstanding under the Term
Facility.

 

6.14         Cash Accounts.  As promptly as reasonably practicable after
the Closing Date the Borrowers will establish and maintain, and cause each of
the other Loan Parties to maintain, their primary depository and disbursement
accounts and their treasury management relationships with Wells Fargo pursuant
to a Secured Cash Management Agreement, except for secondary depository
accounts with another commercial bank located in the United States that has
entered into a deposit account control agreement in form reasonably acceptable
to the Administrative Agent.

 

6.15         Post-Closing
Deliveries.  Because of the short
period of time between the issuance of the final order of the Bankruptcy Court
approving the Acquisition and the date mandated by the Bankruptcy Court that
the Acquisition shall close, the Borrowers represent, and the Administrative
Agent acknowledges, that the Borrowers cannot deliver by the Closing Date (a) the
Fee Property Security Documents and the related Title Policies, opinions of
local counsel and other documents referred to in clauses (v), (xi) and (xviii)
of Section 4.1(a) hereof with respect to the Fee Properties listed on
Schedule 6.15 attached hereto, (b) the other items listed on Schedule
6.15 attached hereto and (c) any other documents, instruments or
deliveries reasonably requested by the Administrative Agent in connection with
the foregoing.  Accordingly, the
Borrowers covenant and agree that they shall deliver such Fee Property Security
Documents and related Title Policies, legal opinions and other documents and
other items on or before the date specified on Schedule 6.15.

 

65

 

SECTION VII

 

FINANCIAL COVENANTS

 

The
Borrowers covenant that so long as any Loan, Letter of Credit or other
Obligation (other than contingent indemnification obligations) remains
outstanding or the Lenders or the LC Issuer have any obligation to make any
Loan or issue any Letter of Credit hereunder:

 

7.1           Total Lease Adjusted
Leverage Ratio.  The Borrowers will
not permit the Total Lease Adjusted Leverage Ratio (a) as of the end of
Fiscal Year 2009 (taken as a single fiscal period) to be greater than 5.00:1.00,
and (b) as of the end of each Measurement Period ending at the end of each
Fiscal Quarter ending thereafter to be greater than 5.00:1.00.

 

7.2           Consolidated
Pre-Distribution Fixed Charge Coverage Ratio.

 

(a)           The
Borrowers will not permit the Consolidated Pre-Distribution Fixed Charge
Coverage Ratio as of the end of any period specified below to be less than the
ratio set forth below opposite each such period:

 

	
  Period

  	
   

  	
  Minimum Consolidated

  Fixed Pre-Distribution

  Charge Coverage Ratio

  
	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter 2009

  	
   

  	
  1.20:1.00

  
	
  1st
  and 2nd Fiscal Quarters 2009 (taken as a single period)

  	
   

  	
  1.20:1.00

  
	
  1st,
  2nd and 3rd Fiscal Quarters 2009 (taken as a single
  period)

  	
   

  	
  1.20:1.00

  
	
  Fiscal Year 2009 (taken as a single period)

  	
   

  	
  1.20:1.00

  

 

(b)           The
Borrowers will not permit the Consolidated Pre-Distribution Fixed Charge
Coverage Ratio to be less than 1.20:1.00 for each Measurement Period ending at
the end of each Fiscal Quarter in the Fiscal Year 2010 and in each Fiscal Year
thereafter.

 

7.3           Consolidated
Post-Distribution Fixed Charge Coverage Ratio.

 

(a)           The
Borrowers will not permit the Consolidated Post-Distribution Fixed Charge
Coverage Ratio as of the end of any period specified below to be less than the
ratio set forth below opposite each such period:

 

	
  Period

  	
   

  	
  Minimum Consolidated

  Fixed Post-Distribution

  Charge Coverage Ratio

  
	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter 2009

  	
   

  	
  1.05:1.00

  
	
  1st
  and 2nd Fiscal Quarters 2009 (taken as a single period)

  	
   

  	
  0.90:1.00

  
	
  1st,
  2nd and 3rd Fiscal Quarters 2009 (taken as a single
  period)

  	
   

  	
  0.95:1.00

  
	
  Fiscal
  Year 2009 (taken as a single period)

  	
   

  	
  1.00:1.00

  

 

66

 

(b)           The
Borrowers will not permit the Consolidated Post-Distribution Fixed Charge
Coverage Ratio to be less than 1.05:1.00 for each Measurement Period ending at
the end of each Fiscal Quarter in Fiscal Year 2010 and in each Fiscal Year
thereafter.

 

7.4           Consolidated EBITDA.  The Borrowers will not permit the
Consolidated EBITDA for each Fiscal Quarter (taken as a separate fiscal period)
ending during Fiscal Year 2009 to be less than the amount set forth below
opposite each such Fiscal Quarter:

 

	
  Fiscal Quarter

  	
   

  	
  Minimum Consolidated

  EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Q1 2009

  	
   

  	
  $

  	
  2,300,000

  	
   

  
	
  Q2 2009

  	
   

  	
  $

  	
  1,750,000

  	
   

  
	
  Q3 2009

  	
   

  	
  $

  	
  1,300,000

  	
   

  
	
  Q4 2009

  	
   

  	
  $

  	
  1,400,000

  	
   

  

 

7.5           Growth Capital
Expenditures.  The Borrowers and
their Subsidiaries will not make or commit to make (by entering into a lease or
other agreement) any Growth Capital Expenditures during any Fiscal Year in
excess of $2,000,000 in the aggregate.

 

SECTION VIII

 

NEGATIVE COVENANTS

 

The
Borrowers covenant that so long as any Loan, Letter of Credit or other
Obligation, remains outstanding or the Lenders or the LC Issuer have any
obligation to make any Loan or to issue any Letter of Credit hereunder:

 

8.1           Indebtedness.  Neither of the Borrowers nor any of their
Subsidiaries shall create, incur, assume, guarantee or be or remain liable with
respect to any Indebtedness other than the following:

 

(a)           Obligations;

 

(b)           Indebtedness
for taxes, assessments or governmental charges to the extent that payment
therefor shall at the time not be required to be made in accordance with Section 6.4;

 

(c)           current
liabilities on open account for the purchase price of services, materials and
supplies incurred by the Borrowers in the ordinary course of business (not as a
result of borrowing), so long as all of such open account current liabilities
shall be promptly paid and discharged when due or in conformity with customary
trade terms and practices, except for 

 

67

 

any such open account
Indebtedness which is being contested in good faith by the Borrowers, as to
which adequate reserves required by GAAP have been established and are being
maintained and as to which no Encumbrance has been placed on any property of
the Borrowers or any of their Subsidiaries (other than Permitted Encumbrances);

 

(d)           Guarantees
permitted under Section 8.1(h) hereof;

 

(e)           Indebtedness
of the Borrowers existing on the date of this Agreement and set forth on Schedule
8.1(e);

 

(f)            Indebtedness
of any Borrower or Subsidiary to another Borrower or Subsidiary;

 

(g)           Subordinated
Debt;

 

(h)           Indebtedness
(of a type of described in subclauses (a), (d), (e), (f) or (h) of
the term Indebtedness but not otherwise included in clauses (a) through (g) of
this Section 8.1) incurred hereafter in the ordinary course of business; provided
that such Indebtedness does not exceed $250,000 in the aggregate at any time
outstanding; and

 

(i)            Indebtedness
of Parent consisting of declared, but unpaid, dividends on its common stock, or
authorized repurchases of its common stock, to the extent permitted under Section 8.6(d).

 

8.2           Contingent
Liabilities.  Neither of the
Borrowers nor any of their Subsidiaries shall create, incur, assume, guarantee
or be or remain liable with respect to any Guarantees other than (i) Subsidiary
Guarantees and (ii) Guarantees resulting from the endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.

 

8.3           Encumbrances.  Neither of the Borrowers nor any of their
Subsidiaries shall create, incur, assume or suffer to exist any mortgage,
pledge, security interest, lien or other charge or encumbrance of any kind,
including the lien or retained security title of a conditional vendor upon or with
respect to any of its property or assets (“Encumbrances”), or assign or
otherwise convey any right to receive income, including the sale or discount of
accounts receivable with or without recourse, except the following (“Permitted
Encumbrances”):

 

(a)           Encumbrances
created under the Security Documents;

 

(b)           liens
for taxes, fees, assessments and other governmental charges to the extent that
payment of the same may be postponed or is not required in accordance with the
provisions of Section 6.4;

 

(c)           landlords’
and lessors’ liens in respect of rent not in default; liens in respect of
pledges or deposits made in the ordinary course of business in compliance with
workmen’s compensation, unemployment insurance, social security laws, or
similar legislation (other than ERISA) or in connection with appeal and similar
bonds incidental to litigation; mechanics’, warehouseman’s, laborers’ and
materialmen’s and similar liens, if the obligations secured by such liens are
not then delinquent for more than 30 days or are being contested in 

 

68

 

good faith by appropriate
proceedings and with respect to which adequate reserves have been established
and are being maintained in accordance with GAAP; liens securing the performance
of bids, tenders, contracts (other than for the payment of money); and liens
securing statutory obligations or surety, indemnity, performance, or other
similar bonds incidental to the conduct of the Borrowers’ or any of their
Subsidiaries’ business in the ordinary course and that do not in the aggregate
materially detract from the value of their property or materially impair the
use thereof in the operation of their business;

 

(d)           judgment
liens securing judgments that (i) are fully covered by insurance, and (ii) shall
not have been in existence for a period longer than 45 days after the creation
thereof or, if a stay of execution shall have been obtained, for a period
longer than 10 days after the expiration of such stay;

 

(e)           rights
of lessors under Capitalized Leases, to the extent such Capitalized Leases are
permitted hereunder;

 

(f)            easements,
rights of way, restrictions and other similar charges or Encumbrances relating
to real property and not interfering in a material way with the ordinary conduct
of the Borrowers’ business;

 

(g)           Encumbrances
constituting a renewal, extension or replacement of any Permitted Encumbrance
if otherwise permitted hereby and not in conflict with the terms hereof; and

 

(h)           Encumbrances
existing on the date of this Agreement and set forth on Schedule 8.3(h).

 

8.4           Merger;
Dispositions; Liquidation.

 

(a)           The
Borrowers shall not, and shall not permit any Subsidiary to, merge or
consolidate into or with any other Person or entity or liquidate or dissolve,
other than a merger of a Subsidiary into another Subsidiary or into a Borrower
(or a liquidation of a Subsidiary into another Subsidiary or into a Borrower
under Section 332 of the Code), provided that both immediately
before and immediately after any such merger, no Default shall have occurred
and be continuing.

 

(b)           The
Borrowers shall not, and shall not permit any Subsidiary to, Dispose of any
assets or properties, except for sales of Qualified Investments, inventory and
obsolete or worn out furniture, fixtures and equipment, in each case in the
ordinary course of business and consistent with past practices.

 

8.5           Subsidiaries.  The Borrowers shall not permit any of their
Subsidiaries to issue any additional shares of their capital stock or other
equity securities, any options therefor or any securities convertible thereto
other than to Borrowers or any of their Subsidiaries.  Neither of the Borrowers nor any of their
Subsidiaries shall sell, transfer or otherwise dispose of any of the capital
stock or other equity securities of a Subsidiary, except to Borrowers or any of
their Subsidiaries.  The Borrowers shall
not, and shall not permit any of their Subsidiaries to, create or 

 

69

 

suffer to exist any
consensual Encumbrances or restrictions on the ability of any Subsidiary to pay
dividends or make any other distributions on its equity interests held by the
Borrowers or pay any Indebtedness owed to the Borrowers or any Subsidiary of
the Borrowers or to make loans or advances or transfer any of its assets to the
Borrowers or any other Subsidiary of the Borrowers.

 

8.6           Restricted Payments.  The Borrowers will not, and will not permit
any of their Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except

 

(a)           Parent
may declare and pay dividends in common stock to its equity holders;

 

(b)           Parent
may declare and pay dividends on the Parent’s common stock in cash to its
equity holders or purchase its common stock from its equity holders, provided
that the total amount of such dividends and the amount paid in connection with
such purchases shall not exceed $1,900,000 in any Fiscal Year, provided,
further, that (i) both at the time any such cash dividend is
declared and paid and any such purchase is authorized and made, and after
giving effect to the payment in connection therewith, no Default shall have
occurred and be continuing and (ii) ten Business Days prior to any such
payment the Administrative Agent shall have received a certificate of a
Responsible Officer of Parent certifying on a pro forma basis that the
conditions set forth in clause (i) have been satisfied with respect to
such payment;

 

(c)           Subsidiaries
of the Borrowers may declare and pay dividends to the Borrowers;

 

(d)           compensation,
expense reimbursements and perquisites paid to employees, officers and
directors in the ordinary course of business and consistent with past
practices; and

 

(e)           payments
with respect to Junior Subordinated Debt to the extent permitted under Section 8.11
below.

 

8.7           Investments;
Purchases of Assets.  Neither of the
Borrowers nor any of their Subsidiaries shall make or maintain any Investments
or purchase or otherwise acquire any material amount of assets other than:

 

(a)           Investments
existing on the date hereof in Subsidiaries as described on Schedule 5.8(e);

 

(b)           Qualified
Investments;

 

(c)           purchases
of inventory in the ordinary course of business;

 

(d)           normal
trade credit extended in the ordinary course of business and consistent with
past practice; and

 

(e)           Indebtedness
permitted by Section 8.1(f).

 

70

 

8.8           ERISA
Compliance.  Neither of the
Borrowerss nor any of their ERISA Affiliates nor any Plan shall (i) engage
in any Prohibited Acquisition which would have a Material Adverse Effect on the
Borrowers and their Subsidiaries, (ii) incur any “accumulated funding
deficiency” (within the meaning of Section 412(a) of the Code and Section 302
of ERISA) whether or not waived, (iii) permit to exist any material amount
of “unfunded benefit liabilities” (within the meaning of Section 4001(a)(18)
of ERISA, (iv) terminate any Pension Plan in a manner which could result
in the imposition of a lien on any property of the Borrowers or any of its
Subsidiaries, (v) fail to make any required contribution to any
Multiemployer Plan or (vi) completely or partially withdraw from a
Multiemployer Plan if such complete or partial withdrawal will result in any
material withdrawal liability under Title IV of ERISA.

 

8.9           Transactions
with Affiliates.  The Borrowers will
not, and will not permit any of their Subsidiaries to, directly or indirectly,
enter into any purchase, sale, lease or other transaction with any Affiliate
except (i) transactions in the ordinary course of business on terms that
are no less favorable to the Borrowers or their Subsidiaries than those which
might be obtained at the time in a comparable arm’s-length transaction with any
Person who is not an Affiliate, (ii) transactions between or among the
Borrowers and their Subsidiaries or between Subsidiaries, and (iii) employment
contracts with senior management of the Borrowers entered into in the ordinary
course of business and consistent with past practices.  Notwithstanding the foregoing, the Borrowers
will not, and will not permit any Subsidiary to, directly or indirectly, pay
any management, consulting, overhead, indemnity, guarantee or other similar fee
or charge to any Affiliate (other than a Borrower).

 

8.10         Fiscal
Year.  The Borrowers and their
Subsidiaries shall not change their Fiscal Year without the prior written
consent of the Administrative Agent, which will not be unreasonably withheld.

 

8.11         Payments
on Junior Subordinated Debt.  The
Borrowers shall not make any payment or prepayment of principal of or interest
on, or any other payment in respect of, the Junior Subordinated Debt, except to
the extent permitted by the Subordination Agreement.

 

SECTION IX

 

DEFAULTS

 

9.1           Events of Default.  Any of the following shall constitute an
Event of Default:

 

(a)           Non-Payment.  Any Borrower or any other Loan Party fails to
(i) pay when and as required to be paid herein, any amount of principal of
any Loan or any LC Disbursement or deposit any funds as cash collateral in
respect of the Maximum Drawing Amount, or (ii) pay within three (3) Business
Days after the same becomes due, any interest on any Loan or on any LC
Disbursement, any fee due hereunder or any other amount payable hereunder or
under any other Loan Document; or

 

(b)           Specific
Covenants.  (i) The Borrowers fail
to perform or observe any term, covenant or agreement contained in any of
Sections 6.1(a), (b), (c), (d), (h) or (i), Sections 6.2(b), 6.3, 6.5,
6.6, 6.7, 6.8, 6.9, 6.12, 6.13 or 6.14 or Section VII or VIII, (ii) any
of the 

 

71

 

Subsidiary Guarantors
fails to perform or observe any term, covenant or agreement contained in any
Subsidiary Guaranty, (iii) any of the Loan Parties which is a party to the
Security Agreement fails to perform or observe any term, covenant or agreement
contained in Sections 3 or 4 of the Security Agreement, (iv) any of
the Loan Parties which is a party to the Pledge Agreement fails to perform or
observe any term, covenant or agreement contained in Sections 4, 6 or 7 of the
Pledge Agreement or (v) any of the Loan Parties which is a party to a Fee
Property Security Agreement that is a mortgage or deed of trust fails to
observe any prohibition on assignments of Rents (as defined therein) contained
therein; or

 

(c)           Other
Defaults.  Any Loan Party fails to
perform or observe any other covenant or agreement (not specified in Section 9.1(a) or
9.1(b) above) contained in any Loan Document on its part to be performed
or observed and such failure continues for 30 days; or

 

(d)           Representations
and Warranties.  Any representation,
warranty, certification or statement of fact made or deemed made by or on
behalf of the Borrowers or any other Loan Party herein, in any other Loan
Document or in any document delivered in connection herewith or therewith shall
be materially incorrect or misleading when made or deemed made; or

 

(e)           Cross-Default.  (i) Any Loan Party or any Subsidiary
thereof (A) fails to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) in respect
of any Indebtedness or Guarantee (other than Indebtedness hereunder and
Indebtedness under Swap Agreements) having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing
to all creditors under any combined or syndicated credit arrangement) of more
than $500,000, or (B) fails to observe or perform any other agreement or
condition relating to any such Indebtedness or Guarantee of more than $500,000
or contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event occurs, the effect of which default or other event
is to cause, or to permit the holder or holders of such Indebtedness or the
beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to be demanded or to become due
or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise),
or an offer to repurchase, prepay, defease or redeem such Indebtedness to be
made, prior to its stated maturity, or such Guarantee to become payable or cash
collateral in respect thereof to be demanded; (ii) the Borrowers or any
Loan Party shall fail to pay when due (after any applicable period of grace)
any amount payable under one or more agreements for the use of real or personal
property requiring aggregate payments in excess of $25,000 in any twelve month
period, or fail to observe or perform any term, covenant or agreement or
relating to such agreement(s) for the use of real or personal property,
and the result of any such failure is to permit any other party to such
agreement(s) to exercise remedies under or terminate such agreement(s) prior
to the expiration date thereof; or (iii) there occurs under any Swap
Agreement an Early Termination Date (as defined in such Swap Agreement)
resulting from (A) any event of default under such Swap Agreement as to
which a Loan Party or any Subsidiary thereof is the Defaulting Party (as
defined in such Swap Agreement) or (B) any Termination Event (as so
defined) under such Swap Agreement as to which a Loan Party or any Subsidiary
thereof is an Affected Party (as so defined).

 

72

 

(f)            Insolvency
Proceedings, Etc.  Any Loan Party or
any Subsidiary thereof institutes or consents to the institution of any
proceeding under any bankruptcy, insolvency, reorganization, receivership or
other debtor relief law, or makes an assignment for the benefit of creditors;
or applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer for it or
for all or any material part of its property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed without the application or consent of such Person and the appointment
continues undischarged or unstayed for 45 calendar days; or any proceeding
under any bankruptcy, insolvency, reorganization, receivership or other debtor
relief law relating to any such Person or to all or any material part of its
property is instituted without the consent of such Person and continues
undismissed or unstayed for 45 calendar days, or an order for relief is entered
in any such proceeding; or

 

(g)           Inability
to Pay Debts; Attachment.  (i) Any
Loan Party or any Subsidiary thereof becomes unable or admits in writing its
inability or fails generally to pay its debts as they become due, or (ii) any
writ or warrant of attachment or execution or similar process is issued or
levied against all or any material part of the property of any such Person and
is not released, vacated or fully bonded within 30 days after its issue or
levy; or

 

(h)           Judgments.  There is entered against any Loan Party or
any Subsidiary thereof (i) one or more final judgments or orders for the
payment of money in an aggregate amount (as to all such judgments and orders)
exceeding $250,000 (to the extent not covered by independent third-party
insurance as to which the insurer is rated at least “A” by A.M. Best
Company, has been notified of the potential claim and does not dispute
coverage), or (ii) any one or more non-monetary final judgments that have,
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and, in either case, (A) enforcement proceedings
are commenced by any creditor upon such judgment or order, or (B) there is
a period of 10 consecutive days while such judgment shall not have been
discharged during which a stay of enforcement of such judgment, by reason of a
pending appeal or otherwise, is not in effect; or

 

(i)            ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of the Borrowers under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC; or (ii) any
Borrower or any ERISA Affiliate fails to pay when due, after the expiration of
any applicable grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan; or

 

(j)            Invalidity
of Loan Documents.  Any material
provision of any Loan Document, at any time after its execution and delivery
and for any reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all the Obligations, ceases to be in full force and
effect; or any Loan Party contests in any manner the validity or enforceability
of any provision of any Loan Document; or any Loan Party denies that it has any
or further liability or obligation under any provision of any Loan Document, or
purports to revoke, terminate or rescind any provision of any Loan Document; or

 

(k)           Change
of Control.  There occurs any Change
of Control; or

 

73

 

(l)            Security
Documents.  Any Security Document
after delivery thereof pursuant to Section 4.1 or 6.12 shall for any
reason (other than pursuant to the terms thereof or solely as a result of
action or inaction of the secured party thereunder) cease to create a valid and
perfected first priority Encumbrance (subject to Permitted Encumbrances) on the
Collateral purported to be covered thereby; or

 

(m)          Subordination.  (i) The subordination provisions of the
Subordination Agreement (the “Subordination Provisions”) shall, in whole
or in part, terminate, cease to be effective or cease to be legally valid,
binding and enforceable against any holder of the Subordinated Debt; or (ii) the
Borrowers or any other Loan Party shall, directly or indirectly, disavow or
contest in any manner (A) the effectiveness, validity or enforceability of
any of the Subordination Provisions, (B) that the Subordination Provisions
exist for the benefit of the Administrative Agent, the Lenders and the L/C
Issuer or (C) that all payments of principal of or premium and interest on
the Subordinated Debt, or realized from the liquidation of any property of any
Loan Party, shall be subject to any of the Subordination Provisions.

 

9.2           Remedies upon Event
of Default.  If any Event of Default
occurs and is continuing, the Administrative Agent may, or at the request of
the Majority Lenders shall, take any or all of the following actions:

 

(a)           declare
the commitment of each Lender to make Loans and any obligation of the LC Issuer
to issue or extend any Letter of Credit to be terminated, whereupon such
commitments and obligation shall be terminated;

 

(b)           declare
the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrowers;

 

(c)           require
that the Borrowers Cash Collateralize the Maximum Drawing Amount; and

 

(d)           exercise
on behalf of itself, the Lenders and the LC Issuer all rights and remedies
available to it, the Lenders and the LC Issuer under any of the Loan Documents
and at law;

 

provided,
however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrowers under the Bankruptcy Code of the
United States, the obligation of each Lender to make Loans and any obligation
of the LC Issuer to issue or extend any Letter of Credit shall automatically
terminate, the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically become due and
payable, and the obligation of the Borrowers to Cash Collateralize the Maximum
Drawing Amount as aforesaid shall automatically become effective, in each case
without further act of the Administrative Agent or any Lender.

 

9.3           Application of Funds.  After the exercise of remedies provided for
in Section 9.2 (or after the Loans have automatically become immediately
due and payable and the Maximum 

 

74

 

Drawing Amount has
automatically been required to be Cash Collateralized as set forth in the
proviso to Section 9.2), any amounts received on account of the Obligations
shall be applied by the Administrative Agent in the following order:

 

First, to payment of that
portion of the Obligations constituting fees, indemnities, expenses and other
amounts (including fees, charges and disbursements of counsel to the Administrative
Agent ) payable to the Administrative Agent in its capacity as such;

 

Second, to payment of that
portion of the Obligations constituting fees, indemnities and other amounts
(other than principal, interest and Letter of Credit Fees) payable to the Lenders
and the LC Issuer (including fees, charges and disbursements of counsel to the
respective Lenders and the LC Issuer, including
fees and time charges for attorneys who may be employees of any Lender or the
LC Issuer) and amounts payable under Sections 2.10, 2.12, 2.13, 2.14 and
2.15, ratably among them in proportion to the respective amounts described in
this clause Second payable to them;

 

Third, to payment of that
portion of the Obligations constituting accrued and unpaid Letter of Credit
Fees and interest on the Loans, LC Disbursements and other Obligations, ratably
among the Lenders and the LC Issuer in proportion to the respective amounts
described in this clause Third payable to them;

 

Fourth, to payment of that
portion of the Obligations constituting unpaid principal of the Loans, LC
Disbursements and amounts owing under Eligible Swap Agreements, ratably among
the Lenders, the LC Issuer and the Swap Banks in proportion to the respective
amounts described in this clause Fourth held by them;

 

Fifth, to the Administrative
Agent for the account of the LC Issuer, to Cash Collateralize the Maximum
Drawing Amount;

 

Sixth , to payment of that
portion of the Obligations constituting unpaid amounts owing under Secured Cash
Management Agreements, ratably among the Cash Management Banks in proportion to
the respective amounts described in this clause Sixth held by them; and

 

Last, the balance, if any, after all
of the Obligations have been indefeasibly paid in full, to the Borrowers or as
otherwise required by Law.

 

Subject
to Section 3.2, amounts used to Cash Collateralize the Maximum Drawing
Amount pursuant to clause Fifth above shall be applied to satisfy
drawings under the then outstanding Letters of Credit as they occur.  If any amount remains on deposit as cash
collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

9.4           Remedies Cumulative.  No remedy conferred upon the Administrative
Agent, the LC Issuer and the Lenders in the Loan Documents is intended to be
exclusive of any other remedy, and each and every remedy shall be cumulative
and shall be an addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or by any 

 

75

 

other provision of
law.  Without limiting the generality of
the foregoing or of any of the terms and provisions of any of the Security
Documents, if and when the Administrative Agent exercises remedies under the
Security Documents with respect to Collateral, the Administrative Agent may, in
its sole discretion, determine which items and types of Collateral to dispose
of and in what order and may dispose of Collateral in any order the
Administrative Agent shall select in its sole discretion, and the Borrowers
consent to the foregoing and waive all rights of marshalling with respect to
all Collateral.

 

SECTION X

 

ASSIGNMENT AND PARTICIPATION

 

10.1         Successors and Assigns.

 

(a)           Successors
and Assigns Generally.  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted
hereby, except that neither the Borrowers nor any other Loan Party may assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of the Administrative Agent and each Lender and no Lender
may assign or otherwise transfer any of its rights or obligations hereunder except
(i) to an assignee in accordance with the provisions of Section 10.1(b),
(ii) by way of participation in accordance with the provisions of Section 10.1(d),
or (iii) by way of pledge
or assignment of a security interest subject to the restrictions of Section 10.1(f) (and
any other attempted assignment or transfer by any party hereto shall be null
and void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in subsection (d) of this Section and,
to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the LC Issuer and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

 

(b)           Assignments
by Lenders.  Any Lender may at any
time assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment(s) and
the Loans (including for purposes of this Section 10.1(b), participations
in the Maximum Drawing Amount) at the time owing to it); provided that
any such assignment shall be subject to the following conditions:

 

(i)            Minimum Amounts.

 

(A)          in the case of an
assignment of the entire remaining amount of the assigning Lender’s Commitment
under any Facility and the Loans at the time owing to it under such Facility or
in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund, no minimum amount need be assigned; and

 

(B)           in any case not
described in Section 10.1(b)(i)(A), the aggregate amount of the Commitment
(which for this purpose includes Loans outstanding thereunder) or, if the
Commitment is not then in effect, the principal outstanding 

 

76

 

balance of the Loans of the assigning Lender subject
to each such assignment, determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of
the Trade Date, shall not be less than $2,000,000, in the case of any
assignment in respect of the Revolving Credit Facility, or $2,000,000, in the
case of any assignment in respect of the Term Facility, unless each of the
Administrative Agent and, so long as no Event of Default has occurred and is
continuing, the Borrowers otherwise consent (each such consent not to be
unreasonably withheld or delayed); provided, however, that
concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met;

 

(ii)           Proportionate
Amounts.  Each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement with respect to the Loans
or the Commitment assigned, except that this clause (ii) shall not
prohibit any Lender from assigning all or a portion of its rights and
obligations among separate Facilities on a non-pro rata basis;

 

(iii)          Required Consents.  No consent shall be required for any
assignment except to the extent required by Section 10.1(b)(i)(B) and,
in addition:

 

(A)          the consent of the
Borrowers (such consent not to be unreasonably withheld or delayed unless the
assignment is to an entity in the same business as a Borrower that is a direct
competitor of such Borrower, in which event the consent may be withheld in the
sole discretion of Borrowers) shall be required unless (1) an Event of
Default has occurred and is continuing at the time of such assignment or (2) such
assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

 

(B)           the consent of the
Administrative Agent (such consent not to be unreasonably withheld or delayed)
shall be required for assignments in respect of (i) any Term Commitment or
Revolving Credit Commitment if such assignment is to a Person that is not a
Lender with a Commitment in respect of the applicable Facility, an Affiliate of
such Lender or an Approved Fund with respect to such Lender or (ii) any
Term Loan to a Person that is not a Lender, an Affiliate of a Lender or an
Approved Fund; and

 

(C)           the consent of the LC
Issuer (such consent not to be unreasonably withheld or delayed) shall be
required for any assignment that increases the obligation of the assignee to
participate in exposure under one or more Letters of Credit (whether or not
then outstanding).

 

(iv)          Assignment and
Assumption.  The parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption, and the 

 

77

 

assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire.

 

(v)           No Assignment to
Borrowers.  No such assignment shall
be made to any Borrower or any of the Borrowers’ Affiliates or Subsidiaries.

 

(vi)          No Assignment to
Natural Persons.  No such assignment
shall be made to a natural person.

 

(vii)         Assignment Fees.  An assignment fee of $3,500 shall be charged
to the assigning Lender with respect to each assignment, except with respect to
an assignment to an Affiliate of the assigning Lender.

 

Subject
to acceptance and recording thereof by the Administrative Agent pursuant to Section 10.1(c),
from and after the effective date specified in each Assignment and Assumption,
the assignee thereunder shall be a party to this Agreement and, to the extent
of the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.10, 2.12, 2.13, 2.15 and 12.2 with respect to facts and circumstances
occurring prior to the effective date of such assignment).  Upon request, the Borrowers (at their
expense) shall execute and deliver Notes to the assignee Lender.  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with Section 10.1(d).

 

Notwithstanding
anything to the contrary in this Section 10.1(b), each Lender will also
have the right, without consent of the Borrowers or the Administrative Agent,
to assign as security all or part of its rights under the Loan Documents to any
Federal Reserve Bank.

 

(c)           Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Administrative
Agent’s office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans and Letter of Credit
Participations owing to, each Lender pursuant to the terms hereof from time to
time (the “Register”).  The
entries in the Register shall be conclusive absent manifest error, and the
Borrowers, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary.  The Register shall be available
for inspection by the Borrowers and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.

 

(d)           Participations.  Any Lender may at any time, without the
consent of, or notice to, the Borrowers or the Administrative Agent, sell
participations to any Person (other than a natural person or any Borrower or
any of the Borrowers’ Affiliates or Subsidiaries) (each, 

 

78

 

a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans
(including such Lender’s Letter of Credit Participations) owing to it); provided
that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the
Borrowers, the Administrative Agent, the Lenders and the LC Issuer shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 12.7(b) that
affects such Participant.  Subject to Section 10.1(e),
the Borrowers agree that each Participant shall be entitled to the benefits of
Sections 2.10, 2.12, 2.13, 2.15 and 12.2  to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 10.1(b).  To the
extent permitted by law, each Participant also shall be entitled to the
benefits of Section 12.5  as though it
were a Lender, provided such Participant agrees to be subject to Section 2.9(d) as
though it were a Lender.

 

(e)           Limitations
upon Participant Rights.  A
Participant shall not be entitled to receive any greater payment under Section 2.13
or 2.15  than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrowers’ prior written consent. 
A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 2.15 unless the Borrowers are
notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrowers, to comply with Section 2.15(e) as
though it were a Lender.

 

(f)            Certain
Pledges.  Any Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement (including under its Notes, if any) to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall
release such Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.

 

(g)           Electronic
Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and
Assumption shall be deemed to include electronic signatures or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.

 

10.2         Replacement of Lenders.  If any Lender requests compensation under Section 2.13,
or if the Borrowers are required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 2.15,
or if any other 

 

79

 

circumstance exists
hereunder that gives the Borrowers the right to replace a Lender as a party
hereto, then the Borrowers may, at their sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 10.1), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that:

 

(a)           the
Borrowers shall have paid to the Administrative Agent the assignment fee
specified in Section 10.1(b);

 

(b)           such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and its Applicable Percentage of all unpaid LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any
amounts under Section 2.10) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers (in the
case of all other amounts);

 

(c)           in the
case of any such assignment resulting from a claim for compensation under Section 2.13
or payments required to be made pursuant to Section 2.15, such assignment
will result in a reduction in such compensation or payments thereafter;

 

(d)           in the
case of any such assignment required by the Borrowers pursuant to the
penultimate sentence of Section 12.7, the assignee shall have agreed in
writing to consent to the proposed amendment, waiver, consent or release, as
the case may be, that the assigning Lender has not consented to; and

 

(e)           such
assignment does not conflict with applicable Laws.

 

A
Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.

 

SECTION XI

 

THE ADMINISTRATIVE AGENT

 

11.1         Appointment of Administrative
Agent.  Each Lender and the LC Issuer
hereby irrevocably appoints and authorizes the Administrative Agent to act as
its agent hereunder and under the other Loan Documents and to execute the Loan
Documents (other than this Agreement) and all other instruments relating
thereto.  Each Lender and the LC Issuer
irrevocably authorizes the Administrative Agent to take such action on behalf
of each of the Lenders and the LC Issuer and to exercise all such powers as are
expressly delegated to the Administrative Agent hereunder and in the other Loan
Documents and all related documents, together with such other powers as are
reasonably incidental thereto.  The
Administrative Agent shall also act as the “Agent” or “Administrative Agent”
under the Security Documents, and each of the Lenders (in its capacities as a
Lender, Swap Bank and potential Cash Management Bank) 

 

80

 

and the LC Issuer hereby
irrevocably appoints and authorizes the Administrative Agent to act as the
agent of such Lender and the LC Issuer for purposes of acquiring, holding and
enforcing any and all Encumbrances on Collateral granted by any of the Loan
Parties to secure any of the Obligations, together with such powers and
discretion as are reasonably incidental thereto.  In this connection, the Administrative Agent,
as “Agent” or “Administrative Agent” under the Security Documents, and any
sub-agent appointed by it, shall be entitled to the benefits of all provisions
of this Section XI as if set forth in full herein with respect
thereto.  The Administrative Agent may,
and the Borrowers hereby authorizes the Administrative Agent to, include
references to the Borrowers and their Subsidiaries, and utilize any logo or
other distinctive symbol associated with the Borrowers or any of its
Subsidiaries, in connection with any advertising, promotion or marketing
undertaken by the Administrative Agent.

 

11.2         Exculpatory Provisions.  The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein.  Without limiting the generality of the
foregoing, (i) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (ii) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing as directed by the
Majority Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 12.7)), provided
that the Administrative Agent shall not be required to take any action that, in
its opinion or the opinion of its counsel, may expose the Administrative Agent
to liability or that is contrary to any Loan Document or applicable law, and (iii) except
as expressly set forth herein, the Administrative Agent shall not have any duty
to disclose, and shall not be liable for the failure to disclose, any
information relating to any Loan Party or any Subsidiary thereof that is
communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity.  The
Administrative Agent shall not be liable for any action taken or not taken by
it with the consent or at the request of the Majority Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.7) or in the absence of its own
gross negligence or willful misconduct. 
The Administrative Agent shall be deemed not to have knowledge of any
Default unless and until written notice thereof is given to the Administrative
Agent by the Borrowers or a Lender.  The
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (A) any statement, warranty or representation made in or
in connection with this Agreement or any other Loan Document, (B) the
contents of any certificate, report or other document delivered hereunder or in
connection herewith, (C) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (D) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, (E) the satisfaction of any
condition set forth in Section IV or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent, (F) the existence, value, collectibility or adequacy
of the Collateral or any part thereof or the validity, effectiveness,
perfection or relative priority of the liens and security interests of the
Lenders and the LC Issuer therein, or (G) the filing, recording, refiling,
continuing or re-recording of any financing statement or other document or
instrument evidencing or relating to the security interests or liens of the
Lenders and the LC Issuer in the Collateral.

 

81

 

11.3         Rights as a Lender.  The Person serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the
Person serving as the Administrative Agent hereunder in its individual
capacity.  Such Person and its Affiliates
may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with
any Loan Party or any Subsidiary or other Affiliate thereof as if such Person
were not the Administrative Agent hereunder and without any duty to account
therefor to the Lenders.

 

11.4         Actions
by Administrative Agent.

 

(a)           The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement as it reasonably deems appropriate unless it
shall first have received such advice or concurrence of the Lenders and shall
be indemnified to its reasonable satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.  The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any of the Loan Documents in
accordance with a request of the Lenders, and such request and any action taken
or failure to act pursuant thereto shall be binding upon the Lenders and all
future holders of the Notes.

 

(b)           Whether
or not an Event of Default shall have occurred, the Administrative Agent may
from time to time exercise such rights of the Administrative Agent, the LC
Issuer and the Lenders under the Loan Documents as it determines may be
necessary or desirable to protect the Collateral and the interests of the
Administrative Agent, the LC Issuer and the Lenders therein and under the Loan
Documents.

 

11.5         Reliance by
Administrative Agent.   The
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed
by it to be genuine and to have been signed, sent or otherwise authenticated by
the proper Person.  The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon.  In
determining compliance with any condition hereunder to the making of a Loan, or
the issuance of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or the LC Issuer, the Administrative Agent may presume
that such condition is satisfactory to such Lender or the LC Issuer unless the
Administrative Agent shall have received notice to the contrary from such
Lender or the LC Issuer prior to the making of such Loan or the issuance of
such Letter of Credit.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrowers), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

 

11.6         Delegation of Duties.  The Administrative Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or 

 

82

 

through any one or more
sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such
sub-agent may perform any and all of its duties and exercise its rights and
powers by or through their respective Related Parties.  The exculpatory provisions of this Section shall
apply to any such sub-agent and to the Related Parties of the Administrative
Agent and any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as Administrative Agent.

 

11.7         Indemnification.  Without limiting the obligations of the
Borrowers hereunder or under any other Loan Document, the Lenders agree to
indemnify the Administrative Agent and the LC Issuer, ratably in accordance
with their Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against the Administrative Agent or the LC Issuer in any way
relating to or arising out of this Agreement or any other Loan Document or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or the enforcement of any of the terms hereof or
thereof or of any such other documents; provided, that no Lender
shall be liable for any of the foregoing to the extent it results from the
gross negligence or willful misconduct of the Administrative Agent or the LC
Issuer, as the case may be.

 

11.8         Reimbursement.  Without limiting the provisions of Section 11.7,
the Lenders, the LC Issuer and the Administrative Agent hereby agree that the
Administrative Agent shall not be obliged to make available to any Person any
sum which the Administrative Agent is expecting to receive for the account of
that Person until the Administrative Agent has determined that it has received
that sum.  The Administrative Agent may,
however, disburse funds prior to determining that the sums which the
Administrative Agent expects to receive have been finally and unconditionally
paid to the Administrative Agent if the Administrative Agent wishes to do
so.  If and to the extent that the
Administrative Agent does disburse funds and it later becomes apparent that the
Administrative Agent did not then receive a payment in an amount equal to the
sum paid out, then any Person to whom the Administrative Agent made the funds
available shall, on demand from the Administrative Agent, refund to the
Administrative Agent the sum paid to that Person.  If the Administrative Agent in good faith
reasonably concludes that the distribution of any amount received by it in such
capacity hereunder or under the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction.  If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the
Administrative Agent is to be repaid, each Person to whom any such distribution
shall have been made shall either repay to the Administrative Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over
the same in such manner and to such Persons as shall be determined by such
court.

 

11.9         Non-Reliance
on Administrative Agent and New Lenders. 
Each Lender represents that it has, independently and without reliance
on the Administrative Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of the Borrowers and decision to enter into
this Agreement and the other Loan Documents and agrees that it will,
independently and without 

 

83

 

reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decision in taking or not taking action under this Agreement or
any other Loan Document.    Unless any
Lender shall promptly object to any action taken by the Administrative Agent
hereunder (other than actions to which the provisions of Section 12.7(b) are
applicable and other than actions which constitute gross negligence or willful
misconduct by the Administrative Agent), such Lender shall conclusively be
presumed to have approved the same.

 

11.10       Resignation
of Administrative Agent.  The
Administrative Agent may resign at any time by giving 30 days prior written
notice thereof to the Lenders and the Borrowers.  Upon any such resignation, the Lenders shall
have the right to appoint a successor Administrative Agent which shall be
reasonably acceptable to the Borrowers (whose consent shall not be unreasonably
withheld or delayed) and shall be a financial institution having a combined
capital and surplus in excess of $150,000,000. 
If no successor Administrative Agent shall have been so appointed by the
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent’s giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent which shall be reasonably acceptable to the
Borrowers (whose consent shall not be unreasonably withheld or delayed) and
shall be a Lender or other financial institution having a combined capital and
surplus in excess of $150,000,000.  Upon
the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder.  After any retiring
Administrative Agent’s resignation, the provisions of this Agreement shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Administrative Agent.

 

11.11       No Other Duties, etc.  Anything herein to the contrary notwithstanding,
neither the Lead Arranger nor the Syndication Agent listed on the cover page hereof
shall have any powers, duties or responsibilities under this Agreement or any
of the other Loan Documents, except in its capacity, as applicable, as the
Administrative Agent, a Lender or the LC issuer hereunder.

 

SECTION XII

GENERAL

 

12.1         Notices; Effectiveness
of Signatures.

 

Unless
otherwise specifically provided herein, any notice or other communication
herein required or permitted to be given shall be in writing and may be
personally served, or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile in complete and legible form, or
three Business Days after depositing it in the United States mail to be sent by
certified or registered mail with postage prepaid and properly addressed; provided
that notices to the Administrative Agent and the LC Issuer shall not be
effective until received.  For the
purposes hereof, the address of each party hereto shall be as set forth on Schedule
12.1 hereof or 

 

84

 

(subject
to said Schedule) in its Administrative Questionnaire or (i) as to the
Borrowers and the Administrative Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to the Administrative
Agent.  The Administrative Agent or the
Borrowers may, in their discretion, agree to accept notices and other
communications to such parties hereunder by electronic communications pursuant
to procedures approved by such parties, provided that approval of such
procedures may be limited to particular notices or communications.

 

Loan
Documents and notices under the Loan Documents may be transmitted and/or signed
by telefacsimile and by signatures delivered in ‘PDF’ format by electronic mail.  The effectiveness of any such documents and
signatures shall, subject to applicable law, have the same force and effect as
an original copy with manual signatures and shall be binding on all Loan
Parties, the Administrative Agent and the Lenders.  The Administrative Agent may also require
that any such documents and signature be confirmed by a manually-signed copy
thereof; provided, however, that the failure to request or
deliver any such manually-signed copy shall not affect the effectiveness of any
facsimile document or signature.

 

Notwithstanding
the foregoing, the Borrowers agree that the Administrative Agent may make any
material delivered by the Borrowers to the Administrative Agent, as well as any
amendments, waivers, consents and other written information, documents,
instruments and other materials relating to the Borrowers, any of their
Subsidiaries, or any other materials or matters relating to the Loan Documents
or any of the transactions contemplated hereby that the Administrative Agent is
required or authorized pursuant to the terms hereof or of any Loan Document to
provide to the Lenders (collectively, the “Communications”) available to the Lenders by posting such
notices on a Platform.  THE BORROWERS
ACKNOWLEDGE THAT (A) THE DISTRIBUTION OF MATERIAL THROUGH AN ELECTRONIC
MEDIUM IS NOT NECESSARILY SECURE AND THAT THERE ARE CONFIDENTIALITY AND OTHER
RISKS ASSOCIATED WITH SUCH DISTRIBUTION, (B) A PLATFORM IS PROVIDED “AS
IS” AND “AS AVAILABLE” AND (C) NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF
ITS AFFILIATES WARRANTS THE ACCURACY, COMPLETENESS, TIMELINESS, SUFFICIENCY, OR
SEQUENCING OF THE COMMUNICATIONS POSTED ON A PLATFORM.  THE ADMINISTRATIVE AGENT AND ITS AFFILIATES
EXPRESSLY DISCLAIM WITH RESPECT TO A PLATFORM ANY LIABILITY FOR ERRORS IN
TRANSMISSION, INCORRECT OR INCOMPLETE DOWNLOADING, DELAYS IN POSTING OR
DELIVERY, OR PROBLEMS ACCESSING THE COMMUNICATIONS POSTED ON SUCH PLATFORM AND
ANY LIABILITY FOR ANY LOSSES, COSTS, EXPENSES OR LIABILITIES THAT MAY BE
SUFFERED OR INCURRED IN CONNECTION WITH SUCH PLATFORM.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE ADMINISTRATIVE AGENT
OR ANY OF ITS AFFILIATES IN CONNECTION WITH ANY PLATFORM.

 

85

 

Each
Lender agrees that notice to it (as provided in the next sentence) specifying
that any Communication has been posted to a Platform shall for purposes of this
Agreement constitute effective delivery to such Lender of such information,
documents or other materials comprising such Communication.  Each Lender agrees (1) to notify, on or
before the date such Lender becomes a party to this Agreement, the
Administrative Agent in writing of such Lender’s e-mail address to which a
notice may be sent (and from time to time thereafter to ensure that the
Administrative Agent has on record an effective e-mail address for such Lender)
and (2) that any notice may be sent to such e-mail address.

 

12.2         Expenses.  Whether or not the transactions contemplated
herein shall be consummated, the Borrowers, jointly and severally, promise to
reimburse the Administrative Agent, the LC Issuer and the Lenders for all
reasonable out-of-pocket fees and disbursements (including all reasonable
attorneys’ fees and collateral evaluation costs) incurred or expended in
connection with the preparation, filing or recording, or interpretation of this
Agreement and the other Loan Documents, or any amendment, modification,
approval, consent or waiver hereof or thereof, or in connection with the
enforcement of any Obligations or the satisfaction of any indebtedness of the
Borrowers hereunder or thereunder, or in connection with any litigation,
proceeding or dispute in any way related to the credit hereunder, the
Obligations, the Loan Documents or the Collateral, including, without
limitation, reasonable fees and disbursements of the outside counsel and the
allocated costs of in-house legal counsel of the Administrative Agent;
accounting, consulting, appraisal, brokerage or other similar professional fees
or expenses; any fees or expenses (including the Administrative Agent’s per
diem charges) relating to any inspections, appraisals or examinations conducted
in connection with the Loans or any Collateral; and all costs and expenses
relating to any attempt to inspect, verify, protect, preserve, restore,
collect, sell, liquidate or otherwise dispose of or realize upon any
Collateral.  The amount of all such
costs, charges and expenses shall, until paid, bear interest at the rate
applicable to Base Rate Loans and shall be an Obligation secured by the
Collateral.  The Borrowers will pay any
taxes (including any interest and penalties in respect thereof), other than the
Lenders’ federal and state income taxes and other Excluded Taxes, payable on or
with respect to the transactions contemplated by the Loan Documents (the
Borrowers, jointly and severally, hereby agreeing, to indemnify the
Administrative Agent, the LC Issuer and the Lenders with respect thereto).

 

12.3         Indemnification.  The Borrowers, jointly and severally, agree
to indemnify and hold harmless the Administrative Agent, the LC Issuer and the
Lenders, as well as their respective shareholders, directors, offices, agents,
attorneys, subsidiaries and Affiliates, from and against all damages, losses,
settlement payments, obligations, liabilities, claims, suits, penalties,
assessments, citations, directives, demands, judgments, actions or causes of
action, whether statutorily created or under the common law, all reasonable
costs and expenses (including, without limitation, reasonable fees and
disbursements of attorneys, engineers and consultants) and all other
liabilities whatsoever (including, without limitation, liabilities under
Environmental Laws) which shall at any time or times be incurred, suffered,
sustained or required to be paid by any such indemnified Person (except any of
the foregoing which result from the gross negligence or willful misconduct of
the indemnified Person) on account of or in relation to or any way in
connection with any of the arrangements or transactions contemplated by,
associated with or ancillary to this Agreement, the other Loan Documents or any
other documents executed or 

 

86

 

delivered in connection
herewith or therewith, all as the same may be amended from time to time, or
with respect to any Letters of Credit, whether or not all or part of the
transactions contemplated by, associated with or ancillary to this Agreement,
any of the Loan Documents or any such other documents are ultimately
consummated.  In any investigation,
proceeding or litigation, or the preparation therefor, the Administrative Agent
and the Lenders shall select their own counsel and, in addition to the
foregoing indemnity, the Borrowers shall pay promptly the reasonable fees and
expenses of such counsel.  In the event
of the commencement of any such proceeding or litigation, the Borrowers shall
be entitled to participate in such proceeding or litigation with counsel of
their choice at their own expense, provided that such counsel shall be
reasonably satisfactory to the Administrative Agent.  The Borrowers authorize the Administrative
Agent, the LC Issuer and the Lenders to charge any deposit account or Note
Record which it may maintain with any of them for any of the foregoing.  The covenants of this Section 12.3 shall
survive payment or satisfaction of payment of all amounts owing with respect to
the Notes, any other Loan Document or any other Obligation.

 

12.4         Survival
of Covenants, Etc.  All covenants,
agreements, representations and warranties made herein, in the other Loan
Documents or in any documents or other papers delivered by or on behalf of the
Borrowers pursuant hereto shall be deemed to have been relied upon by the
Administrative Agent, the LC Issuer and the Lenders, notwithstanding any
investigation heretofore or hereafter made by any of them, and shall survive
the making by the Lenders of the Loans as herein contemplated, and shall
continue in full force and effect so long as any Obligation remains outstanding
and unpaid or any Lender has any obligation to make any Loans hereunder or the
LC Issuer has any obligation to issue any Letter of Credit.  All statements contained in any certificate
or other writing delivered by or on behalf of the Borrowers pursuant hereto or
in connection with the transactions contemplated hereby shall constitute joint
and several representations and warranties by the Borrowers hereunder.

 

12.5         Set-Off.  If a Default shall have occurred and be
continuing, each Lender, the LC Issuer and each of their respective Affiliates
is hereby authorized at any time and from time to time, after obtaining the
prior written consent of the Administrative Agent, to the fullest extent
permitted by applicable law and regardless of the adequacy of any Collateral or
other means of obtaining repayment of the Obligations, to set off and apply any
and all deposits (general or special, time or demand, provisional or final, in
whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender, the LC Issuer or any such Affiliate
to or for the credit or the account of the Borrowers or any other Loan Party
against any and all of the obligations of the Borrowers or such Loan Party now
or hereafter existing under this Agreement or any other Loan Document to such
Lender or the LC Issuer, irrespective of whether or not such Lender or the LC
Issuer shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Borrowers or such Loan Party may
be contingent or unmatured or are owed to a branch or office of such Lender or
the LC Issuer different from the branch or office holding such deposit or
obligated on such indebtedness.  The
rights of each Lender, the LC Issuer and their respective Affiliates under this
Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender, the LC Issuer or their respective
Affiliates may have.  Each Lender and the
LC Issuer agrees to notify the Borrowers and the Administrative Agent promptly
after any such setoff and application, 

 

87

 

provided
that the failure to give such notice shall not affect the validity of such
setoff and application.

 

12.6         No
Waivers.  No failure or delay by the
Administrative Agent, the LC Issuer or any Lender in exercising any right,
power or privilege hereunder, under the Notes or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.  No
waiver shall extend to or affect any Obligation not expressly waived or impair
any right consequent thereon.  No course
of dealing or omission on the part of the Administrative Agent, the LC Issuer
or the Lenders in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto.  No
notice to or demand upon the Borrowers shall entitle the Borrowers to other or
further notice or demand in similar or other circumstances, except as otherwise
specifically provided in the Loan Documents. 
The rights and remedies herein and in the Notes and the other Loan
Documents are cumulative and not exclusive of any rights or remedies otherwise
provided by agreement or law.

 

12.7         Amendments,
Waivers, etc.

 

(a)           Neither
this Agreement nor the Notes nor any other Loan Document nor any provision
hereof or thereof may be amended, waived, discharged or terminated except by a
written instrument signed by the Administrative Agent on behalf of the Lenders
and, with respect to Letters of Credit, the LC Issuer or, as the case may be,
by the Lenders and, with respect to Letters of Credit, the LC Issuer and also,
in the case of amendments, by the Borrowers.

 

(b)           Except
where this Agreement or any of the other Loan Documents authorizes or permits
the Administrative Agent to act alone and except as otherwise expressly
provided in this Section 12.7(b), any action to be taken (including the
giving of notice) by the Lenders may be taken, and any consent or approval
required or permitted by this Agreement or any other Loan Document to be given
by the Lenders may be given, and any term of this Agreement, any other Loan
Document or any other instrument, document or agreement related to this
Agreement or the other Loan Documents or mentioned therein may be amended, and
the performance or observance by the Borrowers or any other Person of any of
the terms thereof and any Default or Event of Default (as defined in any of the
above-referenced documents or instruments) may be waived (either generally or
in a particular instance and either retroactively or prospectively), in each
case only with the written consent of the Majority Lenders; provided, however,
that no such amendment, consent or waiver shall

 

(i)            extend or increase the
Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 9.2)
without the written consent of such Lender;

 

(ii)           postpone any date fixed
by this Agreement or any other Loan Document for any payment  (excluding
mandatory prepayments under subparagraphs (ii) through (v) of Section 2.8(b))
of principal, interest, fees or other amounts due to the Lenders (or any
of them) hereunder or under such other Loan Document without the written
consent of each Lender entitled to such payment;

 

88

 

(iii)          reduce the
principal of, or the rate of interest specified herein on, any Loan or (subject
to clause (iii) of the
second proviso to this Section 12.7(b)) any fees or other amounts
payable hereunder or under any other Loan Document without the written consent
of each Lender entitled to such amount; provided, however, that
only the consent of the Majority Lenders shall be necessary (x) to amend
the provisions of Section 2.5(c) or to waive any obligation of the
Borrowers to pay interest or fees in respect of Letters of Credit at the rate
provided in said Section therein following the occurrence of an Event of
Default or (y) to amend Section VII
hereof (or any defined term used therein) even if the effect of such amendment
would be to reduce the rate of interest on any Loan or to reduce any fee
payable hereunder;

 

(iv)          change (x) Section 2.9(d) or
9.3 in a manner that would alter the pro rata sharing of payments required
thereby without the written consent of each Lender or (y) the order of
application of any reduction in the Commitments or any prepayment of Loans
among the Facilities from the application thereof set forth in the applicable
provisions of Section 2.1(e) and 2.9(b), respectively, in any manner
that materially and adversely affects the Lenders under a Facility without the
written consent of (A) if such Facility is the Term Facility, the Majority
Term Lenders and (B) if such Facility is the Revolving Credit Facility,
the Majority Revolving Credit Lenders;

 

(v)           change (x) any
provision of this Section 12.7 or the definition of “Majority
Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to amend, waive or otherwise modify any rights hereunder or
make any determination or grant any consent hereunder (other than the
definitions specified in clause (y) of this subparagraph (v)), without the
written consent of each Lender or (y) the definition of “Majority
Revolving Credit Lenders,” or “Majority Term Lenders,” without the written
consent of each Lender under the applicable Facility;

 

(vi)          release any Subsidiary
Guaranty or any portion of the value of any Subsidiary Guaranty, without the
written consent of each Lender;

 

(vii)         impose any greater
restriction on the ability of any Lender under a Facility to assign any of its
rights or obligations hereunder without the written consent of (x) if such
Facility is the Term Facility, the Majority Term Lenders, and (y) if such
Facility is the Revolving Credit Facility, the Majority Revolving Credit
Lenders; or

 

(viii)        foreclose on any real
property Collateral without first obtaining reasonable and customary
environmental studies and reports regarding such Collateral, without the
consent of each Lender;

 

and provided,
further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the LC Issuer in addition to the Lenders required above,
affect the rights or duties of the LC Issuer under this Agreement or any
Application relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document; and (iii) the
Fee Letter 

 

89

 

may be
amended, or rights or privileges thereunder waived, in a writing executed only
by the parties thereto.

 

If any
Lender does not consent to a proposed amendment, waiver, consent or release
with respect to any Loan Document that requires the consent of each Lender and
that has been approved by the Majority Lenders, the Borrowers may replace such
non-consenting Lender in accordance with Section 10.2; provided
that such amendment, waiver, consent or release can be effected as a result of
the assignment contemplated by such Section (together with all other such
assignments required by the Borrowers to be made pursuant to this
paragraph).  Notwithstanding anything to
the contrary herein, no Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or consent hereunder, except that the
Commitment of such Lender may not be increased or extended without the consent
of such Lender.

 

12.8         Treatment of Certain
Information; Confidentiality.  Each
of the Administrative Agent, the Lenders and the LC Issuer agrees to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to
the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the
National Association of Insurance Commissioners), (c) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement or (ii) any actual or prospective counterparty (or its advisors)
to any swap or derivative transaction relating to the Borrowers and its
obligations, (g) with the consent of the Borrowers or (h) to the
extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the
Administrative Agent, any Lender, the LC Issuer or any of their respective
Affiliates on a nonconfidential basis from a source other than the Borrowers.

 

For
purposes of this Section, “Information” means all information received
from any Loan Party or any Subsidiary thereof relating to any Loan Party or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to the Administrative Agent, any Lender or the LC
Issuer on a nonconfidential basis prior to disclosure by any Loan Party or any
Subsidiary thereof, provided that, in the case of information received
from a Loan Party or any such Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

90

 

Each
of the Administrative Agent, the Lenders and the LC Issuer acknowledges that (a) the
Information may include material non-public information concerning the
Borrowers or a Subsidiary, as the case may be, (b) it has developed
compliance procedures regarding the use of material non-public information and (c) it
will handle such material non-public information in accordance with applicable
law, including Federal and state securities laws.

 

12.9         Lost
Note, Etc.  Upon receipt of an
affidavit of an officer of any Lender as to the loss, theft, destruction or
mutilation of any Note or any Security Document which is not a public record
and, in the case of any such loss, theft, destruction or mutilation, upon
cancellation of such Note or Security Document, if available, the Borrowers
will issue, in lieu thereof, a replacement Note or other Security Document in
the same principal amount thereof and otherwise of like tenor.

 

12.10       Captions;
Counterparts.  The captions in this
Agreement are for convenience of reference only and shall not define or limit
the provisions hereof.  This Agreement
and any amendment hereof may be executed in several counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one
instrument.  In proving this Agreement it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.  Except as provided in Section 4.1, this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.

 

12.11       Entire Agreement, Etc.  The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding
of the parties with respect to the transactions contemplated hereby and
supersede all prior agreements with respect to the subject matter hereof,
except for the letter agreement dated January 3, 2008 between the Parent
and the Administrative Agent with respect to certain fees payable to the
Administrative Agent and other parties identified therein (as amended from time
to time, the “Fee Letter”), which Fee Letter shall continue in full
force and effect and shall not be superseded by any of the Loan Documents.

 

12.12       Waiver
of Jury Trial.  THE BORROWERS AND
EACH OF THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THEIR
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY INCLUDING,
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE ADMINISTRATION AGENT OR ANY LENDER RELATING TO THE
ADMINISTRATION OR ENFORCEMENT OF THE LOANS AND THE LOAN DOCUMENTS, AND AGREE
THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

 

91

 

EXCEPT
AS PROHIBITED BY LAW, THE BORROWERS AND EACH OF THE LENDERS HEREBY WAIVE ANY
RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN
THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.

 

THE
BORROWERS (a) CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
LENDERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDERS WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (b) ACKNOWLEDGE
THAT THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS TO WHICH EACH IS A PARTY BECAUSE OF, AMONG OTHER THINGS, THE
BORROWERS’ WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

 

12.13       Governing
Law.  This Agreement and each of the
other Loan Documents are contracts under the laws of the State of New York and
shall for all purposes be construed in accordance with and governed by the laws
of said State (excluding the laws applicable to conflicts or choice of law).

 

12.14       Jurisdiction; Consent to
Service of Process.  (a) The
Borrowers hereby irrevocably and unconditionally submit, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to any Loan Document, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a
final, non-appealed judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. 
Nothing in this Agreement or any other Loan Document shall affect any
right that the Borrowers, the Administrative Agent, the LC Issuer or any Lender
may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Document against any other party hereto or their properties
in the courts of any jurisdiction.

 

(b)           The
Borrowers hereby irrevocably and unconditionally waive, to the fullest extent
it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any other Loan Document in any court
referred to in paragraph (a) of this Section.  Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

 

(c)           Each
party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 12.1.  Nothing in this Agreement or any other Loan 

 

92

 

Document will affect the
right of any party to this Agreement to serve process in any other manner
permitted by law.

 

12.15       USA PATRIOT Act Notice.  Each Lender that is subject to the Patriot
Act (as defined below) and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies the Borrowers that pursuant to the
requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Patriot Act”), it is required to
obtain, verify and record information that identifies each Loan Party, which
information includes the name and address of each Loan Party and other
information that will allow such Lender or the Administrative Agent, as
applicable, to identify each Loan Party in accordance with the Patriot Act.

 

12.16       Severability.  The provisions of this Agreement are
severable and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Agreement in any jurisdiction.

 

[Remainder of page intentionally left blank]

 

93

 

IN WITNESS WHEREOF, the undersigned have duly executed
this Credit Agreement under seal as of the date first above written.

 

	
   

  	
  STAR BUFFET, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron Dowdy

  
	
   

  	
            Name:
  Ron Dowdy

  
	
   

  	
            Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STAR BUFFET MANAGEMENT,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron Dowdy

  
	
   

  	
           Name:
  Ron Dowdy

  
	
   

  	
           Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
  SUMMIT FAMILY
  RESTAURANTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron Dowdy

  
	
   

  	
           Name:
  Ron Dowdy

  
	
   

  	
           Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HTB RESTAURANTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron Dowdy

  
	
   

  	
           Name:
  Ron Dowdy

  
	
   

  	
           Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTHSTAR BUFFET, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron Dowdy

  
	
   

  	
            Name:
  Ron Dowdy

  
	
   

  	
            Title:Secretary

  

 

 

	
   

  	
  WELLS FARGO BANK, N.A.,
  individually and as

  Administrative Agent, LC Issuer, Lead Arranger and

  Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Nicholas Cole

  
	
   

  	
         Name:  J. Nicholas Cole

  
	
   

  	
         Title:
  Managing Director

  

 

 

Schedule
1

Commitments and Applicable
Percentages

 

	
  Lender

  	
   

  	
  Revolving

  Credit

  Commitment

  	
   

  	
  Applicable

  Percentage

  	
   

  	
  Term

  Commitment

  	
   

  	
  Applicable

  Percentage

  	
   

  	
  Total

  Commitment

  	
   

  	
  Total

  Percentage

  	
   

  
	
  Wells Fargo
  Bank, N.A.

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  7,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  9,000,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  7,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  9,000,000

  	
   

  	
  100

  	
  %

  

 

 

AGREEMENT AND

 

AMENDMENT NO. 1 TO CREDIT
AGREEMENT

 

THIS
AGREEMENT AND AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”) is
entered into as of February 29, 2008, by and among STAR BUFFET, INC., STAR BUFFET MANAGEMENT, INC., SUMMIT FAMILY
RESTAURANTS, INC., HTB RESTAURANTS, INC., NORTHSTAR BUFFET, INC. and STARLITE
HOLDINGS, INC. (“Starlite”), each a Delaware corporation (each
individually, a “Borrower”, and collectively, the “Borrowers”),
and WELLS FARGO BANK, N.A., a national banking association (“Wells Fargo”).

 

WITNESSETH:

 

WHEREAS,
the Borrowers (other than Starlite) and Wells Fargo are parties to a certain
Credit Agreement, dated as of January 31, 2008 (as amended, restated or
otherwise modified from time to time, the “Credit Agreement”; terms defined
in the Credit Agreement are used herein with the same meanings); and

 

WHEREAS,
Starlite wishes to become a party to the Credit Agreement as a “Borrower”, and
the Borrowers and the Administrative Agent wish to amend the Credit Agreement;

 

NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:

 

Section 1.               Starlite
Holdings, Inc.  Starlite and the
other parties hereto agree that Starlite as of the date hereof shall become a
party to the Credit Agreement as a “Borrower”, and that accordingly the
definitions of “Borrower” and “Borrowers” are hereby amended to
include Starlite.

 

Section 2.               Amendments.  Effective as of the date hereof, the Credit
Agreement is hereby amended as follows:

 

(a)          The
definition of “Total Term Loan Commitment” in Section 1.1 of the Credit
Agreement is amended in full to read as follows:

 

“Total Term
Loan Commitment.  The sum of the Term
Loan Commitments of the Term Lenders as in effect from time to time, which as
of February 29, 2008 shall be $8,000,000.”

 

(b)         Section 2.7(a) of
the Credit Agreement is amended in full to read as follows:

 

“Term Loans.  The Borrowers shall repay the principal
amount of the Term Loans in equal quarterly installments of $175,000 for the
first six full calendar quarters after the Closing Date and in equal quarterly
installments of $225,000 for the next nine full 

 

 

calendar quarters,
payable on each Payment Date commencing April 1, 2008, and the aggregate
principal amount of all Term Loans outstanding on the Maturity Date shall be
paid on such date.”

 

(c)          Section 6.13
of the Credit Agreement is amended in full to read as follows:

 

“Interest Rate
Protection.  The Borrowers shall
obtain on or before March 13, 2008, and maintain in effect at all times
until the third anniversary of the Closing Date, Swap Agreements between
themselves and a Swap Bank with respect to not less than fifty percent (50.00%)
of the Term Loans outstanding under the Term Facility.”

 

(d)         The
schedules to the Credit Agreement and, to the extent applicable, the other Loan
Documents are hereby amended and restated in the forms attached hereto as Exhibit A.

 

Section 3.               Loan Documents.  In addition to Starlite becoming a Borrower
under the Credit Agreement pursuant to Section 1 above, by its execution
hereof, Starlite agrees to become a party to and bound by, and each of the
other parties hereto hereby agrees that Starlite shall become a party to, as of
the date hereof, the following Loan Documents in the same manner as the other
Borrowers:

 

(i)            Revolving Credit Note;

 

(ii)           Term Note;

 

(iii)          Security Agreement;

 

(iv)          Collateral Assignment of
Contracts;

 

(v)           Trademark Security
Agreement;

 

(vi)          Pledge Agreement (as a
Borrower, not a Pledgor);

 

(vii)         Indemnity Agreement
Regarding Hazardous Materials; and

 

(viii)        Collateral Assignment of
Licenses and Permits.

 

Section 4.               Consent to Asset
Purchase Agreement.  The Lender hereby consents to the
transactions contemplated by that certain Asset Purchase Agreement, dated as of
February 5, 2008 between Starlite and Barnhill’s Buffet, Inc. (the “Purchase
Agreement”) and the Guaranty by Star Buffet, Inc. in favor of Spirit
Master Funding, LLC (the “Guaranty”).

 

Section 5.               Representations and
Warranties.  The Borrowers represent and warrant as
follows:

 

(a)          Except as set forth on the updated schedules to the
Credit Agreement attached hereto as Exhibit A, the representations
and warranties contained in Section V of the Credit Agreement, after
giving effect to this Amendment, are true and correct in all material respects
on and as of the date hereof, as though made on and as of such date, except
to the extent that such 

 

2

 

representations
and warranties expressly relate solely to an earlier date (in which case such
representations and warranties were true and accurate on and as of such earlier
date).

 

(b)         No Default
or Event of Default has occurred or is continuing on the date hereof and no
Default or Event of Default will occur or be continuing immediately after the
date hereof.

 

Section 6.               Conditions to
Effectiveness.  This Amendment shall
become effective only when the Administrative Agent shall have received:

 

(a)          counterparts
of this Amendment duly executed by the Borrowers;

 

(b)         a duly
executed certificate of a Responsible Officer of the Borrowers confirming (i) that
the Borrowers have delivered to the
Administrative Agent true and correct copies of the Purchase Agreement and the
Guaranty and all schedules, documents and agreements ancillary thereto as in
effect on the date hereof, (ii) that all conditions to the effectiveness
of the transactions contemplated by the Purchase Agreement have been satisfied,
(iii) that the transactions contemplated by the Purchase Agreement have
been consummated, (iv) that the conditions in Section 5 above and Section 4.2
of the Credit Agreement have been satisfied, (v) delivery to the
Administrative Agent of a certified copy of the final order by the Bankruptcy Court approving the
transactions contemplated by the Purchase Agreement, including without
limitation the Guaranty, in form reasonably satisfactory to the Administrative
Agent and (vi) such other matters as the Administrative Agent shall
require, in form and substance satisfactory to the Administrative Agent;

 

(c)          allonges to the Notes in form and substance
satisfactory to the Administrative Agent,

 

(d)         original
certificates representing the pledged Equity Interests referred to in the
Pledge Agreement, including of Starlite, accompanied by undated stock powers
executed in blank to the extent not previously delivered to the Administrative
Agent;

 

(e)          stamped
receipt copies of a proper financing statement, duly filed on or before the
date hereof under the Uniform Commercial Code of Delaware with respect to all
assets of Starlite;

 

(f)          a duly executed certificate of the Secretary of
Starlite as to authorizing resolutions of its Board of Directors, its
Certificate of Incorporation, bylaws, and incumbency and signatures of
its authorized officers, in form and substance satisfactory to the
Administrative Agent;

 

(g)         a certificate of good standing of Starlite issued by
the Secretary of State of the State of Delaware;

 

(h)         an opinion
of Kilpatrick Stockton LLP counsel to the Borrowers addressed to the
Administrative Agent and each Lender in form and substance satisfactory to the
Administrative Agent; and

 

(i)           such other certificates, instruments and documents as
the Administrative Agent shall reasonably require.

 

3

 

Section 7.               General.  The foregoing amendments to the Credit
Agreement and consent are limited as provided herein and do not extend to any
other provisions of the Credit Agreement not specified herein or to any other
matter.  The Credit Agreement is hereby
ratified and confirmed and shall continue in full force and effect as amended
hereby.  This Amendment may be executed
in any number of counterparts with the same effect as if the signatures hereto
were upon the same instrument. 
Telecopied signatures hereto shall be of the same force and effect as an
original of a manually signed copy.

 

Section 8.               Governing Law.  The laws of the State of New York shall
govern the construction of this Amendment and the rights and duties of the
parties hereto.

 

Section 9.               Headings.
The descriptive headings of the various provisions of this Amendment are for
convenience of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.

 

[Signature page follows.]

 

4

 

IN
WITNESS WHEREOF, this Agreement and Amendment No. 1 to Credit Agreement
has been executed as an instrument under seal as of the date first set forth
above.

 

	
  WELLS FARGO BANK, N.A.,
  individually and as Administrative Agent, LC Issuer, Lead Arranger and
  Syndication Agent

  	
  STAR BUFFET, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
            /s/ Ron Dowdy

  
	
   

  	
            Name:
  Ron Dowdy

  
	
   

  	
            Title:
  Secretary

  
	
  By:

  	
            /s/
  Darcy McLaren

  	
   

  	
   

  
	
            Name:
  Darcy McLaren

  	
  STAR BUFFET MANAGEMENT,
  INC.

  
	
            Title:
   Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
           /s/
  Ron Dowdy

  
	
   

  	
           Name:
  Ron Dowdy

  
	
   

  	
           Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
  SUMMIT FAMILY
  RESTAURANTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
           /s/
  Ron Dowdy

  
	
   

  	
           Name:
  Ron Dowdy

  
	
   

  	
           Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
  HTB RESTAURANTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
           /s/
  Ron Dowdy

  
	
   

  	
           Name:
  Ron Dowdy

  
	
   

  	
           Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
  NORTHSTAR BUFFET, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
            /s/
  Ron Dowdy

  
	
   

  	
            Name:
  Ron Dowdy

  
	
   

  	
            Title:
  Secretary

  
	
   

  	
   

  
	
   

  	
  STARLITE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
            /s/
  Ron Dowdy

  
	
   

  	
            Name:
  Ron Dowdy

  
	
   

  	
            Title:Secretary

  
						

 

[Signature Page to
Amendment No. 1 to Credit Agreement]Exhibit 10.15

 

 

LOAN AGREEMENT

 

Senior Subordinated Promissory Note

Series I

 

$1,400,000.00

 

MADE BY AND BETWEEN

 

STAR BUFFET, INC.,

a Delaware corporation

 

AND

 

ROBERT E. WHEATON &

SUZANNE H. WHEATON,

 

 

Dated as of June 15, 2007

 

 

LOAN AGREEMENT

 

BY THIS AGREEMENT made and entered into as of the 15th day
of June, 2007, STAR BUFFET, INC., a Delaware corporation, whose address is 1312
N. Scottsdale Road, Scottsdale, Arizona 85257 (hereinafter severally and
collectively called “Borrower”), and ROBERT E. WHEATON &
SUZANNE H. WHEATON, whose address is 4716 East Valley Vista Lane, Paradise
Valley, Arizona 85253 (hereinafter called “Lender”), for and in
consideration of the recitals and mutual promises contained herein, confirm and
agree as follows:

 

SECTION 1.         RECITALS

 

1.1           Loan.  Borrower has applied to Lender for a term
loan in the amount of ONE MILLION FOUR HUNDRED THOUSAND AND NO/100THS DOLLARS
($1,400,000.00), upon the terms, conditions and provisions set forth herein,
for the sole purpose of providing working capital for Borrower in the ordinary
course of business.

 

SECTION 2.         DEFINITIONS

 

2.1           Defined Terms.  As used herein, the following capitalized
terms shall have the meanings specified below, unless the context otherwise
requires.

 

(a)           Adjusted Tangible
Net Worth.  Tangible net worth plus
subordinated debt, determined in accordance with GAAP, plus the amount of any
reductions in tangible net worth for non-cash charges required under Financial
Accounting Standard 144 and reserves for notes receivable.

 

(b)           Advance.  Omitted.

 

(c)           Affiliate.  Any person or entity (i) that directly
or indirectly controls, or is controlled by, or is under common control with,
Borrower; (ii) that directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of or membership in Borrower;
(iii) five percent (5%) or more of the voting stock of or membership in
which entity is directly or indirectly beneficially owned or held by Borrower; (iv) that
is an officer, director or manager of Borrower; (v) of which another
Affiliate is an officer, director or manager; or (vi) who is related by
blood, adoption, or marriage to another Affiliate.  The term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of an entity, whether through the ownership of voting
securities, by contract, or otherwise.

 

(d)           Business Day.  Any day other than a Saturday, Sunday, public
holiday, or other day when commercial banks in Arizona are authorized or
required to close.

 

(e)           Capital Expenditures.  For a period, any expenditures of money
during such period for the lease, purchase or construction of assets that are
capitalized on Borrower’s balance sheet.

 

1

 

(f)            Closing.  The satisfaction of all of the conditions
precedent set forth in SECTION 5 hereof and the consummation of all of the
loan transactions contemplated by this Loan Agreement.

 

(g)           Closing Date.  The date, on or before June 15, 2007, on
which the Closing occurs.

 

(h)           Commitment.  As defined in Paragraph 3.1 hereof.

 

(i)            Compliance
Certificate. A certification of compliance in the form attached hereto as Exhibit “A.”

 

(j)            CPLTD.  The amount of principal payments on long term
debt and the amount of capitalized leases that are to be paid within one year.

 

(k)           Disbursement Account.  Omitted.

 

(l)            EBITDA.  Pretax earnings from continuing operations
plus interest expense, depreciation and amortization, impairment of long-lived
assets and reserves for notes receivable, computed and calculated in accordance
with GAAP calculated on a rolling four (4) quarter basis.

 

(m)          Environmental Law.  Any federal, state or local statute,
ordinance, or regulation pertaining to health, industrial hygiene, or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
et  seq. (“CERCLA”); the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Section 6901, et  seq. (“RCRA”);
and the Arizona Environmental Quality Act, Title 49, Arizona Revised Statutes,
and all rules adopted and guidelines promulgated pursuant to the
foregoing.

 

(n)           ERISA.  The Employee Retirement Income Security Act
of 1974, as amended and as in effect from time to time.

 

(o)           Event of Default.  As defined in Paragraph 11.1 hereof.

 

(p)           Facility.  Any real property and improvements owned or
occupied by Borrower in the conduct of its business.

 

(q)           Fixed Charge
Coverage.  The ratio of (a) EBITDA,
less cash taxes and maintenance Capital Expenditures plus rent expense, to (b) CPLTD,
plus interest expense plus rent expense calculated on a rolling four (4) quarter
basis.

 

(r)            GAAP.  Those generally accepted accounting
principles and practices that are recognized as such by the American Institute
of Certified Public Accountants acting through its Accounting Principles Board
or by the Financial Accounting Standards Board or through other appropriate
boards or committees thereof and which are consistently applied for all periods
after the date thereof so as to properly reflect the financial condition, and
the results of operations and changes in the financial position, of Borrower.

 

2

 

(s)           Hazardous Substance:  Includes:

 

(i)            those substances
included within the definitions of “hazardous substances,” “hazardous
materials,” “toxic substances,” or “solid waste” in CERCLA, RCRA, and the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
and in the regulations promulgated pursuant thereto;

 

(ii)           those substances
defined as “hazardous substances” in A.R.S. Section 49-201 and in rules adopted
or guidelines promulgated pursuant thereto;

 

(iii)          those substances listed
in the United States Department of Transportation Table (49 CFR 172.101 and
amendments thereto) or by the Environmental Protection Agency as hazardous
substances (40 CFR Part 302 and amendments thereto); and

 

(iv)          all other substances,
materials and wastes that are, or that become, regulated under, or that are
classified as hazardous or toxic under, any Environmental Law.

 

(t)            Indebtedness.  The total outstanding indebtedness owed
Lender by Borrower under or in connection with the Loan, including principal
and interest accrued but not previously paid.

 

(u)           Lien.  Any lien, mortgage, security interest, tax
lien, pledge, encumbrance, conditional sale or title retention arrangement, or
any other interest in property designed to secure the payment of any
indebtedness or performance of any obligation, whether arising by agreement or
under any statute or law, or otherwise.

 

(v)           Loan Documents.  This Agreement, the Note and all other
documents now or hereafter executed or delivered in connection with the Loan.

 

(w)          Loan.  As defined in Paragraph 3.1 hereof.

 

(x)            Long Term Debt.  Financing that has a maturity of greater than
one year.

 

(y)           Maintenance Capital.  Expenditures defined by GAAP to be
capitalized that are necessary to maintain the operations of the existing
restaurants.

 

(z)            Material
Adverse Effect.  Any event or
condition that either (i) would have a material adverse effect upon the
validity, performance or enforceability of this Agreement, or any of the other
Loan Documents, (ii) is material and adverse to the properties, financial
condition, credit or business operations and prospects of Borrower or any
Subsidiary, (iii) would impair the ability of Borrower to fulfill its
obligations under this Agreement, or any of the other Loan Documents, or (iv) causes
an Event of Default or an event or condition that with notice or lapse of time
or both, would become an Event of Default.

 

3

 

(aa)         Termination Date.  Shall mean June 5, 2012; provided,
however, upon the request of Borrower, such date may be extended in writing by
Lender in its sole and absolute discretion.

 

(bb)         Note.  As defined in Paragraph 3.2 hereof.

 

(cc)         Obligations.  Any and all of the representations,
warranties, covenants and other obligations made or undertaken by Borrower in
this Agreement or in any of the other Loan Documents.

 

(dd)         PBGC.  The Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.

 

(ee)         Permitted Liens.  (i) Liens granted to Lender; (ii) existing
Liens approved by Lender and listed on Exhibit “B” hereto, (iii) future
Liens approved in writing by Lender in its sole discretion; (iv) Liens for
taxes, assessments and other governmental charges that are not past due or
delinquent; (v) Liens imposed by law, such as mechanics’ liens, arising in
the ordinary course of business and that secure payments not yet due; (vi) Mortgage
Liens secured by a Facility where Lender has been notified in writing in
advance of such lien being recorded; and (vii) Liens on other assets to
the extent that such Liens secure financing for the acquisition of that asset.

 

(ff)           Plan.  Each pension, profit sharing, stock bonus,
thrift, savings, and employee stock ownership plan established or maintained,
or to which contributions have been made, by Borrower or any trade or business
which together with Borrower would be treated as a single employer under ERISA.

 

(gg)         Primary Lender.  M&I Marshall & Ilsley Bank.

 

(hh)         SEC.  The United States Security and Exchange
Commission.

 

(ii)           Subsidiary.  Any corporation fifty percent (50%) or more
of which is owned, directly or indirectly, by Borrower.

 

(jj)           Total Funded Debt.  All financings, capitalized lease obligations
and outstanding letters of credit.

 

(kk)         Total Funded Debt to EBITDA.  The ratio Total Funded Debt to EBITDA
calculated on a rolling four (4) quarter basis.

 

2.2           Other Terms.  All accounting and financial terms used and
not otherwise defined in this Agreement shall have the meanings accorded them
under GAAP.

 

SECTION 3.         LOAN

 

3.1           Loan.  Subject to the conditions herein set forth,
Lender agrees to loan to or for the benefit of Borrower, and Borrower agrees to
borrow, in the manner and upon the terms and conditions herein expressed,
amounts that shall not exceed at any time the Commitment (the “Loan”).  The “Commitment” shall be the
principal sum of $1,400,000.00.

 

4

 

3.2           Note.  The Loan shall be evidenced by a promissory
note of Borrower, executed and delivered simultaneously with the execution of
this Agreement, in the amount of the $1,400,000.00 payable to Lender upon the
terms and conditions contained therein (the “Note”).

 

3.3           Advances.  Omitted.

 

3.4           Readvances.  Omitted.

 

3.5           Other Disbursements
by Lender.  Lender, from time to time
in its sole discretion, may make disbursements in payment of interest accrued
and payable upon the Loan and any charges and expenses that are the obligation
of Borrower under this Agreement or any of the other Loan Documents and any
charges or matters necessary to cure any Event of Default, all of which shall
be added to and be part of the Indebtedness.

 

3.6           Repayment.  Borrower, from time to time, may repay the
Loan in whole or in part at any time, without penalty, provided that any
repayment complies with terms then in effect between borrow and Primary
Lender.  Borrower shall immediately repay
to Lender, from time to time, an amount equal to any amount by which the
outstanding principal balance of the Loan exceeds the Commitment.

 

3.7           Termination.  The entire outstanding principal balance, all
accrued and unpaid interest, and all other sums payable in connection with the
Loan shall be due and payable on that date.

 

3.8           Application of
Payments.  So long as no Event of
Default exists, all payments shall be applied first to the payment of any
costs, fees and other charges incurred in connection with the Loan, next to the
payment of any accrued interest and then to the reduction of the principal
balance.  Upon the occurrence and during
the continuation of any Event of Default, all payments shall be applied by
Lender to the Indebtedness and Obligations in such order and manner as Lender
shall determine in its sole and absolute discretion.  All payments shall be applied to the
Indebtedness and Obligations only when received in immediately available funds.

 

3.9           Prior Performance.  Although Lender shall have no obligation to
make any Advance unless and until all of the requirements and conditions
precedent set forth herein have been satisfied, Lender, at its sole discretion,
may make any Advance prior to that time without waiving or releasing any of the
requirements or conditions precedent of this Agreement; Borrower shall continue
to be strictly obligated to perform, and shall be subject to, all such requirements
and conditions notwithstanding any such disbursement.

 

3.10         Right to Advance.  Omitted.

 

SECTION 4.         LOAN FEE

 

4.1           Loan Fee.  Omitted.

 

4.2           Commitment Fee.  Omitted.

 

5

 

SECTION 5.         CONDITIONS PRECEDENT FOR CLOSING

 

The obligation of Lender to make the Loan, and to make any Advance at
Closing, is subject to the following express conditions precedent, all of which
shall have been satisfied prior to Closing:

 

5.1           Documents Required.  Borrower shall have executed (or obtained the
execution or issuing of) and delivered to Lender the following documents, all
in form satisfactory to Lender:

 

(a)           This Agreement

 

(b)           The Note

 

5.2           Loan Fee.  Omitted.

 

5.3           Items Required.  Borrower, at its expense, shall have obtained
and delivered to Lender the following items, all of which shall be in form and
content satisfactory to Lender and shall be subject to approval in writing by
Lender:

 

(a)           A copy of the articles
of incorporation and bylaws of Borrower and each Subsidiary, including all
amendment thereto, certified by the secretary of Borrower or each Subsidiary,
as appropriate, as being true, complete and correct as of the date of
certification.

 

(b)           Certificates of good
standing for Borrower and each Subsidiary issued by the Secretary of State of
the state of incorporation of that corporation.

 

(c)           Resolutions of Borrower
approving the execution, delivery and performance of this Agreement and the
other Loan Documents and the transaction contemplated thereby, duly adopted by
Borrower’s board of directors and accompanied by a certificate of the Secretary
of Borrower stating that such resolutions are true and correct and are in full
force and effect.

 

(d)           A signed certificate of
the secretary of Borrower which shall certify the names of the officers of
Borrower authorized to sign each of the Loan Documents, together with the true
signature of each such officer.

 

5.4           Representative and
Warranties True.  All representations
and warranties by Borrower shall remain true and correct in all material
respects and all agreements that Borrower is to have performed or complied with
by the date hereof shall have been performed or complied with.

 

5.5           No Default.  No Event of Default exists, and no event has
occurred and no condition exists that, after notice or lapse of time, or both,
would constitute an Event of Default.

 

SECTION 6.         ADDITIONAL CONDITIONS

 

The obligation of Lender to make the Loan shall be subject to the
following additional conditions precedent, all of which shall have been
satisfied and remain satisfied at the time of each Advance of the Loan:

 

6

 

6.1           Prior Conditions.  All of the conditions precedent provided in SECTION 5
hereof shall have been satisfied.

 

6.2           Request for Advance.  Omitted.

 

6.3           Representatives and
Warranties True.  All representations
and warranties by Borrower shall remain true and correct in all material
respects and all agreements that Borrower is to have performed or complied with
by the date of the requested Advance shall have been performed or complied
with.

 

6.4           No Default.  No Event of Default exists, and no event has
occurred and no condition exists that, after notice or lapse of time, or both,
would constitute an Event of Default.

 

SECTION 7.         REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Lender as follows:

 

7.1           Recitals True.  The recitals appearing in this Agreement are
true and correct.

 

7.2           Organization and
Good Standing.  Borrower and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is qualified to
do business and is in good standing in each state in which the nature of its
business and property makes such qualification necessary or appropriate.

 

7.3           Power and Authority.  Borrower and each Subsidiary has full power
and authority to own its properties and assets and to carry on its business as
now being conducted.  Borrower has full
power and authority to execute, deliver and perform this Agreement and the
other Loan Documents to which Borrower is a party.

 

7.4           Authorization.  Borrower is fully authorized and permitted to
enter into this Agreement, to execute any and all documentation required
herein, to borrow the amounts contemplated herein upon the terms set forth
herein, and to perform the terms of this Agreement.

 

7.5           No Breach or Default
as to Borrower.  The execution,
delivery and performance by Borrower of this Agreement and the other Loan
Documents to which it is a party will not conflict with or result in a default
under:  (i) any law, rule or
regulation applicable to Borrower, (ii) the organizational documents of
Borrower, or (iii) the terms, conditions or provisions of any agreement or
instrument under which Borrower is a party or is obligated.

 

7.6           Enforceable
Obligations.  This Agreement and each
of the other Loan Documents to which Borrower is a party are valid and binding
legal obligations of Borrower and each is enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to the enforcement of creditors’ rights.

 

7.7           No Liens.  Except for Permitted Liens, all of the
properties and assets of Borrower and its Subsidiaries are free and clear of
all Liens and other adverse claims of any nature, and such corporations have
good and marketable title to such properties and assets.

 

7

 

7.8           No Adverse
Proceedings.  No actions, suits or
proceedings are pending or, to the knowledge of Borrower, threatened against
Borrower or any Subsidiary that could result in a Material Adverse Effect.  Neither Borrower nor any Subsidiary is in
default with respect to any order, writ, injunction or decree, of any court,
governmental department, commission, board, agency or official, which default
could result in a Material Adverse Effect. 
No actions, suits or proceedings are pending or threatened against
Borrower or any Subsidiary other than as set forth in Exhibit “C.”

 

7.9           Licenses; Permits;
Agreements.  Borrower and its
Subsidiaries have obtained, and there remains in full force and effect, all
licenses, permits, rights, approvals and agreements necessary or appropriate
for the operation of their respective businesses.  Neither Borrower nor any Subsidiary is in
default under any material agreement to which it is a party or by which it or
any of its properties is bound.

 

7.10         Compliance with Laws.  Borrower and each of its Subsidiaries are in
compliance with all material laws, rules, regulations, orders and decrees that
are applicable to Borrower or any Subsidiary, or its or their properties.

 

7.11         No Violation of
Environmental Laws.  To the best of
their respective knowledge, neither Borrower nor any Subsidiary, nor any
Facility owned by them or any Affiliate thereof, is in violation of any
Environmental Law and neither Borrower or any Subsidiary, nor any Facility
owned by them or any Affiliate thereof is subject to any existing, pending or,
to the best of their respective knowledge, threatened investigation by any
federal, state or local governmental authority under or in connection with any
Environmental Law.  Borrower has not
obtained as the result of the requirements of any Environmental Law, and is not
required by any Environmental Law to obtain, any permit or license to construct
or use any improvements, fixtures or equipment that are a part of, or are
located on, any Facility or to operate any business that is being conducted or
intended to be conducted on any Facility. 
Borrower has not caused or permitted the Release of, or has any
knowledge of the Release or presence of, any Hazardous Substance on any
Facility or the migration of any Hazardous Substance from or to any other
property adjacent to, or in the vicinity of, any Facility.  Borrower’s prior and present use of each
Facility has not resulted in, and its future use of each Facility will not
result in, the Release of any Hazardous Substance on the Facility.

 

7.12         Statements Correct.  All financial statements, profit and loss
statements, statements as to ownership and other statements or reports
previously or hereafter given to Lender by or on behalf of Borrower and its
Subsidiaries are and shall be true, complete and correct in all material
respects as of the date thereof.  There
has been no change since the latest financial statements of Borrower and its
Subsidiaries given to Lender that could have a Material Adverse Effect.  There is no material fact that Borrower has
not disclosed to Lender that would have a Material Adverse Effect.

 

7.13         Tax Returns Filed.  Borrower and its Subsidiaries have properly
prepared, executed and filed (unless an extension of time has been granted by
the proper authorities) all federal, state and local tax returns required by
law and has paid all of its respective current obligations before delinquent,
including all federal, state and local taxes and all other payments required
under federal, state or local law.

 

7.14         No Margin Security.  Borrower does not own any “margin security”
as that term is defined in Regulation U of the Board of Governors of the
Federal Reserve System except

 

8

 

amounts thereof that do
not and will not in the aggregate constitute a substantial part of Borrower’s
assets.

 

7.15         ERISA Compliance.  Borrower is in compliance in all material
respects with all applicable provisions of ERISA.  Neither a “reportable event” as defined in
ERISA nor a “prohibited transaction” as set forth in ERISA or in the Internal
Revenue Code has occurred and is continuing with respect to any Plan.  No notice of intent to terminate a Plan has
been filed nor has any Plan been terminated; no circumstances exist that
constitute grounds under ERISA entitling PBGC to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings. 
Borrower is not a party to, and has no employees who are covered by, a
multi-employer pension or benefit plan. 
Borrower has met its minimum funding requirements under ERISA with
respect to each Plan and the present value of all vested benefits under each
Plan did not exceed the fair market value of all Plan assets allocable to such
benefits, as determined on the most recent valuation date of ERISA for
calculating the potential liability of Borrower to the PBGC or the Plan under
ERISA.  Borrower has not incurred any
liability to the PBGC under ERISA.

 

7.16         Principal Office.  The principal office of Borrower is at
Borrower’s address at 1312 North Scottsdale Road, Scottsdale, Arizona
85257.  Borrower maintains its principal
books and records at that address.

 

7.17         Subsidiaries.  Borrower does have Subsidiaries.

 

7.18         Affirmation.  Each request by Borrower for an Advance shall
constitute an affirmation on the part of Borrower that the representations and
warranties contained herein are true and correct in all material respects as of
the time of such request and that the conditions precedent for that Advance
have been satisfied.

 

7.19         Survival.  All representations and warranties made
herein shall survive the execution of this Agreement, all Advances, and the
execution and delivery of all other Loan Documents, so long as Lender has any
commitment to lend to Borrower hereunder and until the Indebtedness has been
fully paid and all of the Obligations have been fully performed.

 

SECTION 8.         AFFIRMATIVE COVENANTS

 

Until the Indebtedness as been fully paid and all of the Obligations
have been fully performed:

 

8.1           No Change in
Documents.  Borrower shall, and shall
cause each of its Subsidiaries to, maintain its corporate existence with no
material amendments or changes in its organizational documents without the
prior written approval of the Lender, which consent shall not be unreasonably
withheld.

 

8.2           Licenses, Permits;
Agreements.  Borrower shall, and
shall cause each of its Subsidiaries, to comply with and maintain in full force
and effect all licenses, permits, rights, approvals and agreements necessary or
desirable to conduct its business and to comply with its obligations under this
Agreement and the other Loan Documents.

 

9

 

8.3           Maintain Business.  Borrower shall, and shall cause each of its
Subsidiaries, to act prudently and in accordance with customary industry
standards in managing and operating its properties, assets and business.  Borrower shall, and shall cause each of its
Subsidiaries, to keep all of its properties in good condition and repair
(subject to ordinary wear and tear) and shall make all needed and proper repairs
and improvements to its properties in order to properly conduct its business.

 

8.4           Comply With Laws.  Borrower shall comply in all material
respects with all applicable laws, including without limitation, all applicable
Environmental Laws.  Borrower will not,
and will not permit any third party to, use, generate, manufacture, produce,
store, or Release on, under or about any Facility, or transfer to or from any
Facility, any Hazardous Substance except in compliance with all applicable
Environmental Laws.

 

8.5           Management.  Borrower shall, and shall cause each of its
Subsidiaries, to at all times hire and retain executive and management
personnel adequate for the proper management, supervision and conduct of its
business, operations and properties.

 

8.6           Maintain Insurance.  Borrower shall at all times maintain
insurance with responsible and reputable insurers in such amounts and against
such risks as may from time to time be required by Lender, but in all events in
such amounts and against such risks, including public liability, property
damage and worker’s compensation insurance, as is usually carried by companies
engaged in similar business and owning properties in the same general areas in
which Borrower operates.

 

8.7           Loan Payments.  Borrower shall make all payments of interest
and principal on the Loan and shall keep and comply with all terms, conditions
and provisions of the Loan Documents.

 

8.8           Pay Obligations.  Borrower shall pay all of its current
obligations before they become delinquent, including all federal, state and
local taxes, assessments, levies and governmental charges and all other
payments required under any federal, state or local law.

 

8.9           Statements and
Reports.  Borrower shall maintain a
standard, modern system of accounting that reflects the application of GAAP,
consistently applied, and shall furnish to Lender the following:

 

(a)           Omitted.

 

(b)           Omitted.

 

(c)           Omitted.

 

(d)           Omitted.

 

(e)           Omitted.

 

(f)            Omitted.

 

10

 

8.10         Records.  Borrower
shall maintain, in a safe place, proper and accurate books, ledgers,
correspondence and other records relating to its operations and business
affairs.

 

8.11         No Margin Security.  Borrower
shall not use any proceeds of the Loan, or any proceeds of any other or future
loan from Lender to Borrower, directly or indirectly, to purchase or carry any “margin
security” as that term is defined in Regulation U of the Board of
Governors of the Federal Reserve System or to reduce or retire any indebtedness
undertaken for such purposes within the meaning of said Regulation U, and
will not use such proceeds in a manner that would cause Borrower to be in
violation of Regulation G, T, or X of such Board, nor use such
proceeds for any purpose not permitted by Section 7 of the Securities
Exchange Act of 1934, as amended, or any of the rules or regulations
respecting the extensions of credit promulgated thereunder.

 

8.12         Further Assurance.  Borrower
shall execute and deliver such additional documents and do such other acts as
Lender may reasonably require in connection with this Loan.

 

SECTION 9.         NEGATIVE COVENANTS

 

Until the Indebtedness as been fully paid and
all of the Obligations have been fully performed, without receiving the prior
written consent of Lender, Borrower shall not, and shall not permit any
Subsidiary to:

 

9.1           Incur Debt.  Become or
remain obligated either directly or as a guarantor or surety for any
indebtedness for borrowed money or for any indebtedness incurred in connection
with the acquisition of any property, real or personal, tangible or intangible,
except:

 

(a)           Indebtedness to Primary Lender;

 

(b)           Indebtedness to Lender;

 

(c)           Indebtedness secured by Permitted Liens;

 

(d)           Current liabilities for taxes and assessments incurred
in the ordinary course of business; unsecured trade, utility or
non-extraordinary accounts payable arising in the ordinary course of its
business;

 

(e)           Real estate debt in connection with the purchase of
restaurant properties.

 

9.2           Negative Pledge.  Create or permit
to be created or exist any Lien on any of its property or assets which it now
owns or hereafter acquires except Permitted Liens.

 

9.3           Loans.  Make any
loan, advance, extension of credit, or gift to any person or entity except
items not to exceed $10,000.00 in the aggregate for Borrower and all
Subsidiaries in any fiscal year.

 

9.4           Investments.  Omitted.

 

9.5           Dissolution; Management Change. 
Dissolve or liquidate, or merge or consolidate with or into any other
entity; sell, transfer, lease or otherwise dispose of all or any substantial

 

11

 

part of its property,
assets or business; or, turn over the management or operation of its property,
assets or business to any other person, firm or corporation or make any other
material change in its management or operations.

 

9.6           Fiscal Year.  Change the
times of commencement or termination of its fiscal year or other accounting
periods; or change its methods of accounting other than to conform to GAAP.

 

9.7           Guarantees.  Guarantee,
directly or indirectly, or otherwise become contingently liable or obligated
for, any indebtedness or obligation of any other person or entity except for
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection.

 

9.8           Dividends.  Omitted.

 

9.9           Acquisitions.  Omitted.

 

9.10         Nature of Business.  Engage in any
line of business materially different from that in which it is presently
engaged, or purchase, lease or otherwise acquire assets not related to the
operation of its business.

 

9.11         Capital Expenditures.  Omitted.

 

9.12         Salaries.  Pay excessive
or unreasonable salaries, bonuses, commissions or other compensation; or
increase the salary, bonus, commissions or other compensation of any director, officer,
or consultant, or any member of their families, by more than 20% in any one
fiscal year, either individually or in the aggregate for all such persons.

 

9.13         Financial Covenants.  For Borrower
and its Subsidiaries, on a combined basis, as determined as of end of each
fiscal quarter from the financial statements included in Borrower’s Form 10K
and Form 10-Qs filed with the SEC, permit:

 

(a)           Adjusted Tangible Net Worth to be less than
$17,000,000.00.

 

(b)           The ratio of Total Funded Debt to EBITDA to be greater
than 2.75 to 1.0.

 

(c)           The Fixed Charge Coverage to exceed 1.00 to 1.00.

 

All computations made to determine compliance with
the requirements contained in this paragraph shall be made in accordance with
GAAP and shall be certified as true and correct by Borrower.

 

SECTION 10.       WAIVER

 

10.1         Notice Waivers.  Borrower
waives presentment, demand, protest and notices of protest, nonpayment, partial
payment and all other notices and formalities except as expressly called for in
this Agreement or in the Note.  Borrower
consents to and waives notice of: (i) the granting of indulgences or
extensions of time of payment, (ii) the taking or releasing of security,
and (iii) the addition or release of persons who may be or become
primarily or secondarily liable

 

12

 

on or with respect to the
Indebtedness or any part thereof, and all in such manner and at such time as
Lender may deem advisable.

 

10.2         No Waivers By Lender.  No delay or
omission by Lender in exercising any right, power or remedy hereunder, and no
indulgence given to Borrower, with respect to any term, condition or provision
set forth herein, shall impair any right, power or remedy of Lender under this
Agreement, or be construed as a waiver by Lender of, or acquiescence in, any
Event of Default.  Likewise, no such
delay, omission or indulgence by Lender shall be construed as a variation or
waiver of any of the terms, conditions or provisions of this Agreement.  Any actual waiver by Lender of any Event of
Default shall not be a waiver of any other prior or subsequent Event of Default
or of the same Event of Default after notice to Borrower demanding strict
performance.

 

SECTION 11.       DEFAULT

 

11.1         Events of Default.  The
occurrence of any of the following events or conditions shall constitute an “Event
of Default” under this Agreement:

 

(a)           Any failure to pay any interest or principal or any
other part of the Indebtedness when the same becomes due and payable.

 

(b)           Any failure or neglect to perform or observe any of
the terms, provisions, conditions or covenants of this Agreement or any other
Loan Document, other than those referred to in the other provisions of this
Paragraph 11.1, and such failure or neglect either (i) cannot be
remedied,  (ii) can be remedied
within fifteen (15) days by prompt and diligent action, but it continues
unremedied for a period of fifteen (15) days after notice thereof to Borrower,
or (iii) can be remedied, although not within fifteen (15) days even by
prompt and diligent action, but such remedy is not commenced within fifteen
(15) days after notice thereof to Borrower or is not diligently prosecuted to
completion within a total of thirty (30) days from the date of such notice.

 

(c)           Any warranty, representation or statement contained in
this Agreement, in the Note, in any other Loan Document, or made or furnished
to Lender by or on behalf of Borrower that shall be or shall prove to have been
false or misleading in any material respect as of the time made or furnished.

 

(d)           The filing by Borrower or any Subsidiary of any
proceeding under the federal bankruptcy laws now or hereafter existing or any
other similar statute now or hereafter in effect; or the entry of an order for
relief under such laws with respect to Borrower or any Subsidiary.

 

(e)           The commencement of any proceeding described in
subparagraph (d)above against Borrower or any Subsidiary unless dismissal
of such proceeding is promptly sought and diligently prosecuted and such
proceeding is in fact dismissed within sixty (60) days from the date of such
commencement; the acquiescence by Borrower or such Subsidiary to such
proceedings; or the appointment of a receiver, trustee, custodian or
conservator for all or any part of the assets of Borrower or any Subsidiary.

 

13

 

(f)            The insolvency of Borrower or any Subsidiary; or the
execution by Borrower or any Subsidiary of an assignment for the benefit of
creditors; or the convening by Borrower or any Subsidiary of a meeting of its creditors,
or any class thereof, for purposes of affecting a moratorium upon or extension
or composition of its debts; or the failure of Borrower or any Subsidiary to
pay its debts as they mature; or if Borrower or any Subsidiary is generally not
paying its debts as they mature.

 

(g)           The admission in writing by Borrower or any Subsidiary
that it is unable to pay its debts as they mature or that it is generally not
paying its debts as they mature.

 

(h)           The liquidation, termination or dissolution of
Borrower or any of its Subsidiaries.

 

(i)            Any final judgment for the payment of money in excess
of $500,000.00 (other than a judgment covered by insurance where coverage has
been acknowledged by the insurer) is entered against Borrower or any Subsidiary
and such judgment is not satisfied or discharged with thirty (30) days after
the entry thereof.

 

(j)            The existence or the filing of any Lien, other than
Permitted Liens, in excess of $500,000.00 against any property or assets of
Borrower or any Subsidiary that is not removed, released, bonded or stayed to
the satisfaction of Lender within thirty (30) days after its creation.

 

(k)           Any levy or execution upon, or judicial seizure of,
any property of Borrower or any Subsidiary that has a fair market value in
excess of $250,000.00.

 

(l)            The entry of any judgment, order or decree, or any
other type of adverse ruling, against Borrower or any Subsidiary that could
have a Material Adverse Effect.

 

(m)          The abandonment by Borrower or any Subsidiary of all
or any material part of its property or assets.

 

(n)           The loss, theft or destruction of, or any substantial
damage to, any material part of the property of Borrower or any Subsidiary that
is not adequately covered by insurance.

 

(o)           The occurrence of any event or condition, that with
the giving of notice or passage of time, or both, could result in a material
default by Borrower under any other contract, loan, obligation or agreement of
any kind to which Borrower is a party that results in a Material Adverse
Effect.

 

(p)           The issuance of any order or decree enjoining or
prohibiting Lender or Borrower from performing under this Agreement or any of
the other Loan Documents, which order or decree is not vacated within fifteen
(15) days after the granting thereof.

 

(q)           The occurrence of any default under any of the other
Loan Documents that is not cured within any period for cure set forth therein.

 

(r)            Any failure or neglect to satisfy any of the financial
covenants set forth in Paragraph 9.12 hereof which failure or neglect is
not fully remedied and cured by the end of the next calendar month.

 

14

 

(s)           The occurrence of any event or condition that Lender,
in its reasonably judgment, believes results in a Material Adverse Effect.

 

11.2         Remedies.  Upon the
occurrence of any Event of Default, and at any time thereafter while such Event
of Default is continuing, Lender may do one or more of the following
[except that in the case of an Event of Default described in
subparagraphs 11.1(d) through 11.1(g) above relating to
Borrower, acceleration shall be automatic]:

 

(a)           Declare the entire Loan and the rest of the
Indebtedness immediately due and payable, without notice or demand.

 

(b)           Proceed to protect and enforce its rights under this
Agreement, the Note and all other Loan Documents.

 

(c)           Avail itself of any other relief to which Lender may
be legally or equitably entitled.

 

11.3         Payment of Costs.  Borrower
shall pay all costs and expenses including, without limitation, court costs and
reasonable attorneys’ fees incurred in enforcing payment of the Indebtedness
and performance of the Obligation or in exercising the rights and remedies of
Lender hereunder.  In the event of any
court proceedings, court costs and reasonable attorneys’ fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Lender.

 

11.4         Right to Pay and Perform. 
If Borrower shall fail to pay any amount as required herein or in any of
the other Loan Documents, to satisfy any requirement hereof or of any of the
other Loan Documents, or to perform otherwise as required herein or in any of
the other Loan Documents, Lender may advance the moneys necessary to pay the
same, to satisfy such requirements or to so perform.

 

11.5         No Prejudice to Lender.  No failure on
the part of Lender to exercise any of its rights hereunder arising upon any
Event of Default shall be construed to prejudice its rights upon the occurrence
of any other or subsequent Event of Default. 
No delay on the part of Lender in exercising any such rights shall be
construed to preclude it from the exercise thereof at any time during the
continuance of that Event of Default. 
Lender may enforce any one or more remedies or rights hereunder successively
or concurrently.  By accepting payment of
any of the Indebtedness or performance of any of the Obligation after its due
date, Lender shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Lender waive either its right to require prompt
payment when due of the remainder of the Indebtedness or performance when due
of the remainder of the Obligation or its right to consider the failure to so
pay or perform an Event of Default.

 

SECTION 12.       ACTION UPON AGREEMENT

 

12.1         No Third Party Beneficiaries. 
This Agreement is made for the sole protection and benefit of the
parties hereto and no other person or organization shall have any right of
action hereon or be a third party beneficiary hereof.

 

12.2         Entire Agreement.  This
Agreement, together with the documents and instruments referred to herein,
embodies the entire Agreement of the parties with regard to the

 

15

 

subject matter
hereof.  There are no representations,
promises, warranties, understandings or agreements expressed or implied, oral
or otherwise, in relation thereto, except those expressly referred to or set
forth herein.  Borrower acknowledges that
the execution and delivery of this Agreement is its free and voluntary act and
deed, and that said execution and delivery have not been induced by, nor done
in reliance upon, any representations, promises, warranties, understandings or
agreements made by Lender, its agents, officers, employees or representatives,
other than as set forth herein.

 

12.3         Changes in Writing.  No promise,
representation, warranty or agreement made subsequent to the execution and
delivery of this Agreement by either party hereto, and no revocation, partial
or otherwise, or change, amendment or addition to, or alteration or modification
of, this Agreement shall be valid unless the same shall be in writing signed by
all parties hereto.

 

12.4         Separate Entities.  Lender and
Borrower have separate and independent rights and obligations under this
Agreement.  Nothing contained herein shall
be construed as creating, forming or constituting any partnership, joint
venture, merger or consolidation of Lender and Borrower for any purpose or in
any respect.

 

SECTION 13.       GENERAL

 

13.1         Agreement to Continue.  This
Agreement, and the representations, warranties, and covenants contained herein
shall survive the making of the Loan and shall remain in full force and effect
until the Indebtedness as been fully paid and all of the Obligations have been
fully performed.

 

13.2         Lender’s Investigations.  Borrower
shall be solely responsible for all aspects of Borrower’s business and
activities.  Any investigation or review
by Lender or its counsel shall be solely for Lender’s benefit, including to
determine whether Borrower is properly discharging its obligations to Lender,
and may not be relied upon by Borrower or any third party.  Neither Lender, nor Lender’s counsel, owes
any duty of care to Borrower or to any third party to protect against, or to
inform Borrower or any third party of, any matters disclosed by any
investigation or review by Lender or its counsel.

 

13.3         Rights to Protect Lender. 
All rights, powers and remedies granted Lender herein, or otherwise
available to Lender, are for the sole benefit and protection of Lender, and
Lender may exercise any such right, power or remedy at its option and in its
sole and absolute discretion without any obligation to do so.  In addition, if, under the terms hereof,
Lender is given two or more alternative courses of action, Lender may elect any
alternative or combination of alternatives, at its option and in its sole and
absolute discretion.  All monies advanced
by Lender under the terms hereof and all amounts paid, suffered or incurred by
Lender in exercising any authority granted herein, including reasonable attorneys’
fees, shall bear interest at the highest rate payable on any of the
Indebtedness until paid, and shall be due and payable by Borrower to Lender
immediately without demand.

 

13.4         Indemnity.  Borrower
shall indemnify and hold Lender harmless from and against all claims, costs,
expenses, actions, suits, proceedings, losses, damages and liabilities of any
kind whatsoever, including but not limited to reasonable attorneys’ fees and
expenses, arising out of any matter relating, directly or indirectly, to the
Loan, whether resulting from internal disputes of the Borrower or whether
involving other third persons or entities, or out of any other

 

16

 

matter whatsoever related
to this Agreement, the other Loan Documents, or any Facility, including but not
limited to (i) any use, generation, manufacture, production, storage,
Release, threatened Release, or presence of a Hazardous Substance; (ii) any
violation or claim of violation of any Environmental Law; or (iii) any
breach of any of the warranties, representations and covenants contained
herein, but excluding any claim or liability which arises as the direct result
of the gross negligence or willful misconduct of Lender.  This indemnity provision shall continue in
full force and effect and shall survive not only the making of the Loan but
shall also survive the payment of the Indebtedness and the performance of the
Obligations.

 

13.5         Joint and Several; Context. 
If Borrower consists of more than one person or entity their liability
shall be joint and several.  The
provisions hereof shall apply to the parties according to the context thereof
and without regard to the number or gender of words or expressions used.

 

13.6         Time of the Essence.  Time is
expressly made of the essence of this Agreement.

 

13.7         Notices.  All notices
required or permitted to be given hereunder shall be in writing and may be
given in person or by United States mail, by commercial delivery service or by
electronic transmission with verified receipt. 
Any notice directed to a party to this Agreement shall become effective
upon the earliest of the following:  (i) actual
receipt by that party; (ii) delivery to the designated address of that
party, addressed to that party; or (iii) if given by certified or
registered United States mail, the earlier of the date of delivery shown on the
return receipt or twenty-four (24) hours after deposit with the United States
Postal Service, postage prepaid, addressed to that party at its designated
address.  The designated address of a
party shall be the address of the party shown below or such other address
within the continental United States as that party, from time to time, may
specify by notice to the other parties:

 

	
  Borrower:

  	
   

  	
  Star Buffet, Inc.

  
	
   

  	
   

  	
  1312 N. Scottsdale Road

  
	
   

  	
   

  	
  Scottsdale, AZ 85257

  
	
   

  	
   

  	
   

  
	
  Lender:

  	
   

  	
  Robert E. Wheaton and

  
	
   

  	
   

  	
  Suzanne H. Wheaton

  
	
   

  	
   

  	
  4716 E. Valley Vista Lane

  
	
   

  	
   

  	
  Paradise Valley, AZ 85253

  

 

13.8         Costs and Expenses.  Borrower
shall pay all costs and expenses arising from the preparation of this
Agreement, the closing of the Loan and the making of the Advance, including but
not limited to, Lender’s attorneys’ fees, any other charges that may be imposed
on Lender as a result of this transaction.

 

13.9         Choice of Law.  This
Agreement shall be governed by and construed according to the laws of the State
of Arizona.

 

13.10       Venue.  Lender may
bring any action or proceeding to enforce or arising out of this Agreement in
any court of competent jurisdiction.  If
Lender commences such an action in a court located in the County of Maricopa,
State of Arizona, or the United States District Court for the District of
Arizona, Borrower hereby agrees that it will submit and does hereby irrevocably
submit to the personal jurisdiction of such courts and will not attempt to have
such action dismissed, abated, or transferred on the ground of forum non
convenience or similar grounds; provided, however, that nothing contained
herein shall prohibit Borrower from seeking, by 

 

17

 

appropriate motion, to
remove any action brought in a Arizona state court to the United States
District Court for the District of Arizona. 
If such action is so removed, however, Borrower shall not seek to
transfer such action to any other district, nor shall Borrower seek to transfer
to any other district any action which Lender originally commences in such
federal court.  Any action or proceeding
brought by Borrower arising out of this Agreement or any of the other Loan
Documents shall be brought solely in a court of competent jurisdiction located
in the County of Maricopa, State of Arizona, or in the United States District
Court for the District of Arizona. 
Borrower waives any objection which it may now or hereafter have to
venue of any such action or proceeding and waives any right to seek removal of
any action or proceeding commenced in accordance herewith.

 

13.11       WAIVER OF TRIAL BY JURY.  BORROWER AND
LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
THAT IT MAY HAVE TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE DEALINGS OF
THE PARTIES WITH RESPECT THE TRANSACTION THAT IS THE SUBJECT OF THIS AGREEMENT
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE.  THIS WAIVER HAS BEEN
NEGOTIATED BY THE PARTIES AND IS AN ESSENTIAL PART OF THEIR BARGAIN.  EITHER PARTY MAY FILE A COPY OF THIS
PROVISION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO
THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

 

13.12       Successors and Assigns.  Except as
otherwise provided herein, this Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their successors and assigns.

 

13.13       Headings.  The headings
or captions of sections and paragraphs in this Agreement are for convenience
and reference only, do not define, control or limit the provisions of such
sections or paragraphs, and shall not affect the interpretation of this
Agreement.

 

13.14       Participations.  Lender, at
any time, shall have the right to sell, assign, or grant participations in all
or any portion of the Loan and in any of the Loan Documents.  Lender is authorized to furnish any purchaser
or participant, or prospective purchaser or participant, any documents or
information provided to Lender or that Lender may have obtained relating to
Borrower or relating to the Loan.

 

13.15       Loan Agreement to Prevail. 
In the event of any direct conflict between the provisions of this
Agreement and those of the Note or any other Loan Document, the provisions of
this Agreement shall prevail.

 

18

 

IN WITNESS WHEREOF, these
presents are executed as of the date indicated above.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  STAR BUFFET, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron Dowdy

  
	
   

  	
  Name:     Ron Dowdy

  
	
   

  	
  Title:       Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  Robert E. Wheaton and Suzanne H. Wheaton

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert E. Wheaton

  
	
   

  	
  Name:

  	
  Robert E. Wheaton

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Suzanne H. Wheaton

  
	
   

  	
  Name:

  	
  Suzanne H. Wheaton

  
				

 

19

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