J. ALEXANDERS CORPORATION

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended March 30, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from_______________ to________________

Commission file number 1-8766

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

J. Alexander’s Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands, except per share amount)


			March 30		December 29
			2003		2002

			(Unaudited)
		ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	3,283	$	10,525
	Accounts and notes receivable, including current portion of direct financing leases			74		97
	Inventories			776		790
	Deferred income taxes			488		488
	Prepaid expenses and other current assets			1,110		1,000

	TOTAL CURRENT ASSETS			5,731		12,900
OTHER ASSETS				1,023		951
PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation and amortization of $27,065 and $26,247 at March 30, 2003, and December 29, 2002, respectively				70,621		69,521
DEFERRED INCOME TAXES				712		712
DEFERRED CHARGES, less amortization				930		949

			$	79,017	$	85,033


					March 30			December 29
					2003			2002

					(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts payable				$	1,889		$	3,035
	Accrued expenses and other current liabilities					4,164			4,982
	Unearned revenue					2,088			2,692
	Current portion of long-term debt and obligations under capital leases					2,791			6,786

			TOTAL CURRENT LIABILITIES			10,932			17,495
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, net of portion classified as current						24,308			24,451
OTHER LONG-TERM LIABILITIES						2,516			2,288
STOCKHOLDERS’ EQUITY
		Common Stock, par value $.05 per share: Authorized 10,000,000 shares; issued and outstanding 6,533,935 and 6,660,535 shares at March 30, 2003, and December 29, 2002, respectively				327			333
		Preferred Stock, no par value: Authorized 1,000,000 shares; none issued				—			—
		Additional paid-in capital				33,947			34,357
		Retained earnings				8,158			7,527

						42,432			42,217
		Note receivable — Employee Stock Ownership Plan				(536	)		(688	)
		Employee notes receivable – 1999 Loan Program				(635	)		(730	)

				TOTAL STOCKHOLDERS’ EQUITY		41,261			40,799

					$	79,017		$	85,033

J. Alexander’s Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited in thousands, except per share amounts)


			Quarter Ended

			March 30			March 31
			2003			2002

Net sales			$	26,450		$	25,632
Costs and expenses:
	Cost of sales			8,415			8,202
	Restaurant labor and related costs			8,571			8,395
	Depreciation and amortization of restaurant property and equipment			1,059			1,094
	Other operating expenses			4,751			4,513

		Total restaurant operating expenses		22,796			22,204
General and administrative expenses				1,886			2,082
Pre-opening expense				271			—

Operating income				1,497			1,346
Other income (expense):
	Interest expense, net			(536	)		(297	)
	Other, net			(19	)		(19	)

		Total other expense		(555	)		(316	)

Income before income taxes and cumulative effect of change in accounting principle				942			1,030
Income tax provision				(311	)		(453	)

Income before cumulative effect of change in accounting principle				631			577
Cumulative effect of change in accounting principle				—			(171	)

Net income			$	631		$	406

Basic earnings per share:
	Income before cumulative effect of change in accounting principle		$	.10		$	.09
	Cumulative effect of change in accounting principle			—			(.03	)

	Basic earnings per share		$	.10		$	.06

Diluted earnings per share:
	Income before cumulative effect of change in accounting principle		$	.09		$	.08
	Cumulative effect of change in accounting principle			—			(.02	)

	Diluted earnings per share		$	.09		$	.06

J. Alexander’s Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited in thousands)


		Three Months Ended

		March 30			March 31
		2003			2002

Net cash provided by operating activities		$	243		$	2,167
Net cash used by investing activities:
	Purchase of property and equipment		(2,953	)		(1,355	)
	Other investing activities		(72	)		(69	)

			(3,025	)		(1,424	)
Net cash (used) provided by financing activities:
	Payments on debt and obligations under capital leases		(4,138	)		(4	)
	Proceeds under bank line of credit agreement		—			9,363
	Payments under bank line of credit agreement		—			(9,864	)
	Common stock repurchased		(417	)		(42	)
	Reduction of employee notes receivable – 1999 Loan Program		95			30

			(4,460	)		(517	)
(Decrease) increase in cash and cash equivalents			(7,242	)		226
Cash and cash equivalents at beginning of period			10,525			1,035

Cash and cash equivalents at end of period		$	3,283		$	1,261

J. Alexander’s Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements (Unaudited)

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain reclassifications have been made in the prior year’s consolidated condensed financial statements to conform to the 2003 presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 30, 2003, are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2003. For further information, refer to the consolidated financial statements and footnotes thereto included in the J. Alexander’s Corporation’s (the “Company’s”) annual report on Form 10-K for the fiscal year ended December 29, 2002.

The following table sets forth the computation of basic and diluted earnings per share:


(In thousands, except per share amounts)		Quarter Ended

		March 30		March 31
		2003		2002

Numerator:
Net income (numerator for basic earnings per share)		$	631	$	406
Effect of dilutive securities			—		—

Net income after assumed conversions (numerator for diluted earnings per share)		$	631	$	406

Denominator:
Weighted average shares (denominator for basic earnings per share)			6,616		6,787
Effect of dilutive securities:
	Employee stock options		86		30

Adjusted weighted average shares and assumed conversions (denominator for diluted earnings per share)			6,702		6,817

Basic earnings per share		$	.10	$	.06

Diluted earnings per share		$	.09	$	.06

In situations where the exercise price of outstanding employee stock options is greater than the average market price of common shares, such options are excluded from the computation of diluted earnings per share because of their antidilutive impact. For the quarter ended March 30, 2003, options to purchase 423,000 shares of common stock, at prices ranging from $3.42 to $11.69, were excluded from the computation of diluted earnings per share due to their antidilutive effect. During the corresponding period of 2002, options to purchase 736,000 shares of common stock, at prices ranging from $2.75 to $11.69, were similarly excluded from the computation of diluted earnings per share.

The Company’s provisions for income taxes for the first quarters of both 2003 and 2002 result from estimated federal alternative minimum tax (AMT) and state income taxes payable.

The effective tax rates result from the AMT rate being applied to the Company’s pre-tax accounting income after adding back certain tax preference items as well as permanent differences and timing differences in book and tax income. The Company maintains a significant valuation allowance on its deferred tax assets, and no benefit is recognized in the current year’s income tax provision with respect to the AMT credit carryforward or other tax assets generated for the year. Further, because of the application of AMT, the Company at its current taxable income level is unable to take advantage of selected tax carryforwards that it has accumulated.

In October 2002, the Company obtained $25,000,000 of long-term financing through completion of a mortgage loan transaction. The mortgage loan has an effective annual interest rate of 8.2% and is payable in equal monthly installments of principal and interest of approximately $212,000 through November 2022. At March 30, 2003, the mortgage loan had an outstanding balance of $24,823,000. A portion of these funds was used to pay off the outstanding balance of $15,470,000 on the Company’s bank line of credit, terminating that facility. Remaining funds were invested in short-term money market funds and will be used primarily for retiring the Company’s Convertible Subordinated Debentures. During the quarter ended March 30, 2003, the Company redeemed $4,000,000 of the Convertible Subordinated Debentures and the remaining $2,250,000 of obligations mature on June 1, 2003.

The Company accounts for its stock compensation arrangements using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25 “Accounting for Stock Issued to Employees” and, accordingly, typically recognizes no compensation expense for such arrangements.

The following table represents the effect on net income and earnings per share if the Company had applied the fair value based Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation:


		Quarter Ended

		March 30, 2003			March 31, 2002

Net income, as reported		$	631,000		$	406,000
	Deduct: Total stock-based employee compensation expense determined under fair value methods for all awards, net of related tax effects		(32,000	)		(36,000	)

Pro forma net income		$	599,000		$	370,000

Net income per share:
	Basic, as reported	$	.10		$	.06
	Basic, pro forma	$	.09		$	.05
	Diluted, as reported	$	.09		$	.06
	Diluted, pro forma	$	.09		$	.05
Weighted average shares used in computation:
	Basic		6,616,000			6,787,000
	Diluted		6,702,000			6,817,000

As required, the pro forma disclosures above include options granted since January 1, 1995. Consequently, the effects of applying SFAS No. 123 for providing pro forma disclosures may not be representative of the effects on reported net income for future years until all options outstanding are included in the pro forma disclosures. For purposes of pro forma disclosures, the estimated fair value of stock-based compensation plans and other options is amortized to expense primarily over the vesting period.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, “Goodwill and Other Intangible Assets,” which eliminated the systematic amortization of goodwill. The Company adopted SFAS No. 142, effective December 31, 2001, and ceased amortization of its goodwill balance. However, intangible assets with finite lives continue to be amortized over their estimated useful lives.

SFAS No. 142 also required the Company to complete an impairment review of its goodwill. During the fourth quarter of 2002, the Company completed its transitional impairment test and determined that the goodwill associated with the acquisition of its original restaurant was impaired. Accordingly, effective as of the first quarter of fiscal 2002, the Company recorded as a cumulative effect of change in accounting principle a write-off of its goodwill balance in the amount of $171,000 on which the Company recognized no tax benefit.

As a result of the disposition of its Wendy’s operations in 1996, the Company remains secondarily liable for certain real property leases with remaining terms of one to thirteen years. The total estimated amount of lease payments remaining on these 27 individual leases at March 30, 2003 was approximately $5.5 million. In connection with the sale of its Mrs. Winner’s Chicken & Biscuit restaurant operations in 1989 and certain previous dispositions, the Company also remains secondarily liable for certain real and personal property leases with remaining terms of one to five years. The total estimated amount of lease payments remaining on these 33 individual leases at March 30, 2003, was approximately $2.1 million. Additionally, in connection with the previous disposition of certain other Wendy’s restaurant operations, primarily the southern California Wendy’s restaurants in 1982, the Company remains secondarily liable for certain real property leases with remaining terms of one to five years. The total estimated amount of lease payments remaining on these 11 individual leases as of March 30, 2003, was approximately $1.3 million.

The Company is from time to time subject to routine litigation incidental to its business. The Company believes that the results of such legal proceedings will not have a materially adverse effect on the Company’s financial condition.

On May 12, 2003, the Company entered into a $5 million secured bank line of credit agreement which is available for financing capital expenditures related to the development of new restaurants and for general operating purposes. Provisions of the line of credit agreement require that a minimum fixed charge coverage ratio be maintained and that the Company’s leverage ratio not exceed a specified level. The Company’s ability to incur additional debt outside of the line of credit is also restricted. The line of credit is secured by the real estate of two of the Company’s restaurant locations with an aggregate book value of $7,701,000 at March 30, 2003 and bears interest at the rate of LIBOR plus a spread of two to four percent, depending on the leverage ratio. The credit line expires on April 30, 2006, unless converted to a term loan under the provisions of the agreement prior to March 30, 2006.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table sets forth, for the periods indicated, (i) the percentages which the items in the Company’s Consolidated Statements of Income bear to total net sales, and (ii) other selected operating data:


			Quarter Ended

			March 30			March 31
			2003			2002

Net sales				100.0	%		100.0	%
Costs and expenses:
	Cost of sales			31.8			32.0
	Restaurant labor and related costs			32.4			32.8
	Depreciation and amortization of restaurant property and equipment			4.0			4.3
	Other operating expenses			18.0			17.6

		Total restaurant operating expenses		86.2			86.6
General and administrative expenses				7.1			8.1
Pre-opening expense				1.0			—

Operating income				5.7			5.3
Other income (expense):
	Interest expense, net			(2.0	)		(1.2	)
	Other, net			(0.1	)		(0.1	)

		Total other income (expense)		(2.1	)		(1.2	)

Income before income taxes and cumulative effect of change in accounting principle				3.6			4.0
Income tax provision				(1.2	)		(1.8	)

Income before cumulative effect of change in accounting principle				2.4			2.3
Cumulative effect of change in accounting principle				—			(0.7	)

Net income				2.4	%		1.6	%

Note: Certain percentage totals do not sum due to rounding.
Restaurants open at end of period				25			24
Weighted average weekly sales per restaurant:
	All restaurants		$	83,500		$	82,200
	Same store restaurants		$	83,600		$	81,900

Net sales increased by $818,000, or 3.2%, to $26,450,000 during the first quarter of 2003 from $25,632,000 during the same period of 2002. This increase was attributable to sales increases within the Company’s same store restaurant base and a new restaurant which opened in March, 2003.

Same store sales, which include comparable results for all restaurants open for more than 18 months, totaled $83,600 per week on a base of 22 restaurants during the quarter ended March 30, 2003, an increase of 2.1% compared to $81,900 per week during the same period of 2002. Management estimates the average check per guest, excluding alcoholic beverage sales, was $15.81 for the first quarter of 2003 representing a decrease of 0.8% compared to $15.93 for the first quarter of 2002. Menu prices for the first quarter of 2003 decreased by an estimated 0.4% compared to the same period in 2002. The Company estimates that customer traffic (guest counts) on a same store basis increased by 2.2% in the first quarter of 2003 compared to the corresponding period of 2002.

Management believes that continued emphasis on providing professional service combined with effective menu management will continue to build sales and increase customer traffic over time. However, the results of these efforts may be dependent on improvement in the nation’s economy and consumer confidence levels.

Total restaurant operating expenses decreased to 86.2% of sales in the first quarter of 2003 from 86.6% in the corresponding period of 2002, with restaurant operating margins increasing to 13.8% from 13.4% for the respective periods. Cost of sales decreased to 31.8% in the first quarter of 2003 compared to 32.0% in the corresponding period of 2002, as favorable costs associated with pork and produce more than offset increased costs associated with seafood and poultry products.

Restaurant labor and related costs decreased from 32.8% of sales during the first quarter of 2002 to 32.4% of sales during the first quarter of 2003. This decrease is due largely to the effect of higher tip share contributions by restaurant servers to each restaurant’s tip pool, which resulted in reductions in the hourly wage rates paid by the Company to the employees receiving distributions under the tip pool program. The favorable effects of the higher tip share contributions more than offset the impact of increased wages associated with kitchen staff and increases in workers’ compensation insurance premiums and other benefit related items.

Depreciation and amortization of restaurant property and equipment decreased to 4.0% of sales during the first quarter of 2003, compared to 4.3% of sales during the corresponding period of the prior year, primarily due to assets which became fully depreciated subsequent to March 31, 2002.

Other operating expenses increased to 18.0% of sales during the first quarter of 2003 compared to 17.6% of sales during the same period of 2002. This increase is primarily related to higher repair and maintenance expenditures and increased utilities expense, primarily related to natural gas, during the first quarter of 2003.

While management expects the Company to continue to make progress in the performance of its restaurants during the remainder of 2003, much of the financial improvement achieved in this area will likely be offset by large increases expected in pre-opening expense and interest expense as discussed below.

Management believes that continuing to increase sales volumes in the Company’s restaurants is a significant factor in improving the Company’s profitability and it intends to maintain a low new restaurant development rate of one to two new restaurants per year to allow management to focus intently on improving sales and profits in its existing restaurants while maintaining its pursuit of operational excellence. Further, the Company’s criteria for new restaurant development target locations with high population densities and high household incomes which management believes provide the best prospects for achieving outstanding financial returns on the Company’s investments in new restaurants.

General and administrative expenses, which include supervisory costs as well as management training costs and all other costs above the restaurant level, decreased from $2,082,000 during the first quarter of 2002 to $1,886,000 during the corresponding period of 2003. Reduced management training and relocation costs, which typically comprise 15-20% of the Company’s total general and administrative expenses, were primarily responsible for the decrease noted above. As a percentage of sales, general and administrative expenses decreased from 8.1% during the first quarter of 2002 to 7.1% during the comparable period in 2003.

Pre-opening costs, which are expensed as incurred, totaled $271,000 during the first quarter of 2003 and were incurred in connection with the Northbrook, Illinois restaurant opened in March of 2003. There were no new restaurants opened during 2002. In addition to the Northbrook restaurant, the Company plans to open one additional new restaurant in 2003 and, as a result, expects pre-opening expenses to increase by approximately $600,000 in 2003 compared to 2002.

Net interest expense increased from $297,000 during the first quarter of 2002 to $536,000 during the corresponding quarter of 2003. This increase is due to increased borrowings and to higher interest rates associated with $25,000,000 of mortgage financing the Company completed during the fourth quarter of 2002. Primarily as a result of higher interest rates associated with the mortgage financing, net interest expense is expected to increase by $700,000 to $800,000 in 2003 compared to 2002.

The Company’s provisions for income taxes for the first quarters of both 2003 and 2002 result from estimated federal alternative minimum tax (AMT) and state income taxes payable.

The Company had cash flow from operations totaling $243,000 and $2,167,000 during the first quarters of 2003 and 2002, respectively. Cash and cash equivalents decreased from $10,525,000 at year end 2002 to $3,283,000 at March 30, 2003, primarily due to the Company’s redemption of $4,000,000 in Convertible Subordinated Debentures and the funding of costs associated with the construction of a new restaurant which opened in March 2003.

The Company requires capital primarily for the development and construction of new J. Alexander’s restaurants, for maintenance of its existing restaurants, and for meeting required debt service obligations. The Company has met these needs and maintained liquidity in recent years primarily by use of cash flow from operations, use of a bank line of credit and, beginning in October 2002, through borrowings under a mortgage loan.

On October 29, 2002, the Company obtained $25,000,000 of long-term financing through completion of a mortgage loan transaction. The mortgage loan has an effective annual interest rate of 8.2% and is payable in equal monthly installments of principal and interest of approximately $212,000 over a period of 20 years through November 2022. Net proceeds from the mortgage loan, after deducting fees and expenses associated with the transaction, were approximately $24,275,000. A portion of these funds were used to pay off the outstanding balance of $15,470,000 on the Company’s bank line of credit as of October 29, 2002, terminating that facility. A portion of the remaining funds were used for retiring debentures and new restaurant development as noted above. The remaining $2,250,000 of Convertible Subordinated Debentures mature on June 1, 2003.

In addition to the Northbrook, Illinois restaurant opened in March 2003, the Company plans to open one additional restaurant in 2003, although its completion is subject to certain contingencies. Management estimates that the costs to complete these restaurants and for capital maintenance for existing restaurants will be approximately $6.0 million to $6.5 million for 2003. In addition, the Company could incur capital expenditures for the purchase of property and/or construction of restaurants for locations to be opened in 2004. Any such expenditures are dependent upon the timing and success of management’s efforts to locate acceptable sites and would be in addition to the amounts above.

The Company has periodically made, and expects to continue to make, purchases of its common stock under a repurchase program, under which the total authorized purchases were recently increased to $2,000,000. From June 2001 through May 9, 2003, the Company repurchased approximately 409,000 shares at a cost of approximately $1,184,000. The Company generally does not repurchase shares following the end of its fiscal quarter until after results for the quarter have been publicly announced.

While a working capital deficit of $5,201,000 was present as of March 30, 2003, the Company does not believe this deficit impairs the overall financial condition of the Company because certain of the Company’s expenses, particularly depreciation and amortization, do not require current outlays of cash. Also, requirements for funding accounts receivable and inventories are relatively insignificant, so that virtually all cash generated by operations is available to meet current obligations.

Management believes that funds on hand at March 30, 2003, combined with cash flow from operations and borrowings available under the $5 million line of credit, will be adequate to meet its financing needs through 2003.

As of May 13, 2003, the Company had no financing transactions, arrangements or other relationships with any unconsolidated affiliated entities or related parties. Additionally, the Company is not a party to any financing arrangements involving synthetic leases or trading activities involving commodity contracts.

The preparation of the Company’s consolidated condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, management evaluates its estimates and judgments, including those related to its accounting for income taxes, impairment of long-lived assets, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Management believes the following critical accounting policies are those which involve the more significant judgments and estimates used in the preparation of its consolidated financial statements.

Income Taxes: The Company had $6,142,000 of gross deferred tax assets at December 29, 2002, consisting principally of $4,457,000 of tax credit carryforwards. Generally accepted accounting principles require that the Company record a valuation allowance against its deferred tax assets unless it is “more likely than not” that such assets will ultimately be realized.

Due to losses incurred by the Company from 1997 through 1999 and because the Company operates with a high degree of financial and operating leverage, with a significant portion of its costs being fixed or semi-fixed in nature, management was unable to conclude from 1997 through 2001 that it was more likely than not that its existing deferred tax assets would be realized; therefore, the Company maintained a valuation allowance for 100% of its deferred tax assets, net of deferred tax liabilities, for those years.

In 2002, the Company completed its third consecutive profitable year, with pre-tax income increasing significantly over the previous year. In addition the Company recorded significant increases in operating income in four of the last five years and has reached a size and experience level which make it less likely that any unsuccessful new restaurant would have a significant effect on consolidated operating results. Because of these factors, management further assessed the likelihood of realization of its deferred tax assets, using as its principal basis its forecast of future taxable income adjusted by

		applying varying probability factors to the achievement of this forecast. As the result of this assessment, the beginning of the year valuation allowance was reduced by $1,200,000 in the fourth quarter of 2002, with a corresponding credit to deferred income tax expense.

		Failure to achieve forecasted taxable income could affect the ultimate realization of the net deferred tax assets. Because of the uncertainties discussed above, which are somewhat compounded by an uncertain geopolitical and economic environment, there can be no assurance that management’s forecast of taxable income will be achieved and that there could not be an increase in the valuation allowance in the future. It is also possible that the Company could generate profitability and taxable income levels in the future which would cause management to conclude that it is more likely than not that the Company will realize all, or an additional portion of, its net deferred tax assets.

The Company will continue to evaluate the likelihood of realization of its net deferred tax assets and upon reaching any different conclusion as to the appropriate carrying value of these assets, management would adjust them to their estimated net realizable value. Any such revisions to the estimated net realizable value of the net deferred tax assets could cause the Company’s provision for income taxes to vary significantly from period to period, although its cash tax payments would remain unaffected until the benefits of the various carryforwards were fully utilized.

In addition, certain other components of the Company’s provision for income taxes must be estimated. These items include, but are not limited to, effective state tax rates, allowable tax credits for items such as FICA taxes paid on reported tip income, and estimates related to depreciation expense allowable for tax purposes. These estimates are made based on the best available information at the time the tax provision is prepared. Income tax returns are generally not filed, however, until several months after year-end. All tax returns are subject to audit by federal and state governments, usually years after the returns are filed, and could be subject to differing interpretations of the tax laws.

Property and Equipment: Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the asset’s estimated useful life or the expected lease term, generally including renewal options. Improvements are capitalized while repairs and maintenance costs are expensed as incurred. Because significant judgments are required in estimating useful lives, which are not ultimately known until the passage of time and may be dependent on proper asset maintenance, and in the determination of what constitutes a capitalized cost versus a repair or maintenance expense, changes in circumstances or use of different assumptions could result in materially different results from those determined based on the Company’s estimates.

Impairment of Long-Lived Assets: When events and circumstances indicate that long-lived assets – most typically assets associated with a specific restaurant — might be impaired, management compares the carrying value of such assets to the undiscounted cash flows it expects that restaurant to generate over its remaining useful life. In calculating its estimate of such undiscounted cash flows, management is required to make assumptions, which are subject to a high degree of judgment, relative to the restaurant’s future period of operation, sales performance, cost of sales, labor, operating expenses and occupancy costs, which include property taxes, property and casualty insurance premiums and other similar costs associated with the restaurant’s operation. The resulting forecast of undiscounted cash flows represents management’s estimate based on both historical results and management’s expectation of future operations for that particular restaurant. To date, all of the Company’s long-lived assets have been determined to be recoverable based on management’s estimates of future cash flows.

The above listing is not intended to be a comprehensive listing of all of the Company’s accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 29, 2002, which contain accounting policies and other disclosures required by generally accepted accounting principles.

In connection with the safe harbor established under the Private Securities Litigation Reform Act of 1995, the Company cautions investors that certain information contained in this Form 10-Q, particularly information regarding future economic performance and finances, development plans, and objectives of management is forward-looking information that involves risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements. The Company disclaims any intent or obligation to update these forward-looking statements. Factors which could affect actual results include, but are not limited to, the Company’s ability to increase sales in certain of its restaurants; the Company’s ability to recruit and train qualified restaurant management personnel; competition within the casual dining industry, which is very intense; changes in business and economic conditions; changes in consumer tastes; and government regulations. See “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2002 and incorporated herein by reference for a description of a number of risks and uncertainties which could effect actual results.

Aside from the factors noted above, there have been no material changes in the disclosures set forth in Item 7a of the Company’s Annual Report on Form 10-K for the year ended December 29, 2002.

(a)

Evaluation of disclosure controls and procedures. The Company’s principal executive officer and its principal financial officer, after completing the evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) on May 9, 2003, have concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries is communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

(b)

Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. As a result, no corrective actions were required or undertaken.

(c)

At the Annual Meeting conducted May 13, 2003, the shareholders voted on the election of directors.

Exhibit (10)(a)

$5,000,000 Loan Agreement dated May 12, 2003 by and between J. Alexander’s Corporation, J. Alexander’s Restaurants, Inc., and Bank of America, N.A.

Exhibit (10)(b)

Line of Credit Note dated May 12, 2003, by and between J. Alexander’s Corporation, J. Alexander’s Restaurants, Inc. and Bank of America, N.A.

Exhibit 99.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)

On April 23, 2003, the Company filed a Form 8-K containing Item 12, Regulation FD Disclosure “Results of Operations and Financial Condition”.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		J. ALEXANDER’S CORPORATION

Date: May 13, 2003		/s/ Lonnie J. Stout II

		Lonnie J. Stout II Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date: May 13, 2003		/s/ R. Gregory Lewis

		R. Gregory Lewis Vice-President and Chief Financial Officer (Principal Financial Officer)

1. I have reviewed this quarterly report on Form 10-Q of J. Alexander’s Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

1. I have reviewed this quarterly report on Form 10-Q of J. Alexander’s Corporation;

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


Exhibit No.		Page No.

Exhibit (10)(a)	$5,000,000 Loan Agreement dated May 12, 2003 by and between J.Alexander’s Corporation, J. Alexander’s Restaurants, Inc., and Bank of America, N.A.

Exhibit (10)(b)	Line of Credit Note dated May 12, 2003, by and between J.Alexander’s Corporation, J. Alexander’s Restaurants, Inc. and Bank of America, N.A.

Exhibit 99.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

-23- EX-10.A 3 g82846exv10wa.txt EX-10.A $5,000,000,000 LOAN AGREEMENT 05/12/03 EXHIBIT (10)(a) LOAN AGREEMENT This Loan Agreement ("Agreement") entered into as of the 12th day of May, 2003, by and among J. ALEXANDER'S CORPORATION, J. ALEXANDER'S RESTAURANTS, INC., both Tennessee corporations (collectively referred to as the "Borrower"), and BANK OF AMERICA, N.A. a national banking association ("Lender"). W I T N E S S E T H: WHEREAS, the Borrower has requested that the Lender provide a Five Million and No/100 Dollars ($5,000,000.00) credit facility to the Borrower; and WHEREAS, the Lender has agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth. NOW, THEREFORE, as an inducement to cause Lender to extend credit to Borrower, and for other valuable consideration, the receipt and sufficiency of which are acknowledged, it is agreed as follows: 1. Definitions. (a) "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. (b) "Applicable Margin" means for any Fiscal Quarter the applicable rate per annum in excess of the LIBOR Rate set forth in the table below:

1 III Less than or equal to 4.00 but greater than 3.00 2.50% 0.30% IV Less than or equal to 4.15 but greater than 4.00 4.00% 0.75% V Greater than 4.15 Default Rate 0.75%

(c) "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. (d) "Base Rate" means the LIBOR Daily Floating Rate plus the Applicable Margin. For purposes hereof, the Applicable Margin will be that shown as Level III in the table contained in the definition of Applicable Margin for the period from the Effective Date until delivery by Borrower of the quarterly financial statements of the Borrower in accordance with Section 17(b). Upon receipt of the Borrower's quarterly financial statements, Lender shall determine if the results of such financial statements justify resetting the Applicable Margin to another Level, and if so, then the Applicable Margin shall be retroactively adjusted as of the first day of the then Fiscal Quarter to Level I, II, III, IV or V, as applicable, and shall continue to the last day of such Fiscal Quarter. This will continue each Fiscal Quarter thereafter. If Borrower fails to deliver the quarterly financial statements in accordance with time limits set forth in Section 17(b), the Applicable Margin shall be retroactively adjusted as of the first day of the then Fiscal Quarter to Level IV. (e) "Business Day" means any day other than a Saturday, a Sunday, or legal holiday or a day on which banking institutions are authorized or required by law or other governmental action to close in Nashville, Tennessee; provided that such day is also a day on which dealings between banks are carried on in U.S. dollar deposits in the London interbank market. Should any payment of principal or interest be due on a day that is not a Business Day, then the payment shall be due on the first Business Day thereafter. (f) "Capital Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. (g) "Closing Date" means the date hereof. (h) "Code" means the Internal Revenue Code of 1986, as amended, modified, succeeded or replaced from time to time. (i) "Collateral Documents" means the security agreements, mortgages and such other documents executed and delivered in connection with the attachment and perfection 2 of the Lender's security interests and/or liens in the assets of the Borrower, including, without limitation, a UCC fixture filing financing statement(s). (j) "Collateral" means all collateral referred to in and covered by the Collateral Documents. (k) "Default" has the meaning specified in Section 36. (l) "Default Rate" means the Base Rate plus three percent per annum. (m) "Dollars" and "$" means dollars in lawful currency of the United States of America. (n) "Effective Date" means the date on which the conditions set forth in Section 5 shall have been fulfilled (or waived in the sole discretion of the Lender) and on which the initial Loans shall have been made and/or the initial Letters of Credit shall have been issued. (o) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. (p) "ERISA Affiliates" means an entity, whether or not incorporated, which is under common control with Borrower within the meaning of Section 4001(a)(14) or ERISA, or is a member of a group which includes Borrower and which is treated as a single employer under Sections 414(b), (c), (m), or (o) of the Code. (q) "ERISA Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. (r) "Environmental Laws" means the Environmental Protection Act, the Resource Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Hazardous Materials Transportation Act and any other federal, state or municipal law, rule or regulation relating to air emissions, water discharge, noise emissions, solid or liquid waste disposal, hazardous or toxic waste or materials, or other environmental or health matters. (s) "Fiscal Quarter" means each 13 or 14 week period, as applicable, of Borrower's fiscal year. (t) "Funded Debt" means, without duplication, the sum of (a) all indebtedness of the Borrower for borrowed money, (b) all purchase money indebtedness of the Borrower, 3 (c) the principal portion of all obligations of the Borrower under Capital Leases, (d) commercial letters of credit and the maximum amount of all performance and standby letters of credit issued by bankers' acceptance facilities created for the account of the Borrower to the extent of all unreimbursed draws thereunder, (e) all guaranty obligations of the Borrower with respect to Funded Debt of another person, (f) all Funded Debt of another entity secured by a Lien on any property of the Borrower whether or not such Funded Debt has been assumed by Borrower, (g) all Funded Debt of any partnership or unincorporated joint venture to the extent the Borrower is legally obligated or has a reasonable expectation of being liable with respect thereto, net of any assets of such partnership or joint venture, (h) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product pursuant to which Borrower is the obligor where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP, and (i) any subordinated or convertible debt. (u) "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, consistently applied and maintained throughout the period indicated and consistent with the prior financial practice of Borrower and any predecessors. (v) "Governmental Authority" means any federal, state, local, provincial or foreign court or governmental agency, authority, instrumentality or regulatory body. (w) "Hazardous Materials" means those substances included from time to time within the definition of hazardous substances, hazardous materials, toxic substances, or solid waste under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended, 42 U.S.C. ss. 9601 et seq.; the Resource Conversation and Recovery Act of 1976, 42 U.S.C. ss. 1801 et seq., and in the regulations promulgated pursuant to such acts and laws; and such other substances that are or become regulated under any applicable local, state or federal law or regulation addressing environmental hazards. (x) "Interest Expense" means, for any period, with respect to the Borrower, all interest expense, including the interest component under Capital Leases, as determined in accordance with GAAP. (y) "Interest Income" means, for any period, with respect to the Borrower, all interest income as determined in accordance with GAAP. (z) "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge or any kind (including, without limitation, any agreement to give any of 4 the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). (aa) "Loan" or "Loans" means the Revolving Loans, or a portion of any Revolving Loan, as appropriate. (bb) "Loan Documents" means this Agreement, the Notes, the Collateral Documents, and all other related agreements and/or documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. (cc) "LIBOR Daily Floating Rate" shall mean the fluctuating rate of interest equal to the per annum rate of interest (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the one month London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) on the second preceding Business Day, as adjusted from time to time in Lender's sole discretion for then applicable reserve requirements, deposit insurance assessment rates and other regulatory costs. If for any reason such rate is not available, the term "LIBOR Daily Floating Rate" shall mean the fluctuating rate of interest equal to the one month rate of interest (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the one month London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) on the second preceding Business Day, as adjusted from time to time in Lender's sole discretion for then applicable reserve requirements, deposit insurance assessment rates and other regulatory costs; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. Interest based on the LIBOR Daily Floating Rate is a floating rate and will change on and as of the date of a change in the LIBOR Daily Floating Rate. The period of time during which the LIBOR Daily Floating Rate shall be applicable shall be a LIBOR Daily Floating Rate Interest Period. (dd) "Material Adverse Effect" means a material adverse effect, after taking in account applicable insurance, if any (to the extent the provider thereof has the financial ability to support its obligation with respect thereto and is not disputing same), on (a) the operations, financial condition, business or prospects of the Borrower and its subsidiaries taken as a whole, (b) the ability of Borrower to perform its obligations under this Agreement or any of the other Loan Documents, or (c) the validity or enforceability of this Agreement, any of the other Loan Documents, or the rights or remedies of the Lender hereunder or thereunder taken as a whole. (ee) "Net Income" means, for any period, the net income after taxes for such period of the Borrower, as determined in accordance with GAAP. 5 (ff) "Note" or "Notes" means the Revolving Loan Note together with any renewals, extensions or modifications thereof. (gg) "Notice of Borrowing" means a request by the Borrower for a Revolving Loan. (hh) "Operating Lease" means, as applied to any Person, any lease (including, without limitation, leases which may be terminated by the lessee at any time) of any property (whether real, personal or mixed) which is not a Capital Lease other than any such lease in which that Person is the lessor. (ii) "Permitted Liens" means (a) Liens securing obligations of Borrower to Lender, (b) Liens for taxes not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosures, sale or loss on account thereof), (c) Liens in respect of property imposed by law arising in the ordinary course of business such as materialmen's, mechanics', warehousemen's, carrier's, landlords' and other nonconsensual statutory Liens which are not due and payable or, if due and payable, are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof), (d) pledges or deposits made in the ordinary course of business to secure payment of worker's compensation insurance, unemployment insurance, pensions or social security programs, (e) Liens arising from good faith deposits in connection with or to secure performance of tenders, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (other than obligations in respect of the payment of borrowed money), (f) Liens arising from good faith deposits in connection with or to secure performance of statutory obligations and surety and appeal bonds, (g) easements, rights-of-way, restrictions (including zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered property for its intended purposes, (h) judgment Liens that would not constitute an Event of Default, (i) Liens in connection with indebtedness allowed under Section 33(a), (j) Liens arising by virtue of any statutory or common law provision relating to banker's liens, rights of setoff or similar rights as to deposit accounts or other funds maintained with a creditor depository institution, and (k) Liens existing on the date hereof and identified on Schedule 1; provided that no such Liens shall extend to any property other than the property subject thereto on the Closing Date. (jj) "Permitted Investments" means (i) obligations of U.S. banks limited to bankers acceptances, certificates of deposit, Eurodollar certificates of deposit and Eurodollar time deposits. Banks must be rated A1/P1/F1/D1, or "A" or better by any two of the four U.S. rating agencies (Standard & Poor's, Moody's, Duff & Phelps, and Fitch); (ii) obligations of non U.S. banks which are headquartered in Canada, United Kingdom, 6 France, West Germany, Netherlands, Belgium, Switzerland, Italy, Japan and Australia and limited to Eurodollar certificates of deposit and Eurodollar time deposits and with a bank rating of A1/P1/F1/D1 "A" or better by any two of the four US rating agencies; (iii) commercial paper rated top tier, A1/P1/F1/D1 by any two of the four rating agencies; (iv) securities, including tax-advantaged floating rate securities, of major U.S. corporations and U.S. bank holding companies with a minimum rating of A1/P1, "A" or equivalent; (v) taxable and tax exempt obligations of state, county and local governments including floating rate and auction rate securities and bonds with put options; such investments must be fully secured by standby letter of credit issued by a U.S. bank meeting credit quality stated above or investments must be rated A1/P1/F1/D1; "A"; SP-1/MIG-1 by two of the rating agencies; (vi) Money Market funds regulated by the SEC and where their portfolios consist of the listed eligible investments; or (vii) obligations issued or backed by the U.S. Government or any of its agencies. (kk) "Person" means any individual partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated), or any Governmental Authority. (ll) "Revolving Committed Amount" means $5,000,000.00 or such lesser amount as the Revolving Committed Amount may be reduced. (mm) "Revolving Loan Maturity Date" means April 30, 2006. (nn) "Revolving Loans" means the Revolving Loans made to the Borrower pursuant to Section 2. (oo) "Revolving Note" or "Revolving Notes" means the promissory note of the Borrower in favor of the Lender evidencing the Revolving Loans provided pursuant to Section 2, individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. (pp) "Unused Commitment" means, for any period, the amount by which the face principal amount of the $5,000,000.00 Line of Credit Loan exceeds the daily average sum for such period of the outstanding aggregate principal amount of the revolving loans made by Lender to Borrower under the $5,000,000.00 Line of Credit Loan. 2. Revolving Loan. Lender agrees to make a $5,000,000.00 revolving line of credit loan to the Borrower at any time, and from time to time during the period from the date hereof to, but not including, the Revolving Loan Maturity Date (the "Revolving Loan"). Borrower may borrow, repay and reborrow the Revolving Loan at any time, up to a maximum aggregate amount outstanding at any one time equal to $5,000,000.00, provided that Borrower is not in default under any provision of this Agreement or the Loan Documents, and provided that the borrowings hereunder do not exceed the limitation on borrowings by Borrower set forth in Section 2(g) below. 7 (a) Use of Proceeds. Advances under the Revolving Loan shall be used by Borrower to pay or reimburse itself for capital expenditures related to the development of new restaurants and for general operating purposes. (b) Interest Rate. Prior to maturity, the principal amount outstanding under the Revolving Loan shall bear interest at the Base Rate. (c) Method of Borrowing for Revolving Loan. By no later than 11:00 a.m. Central Standard Time, on the same day of the requested borrowing under the Revolving Loan, the Borrower shall notify Lender of Borrower's desire to borrow under the Revolving Loan indicating the exact amount requested. (d) Funding of Revolving Loan. Upon Borrower's notice to Lender of its intent to borrow under the Revolving Loan pursuant to Section 2(c), the amount of the requested Revolving Loan will then be made available to the Borrower by the Lender by crediting the account of the Borrower on the books of such office of the Lender, to the extent the amount of such request is available for borrowing. (e) Payments. Payment of all obligations arising under the Revolving Loan shall be made as follows: (i) Interest and Fees. Interest on the outstanding principal balance under the Revolving Loan shall be paid in arrears on the 1st day of each month, beginning on June 1, 2003. Also, on the 1st day of each calendar quarter, an Unused Commitment Fee shall be paid in arrears to Lender in accordance with Unused Commitment Fee percentage set forth in section 1(b), multiplied by the Unused Commitment. (ii) Mandatory Prepayment. Borrower must immediately prepay any amount by which the principal balance of the Revolving Loan exceeds $5,000,000.00 as reduced by subsection 2(g) below. (iii) All Amounts Due. All remaining principal, interest and expenses outstanding under the Revolving Loan shall become due on the Revolving Loan Maturity Date. (f) Conversion to Term Loan. Subject to the provisions contained herein, and provided that no Default has occurred and is continuing, and further provided that the Collateral pledged to Lender as security for the Revolving Loan has a loan to value ratio greater than 80% on the date of conversion, Borrower has the option to make a written election to convert the then outstanding balance of the Revolving Loan to a term loan at any time prior to March 30, 2006 (the "Term Loan"). The written election must be delivered to Lender at least thirty (30) days prior to the Revolving Loan Maturity Date. 8 Upon conversion, there will be a conversion fee equal to one-quarter (1/4) of one percent (1%) of the then outstanding principal balance. The then unpaid principal balance will amortized over 60 months and be repayable in sixty (60) equal monthly installments of principal with the first principal payment due thirty (30) days following the conversion date. Interest will continue to be paid monthly at the same time as the principal payment is due. Interest shall accrue on the Note at the Base Rate. (g) Reductions in Committed Amount. In any calendar year, Borrower may attempt to finance up to $750,000.00 of its capital expenditures through one or more equipment leases with an affiliate of Lender on terms and conditions to be negotiated between Borrower and such affiliate. Borrower acknowledges that Lender is not extending any commitment for refinancing on behalf of any such affiliates. To the extent the Borrower utilizes such option, the maximum amount of the Revolving Loan will be reduced dollar for dollar by the amount of such leases. 3. Revolving Loan Note. The Revolving Loans made by Lender shall be evidenced by a duly executed promissory note of the Borrower to Lender in the face amount of the Revolving Committed Amount. 4. Interest. Interest shall be calculated based upon a 360-day year. If the adoption of or change in any applicable legal requirement or any change in the interpretation or administration thereof by any governmental authority or compliance by the Lender with any request or directive (whether or not having the force of law) from any central bank or other governmental authority, shall at any time as a result of any portion of the principal balance of the Revolving Loans being maintained on the LIBOR Daily Floating Rate: (a) Subject the Lender to any tax (including without limitation any United States Interest Equalization Tax), levy, impost, duty, charge, fee (collectively "Taxes"), other than income and franchise taxes of the United States and its political subdivisions; or (b) Change the basis of taxation on payments due from the Borrower to the Lender under any LIBOR Daily Floating Rate borrowing (otherwise than by a change in the rate of taxation of the overall net income of the Lender); or (c) Impose, modify, increase or make applicable any reserve requirement, special deposit requirement or similar requirement (including, but not limited to, state law requirements and Regulation D) against assets held by the Lender, or against deposits or accounts in or for the account of the Lender, or against any loans made by the Lender, or against any other funds, obligations or other property owned or held by Lender; or (d) Impose on the Lender any other condition regarding any LIBOR Daily Floating Rate borrowing; and 9 The result of any of the foregoing (a) through (d) is to increase the cost to the Lender of agreeing to make or of making, renewing or maintaining such borrowing on the basis of the LIBOR Daily Floating Rate, or reduce the amount of principal or interest received by the Lender, then, upon demand by the Lender, the Borrower shall pay to the Lender, from time to time as specified by the Lender, additional amounts which shall reasonably compensate the Lender for such increased cost or reduced amount relating to LIBOR Daily Floating Rate borrowings outstanding after Lender's demand. Lender will promptly notify Borrower of any proposed increase hereunder. The Lender's reasonable determination of the amount of any such increased cost, increased reserve requirement or reduced amount shall be conclusive and binding, absent manifest error. In no event shall the interest rate charged on the Loans exceed the maximum rate allowed under applicable law. Any amounts paid in excess of the maximum lawful rate shall be applied to reduce the principal amount of Borrower's obligations to Lender or shall be refunded to Borrower, at Lender's election. After maturity or upon a Default (by acceleration or otherwise), the principal amount under the Loans shall bear interest at the applicable rate of interest in effect at the time of default plus 3%, per annum (the "Default Rate"). 5. Closing Conditions. The obligation of the Lender to enter into this Agreement and make the Loans is subject to satisfaction of the following conditions (in form and substance acceptable to the Lender in its sole discretion): (a) Executed Credit Documents. Receipt by the Lender of duly executed copies of: (i) this Agreement; (ii) the Note; (iii) the Collateral Documents and (iv) all other Loan Documents. (b) Corporate Documents. Receipt by the Lender of the following: (i) Resolutions. Copies of resolutions of the Board of Directors of Borrower approving and adopting the Loan Documents to which it is a party, the transactions contemplated therein and authorizing execution and delivery thereof, and an incumbency certificate, certified by a secretary or assistant secretary of Borrower to be true and correct and in force and effect as of the Effective Date. (ii) Good Standing. Copies of (A) certificates of good standing, existence or its equivalent with respect to Borrower certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of Borrower's incorporation and in the States of Illinois and Ohio with respect to J. Alexander's Restaurants, Inc. and in the State of Ohio as to J. Alexander's Corporation. 10 (c) Personal Property Collateral. The Lender shall have received, in form and substance satisfactory to the Lender: (i) duly executed UCC fixture filing financing statements for each appropriate jurisdiction as is necessary, in the Lender's sole discretion, to perfect the Lender's security interest in the Collateral. (d) Real Property Collateral. The Lender shall have received in form and substance satisfactory to the Lender: (i) A title commitment issued by a title insurance company acceptable to Lender insuring that the deed of trust or mortgage in favor of Lender is a first priority deed of trust or mortgage with such title commitment being in an amount acceptable to Lender and in a form and containing only those exceptions acceptable to Lender; (ii) A survey in form and content acceptable to Lender and which survey shall cause the survey exception to any title insurance policy to be deleted; and (iii) An environmental checklist and questionnaire completed by Borrower with respect to the Collateral. (e) Evidence of Insurance. Receipt by the Lender of copies of insurance policies or certificates of insurance of the Borrower evidencing liability and casualty insurance meeting the requirements set forth in the Loan Documents, including, but not limited to, naming the Lender as sole loss payee on behalf of the Lender. (f) Corporate Structure. The corporate capital and ownership structure of the Borrower shall be satisfactory in form and substance to the Lender. (g) Certain Consents. Receipt by the Lender of evidence that all governmental, shareholder and material third party consents including, without limitation, written consent, if necessary in the sole discretion of the Lender, of any existing Lenders or bondholders and expiration of all applicable waiting periods without any action being taken by any authority that could reasonably be likely to restrain, prevent or impose any material adverse conditions on the transactions contemplated by this Agreement or that could reasonably be likely to seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the judgment of the Lender could reasonably be likely to have such effect. (h) Material Adverse Effect. There shall not have occurred a change since December 31, 2002, that has had or could reasonably be expected to have a Material Adverse Effect (including matters related to litigation, tax, accounting, labor, insurance and pension liabilities). 11 (i) Litigation. There shall not exist any (i) order, decree, judgment, ruling or injunction which restrains the consummation of the transactions contemplated by this Agreement or (ii) any pending or threatened action, suit, investigation or proceeding which if adversely determined against the Borrower would have or would reasonably be expected to have a Material Adverse Effect. (j) Other Indebtedness. Receipt by the Lender of evidence that after the funding of the Loans, the Borrower shall have no borrowed money indebtedness other than the indebtedness under the Loan Documents and other than miscellaneous indebtedness which does not exceed $44,500,000.00 in the aggregate. (k) Officer's Certificates. The Lender shall have received a certificate or certificates executed by the president or chief financial officer of the Borrower as of the Effective Date stating that (A) the Borrower is in compliance with all existing financial obligations, (B) all governmental, shareholder and third party consents and approvals, if any, with respect to the Loan Documents and the transactions contemplated thereby have been obtained, (C) no action, suit, investigation and proceeding is pending or to his knowledge threatened in any court or before any arbitrator or governmental instrumentality that purports to affect the Borrower or any transaction contemplated by the Loan Documents, or could have or might be reasonably expected to have a Material Adverse Effect, (D) immediately after giving effect to this Agreement, the other Loan Documents and all the transactions contemplated therein to occur on such date, (1) the Borrower is solvent, (2) no Default or Event of Default exists, (3) all representations and warranties contained herein and in the other Loan Documents are true and correct in all material respects, and (4) the Borrower is in compliance with each of the financial covenants set forth in Section 34. (l) Fees and Expenses. Payment by the Borrower of all fees and expenses owed by them to the Lender. (m) Opinion of Borrower's Counsel. Delivery of an opinion of Borrower's counsel to Lender in the form attached as Exhibit B. (n) Other. Receipts by the Lender of such other documents, instruments, agreements or information as reasonably requested by Lender, including, but not limited to, information regarding litigation, tax, accounting, labor, insurance, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership and contingent liabilities of the Borrower. 6. Conditions to All Extensions of Credit. In addition to the conditions precedent stated elsewhere herein, the Lender shall not be obligated to make, continue or convert Loans unless: 12 (a) Notice. The Borrower shall have delivered (i) in the case of any new Revolving Loan, a Notice of Borrowing, duly executed and completed, by the time specified in Section 2(c). (b) Representations and Warranties. The representations and warranties made by the Borrower in any Loan Document are true and correct in all material respects at and as if made as of such date. (c) No Default. No Default or Event of Default shall exist or be continuing either prior to or after giving effect thereto. (d) No Material Adverse Effect. There shall not have occurred any Material Adverse Effect. (e) Availability. Immediately after giving effect to the making of such Loan (and the application of the proceeds thereof), the sum of the Revolving Loans outstanding shall not exceed the Revolving Committed Amount. 7. Capacity. Borrower warrants that it is and shall remain a duly organized Tennessee corporation in good standing under the laws of Tennessee, and that Borrower is and shall remain duly qualified to do business in each state other than Tennessee in which the failure to qualify would result in a Material Adverse Effect on Borrower or its business. Borrower warrants that its execution of and performance under this Agreement and all related documents are permitted under and will not violate any provision of Borrower's Charter or By-Laws or any agreement to which Borrower is a party or any law, rule, ordinance, regulation or Court Order to which Borrower is subject. Borrower further warrants that the execution of all necessary resolutions and other prerequisites of corporate action, as applicable, have been duly performed so that the individual executing this Agreement and related documents on behalf of Borrower is duly authorized to bind Borrower by his signature. 8. No Subsidiaries. Except as set forth on Schedule 8, Borrower warrants that it presently has no subsidiaries or interests in any partnership or other business entity. 9. Corporate Records. Borrower covenants to maintain or cause to be maintained current corporate minute books and stock ledgers and agrees to allow Lender to inspect the same at any time during normal business hours upon reasonable notice. 10. Accounting; Books, Records and Property. Borrower warrants that Borrower's accounting complies with applicable "GAAP" and covenants that it will continue to apply GAAP throughout the life of the Revolving Loan and Term Loan. Borrower agrees to allow Lender to inspect Borrower's books and records and the Collateral throughout the life of the Revolving Loan and Term Loan during normal business hours upon reasonable notice. 13 11. ERISA. Borrower has not incurred and shall not incur a material accumulated funding deficiency within the meaning of ERISA and has not incurred any material liability to the Pension Benefit Guaranty Corporation established under ERISA (or any successor thereto under ERISA) in connection with any retirement plan, and no reportable event has occurred and is continuing or shall occur with respect to any welfare or benefit plan maintained by Borrower. 12. Operation of Restaurants. Borrower represents and warrants to Lender that J. Alexander's Corporation owns Borrower's restaurant located in Lyndhurst, Ohio and leases said restaurant to J. Alexander's Restaurants, Inc., as tenant, pursuant to an unrecorded Lease dated as of January 23, 1996; except for the foregoing lease, there are no unrecorded real property and/or operating leases between J. Alexander's Corporation and any other party with respect to the restaurant located in Lyndhurst, Ohio. Borrower represents and warrants to Lender that J. Alexander's Restaurants, Inc. operates Borrower's restaurant located in the Village of Northbrook, Illinois, and there are no unrecorded real property and/or operating leases between J. Alexander's Restaurants, Inc. and any other party, including, but not limited to, J. Alexander's Corporation with respect to the restaurant located in Northbrook, Illinois. 13. Insurance. In addition to any specific insurance requirements contained herein or in any other document pertaining to the Loans, Borrower agrees to generally maintain adequate insurance against casualty, liability losses, and business interruption in accordance with customary practices in Borrower's field of enterprise. Borrower agrees to provide Lender with proof of the existence of such insurance upon demand. 14. Chief Executive Office. Borrower warrants that the address designated herein to which notices are to be sent to Borrower is Borrower's chief executive office. Borrower agrees to notify Lender in writing of any change thereof and agree that the same shall not in any event be moved outside Davidson County, Tennessee, without Lender's prior written consent. 15. No Defaults Under Other Agreements. Borrower warrants that neither Borrower, nor to the best of Borrower's knowledge, information, and belief, any other party thereto is presently in default beyond any applicable notice and/or cure periods in any material respect under any material contract or agreement to which Borrower is a party, and no condition presently exists which, with the giving of notice, the passing of time, or both, would cause such a default. 16. Disclosure of Litigation. Except as disclosed on Schedule 16, there are no actions, suits or proceedings pending (including, but not limited to, matters relating to any Environmental Laws), or, to the best of knowledge of Borrower, threatened, against or affecting Borrower or involving the validity or enforceability of any of the Loan Documents, at law or in equity, or before any governmental or administrative agency, except actions, suits and proceedings that are covered by insurance in all material respects or that, if adversely determined, would not impair the ability of Borrower to perform each and every one of its obligations under this Agreement, or, if adversely determined, would not materially and adversely affect Borrower's business or Borrower's ability to carry on its business substantially in the manners now conducted (individually or in the aggregate). 14 17. Financial Statements. (a) Warranties. Borrower warrants that Borrower's quarterly and annual financial statements delivered to Lender in connection with the Loans have been prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and present fairly the financial condition of Borrower as of the date or dates thereof and are true and correct in all material respect. Without limiting the foregoing, Borrower warrants that such financial statements disclose all known material contingent liabilities as well as material direct liabilities. Borrower acknowledges that Lender has advanced (or shall advance) the Loans in reliance upon such financial statements, and Borrower warrants that no Material Adverse Effect has occurred to the financial condition of Borrower as set forth in the most recent financial statements. (b) Reporting Requirements. Borrower covenants to furnish Lender Borrower's annual audited financial statements, annual budget and cash flow projections for the upcoming year within ninety (90) days of the close of the preceding fiscal year. Each audit must be performed by Ernst & Young, or another certified public accountant reasonably acceptable to Lender, at Borrower's expense. In addition, Borrower covenants to furnish to Lender, on or before the forty-fifth (45th) day following the end of the first three fiscal quarters of Borrower's fiscal year, unaudited consolidated income statements, cash flow statements, balance sheets and a covenant calculation report together with an officer's certificate executed by the chief financial officer of Borrower certifying compliance with the financial covenants set forth herein and further stating that, to the best of his knowledge, information and belief, no Default exists hereunder as of the date of the certification. Borrower also covenants to furnish to Lender, upon demand, copies of Borrower's tax returns and additional financial information in form and substance acceptable to Lender. 18. Notice of Changes in Financial Condition and Defaults. Borrower covenants to give Lender prompt written notice of (i) the creation or discovery of any material additional contingent liability or the occurrence of any other material adverse change in the financial condition of Borrower, and (ii) the occurrence of any event, or presence of any condition, which constitutes a Default hereunder or which with the giving of notice, the passing of time, or both, would constitute a Default or which would have a Material Adverse Effect. Borrower covenants that it will not change its fiscal year without obtaining the prior written consent of Lender. 19. No Unpaid Taxes. Borrower has filed or properly extended all tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied upon it or upon any of its properties or income, which are due and payable, including interest and penalties, or has provided adequate reserves for the payment thereof, other than any taxes or assessments that could not impair the ability of Borrower to perform each and every one of its obligations hereunder; or materially and adversely affect the ability of Borrower to carry on its business in the manner as now conducted. To the best knowledge of Borrower, no tax liens have been filed against Borrower or any of its properties, that could impair the ability of Borrower to 15 perform each and every one of its obligations hereunder; or materially and adversely affect the business of Borrower. 20. No Untrue or Misleading Representations. Borrower warrants that no information, exhibit or report furnished in writing by Borrower to Lender in connection with the Loans contains any untrue statement of material fact or omits to state a material fact necessary to make the statements contained therein not misleading in any material respect. 21. Compliance with Law. Borrower warrants that the business activities of Borrower are conducted in material compliance with all applicable laws and regulations. Borrower covenants that such activities shall continue to be so conducted. 22. Assistance in Litigation. Borrower covenants to, upon request, cooperatively participate in any proceeding in which Borrower is not an adverse party to Lender and which concerns Lender's rights regarding the Loans. 23. Name. Borrower warrants that during the past five (5) years, Borrower has not been known under or done business under any name other than the name used by Borrower in executing this Agreement. Borrower agrees to give Lender written notice no later than 15 days before Borrower begins using any name other than that used in executing this Agreement. 24. Intentionally Omitted. 25. Fees and Expenses. Upon demand, Borrower will advance to Lender or, at Lender's option, reimburse Lender for, the following fees and expenses: (a) Taxes. All taxes (other than income taxes) that Lender may be required to pay because of the Loans. (b) Administration. All expenses that Lender may incur in connection with the preparation, execution, or enforcement of this Agreement or of any other document pertaining to the Loans; (c) Costs of Collection. All court costs and other costs of collecting any debt, overdraft or other obligation included in the Loans; (d) Litigation. All costs arising from any litigation, investigation, or administrative proceeding (whether or not Lender is a party thereto) that Lender may incur as a result of the Loans or as a result of Lender's association with Borrower, including, but not limited to, expenses incurred by Lender in connection with a case or proceeding involving Borrower under any chapter of the Bankruptcy Code or any successor statute thereto; 16 (e) Fees. All fees, costs or other amounts payable under the Loan Documents; and (f) Attorneys Fees. Reasonable attorneys' fees incurred in connection with any of the foregoing. If Lender pays any of the foregoing fees and expenses or if Borrower fails to pay Lender any of the foregoing fees and expenses when due, they shall become a part of the Revolving Loans and shall bear interest at the rate of interest then in effect. This paragraph shall remain in full effect regardless of the full payment of the Loans, the purported termination of this Agreement, the delivery of the executed original of this Agreement to Borrower, or the content or accuracy of any representation made by Borrower to Lender; provided, however, Lender may terminate this paragraph by executing and delivering to Borrower a written instrument of termination specifically referring to this Paragraph. 26. Further Assurances. Borrower covenants to execute such other documents that Lender may reasonably deem necessary to further evidence the obligations provided for herein. 27. Default Certificates. Borrower covenants to deliver to Lender, within five (5) business days after request, the certificate of Borrower, or of Borrower's appropriate representative (as specified by Lender) stating whether, to the best of the person's knowledge, information, and belief and after due investigation, a Default then exists under this Agreement. The certificate shall describe with particularity any Default and shall address with particularity any circumstances or subjects described by Lender in its request. Borrower covenants that it will promptly forward to Lender a copy of any notice of default Borrower receives from any party with which any Borrower has a contract, where the amount of such contract exceeds $100,000.00. Borrower covenants that it will promptly forward to Lender copies of any individual litigation matter involving Borrower or any of its property where the amount of such litigation exceeds $100,000.00. 28. Recitals. Borrower warrants and agrees that the recitals set forth at the beginning of this Agreement relating to it are true. 29. No Burdensome Agreements. Borrower warrants that Borrower is not a party to any material contract or agreement and is not subject to any material contingent liability that does or may impair the ability of Borrower to perform under the terms of this Agreement. Borrower further warrants that the execution and performance of this Agreement will not cause a default, acceleration or other event under any other contract or agreement to which Borrower or any property of Borrower is subject, and will not result in the imposition of any charge, penalty, lien or other encumbrance against any property of Borrower except in favor of Lender. 30. Legal and Binding Agreement. Borrower warrants that the execution and performance of this Agreement will not violate any judicial or administrative order or governmental law or regulation, and that this Agreement is valid, binding and enforceable according to its terms, subject to bankruptcy and other laws affecting the rights of creditors generally. 17 31. No Consent Required. Borrower warrants that Borrower's execution, delivery and performance of this Agreement does not require the consent of or the giving of notice to any third party including, but not limited to, any other Lender, governmental body or regulatory authority, which has not been obtained. 32. No Default. Borrower warrants that, as of the execution of this Agreement, no Default exits hereunder and no condition exists which, with the giving of notice, the passing of time, or both, would constitute such a Default. 33. Negative Covenants. Without Lender's prior written consent, Borrower shall not do any of the following: (a) Other Debt. Incur, create, assume or permit to exist any indebtedness for borrowed money except: (i) Indebtedness to Lender. (ii) Debts existing as of the execution hereof and disclosed in the financial statements delivered to Lender and any modifications, renewals or extensions thereof and any refinancing of such debt with no increase in the amount of such refinanced debt. (iii) Unsecured debts on open account incurred in the ordinary course of business. (iv) Indebtedness arising from the negotiation and deposit of instruments received in the ordinary course of business. (v) $750,000.00 of additional indebtedness (the "additional indebtedness amount") incurred by Borrower during any calendar year with another lender; to the extent Borrower does not utilize the entirety of the additional indebtedness amount during any calendar year, any portion of the additional indebtedness amount not borrowed by Borrower shall be added to the additional indebtedness amount for the following calendar year. (b) Pledge or Mortgage of Assets. Except for Permitted Liens (together with renewals and extensions thereof), pledge or mortgage any of its existing, or future acquired assets to any other party. (c) Stock Transactions. Redeem any stock, subordinated debt, warrants, or debt securities convertible into stock; provided that Borrower may redeem up to a maximum of $1,500,000.00 of Borrower's currently issued and outstanding common stock, and further provided that Borrower may redeem subordinated debt prior to its stated redemption date, 18 so long as Borrower is not in Default or after giving effect to the proposed transaction, including computing all financial covenants and ratios immediately after such transaction, would not be in Default herewith. (d) Reorganization. Enter into any agreement to merge, consolidate, or otherwise reorganize or recapitalize, or enter into any agreement to acquire stock or assets having a value in excess of $1,000,000.00. (e) ERISA Matters. Suffer or permit any of the following events or conditions to exist or occur: (A) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any ERISA Plan, or any lien shall arise on the assets of the Borrower or any ERISA Affiliate in favor of the PBGC of an ERISA Plan; (B) a Termination Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Lender, likely to result in the termination of such Plan for the purposes of Title IV or ERISA; (C) a Termination Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Lender, likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) the Borrower or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency of (within the meaning of Section 4245 of ERISA) such Plan; or (D) any prohibited transaction (within the meaning of Section 406 of ERISA of Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject the Borrower or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) or ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. (f) Fiscal Year; Organizational Documents. Change its fiscal year or materially change its articles or certificate of incorporation or its by-laws. (g) Investments. Purchase or acquire an interest in any stocks, bonds, debentures, instruments or securities other than (i) Permitted Investments, (ii) investments permitted under Section 33(d), and (iii) other investments whereby the amount invested does not exceed $100,000.00. (h) Management Change. Change its senior management. (i) Change of Business. Make any material change to the business of Borrower as conducted on the Effective Date. (j) Continuation of Business. Liquidate, dissolve or voluntarily suspend business. 19 34. Financial Covenants. Borrower shall maintain the following financial covenants as determined by GAAP on a consolidated basis (unless otherwise noted): (a) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio measured at the end of each fiscal quarter computed on a trailing four quarters basis shall be at least 1.50 to 1.00. For purposes hereof, the Fixed Charge Coverage Ratio is defined as: (Net Income plus depreciation and amortization plus interest expense plus rent expense minus the greater of i) total store maintenance capital expenditures (excluding major remodeling or image enhancements), or ii) the total number of Borrower's stores operating for at least 18 months multiplied by $40,000.00) divided by (interest expense plus rent expense plus current maturities of long term debt plus current maturities of capital leases). (b) Maximum Adjusted Debt to EBITDAR Ratio. The Maximum Adjusted Debt to EBITDAR Ratio measured at the end of each fiscal quarter computed on a trailing four quarters basis shall be less than 4.15 to 1.00. For purposes hereof, the Maximum Adjusted Debt to EBITDAR Ratio is defined as (total Funded Debt minus Invested Funds plus (rent expense multiplied by 8)) divided by EBITDAR. For purposes hereof, Invested Funds is defined as short term, liquid investments such as money markets with maturities generally less than one year in length; provided that investments into any joint venture or any endeavor not consistent with the Borrower's core restaurant operating business without the written consent of Lender shall be specifically excluded. For purposes hereof, EBITDAR is defined as the sum of Net Income for such period (excluding the effect of any extraordinary or non-recurring gains or losses outside of the ordinary course of business) plus an amount which, in the determination of net income for such period has been deducted for (i) interest expense for such period; (ii) total federal, state, foreign or other income taxes for such period; (iii) all depreciation and amortization for such period; and (iv) rent expense, all as determined in accordance with GAAP. 35. Environmental Matters (a) Environmental Law Compliance. Borrower warrants and covenants that the conduct of Borrower's business operations do not and will not violate, in any material respect, any federal laws, rules, or ordinance for environmental protection, regulations of the Environmental Protection Agency and any applicable local or state law, rule, regulation, or rule of common law and any judicial interpretation thereof relating primarily to the environmental or Hazardous Materials and Borrower will not use or permit any other party to use any Hazardous Materials at any of Borrower's places of business or at any other property owned by Borrower except such materials as are incidental to Borrower's normal course of business, maintenance and repairs and which are handled in material compliance with all applicable environmental laws. Upon the occurrence of a Default or if necessary to meet any regulatory requirement imposed on any Lender, Borrower agrees to permit Lender, its agents, contractors, and employees to enter and inspect any of Borrower's places of business or any other property of Borrower at any reasonable times upon five (5) days prior 20 notice for the purpose of conducting an environmental investigation and audit (including taking physical samples) to insure that Borrower is complying with this covenant and Borrower shall reimburse Lender on demand for the costs of any such environmental investigation and audit. Borrower shall provide Lender, its agents, contractors, employees, and representatives with access to and copies of any and all data and documents relating to or dealing with any Hazardous Materials used, generated, manufactured, stored or disposed of by Borrower's business operations within five (5) days of the request thereof. (b) Notification of Environmental Claims. Borrower shall immediately advise Lender in writing of (i) any and all material enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed, or threatened pursuant to any applicable federal, state, or local laws, ordinances or regulations relating to any Hazardous Materials affecting Borrower's business operations; and (ii) all material claims made or threatened by any third party against Borrower relating to damages, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials. Borrower shall immediately notify Lender of any material remedial action taken by Borrower with respect to Borrower's business operations. (c) Indemnification. Borrower shall indemnify, defend, and hold Lender and its successors and assigns harmless from and against any and all claims, demands, suits, losses, damages, assessments, fines, penalties, costs, or other expenses (including reasonable attorneys' fees and court costs) arising from or in any way related to actual or threatened damage to the environment, agency costs of investigation, personal injury or death, or property damage, due to a release or alleged release of Hazardous Materials, arising from Borrower's business operations, any other property owned by Borrower or in the surface or ground water arising from Borrower's business operations, or gaseous emissions arising from Borrower's business operations or any other condition existing from Borrower's business operations resulting from the use or existence of Hazardous Materials, whether such claim proves to be true or false. Borrower further agrees that its indemnity obligations shall include, but are not limited to, liability for damages resulting from the personal injury or death of an employee of the Borrower, regardless of whether the Borrower has paid the employee under the worker's compensation laws of any state or other similar federal or state legislation for the protection of employees. The term "property damage" as used in this paragraph includes, but is not limited to, damage to any real or personal property of the Borrower, the Lender, and of any third parties. The Borrower's obligations under this paragraph shall survive the repayment of the Loans. 36. Default Defined. The occurrence of any one or more of the following events shall constitute a Default under this Agreement: (a) Monetary Default. The failure of Borrower to timely pay any amount due Lender under the Loans as and when due. 21 (b) Breach of Covenant. The failure of Borrower to comply with any of the terms and obligations of this Agreement (other than those addressed in a, c, d, e, f or g hereof) for a period of 30 days. (c) Breach of Warranty. Lender's discovery that any representation or warranty in connection with this Agreement or the Loans or any other Loan Document was materially false when made. (d) Default Under Other Document. Subject to applicable cure periods, the occurrence of a default under the terms of any document evidencing or otherwise pertaining to the Loans, including, without limitation, the Loan Documents or the occurrence of a default under the terms of any document evidencing or otherwise pertaining to any other extension of credit by Lender or any affiliate of Lender to Borrower. (e) Voluntary Bankruptcy. The Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing. (f) Involuntary Bankruptcy. An involuntary case or other proceeding shall be commenced against Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) days; or an order for relief shall be entered against the Borrower under the bankruptcy laws as now or hereafter in effect. (g) Default Under Other Loans. Subject to any grace or cure periods, the occurrence of a default under the terms of any document or agreement evidencing, securing or otherwise pertaining to the extension of credit in excess of $50,000.00 by any other party to Borrower, the default, which if not cured, would permit the acceleration of the debt. (h) Judgment. The entry of a judgment against Borrower or any of its property in an amount is excess of $100,000.00 which is not either satisfied or bonded off prior to the time execution could issue under such judgment. 22 (i) Collateral. Should any Lien in favor of Lender on any Collateral prove to be unperfected, unenforceable or void or should Borrower assert that with respect to any such Lien. 37. Remedies Upon Default. Upon a Default, Lender may exercise any or all of the following remedies: (a) Remedies. Lender, may exercise any right that it may have at law or equity, including those under the Loan Documents and including an action to collect the Loans and foreclosure on some or all of the Collateral. All obligations of Lender to advance or readvance under the Revolving Loans will terminate. Lender, at its option, may increase the rate of interest on the Loans to the Default Rate. (b) Application of Proceeds. All amounts received by Lender for Borrower's account by exercise of its remedies hereunder shall be applied as follows: First, to the payment of all reasonable expenses incurred by Lender in exercising their rights hereunder, including reasonable attorney's fees, and any other expenses due Lender from Borrower; Second, to the payment of all interest included in the Loans, in such order as Lender may elect; Third, to the payment of all principal included in the Loans, in such order as Lender may elect; and Fourth, surplus to Borrower or other party entitled thereto. 38. Reversal of Payments. To the extent Borrower makes a payment or payments to the Lender or the Lender receives any payment or proceeds of the collateral, if applicable, which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Loans or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Lender. 39. Set-Off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon and after the occurrence of any Default and during the continuance thereof, the Lender, and any assignee or participant of a Lender, is hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by the Lender, or any such assignee or participant to or for the credit or the account of Borrower against and on account of the Loans irrespective of whether or not (a) the Lender shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Lender shall have declared any or all of the Loans to be due and payable and although such Loans shall be contingent or unmatured. 23 40. Arbitration. Any controversy or claim between or among the parties to this Agreement or any related loan or collateral agreements or instruments (collectively, "Loan Documents"), including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the arbitration of commercial disputes of Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.), and the "special rules" set forth below. In the event of any inconsistency, the special rules shall control. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to the Loan Documents may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this agreement applies in any court having jurisdiction over such action. The following "Special Rules" shall apply. The arbitration shall be conducted in Nashville, Tennessee and administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is unable or legally precluded from administering the arbitration, then the American Arbitration Association will serve. All arbitration hearings will be commenced within 90 days of the demand for arbitration; further, the arbitrator shall only, upon a showing of cause, be permitted to extend the commencement of such hearing for up to an additional 60 days. Nothing in the foregoing arbitration shall be deemed to (i) limit the applicability of any otherwise applicable statutes of limitation or repose and any waivers contained in the Loan Documents; or (ii) be a waiver by Lender of the protection afforded to it by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the rights of Lender under the Loan Documents (a) to exercise self help remedies such as (but not limited to) set-off, or (b) to foreclose against any real or personal property collateral, or (c) to obtain from a court provisional or ancillary remedies such as (but not limited to) injunctive relief, possession of collateral or the appointment of a receiver. Lender may exercise such self help rights, foreclose upon such property, or obtain such provisional or ancillary remedies before, during or after the pendency of any arbitration proceeding brought pursuant to the Loan Documents. At Lender's option, foreclosure under a deed of trust or mortgage may be accomplished by any of the following: the exercise of a power of sale under the deed of trust or mortgage, or by judicial sale under the deed of trust or mortgage, or by judicial foreclosure. Neither this exercise or self help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies shall constitute a waiver of the right of any party, including the claimant in any such action, to arbitrate the merits of the controversy or claim occasioning resort to such remedies. 41. Not Partners; No Third Party Beneficiaries. Nothing contained herein or in any related document shall be deemed to render Lender a partner of Borrower for any purpose. This Agreement has been executed for the sole benefit of Lender, Borrower and no third party is authorized to rely upon Lender's rights hereunder or to rely upon an assumption that Lender has or will exercise its rights under this Agreement or under any document referred to herein. 24 42. Regulation U. Borrower warrants that none of the proceeds of the loan evidenced by the Note will be used to purchase or carry "margin stock," as defined in Regulation U issued by the Federal Reserve Board. 43. Business Days. If any payment date under the Revolving Loans falls on a day that is not a Business Day of Lender, or if the last day of any notice period falls on such a day, the payment shall be due and the notice period shall end on the next succeeding Business Day of Lender. 44. Notices. Any communications concerning this Agreement or the credit described herein shall be addressed as follows: As to Borrower: J. Alexander's Corporation 3401 West End Avenue, Suite 260 Nashville, TN 37203 J. Alexander's Restaurants, Inc. 3401 West End Avenue, Suite 260 Nashville, TN 37203 With a Copy to: Bass, Berry & Sims, PLC Attention: Felix Dowsley 315 Deaderick Street, Suite 2700 Nashville, TN 37238-0002 As to Lender: Bank of America, N.A. Attention: Thomas Kilcrease 414 Union Street Nashville, TN 37239 With a copy to: Neal & Harwell, PLC Attention: James R. Kelley 2000 One Nashville Place 150 Fourth Avenue North Nashville, Tennessee 37219-2498 25 Communications to be given to a party shall be effective when actually or constructively received by such party or three (3) days after when set forth in writing and mailed by certified mail, return receipt requested, or hand-delivery to such party's address stated above. Any party may change its address for receipt of notices by submitting the change in writing to the other party. 45. Participations. Lender may, from time to time, in its sole discretion, and without notice to Borrower, sell participations in any credit subject hereto to such other investors or financial institutions as it may elect. Such participants will have no direct relationship with Borrower and will have no right with respect to waivers or amendments or default declarations. Lender may from time to time disclose to any participant or prospective participant such information as the Lender may have regarding the financial condition, operations, and prospects of Borrower, but the Lender shall take reasonable precautions to require such participant or prospective participant to keep such information confidential. 46. Incorporation of Exhibits and Schedules. All Exhibits and Schedules referred to in this Agreement are incorporated herein by this reference. 47. Indulgence Not Waiver. Lender's indulgence in the existence of a default hereunder or any other departure from the terms of this Agreement shall not prejudice Lender's rights to declare a default or otherwise demand strict compliance with this Agreement. 48. Cumulative Remedies. The remedies provided Lender in this Agreement are not exclusive of any other remedies that may be available to Lender under any other document or at law or equity. 49. Amendments, Waiver and Consents. Neither this Agreement nor any other Loan Documents nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing and signed by the Lender and the Borrower. 50. Assignment. This Agreement shall be binding upon and inure to the benefit of the respective heirs, successors and assigns of Borrower and Lender, except that Borrower shall not assign any rights or delegate any obligations arising hereunder without the prior written consent of Lender. Any attempted assignment or delegation by Borrower without the required prior consent shall be void. 51. Entire Agreement. This Agreement and the other written agreements between Borrower and Lender represent the entire agreement between the parties concerning the subject matter hereof, and all oral discussions and prior agreements are merged herein. 52. Severability. Should any provision of this Agreement be invalid or unenforceable for any reason, the remaining provisions hereof shall remain in full effect. 26 53. Time of Essence. Time is of the essence of this Agreement, and all dates and time periods specified herein shall be strictly observed, except that Lender may permit specific deviations therefrom by its written consent. 54. Applicable Law. The validity, construction and enforcement of this Agreement and all other documents executed with respect to the Loans shall be determined according to the laws of Tennessee applicable to contracts executed and performed entirely within that state, in which state this Agreement has been executed and delivered. 55. Gender and Number. Words used herein indicating gender or number shall be read as context may require. 56. Captions Not Controlling. Captions and headings have been included in this Agreement for the convenience of the parties, and shall not be construed as affecting the content of the respective paragraphs. Executed the date first written above. BANK OF AMERICA, N.A. By: Thomas L. Kilcrease, Jr. -------------------------------------------- Title: Senior Vice President ----------------------------------------- J. ALEXANDER'S CORPORATION By: R. Gregory Lewis --------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ J. ALEXANDER'S RESTAURANTS, INC. By: R. Gregory Lewis --------------------------------------------- Title: Vice President ------------------------------------------ 27 SCHEDULE 1 PERMITTED LIENS 28 SCHEDULE 8 SUBSIDIARIES Company/Subsidiary Name: Nature of Business 1. J. Alexander's Corporation: Common parent corporation, Florida restaurant operations, and real estate ownership. 2. Union Leasing Corporation: Owns very small portfolio of restaurant stocks; otherwise inactive. 3. VCE Restaurants, Inc.; Inactive subsidiary; was Wendy's operating company. 4. Volunteer Capital West, Inc.: Leasing of former Wendy's properties. Limited activity. 5. J. Alexander's Restaurants, Inc.: Restaurant operating subsidiary. 6. J. Alexander's Restaurants of Kansas, Inc.: Operating subsidiary for Kansas restaurant. 7. J. Alexander's Restaurants of Texas, Inc.: Operating subsidiary for Texas restaurant. 8. JAX Holdings, Inc.: Holding company for VCE Restaurants, Inc. 9. *JAX Real Estate, LLC: Owns real estate mortgaged to GE Capital Franchise Finance Corporation and leases to operating subsidiary. 10. *JAX RE Holdings, LLC: Holding Company for JAX Real Estate, LLC. 11. *JAX Real Estate Management, Inc.: Management Company for JAX Real Estate, LLC and JAX RE Holdings, LLC. 12. J. Alexander's of Kansas, LLC: Gift Card Business. *See Note D to Consolidated Financial Statements included in J. Alexander's Corporation's 2002 Annual Report to Shareholders. 29 SCHEDULE 16 LITIGATION None. 30 EX-10.B 4 g82846exv10wb.txt EX-10.B LINE OF CREDIT NOTE 05/12/03 EXHIBIT (10)(b) LINE OF CREDIT NOTE $5,000,000.00 Nashville, Tennessee as of May 12, 2003 FOR VALUE RECEIVED, J. ALEXANDER'S CORPORATION and J. ALEXANDER'S RESTAURANTS, INC., both Tennessee corporations (collectively, the "Maker"), jointly and severally promise to pay to the order of BANK OF AMERICA, N.A. ("Payee" or "Bank of America"), the sum of Five Million and No/100 Dollars ($5,000,000.00), or as much thereof as may be outstanding from time to time, together with interest thereon as set forth below. This Note is made pursuant to the terms of that certain Loan Agreement dated as of May 12, 2003 (the "Loan Agreement"). Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement. Maker may borrow, repay and reborrow at any time, up to a maximum aggregate amount outstanding at any one time equal to the principal amount of this Note, provided that Maker is not in default, subject to applicable grace and cure periods, if any, set forth in the Loan Agreement, under any provision of this Note, any other documents executed in connection with this Note, or any other note or other Loan Documents now or hereafter executed in connection with any other obligation of Maker to Payee, and provided that the borrowings hereunder do not exceed the limitation on borrowings by Maker set forth in Section 2.(e)(ii) of the Loan Agreement. From the date hereof until the stated maturity of this Note, interest shall accrue at the rate set forth in the Loan Agreement. From the date hereof until the stated maturity of this Note, an unused commitment fee as determined by the provisions of the Loan Agreement shall be paid quarterly in arrears. Interest in arrears shall be due and payable on the first (1st) day of each month beginning on June 1, 2003, and continuing on the same day of each consecutive month thereafter until the stated maturity of this Note. All remaining principal and interest shall become due on April 30, 2006 (the "Maturity Date"). Maker has elected to authorize Bank of America to effect payment of sums due under this Note by means of debiting Maker's account number 112638499 ABA routing # 0064002. This authorization shall not affect the obligation of Maker to pay such sums when due, without notice, if there are insufficient funds in such account to make such payment in full on the due date thereof, or if Bank of America fails to debit the account. Subject to the provisions of the Loan Agreement, Maker has the option to convert the $5,000,000.00 Line of Credit Loan evidenced by this note to a term loan as more particularly set forth in the Loan Agreement. Interest hereunder shall be calculated based upon a 360 day year and actual days elapsed. The interest rate required hereby shall not exceed the maximum rate permissible under applicable law, and any amounts paid in excess of such rate shall be applied to reduce the principal amount hereof or shall be refunded to Maker, at the option of the holder of this Note. 1 All amounts due under this Note are payable at par in lawful money of the United States of America, at the principal place of business of Payee in Nashville, Tennessee, or at such other address as the Payee or other holder hereof (herein "Holder") may direct. Any payment not made within fifteen (15) days of its due date will be subject to assessment of a late charge equal to five percent (5%) of such payment. Holder's right to impose a late charge does not evidence a grace period for the making of payments hereunder. The occurrence of a Default under the Loan Agreement shall constitute an event of default under this Note. Upon the occurrence of an event of default, as defined above, Holder may, at its option and without notice, terminate any obligation to advance funds under this Note, declare all principal and interest provided for under this Note, and any other obligations of Maker to Holder, to be presently due and payable, and Holder may enforce any remedies available to Holder under any documents securing or evidencing debts of Maker to Holder. Holder may waive any default before or after it occurs and may restore this Note in full effect without impairing the right to declare it due for a subsequent default, this right being a continuing one. Upon default, at Holder's election, the remaining unpaid principal balance of the indebtedness evidenced hereby and all expenses due Holder shall bear interest at the Default Rate as said term is defined in the Loan Agreement. All amounts received for payment of this Note shall be first applied to any expenses due Holder under this Note or under any other documents evidencing or securing obligations of Maker to Holder, then to accrued interest, and finally to the reduction of principal. Prepayment of principal or accrued interest may be made, in whole or in part, at any time without penalty. Any prepayment(s) shall reduce the final payment(s) and shall not reduce or defer installments next due. This Note may be freely transferred by Holder. Maker and all sureties, guarantors, endorsers and other parties to this instrument hereby consent to any and all renewals, waivers, modifications, or extensions of time (of any duration) that may be granted by Holder with respect to this Note and severally waive demand, presentment, protest, notice of dishonor, and all other notices that might otherwise be required by law. All parties hereto waive the defense of impairment of collateral and all other defenses of suretyship. Maker and all sureties, guarantors, endorsers and other parties hereto agree to pay reasonable attorneys' fees and all court and other costs that Holder may incur in the course of efforts to collect the debt evidenced hereby or to protect Holder's interest in any collateral securing the same. The validity and construction of this Note shall be determined according to the laws of Tennessee applicable to contracts executed and performed within that state. If any provision of this Note should for any reason be invalid or unenforceable, the remaining provisions hereof shall remain in full effect. 2 The provisions of this Note may be amended or waived only by instrument in writing signed by the Holder and Maker and attached to this Note. Any controversy or claim between or among the parties to this Note or any related loan or collateral agreements or instruments (collectively, "Loan Documents"), including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the arbitration of commercial disputes of Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.), and the "special rules" set forth below. In the event of any inconsistency, the special rules shall control. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to the Loan Documents may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this agreement applies in any court having jurisdiction over such action. The following "Special Rules" shall apply. The arbitration shall be conducted in Nashville, Tennessee and administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is unable or legally precluded from administering the arbitration, then the American Arbitration Association will serve. All arbitration hearings will be commenced within 90 days of the demand for arbitration; further, the arbitrator shall only, upon a showing of cause, be permitted to extend the commencement of such hearing for up to an additional 60 days. Nothing in the foregoing arbitration shall be deemed to (i) limit the applicability of any otherwise applicable statutes of limitation or repose and any waivers contained in the Loan Documents; or (ii) be a waiver by Bank of America of the protection afforded to it by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the rights of Bank of America under the Loan Documents (a) to exercise self help remedies such as (but not limited to) set-off, or (b) to foreclose against any real or personal property collateral, or (c) to obtain from a court provisional or ancillary remedies such as (but not limited to) injunctive relief, possession of collateral or the appointment of a receiver. Bank of America may exercise such self help rights, foreclose upon such property, or obtain such provisional or ancillary remedies before, during or after the pendency of any arbitration proceeding brought pursuant to the Loan Documents. At Bank of America's option, foreclosure under a deed of trust or mortgage may be accomplished by any of the following: the exercise of a power of sale under the deed of trust or mortgage, or by judicial sale under the deed of trust or mortgage, or by judicial foreclosure. Neither this exercise or self help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies shall constitute a waiver of the right of any party, including the claimant in any such action, to arbitrate the merits of the controversy or claim occasioning resort to such remedies. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 3 Words used herein indicating gender or number shall be read as context may require. J. ALEXANDER'S CORPORATION J. ALEXANDER'S RESTAURANTS, INC. By: R. Gregory Lewis By: R. Gregory Lewis -------------------------- -------------------------- Title: Vice President and Title: Vice President Chief Financial Officer -------------------- ----------------------- 4 EX-99.1 5 g82846exv99w1.txt EX-99.1 SARBANES CEO CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of J. Alexander's Corporation (the "Company") on Form 10-Q for the period ending March 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lonnie J. Stout II, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Lonnie J. Stout II - ----------------------------------------------- Lonnie J. Stout II Chairman, President and Chief Executive Officer May 13, 2003 A signed original of this written statement required by Section 906 has been provided to J. Alexander's Corporation and will be retained by J. Alexander's Corporation and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.2 6 g82846exv99w2.txt EX-99.2 SARBANES CFO CERTIFICATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of J. Alexander's Corporation (the "Company") on Form 10-Q for the period ending March 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, R. Gregory Lewis, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ R. Gregory Lewis - ------------------------------------------ R. Gregory Lewis Vice President and Chief Financial Officer May 13, 2003 A signed original of this written statement required by Section 906 has been provided to J. Alexander's Corporation and will be retained by J. Alexander's Corporation and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----


Tennessee		62-0854056

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


		Duncan		Fritts		Reed		Stout

	For		5,039,167		5,080,009		5,079,109		5,039,295
Withhold Authority			95,989		55,147		56,047		95,861

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PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION
SIGNATURES
EX-10.A $5,000,000,000 LOAN AGREEMENT 05/12/03
EX-10.B LINE OF CREDIT NOTE 05/12/03
EX-99.1 SARBANES CEO CERTIFICATION
EX-99.2 SARBANES CFO CERTIFICATION


By:		/s/ Lonnie J. Stout II

		Lonnie J. Stout II
		Chairman of the Board, Chief Executive Officer and President


By:		/s/ R. Gregory Lewis

		R. Gregory Lewis
		Vice President, Chief Executive Officer and Secretary