Document:

Exhibit 10.13

EMPLOYMENT TERMINATION BENEFITS AGREEMENT

                AGREEMENT, made this 16th day of December, 2003, between ASTRONICS
CORPORATION, a New York corporation with an office and place of business at 1801
Elmwood Avenue, Buffalo, New York 14207 (the "Company"), and David C. Burney who
resides at 111 Pinewood Drive, West Seneca, New York 14224 ("Executive").

RECITALS:

        A.     Executive is presently employed by Company and the Board of
Directors of Company (the "Board") recognizes that Executive's contribution to
the growth and success of Company has been substantial; 

        B.     The Board desires to establish appropriate employment arrangements
which the Board has determined will reinforce and encourage Executive's
continued attention and dedication to the Company's business and success as a
member of the Company's management, furthering the best interest of the Company
and its shareholders; and

        C.     Executive is willing to commit himself to continue to serve Company
on the terms and conditions herein provided.

                NOW, THEREFORE, in consideration of the mutual promises and the respective
covenants and agreements of the parties herein contained and intending to be
legally bound hereby, the parties hereto agree as follows:

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ARTICLE I -
DEFINITIONS

                1.01     Terms Defined. In addition to any words and terms elsewhere
defined herein, the following words and terms shall have the meanings indicated
below unless the context or use indicates a different meaning:

	 	
    (a)
	
                "CAUSE" shall mean any act that is materially
                inimical to the best interests of the Company and that
                constitutes, on the part of the Executive, intentional or
                grievous wrong, including, but not limited to, common law fraud,
                a felony, or other gross malfeasance of duty.

                
	 	 	 
	 	
    (b)
	
                A "CHANGE OF CONTROL" shall mean the transfer in
                one or more transactions, extending over a period of not more
                than 24 months, of Common Stock of the Company possessing 25% or
                more of the total combined voting power of all Class A and Class
                B Shares of Common Stock. A transfer shall be deemed to occur if
                shares of Common Stock are either transferred or made the
                subject of options, warrants, or similar rights granting a third
                party the opportunity to acquire ownership or voting control of
                such Common Stock.

                
	 	 	 
	 	
    (c)
	
                "COMMON STOCK" shall mean the Class A and Class B
                $1.00 par value shares of the capital stock of the Company, as
                well as all other securities with voting rights or convertible
                into securities with voting rights.

                

-3-

	 	
    (d)
	
                "COMPENSATION" shall mean the base salary paid to
                the Executive for a calendar year plus any cash bonus or cash
                incentive payments earned for or attributable to that year,
                whether or not the bonus or incentive payments are paid during
                that year. "AVERAGE ANNUAL COMPENSATION" shall mean the average
                of the Compensation paid to Executive for the two years
                preceding termination. 

                
	 	 	 
	 	
    (e)
	
                "COMPENSATION COMMITTEE" shall mean the Executive
                Compensation Committee of Board, as it is constituted from time
                to time.

                
	 	 	 
	 	
    (f)
	
                "COMPANY" shall mean ASTRONICS CORPORATION, as
                well as any successors or assigns of ASTRONICS CORPORATION,
                whether by transfer, merger, consolidation, acquisition of all
                or substantially all of the business assets, change in identity,
                or otherwise by operation of law and for purposes of employment
                of Executive shall also mean any parent, subsidiary or
                affiliated entity to whom Executive's services may be assigned.

                

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    (g)
	
                "DISABILITY" shall mean the inability of Executive
                to perform a substantial portion of his duties hereunder for a
                continuous period of 6 months or more.

                
	 	 	 
	 	
    (h)
	
                "EFFECTIVE DATE" shall mean the date of this
                Agreement.

                
	 	 	 
	 	
    (i)
	
                "INVOLUNTARY TERMINATION OF EMPLOYMENT" shall mean
                a severance of the Executive's employment relationship prior to
                age 65, other than for death, Disability, Retirement, or Cause,
                by or at the instigation of Company or by or at the instigation
                of Executive where Executive's pay has been diminished or
                reduced to a greater extent than any diminution or reduction of
                Company's Executives generally. Where there has been a Change of
                Control, Involuntary Termination of Employment shall mean a
                termination of the employment relationship by or at the
                instigation of Company or by or at the instigation of Executive
                (whether before or after age 65) within two years of the Change
                of Control.

                
	 	 	 
	 	
    (j)
	
                "RETIREMENT" shall mean the election of Executive
                to retire from active employment with Company at the end of the
                month in which Executive attains 65 years of age or thereafter.
                Retirement shall also mean a similar election by Executive prior
                to age 65, where Executive elects to receive early Retirement
                benefits under the Company's Profit Sharing Plan or any
                successor Company retirement plan.

                

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    (k)
	
                "TERM OF EMPLOYMENT" means the period commencing
                on the effective date and expiring on the earliest to occur of (i) Executive's
                death, Disability or Retirement, (ii) the Voluntary Termination
                of Employment by Executive, or (iii) Termination for Cause of
                Executive's employment.

                
	 	 	 
	 	
    (l)
	
                "TERMINATION FOR CAUSE" shall mean severance of
                the Employment relationship based upon or brought about by Cause
                as defined in paragraph (a) above.

                
	 	 	 
	 	
    (m)
	
                "VOLUNTARY TERMINATION OF EMPLOYMENT" shall mean a
                severance of the Employment relationship by or at the
                instigation of Executive, other than a termination occurring
                upon a Change of Control as defined in paragraph (b) above, or
                upon death, Disability or Retirement.

              
	 	 	 

ARTICLE II -
EMPLOYMENT, TERM, DUTIES

               
2.01     Employment. Company hereby hires Executive, and Executive
agrees to serve Company, for a term beginning on the Effective Date of this
Agreement, and ending on the last day of the Term of this Agreement.

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2.02     Term. The term of this Agreement shall begin on the
Effective Date, and shall end as provided in Section 5.01. Unless benefits under
this Agreement are being provided at that time, this Agreement shall also end
upon Executive's attainment of age 70.

               
2.03     Capacity. Executive shall serve in such executive or
managerial capacity as the Board of Directors of the Company shall determine,
and shall have all of the duties, responsibilities, obligations and privileges
commensurate with such position.

               
2.04     Duties. Executive agrees to devote his full business time
and energy to the business and affairs of Company and to utilize his best
efforts, skill and abilities to promote such interest, performing such duties as
may be assigned on the executive or managerial level. Company agrees that
Executive shall have such powers and authority as shall reasonably be required
to enable Executive to discharge his duties in an efficient manner.

               
2.05     Base of Operations. Company agrees that Executive's base
of operations shall be Executive's location as of the Effective Date of this
Agreement. Although Executive recognizes that substantial traveling may be
required in connection with employment, Executive shall not be required to
operate from any other area without Executive's prior consent.

ARTICLE III -
COMPENSATION AND BENEFITS

               
3.01     Base Salary and Profit Share. During the Term of
Employment, Company shall pay Executive for all services to be rendered as set
forth herein, a base salary as determined from time to time by the Compensation
Committee, plus an annual bonus award based on the performance of the Company
and of the Executive as the Compensation Committee may determine. The base
salary shall be payable in periodic installments not less frequently than on a
monthly basis. Any bonus award shall be payable annually in the month of January
and shall be based on performance for the prior fiscal year.

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                This Agreement shall not be deemed abrogated or terminated if Company, in its
discretion, shall determine to modify the base compensation of Executive for any
period of time, and Executive accepts the modification, but nothing herein
contained shall be deemed to obligate Company to make any increase in base
compensation.

               
3.02     Other Employment Benefits. Executive shall be entitled to
all rights and benefits for which he shall be eligible under any retirement,
profit sharing, employee stock purchase plan, savings and investment plan,
business travel, group life, disability, accident or health insurance, vacation,
and other benefit plans which Company provides for its employees generally, as
well as for any stock option, incentive compensation, club memberships,
supplemental medical and life insurance coverages and similar benefit plans
which Company provides for executive personnel having duties and
responsibilities similar to those of Executive.

               
3.03     Reimbursement of Expenses. Company shall provide Executive
with an automobile or an allowance for automobile use and shall pay or reimburse
Executive for all reasonable traveling or other expenses incurred or paid by
Executive in connection with the performance of his services under this
Agreement upon presentation of expense statements or vouchers, and such other
supporting information as it may from time to time request.

-8-

ARTICLE IV - NON
COMPETITION, CONFIDENTIAL DATA

               
4.01     Non-Competition. During the term of this Agreement, and in
the event of Involuntary Termination upon a Change in Control until the last
payment of any benefits to Executive under this Agreement, Executive will not
directly or indirectly engage in or compete with the business of the Company,
either as owner, partner or employee. In the event that Executive shall compete
with the business of the Company, payment of benefits under this Agreement will
be suspended so long as Executive engages in activity deemed to be in
competition with the business of the Company.

               
4.02     Confidential Information. Executive agrees, during the
term of this Agreement and thereafter, not to use or make use of nor to divulge
to anyone other than authorized personnel or representatives of Company, any
information or knowledge relating to the business, business methods or
techniques of Company including, without being limited to, information about
accounting procedures, training methods or techniques, data, processes, research
manufacturing formulae, costing, sales prospects, customers' or suppliers'
lists, bidding formulae, sales, profits or costs, except to the extent that
Executive can establish the same to be generally known to the public or
recognized as standard practice in the business in which Company is engaged or
to the extent Executive is required to divulge such information or knowledge in
connection with any legal proceeding.

               
4.03     Patents and Inventions. Executive agrees that any patents,
inventions, improvements, discoveries, formulae or processes which he may
obtain, make or conceive during the period of employment hereunder, shall be the
sole and exclusive property of Company, and that he will sign and execute any
and all applications, assignments or other instruments necessary or appropriate
to assign, convey or otherwise make available exclusively to Company all such
patents, inventions, improvements, discoveries, formulae or processes.

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4.04     Enforcement. Executive agrees that in the event of a
breach or threatened breach by Executive of any provision of this Article,
Company may institute legal proceedings to compel Employee compliance hereunder,
including injunctive relief and any other remedy provided in law or equity. If
the scope of any restriction contained in this Agreement is too broad to permit
enforcement of such restriction to its full extent, then such restriction shall
be enforced to the maximum extent permitted by law, and Executive hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.

                In the event of such judicial modification, Company may, if it determines in
its sole judgment that such action is contrary to the best interests of Company,
within ten days after notification of such modification, terminate all
obligations of Company under this Agreement by giving Executive not less than
15 days notice of such termination.

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ARTICLE V -
TERMINATION

               
5.01     Termination of Employment. Executive's employment by
Company shall terminate on the earliest to occur of (a) Executive's death,
Disability or Retirement, (b) Voluntary Termination of Employment by Executive,
or (c) Termination for Cause of Executive's employment. In any such event this
Agreement shall also terminate other than for the provisions of Articles IV, VI
and VII, which shall survive such Termination.

                The existence of Disability, as defined herein, shall be determined in the
sole judgment of the Compensation Committee, and effective upon delivery to
Executive of written notice that such determination has been made, Executive's
employment shall be terminated and Executive shall be removed from all
positions, as an officer, director, or otherwise, with Company.

                5.02     Effect of Involuntary Termination. This Agreement shall survive
an Involuntary Termination of Employment.

                5.03     Executive Obligations Upon Termination. Executive agrees that
upon termination of services under this Agreement, for any cause whatsoever, he
will deliver to Company all documents, drawings, papers, computer tapes or
discs, notes, memoranda, handbooks, manuals, and all other tangible material on
which information is stored or recorded, and all copies thereof which Executive
has in his control or possession in any way related to the business of Company,
its customers, suppliers or affiliates.

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ARTICLE VI - BENEFITS
UPON TERMINATION

               
6.01     Death, Disability, Retirement. In the event of termination
upon death, or by virtue of Retirement or Disability, Executive's surviving
spouse or estate shall be entitled to the benefits provided generally by the
Company to its executives. 

               
6.02     Termination For Cause. Upon termination of Executive's
employment for Cause, Executive shall be entitled to his base salary up to the
date of such termination, as well as any vested benefits under any Company
retirement plan or supplemental retirement plan in which Executive may
participate. Under such termination, Executive shall not be entitled to
participate in any profit share award or incentive compensation payable after
the date of termination, but will be eligible to receive a payment in cash for
any unutilized vacation benefits accrued for Executive. Unless otherwise
provided by law, Executive shall not have the right or privilege of exercising
any stock options held by Executive and issued under any stock option plan or
stock purchase plan of the Company.

               
6.03     Voluntary Termination of Employment. In the event of
Executive's Voluntary Termination of Employment with Company, Executive shall be
entitled to his employment benefits up to the date of termination, including any
vested benefits under any Company profit sharing, retirement plan or
supplemental retirement plan, in which Executive may participate, but unless any
profit share award or incentive compensation is payable prior to such
termination, Executive shall not receive any such payment. Executive shall
receive a payment in cash for any unutilized vacation benefits accrued for
Executive. Executive shall have the right to exercise any stock options
previously granted to Executive to the extent permitted by the terms of the
applicable stock option plan or the grant thereunder.

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6.04     Involuntary Termination of Employment. In the event of the
Involuntary Termination of Employment in the circumstance of a Change in
Control, Executive shall be entitled to receive his base salary then in effect
or his Average Annual Compensation, whichever is greater, for a period of one
(1) year; any vested benefits under any Company retirement plan, profit sharing
or supplemental retirement plan in which he may participate; the continuation at
Company's expense for one (1) year of any club memberships held by Executive for
which reimbursement was provided by Company; and, for a period of one (1) year,
continue to be provided with an automobile, or reimbursement of automobile
expense. In lieu of the continuation of the foregoing pay and benefits provided
for in the foregoing sentence, Executive may elect to receive some or all of
such pay and benefits in a lump sum, the same to be paid within sixty (60) days
of Executive's written election, which election must be made within sixty (60)
days of the Involuntary Termination of Employment. Executive shall have the
right to exercise any vested or unvested stock options held by Executive at the
date of termination within the one year period after the date of such
Involuntary Termination of Employment but not later than the expiration date(s)
of such stock options, or if such exercise is not permitted or, in
any event, if Executive so elects, an amount equal to the bargain element of
such options, vested or unvested, shall be paid. Executive shall also receive
for one (1) year after Termination the same health, life and disability
insurance coverages for which he was eligible during employment. Executive shall
also receive a payment in cash for any unutilized vacation benefits accrued for
Executive. Notwithstanding the foregoing, if the Executive dies within three
months from the  

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date of the Involuntary Termination of Employment, his vested
and unvested stock options may be exercised within the one year period after the
date of such Involuntary Termination of Employment but not later than the
expiration date(s) of such stock options, or if such exercise is not permitted
or, in any event, if Executive so elects, an amount equal to the bargain element
of such options, vested or unvested, shall be paid. For purposes of this Section
6.04, the bargain element of options shall be determined as of the date a Change
of Control occurs.

ARTICLE VII -
MISCELLANEOUS

               
7.01     Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when received, if personally delivered,
electronically transmitted, or mailed, first class postage prepaid, addressed to
Company at 130 Commerce Way, East Aurora, New York 14052 (with a copy to Hodgson
Russ LLP, attention John B. Drenning, Esq., One M & T Plaza, Suite 2000 Buffalo,
New York 14203), or to Executive at the address on the first page, or such other
address as may be designated by notice in accordance with the provisions of this
Section.

               
7.02     Arbitration. All disputes, differences and controversies
arising under or in connection with this Agreement, including but not limited to
its interpretation, construction, performance or application, shall be settled
and finally determined by arbitration in the City of Buffalo, New York, under
the then existing rules of the American Arbitration Association.

               
7.03     Entire Agreement. This instrument contains the entire
agreement of the parties with respect to its subject matter, and supersedes and
replaces any prior agreement or understanding, and no amendment, modification or
waiver of any provision hereof shall be valid unless it be in writing and signed
by Company and Executive.

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7.04     Non-Waiver. The waiver of, or failure to take action with
regard to, any breach of any term or condition of this Agreement shall not be
deemed to constitute a continuing waiver or a waiver of any other breach of the
same or any other term or condition.

               
7.05     Paragraph and Other Headings. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way, the meaning or interpretation of this Agreement.

               
7.06     Gender and Number. The masculine gender used herein shall
be deemed to include the feminine and neuter genders, and vice versa, and the
singular or plural, shall be deemed to include the plural or singular, as the
case may be, when required by the context, and the word "person" shall include
corporation, firm, partnership or other form of association.

               
7.07     Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.

               
7.08     Persons Bound - Non-Assignment. This Agreement and all of
the provisions hereof shall be binding upon the parties hereto, their legal
representatives, heirs, distributees, successors and assigns. Except as
expressly stated herein, nothing in this Agreement is intended to confer upon
any other person any rights or remedies under or by reason of this Agreement.
Neither this Agreement nor any rights hereunder shall be assignable by
Executive.

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7.09     Guarantee of Company. If Executive's services are assigned
to any parent, subsidiary or affiliate of Company, Company shall remain liable
as a guarantor of the obligations hereunder.

               
7.10     Inconsistent Provisions. If any provision of this
Agreement is inconsistent with any provision or any plan or resolution
(including a severance pay resolution) providing benefits substantially similar
to those provided by this Agreement or any other document required or executed
pursuant to this Agreement, the provisions of this Agreement shall be
controlling.

               
7.11     Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid, the
remainder of this Agreement and the application of such provision to the other
person and circumstances shall not be affected thereby and each term and
condition of the Agreement shall be valid and enforced to the fullest extent
permitted by law.

               
7.12     Choice of Law. This Agreement shall be construed as to
both validity and performance and enforced in accordance with and governed by
the laws of the State of New York, without giving effect to the choice of law
principles of those laws.

               
7.13     No Conflicting Agreement. Executive represents and
warrants to Company that he is not a party to, or bound by, any agreement,
understanding or plan which would interfere with or prevent performance under
this Agreement. Company similarly represents and warrants to Executive.

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7.14     Attorney's Fees. In the event that any dispute or
difference arising under or in connection with this Agreement results in
arbitration or litigation, Company shall reimburse Executive for all reasonable
Attorney's fees and expenses if Executive prevails in such proceeding.

               
7.15     Authorization. Company represents to Executive that this
Agreement has been duly approved by its Board of Directors and execution by an
appropriate officer duly authorized.

                IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this
Agreement as of the day and year first above written.

	WITNESS:	 	ASTRONICS CORPORATION
	 	 	 
	 	 	By	 
	 	 	 
	 	 	 
	WITNESS:	 	 
	 	 	 
	 	 	 
	 	 	DAVID C. BURNEYQuickLinks
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Exhibit 10.7    
    

 
 

AMENDMENT NO. 5 TO
  LOAN AGREEMENT    
    

        This AMENDMENT NO. 5 TO LOAN AGREEMENT (this "Amendment"), effective as of March 26, 2004 upon the
satisfaction of the conditions set forth herein, is hereby entered into among WELLS FARGO FOOTHILL, INC., a California corporation formerly known as FOOTHILL CAPITAL CORPORATION, a California
corporation ("Lender"), and American Restaurant Group, Inc., a Delaware corporation ("ARG"), ARG
Enterprises, Inc., a California corporation ("Enterprises"), ARG Property Management Corporation, a California corporation
("Property Management"), and ARG Terra, Inc., a Delaware corporation ("Terra"). ARG, Enterprises,
Property Management, and Terra are collectively referred to herein as "Borrowers" and individually as a
"Borrower". 

 
  RECITALS    
    

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

        WHEREAS, Borrowers have requested Lender to (1) amend the calculation of Advance availability for a limited period of time,
(2) amend the definition of EBITDA, and (3) waive Borrowers' noncompliance with the covenants under Section 7.20 of the Loan Agreement as of December 31, 2003 (the
"Existing Default"). Lender has agreed to such amendments and waiver, subject to the terms and conditions of this Amendment. 

        NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrowers and Lender do
hereby agree as follows: 

 SECTION 1. RELATION TO THE LOAN AGREEMENT; DEFINITIONS.  

        1.1    Relation to Loan Agreement.    This Amendment constitutes an
integral part of the Loan Agreement and shall be deemed to be a Loan Document for all purposes. Upon the effectiveness of this Amendment, on and after the date hereof each reference in the Loan
Agreement to "this Agreement," "hereunder," "hereof," or words of like import referring to the Loan Agreement, and each reference in the other Loan Documents to "the Loan Agreement," "thereunder,"
"thereof" or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby. 

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

 SECTION 2. AMENDMENT TO LOAN AGREEMENT.  

        2.1    Amendment to Definition of "EBITDA".

        The
definition of "EBITDA" contained in Section 1.1 of the Loan Agreement is hereby amended from and after the date hereof by deleting such definition in its entirety and
replacing it with the following: 

        "EBITDA"
means, with respect to any fiscal period being measured, Borrowers' and Subsidiary Guarantors' consolidated net earnings (or loss) from operations, minus (a) to the
extent included in computing net earnings (loss) from operations, extraordinary gains; plus (b) without duplication, to the extent deducted in computing net earnings (loss) from operations,
interest expense (net of interest income), income taxes, extraordinary losses, depreciation, amortization and non-cash charges for the following items incurred by Borrowers or Subsidiary
Guarantors in connection with changes to Borrowers' and Subsidiary Guarantors' financial statements because of GAAP requirements: vacation 

 

accrual,
asset impairment, store-closing reserves, gift-certificate accrual, and litigation accrual; provided, however, that such non-cash charges shall not exceed
(w) $62,500 for the first fiscal quarter of any fiscal year, (x) $62,500 for the second fiscal quarter of any fiscal year, (y) $187,500 for the third fiscal quarter of any fiscal
year, and (z) $187,500 for the fourth fiscal quarter of any fiscal year; plus (c) the loss on impairment and store closures not to exceed $3,889,000 for the fiscal quarter ending
September 29, 2003 and not to exceed $5,478,000 for the fiscal quarter ending December 29, 2003; plus (d) a reserve for the SRG bankruptcy not to exceed $10,010,000 for the fiscal
quarter ending September 29, 2003 and a credit to the SRG bankruptcy reserve not to exceed $1,596,000 for the fiscal quarter ending December 29, 2003; plus (e) a reserve for the
discontinued gift-certificate program not to exceed $400,000 for the fiscal quarter ending September 29, 2003 and a reserve for the discontinued gift-certificate program
not to exceed $2,400,000 for the fiscal quarter ending December 29, 2003. All of the foregoing shall, in each case and for each aspect of this calculation, be determined in accordance with GAAP
with respect only to the applicable fiscal period. 

        2.2    Section 2.1(a).

        Section 2.1(a)
of the Loan Agreement is hereby amended by deleting clause (ii) thereof and inserting the following in lieu thereof: 

        (ii)
with respect to the period from January 1, 2004 to and including March 31, 2004, ninety percent (90%) of the trailing twelve-month EBITDA, and at all other times
seventy-five percent (75%) of the trailing twelve-month EBITDA, in each case as calculated monthly in accordance with 6.3(a)(ii)(A), less the Letter of Credit Usage. 

 SECTION 3. WAIVER OF EXISTING DEFAULT; RESERVATION OF OTHER RIGHTS.  

        3.1    Acknowledgment of Existing Default; No Additional Defaults or Events of
Default.    Borrowers acknowledge that the Existing Default exists and the occurrence of the Existing Default entitles Lender to exercise its
rights and remedies under the Loan Documents. Except for the Existing Default, Borrowers represent and warrant that as of the date hereof no event has occurred and no condition exists that
constitutes a Default or an Event of Default under the Loan Agreement or the other Loan Documents. Borrowers represent and warrant that upon the consummation of the transactions contemplated by this
Amendment, no Default or Event of Default will then exist or be created under the Loan Agreement or any other Loan Document. 

        3.2    Waiver of Existing Default; Reservation of Other
Rights.    Based on the foregoing, and in reliance thereon, Lender hereby waives the Existing Default. Except as expressly provided herein,
Lender reserves all of its rights and remedies under the Loan Documents. 

 SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWERS.  

        4.1    Corporate Organization and Authority.

        (a)   Each
Borrower is a corporation duly organized and existing and in good standing under the laws of its jurisdiction of formation and is duly qualified to do business and
in good standing in every jurisdiction in which the nature of the business done or the property owned by it would make such qualification necessary. 

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

2

 

        4.2    Corporate Proceedings; Validity of Amendment.    Each Borrower
has taken all corporate action necessary to be taken by it to authorize the execution and delivery of this Amendment. This Amendment has been duly executed and delivered by each Borrower and
constitutes the legal, valid, and binding obligation of each Borrower, enforceable against each Borrower in accordance with its terms. 

        4.3    No Violations, Consents, or Approvals.    The execution, delivery, and performance by
each Borrower of this Amendment, and the consummation of the transactions contemplated hereby, do not and will not (i) violate any provision of federal, state, or local law or regulation
applicable to such Borrower, the Governing Documents of such Borrower, or any order, judgment, or decree of any court or other Governmental Authority binding on such Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of such Borrower, including, without limitation, the Indenture
and Eligible Credit Facility, or (iii) require any approval of such Borrower's stockholders or any approval or consent of any Person under any material contractual obligation of such Borrower. 

        4.4    Ratification and Confirmation of Loan Documents.    The Loan
Agreement and all other Loan Documents and all representations, warranties, terms, and conditions therein remain in full force and effect, and each Borrower hereby confirms and ratifies each of the
provisions of the Loan Agreement and the other Loan Documents. 

 SECTION 5. MISCELLANY.  

        5.1    Conditions to Effectiveness.    This Amendment shall not become effective until Lender
has received each of the following: 

        (a)   duly
executed and delivered counterparts of this Amendment by Lender and Borrowers; 

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

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

        (d)   Borrowers
shall have paid Lender a waiver and amendment fee in the aggregate amount of $75,000, which fee shall be nonrefundable and shall be deemed fully earned on the
date paid. 

        5.2    Successors and Assigns.    This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors and assigns. 

        5.3    Counterparts.    This Amendment may be executed simultaneously
in two or more counterparts, each of which shall be deemed to be an original but all of which shall constitute together but one and the same instrument. Delivery of an executed counterpart hereof by
facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart of this Amendment. 

        5.4    GOVERNING LAW.    THE VALIDITY OF THIS AMENDMENT, THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA.  

        5.5    Expenses.    Borrowers agree to
pay the
expenses of Lender in connection with the transactions contemplated by this Amendment (including, without limitation, the fees and expenses of counsel for the Lender). 

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        5.6    Release.

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

        (b)   As
to each and every claim released hereunder, Borrowers represent that they have received the advice of legal counsel with regard to the releases contained herein, and
having been so advised, each of them specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California: 

A
GENERAL RELEASE DOES NOT EXTEND TO

CLAIMS WHICH THE CREDITOR DOES NOT KNOW

OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME

OF EXECUTING THE RELEASE, WHICH IF KNOWN

BY HIM MUST HAVE MATERIALLY AFFECTED HIS

SETTLEMENT WITH THE DEBTOR. 

        5.7    Ratification.    Except as expressly amended hereby, any
conditions of the Loan Documents shall remain unamended and unwaived. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and
shall not (i) be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of any other document or of any transaction or further action on the part of
the Borrowers that would require the consent of Lender under the Loan Agreement or (ii) create a course of conduct or dealing among the parties hereto. 

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        IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed and delivered by a duly authorized representative. 

	 	 	AMERICAN RESTAURANT GROUP, INC.,

a Delaware corporation
	

 	
 	

By:	
 	

/s/  PATRICK J. KELVIE      
 Patrick J. Kelvie
	 	 	Title:	 	Vice President
	

 	
 	
ARG ENTERPRISES, INC.,

a California corporation
	

 	
 	

By:	
 	

/s/  PATRICK J. KELVIE      
 Patrick J. Kelvie
	 	 	Title:	 	Vice President
	

 	
 	
ARG PROPERTY MANAGEMENT CORPORATION,

a California corporation
	

 	
 	

By:	
 	

/s/  PATRICK J. KELVIE      
 Patrick J. Kelvie
	 	 	Title:	 	Vice President
	

 	
 	
ARG TERRA, INC.,

a Delaware corporation
	

 	
 	

By:	
 	

/s/  PATRICK J. KELVIE      
 Patrick J. Kelvie
	 	 	Title:	 	Vice President
	

 	
 	
WELLS FARGO FOOTHILL, INC.,

a California corporation
	

 	
 	

By:	
 	

/s/  DANIEL MORIHIRO      
 Daniel Morihiro
	 	 	Title:	 	Vice President

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QuickLinks

Exhibit 10.7

AMENDMENT NO. 5 TO LOAN AGREEMENT

RECITALS

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