Document:

EX-10.19.1

 

Exhibit 10.19.1

AMENDMENT NO. 4

TO SUBLEASE AGREEMENT

     THIS AMENDMENT TO SUBLEASE AGREEMENT (as originally dated December 11, 1991, and as
subsequently amended the “Sublease”) by and between AMERICAN CAST IRON PIPE COMPANY, a Georgia
corporation (“Landlord”) and L.B. FOSTER COMPANY, a Pennsylvania corporation (“Tenant”) is made and
entered into between Landlord and Tenant on and as of this the 15 day of November, 2000
(“Amendment”).

WITNESSETH:

     WHEREAS, Landlord and Tenant desire to further amend the Sublease which has heretofore been
amended by Amendment No. 1 amending Exhibit “A” to the Sublease, by Amendment No. 2 providing that
the Commencement Date of the Sublease is April 1, 1992 and extending the term of the Sublease; and
by Amendment No. 3 providing for the construction of certain improvements on the “demised premises”
and the payment of Supplemental Rent in connection therewith;

     WHEREAS, Landlord and Tenant desire to further extend the term of the Sublease, to limit the
period with respect to which Supplemental Rent is payable and to eliminate the formula for
adjusting Additional Rent with respect to the period prior to July 31, 2000.

     NOW THEREFORE, in consideration of the premises and the mutual undertakings, covenants,
promises and agreements herein contained and for other good and valuable consideration, receipt of
which is acknowledged, Landlord and Tenant agree as follows:

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	A.	 	CERTAIN AGREEMENTS

	 	1.	 	Except as otherwise provided herein, all defined terms in the Sublease are
incorporated by reference into this Amendment.
	 
	 	2.	 	As used in the Sublease

	 	a.	 	the term, “Supplemental Commencement Date” is redefined to mean
August 1, 1997. The definition herein supersedes the definition contained in
Amendment No. 3 to Lease Agreement dated on or about April 15, 1999 (“Amendment
No. 3”).
	 
	 	b.	 	the term, Supplemental Sublease Year’, means the period of
twelve (12) consecutive months commencing on August 1, 1997 and on each
anniversary of August 1, 1997, with the final Supplemental Sublease Year
commencing on August 1, 1999 and ending on July 31, 2000. The definition
herein is supersedes the definition contained in Amendment No. 3.

	B.	 	FURTHER AGREEMENTS AND AMENDMENTS

	 	1.	 	ARTICLE 1. PREMISES AND TERM. Article 1 (Premises and Term) is hereby amended
by changing and amending the second paragraph of Article 1 to read in its entirety as
follows:
	 
	 	 	 	TO HAVE AND TO HOLD the said demised premises, together with all and singular the
improvements thereunto belonging or in any manner appertaining, unto Tenant for a
term commencing on the Commencement
Date set forth in Article 3 hereof, and continuing thereafter to and including July
31, 2007 subject, however, to earlier termination as provided elsewhere in this
sublease.

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	 	2.	 	Article 6(b)(ii) is hereby amended by changing and amending the second
paragraph of said Article to read in its entirety as follows:
	 
	 	 	 	“Commencing with the consecutive, 12 month period ending July 31, 2000 and for each
consecutive, 12 month period thereafter during the term of this Sublease, if Tenant
and Landlord are unable to agree upon a mutually acceptable percentage of gross
revenues to be paid by Tenant as Additional Rent at least ninety (90) days prior to
commencement of each succeeding consecutive, 12 month period commencing on each
August 1st during the term of this Sublease after July 31, 2000 to which such
percentages shall apply, the following shall apply for the following consecutive, 12
month period. If the Additional Rent paid by Tenant to Landlord in the previous
Sublease year is less than $300,000.00 then the percentages set forth in
subparagraph (i) above shall increase by one-half of one percent. If Additional
Rent paid by Tenant to Landlord in the previous consecutive, 12 month period is
$300,000.00 or greater, then the percentages shall be reduced by one-half of one
percent.”
	 
	 	3.	 	Article 6(b)(iii) is hereby amended by changing and amending said Article to
read in its entirety as follows:
	 
	 	 	 	“(iii) During each Supplemental Sublease Year or, in the event of termination of
this Sublease prior to the expiration of twelve (12) months from the date of
commencement of any such Supplemental Sublease Year, the part of the Supplemental
Sublease Year remaining until July 31, 2000, Tenant shall, in addition to the
Additional Rent, pay the Landlord additional rent for the demised premises
(“Supplemental Rent”) equal to three-quarters of one percent (.075%) of “gross
revenues” (as defined in the Sublease) earned in the coating of pipe by Tenant
(regardless of pipe size) in the demised premises.”
	 
	 	4.	 	Article 6(e)(i) is hereby amended by changing and amending said Article to
read in its entirety as follows:
	 
	 	 	 	“(i) Within thirty (30) days after the end of each calendar quarter during the
Sublease term and after the expiration or earlier termination of
the Sublease term if such expiration or termination shall occur during a calendar
quarter, Tenant shall furnish to Landlord a verified, detailed statement certified
as to its accuracy by an officer of Tenant, setting forth the amount of gross
revenues of Tenant from coating operations during 

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	 	 	 	the preceding quarter or, if
applicable, part thereof, showing the amount of Additional Rent and, with respect
only to the period prior to August 1, 2000, Supplemental Rent, required to be paid
by Tenant for such quarter or, if applicable, shorter period and providing a
breakdown of the calculations of the Additional Rent and Supplemental Rent.
Simultaneously with the delivery of such statement, Tenant shall pay to landlord all
such Additional Rent and Supplemental Rent other than the Additional Rent and
Supplemental Rent to be deducted by Landlord from Tenant’s invoices. Tenant shall
keep a full and accurate set of records adequately showing the amount of gross
revenues arising out of operations conducted on the demised premises each month
during the Sublease term.”

	C.	 	Except as amended hereby, all provisions of the Sublease shall remain in full force and effect.

     IN WITNESS WHEREOF, Landlord and Tenant have duly executed and affixed their respective seals
to this instrument, being duly authorized in the premises, on the day and year first above written.

	 	 	 	 	 
	 	LANDLORD:

American Cast Iron Pipe Company,

a Georgia corporation

 	 
	 	By:  	/s/ J. M. O’Brien
 	 
	 	 	 	 
	 	 	     Its: V.P. Sales 	 
	 
	 	TENANT:

L.B. Foster Company,

a Pennsylvania corporation

 	 
	 	By:  	/s/ Lee B. Foster
 	 
	 	 	 	 
	 	 	     Its: Chief Executive Officer 	 
	 

4<PAGE>

                                                                    Exhibit 10.1

              SIXTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

     This Sixth Amended and Restated Revolving Credit Agreement dated as of May
4, 2006 (the "Agreement"), is between Max & Erma's Restaurants, Inc., a Delaware
corporation (the "Company"), and National City Bank, individually and as agent
(the "Bank") amends and restates in its entirety the Fifth Amended and Restated
Revolving Credit Agreement between the parties dated September 22, 2003, as the
same was amended from time to time. The parties agree as follows:

                                    SECTION 1

                         AMOUNT AND TERMS OF THE CREDIT

     1.1 Commitment of the Bank.

               1.1.1. Commitment. The Bank agrees, on the terms and conditions
          of this Agreement and provided that no Event of Default or Default
          (the definitions of those and other capitalized terms used herein have
          the meanings provided in Section 9) then exists, to make Loans to the
          Company at the main office of the Bank, 1 East Fourth Street,
          Cincinnati, Ohio, from time to time on and after the date hereof but
          prior to the Term Loan Maturity Date, the Revolving Credit Maturity
          Date or the Draw Note Maturity Date.

               1.1.2. Maximum Commitment. The Bank agrees to extend the
          following credit term facilities: (a) a term loan (the "Term Loan") in
          the original principal amount of $20,600,000, evidenced by the Second
          Amended and Restated Term Promissory Note dated as of the date hereof
          in the amount of $12,800,000, payable by the Company to the Bank in 19
          equal quarterly installments of principal of $600,000 plus interest
          commencing August 1, 2006 and terminating on March 1, 2011 (the "Term
          Loan Maturity Date") pursuant to the terms thereof and Section 1.4
          hereof (the "Term Note"), (b) a revolving loan in the original
          principal amount of $15,000,000 pursuant to the terms of a Second
          Amended and Restated Revolving Credit Note dated as of the date hereof
          (the "Revolving Note") and (c) a term loan in the maximum amount of
          $2,375,000 pursuant to the terms of a Draw Promissory Note dated as of
          the date hereof (the "Draw Note" and, collectively with the Revolving
          Note and the Term Note, the "Notes"). The maximum amount of all
          outstanding Loans of the Bank to the Company under this Agreement
          shall not exceed $30,175,000 (the "Maximum Commitment"). The Maximum
          Commitment of the Bank as adjusted from time to time is hereinafter
          called the "Commitment" of the Bank.

                                       1

<PAGE>

               1.1.3. Revolving Commitment. The $15,000,000 available to the
          Company under the Revolving Note shall be hereinafter called the
          "Revolving Commitment." As of the Revolving Credit Maturity Date (as
          defined below), the Bank shall have no further obligation to fund any
          Revolving Credit Loans under this Agreement. Any amounts outstanding
          under the Revolving Credit Note shall become due and payable on March
          1, 2011 ("Revolving Credit Maturity Date") pursuant to the terms
          thereof and Section 1.4 hereof. No Commitment shall become effective
          until each of the parties hereto shall have executed this Agreement or
          a counterpart hereof.

               1.1.4. Draw Note. The $6,000,000 available to the Company under
          the Draw Note shall be hereinafter called the "Draw Commitment." The
          Company has borrowed (individually a "Draw Loan" and collectively the
          "Draw Loans") an amount not to exceed the Draw Commitment. After the
          receipt of a Draw Loan, the Company must fulfill the Draw Loan
          Conditions Subsequent described below.

                    (a) In addition, the Company must provide to the Bank as
          soon as possible, but in no event later than sixty (60) days after the
          receipt of a Draw Loan, (1) a copy of a release or the bill of sale of
          the leased equipment executed by the lessor in form reasonably
          acceptable to the Bank and (2) UCC termination statements regarding
          any UCC-1 financing statements the lessor filed against the equipment
          (collectively, the "Draw Loan Conditions Subsequent").

                    (b) Any principal amounts outstanding under the Draw Note
          shall become due and payable on the last day of the month commencing
          on December 31, 2003 in monthly installments of $125,000 until the
          earlier (a) December 31, 2007 or (b) the Subordinated Debt Funding
          Date (the "Draw Loan Maturity Date"), when all remaining principal on
          the Draw Note shall become due and payable.

                    (c) Interest shall accrue on each Draw Loan from the date
          the Draw Loan is made, and interest on the Draw Loans shall be paid,
          in accordance with the provisions of Section 1.4 hereof.

     1.2 Cancellation or Reduction of the Commitment by the Company. During the
period from and including the date of this Agreement to but excluding the later
of the Term Loan Maturity Date, the Revolving Credit Maturity Date or the Draw
Loan Maturity Date, the Commitment of the Bank may, subject to the payment of
the Interest Preservation Amount described in Section 1.5, be cancelled or may
be reduced permanently from time to time by the Company in the amount of
$100,000 or any larger amount which is a whole multiple of $100,000 upon 10
Banking Days' written notice to the Bank of the Company's election to do so,
which notice shall specify the date when such cancellation or reduction shall be
effective and on the effective date of such reduction the Commitment of the Bank
shall be reduced; provided that-

                                       2

<PAGE>

                    (a) any such cancellation or reduction shall be irrevocable;

                    (b) in the event of a cancellation of the Commitment of the
          Bank, (i) the Notes shall be paid in full, (ii) all Commitment Fees
          due to the date of cancellation shall be paid in full and (iii) all
          expenses due pursuant to Section 10.7 hereof shall be paid in full;
          and

                    (c) in the event of a reduction of the Commitment of the
          Bank to an amount less than the principal amount then outstanding
          hereunder, the Notes shall be prepaid so that the unpaid aggregate
          principal amount of the then outstanding Loans does not exceed the
          Commitment of the Bank as so reduced.

     1.3 Fees.

          (a) Commitment Fee. As consideration for the Commitment of the Bank,
the Company shall pay to the Bank a fee (the "Commitment Fee") on the daily
average unused portion of the Bank's Revolving Commitment and the Draw
Commitment at a rate per annum equal to 1/2 of 1%, commencing with the effective
date hereof (calculated on the basis of the actual number of days elapsed over a
year of 360 days). The Commitment Fee shall be payable quarterly on the date for
payment of interest pursuant to Section 1.4 commencing with the first such date
after the effective date hereof.

          (b) Additional Commitment Fee. The Company hereby agrees to pay an
additional commitment fee equal to 0.25% of any new funds above the amount of
the Maximum Commitment made available to the Company by the Bank in the future.
Any such new funds shall be subject to the terms of this Agreement as amended
from time to time.

          (c) Agency Fee. As consideration for the Bank agreeing to serve as
agent and participate a portion of the Commitment, the Company shall pay to the
Bank an Agency Fee of $25,000 on each November 1 thereafter until the later of
the Term Loan Maturity Date, the Revolving Credit Maturity Date or the Draw Loan
Maturity Date.

          (d) Waiver and Restructuring Fee. The Company hereby agrees to pay a
waiver and restructuring fee of $40,000 to the Bank in consideration of the Bank
agreeing to waive various covenant violations and restructure the credit
provided hereunder in connection with the issuance of new Subordinated Debt.

     1.4 The Notes.

          (a) Form. The Loans made by the Bank pursuant hereto shall be
evidenced by the Revolving Note of the Company substantially in the form of
Exhibit A-1,the Term Note of the Company substantially in the form of Exhibit
A-2 and the Draw Note of the Company substantially in the form of Exhibit A-3,
payable to the order of the Bank and representing the obligation of the Company
to pay the amount of the Commitment or, if less, the aggregate

                                       3

<PAGE>

unpaid principal amount of all Loans made by the Bank, with interest thereon as
prescribed in this Section 1.4. The Notes shall (i) be dated on the date hereof,
(ii) be stated to mature on the respective Maturity Dates; and (iii) bear
interest at the applicable interest rate per annum as provided in, and payable
as specified in this Section 1.4. Each Loan made by the Bank and each payment
made on account of principal on the Notes shall be recorded by the Bank, on its
books and records or endorsed on the grid attached to the applicable Note, such
books and records or endorsements to constitute prima-facie evidence of the
amount of all Loans and payments; provided, however, that the failure of the
Bank to make such recordation shall not limit or otherwise affect the
obligations of the Company under the Notes.

          (b) Interest. Each Loan shall bear interest on the unpaid principal
balance of all Loans made by the Bank for each day from the day such Loan is
made until it becomes due, at a fluctuating rate per annum equal to (the rate
set forth below (as adjusted based upon the Company's submission of financial
information pursuant to Section 5.2 herein). The interest rate adjustment will
be effective the first Monday following receipt by the Bank of the Quarterly
Compliance Certificate pursuant to Section 5.4(c) herein. The interest rate will
be established according to the following schedule based upon the Financial
Ratio (as defined in Section 6.2(h) hereof) of the Company during the
immediately preceding twelve month period as of the date of each fiscal quarter
end:

<TABLE>
<CAPTION>
Ratio at quarter end                Rate for following quarter
--------------------                --------------------------
<S>                    <C>
Less than 4.25:1.0     Either the Prime Rate minus 25 basis points or
                       the LIBOR Rate plus 250 basis points

4.25 through 5.0:1.0   Either the Prime Rate plus 25 basis points or the
                       LIBOR Rate plus 300 basis points

Greater than 5.0:1.0   Either the Prime Rate plus 75 basis points or the
                       LIBOR Rate plus 350 basis points
</TABLE>

     Interest on all Loans shall be calculated on the basis of the actual number
of days elapsed over a year of 360 days. As used in this Agreement, the term
"Prime Rate" on any day shall mean the rate published or announced by the Bank
as its prime rate which rate may not be the Bank's lowest rate. Any change in
the interest rate on a Loan due to a change in the Prime Rate shall take effect
on the date of such change in the Prime Rate. "LIBOR Rate" shall mean the
offered rate for U.S. Dollar deposits of not less than $1,000,000.00 for a
period of time equal to each Interest Period as of 11:00 A.M. City of London,
England time two London Business Days prior to the first date of each Interest
Period of the Notes as shown on the display designated as "British Bankers
Assoc. Interest Settlement Rates" on the Telerate System ("Telerate"), Page 3750
or Page 3740, or such other page or pages as may replace such pages on Telerate
for the purpose of displaying such rate; provided, however, that if such rate is
not available on Telerate then such offered rate shall be otherwise
independently determined by the Bank from an alternate, substantially similar
independent source available to the Bank or shall be calculated by the Bank by a
substantially similar methodology as that theretofore used to determine such
offered rate in Telerate. "London Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions are generally authorized
or obligated by law or executive order to close in the City of London, England.
Each change in the rate to be charged hereunder

                                       4

<PAGE>

will become effective without notice on the commencement of each Interest Period
based upon the LIBOR Rate then in effect. "Interest Period" means each
consecutive one, two, three or six month period (the first of which shall
commence on the date of this Agreement) effective as of the first day of each
Interest Period and ending on the last day of each Interest Period, provided
that if any Interest Period is scheduled to end on a date for which there is no
numerical equivalent to the date on which the Interest Period commenced, then it
shall end instead on the last day of such calendar month. Under no circumstances
will the interest rate on the Notes be more than the maximum rate allowed by
applicable law.

          (c) Interest Payments. Interest on the Loans shall be payable
quarterly on the first day of each February, May, August and November,
commencing on the first such date following the initial Loan. To the extent
permitted by applicable law, the Bank may charge interest at the foregoing rates
on all interest and other amounts owing hereunder which are not paid when due.

          (d) Principal. Principal on the Loans shall be due and payable
pursuant to the terms of the Notes and shall be due and payable in full on the
respective Maturity Dates; provided, however, that any Excess Cash Flow payments
the Company makes shall be applied to principal reduction of the Term Note in
the inverse order of maturity. The Company shall be required to make additional
principal payments on the Term Loan based on the annual Net Income of the
Company, commencing for the fiscal year ending in 2003. The Company shall pay an
amount (the "Excess Cash Flow") equal to fifty percent (50%) of the Company's
annual Net Income that exceeds the amount of principal paid by the Company on
the Term Loans during such fiscal year; provided, however, that such payment
shall never be greater than $500,000 for any fiscal year. The Company shall pay
the Excess Cash Flow on the February 1 occurring immediately after each fiscal
year end. The Company shall be required to pay any Excess Cash Flow to the Bank.

     1.5 Prepayments and Right to Reborrow. Except as set forth below,
outstanding Loans may be prepaid in whole at any time or in part from time to
time without premium or penalty. No prepayment shall affect the Company's right
to reborrow from the Bank under the Revolving Commitment of the Bank up to the
permissible amount hereunder prior to the Revolving Credit Maturity Date. The
Company may prepay all or any portion of the principal amount of the Loans
bearing interest at a LIBOR Rate, provided that if the Company makes any such
prepayment other than on the last day of an Interest Period, the Company shall
pay all accrued interest on the principal amount prepaid with such prepayment
and, on demand, shall reimburse the Bank and hold the Bank harmless from all
losses and expenses incurred by the Bank as a result of such prepayment,
including, without limitation, any losses and expenses arising from the
liquidation or reemployment of deposits acquired to fund or maintain the
principal amount prepaid. Such reimbursement shall be calculated as though the
Bank funded the principal amount prepaid through the purchase of U.S. Dollar
deposits in the London, England interbank market having a maturity corresponding
to such Interest Period and bearing an interest rate equal to the LIBOR Rate for
such Interest Period, whether in fact that is the case or not. The Bank's
determination of the amount of such reimbursement shall be conclusive in the
absence of manifest error.

                                       5

<PAGE>

     1.6 Loans. Each Loan shall be made pursuant to the Bank's Automated Line of
Credit Service. Further, the Bank will, at the request of the Company repay
prior Loans pursuant to the Automated Line of Credit service. The Company may
request the Bank to make Loans by written or telephonic request made prior to
2:00 p.m. Columbus, Ohio time. The proceeds of any such request will subject to
the satisfaction of the terms and conditions of this Agreement, promptly made
available to the Company by the Bank at the office of the Bank by crediting the
account of the Company on the books of such office of the Bank.

     1.7 Letters of Credit.

          (A) The Company may request a Letter of Credit by completing the
Bank's then standard application for a Letter of Credit and delivering the
application to the Bank at least two days before the date on which the Letter of
Credit is to be issued. On the date the Letter of Credit is to be issued, the
Bank shall deliver the Letter of Credit to the Company, or to the Person
designated by the Company. No Letter of Credit shall be issued with an
expiration date after the Revolving Credit Maturity Date or which is payable in
a currency other than United States dollars. Except as otherwise provided
herein, all the terms of the Letter of Credit and such standard application
shall govern the Letter of Credit. The amount of each Letter of Credit must be
approved by the Bank (provided that there shall never be more than $500,000 in
face amount of Letters of Credit outstanding), and the Bank may disapprove a
Letter of Credit request at any time for any reason. The Revolving Commitment
shall be reduced by the face amount of any Letter of Credit.

          (B) The Company shall immediately reimburse the Bank for the amount
paid on all drafts drawn under Letters of Credit issued hereunder. If,
notwithstanding the foregoing sentence, the Company should fail to so
immediately reimburse the Bank, then, in addition to any other remedy which the
Bank may have with respect to such failure, any amount paid by the Bank on any
draft under a Letter of Credit shall be treated as a Loan (bearing interest as
provided in Section 1.4).

                                    SECTION 2

                                  GENERAL TERMS

     2.1 Payments. The Company shall make all payments of principal, interest
and Commitment Fees to the Bank as payee at its main office, 155 East Broad
Street, Columbus, Ohio 43251, in immediately available funds prior to 3:00 p.m.,
Cincinnati, Ohio time, on the date such payments shall become due in accordance
with the terms hereof and of the Notes.

     2.2 Payment on Non-Banking Days. Whenever any payment to be made hereunder
or under the Notes shall be stated to be due on a day other than a Banking Day,
such payment shall be made on the next succeeding Banking Day and such extension
of time shall in such case be included in the computation of payment of interest
hereunder or under the Notes or the Commitment Fees hereunder, as the case may
be.

                                       6

<PAGE>

     2.3 Setoffs. Upon the occurrence of any Event of Default, the Bank shall ha
the right to setoff against all obligations of the Company to the Bank
hereunder, under the Notes or under any of the Loan Documents, whether matured
or unmatured, all amounts owing to the Company by the Bank or any Affiliate of
the Bank, whether or not then due and payable, and all other funds or property
of the Company on deposit with or otherwise held by or in the custody of the
Bank or any Affiliate of the bank for the beneficial account of the Company.

     2.4 Capital Adequacy. If, on or after the date hereof, the Bank shall have
determined that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return below that
achieved on the date of this Agreement on the Bank's capital as a consequence of
its obligations hereunder to a level below that which the bank could have
achieved but for such adoption, change or compliance (taking into consideration
the Bank's policies with respect to capital adequacy) by an amount deemed by the
Bank to be material, then, sixty days after the Bank delivers notice to the
Company regarding such circumstances, the Company shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction.

     2.5 Interest After Maturity. Whenever any payment to be made hereunder,
under the Notes or under any of the Loan Documents shall become due and payable,
whether at the stated maturity thereof, by acceleration or otherwise, interest
thereon shall thereafter be payable at the interest rate per annum then in
effect plus 300 basis points.

     2.6 Security. The obligations of the Company hereunder are secured pursuant
to the Security Agreements.

                                    SECTION 3

                             CONDITIONS OF BORROWING

     The obligation of the Bank to make the Loans to the Company provided for
hereunder shall be subject to the following conditions.

     3.1 Conditions Precedent to Initial Loan. Prior to the initial Loan, the
Company shall furnish to the Bank all of the following, each dated the date
hereof (unless otherwise indicated) in form and substance satisfactory to the
Bank:

          (a) Notes. Properly executed forms of the Revolving Note, the Term
Note and the Draw Note, each drawn to the order of the Bank in the principal
amount of the Bank's Commitment.

          (b) Security Agreements. A properly executed Amendment No. 4 to Third
Amended and Restated Security Agreement dated May 4, 2005 (the "Personal
Property Security

                                       7

<PAGE>

Agreement"), a properly executed Amendment No. 2 to Amended and Restated
Intellectual Property Security dated May 4, 2005 (the "Intellectual Property
Security Agreement") and various Leasehold Open End Mortgage, Fixture Filing,
Security Agreements and Assignment of Subleases and Rents dated as of May 4,
2005 (the "Leasehold Mortgages" and, collectively with the Personal Property
Security Agreement and the Intellectual Property Security Agreement, the
"Security Agreements").

          (c) Financing Statements, Assignments, Etc.. Copies of duly completed
and executed Uniform Commercial Code financing statements and/or statements of
assignment and/or statements of amendment with respect to the property covered
by the Security Agreements in proper form for filing in all jurisdictions in
which such filing is necessary or appropriate to establish, perfect, protect and
preserve the rights, titles, interests, remedies, powers, privileges and Liens
of the Bank in such property.

          (d) Liens and Other Searches. Results of record searches by a Person
satisfactory to the Bank, of the Uniform Commercial Code filings which may have
been filed with respect to the personal property of the Company in the state and
county filing offices and real estate records in each of the jurisdictions
requested by the Bank, and of judgment and tax Liens with respect to the
Company.

          (e) Certified Resolutions, Certificate of Incorporation and Good
Standing Certificate of Company. A certified copy of the resolutions of the
Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement, the Notes issued hereunder, and the Security
Agreements, a Certificate of Incorporation (certified by the Delaware Secretary
of State) of the Company and a Good Standing Certificate (issued by the Delaware
Secretary of State) of the Company.

          (f) Participation Agreement. The Twelfth Amended and Restated
Participation Agreement among the Bank, Park National Bank and The Huntington
National Bank shall have been acknowledged by the Company.

          (g) Closing Fee. The Company shall pay the fee described in Section
1.3(d) of $40,000 to the Bank, to be divided among the Bank and the participant
lenders.

          (h) Payments Due at Closing. The Company shall pay the out-of-pocket
expenses of the Bank incurred in connection with the closing, including, without
limitation, legal fees and lien search expenses.

     3.2 Conditions Precedent to Each Loan. The obligation of the Bank to make
any Loan hereunder (including the initial Loan) shall be subject to the further
condition precedent that, at the time of each Loan, the Company shall be in
compliance with all of the provisions, warranties, covenants and conditions
contained in this Agreement, and there shall exist no Default or Event of
Default as set forth in Section 7. Each borrowing hereunder shall be deemed to
be a representation and warranty by the Company on the date of such borrowing
that the representations and warranties contained in Section 4 are true and
correct, and that the Company is then in compliance with the covenants contained
in Sections 5 and 6.

                                       8

<PAGE>

                                    SECTION 4

                         REPRESENTATIONS AND WARRANTIES

     The Company represents and warrants to the Bank, which representations and
warranties will survive the execution and delivery of this Agreement and the
Notes, as follows:

     4.1 Organization and Authority. The Company is a corporation duly
incorporated, and is existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority,
corporate or otherwise, to own or lease its properties and to carry on its
business as now conducted. The Company has all requisite power and authority,
corporate or otherwise, to enter into and perform all of its obligations under
this Agreement, the Notes, and the Security Agreements. The execution, delivery
and performance of this Agreement, the Notes and each of the Loan Documents have
been duly authorized by the Company by appropriate corporate action, there is no
prohibition, either in law, in its Certificate of Incorporation or Bylaws, in
any order, writ, injunction or decree of any court or arbitrator presently in
effect having applicability to the Company, or in any agreement to which it is a
party, which in any way prohibits or would be violated by the execution and
carrying out of this Agreement, the Notes or any of the Loan Documents in any
respect; this Agreement, the Notes and each of the Loan Documents have been duly
executed and delivered and are the legal, valid and enforceable obligations of
the Company, except as enforceability hereof or thereof may be limited by
bankruptcy, insolvency or laws affecting creditors' rights generally.

     4.2 Qualification. The Company is duly qualified or licensed and in good
standing as a foreign corporation duly authorized to do business in each
jurisdiction in which the character of the properties owned or leased or the
nature of the activities conducted makes such qualifications or licensing
necessary.

     4.3 Financial Statements. The Company has furnished to the Bank audited
financial statements of the Company including (a) an audited balance sheet as at
October 30, 2005; (b) an audited statement of operations for the year ended
October 30, 2005, (c) an audited statement of shareholders' equity for the year
ended October 30, 2005; and (d) an audited statement of cash flow for the year
ended October 30, 2005. The Company has also furnished to the Bank unaudited
financial statements for the interim period ending on, and as of February 19,
2006. Except as disclosed to the Bank in writing prior to the date hereof, such
financial statements are complete and correct in all material respects, and
fairly reflect the financial condition of the Company as at such dates and the
results of operations of the Company for the periods ended on such dates. Since
February 19, 2006, no material or adverse change has occurred in the businesses
property or condition (financial or other) of the Company except as disclosed to
the Bank in writing prior to the date hereof.

     4.4 Tax Returns and Payments. The Company has filed all tax returns
required by law to be filed and has paid all taxes, assessments and other
governmental charges levied upon any of its properties, assets, income or
franchises, other than those not yet delinquent. The charges, accruals and
reserves on the books of the Company in respect to income taxes for all

                                       9

<PAGE>

fiscal periods are adequate in the opinion of the Company, and the Company knows
of no unpaid assessment for additional income taxes for any fiscal period or of
any basis therefor.

     4.5 Titles to Properties: Liens. The Company has good and marketable title
to all of its properties, in each case including the properties and assets
reflected in the balance sheet as of February 19, 2006, except properties held
under leases which are capitalized in accordance with GAAP and except properties
and assets disposed of since the date of such balance sheet in the ordinary
course of business, and none of such properties or assets is subject to any Lien
except as permitted by Section 6.1(a). The Company enjoys peaceful and
undisturbed possession under all leases under which it operates, and all of such
leases are valid, subsisting and in full force and effect. None of such leases
contains any provision restricting incurrence of Indebtedness by the Company, or
any provision which materially adversely affects or in the future may (so far as
the Company can now foresee) materially adversely affect the operations of the
Company under any such lease.

     4.6 Litigation, Etc. There is no action, proceeding or investigation
pending or, to the Company's knowledge, threatened (or any basis therefor known
to the Company) which questions the validity of this Agreement, the Notes or any
of the Loan Documents, or any action taken or to be taken pursuant hereto or
thereto, or which might result, either in any case or in the aggregate, in any
material adverse change in the business, operations, affairs or condition of the
Company or its properties and assets or in any material liability on the part of
the Company except as set forth on Schedule 4.6.

     4.7 Compliance with Other Instruments, Etc. The Company is not in violation
of any provision of its Certificate of Incorporation or Bylaws, as amended to
date, or to the Company's knowledge, of any agreement, instrument, judgment,
decree, order, statute or governmental law, rule or regulation applicable to the
Company and the execution, delivery and performance of this Agreement, the Notes
or any of the Loan Documents will not result in any such violation or be in
conflict with or constitute a default under any such provisions or result in the
creation of any Lien upon any of the properties or assets of the Company which
now or in the future may (so far as the Company can now foresee) materially and
adversely affect the business, operations, affairs or condition of the Company
or its properties or assets.

     4.8 ERISA. Without in any way limiting the scope of Section 4.7, the
Company has not (a) incurred any material accumulated funding deficiency within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
from time to time ("ERISA") (b) incurred any material liability to the Pension
Benefit Guaranty Corporation established under ERISA (or any successor thereto
under ERISA) in connection with any employee benefit plan established or
maintained by the Company; nor (c) had any tax assessed against it by the
Internal Revenue Service for any alleged violation under Section 4975 of the
Internal Revenue Code.

     4.9 Patents, Trademarks, Etc. The Company owns or possesses all the
patents, trademarks, service marks, trade names, copyrights, licenses and rights
in respect of the foregoing, necessary for the conduct of its business as now
conducted, without any known conflict with the rights of others except such
conflicts which would not materially and adversely affect the business of the
Company.

                                       10
<PAGE>

     4.10 Liabilities. The Company has no material Liabilities, direct or
contingent except (a) as disclosed in the balance sheet of the Company as of
August 5, 2001; (b) as disclosed to the Bank in writing prior to the execution
of this Agreement; and (c) debt, contractual commitments, canceled purchase
orders, and accruals, all arising out of the ordinary course of business.

     4.11 Subsidiaries and Affiliates. The Company has no Subsidiaries or
Affiliate except those set forth on Schedule 4.11 attached hereto.

     4.12 Disclosure. Neither this Agreement nor any other document, certificate
or statement furnished to the Bank or to special counsel for the Bank by the
Company or its counsel in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to the Company which materially and adversely
affects or in the future may (so far as the Company can now foresee) materially
and adversely affect the business, operations, affairs or condition of the
Company or any of its properties or assets which has not been set forth in this
Agreement or in the other documents, certificates or statements furnished to the
Bank by or on behalf of the Company prior to the date hereof in connection with
the transactions contemplated hereby.

     4.13 No Governmental Approvals. No authorization, consent, approval or
exemption of, or registration, qualification or filing with, any governmental
authority is required to permit the execution, delivery and performance by the
Company of this Agreement, the Notes, or the Security Agreements. The Company is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

     4.14 Investments, Loans and Advances. The Company (a) is not a general
partner in any partnership or a member in any joint venture other than as
disclosed on Schedule 4.1 1, (b) does not own or hold the assets, stocks, bonds,
notes or other evidence of Indebtedness or any other security of any Person
other than as disclosed on Schedule 4.11 or in the financial statements
delivered to the Bank pursuant to Section 4.3, nor (c) is a party to any
agreement relating to commodity futures, financial futures or similar
investments.

     4.15 Insurance. All of the properties and operations of the Company of a
character usually insured by Persons of established reputation engaged in the
same or a similar business similarly situated are adequately insured, by
financially sound and reputable insurers, against loss or damage of the kinds
and in the amounts customarily insured against by such Persons; and the Company
carries, with such insurers in customary amounts, such other insurance,
including public and product liability insurance, as is usually carried by
Persons of established reputation engaged in the same or a similar business
similarly situated.

     4.16 Environmental Matters. To the best of the Company's knowledge, there
are no materials presently located- on any real property owned by, leased to or
operated by the Company which are radioactive or toxic, or which under federal,
state or local law, statute, ordinance or regulations, or court or
administrative order or decree, or private agreement (the "Environmental
Requirements") require special handling in collection, storage, treatment or

                                       11

<PAGE>

disposal ("Hazardous Materials") which are not being handled in accordance with
the Environmental Requirements and no part of such real property has been
contaminated by any Hazardous Materials.

     4.17 Security. Each Note is entitled to the benefits of, and is secured by
valid Liens created by the Security Agreements.

     4.18 Perfection. The provisions of the Security Agreements are effective to
create in favor of the Bank legal, valid and enforceable security interests in
all right, title and interest of the Company in the Collateral, as defined
therein. All necessary filings, recordings and actions have been taken so that
the security interests created by the Security Agreements constitute perfected
security interests in all right, title and interest of the Company in the
Collateral superior in right to any "Collateral Interest" (as defined below),
existing or future, which the Company or any third Person may have against the
Collateral or interests therein except as expressly permitted under this
Agreement or the Security Agreements, and such filings are the only filings
necessary to give constructive notice to third Persons of the security interest
created thereby. The term "Collateral Interest" shall include Liens created
under the Uniform Commercial Code, Liens of record, and consensual Liens created
by the Company which are not of record.

     4.19. Stock Redemption. Since October 1, 2001, the Company has redeemed
197,033 shares of is issued and outstanding common stock and has paid a total of
$2,898,196 in such redemptions.

     4.20 Franchises. The Company is not in material default of any of its
obligations under any franchise agreement and each franchise agreement to which
the Company is a party is in full force and effect and the terms thereof comply
in all material respects with all applicable laws and regulations. The Company
has not received from any other party to a franchise agreement any written
notice of default or intent to terminate. All registrations, disclosure
requirements and filings related to the Company's registration to sell
franchises are current and comply in all material respects with all applicable
laws and regulations in all jurisdictions where any such Person is engaged in
franchise-related activities. The Company has not offered to sell franchises in
any state in which the Company was required to be registered to sell franchises
but was not so registered.

                                    SECTION 5

                              AFFIRMATIVE COVENANTS

     Until all Loans and other sums due and owing under this Agreement to the
Bank have been paid in full and the Company no longer has any right to borrow
hereunder, the Company covenants and agrees as follows.

     5.1 Use of Proceeds. The Company shall use the Loan proceeds disbursed
pursuant to this Agreement for (a) repayment of term indebtedness owing to the
Bank, (b) store expansion, (c) common stock repurchases and (d) general working
capital purposes; provided,

                                       12

<PAGE>

however, that the maximum amount of Loan proceeds that may be used to repurchase
common stock subsequent to the date of this Agreement is $1,000,000.

     5.2 Periodic Financial Statements. The Company shall furnish to the Bank:

          (a) Within 45 days after the end of its first three quarterly
accounting periods of its fiscal year (i) a balance sheet of the Company as at
the close of such period; (ii) a consolidated statement of operations for the
Company for such period and for the year to date; and (iii) a consolidated
statement of cash flows as at the close of such period; (iv) calculations of
Adjusted EBITDA and EBITDAR for such quarterly period; and (v) in comparative
form, figures for the actual results for the corresponding quarterly and
year-to-date periods in the immediately preceding fiscal year ; all in
reasonable detail, prepared in accordance with GAAP and certified as complete
and correct, subject to changes resulting from year-end adjustments, by the
chief financial officer of the Company.

          (b) On or before the 20th day after each four week accounting period,
(i) a statement of operations for each of the Company's restaurants for such
four week period; (ii) a statement of operations all of the Company's
restaurants for such four week period (presented on an aggregate basis); (iii) a
calculation of Total Debt as at the close of such four week period; and (iv) in
comparative form with respect to the financial information provided pursuant to
clauses (i) and (ii) of this Section 5.2(b), figures for the actual results for
the corresponding four week and year-to-date periods in the immediately
preceding fiscal year; all in reasonable detail, prepared in accordance with
GAAP and certified as complete and correct, subject to changes resulting from
year-end adjustments, by the chief financial officer of the Company.

          (c) Within 45 days after the end of each quarterly accounting period
of the Company's fiscal year, a report that lists (i) all new store openings in
such quarter, (ii) the addresses of all new stores (including the county where
such store is located), (iii) the consummation of any Permitted Sale/Leaseback;
and (iv) the total number of shares of the common stock of the Company redeemed
by the Company, and the total of the redemption prices paid by the Company,
during such quarter.

     5.3 Annual Financial Statements. The Company shall furnish to the Bank
within 90 days after the close of each fiscal year a complete annual audit
report, including (a) a consolidated balance sheet of the Company as at the end
of such fiscal year and (b) consolidated statements of operations, shareholders'
equity and cash flow for such fiscal year, setting forth in each case of
subsections (a) and (b), in comparative form, corresponding figures for the
period covered by the preceding annual audit and as of the end of the preceding
fiscal year; all in reasonable detail and prepared in accordance with GAAP and
accompanied by an unqualified opinion thereon of Deloitte & Touche, or other
independent auditors of recognized national standing selected by the Company and
acceptable to the Bank.

     5.4 Quarterly Compliance Certificate. The quarterly and annual financial
statements furnished pursuant to Sections 5.2 and 5.3 shall be accompanied by a
certificate of the chief financial officer of the Company:

                                       13

<PAGE>

               (a) No Event of Default. Stating that except as disclosed in the
certificate, such officer, after reasonable investigation, has no knowledge of
any (i) Event of Default or (ii) Default;

               (b) Financial Ratios. Setting forth, in summary form,
calculations showing the financial status of the Company (at the end of, or, in
the case of incurrence tests, during such accounting Period) in respect of the
restrictions contained in Sections 6.2 and 6.3 hereof; and

               (c) Interest Rate. Setting forth, in summary form, calculations
showing the ratio set forth in Section 1.4(b).

     5.5 Notice of Event of Default. In addition to the certificate furnished
pursuant to Section 5.4, the Company shall furnish to the Bank, forthwith upon
any executive officer of the Company obtaining knowledge of any Default or Event
of Default, a certificate specifying the nature and period of the existence
thereof, and what action the Company has taken or is taking or proposes to take
in respect thereof.

     5.6 Auditors' Certificate. The annual audit report called for by Section
5.3 shall be accompanied by a certificate prepared by the Company's independent
auditors stating that except as disclosed in the certificate they have knowledge
of any Event of Default or Default which relates to the financial and accounting
matters set forth in Sections 6 and 7.

     5.7 Maintenance of Properties and Insurance. The Company shall at all times
maintain in good repair, working order and condition all properties used or
useful in the business of the Company and from time to time will make all
appropriate repairs, renewals and replacements thereof- maintain insurance upon
its property of such character and amounts as are usually maintained by
companies engaged in like business; furnish to the Bank, upon request, a
statement of its insurance coverage.

     5.8 Inspection. Upon request of the Bank, the Company shall allow any
authorized representatives of the Bank to visit and inspect any of its
properties, to examine and make copies of and from its books of record and
account and to discuss its affairs, finances and accounts with its officers,
employees and independent accountants, and shall furnish to the Bank any
information regarding its business affairs and financial condition within a
reasonable time after receipt of a written request therefor. Except (i) as the
Bank deems it necessary in connection with the enforcement of its rights arising
out of any Default or as required by law or with respect to disclosures to bank
regulatory authorities or the independent auditors or counsel or the employees,
officers or directors of the Bank, (ii) disclosure to any actual or potential
participant or assignee of the Bank's rights under this Agreement, or (iii) as
consented to by the Company, the Bank will not publish or disclose to any third
Person any information gained under any inspection conducted pursuant to this
Section 5.8 unless and until such information is or becomes a matter of public
knowledge.

     5.9 Payment of Taxes and Claims. The Company shall promptly pay and
discharge all taxes and assessments levied and assessed or imposed upon its
property or upon its income as

                                       14

<PAGE>

well as all claims which, if unpaid, might by law become a Lien upon its
property; provided, however, that nothing herein contained shall require the
Company to pay any such taxes, assessments or claims so long as the Company
shall in good faith contest the validity and stay the execution and enforcement
thereof.

     5.10 Reports, Etc. The Company shall furnish to the Bank copies of all
material which the Company shall send to any class of its security holders or
file with the Securities and Exchange Commission or any national securities
exchange including, but not limited to, all registration statements, annual
reports on Form 10-K, quarterly reports on Form 10-Q, reports on Form 8-K, proxy
material and annual reports to shareholders, and any and all amendments thereof
or supplements thereto, within 15 days after mailing or filing such materials.

     5.11 Preservation of Corporate Existence, Etc.: Business. Subject to the
provisions of Section 6.1(d) hereof, the Company shall, at all times preserve
and keep in full force and effect its corporate existence, rights and
franchises. The Company will engage primarily in a business of the same general
character as that now conducted.

     5.12 Compliance with Laws, Etc. The Company shall comply in all material
respects with all statutes, laws, ordinances and governmental rules, regulations
and orders to which it is subject or which are applicable to its business,
properties and assets.

     5.13 Books and Records. The Company shall keep adequate records and books
of account in which complete entries will be made in accordance with generally
accepted accounting procedures consistently applied, reflecting all financial
transactions.

     5.14 Notice of Litigation. The Company shall notify the Bank in writing
promptly of any litigation, arbitration proceeding or administrative
investigation, inquiry or other proceeding to which the Company is or hereafter
may become a party which may involve any risk of any material judgment or
liability which would exceed the amounts covered by insurance by $100,000 or
more or which may otherwise result in any materially adverse change in the
business or assets or in the condition (financial or otherwise) of the Company
or which may impair the ability of the Company to perform this Agreement.

     5.15 ERISA. The Company shall comply in all material respects with the
applicable provisions of ERISA. The Company shall furnish to the Bank (a) as
soon as possible, and in any event within one Banking Day after any executive
officer of the Company knows or has reason to know that any Reportable Event (as
described in ERISA) with respect to any plan of the Company has occurred, a
statement of the chief financial officer of the Company setting forth details as
to such Reportable Event and the action which is proposed to be taken with
respect thereto, together with a copy of the notice of such Reportable Event
given to the Pension Benefit Guaranty Corporation, (b) promptly after filing
with the Internal Revenue Service, copies of each annual report with respect to
each plan subject to ERISA, (c) promptly upon filing with the Pension Benefit
Guaranty Corporation, a copy of any notice from the Company or the administrator
of any such plan to the Pension Benefit Guaranty Corporation that any such plan
is to be terminated, (d) promptly after receipt thereof, a copy of any notice
the Company, any such plan or the administrator of any such plan may receive
from the Pension Benefit Guaranty

                                       15

<PAGE>

Corporation to terminate any such plan or to appoint a trustee to administer any
such plan, (e) promptly after receipt thereof, a copy of any notice the Company
or the administrator of such plan may receive from the Internal Revenue Service
relating to the disqualification of any previously qualified plan, and (f)
promptly after any executive officer of the Company knows or has reason to know
that the Company will be involved in a withdrawal or partial withdrawal from a
multiemployer plan, a statement to that effect and setting forth the details of
such withdrawal or partial withdrawal, including the estimated liability of the
Company with respect thereto.

     5.16 Performance of Contracts. The Company shall perform and comply with
all of its agreements if non-performance thereof could materially adversely
affect the business or credit of the Company or could impair the ability of the
Company to perform this Agreement, the Notes or any of the Loan Documents.

     5.17 Environmental Matters. If at any time the Company obtains notice that
any real property owned by, leased to or operated by the Company has located
therein Hazardous Materials, the Company shall, within 30 days after receipt of
such notice, take or cause to be taken, at its sole expense, such actions as may
be necessary to comply with all Environmental Requirements.

     5.18. Landlord Waivers. Immediately after execution hereof, the Company
shall use its best efforts to obtain from its landlords, in those jurisdictions
where such landlords are given a statutory Lien superior to or pari passu with
the Lien granted to the Bank under the Loan Documents, a Landlord's Waiver and
Consent in a form acceptable to the Bank; provided, however, that a new
Landlord's Waiver and Consent shall not be required from any landlord who
already has executed a Landlord's Waiver and Consent in favor of the Bank.

     5.19. Management. The Company shall retain Todd B. Barnum in the capacity
of Chairman of the Board and Chief Executive Officer of the Company, or Mr.
Barnum shall have been replaced by an individual performing similar duties who
shall be satisfactory to the Bank within 180 days from the date Mr. Barnum shall
cease to function in such capacity.

     5.20. Bank Accounts. The Company will establish and maintain the Bank as
its principal bank of account and primary depositary. The Company will, at all
times, maintain a compensating balance of at least $100,000 in its depository
account maintained at the Bank.

     5.21 Board Information Rights. The Company shall (i) give the Bank notice
of all meetings (including regularly scheduled meetings, special meetings and
emergency meetings) and other activities of the Board of Directors (or
comparable governing body) of the Company and all committees thereof, at the
same time and in the same manner as furnished to directors, (ii) provide the
Bank with all material notices, documents and information furnished to directors
whether at or in anticipation of a meeting, an action by written consents or
otherwise, at the same time and in the same manner as furnished to such
directors, (iii) provide the Bank with copies of the minutes of all such
meetings at the time and in the same manner such minutes are furnished to
directors, (iv) cause regularly-scheduled meetings of directors to be held no
less frequently than quarterly, and (v) within ten (10) Banking Days of any such
meeting, make available to the

                                       16

<PAGE>

Bank, either by phone or in person, at a mutually agreeable time, Company's
executive officers and chairman of the board to discuss agenda items at the most
recent board meeting and other items relevant to the Company or this agreement
with the Bank.

                                    SECTION 6

                               NEGATIVE COVENANTS

     Until all Loans and other sums due and owing under this Agreement to the
Bank have been paid and the Company no longer has the right to borrow hereunder,
unless the Bank shall have otherwise agreed in writing, the Company covenants
and agrees as follows.

     6.1 Restrictions. The Company will not either directly or indirectly:

          (a) Liens. Create, assume, or suffer to exist any mortgage, pledge,
encumbrance, security interest, lien or charge of any kind (collectively,
"Liens") upon any of its property or assets, whether now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except.

               (i)  Liens securing taxes, assessments, fees or other
                    governmental charges or levies or securing the claims of
                    materialmen, mechanics, carriers, warehousemen, landlords
                    and other similar persons, the payment of which is not at
                    the time required by Section 5.9;

               (ii) Liens incurred or deposits made in the ordinary course of
                    business (A) in connection with workers' compensation,
                    unemployment insurance, social security and other similar
                    laws, or (B) to secure the performance of bids, tenders,
                    sales, contracts, public or statutory obligations, surety,
                    customs, appeal and performance bonds and other similar
                    obligations not incurred in connection with the borrowing of
                    money, the obtaining of advances or the payment of the
                    purchase price of property;

               (iii) Attachment, judgment and other similar Liens arising in
                    connection with court proceedings, provided, however, that
                    the execution or other enforcement of such Liens is
                    effectively stayed and the claims secured thereby are
                    currently being contested in good faith by appropriate
                    proceedings and as to which the Company shall have set aside
                    on its books adequate reserves in accordance with GAAP;

               (iv) Easements, rights of way, restrictions, leases,
                    installations of public utilities, title imperfections and
                    restrictions, reservations in land patents, zoning
                    ordinances and other similar encumbrances

                                       17

<PAGE>

                    affecting real or tangible personal property, which in the
                    aggregate do not materially detract from the value of such
                    property or materially impair its use in the operations of
                    the business of the Company taken as a whole;

               (v)  Liens securing purchase money obligations respecting
                    personal property of the Company so long as such Liens apply
                    only to the personal property being purchased or leased and
                    not otherwise subject to the Lien of the Bank;

               (vi) Other Liens existing on the date hereof to the extent shown
                    in Schedule 6.1 attached hereto;

               (vii) Liens securing the repayment of Indebtedness owed by the
                    Company to the Bank;

               (viii) Liens securing obligations with respect to capital leases;
                    provided that the aggregate amount of the obligations at any
                    time outstanding secured by such Liens shall not exceed
                    $1,500,000; and

               (ix) Liens related to Indebtedness incurred in a Permitted
                    Sale/Leaseback.

          (b) Subsidiaries. Create or suffer to exist any Subsidiaries other
than those listed on Schedule 4.11 hereof unless such Subsidiaries sign the
appropriate documentation subjecting each such Subsidiary to the terms and
conditions of this Agreement including, without limitation, terms which evidence
that the repayment of the Indebtedness is secured by all of the assets of such
Subsidiary.

          (c) Contingent Liabilities. Assume, guarantee, endorse, contingently
agree to purchase or otherwise become liable upon the obligation of any one or
more Persons if the amount of all such guaranties, endorsements, and other
contingent Liabilities at any one time outstanding exceeds $100,000 except those
liabilities associated with the establishment of a new wholly-owned subsidiary,
the sole purpose of which is to operate one or more Italian theme restaurants,
or become a general partner in any partnership other than (i) those partnerships
reflected in Schedule 6.1(c) or (ii) those partnerships established to own and
operate one or more Max & Erma's restaurants as long as the partnership(s) are
consolidated into the financial statements of the Company provided to the Bank
pursuant to Sections 5.2 and 5.3 hereof and such partnerships and the Company
execute documents, in form and substance acceptable to the Bank, that allow the
Bank to obtain a first priority security interest in the assets of the
partnerships, prohibit transfers of assets from the Company to the partnerships
and prohibit the assumption of partnership Indebtedness by the Company or
Liabilities by Borrower..

          (d) Merger, Consolidation and Sale of Assets; Change of Control;
Change of Management. Merge or consolidate with any other Person, or liquidate,
or sell, lease, transfer or

                                       18

<PAGE>

otherwise dispose of (whether in one transaction or in a series of transactions)
any assets the value of which exceeds $500,000 in the aggregate in any fiscal
year, other than (x) obsolete equipment no longer used or useful in the conduct
of business or (y) pursuant to a Permitted Sale/Leaseback with an Approved
Sale/Leaseback Creditor or (z) pursuant to Permitted Restaurant Closure.
"Permitted Restaurant Closures" means the closing of an underperforming
restaurant, provided, however that (A) the cash costs incurred in connection
with all Permitted Restaurant Closures shall not exceed $500,000 in the
aggregate in any fiscal year and (B) the net proceeds received by the Borrower
in connection with such Permitted Restaurant Closures in excess of $500,000 in
the aggregate in any fiscal year shall be used to repay the Term Loan or, if the
Bank elects not to apply all of the net proceeds to the Term Loan or if the net
proceeds exceed the then outstanding obligations with respect to the Term Loan,
then that portion of the net proceeds not applied to the Term Loan shall prepay
the Subordinated Debt. The Company shall not suffer a Change of Control to
occur. "Change Of Control" means that the individuals serving as the officers
and the Board of Directors of the Company as of the date of this Agreement fail
to own at least 30% of the outstanding common stock of the Company or the
replacement of a majority of the Board of Directors of the Company from the
directors who constituted the Board of Directors on the date of this Agreement,
for any reason other than death, retirement or disability, and such replacement
shall not have been approved by the Board of Directors of the Company as
constituted on the date of this Agreement (or as such Board of Directors has
been changed over time with the approval of the then-existing Board of Directors
of the Company), provided that the Directors must include Todd B. Barnum and
William C. Niegsch, Jr., in each case without the prior written consent of the
Bank.. Without the prior written consent of the Bank, the Company shall not
suffer a change in management of the Company such that Todd B. Barnum is no
longer the Chairman of the Board of Directors and William C. Niegsch, Jr. is no
longer an officer of the Company.

          (e) Sale and Leaseback. Enter into any agreement with any Person
providing for the leasing by the Company of real or personal property which has
been or is to be sold or transferred by the Company to such Person or of real or
personal property intended to be used for substantially the same purpose as the
property sold or transferred by the Company; provided, however, that any future
sale and leaseback transaction with Franchise Finance Corporation of America,
General Electric Capital Corporation or any other creditor that issues a
commitment (in form and substance satisfactory to the Bank) to provide
sale/leaseback financing to the Company (an "Approved Sale/Leaseback Creditor")
shall be deemed to be permitted hereunder if it meets all the following
conditions: (1) no Default or Event of Default exists hereunder or would exist
after giving effect to such transaction and (2) the Company has received
reasonably equivalent value in the transaction (a "Permitted Sale/Leaseback").
Notwithstanding the foregoing, the Company shall not invest more than $100,000
for any new restaurant opened pursuant to a sale and leaseback transaction,
prior to the Company receiving a commitment from a third party to purchase such
new restaurant for at least $2,000,000 and subject to market lease terms.

          (f) Accounts Receivable. Discount or sell any of its notes or accounts
receivable.

          (g) Investments. Acquire or purchase the assets of any Person or
acquire or purchase the outstanding securities of any Person, or make any
additional investments in or

                                       19

<PAGE>

capital contributions to any Person; provided, however, that this prohibition
shall not apply to the following: (i) purchases of (A) U. S. Government
securities directly or pursuant to repurchase agreements with the Bank, (B)
certificates of deposit of the Bank and (C) commercial paper rated A-1 or P-1 if
all of such investments have a maturity of one year or less; or (ii) any such
purchase or acquisition of assets for the sole purpose of establishing or
converting such assets into one or more Max & Erma's restaurants as long as (A)
the assets are consolidated into the financial statements of the Company
provided to the Bank pursuant to Sections 5.2 and 5.3 hereof and (B) the Company
executes documents, in form and substance acceptable to the Bank, that allow the
Bank to obtain a first priority security interest in such assets, prohibit the
transfer of assets from the Company to any entity owning the assets and prohibit
the assumption of Indebtedness by the Company in connection with the acquisition
of such assets.

          (h) Loans and Advances. Make any loans or advances in excess of an
aggregate of $100,000 at any one time outstanding.

     6.2 Financial Ratios. The Company will not:

          (a) Current Ratio. After November 1, 2005, permit the ratio of Current
Assets to Current Liabilities at any time to be less than 0.35 to 1.

          (b) Liabilities/Tangible Net Worth Ratio. Permit the ratio of
Liabilities to Tangible Net Worth to exceed (i) 5.35 to 1.00 on February 1, 2006
through October 31, 2006, (ii) 5.15 to 1.00 on November 1, 2006 through October
31, 2007 and (v) 4.75 to 1.00 on November 1, 2007 and thereafter.

          (c) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio shall
not be less than (i) 1.20 to 1.00 through October 31, 2007, (ii) 1.25 to 1.00
from November 1, 2007 through October 31, 2008 and (iii) 1.35 to 1.00
thereafter. "Fixed Charge Coverage Ratio" means, for the Company during the
Fiscal Period being measured, the quotient of (a) the sum of (i) Adjusted EBITDA
minus (ii) during the Fiscal Period this ratio is being measured, Store Capital
Expenditures in the prior 12 months divided by (b) the sum of (x) current
maturities of other long term indebtedness plus (v) current maturities of
capitalized lease obligations plus (z) Cash Interest Expense. "Store Capital
Expenditures" means the actual Capital Expenditures on restaurants during the
Fiscal Period that have been open for 12 months or more. "Cash Interest Expense"
means for any Fiscal Period, total interest obligations of the Company for such
period required to be paid in cash in respect of all outstanding Indebtedness,
without regard to any waiver, consent or other forbearance with respect thereto,
whether paid, accrued, expensed or capitalized (except for construction period
interest), and includes without limitation, all such cash obligations in the
forms of commissions, discounts, commitment fees and other fees and charges owed
in respect of such Indebtedness, including that portion of any lease payment
under a capitalized lease obligation that would be treated as interest under
GAAP, and any interest on Indebtedness used to finance working capital.

          (d) Total Debt to Adjusted EBITDA. At the end of any Fiscal Period
commencing (i) on the date hereof and ending on May 14, 2006, permit the ratio
of (a) the Company's Indebtedness including any Subordinated Debt (the "Total
Debt") during the Fiscal

                                       20

<PAGE>

Period being measured to (b) the Company's Adjusted EBITDA during the Fiscal
Period being measured to be greater than 3.50 to 1.00; (ii) on May 15, 2006 and
ending on October 31, 2007, permit the ratio of (a) the Company's Total Debt
during the Fiscal Period being measured to (b) the Company's Adjusted EBITDA
during the Fiscal Period being measured to be greater than 3.25 to 1.00; and
(iii) on November 1, 2007 and thereafter, permit the ratio of (a) the Company's
Total Debt during the Fiscal Period being measured to (b) the Company's Adjusted
EBITDA during the Fiscal Period being measured to be greater than 3.00 to 1.00.

          (e) Tangible Net Worth. Permit its Tangible Net Worth to be less than
(i) $11,000,000 (the "Base Amount") from the date hereof through October 29,
2006 and (ii) thereafter, the Base Amount plus $1,000,000 (as of the last day of
each ensuing fiscal year) until the later of the Revolving Credit Maturity Date,
the Draw Loan Maturity Date or the Term Loan Maturity Date.

          (f) Trailing Twelve Months Adjusted EBITDA. Permit the Company's
Adjusted EBITDA for the quarter ended (plus the three immediately preceding
fiscal quarters) to be less than (i) $8,500,000 as of April 30, 2006, (ii)
$9,000,000 as of August 6, 2006 and October 29, 2006, and (iii) $9,500,000 as of
each Fiscal Period thereafter.

          (g) Senior Debt to Adjusted EBITDA. At the end of any Fiscal Period
commencing (1) on November 1, 2005 and ending on May 14, 2006, permit the ratio
of (i) the Company's Indebtedness less any Subordinated Debt (the "Senior Debt")
during the Fiscal Period being measured to (ii) the Company's Adjusted EBITDA
during the Fiscal Period being measured to be greater than 2.75 to 1.00; (2) on
May 15, 2006 and ending on October 29, 2006, permit the ratio of (i) the
Company's Senior Debt during the Fiscal Period being measured to (ii) the
Company's Adjusted EBITDA during the Fiscal Period being measured to be greater
than 2.50 to 1.00; (3) on October 30, 2006 through October 31, 2007, permit the
ratio of (i) the Company's Senior Debt during the Fiscal Period being measured
to (ii) the Company's Adjusted EBITDA during the Fiscal Period being measured to
be greater than 2.25 to 1.00 and (4) on November 1, 2007 and thereafter, permit
the ratio of (i) the Company's Senior Debt during the Fiscal Period being
measured to (ii) the Company's Adjusted EBITDA during the Fiscal Period being
measured to be greater than 2.00 to 1.00.

          (h) Financial Ratio Test. Permit the Financial Ratio (1) to be more
than 6.25 to 1.00 from November 1, 2005 through August 6, 2006, then (2) to be
more than 6.00 to 1.00 from August 7, 2006 through October 29, 2006, (3) to be
more than 5.80 to 1.00 from October 30, 2006 through October 31, 2007 and (4) to
be more than 5.75 to 1.00 thereafter. "Financial Ratio" shall mean the sum of
the Total Debt (as defined in Section 6.2(d) hereof) of the Company plus the
product of the Company's rent expense, including common area charges but
excluding taxes and insurance, related to all operating leases ("Rental
Expense") multiplied by eight (8), as such sum is divided by EBITDAR. "EBITDAR"
means Adjusted EBITDA plus Rental Expense of the Company.

     6.3 Dividends and Purchases. The Company will not declare or pay any
dividends on, or make any distribution with respect to, any shares of capital
stock of the Company of any class.

                                       21

<PAGE>

     6.4 Transactions with Affiliates. The Company will not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
any property or the rendering of any service, with any Affiliate of the Company
except in the ordinary course of and pursuant to the reasonable requirements of
the business of the Company and upon fair and reasonable terms no less favorable
to the Company than would obtain in an arm's length transaction with a Person
not an Affiliate of the Company.

     6.5 Limitation on Store Openings; Notice of Store Openings. The Company
will not open more than ten new stores per fiscal year. The Company will notify
the Bank of each new store opening by delivering an updated Exhibit B that
contains a complete list of all the Company's operating stores. Exhibit B
attached hereto is a complete list of all the Company's operating stores.

     6.6 Subordinated Debt Funding. If the Company has not received $7,000,000
in gross proceeds from the issuance of Subordinated Debt by the Subordinated
Debt Funding Date, then the Company shall be required to comply with different
financial covenants than those set forth in Section 6.2 above (the "New
Covenants"). The Bank shall be entitled to have the Company authorize the New
Covenants in an amendment to this Agreement within thirty (30) days after the
Subordinated Debt Funding Date.

                                    SECTION 7

                         EVENTS OF DEFAULT AND REMEDIES

     If any of the following events ("Events of Default") shall occur and be
continuing:

          (a) Principal Payments. The Company shall default in the payment of
the principal of the Notes when and as the same shall become due and payable,
after having received written notification of such payment being due, whether at
the due date thereof or by acceleration or otherwise;

          (b) Interest Payments and Fees. The Company shall default in the
payment of interest on the Notes, or the payment of any Commitment Fee, when and
as the same shall become due and payable, whether at the due date thereof or by
acceleration or otherwise, provided such default shall continue for a period of
10 days;

          (c) Representations and Warranties. Any representation or warranty
made by the Company in this Agreement or in connection with any Loans hereunder,
or in any Loan Document, agreement, report, certificate, financial statement, or
other instrument furnished in connection with this Agreement or the Loans
hereunder shall prove to be false or misleading in any material respect;

          (d) Negative Covenants. The Company shall fail to observe or perform
any covenant, condition or agreement in Section 6 of this Agreement;

                                       22

<PAGE>

          (e) Other Covenants. The Company shall fail to observe or perform any
covenant, condition or agreement (other than those mentioned in Section 6) to be
observed or performed pursuant to the terms hereof or the terms of any Loan
Document, provided such default shall continue unremedied for 30 days after
written notice thereof to the Company by the Bank;

          (f) Cross Default. (i) The Company or any Subsidiary shall default
with respect to the payment of any Indebtedness other than Indebtedness
represented by the Notes, or (ii) any event or condition shall occur which
enables the holder of any Indebtedness (other than Indebtedness represented by
the Notes) or any Person acting on such holder's behalf to accelerate the
maturity thereof, or (iii) the holder of any Indebtedness other than
Indebtedness represented by the Notes shall accelerate the maturity of such
Indebtedness; provided no Default under this Section 7(f) shall be deemed to
occur where the amount, individually or in the aggregate, of such Indebtedness
does not exceed $200,000;

          (g) Judgments. One or more judgments from which no appeal may be taken
or with respect to which the time to appeal has expired for the payment of money
aggregating $200,000 or more shall be rendered against the Company and/or any
Subsidiary and the same shall remain undischarged for a period of 30 consecutive
days during which the execution shall not be effectively stayed;

          (h) Bankruptcy, Etc. The Company shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator for it or for any of its
property- (ii) admit in writing its inability to pay its debts as they mature;
(iii) make a general assignment for the benefit of creditors; (iv) be
adjudicated a bankrupt or insolvent; or (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
answer admitting the material allegations of a petition filed against it in any
proceeding under any such law or if corporate action shall be taken by the
Company for the purpose of effecting any of the foregoing;

          (i) Reorganization, Receiver, Etc. An order, judgment or decree shall
be entered without the application, approval or consent of the Company by any
court of competent jurisdiction, approving a petition seeking reorganization of
the Company or appointing a receiver, trustee or liquidator of the Company or of
all or a substantial part of the assets thereof, and such order, judgment or
decree shall continue unstayed and in effect for any period of 60 days,

          (j) ERISA. A Reportable Event (as defined in ERISA) shall have
occurred with respect to any Plan (as defined therein) and, within 30 days after
the reporting of such Reportable Event to the Bank, the Bank shall have notified
the Company in writing that (i) it has made a determination that, on the basis
of such Reportable Event, there are reasonable grounds for the termination of
such Plan by the Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States District Court of a trustee to administer such
Plan; and (ii) as a result thereof an Event of Default exists hereunder; or a
trustee shall be appointed by

                                       23

<PAGE>

a United States District Court to administer any Plan; or the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate any Plan;

          (k) Collateral Default. Any default shall occur pursuant to the terms
of any of the Loan Documents.

          then (i) the Bank at any time thereafter during the continuance of any
such Event of Default specified above (other than in Section (h) or (i)), may,
by written notice to the Company terminate the Commitment of the Bank (if still
in existence), and declare the entire principal amount of the Notes to be due
and payable forthwith, whereupon the Notes including all principal and interest
and all other amounts payable hereunder or under any Loan Document shall
forthwith become due and payable; and (ii) automatically upon the occurrence of
any of the events specified in Section (h) or (i) the Commitment of the Bank
shall terminate (if still in existence) and the Notes, including all principal
and interest and all other amounts payable hereunder or under any Loan Document
shall become immediately due and payable, in either case without presentment,
demand, protest, or notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Notes or the Loan Documents to the
contrary notwithstanding.

                                    SECTION 8

                           ASSIGNMENTS/PARTICIPATIONS

     8.1 Assignment by the Company. The Company may not assign its rights or
obligations hereunder or under the Notes without the prior written consent of
the Bank.

     8.2 Assignments by the Bank. The Bank may assign any of the Loans, the
Notes, or its Commitment without the prior consent of the Company.

     8.3 Participations. The Bank may sell or agree to sell to one or more other
Persons a participation in all or any part of any Loans held by it or any Loan
made or to be made by it.

     8.4 Information. Upon the request of the Bank, the Company shall furnish
any information concerning the Company required to be furnished under this
Agreement to assignees and participants (including prospective assignees and
participants).

                                    SECTION 9

                                   DEFINITIONS

     9.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings specified.

          "Adjusted EBITDA" means, with respect to any period, the sum of (1)
net income plus (2) Impairment Charges plus (3) non-recurring charges, to the
extent reflected in net income plus (4) amortization and depreciation plus (5)
interest expense plus (6) income tax expense plus

                                       24

<PAGE>

(7) cash operating losses at closed restaurants minus (8) non-recurring gains,
to the extent reflected in net income; provided, however that for purposes of
computing Adjusted EBITDA, the sum of Impairment Charges and cash operating
losses from closed restaurants shall not exceed $2,500,000 in any Fiscal Period.

          "Affiliate" with respect to any Person shall mean each Person that
directly or indirectly (through one or more intermediaries or otherwise),
controls, is controlled by, or is under common control with such Person.

          "Agreement" is defined in the preamble.

          "Approved Sale/Leaseback Creditor" is defined at Section 6.1(e).

          "Bank" is identified in the preamble.

          "Banking Days" shall mean days other than Saturdays, Sundays and other
legal holidays or days on which the principal office of the Bank is closed.

          "Capital Expenditures" shall mean, as to any Person, for any period,
expenditures (including the aggregate amount due under capital leases incurred
during such period but excluding such amounts under capital leases of assets as
to which inclusion of which would cause such amount to be double counted for
such period) made by such Person to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements) during such
period, computed in accordance with GAAP.

          "Commitment" is defined at Section 1.1.2.

          "Commitment Fee" is defined at Section 1.3.

          "Company" is identified in the preamble.

          "Current Assets" shall mean all assets which may properly be
classified as current assets in accordance with GAAP.

          "Current Liabilities" shall mean all Liabilities as may properly be
classified as current Liabilities in accordance with GAAP and, prior to the
later of the Revolving Credit Maturity Date (or the Extended Maturity Date), the
Term Loan Maturity Date (as extended) or the Draw Loan Maturity Date, shall
include the amount of all Loans which are outstanding hereunder which are due
within the next twelve months.

          "Default" shall mean any condition or event which constitutes an Event
of Default or which would become an Event of Default with the giving of notice
or lapse of time or both (unless cured or waived).

          "Draw Commitment" is defined at Section 1.1.4.

                                       25

<PAGE>

          "Draw Loan" is defined at Section 1.1.4.

          "Draw Loan Maturity Date" means December 31, 2007.

          "Draw Note" is defined at Section 1.1.2.

          "Draw Note Conditions Precedent" is defined at Section 1.1.4(a).

          "Draw Note Conditions Subsequent" is defined at Section 1.1.4(a).

          "Draw Note Conversion Date" is defined at Section 1.1.4.

          "Environmental Requirements" is defined at Section 4.16.

          "ERISA" is defined at Section 4.8.

          "Events of Default" is defined at Section 7.

          "Fiscal Period" for purposes of calculating the ratios, the Period
will end on each fiscal quarter end date, and will include the immediately
preceding four fiscal quarters.

          "GAAP" means generally accepted accounting principles consistently
applied, as reflected in the financial statements delivered pursuant to Section
4.3 hereof.

          "Hazardous Materials" is defined at Section 4.16.

          "Impairment Charges" shall mean impairment charges determined in
accordance with GAAP.

          "Indebtedness" shall mean any Liabilities representing obligations for
borrowed money or the deferred purchase price of property or services (except
accruals and trade accounts payable arising in the ordinary course of business)
including, without limitation, capitalized lease obligations, and Liabilities
similar to the foregoing of other Persons which are secured by a Lien on any
asset of the Company, or guaranteed directly or indirectly by the Company;
provided, however, that Indebtedness shall not include any Capital Expenditures
which qualify for a Permitted Sale/Leaseback with an Approved Sale/Leaseback
Creditor.

          "Inventory" shall mean all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in the business of the Company or used in connection
with the manufacturing, packing, shipping, advertising, selling or finishing of
such goods, merchandise and other personal property, and all goods, merchandise
and other personal property wherever located, to be furnished by the Company
under any contract or contract for service or held for sale or lease, whether
now owned or hereafter acquired, and all documents of title or other documents
representing the foregoing.

                                       26

<PAGE>

          "Letter of Credit" means a commercial letter of credit issued
hereunder by the Bank pursuant to this Agreement on behalf of the Company.

          "Liabilities" as applied to any Person, shall mean (a) all items
(except items of capital stock of capital surplus, of general contingency
reserves or of retained earnings and amounts attributable to minority interest,
if any) which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Liabilities are to be determined, including specifically
capitalized lease obligations and the reimbursement obligations under a Letter
of Credit and (b) all obligations secured by any Lien or conditional sale or
other title retention agreement to which any property or asset owned or held by
such Person is subject, whether or not the obligations secured thereby shall
have been assumed (excluding non-capitalized leases which may amount to title
retention agreements).

          "Liens" are identified at Section 6.1 (a).

          "Loan" shall mean a loan made by the Bank pursuant to Section 1,
including without limitation Draw Loans, Revolving Credit Loans and Term Loans.

          "Loan Documents" shall mean the Notes, the Security Agreements and all
other documents, instruments and certificates to be delivered hereunder or
thereunder.

          "Maximum Commitment" is defined at Section 1.1.2.

          "Net Income" shall mean for any period the net income (loss) of the
Company incurred during such period as determined in accordance with GAAP.

          "Notes" is defined at Section 1.1.2.

          "Permitted Sale/Leaseback" is defined at Section 6.1(e).

          "Person" shall mean and include an individual, partnership,
corporation, trust, unincorporated organization, a government or any department
or agency thereof or any other entity.

          "Prime Rate" is defined at Section 1.4(b).

          "Revolving Commitment" is defined at Section 1.1.3.

          "Revolving Credit Loan" means a Loan made pursuant to the Revolving
Commitment.

          "Revolving Credit Maturity Date" is defined at Section 1.1.3.

          "Revolving Note" is defined at Section 1.1.2.

                                       27

<PAGE>

          "Security Agreements" is defined at Section 3.1 (b).

          "Subordinated Debt" shall mean all unsecured Indebtedness of the
Company maturing more than 12 months from the date of determination thereof
which in each case shall be subordinated to all Loans and all other amounts owed
to the Bank, all on specific terms and conditions satisfactory to and approved
in writing by the Bank prior to the incurrence thereof.

          "Subordinated Debt Funding Date" shall mean the closing date of the
issuance of certain subordinated debt, which shall be no later than May 31,
2006.

          "Subsidiary" shall mean any corporation which is incorporated under
the laws of the United States or Canada at least a majority of the outstanding
voting stock of which shall, at the time as of which any determination is being
made, be owned by the Company either directly or through Subsidiaries.

          "Tangible Net Worth" shall mean the total of the capital stock (net of
treasury stock), paid in surplus and retained earnings (deficit) as determined
in accordance with GAAP, minus the following items (without duplication of
deductions), if any, appearing on the balance sheet of the Company:

          (a) all deferred charges (net of amortization) excluding deferred
     income tax assets;

          (b) the book amount of all assets which would be treated as
     intangibles (including capital leases) under GAAP, including, without
     limitation, such items as good will, unamortized debt discount and expense
     and corporate organization expenses, treasury stock, trademarks, trademark
     applications, trade names, service marks, brand names, copyrights, patents,
     patent applications and licenses, and rights with respect to the foregoing;
     and

          (c) any write-up in the book amount of any asset resulting from a
     revaluation thereof from the book amount entered upon acquisition.

          "Term Loan Maturity Date" is defined at Section 1.1.2.

          "Term Note" is defined at Section 1.1.2.

          "Wholly Owned Subsidiary" shall mean a Subsidiary, all of the voting
stock (other than directors' qualifying shares) of which and all other stock and
equity securities of which are owned by the Company, or by the Company and one
or more Wholly Owned Subsidiaries.

     9.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP consistent with those applied in the
preparation of the financial statements of the Company at the date hereof.

                                       28

<PAGE>

                                   SECTION 10

                                  MISCELLANEOUS

     10.1 Term of Agreement: Successors and Assigns. This Agreement and all
covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the making by the Bank of
the Loans and the execution and delivery to the Bank of the Notes and shall
continue in full force and effect until the termination of the Commitment or
until payment in full of the Notes, whichever is later. Whenever in this
Agreement either of the parties hereto are referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
terms and provisions of this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.

     10.2 Notices. Notices, demands and communications shall be deemed to have
been properly given to the Company when deposited in the United States mail,
registered or certified, postage prepaid, and addressed to the Company at P.O.
Box 297830, 4849 Evanswood Drive, Columbus, OH 43229, Attention- Chief Financial
Officer, whether or not the same are actually received by the Company. Except
for purposes of notification of an Event of Default hereunder, such
communication shall be effective only upon receipt by the Company at the address
indicated. Any communication to the Bank shall be deemed properly given if
similarly mailed and addressed to National City Bank, 155 East Broad Street,
Columbus, Ohio 43251.

     10.3 No Implied Waivers. No delay on the part of the bank in exercising any
right, power or privilege granted hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof. The rights and remedies herein
expressly specified are cumulative and not exclusive of any other rights and
remedies which the Bank would otherwise have.

     10.4 Amendments, Modifications, Etc. No amendment, modification,
termination, or waiver of any provision of this Agreement or of the Notes nor
consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No notice or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances.

     10.5 Applicable Law. This Agreement and the Notes shall be deemed to be
contracts made under the laws of the State of Ohio, and for all purposes shall
be construed in accordance with the laws of such state.

     10.6 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.

                                       29

<PAGE>

     10.7 Expenses. All legal fees, costs or expenses, incurred by the Bank in
connection with the preparation, execution, delivery and enforcement of this
Agreement, the Notes or any of the Loan Documents shall be paid by the Company.

     10.8 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument. Complete sets of counterparts shall be lodged with the Company
and the Bank.

     10.9 Merger. This Agreement, the Notes and the Loan Documents reflect the
entire understanding of the parties with respect to their subject matter and
supersede all prior agreements or understandings with respect thereto in their
entirety.

     10.10 Headings. Headings of the sections of this Agreement are for
convenience only and shall not affect the construction of this Agreement.

     10.11 Effective Date. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties.

     10.12 Confession of Judgment. The undersigned Company and all indorsers
authorize any attorney at law, including an attorney engaged by the holder, to
appear in any court of record in Columbus, Ohio, after the indebtedness
evidenced hereby, or any part thereof, becomes due and waive the issuance and
service of process and confess judgment against the undersigned and all
indorsers in favor of the holder, for the amount then appearing due, together
with costs of suit and, thereupon, to release all errors and waive all rights of
appeal and stay of execution. The foregoing warrant of attorney shall survive
any judgment; and if any judgment be vacated for any reason, the holder hereof
nevertheless may thereafter use the foregoing warrant of attorney to obtain an
additional judgment or judgments against the undersigned and all indorsers or
any one or more of them. The undersigned and all indorsers hereby expressly
waive any conflict of interest that the holder's attorney may have in confessing
such judgment against such parties and expressly consent to the confessing
attorney receiving a legal fee from the holder for confessing such judgment
against such parties.

                                       30

<PAGE>

     The parties hereto have caused this Agreement to be duly executed by their
respective duly authorized officers as of the date first above written.

WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.

MAX & ERMA'S RESTAURANTS, INC.          NATIONAL CITY BANK

By: /s/ William C. Niegsch, Jr.         By: /s/ Douglas E. Houser
    ---------------------------------       ------------------------------------
Name: William C. Niegsch, Jr.           Name: Douglas E. Houser
Its: Chief Financial Officer            Its: Senior Vice President

                                       31

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