10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 22, 2009

COMMISSION FILE NUMBER 001-7323

FRISCH’S RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)

OHIO	31-0523213
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2800 Gilbert Avenue, Cincinnati, Ohio	45206
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 513-961-2660

Not Applicable

Former name, former address and former fiscal year, if changed since last report

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.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).    YES  ¨    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	¨	Accelerated Filer	x
Non-accelerated Filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

There were 5,107,058 shares outstanding of the issuer’s no par common stock, as of September 21, 2009.

TABLE OF CONTENTS

			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Consolidated Statement of Earnings	3
		Consolidated Balance Sheet	4 - 5
		Consolidated Statement of Shareholders’ Equity	6
		Consolidated Statement of Cash Flows	7
		Notes to Consolidated Financial Statements	8 - 26
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27 - 34
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34 - 35
	Item 4.	Controls and Procedures	35
	Item 4T.	Controls and Procedures	35
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	35 - 36
	Item 1A.	Risk Factors	36 - 38
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
	Item 3.	Defaults Upon Senior Securities	39
	Item 4.	Submission of Matters to a Vote of Security Holders	39
	Item 5.	Other Information	39
	Item 6.	Exhibits	40 - 42
SIGNATURE			43

Frisch’s Restaurants, Inc. and Subsidiaries

Consolidated Statement of Earnings

(Unaudited)

	Sixteen Weeks Ended
	September 22, 2009			September 23, 2008
Sales	$	88,982,102		$	89,881,631
Cost of sales
Food and paper		30,273,962			33,273,371
Payroll and related		29,704,600			29,597,002
Other operating costs		20,017,149			20,437,920
		79,995,711			83,308,293
Gross profit		8,986,391			6,573,338
Administrative and advertising		4,454,390			4,438,372
Franchise fees and other revenue		(392,259	)		(400,651	)
Gains on sale of assets		—			(1,115,910	)
Operating profit		4,924,260			3,651,527
Interest expense		531,595			588,467
Earnings before income taxes		4,392,665			3,063,060
Income taxes		1,405,000			888,000
Net Earnings	$	2,987,665		$	2,175,060
Earnings per share (EPS) of common stock:
Basic net earnings per share	$	.59		$	.43
Diluted net earnings per share	$	.57		$	.42

The accompanying notes are an integral part of these statements.

3

Frisch’s Restaurants, Inc. and Subsidiaries

Consolidated Balance Sheet

ASSETS

	September 22, 2009		June 2, 2009
	(unaudited)
Current Assets
Cash and equivalents	$	1,964,647	$	898,779
Trade and other receivables		1,405,128		1,549,226
Inventories		5,007,120		6,531,127
Prepaid expenses and sundry deposits		1,704,250		891,176
Prepaid and deferred income taxes		1,531,548		1,588,721
Total current assets		11,612,693		11,459,029
Property and Equipment
Land and improvements		72,680,204		71,247,614
Buildings		96,418,392		95,057,324
Equipment and fixtures		92,414,848		91,137,232
Leasehold improvements and buildings on leased land		24,230,797		24,561,228
Capitalized leases		1,558,209		1,558,209
Construction in progress		6,398,101		3,424,332
		293,700,551		286,985,939
Less accumulated depreciation and amortization		132,769,439		129,348,004
Net property and equipment		160,931,112		157,637,935
Other Assets
Goodwill		740,644		740,644
Other intangible assets		781,324		806,903
Investments in land		893,171		691,834
Property held for sale		2,751,532		2,526,176
Deferred income taxes		1,900,741		1,662,888
Other		1,741,746		1,450,539
Total other assets		8,809,158		7,878,984
Total assets	$	181,352,963	$	176,975,948

The accompanying notes are an integral part of these statements.

4

LIABILITIES AND SHAREHOLDERS’ EQUITY

	September 22, 2009 (unaudited)			June 2, 2009
Current Liabilities
Long-term obligations due within one year
Long-term debt	$	8,228,569		$	7,740,616
Obligations under capitalized leases		230,204			239,461
Self insurance		453,130			396,001
Accounts payable		10,620,251			8,038,418
Accrued expenses		8,545,796			11,555,028
Income taxes		94,609			41,567
Total current liabilities		28,172,559			28,011,091
Long-Term Obligations
Long-term debt		23,310,397			21,961,677
Obligations under capitalized leases		341,612			397,626
Self insurance		788,084			727,997
Underfunded pension obligation		7,921,323			7,507,375
Deferred compensation and other		4,297,878			3,993,038
Total long-term obligations		36,659,294			34,587,713
Commitments		—			—
Shareholders’ Equity
Capital stock
Preferred stock - authorized, 3,000,000 shares without par value; none issued		—			—
Common stock - authorized, 12,000,000 shares without par value; issued, 7,585,764 and 7,582,347 shares - stated value - $1		7,585,764			7,582,347
Additional contributed capital		64,925,529			64,721,328
		72,511,293			72,303,675
Accumulated other comprehensive loss		(6,457,563	)		(6,634,422	)
Retained earnings		84,018,221			82,306,488
		77,560,658			75,672,066
Less cost of treasury stock (2,478,706 and 2,482,233 shares)		(33,550,841	)		(33,598,597	)
Total shareholders’ equity		116,521,110			114,377,144
Total liabilities and shareholders’ equity	$	181,352,963		$	176,975,948

5

Frisch’s Restaurants, Inc. and Subsidiaries

Consolidated Statement of Shareholders’ Equity

Sixteen weeks ended September 22, 2009 and September 23, 2008

(Unaudited)

	Common stock at $1 per share - Shares and amount		Additional contributed capital			Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total
Balance at June 3, 2008	$	7,580,263	$	64,451,899		$	(1,992,515	)	$	74,034,980		$	(33,359,781	)	$	110,714,846
Net earnings for sixteen weeks		—		—			—			2,175,060			—			2,175,060
Other comprehensive income, net of tax		—		—			55,366			—			—			55,366
Stock options exercised - treasury shares re-issued		—		(5,210	)		—			—			13,520			8,310
Excess tax benefit from stock - based compensation		—		4,907			—			—			—			4,907
Treasury shares acquired		—		—			—			—			(92,532	)		(92,532	)
Treasury shares re-issued		—		4,048			—			—			4,136			8,184
Stock-based compensation expense		—		77,539			—			—			—			77,539
Cash dividends - $.24 per share		—		—			—			(1,225,821	)		—			(1,225,821	)
Balance at September 23, 2008		7,580,263		64,533,183			(1,937,149	)		74,984,219			(33,434,657	)		111,725,859
Net earnings for thirty-six weeks		—		—			—			8,545,795			—			8,545,795
Other comprehensive loss, net of tax		—		—			(4,697,273	)		—			—			(4,697,273	)
Stock options exercised - new shares issued		2,084		29,377			—			—			—			31,461
Excess tax benefit from stock - based compensation		—		6,853			—			—			—			6,853
Stock-based compensation expense		—		171,330			—			—			—			171,330
Treasury shares acquired		—		—			—			—			(163,940	)		(163,940	)
Employee stock purchase plan		—		(19,415	)		—			—			—			(19,415	)
Cash dividends - $.24 per share		—		—			—			(1,223,526	)		—			(1,223,526	)
Balance at June 2, 2009		7,582,347		64,721,328			(6,634,422	)		82,306,488			(33,598,597	)		114,377,144
Net earnings for sixteen weeks		—		—			—			2,987,665			—			2,987,665
Other comprehensive income, net of tax		—		—			176,859			—			—			176,859
Stock options exercised - new shares issued		3,417		80,449			—			—			—			83,866
Stock options exercised - treasury shares re-issued		—		(3,480	)		—			—			13,540			10,060
Excess tax benefit from stock - based compensation		—		6,144			—			—			—			6,144
Other treasury shares re-issued		—		40,557			—			—			34,216			74,773
Stock based compensation expense		—		80,531			—			—			—			80,531
Cash dividends - $.25 per share		—		—			—			(1,275,932	)		—			(1,275,932	)
Balance at September 22, 2009	$	7,585,764	$	64,925,529		$	(6,457,563	)	$	84,018,221		$	(33,550,841	)	$	116,521,110

Comprehensive income:	Sixteen weeks ended September 22, 2009		Thirty-seven weeks ended June 2, 2009			Sixteen weeks ended September 23, 2008
Net earnings for the period	$	2,987,665	$	8,545,795		$	2,175,060
Change in defined benefit pension plans, net of tax		176,859		(4,697,273	)		55,366
Comprehensive income	$	3,164,524	$	3,848,522		$	2,230,426

The accompanying notes are an integral part of these statements.

6

Frisch’ s Restaurants, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Sixteen weeks ended September 22, 2009 and September 23, 2008

(unaudited)

	September 22,			September 23,
	2009			2008
Cash flows provided by (used in) operating activities:
Net earnings	$	2,987,665		$	2,175,060
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization		4,220,961			4,085,323
Loss (gain) on disposition of assets, net of abandonments		71,705			(1,038,288	)
Pension plans - expense recognized from accumulated other comprehensive income		267,967			83,884
Stock based compensation expense		80,531			77,539
		7,628,829			5,383,518
Changes in assets and liabilities:
Accounts receivable		144,098			(67,842	)
Inventories		1,005,885			(97,776	)
Prepaid expenses and sundry deposits		(813,074	)		(411,790	)
Other assets		25,580			(27,578	)
Prepaid, accrued and deferred income taxes		(212,603	)		(60,867	)
Excess tax benefit from stock based compensation		(6,144	)		(4,907	)
Accounts payable		1,917,915			(1,165	)
Accrued expenses		(3,009,232	)		(227,140	)
Self insured obligations		117,216			26,418
Underfunded pensin obligation		413,948			351,042
Deferred compensation and other liabilities		304,840			(132,544	)
		(111,571	)		(654,149	)
Net cash provided by operating activities		7,517,258			4,729,369
Cash flows provided by (used in) investing activities:
Additions to property and equipment		(7,508,829	)		(7,594,787	)
Proceeds from disposition of property		14,415			1,581,037
Change in other assets		(291,207	)		182,602
Net cash (used in) investing activities		(7,785,621	)		(5,831,148	)
Cash flows provided by (used in) financing activities:
Proceeds from borrowings		4,000,000			5,000,000
Payment of long-term debt and capital lease obligations		(2,228,597	)		(2,519,266	)
Cash dividends paid		(612,014	)		(612,929	)
Proceeds from stock options exercised - new shares issued		83,866			—
Proceeds from stock options exercised - treasury shares re-issued		10,060			8,310
Excess tax benefit from stock based compensation		6,144			4,907
Treasury shares acquired		—			(92,532	)
Treasury shares re-issued		74,772			8,184
Net cash provided by financing activities		1,334,231			1,796,674
Net increase in cash and equivalents		1,065,868			694,895
Cash and equivalents at beginning of year		898,779			801,297
Cash and equivalents at end of quarter	$	1,964,647		$	1,496,192
Supplemental disclosures:
Interest paid	$	479,741		$	527,608
Income taxes paid		1,674,803			948,869
Income tax refunds received		57,201			—
Dividends declared but not paid		663,918			612,892

The accompanying notes are an integral part of these statements.

7

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE A – ACCOUNTING POLICIES

A summary of the Company’s significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

Description of the Business

Frisch’s Restaurants, Inc. and Subsidiaries (the Company) is a regional company that operates full service family-style restaurants under the name “Frisch’s Big Boy.” The Company also operates grill buffet style restaurants under the name “Golden Corral” pursuant to certain licensing agreements. All Big Boy restaurants operated by the Company are currently located in various regions of Ohio, Kentucky and Indiana. Golden Corral restaurants currently operate primarily in the greater metropolitan areas of Cincinnati, Columbus, Dayton, Toledo and Cleveland, Ohio, Louisville, Kentucky and Pittsburgh, Pennsylvania.

The Company owns the trademark “Frisch’s” and has exclusive, irrevocable ownership of the rights to the “Big Boy” trademark, trade name and service marks in the states of Kentucky and Indiana, and in most of Ohio and Tennessee. All of the Frisch’s Big Boy restaurants also offer “drive-thru” service. The Company also licenses Big Boy restaurants to other operators, currently in certain parts of Ohio, Kentucky and Indiana. In addition, the Company operates a commissary and food manufacturing plant near its headquarters in Cincinnati, Ohio that services all Big Boy restaurants operated by the Company, and is available to supply restaurants licensed to others.

Consolidation Practices

The accompanying unaudited consolidated financial statements include all of the Company’s accounts, prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of management, these interim financial statements include all adjustments (all of which were normal and recurring) necessary for a fair presentation of all periods presented.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.

Fiscal Year

The Company’s fiscal year is the 52 week (364 days) or 53 week (371 days) period ending on the Tuesday nearest to the last day of May. The first quarter of each fiscal year contains sixteen weeks, while the last three quarters each normally contain twelve weeks. Every fifth or sixth year, the additional week needed to make a 53 week year is added to the fourth quarter, resulting in a thirteen week fourth quarter. The current fiscal year will end on Tuesday, June 1, 2010 (fiscal year 2010), a period of 52 weeks. The year ended June 2, 2009 (fiscal year 2009) was also a 52 week year.

Use of Estimates and Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to use estimates and assumptions to measure certain items that affect the amounts reported. These judgments are based on knowledge and experience about past and current events, and assumptions about future events. Although management believes its estimates are reasonable and adequate, future events affecting them may differ markedly from current judgment. Significant estimates and assumptions are used to measure self-insurance liabilities, deferred executive compensation obligations, net periodic pension cost and future pension obligations, the carrying values of property held for sale and for long-lived assets including property and equipment, goodwill and other intangible assets.

Management considers the following accounting policies to be critical accounting policies because the application of estimates to these policies requires management’s most difficult, subjective or complex judgments: self-insurance liabilities, net periodic pension cost and future pension obligations, and the carrying values of long-lived assets.

8

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE A – ACCOUNTING POLICIES (CONTINUED)

Cash and Cash Equivalents

Funds in transit from credit card processors are classified as cash. Highly liquid investments with original maturities of three months or less are considered as cash equivalents.

Receivables

Trade notes and accounts receivable are valued on the reserve method. The reserve balance was $30,000 as of September 22, 2009 and June 2, 2009. The reserve is monitored for adequacy based on historical collection patterns and write-offs, and current credit risks.

Inventories

Inventories, comprised principally of food items, are valued at the lower of cost, determined by the first-in, first-out method, or market.

Accounting for Rebates

Cash consideration received from certain food vendors is treated as a reduction of cost of sales and is recognized in the same periods in which the rebates are earned.

Leases

Minimum scheduled lease payments on operating leases, including escalating rental payments, are recognized as rent expense on a straight-line basis over the term of the lease. Under certain circumstances, the lease term used to calculate straight-line rent expense includes option periods that have yet to be legally exercised. Contingent rentals, typically based on a percentage of restaurant sales in excess of a fixed amount, are expensed as incurred. Rent expense is also recognized during that part of the lease term when no rent is paid to the landlord, often referred to as a “rent holiday,” that generally occurs while a restaurant is being constructed on leased land. The Company does not typically receive leasehold incentives from landlords.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided principally on the straight-line method over the estimated service lives, which range from ten to 25 years for new buildings or components thereof and five to ten years for equipment. Leasehold improvements are depreciated over the shorter of the useful life of the asset or the lease term. Property betterments are capitalized while the cost of maintenance and repairs is expensed as incurred.

The cost of land not yet in service is included in “construction in progress” if construction has begun or if construction is likely within the next twelve months. As of September 22, 2009, two restaurant buildings were under construction on land owned by the Company, with estimated costs of approximately $571,000 remaining to complete the projects. The cost of land for two additional sites on which construction had yet to begin was also included in construction in progress. Other contracts that had been entered before September 22, 2009 to acquire sites for future development were cancellable at the Company’s sole discretion while due diligence is pursued under the inspection period provisions of the contracts.

Interest on borrowings is capitalized during active construction periods of new restaurants. Capitalized interest for the sixteen weeks ended September 22, 2009 and September 23, 2008 was $35,000 and $43,000, respectively.

Five Big Boy restaurant facilities, which had been occupied under month-to-month arrangements until litigation was resolved, were acquired on September 1, 2009 for the total sum of $4,000,000. (See Note C – Leased Property. Also see Litigation in Note H – Commitments and Contingencies.)

9

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE A – ACCOUNTING POLICIES (CONTINUED)

The cost of land on which construction is not likely within the next twelve months is classified as “Investments in land” in the consolidated balance sheet. Surplus property that is no longer needed by the Company, including two former Big Boy restaurants (one that ceased operations near the end of fiscal year 2008 and the other near the end of fiscal year 2009), is classified as “Property held for sale” in the consolidated balance sheet. All of the surplus property is stated at net realizable value. Market values are generally determined by opinions of value provided by real estate brokers and/or management’s judgment.

Costs incurred during the application development stage of computer software that is developed or obtained for internal use is capitalized, while the costs of the preliminary project stage are expensed as incurred, along with certain other costs such as training. Capitalized computer software is amortized on the straight-line method over the estimated service lives, which range from three to ten years. Software assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining service life.

Impairment of Long-Lived Assets

Management considers a history of cash flow losses on a restaurant-by-restaurant basis to be its primary indicator of potential impairment of assets. Carrying values are tested for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying values of the assets may not be recoverable from the estimated future cash flows expected to result from the use and eventual disposition of the property. When undiscounted expected future cash flows are less than carrying values, an impairment loss is recognized equal to the amount by which the carrying values exceed the greater of the net present value of the future cash flow stream or a floor value. Floor values are generally determined by opinions of value provided by real estate brokers and/or management’s judgment as developed through its experience in disposing of unprofitable restaurant properties.

No impairment losses were recognized during either of the sixteen weeks ended September 22, 2009 or September 23, 2008. Three Golden Corral restaurants that were determined to be impaired in fiscal year 2008 remain in operation.

Restaurant Closing Costs

Any liabilities associated with exit or disposal activities are recognized only when the liabilities are incurred, rather than upon the commitment to an exit or disposal plan. Conditional obligations that meet the definition of an asset retirement obligation are currently recognized if fair value is reasonably estimable.

The carrying values of closed restaurant properties that are held for sale are reduced to estimated net realizable value in accordance with the accounting policy for impairment of long-lived assets (see above). When leased restaurant properties are closed, a provision is made equal to the present value of remaining non-cancellable lease payments after the closing date, net of estimated subtenant income. The carrying values of leasehold improvements are also reduced in accordance with the accounting policy for impairment of long-lived assets.

Goodwill and Other Intangible Assets, Including Licensing Agreements

As of September 22, 2009 and June 2, 2009, the carrying amount of goodwill that was acquired in prior years amounted to $741,000. Acquired goodwill is tested annually for impairment and whenever an impairment indicator arises. Impairment losses are recorded if impairment is determined to have occurred.

Other intangible assets consist principally of initial franchise fees paid for each new Golden Corral restaurant the Company has opened (finite useful lives are subject to amortization) or has the right to open (yet to be determined useful lives are not subject to amortization). Amortization of the $40,000 initial fee begins when the restaurant opens and is computed using the straight-line method over the 15 year term of each individual restaurant’s franchise agreement. The fees are ratably amortized at $2,667 per year per restaurant, which equates to $85,000 per year in each of the next five years for the 35 Golden Corral restaurants that were in operation as of September 22, 2009, net of three impaired Golden Corral restaurants (see below). Amortization was $26,000 in each of the sixteen weeks ended September 22, 2009 and September 23, 2008.

10

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE A – ACCOUNTING POLICIES (CONTINUED)

Other intangible assets are tested annually for impairment and whenever an impairment indicator arises. The remainder of unamortized initial franchise fees associated with three impaired Golden Corral restaurants (see Impairment of Assets elsewhere in Note A – Accounting Policies) were written-off in fiscal year 2008. The three restaurants remain in operation.

Miscellaneous other intangible assets are not currently being amortized because these assets have indefinite or yet to be determined useful lives. An analysis of other intangible assets follows:

	September 22, 2009			June 2, 2009
	(in thousands)
Golden Corral initial franchise fees subject to amortization	$	1,280		$	1,280
Less accumulated amortization		(606	)		(579	)
Carrying amount of Golden Corral initial franchise fees subject to amortization		674			701
Current portion of Golden Corral initial franchise fees subject to amortization		(85	)		(85	)
Golden Corral fees not yet subject to amortization		135			135
Other intangible assets not subject to amortization		57			56
Total other intangible assets	$	781		$	807

The franchise agreements with Golden Corral Franchising Systems, Inc. also require the Company to pay fees based on defined gross sales. These costs are charged to expense as incurred.

Revenue Recognition

Revenue from restaurant operations is recognized upon the sale of products as they are sold to customers. All sales revenue is recorded on a net basis, which excludes sales tax collected from being reported as sales revenue and sales tax remitted from being reported as a cost. Revenue from the sale of commissary products to Big Boy restaurants licensed to other operators is recognized upon shipment of product. Revenue from franchise fees, based on certain percentages of sales volume of Big Boy restaurants licensed to other operators, is recorded on the accrual method as earned. Initial franchise fees are recognized as revenue when the fees are deemed fully earned and non-refundable, which ordinarily occurs upon the execution of the license agreement, in consideration of the Company’s services to that time.

Revenue from the sale of gift cards is deferred for recognition until the gift card is redeemed by the cardholder, or when the probability is remote that the cardholder will demand full performance by the Company and there is no legal obligation to remit the value of the unredeemed gift card under applicable state escheatment statutes.

11

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE A – ACCOUNTING POLICIES (CONTINUED)

New Store Opening Costs

New store opening costs consist of new employee training costs, the cost of a team to coordinate the opening and the cost of certain replaceable items such as uniforms and china. New store opening costs are charged to expense as incurred:

	Sixteen weeks ended
	September 22, 2009		September 23, 2008
	(in thousands)
Big Boy	$	14	$	329
Golden Corral		—		—
	$	14	$	329

Benefit Plans

The Company maintains two qualified defined benefit pension plans: the Pension Plan for Managers, Office and Commissary Employees (the Salaried Pension Plan) and the Pension Plan for Operating Unit Hourly Employees (the Hourly Pension Plan). Plan benefits are based on years-of-service and other factors. The Company’s funding policy is to contribute at least the minimum annual amount sufficient to satisfy legal funding requirements plus additional discretionary tax deductible amounts that may be deemed advisable, even when no minimum funding is required. Contributions are intended to provide not only for benefits attributed to service-to-date, but also for those expected to be earned in the future (see Note E – Pension Plans).

The Hourly Pension Plan covers hourly restaurant employees. The Plan was amended on July 1, 2009 to freeze all future accruals for credited service under the Plan after August 31, 2009. The Plan had previously been closed to all hourly paid restaurant employees that were hired after December 31, 1998. Hourly restaurant employees hired January 1, 1999 or after have been eligible to participate in the Frisch’s Restaurants, Inc. Hourly Employees 401(k) Savings Plan (the Hourly Savings Plan), a defined contribution plan that provided a 40 percent match by the Company on the first ten percent of earnings deferred by the participants. The Company’s match has vested on a scale based on length of service that reached 100 percent after four years of service. The Hourly Savings Plan was amended effective September 1, 2009 to provide for immediate vesting along with a 100 percent match from the Company on the first three percent of earnings deferred by participants. All hourly restaurant employees are now eligible to participate, regardless of when hired.

The Salaried Pension Plan covers restaurant management, office and commissary employees (salaried employees). The Plan was amended on July 1, 2009 to close entry into the Plan to employees hired after June 30, 2009. Salaried employees hired before June 30, 2009 will continue to participate in the Salaried Pension Plan and be credited with normal benefits for years of service. Salaried employees are automatically enrolled, unless otherwise elected, in the Frisch’s Employee 401(k) Savings Plan (the Salaried Savings Plan), a defined contribution plan. The Salaried Savings Plan provides immediate vesting under two different Company matching schedules. Employees who are participants in the Salaried Pension Plan (hired before June 30, 2009) may continue to defer up to 25 percent of their compensation under the Salaried Savings Plan, with the Company contributing a ten percent match on the first eighteen percent deferred. Beginning September 1, 2009, salaried employees hired after June 30, 2009 receive a 100 percent match from the Company on the first three percent of compensation deferred.

12

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE A – ACCOUNTING POLICIES (CONTINUED)

The executive officers of the Company and certain other “highly compensated employees” (HCE’s) are disqualified from participation in the Salaried Savings Plan. A non-qualified savings plan – Frisch’s Executive Savings Plan (FESP) – provides a means by which the HCE’s may continue to defer a portion of their compensation. FESP allows deferrals of up to 25 percent of a participant’s compensation into a choice of mutual funds or common stock of the Company. Matching contributions are added to the first ten percent of salary deferred at a rate of ten percent for deferrals into mutual funds, while a fifteen percent match is added to deferrals into the Company’s common stock. HCE’s hired after June 30, 2009 receive a 100 percent matching contribution from the Company on the first three percent of compensation deferred into either mutual funds or common stock.

Although the Company owns the mutual funds until the retirement of the participants, the funds are invested at the direction of the participants. The common stock is a “phantom investment” that may be paid in actual shares or in cash upon retirement of the participant. The FESP liability to the participants is included in “Deferred compensation and other” long term obligations in the consolidated balance sheet.

The Company also maintains an unfunded non-qualified Supplemental Executive Retirement Plan (SERP) that was originally intended to provide a supplemental retirement benefit to the HCE’s whose benefits under the Salaried Pension Plan were reduced when their compensation exceeded Internal Revenue Code imposed limitations or when elective salary deferrals were made to FESP. The SERP was amended effective January 1, 2000 to exclude any benefit accruals after December 31, 1999 (interest continues to accrue) and to close entry into the Plan by any HCE hired after December 31, 1999.

Effective January 1, 2000, a Nondeferred Cash Balance Plan was adopted to provide comparable retirement type benefits to the HCE’s in lieu of future accruals under the Salaried Pension Plan and the SERP. The comparable benefit amount is determined each year and converted to a lump sum (reported as W-2 compensation) from which taxes are withheld and the net amount is deposited into the HCE’s individual trust account (see Note E – Pension Plans).

FESP assets are the principal components of “Other long-term assets” in the consolidated balance sheet, along with the value, if any, of pension plan assets in excess of projected benefit obligations (see Note E – Pension Plans).

Self-Insurance

The Company self-insures its Ohio workers’ compensation claims up to $300,000 per claim. Initial self-insurance liabilities are accrued based on prior claims history, including an amount developed for incurred but unreported claims. Active claims management and post accident drug testing in recent years have effected vast improvements in claims experience. Management performs a comprehensive review each fiscal quarter and adjusts the self-insurance liabilities as deemed appropriate based on claims experience. During the sixteen weeks ended September 22, 2009, self insurance liabilities were increased $209,000 (charged to expense). No adjustment to self-insurance liabilities was necessary during the sixteen weeks ended September 23, 2008.

Income Taxes

Income taxes are provided on all items included in the consolidated statement of earnings regardless of when such items are reported for tax purposes. The provision for income taxes in all periods has been computed based on management’s estimate of the effective tax rate for the entire year.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts payable and accounts receivable, investments and long-term debt. The carrying values of cash and cash equivalents together with accounts payable and accounts receivable approximate their fair value based on their short-term character. The fair value of long-term debt is disclosed in Note B – Long-Term Debt. The Company does not use derivative financial instruments.

13

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE A – ACCOUNTING POLICIES (CONTINUED)

New Accounting Pronouncements

“The FASB Accounting Standard Codification and Hierarchy of Generally Accepted Accounting Principles” (FASB Accounting Standards Codification) is effective for all interim and annual periods ending after September 15, 2009. It was issued to establish the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by FASB to be applied in the preparation of financial statements that conform with generally accepted accounting principles in the United States of America (GAAP). As a result, legacy references to previously issued authoritative accounting literature have not been used in the preparation of the financial statements contained herein for the sixteen weeks ended September 22, 2009.

“Fair Value Measurements and Disclosures”, FASB Accounting Standards Codification Topic 820 (Topic 820), clarifies the definition of fair value, provides a framework for the measurement of fair value, and expands disclosure requirements about fair value measurements. Topic 820 was effective for fiscal years that begin after November 15, 2007 (fiscal year 2009) for financial assets and liabilities. Its adoption on June 4, 2008 had no material effect on the Company’s financial position or results of operations. The effective date of Topic 820 for non-financial assets and non-financial liabilities is for fiscal years that begin after November 15, 2008 (fiscal year 2010). Fair value measurements of non-financial assets and non-financial liabilities are used primarily in the impairment analyses of long-lived assets, goodwill and other intangible assets. Its adoption on June 3, 2009 had no material effect on the Company’s financial position or results of operations.

“Subsequent Events”, FASB Accounting Standards Codification Topic 855 (Topic 855), establishes general standards of accounting for and disclosure of events occurring subsequent to the date of the balance sheet, but before financial statements are issued. Topic 855 is applicable to the Company’s interim and annual periods that end after June 15, 2009. The Company evaluated all transactions that occurred after September 22, 2009 but before the date of the financial statements contained herein were issued for potential application. The evaluation determined that no material recognizable subsequent events had occurred.

“Employers’ Disclosure about Post Retirement Benefit Plan Assets”, FASB Accounting Standards Codification Topic 715-20 (Topic 715-20), requires expanded disclosures about plan assets in an employer’s defined benefit pension or other post retirement plan. The expanded disclosures require information to be provided on how investment decisions are made, the major categories of plan assets, input and valuation techniques used to measure fair value of plan assets, and concentrations of risk with plan assets. The Company will report the expanded disclosures required by Topic 715-20 in its annual financial statements for the period ending June 1, 2010.

The Company reviewed all other significant newly issued accounting pronouncements and concluded that they are either not applicable to the Company’s business or that no material effect is expected on the financial statements as a result of future adoption.

14

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE B – LONG-TERM DEBT

	September 22, 2009				June 2, 2009
	Payable within one year		Payable after one year		Payable within one year		Payable after one year
	(in thousands)
Construction Draw Facility -
Construction Phase Loans	$	—	$	—	$	—	$	1,000
Term Loans		6,843		20,156		6,851		20,962
Revolving Credit Agreement -
Revolving Loan		—		—		—		—
2007 Term Loan (former Bullet Loan)		540		—		890		—
2009 Term Loan		846		3,154		—		—
	$	8,229	$	23,310	$	7,741	$	21,962

The portion payable after one year matures as follows:

	September 22, 2009		June 2, 2009
	(in thousands)
Period ending in 2011	$	7,323	$	7,424
2012		6,030		5,119
2013		4,545		3,848
2014		2,915		2,808
2015		1,880		1,894
Subsequent to 2015		617		869
	$	23,310	$	21,962

The Company has two loan agreements in place with the same lending institution, under which the Company may not assume or permit to exist any other indebtedness. Both of these loan agreements were amended and restated in September 2009.

The Construction Draw Facility (the Facility) is an unsecured draw credit line intended to finance new restaurant construction. The September 2009 amendment increased the amount available to be borrowed from $4,500,000 to $8,000,000. Unless extended, the Facility is currently scheduled to expire October 21, 2010.

The Facility is subject to a commitment fee equal to ..25 percent of the amount available to be borrowed. Under the terms of the Facility, funds borrowed are initially governed as a Construction Phase Loan, with interest determined by a pricing matrix that uses changeable basis points, determined by certain of the Company’s financial ratios. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly. Within six months of the completion and opening of each restaurant, the balance outstanding under each Construction Phase Loan must be converted to a Term Loan. Outstanding balances of loans initiated prior to September 2007 had to be converted with an amortization period not to exceed seven years. Loans initiated in or after September 2007 may be converted with amortization periods of up to twelve years. For any Term Loan converted with an amortization period of less than twelve years, a one-time option is available during the chosen term to extend the amortization period up to twelve years. Upon conversion to an amortizing Term Loan, the Company may select a fixed interest rate over the chosen term or may choose among various adjustable rate options.

15

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE B – LONG-TERM DEBT (CONTINUED)

As of September 22, 2009, the aggregate outstanding balance under the Facility was $26,999,000, which consisted entirely of Term Loans. There was no balance in the Construction Phase awaiting conversion. Since the inception of the Facility, fourteen of the Term Loans ($34,000,000 out of $84,500,000 in original notes) had been retired as of September 22, 2009. All of the outstanding Term Loans are subject to fixed interest rates, the weighted average of which is 6.06 percent, all of which are being repaid in 84 equal monthly installments of principal and interest aggregating $736,000, expiring in various periods currently ranging from October 2009 through August 2016. Prepayments of the existing Term Loans are permissible upon payment of sizeable prepayment fees and other amounts. The September 2009 amendment to the Facility added a breakfunding provision. For Term Loans initiated after September 2009, the Company has been granted the option at the time of conversion to include a small premium over the otherwise applicable fixed interest rate in exchange for the right to prepay in whole or in part at any time without incurring a prepayment fee. Unless the Facility is extended, any outstanding amount in the Construction Phase that has not been converted into a Term Loan on October 21, 2010 shall mature and be payable in full at that time.

The Revolving Credit Agreement affords the Company with three separate loans. Its primary function is to provide an unsecured Revolving Loan that allows for borrowing of up to $5,000,000 to fund temporary working capital needs through October 21, 2010, unless extended. The Revolving Loan, none of which was outstanding as of September 22, 2009, will mature and be payable in full October 21, 2010, unless extended. It is also subject to a 30 consecutive day out-of-debt period each fiscal year. Interest is determined by the same pricing matrix used for Construction Phase Loans under the Construction Draw Facility. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly. The loan is subject to a .25 percent unused commitment fee.

The 2007 Term Loan (a Bullet Loan prior to March 15, 2007) requires 36 equal monthly installments of $92,000 including principal and interest at a fixed 6.13 percent rate. The final payment is due March 15, 2010. The 2007 Term Loan is secured by mortgages that encumber the real property of two Golden Corral restaurants that have an approximate book value of $3,931,000 as of September 22, 2009.

The 2009 Term Loan was borrowed in September 2009 to fund the acquisition of five Big Boy restaurants from the landlord of the facilities. (See Note C – Leased Property. Also see Litigation in Note H – Commitments and Contingencies.) The 2009 Term Loan requires 48 monthly installments of $89,459 including principal and interest at a fixed 3.47 percent rate. The final payment is due October 21, 2013. The 2009 Term Loan is unsecured.

Both the Construction Draw Facility and the Revolving Credit Agreement contain covenants relating to cash flows, debt levels, asset dispositions, investments and restrictions on pledging certain restaurant operating assets. The Company was in compliance with all loan covenants as of September 22, 2009. Compensating balances are not required by either of these loan agreements.

The fair values of the fixed rate Term Loans within the Construction Draw Facility as shown in the following table are based on fixed rates that would be available at September 22, 2009 if the loans could be refinanced with terms similar to the remaining terms under the present Term Loans. The carrying value of all other long-term debt approximates its fair value.

	Carrying Value		Fair Value
Terms Loans under Construction Draw Facility	$	26,999,000	$	28,263,000

16

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE C – LEASED PROPERTY

The Company’s policy is to own its restaurant locations whenever possible, however, the Company occupies certain of its restaurants pursuant to lease agreements. Most of the leases are for fifteen or twenty years and contain renewal options for ten to twenty years, and/or have favorable purchase options. As of September 22, 2009, 23 restaurants were in operation on non-owned premises. All of the 23 leases are operating leases, of which sixteen are for Big Boy operations and seven are for Golden Corral operations.

Five Big Boy restaurant facilities, which had been occupied under month-to-month arrangements, were acquired from the landlord on September 1, 2009 for the total sum of $4,000,000. The purchase prices had been the subject of litigation (see Litigation in Note H – Commitments and Contingencies). Residual value guarantees on the five leases aggregating $2,101,000 were retired as a result of the acquisitions. The guarantees had been included as a current liability in the consolidated balance sheet as of June 2, 2009.

Office space is occupied under an operating lease that expires during fiscal year 2013, with renewal options available through fiscal year 2023. A purchase option is available in 2023 to acquire the office property in fee simple. Delivery and other equipment is held under capitalized leases expiring during various periods through fiscal year 2013.

Amortization of capitalized lease assets is computed on the straight-line method over the primary terms of the leases. An analysis of the capitalized leased property follows:

	Asset balances at
	September 22, 2009			June 2, 2009
	(in thousands)
Delivery and other equipment	$	1,558		$	1,558
Less accumulated amortization		(1,057	)		(998	)
	$	501		$	560

Rent expense under operating leases (including the month-to-month arrangements through September 1, 2009) for the sixteen weeks ended:

	September 22, 2009		September 23, 2008
	(in thousands)
Minimum rentals	$	685	$	733
Contingent payments		10		12
	$	695	$	745

17

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE C – LEASED PROPERTY (CONTINUED)

Future minimum lease payments under capitalized leases and operating leases are summarized below:

Period ending September 22,	Capitalized leases			Operating leases
	(in thousands)
2010	$	268		$	1,583
2011		251			1,502
2012		108			1,434
2013		—			1,371
2014		—			1,385
2015 to 2027		—			11,599
Total		627		$	18,874
Amount representing interest		(55	)
Present value of obligations		572
Portion due within one-year		(230	)
Long-term obligations	$	342

NOTE D – CAPITAL STOCK

The Company has two equity compensation plans adopted respectively in 1993 and 2003.

2003 Stock Option and Incentive Plan

Shareholders approved the 2003 Stock Option and Incentive Plan ((the 2003 Incentive Plan) or (Plan)) in October 2003. The 2003 Incentive Plan provides for several forms of awards including stock options, stock appreciation rights, stock awards including restricted and unrestricted awards of stock, and performance awards. The Board of Directors adopted certain amendments in December 2006 to bring the Plan into compliance with the American Jobs Creation Act of 2004 and Section 409A of the Internal Revenue Code (IRC). Further amendments were adopted in October 2008 to meet final regulations relating to Section 409A of the IRC.

No award shall be granted under the Plan on or after October 6, 2013 or after such earlier date on which the Board of Directors may terminate the Plan. The maximum number of shares of common stock that the Plan may issue is 800,000, subject, however, to proportionate and equitable adjustments determined by the Compensation Committee of the Board of Directors (the Committee) as deemed necessary following the event of any equity restructuring that may occur.

The Plan provides that the total number of shares of common stock covered by options plus the number of stock appreciation rights granted to any one individual may not exceed 80,000 during any fiscal year. Additionally, no more than 80,000 shares of common stock may be issued in payment of performance awards denominated in shares, and no more than $1,000,000 in cash (or fair market value, if paid in shares) may be paid pursuant to performance awards denominated in dollars, granted to any one individual during any fiscal year if the awards are intended to qualify as performance based compensation. Employees of the Company and non-employee members of the Board of Directors are eligible to be selected to participate in the Plan. Participation is based on selection by the Committee. Although there is no limit to the number of participants in the Plan, there are approximately 40 persons currently participating in the Plan.

18

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE D – CAPITAL STOCK (CONTINUED)

Options to purchase shares of the Company’s common stock permit the holder to purchase a fixed number of shares at a fixed price. When options are granted, the Committee determines the number of shares subject to the option, the term of the option, which may not exceed ten years, the time or times when the option will become exercisable and the price per share that a participant must pay to exercise the option. No option will be granted with an exercise price that is less than 100 percent of fair market value on the date of the grant. The option price and obligatory withholding taxes may be paid pursuant to a “cashless” exercise/sale procedure involving the simultaneous sale by a broker of shares that are covered by the option.

Stock appreciation rights (SAR’s) are rights to receive payment, in cash, shares of common stock or a combination of the two, equal to the excess of (1) the fair market value of a share of common stock on the date of exercise over (2) the price per share of common stock established in connection with the grant of the SAR (the reference price). The reference price must be at least 100 percent of the common stock’s fair market value on the date the SAR is granted. SAR’s may be granted by the Committee in its discretion to any participant, and may have terms no longer than ten years.

Stock awards are grants of shares of common stock that may be restricted (subject to a holding period or other conditions) or unrestricted. The Committee determines the amounts, vesting, if any, terms and conditions of the awards, including the price to be paid, if any, for restricted awards and any contingencies related to the attainment of specified performance goals or continued employment or service.

The Committee may also grant performance awards to participants. Performance awards are the right to receive cash, common stock or both, at the end of a specified performance period, subject to satisfaction of the performance criteria and any vesting conditions established for the award.

As of September 22, 2009, options to purchase 269,250 shares had been cumulatively granted under the Plan, including 20,000 that belong to the President and Chief Executive Officer (CEO). The outstanding options belonging to the CEO vested six months from the date of grant. Outstanding options granted to other key employees vest in three equal annual installments, while outstanding options granted to non-employee members of the Board of Directors vest one year from the date of grant. Beginning in October 2009, options granted to the CEO pursuant to the terms of his employment agreement will vest one year from the date of grant. The Committee may, in its sole discretion, accelerate the vesting of all or any part of any awards held by a terminated participant, excluding, however, any participant who is terminated for cause.

As of September 22, 2009, 566,500 shares remain available to be optioned, including 35,750 shares granted that were subsequently forfeited, which are again available to be granted in accordance with the “Re-use of Shares” provision of the Plan. There were 219,088 options outstanding as of September 22, 2009.

No other awards - stock appreciation rights, restricted stock award, unrestricted stock award or performance award—had been granted under the 2003 Stock Option and Incentive Plan as of September 22, 2009.

1993 Stock Option Plan

The 1993 Stock Option Plan was not affected by the adoption of the 2003 Stock Option and Incentive Plan. The 1993 Stock Option Plan originally authorized the grant of stock options for up to 562,432 shares (as adjusted for changes in capitalization in earlier years) of the common stock of the Company for a ten-year period that began May 9, 1994. Shareholders approved the Amended and Restated 1993 Stock Option Plan (Amended Plan) in October 1998, which extended the availability of options to be granted to October 4, 2008. The Board of Directors adopted certain amendments in December 2006 to bring the Amended Plan into compliance with the American Jobs Creation Act of 2004 and section 409A of the Internal Revenue Code.

Options to purchase 556,228 shares were cumulatively granted under the 1993 Stock Option Plan and the Amended Plan before granting authority expired October 4, 2008. As of September 22, 2009, 270,481 shares granted remain outstanding, including 211,478 that belong to the CEO.

19

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE D - CAPITAL STOCK (CONTINUED)

All outstanding options under the 1993 Stock Option Plan and the Amended Plan were granted at fair market value and expire ten years from the date of grant. Final expirations will occur in June 2014. Outstanding options to the CEO vested after six months, while options granted to non-employee members of the Board of Directors vested after one year. Outstanding options granted to other key employees vested in three equal annual installments.

Outstanding and Exercisable Options

The changes in outstanding and exercisable options involving both the 1993 Stock Option Plan and the 2003 Stock Option and Incentive Plan are shown below as of September 22, 2009:

	No. of shares		Weighted avg. price per share		Weighted avg. Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at beginning of year	443,236		$	20.93
Granted	51,500		$	26.99
Exercised	(4,417	)	$	21.26
Forfeited or expired	(750	)	$	26.72
Outstanding at end of quarter	489,569		$	21.56	5.00 years	$	1,991
Exercisable at end of quarter	399,734		$	20.72	4.03 years	$	1,899

The intrinsic value of stock options exercised during the sixteen weeks ended September 22, 2009 and September 23, 2008 was $36,000 and $14,000, respectively.

Stock options outstanding and exercisable as of September 22, 2009 for the 1993 Stock Option Plan and the 2003 Stock Option and Incentive Plan are shown below:

Range of Exercise Prices per Share	No. of shares	Weighted average price per share		Weighted average remaining life in years
Outstanding:
$ 8.31 to $13.00	63,478	$	10.62	.76 years
$13.01 to $18.00	49,167	$	13.80	1.81 years
$18.01 to $24.20	179,168	$	20.72	5.16 years
$24.21 to $31.40	197,756	$	27.76	7.00 years
$ 8.31 to $31.40	489,569	$	21.56	5.00 years
Exercisable:
$ 8.31 to $13.00	63,478	$	10.62	.76 years
$13.01 to $18.00	49,167	$	13.80	1.81 years
$18.01 to $24.20	146,833	$	20.59	4.33 years
$24.21 to $31.40	140,256	$	27.87	5.97 years
$ 8.31 to $31.40	399,734	$	20.72	4.03 years

20

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE D - CAPITAL STOCK (CONTINUED)

Employee Stock Purchase Plan

Shareholders approved the Employee Stock Option Plan (elsewhere referred to as Employee Stock Purchase Plan) in 1998. The Plan provides employees who have completed 90 days of continuous service with an opportunity to purchase shares of the Company’s common stock through payroll deduction. Immediately following the end of each semi-annual offering period, participant account balances are used to purchase shares of stock measured at 85 percent of the fair market value of shares at the beginning of the offering period or at the end of the offering period, whichever is lower. The Plan authorizes a maximum of 1,000,000 shares that may be purchased on the open market or from the Company’s treasury. Through April 30, 2009 (latest available data), 141,287 shares had been cumulatively purchased through the Plan. Shares purchased through the Plan are held by the Plan’s custodian until withdrawn or distributed. As of April 30, 2009, the custodian held 42,456 shares on behalf of employees.

Frisch’s Executive Savings Plan

Common shares totaling 58,492 (as adjusted for changes in capitalization in earlier years) were reserved for issuance under the non-qualified Frisch’s Executive Savings Plan (FESP) (see Benefit Plans in Note A – Accounting Policies) when it was established in 1993. As of September 22, 2009, 40,792 shares remained in the FESP reserve, including 9,752 shares allocated but not issued to participants.

There are no other outstanding options, warrants or rights.

Treasury Stock

As of September 22, 2009, the Company’s treasury held 2,478,706 shares of the Company’s common stock. Most of the shares were acquired in a series of repurchase programs authorized by the Board of Directors from 1998 through 2002, and through a modified “Dutch Auction” self-tender offer in 1997.

In January 2008, the Board of Directors authorized a new repurchase program under which the Company may repurchase up to 500,000 shares of common stock in the open market or through block trades over a two-year period that expires January 28, 2010. Since inception of the current authorization, the Company has acquired 38,681 shares under the program at a cost of approximately $857,000. No shares were repurchased from June 3, 2009 through September 22, 2009.

Earnings Per Share

Basic earnings per share is based on the weighted average number of outstanding common shares during the period presented. Diluted earnings per share includes the effect of common stock equivalents, which assumes the exercise and conversion of dilutive stock options.

	Basic earnings per share			Stock equivalents	Diluted earnings per share
	Weighted average shares outstanding	EPS			Weighted average shares outstanding	EPS
September 22, 2009	5,102,482	$	.59	121,497	5,223,979	$	.57
September 23, 2008	5,107,459		.43	73,223	5,180,682		.42

Stock options to purchase 90,000 shares in the quarter ended September 22, 2009 and 206,200 in the quarter ended September 23, 2008 were excluded from the calculation because the effect was anti-dilutive.

21

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE D - CAPITAL STOCK (CONTINUED)

Share-Based Payment (Compensation Cost)

The fair value of stock options granted is recognized as compensation cost in the consolidated statement of earnings on a straight-line basis over the vesting period of the award. Compensation costs arising from stock options granted are shown below:

	September 22, 2009		September 23, 2008
	(in thousands)
Charged to administrative and advertising expense	$	81	$	78
Tax benefit		28		27
Total share-based compensation cost, net of tax	$	53	$	51
Effect on basic earnings per share	$	.01	$	.01
Effect on diluted earnings per share	$	.01	$	.01

The fair value of each option award is estimated on the date of the grant using the modified Black-Scholes option pricing model, developed with the following assumptions:

	September 22, 2009			September 23, 2008
Weighted average fair value of options	$	8.14		$	6.10
Dividend yield		1.9	%		2.0	%
Expected volatility		32	%		29	%
Risk free interest rate		3.31	%		3.52	%
Expected lives		6.0 years			5.0 years

Dividend yield is based on the Company’s current dividend yield, which is considered the best estimate of projected dividend yields within the contractual life of the options. Expected volatility is based on the historical volatility of the Company’s stock using the month end closing price of the previous five years. Risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. Expected life represents the period of time the options are expected to be outstanding.

As of September 22, 2009, there was $458,000 of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted average period of 1.36 years.

Compensation cost is also recognized in connection with the Company’s Employee Stock Purchase Plan (described elsewhere in Note D). Compensation costs related to the Employee Stock Purchase Plan are determined at the end of each semi-annual offering period—October 31 and April 30.

22

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE E - PENSION PLANS

As discussed more fully under Benefit Plans in Note A – Accounting Policies, the Company sponsors two qualified defined benefit plans plus an unfunded non-qualified Supplemental Executive Retirement Plan (SERP) for “highly compensated employees” (HCE’s). Net periodic pension cost for all three retirement plans is summarized below:

	Sixteen weeks ended
Net periodic pension cost components	September 22, 2009			September 23, 2008
	(in thousands)
Service cost	$	466		$	496
Interest cost		561			535
Expected return on plan assets		(484	)		(630	)
Amortization of prior service cost		3
Recognized net actuarial loss		165			79
Settlement loss		51			—
Curtailment cost		49			—
Net periodic pension cost	$	811		$	485
Weighted average discount rate		6.50	%		6.50	%
Weighted average rate of compensation increase		4.00	%		4.50	%
Weighted average expected long-term rate of return on plan assets		8.00	%		8.00	%

The Company contributes amounts to the two qualified defined benefit pension plans that are sufficient to satisfy legal funding requirements, plus discretionary tax-deductible amounts that may be deemed advisable. Although no contributions are needed to meet minimum funding requirements for the year that will end June 1, 2010, discretionary contributions are currently anticipated at a level of $1,625,000, including $125,000 that had been contributed through September 22, 2009. Obligations to participants in the SERP are satisfied in the form of a lump sum distribution upon retirement of the participants.

Equity securities comprise 70 percent of the target allocation of the plans’ assets. Market volatility experienced over the past twelve months has significantly lowered market values of these securities. The Company’s equity was reduced by approximately $5,000,000 at the end of fiscal year 2009, net of tax, to recognize underfunding in the defined benefit plans, which was the direct result of the market declines in equity securities. In addition, the market declines will likely have a material adverse effect on future funding requirements and result in the recognition of much higher net periodic pension costs for years to come. Net periodic pension cost for the year that will end June 1, 2010 is currently expected in the range of $2,500,000 to 2,600,000.

Compensation expense (not included in the net periodic pension cost described above) relating to the Non Deferred Cash Balance Plan (see Benefit Plans in Note A – Accounting Policies) was $76,000 and $98,000 respectively, during the sixteen weeks ended September 22, 2009 and September 23, 2008. Fiscal 2010’s contribution to the Non-Deferred Cash Balance Plan is currently expected to approximate $250,000. In addition, the President and Chief Executive Officer (CEO) has an employment agreement that calls for additional annual contributions to be made to the trust established for the benefit of the CEO under the Non Deferred Cash Balance Plan (see Benefit Plans in Note A – Accounting Policies) when certain levels of annual pretax earnings are achieved.

The Company also sponsors two 401(k) defined contribution plans and a non-qualified Executive Savings Plan (FESP) for certain HCE’s who have been disqualified from participation in the 401(k) plans (see Benefit Plans in Note A – Accounting Policies). In the sixteen weeks ended September 22, 2009 and September 23, 2008, matching contributions to the 401(k) plans amounted to $50,000 and $51,000 respectively. Matching contributions to the Executive Savings Plan (see Benefit Plans in Note A – Accounting Policies) were $10,000 and $8,000 respectively, in the sixteen week periods ended September 22, 2009 and September 23, 2008.

The Company does not sponsor post retirement health care benefits.

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Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE F – COMPREHENSIVE INCOME

	September 22, 2009			September 23, 2008
	(in thousands)
Net earnings	$	2,988		$	2,175
Amortization of amounts included in net periodic pension cost		268			84
Tax effect		(91	)		(29	)
Comprehensive income	$	3,165		$	2,230

NOTE G – SEGMENT INFORMATION

The Company has two reportable segments within the food service industry: Big Boy restaurants and Golden Corral restaurants. Financial information by operating segment is as follows:

	Sixteen weeks ended
	September 22, 2009			September 23, 2008
	(in thousands)
Sales
Big Boy	$	57,453		$	57,561
Golden Corral		31,529			32,321
	$	88,982		$	89,882
Earnings before income taxes
Big Boy	$	5,545		$	4,906
Opening expense		(14	)		(329	)
Total Big Boy		5,531			4,577
Golden Corral		1,391			(112	)
Opening expense		—			—
Total Golden Corral		1,391			(112	)
Total restaurant level profit		6,922			4,465
Administrative expense		(2,390	)		(2,329	)
Franchise fees and other revenue		392			400
Gains on asset sales		—			1,116
Operating profit		4,924			3,652
Interest expense		(531	)		(589	)
Earnings before income taxes	$	4,393		$	3,063

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Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE G – SEGMENT INFORMATION (CONTINUED)

Depreciation and amortization
Big Boy	$	2,519	$	2,364
Golden Corral		1,702		1,721
	$	4,221	$	4,085
Capital expenditures
Big Boy	$	6,884	$	6,895
Golden Corral		625		700
	$	7,509	$	7,595
	As of
	September 22, 2009		June 2, 2009
Identifiable assets
Big Boy	$	108,545	$	102,886
Golden Corral		72,808		74,090
	$	181,353	$	176,976

NOTE H – COMMITMENTS AND CONTINGENCIES

Commitments

In the ordinary course of business, purchase commitments are entered into with certain of the Company’s suppliers. Most of these agreements are typically for periods of one year or less in duration; however, longer term agreements are also in place. Future minimum payments under these arrangements are $7,860,000, $3,278,000, $3,308,000, $2,514,000 and $56,000 respectively, for the periods ending September 22, 2010, 2011, 2012, 2013 and 2014. These agreements are intended to secure favorable pricing while ensuring availability of desirable products. Management does not believe such agreements expose the Company to any significant risk.

Litigation

In April 2008, the Company filed five separate lawsuits against the lessor of five properties on which the Company operates five Big Boy restaurants. The Company’s complaints claimed breach of contract and asked for declaratory relief and specific performance to force the lessor to allow the Company to purchase the underlying properties for certain amounts that are specified in the lease agreements, which taken together amounted to $2,472,000. The lessor claimed that the Company must purchase the properties for a larger amount based upon alternative values in the lease agreements and market appraisal values. The lessor also filed a lawsuit in April 2008. Its complaint against the Company asked for declaratory relief and specific performance as to the same disputed leases.

The parties entered into a settlement agreement effective August 24, 2009, settling all claims and counterclaims that had been asserted in the six lawsuits. In consideration of the settlement agreement, the lessor agreed to sell, and the Company agreed to purchase, the five properties for the total sum of $4,000,000. The real estate transactions were completed on September 1, 2009.

The Company is subject to various other claims and suits that arise from time to time in the ordinary course of business. Management does not presently believe that the resolution of any claims currently outstanding will result in a material effect on the Company’s earnings, cash flows or financial position. Exposure to loss contingencies from pending or threatened litigation is continually evaluated by management, which believes that adequate provisions for losses have already been included in the consolidated financial statements.

25

Frisch’s Restaurants, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Quarter Fiscal 2010, Ended September 22, 2009

NOTE H – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Other Contingencies

The Company self-insures a significant portion of expected losses under its workers’ compensation program in the state of Ohio. Insurance coverage is purchased from an insurance company for individual claims that may exceed $300,000. (See Self Insurance in Note A – Accounting Policies.) Insurance coverage is maintained for various levels of casualty and general and product liability.

An outstanding letter of credit for $100,000 is maintained by the Company to support its self-insurance program. There are no other outstanding letters of credit issued by the Company.

As of September 22, 2009, the Company operated 23 restaurants on non-owned properties. (See Note C – Leased Properties.) Certain of the leases provide for contingent rental payments, typically based on a percentage of the leased restaurant’s sales in excess of a fixed amount.

The Company is secondarily liable for the performance of a ground lease that has been assigned to a third party. The annual obligation of the lease approximates $48,000 through 2020. Since there is no reason to believe that the third party will default, no provision has been made in the consolidated financial statements for amounts that would be payable by the Company. In addition, the Company has the right to re-assign the lease in the event of the third party’s default.

NOTE I – RELATED PARTY TRANSACTIONS

The Chief Executive Officer of the Company (Craig F. Maier), who also serves as a director of the Company, owns a Big Boy restaurant licensed to him by the Company. Another officer and director of the Company (Karen F. Maier) is a part owner of a Big Boy restaurant that is licensed to her and her siblings (excluding Craig F. Maier). Until her death on September 1, 2009, Blanche F. Maier (the mother of Craig F. Maier and Karen F. Maier) served as a director of the Company. Certain other family members of Mrs. Maier’s also own a licensed Big Boy restaurant.

These three restaurants are operated by the Company and they pay to the Company franchise and advertising fees, employee leasing and other fees, and make purchases from the Company’s commissary. The total paid to the Company by these three restaurants amounted to $1,477,000 and $1,515,000 respectively, during the sixteen weeks ended September 22, 2009 and September 23, 2008. The amount owed to the Company from these restaurants was $96,000 and $86,000 respectively, as of September 22, 2009 and June 2, 2009. Amounts due are generally settled within 28 days of billing.

All related party transactions described above were effected on substantially similar terms as transactions with persons having no relationship with the Company.

The Chairman of the Board of Directors from 1970 to 2005 (Jack C. Maier, deceased February 2005) had an employment agreement that contained a provision for deferred compensation. The agreement provided that upon its expiration or upon the Chairman’s retirement, disability, death or other termination of employment, the Company would become obligated to pay the Chairman or his survivors for each of the next ten years the amount of $214,050, adjusted annually to reflect 50 percent of the annual percentage change in the Consumer Price Index (CPI). Monthly payments of $17,838 to the Chairman’s widow (Blanche F. Maier), a director of the Company until her death on September 1, 2009, commenced on March 1, 2005. On March 1, 2009, the monthly payment was increased to $18,753 from $18,744 in accordance with the CPI provision of the agreement. The present value of the long-term portion of the obligation to Mrs. Maier’s Estate, approximating $906,000, is included in the consolidated balance sheet under the caption “Deferred compensation and other.” The present value of the current portion of the obligation, approximating $167,000, is included in current liabilities in the consolidated balance sheet.

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ITEM 2. MANAGEMENT’S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS

SAFE HARBOR STATEMENT under the PRIVATE SECURITIES LITIGATION REFORM ACT of 1995

Forward-looking statements are included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A). Such statements may generally express management’s expectations with respect to its plans, or its assumptions and beliefs concerning future developments and their potential effect on the Company. There can be no assurances that such expectations will be met or that future developments will not conflict with management’s current beliefs and assumptions, which are inherently subject to risks and other uncertainties. Factors that could cause actual results and performance to differ materially from anticipated results that may be expressed or implied in forward-looking statements are included in, but not limited to, the discussion in this Form 10-Q under Part II, Item 1A. “Risk Factors.”

Words such as “should,” “would,” “could,” “may,” “plan(s),” “anticipate(s),” “project(s),” “believe(s),” “will,” “expect(s),” “estimate(s),” “intend(s),” “continue(s),” “assumption(s),” “goal(s),” “target” and similar words (or derivatives thereof) are generally used to distinguish forward-looking statements from historical or present facts.

All forward-looking information in this MD&A is provided by the Company pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of all risk factors. Except as may be required by law, the Company disclaims any obligation to update any forward-looking statements that may be contained in this MD&A.

This MD&A should be read in conjunction with the consolidated financial statements. The Company has no off-balance sheet arrangements and does not use special purpose entities.

CORPORATE OVERVIEW

The operations of Frisch’s Restaurants, Inc. and Subsidiaries (“Company”) consist of two reportable segments within the restaurant industry: full service family-style “Big Boy” restaurants and grill buffet-style “Golden Corral” restaurants. As of September 22, 2009, 88 Big Boy restaurants and 35 Golden Corral restaurants were owned and operated by the Company, located in various regions of Ohio, Kentucky and Indiana, plus smaller areas in Pennsylvania and West Virginia.

The Company’s First Quarter of Fiscal 2010 consists of the sixteen weeks ended September 22, 2009. It compares with the sixteen weeks ended September 23, 2008, which constituted the First Quarter of Fiscal 2009. The first quarter of the Company’s fiscal year normally accounts for a disproportionate share of annual revenue and earnings because it contains sixteen weeks, whereas the following three quarters normally contain only twelve weeks each. References to Fiscal 2010 refer to the 52 week year that will end on June 1, 2010. References to Fiscal 2009 refer to the 52 week year that ended June 2, 2009.

Net earnings for the First Quarter of Fiscal 2010 were $2,988,000, or diluted earnings per share (EPS) of $.57, compared with $2,175,000, or diluted EPS of $.42 in the First Quarter of Fiscal 2009.

Significant factors accounting for the change:

• Food cost is much lower – as a percentage of sales, food costs decreased to 34.0 percent in the First Quarter of Fiscal 2010, from 37.0 percent in the First Quarter of Fiscal 2009.

• Gains on the sale of real estate were $1,116,000 in the First Quarter of Fiscal 2009. There were no gains in the First Quarter of Fiscal 2010.

• The effective tax rate was 32 percent in the First Quarter of Fiscal 2010, up from 29 percent in the First Quarter of Fiscal 2009.

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Another significant factor that continues to place pressure on the Company’s operating margins has been the automatic annual increase in the minimum wage to adjust for inflation, as mandated by Ohio voters.

• The minimum wage was increased 33 percent from $5.15 per hour to $6.85 per hour beginning January 1, 2007. It was increased to $7.00 per hour on January 1, 2008 and to $7.30 per hour on January 1, 2009.

• The minimum wage for tipped employees increased 61 percent from $2.13 per hour to $3.43 per hour beginning January 1, 2007. It was increased to $3.50 per hour on January 1, 2008 and to $3.65 per hour on January 1, 2009.

More than two-thirds of the Company’s payroll costs are incurred in Ohio. The effects of paying the required higher hourly rates of pay have effectively been countered through the combination of higher menu prices charged to customers and reductions in the number of hours that employees are permitted to work. The next Ohio wage increase goes into effect on January 1, 2010. Although no increase is currently expected, additional reductions in hours will be implemented if necessary.

The federal minimum wage for non-tipped employees increased from $5.15 per hour to $5.85 per hour in July 2007. It was increased to $6.55 per hour in July 2008 and to $7.25 per hour in July 2009. The rate for tipped employees was not affected by the federal legislation, remaining at $2.13 per hour. Without benefit of further reductions in labor hours, the July 2009 increase to $7.25 per hour would increase annual payroll costs by an estimated $400,000.

RESULTS of OPERATIONS

Sales

The Company’s sales are primarily generated through the operation of Big Boy restaurants and Golden Corral restaurants. Big Boy sales also include wholesale sales from the Company’s commissary to restaurants licensed to other Big Boy operators and the sale of Big Boy’s signature brand tartar sauce to grocery stores. Same store sales comparisons are a key metric that management uses in the operation of the business. Same store sales are affected by changes in customer counts and menu price increases. Changes in sales also occur as new restaurants are opened and older restaurants are closed. Below is the detail of consolidated restaurant sales:

	1st Quarter
	2010		2009
	(in thousands)
Big Boy restaurants	$	54,517	$	54,418
Wholesale sales to licensees		2,672		2,850
Wholesale sales to grocery stores		264		293
Total Big Boy sales		57,453		57,561
Golden Corral restaurants		31,529		32,321
Consolidated restaurant sales	$	88,982	$	89,882

Big Boy sales decreased in the First Quarter of Fiscal 2010 because a) of lower wholesale sales to licensees and grocery stores, and b) same store sales decreased .1 percent on a decrease in customer counts of 2.3 percent. The Big Boy same store sales comparisons include average menu price increases of 1.0 percent and 2.4 percent implemented respectively in the First Quarter of Fiscal 2010 and the First Quarter of Fiscal 2009. In addition, a 1.4 percent increase was put into place in February 2009. Another increase will likely be implemented in February 2010. It should also be noted that sales for the First Quarter of Fiscal 2009 were adversely affected by a Big Boy restaurant that was taken out of service for three months while a replacement building was being constructed.

The Company operated 88 Big Boy restaurants as of September 22, 2009. The count of 88 includes two new restaurants that opened respectively in August and October 2008, minus one low volume Big Boy restaurant that ceased operating at the end of Fiscal 2009. No Big Boy restaurants were opened or closed during the First Quarter of Fiscal 2010. Two Big Boy restaurant buildings were under construction as of September 22, 2009. The first one opened for business on September 30, 2009. It replaced an older facility with a new building on a superior nearby site. The second new restaurant is scheduled to open in November 2009 in a new market area. In addition, two more Big Boys are being planned to open before the end of Fiscal 2010.

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Golden Corral sales decreased in the First Quarter of Fiscal 2010 because of a same store sales decrease of 2.4 percent, which came on a 5.1 percent reduction in customer counts. The Company currently operates 35 Golden Corral restaurants, all of which are included in the same store sales comparison. The Golden Corral same store sales comparisons include average menu price increases of .3 percent, 2.5 percent and .5 percent implemented respectively in May 2009, September 2008 and June 2008.

Gross Profit

Gross profit for the Big Boy segment includes wholesale sales and cost of wholesale sales. Gross profit differs from restaurant level profit disclosed in Note G (Segment Information) to the consolidated financial statements, as advertising expense is charged against restaurant level profit. Gross profit for both operating segments is shown below:

	1st Quarter
	2010		2009
	(in thousands)
Big Boy gross profit	$	6,912	$	5,958
Golden Corral gross profit		2,074		615
Total gross profit	$	8,986	$	6,573

The operating percentages shown in the following table are percentages of total sales, including Big Boy wholesale sales. The table supplements the discussion that follows, which addresses cost of sales for both the Big Boy and Golden Corral reporting segments, including food cost, payroll and other operating costs.

	1st Quarter 2010			1st Quarter 2009
	Total	Big Boy	GC	Total	Big Boy	GC
Sales	100.0	100.0	100.0	100.0	100.0	100.0
Food and Paper	34.0	32.3	37.2	37.0	35.1	40.5
Payroll and Related	33.4	35.8	28.9	32.9	34.8	29.5
Other Operating Costs (including opening costs)	22.5	19.8	27.3	22.7	19.7	28.1
Gross Profit	10.1	12.1	6.6	7.4	10.4	1.9

Food cost deflation continued through the summer of 2009. The reductions have been driven primarily by lower costs for major grains that are the principal feed ingredients for cattle, hogs and poultry. Corn prices in particular have experienced a precipitous decline from a year ago. Evidence of the relief can be clearly identified by the much lower food and paper cost percentages shown in the above table. Notwithstanding the improvements, the market for beef remains highly volatile, as import and export restrictions can and do cause wide cost fluctuations. The food and paper cost percentages for the Golden Corral segment are much higher than the Big Boy segment because of the all-you-can-eat nature of the Golden Corral concept, as well as its use of steak as a featured item on the buffet.

Although the Company has effectively mitigated the effects of mandated increases in the minimum wage through higher menu prices and a reduction in the number of hours worked by hourly paid employees, several other factors drove the payroll and related percentage higher during the First Quarter of Fiscal 2010. In addition to higher payments of incentive compensation to restaurant management commensurate with improved earnings, higher costs were also incurred for medical insurance premiums and pension costs, along with a charge to increase the Company’s reserves for its self-insured workers’ compensation program.

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Medical insurance premiums escalated by almost fifteen percent for the plan year that runs January 1, 2009 through December 31, 2009. The Company is absorbing 75 to 80 percent of the estimated $9.5 million cost for the 2009 plan year, with employees contributing the remaining 20 to 25 percent.

Management performs a comprehensive review each quarter of its self-insurance program for Ohio workers’ compensation and adjusts its reserves as deemed appropriate based on claims experience. A $209,000 charge against earnings was recorded during the First Quarter of Fiscal 2010 to increase the reserves. No adjustment to the reserves was necessary during the First Quarter of Fiscal 2009.

Net periodic pension cost was $811,000 and $485,000 respectively, in the First Quarter of Fiscal 2010 and the First Quarter of 2009. Net periodic pension cost for Fiscal 2010 is currently expected to be in the range of $2,500,000 to $2,600,000. The final total in Fiscal 2009 was $1,814,000. The higher cost is primarily the result of Fiscal 2009’s significant market losses in equity securities, which are the primary funding source for the pension trusts. The market losses in Fiscal 2009 required underfunded status of the pension plans to be recognized at June 2, 2009, which resulted in a reduction in the Company’s equity of approximately $5,000,000, net of tax. In addition, absent a material restoration in the values of the securities, future funding requirements will be adversely affected, and much higher levels of net periodic pension costs will need to be recognized for years to come. Although no contributions are needed to meet minimum funding requirements for Fiscal 2010, discretionary contributions are currently anticipated at a level of $1,625,000, including $125,000 that was contributed during the First Quarter of Fiscal 2010.

Other operating costs include occupancy costs such as maintenance, rent, depreciation, property tax, insurance and utilities; plus costs relating to field supervision, accounting and payroll preparation costs, franchise fees for Golden Corral restaurants, new restaurant opening costs and many other restaurant operating expenses. Opening costs were $14,000 for Big Boy restaurants and zero for Golden Corral restaurants during the First Quarter of Fiscal 2010. During the First Quarter of Fiscal 2009, opening costs were $329,000 for Big Boy and zero for Golden Corral. As most of the expenses charged to other operating costs tend to be more fixed in nature, the percentages shown in the above table can be greatly affected by changes in same store levels. The reduction in Golden Corral from 28.1 percent to 27.3 percent is the result of lower costs for utilities and maintenance. Other operating costs are a much higher percentage of sales in the Golden Corral segment (compared with the Big Boy segment) because sales volumes generally remain well below original expectations.

Operating Profit

To arrive at the measure of operating profit, administrative and advertising expense is subtracted from gross profit, while franchise fees and other revenue is added to it. Gains and losses from the sale of real property, if any, are then respectively added or subtracted.

Administrative and advertising expense did not appreciably change during the First Quarter of Fiscal 2010, as compared with the First Quarter of Fiscal 2009. Stock based compensation expense included in administrative and advertising expense was $81,000 during the First Quarter of Fiscal 2010, and was $78,000 in the First Quarter of Fiscal 2009.

Revenue from franchise fees is based on sales volumes generated by Big Boy restaurants that are licensed to other operators. The fees are based principally on percentages of sales and are recorded on the accrual method as earned. As of September 22, 2009, 26 Big Boy restaurants were licensed to other operators and paying franchise fees to the Company, a reduction of one restaurant from a year ago. Other revenue also includes certain other fees from restaurants licensed to others along with minor amounts of rent and investment income.

There were no sales of real property during the First Quarter of Fiscal 2010. Gains from the sale of real property amounted to $1,116,000 during the First Quarter of Fiscal 2009. These gains resulted primarily from the disposition of a Big Boy restaurant that ceased operations in June 2008. Aggregate proceeds amounted to $1,581,000.

No impairment of assets was recorded during either the First Quarter of Fiscal 2010 or the First Quarter of Fiscal 2009.

30

Interest Expense

Interest expense in the First Quarter of Fiscal 2010 was $57,000 lower than the First Quarter of Fiscal 2009, a reduction of 9.7 percent. The reduction is the result of lower debt levels than a year ago, lower variable interest rates and lower interest charges associated with capitalized leases.

Income Tax Expense

Income tax expense as a percentage of pretax earnings was estimated at 32 percent in the First Quarter of Fiscal 2010 and was 29 percent in the First Quarter of Fiscal 2009. These rates have been kept consistently low through the Company’s use of tax credits, especially the federal credit allowed for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. These tax credits are generally less favorable to the effective tax rate when pretax income increases.

LIQUIDITY and CAPITAL RESOURCES

Sources of Funds

Food sales to restaurant customers provide the Company’s principal source of cash. The funds from sales are immediately available for the Company’s use, as substantially all sales to restaurant customers are received in currency or are settled by debit or credit cards. The primary source of cash provided by operating activities is net earnings plus depreciation and impairment of assets, if any. Other sources of cash may include borrowing against credit lines, proceeds received when stock options are exercised and occasional sales of real estate. In addition to servicing debt, these cash flows are utilized for discretionary objectives, including capital projects (principally restaurant expansion) and dividends.

Working Capital Practices

The Company has historically maintained a strategic negative working capital position, a common practice in the restaurant industry. As significant cash flows are consistently provided by operations, and credit lines remain readily available, the use of this practice should not hinder the Company’s ability to satisfactorily retire any of its obligations when due, including the aggregated contractual obligations and commercial commitments shown in the following table.

Aggregated Information about Contractual Obligations and Commercial Commitments September 22, 2009

		Payments due by period (in thousands)
		Total		year 1		year 2		year 3		year 4		year 5		More than 5 years
	Long-Term Debt	$	31,539	$	8,229	$	7,323	$	6,030	$	4,545	$	2,915	$	2,497
	Rent due under Capital Lease Obligations		627		268		251		108		-		-		-
	Rent due under Operating Leases		18,874		1,583		1,502		1,434		1,371		1,385		11,599
1	Unconditional Purchase Obligations		17,016		7,860		3,278		3,308		2,514		56		-
2	Other Long-Term Obligations		1,262		227		230		232		235		238		100
	Total Contractual Cash Obligations		69,318		18,167		12,584		11,112		8,665		4,594		14,196

1 Primarily consists of commitments for certain food and beverage items, plus capital projects including commitments to purchase real property, if any.

2 Deferred compensation liability.

The working capital deficit was $16,560,000 as of September 22, 2009, about the same as it was as of June 2, 2009.

In September 2009, the maximum amount that may be borrowed under the terms of the Company’s Construction Draw Facility was increased by $3,500,000, which brought to $8,000,000 the amount available to be drawn upon. These funds are readily available. In addition, a $5,000,000 revolving loan (currently unused) is also readily available if needed to fund temporary working capital. The Company is in compliance with the covenants contained in both of these credit facilities. Unless extended, both of the credit facilities are scheduled to expire in October 2010.

31

Operating Activities

Operating cash flows were $7,517,000 in the First Quarter of Fiscal 2010, or $2,788,000 higher than the First Quarter of Fiscal 2009. The increase is primarily attributable to higher net earnings plus normal changes in assets and liabilities such as prepaid expenses, inventories and accounts payable, all of which can and do often widely fluctuate from quarter to quarter. Net earnings in the First Quarter of Fiscal 2009 included gains from the sale of real estate that amounted to $1,116,000. Management measures cash flows from the operation of the business by simply adding to net earnings certain non-cash expenses such as depreciation, losses (net of any gains) on dispositions of assets, charges for impairment of assets (if any) and stock based compensation cost. The result of this approach is reflected as a sub-total in the consolidated statement of cash flows: $7,629,000 in the First Quarter of Fiscal 2010 and $5,384,000 in the First Quarter of Fiscal 2009.

Investing Activities

Capital spending is the principal component of investing activities. Capital spending was $7,509,000 during the First Quarter of Fiscal 2010, a decrease of $86,000 from the First Quarter of Fiscal 2009. This year’s capital spending includes $6,884,000 for Big Boy restaurants and $625,000 for Golden Corral restaurants. These capital expenditures consisted of new restaurant construction, acquisitions of existing restaurants, remodeling existing restaurants including kitchen and dining room expansions, routine equipment replacements and other capital outlays.

There were no proceeds from disposition of property during the First Quarter of Fiscal 2010. Proceeds in First Quarter of Fiscal 2009 amounted to $1,581,000, primarily reflecting the sale of an older Big Boy restaurant that had ceased operations in June 2008. Its sale resulted in a gain of $1,072,000.

Financing Activities

Borrowing against credit lines amounted to $4,000,000 during the First Quarter of Fiscal 2010. Scheduled and other payments of long-term debt and capital lease obligations amounted to $2,229,000 during the First Quarter of Fiscal 2010. Regular quarterly cash dividends paid to shareholders during the First Quarter of Fiscal 2010 totaled $612,000. In addition, the Board of Directors declared a $.13 per share dividend (one cent per share or 8 percent higher than the previous $.12 per share dividend) on September 2, 2009 that totaled $664,000 when it was paid on October 9, 2009. The Company expects to continue its 49 year practice of paying regular quarterly cash dividends.

During the First Quarter of Fiscal 2010, 4,400 shares of the Company’s common stock were acquired pursuant to the exercise of stock options, yielding proceeds to the Company of approximately $94,000. As of September 22, 2009, 490,000 shares granted under the Company’s two stock option plans remain outstanding, including 400,000 fully vested shares at a weighted average exercise price per share of $20.72. As of September 22, 2009, approximately 566,000 shares remained available to be granted under the 2003 Stock Option and Incentive Plan, net of 52,000 options that were granted to employees in June 2009. On October 6, 2009, 18,000 option shares were granted to non-employee members of the Board of Directors and 3,000 option shares were granted to the President and Chief Executive Officer pursuant to the terms of his employment agreement.

In January 2008, the Board of Directors authorized a repurchase program under which the Company may repurchase up to 500,000 shares of its common stock in the open market or through block trades over a two-year period that will expire on January 28, 2010. No shares were acquired under the program during the First Quarter of Fiscal 2010. Since inception of the current authorization, 38,681 shares had been acquired at a cost of $857,000.

Other Information

No new Big Boy restaurants opened for business during the First Quarter of Fiscal 2010. Two Big Boy restaurant buildings were under construction as of September 22, 2009. The first one opened for business on September 30, 2009, which replaced an older suburban Cincinnati Big Boy with a new building on a superior nearby site. The second one is currently on schedule to open in November 2009 in new market area of suburban Cincinnati. Two other new Big Boy restaurants are currently scheduled to open respectively in March and April 2010 on land acquired by the Company in fiscal year 2009. Construction has been scheduled to begin in December 2009.

Including land and land improvements, the cash required to build and equip each new Big Boy restaurant currently ranges from $2,500,000 to $3,200,000. The actual cost depends greatly on the price paid for the land and the cost of land improvements, which can vary widely from location to location, and whether the land is purchased or leased. Future costs will also depend on whether the present building prototype (used since 2001) is constructed or whether the prototype of a second design having a smaller footprint is used, which is being developed for use in smaller

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markets. The smaller prototype is designed to maintain the overall appearance and theme of the larger prototype. The two new Big Boy restaurants scheduled to open respectively in March and April 2010 will be built using plans for the smaller prototype. Several sites are currently being evaluated for potential acquisition and development. As of September 22, 2009, any contracts that existed to acquire sites for future development were cancellable at the Company’s sole discretion while due diligence is being pursued under the inspection period provisions of the contracts.

Approximately one-fifth of the Big Boy restaurants are routinely renovated or decoratively updated each year. The renovations not only refresh and upgrade interior finishes, but are also designed to synchronize the interiors and exteriors of older restaurants with the newer prototype that has been used since 2001. The current average cost to renovate a typical older restaurant ranges from $150,000 to $175,000. Restaurants opened since 2001 also receive updates when they reach five years of age, which on average currently range from $80,000 to $90,000. In addition, certain high-volume Big Boy restaurants are regularly evaluated to determine whether their kitchens should be redesigned for increased efficiencies and whether an expansion of the dining room is warranted. A typical kitchen redesign costs approximately $125,000 while a dining room expansion can cost up to $750,000.

Although the Company possesses development rights to open up to twelve more Golden Corrals, no further development is currently planned and there is no active search for sites on which to build. Three Golden Corral restaurant locations that were determined to have an impairment of long-lived assets at the end fiscal year 2008 remained in operation as of September 22, 2009.

Eleven Golden Corral restaurants are scheduled to be renovated in Fiscal 2010. In addition, carpeting is typically replaced in each restaurant every two and a half years on average. The Fiscal 2010 remodeling budget, including carpeting costs, is approximately $1,800,000.

Although part of the Company’s strategic plan entails owning the land on which it builds new restaurants, it is sometimes necessary to enter ground leases to obtain desirable land on which to build. Seven of the 35 Golden Corral restaurants now in operation and three Big Boy restaurants opened since 2003 were built on leased land. As of September 22, 2009, a total of 23 restaurants were in operation on non-owned premises, all of which are being accounted for as operating leases.

Five Big Boy restaurant facilities, which had been occupied under month-to-month arrangements, were acquired from the landlord on September 1, 2009 for the total sum of $4,000,000. The purchase prices had been the subject of litigation, which was settled in August 2009.

APPLICATION of CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to use estimates and assumptions to measure certain items that affect the amounts reported in the financial statements and accompanying footnotes. These judgments are based on knowledge and experience about past and current events, and assumptions about future events. Accounting estimates can and do change as new events occur and additional information becomes available. Actual results may differ markedly from current judgment.

Two factors are required for an accounting policy to be deemed critical. The policy must be significant to the fair presentation of a company’s financial condition and its results of operations, and the policy must require management’s most difficult, subjective or complex judgments. The Company believes the following to be its critical accounting policies.

Self Insurance

The Company self-insures a significant portion of expected losses from its workers’ compensation program in the state of Ohio. The Company purchases coverage from an insurance company for individual claims in excess of $300,000. Reserves for claims expense include a provision for incurred but not reported claims. Each quarter, the Company reviews claims valued by its third party administrator (TPA) and then applies experience and judgment to determine the most probable future value of incurred claims. As the TPA submits additional new information, the Company reviews it in light of historical claims for similar injuries, probability of settlement, and any other facts that might provide guidance in determining ultimate value of individual claims. Unexpected changes in any of these or other factors could result in actual costs differing materially from initial projections or values currently carried in the self-insurance reserves.

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Pension Plans

Pension plan accounting requires rate assumptions for future compensation increases and the long-term return on plan assets. A discount rate is also applied to the calculations of net periodic pension cost and projected benefit obligations. An informal committee consisting of executives from the Finance Department and the Human Resources Department, with guidance provided by the Company’s actuarial consulting firm, develops these assumptions each year. The consulting firm also provides services in calculating estimated future obligations and net periodic pension cost.

Assets of the pension plans are targeted to be invested 70 percent in equity securities, as these investments have historically provided the greatest long-term returns. To determine the long-term rate of return on plan assets, the committee looks at the target asset allocation of plan assets and determines the expected return on each asset class. The expected returns for each asset class are combined and rounded to the nearest 25 basis points to determine the overall expected return on assets. The committee determines the discount rate by looking at the projected future benefit payments and matches them to spot rates based on yields of high-grade corporate bonds. A single discount rate is selected, and then rounded to the nearest 25 basis points, which produces the same present value as the various spot rates.

Future funding of the pension plans largely depends upon the performance of investments held in the trusts that have been established for the plans. Equity securities comprise 70 percent of the target allocation of the plans’ assets. Poor performance in equity securities markets can significantly lower the market values of the plans’ investment portfolios, which, in turn, can result in a) material increases in future funding requirements, b) much higher net periodic pension costs to be recognized in future years, and c) the plans reaching underfunded status requiring reductions in the Company’s equity to be recognized.

Long-Lived Assets

Long-lived assets include property and equipment, goodwill and other intangible assets. Property and equipment typically approximates 85 to 90 percent of the Company’s total assets. Judgments and estimates are used to determine the carrying value of long-lived assets. This includes the assignment of appropriate useful lives, which affect depreciation and amortization expense. Capitalization policies are continually monitored to assure they remain appropriate.

Management considers a history of cash flow losses on a restaurant-by-restaurant basis to be the primary indicator of potential impairment. Carrying values of property and equipment are tested for impairment at least annually, and whenever events or circumstances indicate that the carrying value may be impaired. When undiscounted expected future cash flows are less than carrying values, an impairment loss is recognized for the amount by which carrying values exceed the greater of the net present value of the future cash flow stream or a floor value. Future cash flows can be difficult to predict. Changing neighborhood demographics and economic conditions, and many other factors may influence operating performance, which affect cash flows. Floor values are generally determined by opinions of value provided by real estate brokers and/or management’s judgment as developed through its experience in disposing of property.

Sometimes it becomes necessary to cease operating a certain restaurant due to poor operating performance. The final impairment amount can be significantly different from the initial charge, particularly if the eventual market price received from the disposition of the property differs materially from initial estimates of floor values.

Acquired goodwill and other intangible assets are tested for impairment annually or whenever an impairment indicator arises.

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES about MARKET RISKS

The Company has no significant market risk exposure to interest rate changes as substantially all of its debt is currently financed with fixed interest rates. The Company does not currently use derivative financial instruments to manage its exposure to changes in interest rates. Any cash equivalents maintained by the Company have original maturities of three months or less. The Company does not use foreign currency.

Big Boy restaurants utilize centralized purchasing and food preparation, which is provided through the Company’s commissary and food manufacturing plant. The Company believes the commissary operation ensures uniform product quality and safety, timeliness of distribution to restaurants and creates efficiencies that ultimately result in lower food and supply costs. The commissary operation does not supply Golden Corral restaurants.

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Commodity pricing affects the cost of many of the Company’s food products. Commodity pricing can be extremely volatile, affected by many factors outside the Company’s control, including import and export restrictions, the influence of currency markets relative to the U.S. dollar, supply versus demand, production levels and the impact that adverse weather conditions may have on crop yields. Certain commodities purchased by the commissary, principally beef, chicken, pork, dairy products, fish, french fries and coffee, are generally purchased based upon market prices established with vendors. Purchase contracts for some of these items may contain contractual provisions that limit the price to be paid. These contracts are normally for periods of one year or less but may have longer terms if favorable long-term pricing becomes available. Food supplies are generally plentiful and may be obtained from any number of suppliers, which mitigates the Company’s overall commodity cost risk. Quality, timeliness of deliveries and price are the principal determinants of source. The Company does not use financial instruments as a hedge against changes in commodity pricing.

Except for items such as bread, fresh produce and dairy products that are purchased from any number of reliable local suppliers, the Golden Corral segment of the business currently purchases substantially all food, beverage and other menu items from the same approved vendor that Golden Corral Franchising Systems, Inc. (the Franchisor) uses in its operations. Deliveries are received twice per week. Other vendors are available to provide products that meet the Franchisor’s specifications at comparable prices should the Company wish or need to make a change.

ITEM 4. CONTROLS and PROCEDURES

a) Effectiveness of disclosure controls and procedures. The Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 22, 2009, the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that the Company files under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) would be accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

b) Changes in internal control over financial reporting. The CEO and CFO have concluded that there were no significant changes in the Company’s internal control over financial reporting during the fiscal quarter ended September 22, 2009 that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 4T. CONTROLS and PROCEDURES

Not applicable.

PART II - - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A. In April 2008, the Company filed five separate lawsuits against 7373 Corporation (“7373”), the landlord of five properties on which the Company operates five Big Boy restaurants. The Company’s complaints claimed breach of contract and asked for declaratory relief and specific performance. In May 2008, 7373 filed its Answers and Counterclaims. The Company maintained that it should be allowed to purchase the five underlying properties for certain amounts that are specified in the Lease Agreements, which taken together amounted to $2,471,540. 7373 claimed that the Company must purchase the properties for a larger amount based upon alternative values in the Lease Agreements and market appraisal values.

7373 filed a lawsuit against the Company on April 2, 2008 that asked for declaratory relief and specific performance as to the same disputed leases. In May 2008, the Company filed a Motion to Dismiss for Lack of Personal Jurisdiction, Or, In the Alternative, Motion to Abate.

The parties entered into a Settlement Agreement effective August 24, 2009, settling all claims and counterclaims that had been asserted in the six lawsuits, which are listed below:

• Case No. 08-CI-1079 filed April 2, 2008 in Kenton County Circuit Court, Kenton County Kentucky.

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• Case No. 08-CI-609 filed April 2, 2008 in Franklin County Circuit Court, Franklin County Kentucky.

• Case No. 08-CI-1374 filed April 25, 2008 in Kenton County Circuit Court, Kenton County Kentucky.

• Case No. 08-CI-4671 filed April 25, 2008 in Jefferson County Circuit Court, Jefferson County Kentucky.

• Case No. 08CV71318 filed April 25, 2008 in Warren County Court of Common Pleas, Warren County, Ohio.

• Case No. 50-2008 CA009950XXXXMB filed April 2, 2008 in Palm Beach County Florida, Circuit Court of the Fifteenth Judicial Circuit.

The parties agreed to file with the respective courts an Agreed Order of Dismissal, with prejudice, of all claims and counterclaims. In consideration of the Settlement Agreement, 7373 agreed to sell, and the Company agreed to purchase, the five properties for the total sum of $4,000,000. The real estate transactions closed on September 1, 2009.

B. The Company is subject to various other claims and suits that arise from time to time in the ordinary course of business. Management does not presently believe that the resolution of any claims currently outstanding will result in a material effect on the Company’s earnings, cash flows or financial position. Exposure to loss contingencies from pending or threatened litigation is continually evaluated by management, which believes that adequate provisions for losses have already been included in the consolidated financial statements.

ITEM 1A. RISK FACTORS

The Company continually takes reasonable preventive measures to reduce its risks and uncertainties. However, the nature of some risks and uncertainties provides little, if any, control to the Company. The materialization of any of the risks and uncertainties identified herein, together with those risks not specifically listed or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of any affected restaurant(s) with an impairment of assets charge taken against earnings, and could adversely affect the price at which shares of the Company’s common stock trade.

Food Safety

Food safety is the most significant risk to any company that operates in the restaurant industry. It is the focus of increased government regulatory initiatives at the local, state and federal levels. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to be certified in ServSafe Training and are required to be re-certified every five years.

Failure to protect the Company’s food supplies could result in food borne illnesses and/or injuries to customers. Publicity of such events in the past has caused irreparable damages to the reputations of certain operators in the restaurant industry. If any of the Company’s customers become ill from consuming the Company’s products, the affected restaurants may be forced to close. An instance of food contamination originating at the commissary operation could have far-reaching effects, as the contamination would affect substantially all Big Boy restaurants.

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Economic Factors

Economic recessions can negatively influence discretionary spending in restaurants and result in lower customer counts, as consumers become more price conscious, tending to conserve their cash as unemployment and economic uncertainty mount. The effects of higher gasoline costs can also negatively affect discretionary consumer spending in restaurants. Increasing costs for energy can affect profit margins in other ways. Petroleum based material is often used to package certain products for distribution. In addition, suppliers may add surcharges for fuel to their invoices. The cost to transport products from the commissary to restaurant operations will rise with each increase in fuel prices. Higher costs for natural gas and electricity result in much higher costs to heat and cool restaurant facilities and to cook food.

Inflationary pressure, particularly on food costs, labor costs (especially associated with increases in the minimum wage) and health care benefits, can negatively affect the operation of the business. Shortages of qualified labor are sometimes experienced in certain local economies. In addition, the loss of a key executive could pose a significant adverse effect on the Company.

Future funding requirements of the two qualified defined benefit pension plans that are sponsored by the Company largely depend upon the performance of investments that are held in trusts that have been established for the plans. Equity securities comprise 70 percent of the target allocation of the plans’ assets. Poor performance in equity securities markets can significantly lower the market values of the plans’ investment portfolios, which, in turn, can result in a) material increases in future funding requirements, b) much higher net periodic pension costs to be recognized in future years, and c) the plans reaching underfunded status requiring reductions in the Company’s equity to be recognized.

Competition

The restaurant industry is highly competitive and many of the Company’s competitors are substantially larger and possess greater financial resources than does the Company. Both the Big Boy and Golden Corral operating segments have numerous competitors, including national chains, regional and local chains, as well as independent operators. None of these competitors, in the opinion of the Company’s management, presently dominates the family-style sector of the restaurant industry in any of the Company’s operating markets. That could change at any time due to:

• changes in economic conditions

• changes in demographics in neighborhoods where the Company operates restaurants

• changes in consumer perceptions of value, food and service quality

• changes in consumer preferences, particularly based on concerns with nutritional content of food on the Company’s menus

• new competitors that enter the Company’s markets from time to time

• increased competition from supermarkets and other non-traditional competitors

• increased competition for quality sites on which to build restaurants

Development Plans

The Company’s business strategy and development plans also face risks and uncertainties. These include the inherent risk of poor quality decisions in the selection of sites on which to build restaurants, the ever rising cost and availability of desirable sites and increasingly rigorous requirements on the part of local governments to obtain various permits and licenses. Other factors that could impede plans to increase the number of restaurants operated by the Company include saturation in existing markets and limitations on borrowing capacity and the effects of higher interest rates.

The Supply and Cost of Food

Food purchases can be subject to significant price fluctuations that can considerably affect results of operations from quarter to quarter and year to year. Price fluctuations can be due to seasonality or any number of factors. The market for beef, in particular, continues to be highly volatile due in part to import and export restrictions. Beef costs can also be affected by bio-fuel initiatives and other factors that influence the cost to feed cattle. The Company depends on timely deliveries of perishable food and supplies. Any interruption in the continuing supply would harm the Company’s operations.

Litigation and Negative Publicity

Employees, customers and other parties bring various claims against the Company from time to time. Defending such claims can distract the attention of senior level management away from the operation of the business. In addition, negative publicity associated with any adverse judgment that may be rendered against the Company could

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harm the Company’s reputation, which, in turn, could adversely affect operating results. Other negative publicity such as that arising from rumor and innuendo spread though social internet media and other sources can also create adverse effects on results of operations.

Governmental and Other Rules and Regulations

Governmental and other rules and regulations can pose significant risks to the Company. Examples include:

• changes in environmental regulations that would significantly add to the Company’s costs

• exposure to penalties for potential violations of numerous governmental regulations in general, and immigration (I-9) and labor regulations regarding the employment of minors in particular

• any future imposition by OSHA of costly ergonomics regulations on workplace safety

• legislative changes affecting labor law, especially increases in the federal or state minimum wage requirements

• legislation affecting health care costs

• climate change legislation that affects the cost of energy

• legislation or court rulings that result in changes to tax codes that are adverse to the Company

• changes in accounting standards imposed by governmental regulators or private governing bodies could adversely affect the Company’s financial position

• estimates used in preparing financial statements and the inherent risk that future events affecting them may cause actual results to differ markedly

Catastrophic Events

Unforeseen catastrophic events could disrupt the Company’s operations, the operations of the Company’s suppliers and the lives of the Company’s customers. The Big Boy segment’s dependency on the commissary operation in particular could present an extensive disruption of products to restaurants should a catastrophe impair its ability to operate. Examples of catastrophic events include but are not limited to:

• adverse winter weather conditions

• natural disasters such as earthquakes or tornadoes

• fires or explosions

• widespread power outages

• criminal acts, including bomb threats, robberies, hostage taking, kidnapping and other violent crimes

• acts of terrorists or acts of war

• civil disturbances and boycotts

• disease transmitted across borders that may enter the food supply chain

Technology and Information Systems

The strategic nature of technology and information systems is of vital importance to the operations of the Company. Events that could pose threats to the operation of the business include:

• catastrophic failure of certain information systems

• security violations or any unauthorized access to information systems

• difficulties that may arise in maintaining existing systems

• difficulties that may occur in the implementation of and transition to new systems

• financial stability of technology vendors to support software over the long-term

Golden Corral

Golden Corral same-store sales declines have been experienced in nineteen of the last 24 quarters, during which cash flows from Golden Corral operations have sometimes deteriorated. The ability of the Company to reverse the downturn and permanently restore sales and margin growth, thereby allowing corrective measures to be set in place, being critical to the restoration of sales and margin growth, poses a significant risk to the Company.

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ITEM 2. UNREGISTERED SALES of EQUITY SECURITIES and USE of PROCEEDS

In January 2008, the Board of Directors authorized a program to repurchase up to 500,000 shares of the Company’s common stock in the open market or through block trades over a two year time frame that expires January 28, 2010. No repurchases of common stock were made during the fiscal quarter ended September 22, 2009. A maximum of 461,319 common shares remain available to be repurchased under the program.

ITEM 3. DEFAULTS upon SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDERS

a) The Annual Meeting of Shareholders was held on October 6, 2009.

b) Directors elected on October 6, 2009 to serve until the 2011 annual meeting of shareholders:

Dale P. Brown	Craig F. Maier
Daniel W. Geeding	Jerome P. Montopoli

Directors whose terms continued after the meeting (serving until the 2010 annual meeting of shareholders):

Robert J. (RJ) Dourney	Karen F. Maier
Lorrence T. Kellar	William J. Reik, Jr.

c) The following matters were voted upon:

1) Election of Directors to serve until the 2011 annual meeting of shareholders:

Name	For	Withheld Authority
Dale P. Brown	4,498,830	58,464
Daniel W. Geeding	4,442,707	114,587
Craig F. Maier	4,486,665	70,629
Jerome P. Montopoli	4,451,889	105,405

2) Proposal to ratify the appointment of Grant Thornton LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year commencing June 3, 2009 was approved.

For	Against	Abstain
4,537,272	16,127	3,895

d) Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

3.1 Third Amended Articles of Incorporation, filed as Exhibit (3) (a) to the Registrant’s Form 10-K Annual Report for 1993, is incorporated herein by reference.

3.2 Amended and Restated Code of Regulations effective October 2, 2006, filed as Exhibit A to the Registrant’s Definitive Proxy Statement dated September 1, 2006, is incorporated herein by reference.

10.1 Intellectual Property Use and Noncompete Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, filed as Exhibit (10) (a) to the Registrant’s Form 10-Q Quarterly Report for March 4, 2001, is incorporated herein by reference.

10.2 Transfer Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, filed as Exhibit (10) (b) to the Registrant’s Form 10-Q Quarterly Report for March 4, 2001, is incorporated herein by reference.

10.3 Agreement Regarding Use of Trademarks between the Registrant and Big Boy Restaurants International, LLC dated November 7, 2007, filed as Exhibit 10 (c) to the Registrant’s Form 10-Q Quarterly Report for December 11, 2007, is incorporated herein by reference.

10.4 Second Amended and Restated Loan Agreement (Golden Corral Construction Facility) between the Registrant and US Bank NA dated October 21, 2009 is filed herewith.

10.5 Third Amended and Restated Loan Agreement (Revolving and Bullet Loans) between the Registrant and US Bank NA dated October 21, 2009 is filed herewith.

10.6 Area Development Agreement, Termination Agreement and Addendum effective July 20, 2004 between the Registrant and Golden Corral Franchising Systems, Inc., filed as Exhibit (10) (f) to the Registrant’s Form 10-K Annual Report for 2004, is incorporated herein by reference.

10.7 Second Amendment to Area Development Agreement (see Exhibit 10.6 above) effective April 3, 2008 between the Registrant and Golden Corral Franchising Systems, Inc., filed as Exhibit 10 (h) to the Registrant’s Form 10-Q Quarterly Report for March 4, 2008, is incorporated herein by reference.

10.8 Agreement to Purchase Stock between the Registrant and Frisch West Chester, Inc. dated June 1, 1988, filed as Exhibit 10 (f) to the Registrant’s Form 10-Q Quarterly Report for September 19, 2006, is incorporated herein by reference.

10.9 Agreement to Purchase Stock between the Registrant and Frisch Hamilton West, Inc. dated February 19, 1988, filed as Exhibit 10 (g) to the Registrant’s Form 10-Q Quarterly Report for September 19, 2006, is incorporated herein by reference.

10.10 Employment Agreement between the Registrant and Craig F. Maier effective June 3, 2009, dated April 10, 2009, filed as Exhibit 10.16 to the Registrant’s Form 10-Q Quarterly Report for March 10, 2009, is incorporated herein by reference. *

10.11 Frisch’s Executive Retirement Plan (SERP) effective June 1, 1994, filed as Exhibit (10) (b) to the Registrant’s Form 10-Q Quarterly Report for September 17, 1995, is incorporated herein by reference. *

10.12 Amendment No. 1 to Frisch’s Executive Retirement Plan (SERP) (see Exhibit 10.11 above) effective January 1, 2000, filed as Exhibit 10 (k) to the Registrant’s form 10-K Annual Report for 2003, is incorporated herein by reference. *

10.13 2003 Stock Option and Incentive Plan, filed as Appendix A to the Registrant’s Proxy Statement dated August 28, 2003, is incorporated herein by reference. *

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10.14 Amendment # 1 to the 2003 Stock Option and Incentive Plan (see Exhibit 10.13 above) effective September 26, 2006, filed as Exhibit 10 (q) to the Registrant’s Form 10-Q Quarterly Report for September 19, 2006, is incorporated herein by reference. *

10.15 Amendments to the 2003 Stock Option and Incentive Plan (see Exhibits 10.13 and 10.14 above) effective December 19, 2006, filed as Exhibit 99.2 to the Registrant’s Form 8-K Current Report dated December 19, 2006, is incorporated herein by reference. *

10.16 Amendments to the 2003 Stock Option and Incentive Plan (see Exhibits 10.13, 10.14 and 10.15 above) adopted October 7, 2008, filed as Exhibit 10.21 to the Registrant’s Form 10-Q Quarterly Report for September 23, 2008, is incorporated herein by reference. *

10.17 Forms of Agreement to be used for stock options granted to employees and to non-employee directors under the Registrant’s 2003 Stock Option and Incentive Plan (see Exhibits 10.13, 10.14, 10.15 and 10.16 above), filed as Exhibits 99.1 and 99.2 to the Registrant’s Form 8-K dated October 1, 2004, are incorporated herein by reference. *

10.18 Amended and Restated 1993 Stock Option Plan, filed as Exhibit A to the Registrant’s Proxy Statement dated September 9, 1998, is incorporated herein by reference. *

10.19 Amendments to the Amended and Restated 1993 Stock Option Plan (see Exhibit 10.18 above) effective December 19, 2006, filed as Exhibit 99.1 to the registrant’s Form 8-K Current Report dated December 19, 2006, is incorporated herein by reference. *

10.20 Employee Stock Option Plan, filed as Exhibit B to the Registrant’s Proxy Statement dated September 9, 1998, is incorporated herein by reference. *

10.21 Change of Control Agreement between the Registrant and Craig F. Maier dated November 21, 1989, filed as Exhibit (10) (g) to the Registrant’s Form 10-K Annual Report for 1990, is incorporated herein by reference. It was also filed as Exhibit 99.2 to the Registrant’s Form 8-K Current Report dated March 17, 2006, which is also incorporated herein by reference. *

10.22 First Amendment to Change of Control Agreement (see Exhibit 10.21 above) between the Registrant and Craig F. Maier dated March 17, 2006, filed as Exhibit 99.1 to the Registrant’s Form 8-K Current Report dated March 17, 2006, is incorporated herein by reference. *

10.23 Second Amendment to Change of Control Agreement (see Exhibits 10.21 and 10.22 above) between the Registrant and Craig F. Maier dated October 7, 2008, filed as Exhibit 99.1 to the Registrant’s Form 8-K Current Report dated October 7, 2008, is incorporated herein by reference. *

10.24 Frisch’s Nondeferred Cash Balance Plan effective January 1, 2000, filed as Exhibit (10) (r) to the Registrant’s Form 10-Q Quarterly Report for December 10, 2000, is incorporated herein by reference, together with the Trust Agreement established by the Registrant between the Plan’s Trustee and Donald H. Walker (Grantor). There are identical Trust Agreements between the Plan’s Trustee and Craig F. Maier, Rinzy J. Nocero, Karen F. Maier, Michael E. Conner, Louie Sharalaya, Lindon C. Kelley, Michael R. Everett, Ronnie A. Peters, William L. Harvey and certain other “highly compensated employees” (Grantors). *

10.25 First Amendment (to be effective June 6, 2006) to the Frisch’s Nondeferred Cash Balance Plan that went into effect January 1, 2000 (see Exhibit 10.24 above), filed as Exhibit 99.2 to the Registrant’s Form 8-K Current Report dated June 7, 2006, is incorporated herein by reference. *

10.26 Senior Executive Bonus Plan effective June 2, 2003, filed as Exhibit (10) (s) to the Registrant’s Form 10-K Annual Report for 2003, is incorporated herein by reference. *

10.27 Non-Qualified Deferred Compensation Plan, Basic Plan Document to Restate Frisch’s Executive Savings Plan (FESP) effective December 31, 2008, (also see Exhibits 10.28, 10.29 and 10.30), filed as Exhibit 10.32 to the Registrant’s Form 10-Q Quarterly Report for September 23, 2008, is incorporated herein by reference. *

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10.28 Non-Qualified Deferred Compensation Plan, Adoption Agreement (Stock) to Restate Frisch’s Executive Savings Plan (FESP) effective December 31, 2008, (also see Exhibits 10.27, 10.29 and 10.30), filed as Exhibit 10.33 to the Registrant’s Form 10-Q Quarterly Report for September 23, 2008, is incorporated herein by reference. *

10.29 Non-Qualified Deferred Compensation Plan, Adoption Agreement (Mutual Funds) to Restate Frisch’s Executive Savings Plan (FESP) effective December 31, 2008, (also see Exhibits 10.27, 10.28 and 10.30), filed as Exhibit 10.34 to the Registrant’s Form 10-Q Quarterly Report for September 23, 2008, is incorporated herein by reference. *

10.30 Non-Qualified Deferred Compensation Plan, Adoption Agreement to Restate Frisch’s Executive Savings Plan (FESP) effective July 1, 2009 (also see Exhibits 10.27, 10.28 and 10.29), filed as Exhibit 10.36 to the Registrant’s Form 10-K Annual Report for 2009, is incorporated herein by reference. *

* Denotes a compensatory plan or agreement

14 Code of Ethics for Chief Executive Officer and Financial Professionals, filed as Exhibit 14 to the Registrant’s Form 10-K Annual Report for 2003, is incorporated herein by reference.

15 Letter re: unaudited interim financial statements, is filed herewith.

31.1 Certification of Chief Executive Officer pursuant to rule 13a -14(a)/15d – 14(a) is filed herewith.

31.2 Certification of Chief Financial Officer pursuant to rule 13a - 14(a)/15d – 14(a) is filed herewith.

32.1 Section 1350 Certification of Chief Executive Officer is filed herewith.

32.2 Section 1350 Certification of Chief Financial Officer is filed herewith.

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SIGNATURE

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.

	FRISCH’S RESTAURANTS, INC.
	(Registrant)
DATE October 23, 2009
	BY	/S/    DONALD H. WALKER
	Donald H. Walker
	Vice President – Finance, Treasurer and
	Principal Financial and Accounting Officer

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EX-10.4

EXHIBIT 10.4

SECOND AMENDED AND RESTATED LOAN AGREEMENT

[GOLDEN CORRAL]

THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT [GOLDEN CORRAL] (this “Agreement”) is made and entered into as of the 21st day of October, 2009 by and between (i) FRISCH’S RESTAURANTS, INC., an Ohio corporation (the “Borrower” ), and (ii) U.S. BANK NATIONAL ASSOCIATION, a national banking association formerly known as Firstar Bank, N.A. and Star Bank, National Association, and its successors and assigns (the “Bank”), and amends and restates the First Amended and Restated Loan Agreement made and entered into as of October 15, 2004 by and between the Borrower and the Bank, as amended (the “Prior Loan Agreement”).

1. Representations and Warranties. To induce the Bank to enter into this Agreement and to agree to make and/or to continue the Loans described in Section 4 hereof, the Borrower makes the following representations and warranties:

(a) Existence. The Borrower is duly organized, validly existing and in good standing as a corporation under the laws of the State of Ohio, and each Subsidiary (as hereinafter defined) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The Borrower and each Subsidiary is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction in which the failure to be so qualified by the Borrower or the Subsidiary would have a material adverse effect on its business, prospects or financial condition. “Subsidiary” for purposes hereof means any corporation or other entity the majority of the voting stock of which is owned, directly or indirectly, beneficially or of record, by the Borrower or any Subsidiary, or which is otherwise controlled, directly or indirectly, by the Borrower or any Subsidiary.

(b) Authority. The Borrower and each Subsidiary has full power and authority to own its properties and to conduct its business as such business is now being conducted, and the Borrower has full power and authority to execute, deliver and perform under this Agreement, the Notes (as hereinafter described) and all other documents and instruments executed in connection with or otherwise relating to this Agreement or the Loans (as hereinafter defined) (collectively, the “Loan Documents”).

(c) Borrowing Authorization. The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents: (i) have been duly authorized by all requisite corporate action; (ii) do not and will not violate (A) any provision of any law, statute, rule or regulation, (B) any order, judgment or decree of any court, arbitrator or other agency of government, (C) the Articles of Incorporation or Code of Regulations or other organizational or governing documents of the Borrower, or (D) any provision of any agreement (including, without limitation, any agreement with stockholders) to which the Borrower or any Subsidiary is a party or subject, or by which it or any of its properties or assets are bound; (iii) do not and will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower or any Subsidiary; and (iv) do not and will not require any consent, approval or other action by or any notice to or filing with any court or administrative or governmental body. This Agreement and the other Loan

Documents have been duly executed and delivered on behalf of the Borrower and constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.

(d) Financial Information and Reports. Exhibit A to this Agreement is a complete list of the financial statements and projected financial statements furnished by the Borrower to the Bank in connection with the borrowings to be made hereunder. Each such historical financial statement fairly presents in accordance with generally accepted accounting principles the financial condition of the Borrower and its Subsidiaries and the results of their operations as of the date (or with respect to the period) noted in such financial statements. Other than any liability incident to any actions described in Exhibit B to this Agreement, neither the Borrower nor any Subsidiary has any material contingent liabilities required to be disclosed under generally accepted accounting principles which are not provided for or disclosed in such financial statements. Each such statement (including any related schedule and/or notes) is true, correct and complete in all material respects (subject, as to interim statements, to changes resulting from audits and year-end adjustments) and has been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods involved. No such statement omits to state a material fact necessary to make such statement not misleading in light of the circumstances under which it was made. There has been no material adverse change in the business, operations or condition (financial or otherwise) of the Borrower or any Subsidiary since the date of such financial statements.

(e) Indebtedness. Neither the Borrower nor any Subsidiary has any Indebtedness (as hereinafter defined) other than Permitted Indebtedness (as hereinafter defined), or has guaranteed the obligations of any other person (except by endorsement of negotiable instruments payable on sight for deposit or collection or similar banking transactions in the usual course of business), and to the best of the Borrower’s knowledge after diligent investigation, there exists no default under the provisions of any instrument evidencing any Indebtedness of the Borrower or any Subsidiary or of any agreement relating thereto. “Indebtedness” as used herein means all indebtedness for borrowed money which in accordance with generally accepted accounting principles would be considered as a liability, all rental obligations under leases required to be capitalized under generally accepted accounting principles, all guarantees and other contingent obligations in respect of, or obligations to purchase or otherwise acquire, Indebtedness of others, and Indebtedness of others secured by any lien on property owned by the Borrower or any Subsidiary, whether or not the Borrower or such Subsidiary has assumed such Indebtedness.

(f) Actions. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary before any court, arbitrator or administrative or governmental agency except for those described in Exhibit B to this Agreement, none of which might result in any material adverse change in the business, operations or condition (financial or otherwise) of the Borrower or any Subsidiary, nor, to the best of the Borrower’s knowledge after diligent investigation, is there any basis for any such action which might result in such a material adverse change.

(g) Title to Property. The Borrower and each Subsidiary has good and marketable title to its real properties (other than properties which it leases as lessee) and good title to all of its other properties and assets, including the properties and assets reflected in the most recent

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balance sheet described in Exhibit A hereto (other than properties and assets disposed of in the ordinary course of business since the date thereof), free and clear of all liens, mortgages, pledges, security interests, encumbrances or charges of any kind, including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof (each, a “Lien”), other than the following (each, a “Permitted Lien”): (i) Liens described on Exhibit C hereto, (ii) leases required under generally accepted accounting principles to be capitalized on the Borrower’s or such Subsidiary’s books (“Capitalized Leases”) so long as there is no violation of any of the Financial Covenants set forth on Exhibit D hereto, and (iii) Liens in favor of the Bank. The Borrower and each Subsidiary is in undisturbed possession under all leases necessary in any material respect for the operation of its business, and no such leases contain any unusual or burdensome provisions which might materially affect or impair the Borrower’s or the Subsidiary’s operations thereunder. All such leases are valid and in full force and effect.

(h) Employee Benefit Plans. To the best of the Borrower’s knowledge after diligent investigation, no “reportable event” or “prohibited transaction,” as defined by the Employee Retirement Income Security Act of 1974 (“ERISA”) has occurred or is continuing, as to any plan of the Borrower or any of its affiliates which poses a threat of taxes or penalties against or termination of such plans (or trusts related thereto). Neither the Borrower nor any of its affiliates has violated in any material respect the requirements of any “qualified pension benefit plan,” as defined by ERISA and the Internal Revenue Code of 1986, or done anything to create any material liability under the Multi-Employee Pension Plan Amendment Act. Neither the Borrower nor any of its affiliates has incurred any material liability to the Pension Benefit Guarantee Corporation (the “PBGC”) in connection with such plans, including, but not limited to, any “funding deficiency” (as defined by ERISA).

(i) Purpose of Loans. The Loans shall be used only for the purpose of financing the construction and opening and/or the refurbishing of Golden Corral Restaurants and Big Boy Restaurants (collectively, the “Restaurants”). The Loans are not and shall not be secured, directly or indirectly, by any stock for the purpose of purchasing or carrying any margin stock or for any purpose which would violate either Regulation U, 12 C.F.R. Part 221, or Regulation X, 12 C.F.R. Part 224, promulgated by the Board of Governors of the Federal Reserve System.

(j) Compliance. The Borrower and each Subsidiary is in compliance in all material respects with all laws, statutes, ordinances, rules, regulations and orders of any governmental entity (including, but not by way of limitation, any such laws, statutes, ordinances, rules, regulations and orders related to ecology, human health and the environment) applicable to it.

(k) Adverse Contracts and Conditions. Neither the Borrower nor any Subsidiary is a party to any contract or agreement, or subject to any charge, restriction, judgment, decree or order, materially and adversely affecting its business, property, assets, operations or condition, financial or otherwise, nor a party to any labor dispute. There are no restrictions applicable to any Subsidiary which might limit its ability to pay dividends or make loans to the Borrower.

(l) Taxes. The Borrower and each Subsidiary has filed all federal, state and local tax returns and other reports which it is required by law to file, has paid all taxes, assessments and other similar charges that are due and payable, other than taxes, if any, being contested by the

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Borrower or a Subsidiary in good faith and as to which adequate reserves have been established in accordance with generally accepted accounting principles, and has withheld all employee and similar taxes which it is required by law to withhold. Federal income tax returns of the Borrower and each Subsidiary have been examined by the taxing authorities or closed by applicable statutes and satisfied for all fiscal years prior to and including the Borrower’s 2005 fiscal year end. Federal income tax returns of the Borrower and its Subsidiaries for the Borrower’s 2006 fiscal year end and all years thereafter may still be examined by the taxing authorities.

2. Borrower’s Covenants. The Borrower agrees that, from the date of this Agreement and until the Loans are paid in full and all obligations under this Agreement are fully performed, and the commitment of the Bank to make Loans hereunder has terminated:

(a) Financial Covenants. The Borrower shall comply with each of the financial covenants set forth in Exhibit D to this Agreement (collectively, the “Financial Covenants”).

(b) Financial Statements; Periodic Reports. The Borrower shall furnish to the Bank: (i) as soon as practicable and in any event within ninety (90) days after the last day of each fiscal year of the Borrower, a copy of the annual audit report of the Borrower, prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year, and consisting of a consolidated balance sheet as at the end of such fiscal year and consolidated statements of earnings, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such fiscal year, setting forth in each case in comparative consolidated form corresponding consolidated figures from the preceding annual audit, certified by a nationally-recognized firm of independent certified public accountants, whose certificate shall be in scope and substance reasonably satisfactory to the Bank and shall include, without limitation, a certification that in auditing the Borrower, such accountant has obtained no knowledge of an Event of Default (as hereinafter defined) hereunder, or if any Event of Default exists, specifying the nature and period of existence thereof, and accompanied by such accountant’s management letter with respect thereto; (ii) as soon as practicable and in any event within forty-five (45) days after the last day of each of the Borrower’s first three fiscal quarters, a copy of the Borrower’s unaudited financial statements, prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal quarter, and consisting of a consolidated balance sheet as at the end of such fiscal quarter and consolidated statements of earnings, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for the period from the beginning of the then-current fiscal year through the end of such fiscal quarter, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, and certified by an authorized financial officer of the Borrower, subject to changes resulting from year-end adjustments; (iii) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as the Borrower shall send to its stockholders and copies of all registration statements (without exhibits) and all regulatory and periodic reports which the Borrower files with the Securities and Exchange Commission (the “SEC”) or any governmental body or agency succeeding to the functions of the SEC; and (iv) with reasonable promptness, such other financial data in such form as the Bank may reasonably request, provided that the Bank shall keep such data confidential to the extent required by applicable securities laws.

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Together with each delivery of financial statements required under clauses (i) and (ii) above, the Borrower shall deliver a certificate of its Chief Financial Officer (A) setting forth a comparison between actual calculated results and covenanted results for each of the Financial Covenants set forth on Exhibit D hereto and (B) stating that, to the best of such Chief Financial Officer’s knowledge after diligent investigation, no Event of Default hereunder then exists, or if such an Event of Default hereunder does then exist, specifying the nature thereof, the period of existence thereof, and the action the Borrower proposes to take with respect thereto. The Borrower further agrees that promptly upon the President or Chief Financial Officer of the Borrower obtaining knowledge of an event that constitutes an Event of Default hereunder, the Borrower shall deliver to the Bank a certificate specifying the nature thereof, the period of existence thereof, and the action the Borrower proposes to take with respect thereto. The Bank is authorized to deliver a copy of any financial statement or other communication or document delivered to it pursuant to this Section 2(b) to any regulatory body having jurisdiction over it if such delivery is required by such regulatory body. The Borrower and each Subsidiary shall permit the Bank and its agents and representatives, at the expense of the Bank, to inspect its real and personal property, including without limitation any and all of the Restaurants, and to verify accounts and inspect and make copies of or extracts from its books, records and files, and to discuss its affairs, finances and accounts with its principal officers, all at such reasonable times and as often as the Bank may reasonably request.

In addition to the foregoing, the Borrower shall furnish to the Bank, as soon as practicable and in any event within forty-five (45) days after the last day of each of the Borrower’s four (4) fiscal quarters, key operating statistics (in form and detail reasonably satisfactory to the Bank and including, without limitation, key sales, earnings, and EBITDA information) for each of the Borrower’s Golden Corral Restaurants.

(c) Insurance. The Borrower shall, and shall cause each Subsidiary to, maintain with responsible carriers All Risk coverage for the full replacement value of all of its real and personal property, except that the Borrower and each Subsidiary may self-insure risks to its real and personal property in an amount not to exceed Five Hundred Thousand Dollars ($500,000), and maintain with responsible carriers general public liability insurance coverage including Excess liability coverage in an amount not less than Twenty-Five Million Dollars ($25,000,000), except that the Borrower and each Subsidiary may self-insure general public liability risks in an amount not to exceed Five Hundred Thousand Dollars ($500,000) per occurrence during the term of this Agreement. The Borrower shall deliver to the Bank, together with delivery of the financial statements required under Section 2(b)(i) above, a certificate specifying the details of all such insurance in effect. The Borrower shall cause the Bank to be named as lender loss payee and/or additional insured, as applicable, on its policies of insurance.

(d) Taxes. The Borrower shall, and shall cause each Subsidiary to, file all federal, state and local tax returns and other reports it is required by law to file, and shall pay when due all taxes, assessments and other liabilities, except that the Borrower and any Subsidiary shall not be obligated to pay any taxes or assessments which it is contesting in good faith, provided that adequate reserves therefor are established in accordance with generally accepted accounting principles, that such contests will not materially adversely affect the Borrower’s or any Subsidiary’s operations or financial condition, and that such taxes and assessments are promptly paid when the dispute is finally determined.

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(e) Existence and Status. The Borrower shall, and shall cause each Subsidiary to, maintain its existence in good standing under the laws of each jurisdiction described in Section 1(a) of this Agreement, provided that the Borrower or any Subsidiary may change its jurisdiction of incorporation if it shall remain in good standing under the laws thereof.

(f) Maintenance of Property. The Borrower shall, and shall cause each Subsidiary to, maintain to the extent consistent with good business practices all of its real and personal property in good condition and repair, not commit or permit any waste thereof, and not, except in the ordinary course of business, remove or permit the removal of any improvement, accession or fixture therefrom that may in any way materially impair the value of said property.

(g) Environmental Matters. The Borrower represents, warrants and covenants with the Bank that: (i) neither the Borrower nor any of its Subsidiaries nor, to the best of the Borrower’s knowledge, after due investigation, any other person or entity, has used or permitted any Hazardous Substances (as hereinafter defined) to be placed, held, stored or disposed of on any property owned or operated by the Borrower or any of its Subsidiaries (the “Designated Properties”), in violation of any Environmental Laws (as hereinafter defined); (ii) none of the Designated Properties now contains any Hazardous Substance in violation of any Environmental Laws; (iii) there have been no complaints, citations, claims, notices, information requests, orders (including but not limited to clean-up orders) or directives on environmental grounds made or delivered to, pending or served on, or anticipated by the Borrower or any of its Subsidiaries, or of which the Borrower, after due investigation, including consideration of the previous uses of the Designated Properties and meeting the standard under 42 U.S.C. Section 9601(35)(B)(1986), is aware or should be aware (A) issued by a governmental department or agency having jurisdiction over any of the Designated Properties, or (B) issued or claimed by any persons, agencies or organizations or affecting any of the Designated Properties; and (iv) neither the Borrower nor any of its Subsidiaries, so long as any of the Indebtedness under this Agreement remains unpaid, shall allow any Hazardous Substances to be placed, held, stored or disposed on any of the Designated Properties or incorporated into any improvements on any of the Designated Properties in violation of any Environmental Laws. The term “Hazardous Substance” shall mean any solid, hazardous, toxic or dangerous waste, substance or material defined as such in or for the purpose of the Comprehensive Environmental Response, Compensation and Liability Act, any so-called “Superfund” or “Super-Lien” law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree relating to, or imposing liability or standards of conduct concerning, any Hazardous Substance (the “Environmental Laws”, as now or at any time hereafter in effect).

The Borrower agrees to indemnify and hold the Bank harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever, paid, incurred or suffered by, or asserted against the Bank for, with respect to, or as a direct or indirect result of, any of the following: (i) the presence on or under or the escape, seepage, leakage, spillage, discharge, emission, discharging or release from any of the Designated Properties of any Hazardous Substance (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any of the Environmental Laws); or (ii) any liens against any of the Designated Properties or any interest or estate in any of the Designated Properties, created, permitted or imposed by the Environmental Laws, or any actual or asserted liability of or obligations of the Borrower or any of its Subsidiaries under the Environmental Laws.

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The Borrower shall immediately notify the Bank should the Borrower become aware of any Hazardous Substance on any of the Designated Properties in violation of any Environmental Laws or any claim that any of the Designated Properties may be contaminated by any Hazardous Substance in violation of any Environmental Laws. The Borrower shall, at its own cost and expense, be responsible for the cleanup of any Hazardous Substance caused, or knowingly permitted, by the Borrower or any of its Subsidiaries to be on any of the Designated Properties which is in violation of any Environmental Laws including any removal, containment and remedial actions in accordance with all applicable Environmental Laws. The Borrower’s obligations hereunder shall not be subject to any limitation of liability provided herein or in any of the other Loan Documents and the Borrower acknowledges that its obligations hereunder are not conditional and shall continue in effect so long as a valid claim may lawfully be asserted against the Bank or for so long as this Agreement, any of the other Loan Documents or any renewal, amendment, extension or modification thereto remain in effect, whichever extends for a greater period of time.

(h) Notice. The Borrower shall notify the Bank in writing, promptly upon the Borrower’s learning thereof, of: (i) any litigation, suit or administrative proceeding which may materially affect the operations, financial condition or business of the Borrower or any Subsidiary, whether or not the claim is considered by the Borrower to be covered by insurance, unless the applicable insurer has agreed to defend any such claim and cover the liability therefor; (ii) the occurrence of any material event described in Section 4043 of ERISA or any anticipated termination, partial termination or merger of a “Plan” (as defined in ERISA) or a transfer of the assets of a Plan; (iii) any labor dispute to which the Borrower or any Subsidiary may become a party; (iv) any default by the Borrower or any Subsidiary under any note, indenture, loan agreement, mortgage, lease or other similar agreement to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary or its assets are bound; and (v) any default by any obligor under any material note or other evidence of debt payable to the Borrower or any Subsidiary.

(i) Liens. The Borrower shall not, and shall not permit any Subsidiary to, create, assume or permit to exist any Lien with respect to any of its assets, whether now owned or hereafter acquired, except Permitted Liens. Furthermore, the Borrower shall not, and shall not permit any Subsidiary to, enter into any agreement with any other person or entity pursuant to which the Borrower or any Subsidiary agrees not to create, assume or permit to exist any Lien with respect to any of its assets, whether now owned or hereafter acquired.

(j) Indebtedness. The Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except the following (each, “Permitted Indebtedness”): (i) Indebtedness incurred under this Agreement and other Indebtedness to the Bank; (ii) outstanding Indebtedness reflected in the historical financial statements listed in Exhibit A attached hereto (but not any refinancing or refunding of such Indebtedness); (iii) Indebtedness described in Exhibit E attached hereto; and (iv) Indebtedness incurred in connection with Capitalized Leases so long as there is no violation of any of the Financial Covenants set forth on Exhibit D hereto.

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(k) Loans; Investments. The Borrower shall not, and shall not permit any Subsidiary to, make or permit to remain outstanding any loan or advance to, or own or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any person or entity, except that the Borrower or any Subsidiary may: (i) make or permit to remain outstanding loans or advances to any Subsidiary or the Borrower; (ii) own or acquire stock, obligations or securities of a Subsidiary or of a corporation which immediately after such acquisition will be a Subsidiary; (iii) own or acquire prime commercial paper and certificates of deposit in United States commercial banks having capital resources in excess of Fifty Million Dollars ($50,000,000), in each case due within one (1) year from the date of purchase and payable in United States Dollars, obligations of the United States Government or any agency thereof, and obligations guaranteed by the United States Government, and repurchase agreements with such banks for terms of less than (1) one year in respect of the foregoing certificates and obligations; (iv) make travel advances in the ordinary course of business to officers and employees or other advances in the ordinary course of business to officers and employees (excluding advances to employees for relocation purposes) not to exceed One Hundred Twenty-Five Thousand Dollars ($125,000) in the aggregate at any time outstanding for the Borrower and all Subsidiaries; (v) make advances to employees for relocation purposes not to exceed One Hundred Fifty Thousand Dollars ($150,000) in the aggregate at any time outstanding for the Borrower and all Subsidiaries; (vi) own or acquire money-market preferred stock in an amount not to exceed Seven Hundred Fifty Thousand Dollars ($750,000); (vii) make or permit to remain outstanding loans or advances to, or own or acquire stock, obligations or securities of, any other person or entity, provided that the aggregate principal amount of such loans and advances (excluding loans which are fully secured by real estate consisting of former restaurant locations), plus the aggregate amount of the investment (at original cost) in such stock, obligations and securities, shall not exceed Five Hundred Thousand Dollars ($500,000) at any time outstanding for the Borrower and all Subsidiaries; and (viii) make investments in the Borrower’s non-qualified executive savings plan.

(l) Merger and Sale of Assets. Without the prior written consent of the Bank, the Borrower shall not, and shall not permit any Subsidiary to, merge or consolidate with any other corporation, or sell, lease or transfer or otherwise dispose of any of its assets, including, without limitation, the stock of any Subsidiary, or sell with recourse or discount or otherwise sell for less than the face value thereof any of its notes or accounts receivable, except that without the prior written consent of the Bank: (i) any Subsidiary may merge or consolidate with the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with any one or more other Subsidiaries; (ii) any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Borrower or another Subsidiary; (iii) the Borrower or any Subsidiary may otherwise sell, lease, transfer or otherwise dispose of any of its assets having a book value of less than One Hundred Thousand Dollars ($100,000) provided that the aggregate book value of all such assets so sold, leased, transferred or otherwise disposed of by the Borrower and its Subsidiaries during any fiscal year shall not exceed Five Hundred Thousand Dollars ($500,000); and (iv) the Borrower or any Subsidiary may sell, lease, transfer or otherwise dispose of property (as hereinafter defined) and equipment in connection with remodelings and equipment replacements in the ordinary course of business. For purposes of this Section 2(l), “property” shall mean those components of the real estate (such as walls, electrical and plumbing) which are removed during a remodeling.

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(m) Intentionally deleted.

(n) Restrictions on Transactions With Stockholders and Other Affiliates. Except as otherwise expressly permitted under this Agreement, the Borrower shall not, and shall not permit any Subsidiary to, enter into or be a party to any transaction reportable under Item 404(a) of Regulation S-K of the Securities and Exchange Commission, except in the ordinary course of business, pursuant to the reasonable requirements of its business, and upon fair and reasonable terms which are fully disclosed to the Bank and are no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary could obtain in a comparable arm’s length transaction with an unrelated third party.

(o) Books and Records. The Borrower shall, and shall cause each Subsidiary to, keep and maintain complete books of accounts, records and files with respect to its business in accordance with generally accepted accounting principles consistently applied in accordance with past practices and shall accurately and completely record all transactions therein.

(p) Business Activities. The Borrower shall, and shall cause each Subsidiary to, continue to engage in the types of business activities in which it is currently engaged or other activities involving food service and wholesaling food and related products, and shall not, and shall not permit any Subsidiary to, be engaged in any business activities other than the types in which it is currently engaged or other activities involving food service and wholesaling food and related products.

(q) Compliance with Law. The Borrower shall, and shall cause each Subsidiary to, comply at all times with all laws, statutes, ordinances, rules, regulations and orders of any governmental entity (including, but not by way of limitation, such laws, statutes, ordinances, rules, regulations and orders relating to ecology, human health and the environment) having jurisdiction over it or any part of its assets, where such failure to comply would have a material adverse effect on the Borrower’s or any Subsidiary’s operations or financial condition or the ability of the Borrower to perform its obligations hereunder. The Borrower and each Subsidiary shall obtain and maintain all permits, licenses, approvals and other similar documents required by any such laws, statutes, ordinances, rules, regulations or orders.

(r) Deposit Accounts. The Borrower will maintain its primary deposit accounts at the Bank so long as any obligations to the Bank, whether under the Loans or otherwise, remain outstanding.

(s) Waiver. Any variance from the covenants of the Borrower pursuant to this Section 2 shall be permitted only with the prior written consent and/or waiver of the Bank. Any such variance by consent and/or waiver shall relate solely to the variance addressed in such consent and/or waiver, and shall not operate as the Bank’s consent and/or waiver to any other variance of the same covenant or other covenants, nor shall it preclude the exercise by the Bank of any power or right under this Agreement, other than with respect to such variance.

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3. Closing Conditions. The obligation of the Bank to make the Loans, or any portion thereof, and the effectiveness of this Agreement are, at the Bank’s option, subject to the satisfaction of each of the following conditions precedent:

(a) Default. Before and after giving effect to the Loans, or any portion thereof, no Event of Default or any event which, with the passage of time or the giving of notice, might mature into an Event of Default, shall have occurred and be continuing.

(b) Warranties. Before and after giving effect to the Loans or any portion thereof, the representations and warranties in Section 1 hereof shall be true and correct as though made on the date of such Loans or portion thereof.

(c) Certification. The Borrower shall have delivered to the Bank a certificate of the President or Chief Financial Officer of the Borrower dated as of the date hereof: (i) as to the matters set forth in Sections 3(a) and 3(b) above; (ii) to the effect that the resolutions described in Section 3(d) below have not been amended or rescinded and remain in full force and effect; (iii) as to the incumbency of the individuals authorized to sign this Agreement, the Notes (as hereinafter defined) and the other Loan Documents (with specimen signatures attached); and (iv) to the effect that the Articles of Incorporation and Code of Regulations of the Borrower are in full force and effect in the form delivered to the Bank.

(d) Resolutions. The Borrower shall have delivered to the Bank copies of the resolutions of the Borrower’s Board of Directors authorizing the borrowings hereunder and the execution and delivery of this Agreement, the Notes and other Loan Documents.

(e) Articles and Regulations. The Borrower shall have delivered to the Bank true and correct copies of its Articles of Incorporation and Code of Regulations.

(f) Construction Note. The Borrower shall have delivered the Construction Note (as hereinafter defined) to the Bank with all blanks appropriately completed and duly executed on behalf of the Borrower.

(g) Opinion. The Borrower shall have delivered to the Bank the opinion of outside counsel acceptable to the Bank, dated the date of this Agreement, to the effect that: (i) the Borrower is duly organized, validly existing and in good standing as a corporation under the laws of the State of Ohio; (ii) the Borrower has full power and authority to execute and deliver this Agreement, the Notes and the other Loan Documents and to perform its obligations thereunder; (iii) the execution and delivery by the Borrower of this Agreement, the Notes and the other Loan Documents, and the performance by the Borrower of its obligations thereunder, have been duly authorized by all necessary corporate action, and are not in conflict with any provision of law or of the Articles of Incorporation or Code of Regulations of the Borrower, nor in conflict with any agreement, order or decree binding upon the Borrower of which such counsel has knowledge; and (iv) this Agreement, the Notes and the other Loan Documents are the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as the same may be affected by bankruptcy, insolvency, moratorium or similar laws now or hereafter in effect, or by legal or equitable principles relating to or limiting creditors’ rights generally, or other rules of law or equity limiting the availability of specific performance or injunctive relief.

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(h) Amendment Fee. The Borrower shall have paid to the Bank in immediately available funds a $10,000 amendment fee as well as all out-of-pocket costs and expenses of the Bank and its employees (including, without limitation, costs and expenses of legal counsel) incurred by the Bank in entering into this Agreement and preparing the documentation in connection herewith.

(i) Revolving/Bullet Loan Agreement. The Borrower shall have delivered to the Bank the Revolving/Bullet Loan Agreement (as defined in Section 5(e)), and all related documents and instruments to the Bank with all blanks appropriately completed and duly executed on behalf of the Borrower.

4. Loans.

(a) Loans. Subject to the terms and conditions of this Agreement, and subject to there being no Event of Default (or event which might, with the giving of notice or the passage of time, mature into an Event of Default) hereunder, the Bank agrees to make loans to the Borrower in an aggregate amount not to exceed the lesser of (i) Ninety-Two Million Five Hundred Thousand Dollars ($92,500,000) (the “Total Commitment Amount”) or (ii) the amount necessary to construct and open the Restaurants (collectively, the “Loans”); provided, however, that at no time shall the ratio of (A) the sum of the outstanding principal balance of the Loans plus all other Senior Bank Debt (as defined in Exhibit D attached hereto) to (B) Borrower’s Adjusted EBITDA (as defined in Exhibit D attached hereto) exceed 2.00 to 1.0. In the event that any of the upper limits described in the immediately preceding sentence shall at any time be exceeded, the Borrower shall immediately, without notice or demand, prepay the outstanding principal balance of the Loans such that the upper limits set forth in the immediately preceding sentence are not exceeded.

The Borrower shall provide the Bank notice of the Borrower’s desire to obtain Loan proceeds for the purpose of constructing and opening any particular Restaurant, which notice shall state the amount of the Loan requested and the location of the particular Restaurant. The term “Business Day” as used herein shall mean any day other than a Saturday, Sunday or holiday on which banks in Cincinnati, Ohio are required or authorized by law to close. The Loans shall be effectuated by the Bank crediting an account maintained by the Borrower at the Bank. No repayment or prepayment of the Loans shall be reason for any relending or additional lending of proceeds of the Loans to the Borrower, and no Loan proceeds shall be disbursed after October 21, 2010. The outstanding principal balance of each Loan which has not been converted into a Term Loan (as hereinafter defined) in accordance with the next paragraph hereof (such Loans which have not been so converted being collectively referred to herein as “Construction Loans”) shall mature and be payable in full on October 21, 2010 (the “Construction Loan Maturity Date”), unless the maturity thereof is accelerated as described herein. As of October 21, 2009, as a result of the prior draws by the Borrower under the Loans and prior conversions of Construction Loans to Term Loans, of the maximum Ninety-Two Million Five Hundred Thousand Dollars ($92,500,000) Construction Loan facility, (i) Eighty-Four Million Five Hundred Thousand Dollars ($84,500,000) has been drawn by the Borrower under the

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Construction Loans and already been converted to Term Loans or currently remains outstanding as Construction Loans and (ii) a maximum of Eight Million Dollars ($8,000,000) still remains available to be drawn by the Borrower under the Construction Loans. The Construction Loans shall be evidenced by a Promissory Note in substantially the form of Exhibit F attached hereto, as the same may be amended and/or restated from time to time (the “Construction Note”).

Upon the substantial completion of construction of each Restaurant the construction or opening of which has been financed with Loan proceeds, the Borrower shall promptly notify the Bank in writing of the date thereof (each such date being referred to herein as a “Completion Date”). Within six (6) months after the Completion Date of each such Restaurant, the Borrower shall elect to convert the outstanding principal balance of all Loans obtained for the purpose of constructing or opening of such Restaurant to a term loan with a maturity date that is not greater than twelve (12) years after the Conversion Date (each such Loan being referred to herein as a “Term Loan”), by providing ten (10) Business Days prior written notice to the Bank of (i) the date on which the Borrower desires such conversion to be effective (the “Conversion Date”), which date must be the first day of a calendar month and not later than the date which is six (6) months after the Completion Date, (ii) the maturity date elected by the Borrower for such Term Loan (each, a “Term Loan Maturity Date”; the Term Loan Maturity Dates and the Construction Loan Maturity Date are each sometimes referred to herein as a “Maturity Date”), which Maturity Date shall be no later than the date which is twelve (12) years after the Conversion Date, (iii) if the Borrower desires that such Term Loan bear interest at the Cost of Funds-Based Rate (as hereinafter defined), the irrevocable commitment by the Borrower to accept and be bound by its election of such Cost of Funds-Based Rate until the Maturity Date of such Term Loan or as otherwise expressly provided herein, and (iv) if the Borrower desires that such Term Loan be a LIBOR Rate Loan (as hereinafter defined), its election of such LIBOR Rate Loan and election of one of the 1, 2 or 3 month LIBOR rate as described in Section 4(b). Notwithstanding the foregoing, the Borrower shall have the option to extend the Maturity Date of any Term Loan having both a Conversion Date after December 3, 2007 and an original Maturity Date of less than twelve (12) years from the Conversion Date once during the term thereof to a date not later than twelve (12) years after the Conversion Date, by providing no less than thirty (30) days’ written notice to the Bank of its intent to exercise such option.

Each Term Loan which bears interest at the Cost of Funds-Based Rate shall be evidenced by a Promissory Note in substantially the form of Exhibit G-1 attached hereto with all blanks appropriately completed and each Term Loan which does not bear interest at the Cost of Funds-Based Rate shall be evidenced by a Promissory Note in substantially the form of Exhibit G-2 attached hereto with all blanks appropriately completed (each, a “Term Note”; the Term Notes and the Construction Note are sometimes collectively referred to herein as the “Notes”).

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(b) Interest. Interest on each advance of the Construction Loans hereunder (prior to conversion to a Term Loan) shall accrue at an annual rate equal to the LIBOR Rate Margin (as hereinafter defined) plus the 1, 2, or 3 month LIBOR rate quoted by the Bank from Telerate Page 3750 or any successor thereto (which shall be the LIBOR rate in effect two New York Banking Days prior to (i) commencement of the advance or (ii) the end of each Loan Period (as hereinafter defined)), adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation (a “LIBOR Rate Loan”).

The term “New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York.

In the event the Borrower does not timely select an interest rate option at least two New York Banking Days before the end of the Loan Period for a Construction Loan, the funds advanced under such Construction Loan shall, beginning on the first day of the new Loan Period, accrue interest at the 1 month LIBOR rate in effect two New York Banking Days prior to commencement such Loan Period.

The term “Loan Period” means the period commencing on the advance date (or the Conversion Date) of the applicable LIBOR Rate Loan and ending on the numerically corresponding day 1, 2, or 3 months thereafter matching the interest rate term selected by the Borrower; provided, however, (y) if any Loan Period would otherwise end on a day which is not a New York Banking Day, then the Loan Period shall end on the next succeeding New York Banking Day unless the next succeeding New York Banking Day falls in another calendar month, in which case the Loan Period shall end on the immediately preceding New York Banking Day; or (z) if any Loan Period begins on the last New York Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of the Loan Period), then the Loan Period shall end on the last New York Banking Day of the calendar month at the end of such Loan Period.

No Construction Loan may extend beyond the Construction Loan Maturity Date. In any event, if the Loan Period for a Construction Loan should happen to extend beyond the Construction Loan Maturity Date, such Construction Loans must be prepaid at the Construction Loan Maturity Date. Each Construction Loan shall be in a minimum principal amount of Five Hundred Thousand Dollars ($500,000) and in increments of Five Hundred Thousand Dollars ($500,000) thereafter.

If a LIBOR Rate Loan is prepaid prior to the end of the Loan Period, as defined above, for such loan, whether voluntarily or because prepayment is required due to such loan’s maturing or accelerating upon default or otherwise, the Borrower agrees to pay all of the Bank’s costs, expenses, and Interest Differential (as determined by the Bank) incurred as a result of such prepayment. The term “Interest Differential” shall mean that sum equal to the greater of zero or the financial loss incurred by the Bank resulting from prepayment, calculated as the difference between the amount of interest the Bank would have earned (from like investments in the Money Markets as of the first day of the LIBOR Rate Loan) had prepayment not occurred and the interest the Bank will actually earn (from like investments in the Money Markets as of the date of prepayment) as a result of the redeployment of funds from the prepayment. Because of the short-term nature of this facility, the Borrower agrees that the Interest Differential shall not be

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discounted to its present value. Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining entire principal balance of such loan. The term “Money Markets” refers to one or more wholesaling funding markets available to and selected by the Bank, including negotiable certificates of deposit, commercial paper, Eurodollar deposits, bank notes, federal funds, interest rate swaps, or others.

The “LIBOR Rate Margin” is currently one hundred thirty-five (135) basis points and shall be subject to adjustment on each March 1 for application to the period commencing on such date in accordance with the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA for the period commencing on the first day of the Borrower’s then-current fiscal year and ending on the last day of the second quarter of such fiscal year and on each September 1 for application to the period commencing on such date in accordance with the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA for the period commencing on the first day of the Borrower’s immediately preceding fiscal year and ending on the last day of such fiscal year, as follows: if the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA is 1.50 to 1.0 or greater, the LIBOR Rate Margin shall be one hundred eighty (180) basis points; if the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA is less than 1.50 to 1.0 but equal to or greater than 1.00 to 1.0, the LIBOR Rate Margin shall be one hundred fifty-five (155) basis points; and if the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA is less than 1.00 to 1.0, the LIBOR Rate Margin shall be one hundred thirty-five (135) basis points. Such adjustments shall be based upon the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA as determined from the financial statements delivered to the Bank pursuant to Section 2(b)(i) or (ii) hereof, as applicable. The foregoing provisions are not intended to, and shall not be construed to, authorize any violation by the Borrower of any Financial Covenant or constitute a waiver thereof or any commitment by the Bank to waive any violation by the Borrower of any Financial Covenant.

Upon conversion of a Construction Loan to a Term Loan, the Borrower shall choose that interest on such Term Loan shall accrue after such Term Loan’s Conversion Date as provided under either Option A or Option B that follows (with Option B only being available as a choice to the Borrower so long as no Event of Default or event which, with the passage of time or the giving of notice, might mature into an Event of Default, shall have occurred and be continuing): (A) under Option A (which shall be known as a “Variable Rate Term Loan”), for which Borrower shall execute a Promissory Note in substantially the form of Exhibit G-2 attached hereto, interest on such Variable Rate Term Loan shall accrue after such Variable Rate Term Loan’s Conversion Date as a LIBOR Rate Loan at the then applicable LIBOR Rate Margin plus the 1, 2, or 3 month LIBOR rate quoted by the Bank from Telerate Page 3750 or any successor thereto (which shall be the LIBOR rate in effect two New York Banking Days prior to (i) commencement of the Variable Rate Term Loan or (ii) the end of each Loan Period, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation; or (B) under Option B (which shall be known as a “Cost of Funds Rate Term Loan”), for which Borrower shall execute a Promissory Note in substantially the form of Exhibit G-1 attached hereto, interest on such Cost of Funds Rate Term Loan shall accrue after such Cost of Funds Rate Term Loan’s Conversion Date at a fixed rate per annum equal to one hundred fifty (150) basis points plus the Bank’s Cost of Funds as of the Conversion Date (the “Cost of Funds-Based Rate”).

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With respect to any Variable Rate Term Loan, in the event the Borrower does not timely select another interest rate option at least two New York Banking Days before the end of the Loan Period for a LIBOR Rate Loan, the funds advanced under the LIBOR Rate Loan shall, beginning on the first day of the new Loan Period, accrue interest at the 1 month LIBOR rate in effect two New York Banking Days prior to commencement such Loan Period. No Variable Rate Term Loan may extend beyond the Term Loan Maturity Date for such Variable Rate Term Loan. In any event, if the Loan Period (as defined below) for a Variable Rate Term Loan should happen to extend beyond the Term Loan Maturity Date for such Variable Rate Term Loan, such Variable Rate Term Loan must be prepaid at its Term Loan Maturity Date. Each Variable Rate Term Loan shall be in a minimum principal amount of Five Hundred Thousand Dollars ($500,000) and in increments of Five Hundred Thousand Dollars ($500,000) thereafter.

With respect to any Cost of Funds Rate Term Loan, the term “Cost of Funds” means the rate at which the Bank would be able to borrow funds of comparable amounts in the Money Markets for a period equal to the remaining term of such Cost of Funds Rate Term Loan, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, with such rate rounded upward to the nearest one-eighth percent, and the term “Money Markets” refers to one or more wholesale funding markets available to and selected by the Bank, including negotiable certificates of deposit, commercial paper, Eurodollar deposits, bank notes, federal funds, interest rate swaps or others.

Interest on the Loans shall be computed on the basis of a year consisting of three hundred sixty (360) days but applied to the actual number of days elapsed. The Bank’s internal records of applicable interest rates shall be determinative in the absence of manifest error.

At the option of the Bank, (a) prior to acceleration of the Loans, in the event that any interest on or principal of any Loan remains unpaid past thirty (30) days of the date due, and/or (b) upon the occurrence of any other Event of Default hereunder or upon the acceleration of the Loans, interest (computed and adjusted in the same manner, and with the same effect, as interest on the Loans prior to maturity) on the outstanding balance of the Loans shall be payable on demand at the rate that would otherwise be in effect for such Loans from time to time as set forth in this Section 4(b) plus an additional three percent (3%) per annum up to any maximum rate permitted by law, in all cases until paid and whether before or after the entry of any judgment thereon. In addition, in the event that the Borrower should fail to make any payment hereunder within ten (10) days of the date due, the Borrower shall pay the Bank a fee in an amount of up to five percent (5%) of the amount of such payment, but in no event less than Fifty Dollars ($50.00), which fee shall be immediately due and payable without notice or demand.

(c) Payments. Interest on any Variable Rate Term Loan shall be payable, in arrears, on the last day of the Loan Period applicable thereto, and when such Loan is due (whether by reason of acceleration or otherwise). Interest on any Prime Rate (as defined below) priced Loan shall be payable, in arrears, on the last day of each month, and when such Loan is due (whether by reason of acceleration or otherwise). In addition, the Borrower shall pay all accrued but unpaid interest on each Construction Loan on the Conversion Date of such Construction Loan to a Term Loan.

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The principal of each Construction Loan which has not been converted into a Term Loan shall be due and payable in full on the Construction Loan Maturity Date.

The principal of each Variable Rate Term Loan shall be payable in equal monthly installments in amounts sufficient to amortize the principal amount of such Variable Rate Term Loan over the period commencing on the Conversion Date for such Variable Rate Term Loan and ending on its Term Loan Maturity Date, with such payments commencing on the first day of the calendar month after the calendar month which includes the Conversion Date and continuing on the first day of each calendar month thereafter through and including the applicable Term Loan Maturity Date, at which time the outstanding principal balance of such Variable Rate Term Loan shall be due and payable in full.

With respect to each Cost of Funds Rate Term Loan, on the first day of the calendar month after the calendar month which includes the Conversion Date for such Cost of Funds Rate Term Loan and on the first day of each calendar month thereafter through and including the Term Loan Maturity Date thereof, the Borrower shall make equal payments of principal and interest in amounts sufficient to amortize the principal balance of such Cost of Funds Rate Term Loan as of the Conversion Date over the period commencing on the Conversion Date and extending until the Term Loan Maturity Date, with each such payment being applied first to accrued interest and then to principal. The outstanding principal balance of and all interest on each Cost of Funds Rate Term Loan shall be due and payable in full on its Term Loan Maturity Date.

All payments of principal and interest hereunder shall be made in immediately available funds to the Bank at such place as may be designated by the Bank to the Borrower in writing. The Bank is authorized by the Borrower to enter from time to time the balance of the Loans and all payments and prepayments thereon on the reverse of the Notes or in the Bank’s regularly maintained data processing records, and the aggregate unpaid amount of the Loans set forth thereon or therein shall be presumptive evidence of the amount owing to the Bank and unpaid thereon.

(d) Changes in Laws and Circumstances; Illegality.

(i) In the event of (A) any change in the reserve requirements and/or the assessment rates of the FDIC which are applicable to the Bank in making any or all of the Loans or (B) any change in circumstances affecting the interbank market, and the result of any such event described in clause (A) or (B) above is to increase the costs to the Bank of making the Loans, the Borrower shall promptly pay the Bank any additional amounts, upon demand accompanied by a reasonably detailed statement as to such additional amounts (which statement shall be conclusive in the absence of manifest error), which will reasonably compensate the Bank for such costs.

(ii) If by reason of circumstances affecting the interbank market adequate and reasonable means do not exist in the reasonable judgment of the Bank for ascertaining the rate of interest for a LIBOR Rate Loan or Cost of Funds Rate Term Loan at any time, the Bank shall forthwith give notice thereof to the Borrower. Unless and until such notice has been withdrawn by the Bank, the Borrower may not thereafter elect to have any portion of the Loans bear interest at a LIBOR based rate or Cost of Funds-Based Rate, as applicable.

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(iii) If any law, rule, regulation, treaty, guideline, order or directive or any change therein or in the interpretation or application thereof shall make it unlawful for the Loans to bear interest at a LIBOR based rate or Cost of Funds-Based Rate, the Bank shall notify the Borrower thereof and no portion of the Loans may thereafter bear interest at a LIBOR based rate or Cost of Funds-Based Rate, as applicable. If required by law, any portion of the Loans then bearing interest at a LIBOR based rate or Cost of Funds-Based Rate, as applicable, shall cease to bear interest at the LIBOR based rate or Cost of Funds-Based Rate, as applicable, and shall bear interest based on the Prime Rate. The “Prime Rate” is the rate announced from time to time by the Bank as its prime rate. The Prime Rate is determined solely by the Bank pursuant to market factors and its own operating needs and is not necessarily the Bank’s best or most favorable rate for corporate, commercial, or other loans.

(e) Prepayments. The Borrower may, at its option, from time to time repay or prepay part or all of the outstanding principal balance of the Loans bearing interest based on the Prime Rate without premium.

If any LIBOR Rate Loan is prepaid prior to the end of the Loan Period for such loan, whether voluntarily or because prepayment is required due to such loan’s maturing or accelerating upon default or otherwise, the Borrower agrees to pay all of the Bank’s costs, expenses, and Interest Differential (as determined by the Bank) incurred as a result of such prepayment. Because of the short-term nature of this facility, the Borrower agrees that the Interest Differential shall not be discounted to its present value. Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining entire principal balance of such loan.

There shall be no prepayments of any Cost of Funds Rate Term Loan, provided that the Bank may consider requests for its consent with respect to prepayment of any Cost of Funds Rate Term Loan, without incurring an obligation to do so, and the Borrower acknowledges that in the event that such consent is granted, the Borrower shall be required to pay the Bank, upon prepayment of all or part of the principal amount of a Cost of Funds Rate Term Loan before final maturity, a prepayment indemnity (“Prepayment Fee”) equal to the greater of zero, or that amount, calculated on any date of prepayment (“Prepayment Date”), which is derived by subtracting: (a) the principal amount of such Cost of Funds Rate Term Loan or portion of such Cost of Funds Rate Term Loan to be prepaid from (b) the Net Present Value of such Cost of Funds Rate Term Loan or portion of such Cost of Funds Rate Term Loan to be prepaid on such Prepayment Date; provided, however, that the Prepayment Fee shall not in any event exceed the maximum prepayment fee permitted by applicable law. Notwithstanding the foregoing, if prior to the conversion of a Construction Loan to a Cost of Funds Rate Term Loan, the Bank and the Borrower mutually agree that the Cost of Funds-Based Rate will include a premium as payment to the Bank for waiver by the Bank of any Prepayment Fee (determined by the Bank in its sole discretion) over the then applicable Cost of Funds-Based Rate and such premium is expressly described in the applicable Promissory Note, then the Borrower may prepay such Cost of Funds Rate Term Loan without incurring a Prepayment Fee.

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“Net Present Value” shall mean the amount which is derived by summing the present values of each prospective payment of principal and interest which, without such full or partial prepayment, could otherwise have been received by the Bank over the remaining contractual life of such Cost of Funds Rate Term Loan. The individual discount rate used to present value each prospective payment of interest and/or principal shall be the Money Market Rate at Prepayment for the maturity matching that of each specific payment of principal and/or interest.

“Money Market Rate At Prepayment” shall mean that zero-coupon rate, calculated on the Prepayment Date, and determined solely by the Bank, as the rate at which the Bank would be able to borrow funds in Money Markets for the prepayment amount matching the maturity of a specific prospective Cost of Funds Rate Term Loan payment date, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation. A separate Money Market Rate at Prepayment will be calculated for each prospective interest and/or principal payment date.

In calculating the amount of such Prepayment Fee, the Bank is hereby authorized by the Borrower to make such assumptions regarding the source of funding, redeployment of funds, and other related matters, as the Bank may deem appropriate. If the Borrower fails to pay any Prepayment Fee when due, the amount of such Prepayment Fee shall thereafter bear interest until paid at the default rate specified in this Agreement (computed on the basis of a 360-day year, actual days elapsed). Any prepayment of principal shall be accompanied by a payment of interest accrued to date thereon; and said prepayment shall be applied to the principal installments in the inverse order of their maturities. All prepayments shall be in an amount of at least $100,000 or, if less, the remaining entire principal balance of the applicable Cost of Funds Rate Term Loan.

No partial prepayment of any of the Loans shall change any due date or the amount of any regularly-scheduled installment of principal thereof.

(f) Unused Credit Fee. The Borrower shall pay the Bank an unused credit fee in an amount equal to one quarter of one percent (.25%) per annum times the daily average of the unused Total Commitment Amount (the “Unused Credit Fee”), which fee shall be payable quarterly, in arrears, having commenced on the first day of December, 1998, and on the first day of each March, June, September and December thereafter, and when the Loans are due (whether by reason of acceleration or otherwise). The Unused Credit Fee shall be computed on the basis of a year consisting of three hundred sixty (360) days but applied to the actual number of days elapsed.

5. Events of Default. If any of the following events (each, an “Event of Default”) shall occur, then the Bank may, without further notice or demand, accelerate the Loans and declare them to be, and thereupon the Loans shall become, immediately due and payable (except that the Loans shall become automatically due and payable upon the occurrence of an event described in Sections 5(j), (k) and (l) below), and, to the extent that the Loan proceeds have not yet been used or fully drawn on by the Borrower, terminate the Bank’s obligation to disburse the balance of same; and the Bank shall have all rights provided herein or in any of the other Loan Documents or otherwise provided by law to realize on any collateral or security for the Loans:

(a) The Borrower does not pay the Bank any interest on the Loans within ten (10) days after the date due, whether by reason of acceleration or otherwise, or does not pay or repay to the Bank any principal of the Loans or any other obligation hereunder when due, whether by reason of acceleration or otherwise; or

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(b) The Borrower defaults in the performance or observance of any agreement contained in Section 2(b), 2(c), 2(d), 2(e), 2(f), 2(g), 2(h) or 2(o) hereof and such default has not been cured by the Borrower within ten (10) days after the occurrence thereof, or the Borrower defaults in the performance or observance of any other agreement contained in Section 2 hereof; or

(c) There shall have occurred any other violation or breach of any covenant, agreement or condition contained herein or in any other Loan Document which has not been cured by the Borrower within thirty (30) days after the earlier to occur of the date the Borrower has knowledge thereof and the date the Bank gives the Borrower notice thereof; or

(d) The Borrower does not pay when due or prior to the expiration of the applicable cure period, if any, any principal or interest on any other Indebtedness in excess of One Hundred Thousand Dollars ($100,000), or the Borrower defaults in the performance or observance of any other term or condition contained in any agreement or instrument under which such Indebtedness is created, and the holder of such other Indebtedness declares, or may declare, such Indebtedness due prior to its stated maturity because of the Borrower’s default thereunder; or

(e) There shall have occurred any violation or breach of any covenant, agreement or condition contained in any other agreement between the Borrower and the Bank which has not been cured by the Borrower prior to the expiration of the applicable cure period, if any, including without limitation, the Third Amended and Restated Loan Agreement [Revolving and Bullet Loans] between the Borrower and the Bank dated as of October 21, 2009, as amended from time to time (the “Revolving/Bullet Loan Agreement”); or

(f) The Borrower does not perform its obligations under any agreement material to its business, and the other party to such agreement declares, or may declare, such agreement in default; or

(g) Any representation or warranty made herein or in any other Loan Document or writing furnished in connection with this Agreement shall be false or misleading in any material respect when made; or

(h) The Borrower is generally not paying its debts as they become due; or

(i) With respect to the plans referred to in Section 1(h) above, or any other similar plan, a “reportable event” or “prohibited transaction” pursuant to ERISA has occurred which results in the imposition of material taxes or penalties against the Borrower or the termination of such plans (or trusts related thereto), or the Borrower incurs any material liability to the PBGC in connection with such plans; or

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(j) The Borrower makes an assignment of a material part of its assets for the benefit of creditors; or

(k) The Borrower applies for the appointment of a trustee or receiver for a material part of its assets or commences any proceedings relating to the Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or other liquidation law of any jurisdiction; or any such application is filed, or any such proceedings are commenced, against the Borrower, and the Borrower indicates its approval, consent or acquiescence thereto; or an order is entered appointing such trustee or receiver, or adjudicating the Borrower bankrupt or insolvent, or approving the petition in any such proceedings, and such order remains in effect for sixty (60) days; or

(l) Any order is entered in any proceedings against the Borrower decreeing the dissolution of the Borrower; or

(m) Any material part of the Borrower’s operations shall cease, other than temporary or seasonal cessations which are experienced by other companies in the same line of business and which would not have a material adverse effect on the Borrower’s operations or financial condition or its ability to perform its obligations hereunder; or

(n) Any final non-appealable judgment which, together with other outstanding judgments against the Borrower, causes the aggregate of such judgments in excess of confirmed insurance coverage satisfactory to the Bank to exceed Seven Hundred Fifty Thousand Dollars ($750,000), shall be rendered against the Borrower; or

(o) Any event of default occurs under any other agreement to which the Borrower and the Bank are parties or under any document or instrument running to the benefit of the Bank from the Borrower.

The above recitation of Events of Default shall be interpreted in all respects in favor of the Bank. To the extent any cure-of-default period is provided above, the Bank may nevertheless, at its option pending completion of such cure, suspend its obligation to consider further disbursement of the Loans hereunder.

6. General.

(a) Reasonable Actions. The Bank agrees that in taking any action which it is permitted or empowered to take under this Agreement, it will act reasonably under what it believes are the facts and circumstances existing at such time.

(b) Delay. No delay, omission or forbearance on the part of the Bank in the exercise of any power or right shall operate as a waiver thereof, nor shall any single or partial delay, omission or forbearance in the exercise of any other power or right. The rights and/or remedies of the Bank herein provided are cumulative, shall be interpreted in all respects in favor of the Bank and are not exclusive of any other rights and/or remedies provided by law.

20

(c) Notice. Except as otherwise expressly provided in this Agreement, any notice hereunder shall be in writing and shall be deemed to be given when personally delivered or when sent by certified mail, postage prepaid, and addressed to the parties at their addresses set forth below:

Bank:	U.S. Bank National Association
	425 Walnut Street
	Cincinnati, Ohio 45202
	Attention: Shawn Masterson
	Vice President
With a copy to:	Jeffrey S. Schloemer, Esq.
	Taft, Stettinius & Hollister LLP
	425 Walnut Street, Suite 1800
	Cincinnati, Ohio 45202
Borrower:	Frisch’s Restaurants, Inc.
	2800 Gilbert Avenue
	Cincinnati, Ohio 45206
	Attention: Mr. Donald H. Walker
	Vice President-Finance
With copies to:	Craig F. Maier, President
	Frisch’s Restaurants, Inc.
	2800 Gilbert Avenue
	Cincinnati, Ohio 45206

and

Donald A. Bodner

Frisch’s Restaurants, Inc.

2800 Gilbert Avenue

Cincinnati, Ohio 45206

The Borrower or the Bank may, by written notice to the other as provided herein, designate another address for purposes hereunder.

(d) Expenses; Indemnity. The Borrower shall pay all reasonable out-of-pocket expenses incurred by the Bank, including the reasonable fees, charges and disbursements of outside-counsel for the Bank (determined on the basis of such counsel’s generally applicable rates, which may be higher than the rates such counsel charges the Bank in certain matters) and/ or the allocated costs of in-house counsel incurred from time to time by the Bank in entering into and closing this Agreement and preparing the documentation in connection herewith, administering the obligations of the Borrower hereunder or under any of the other Loan Documents, and enforcing the obligations of the Borrower hereunder or under any of the other Loan Documents, and the Borrower agrees to pay the Bank upon demand for the same. The

21

Borrower agrees to defend, indemnify and hold the Bank harmless from any liability, obligation, cost, damage or expense (including reasonable attorneys’ fees and legal expenses) for taxes (other than income taxes), fees or third party claims which may arise or be related to the execution, delivery or performance of this Agreement or any of the other Loan Documents, except in the case of negligence or willful misconduct on the part of the Bank. The Borrower further agrees to indemnify and hold harmless the Bank from any loss or expense which the Bank may sustain or incur as a consequence of default by the Borrower in payment of any principal of or interest on the Loans, including, without limitation, any such loss or expense arising from interest or fees payable by the Bank to lenders of funds obtained by it in order to maintain interest rates on the Cost of Funds Loans.

(e) Survival. All covenants and agreements of the Borrower made herein or otherwise in connection with the transactions contemplated hereby shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall remain in effect so long as any obligations of the Borrower are outstanding hereunder or under any of the other Loan Documents.

(f) Severability. Any provision of this Agreement or any of the other Loan Documents which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition of enforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

(g) Law. IMPORTANT: The Loans shall be deemed made in Ohio and this Agreement and all other Loan Documents, and all of the rights and obligations of the Borrower and the Bank hereunder and thereunder, shall in all respects be governed by and construed in accordance with the laws of the State of Ohio, including all matters of construction, validity and performance. Without limitation on the ability of the Bank to initiate and prosecute any action or proceeding in any applicable jurisdiction related to loan repayment, the Borrower and the Bank agree that any action or proceeding commenced by or on behalf of the parties arising out of or relating to the Loans and/or this Agreement and/or any of the other Loan Documents shall be commenced and maintained exclusively in the District Court of the United States for the Southern District of Ohio, or any other court of applicable jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and complaint commencing an action or proceeding in any such Ohio courts by or on behalf of such parties shall be properly served and shall confer personal jurisdiction on a party to which said party consents, if (i) served personally or by certified mail to the other party at any of its addresses noted herein, or (ii) as otherwise provided under the laws of the State of Ohio. The interest rates and all other terms of the Loans negotiated with the Borrower are, in part, related to the aforesaid provisions on jurisdiction, which the Bank deems a vital part of this loan arrangement.

(h) Successors. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Bank and their respective successors and assigns. The Borrower shall not assign its rights or delegate its duties hereunder without the prior written consent of the Bank.

(i) Amendment and Restatement. This Agreement amends and restates the Prior Loan Agreement and amounts outstanding under the Prior Loan Agreement shall not be deemed cancelled or satisfied, but shall be evidenced by this Agreement instead of by the Prior Loan Agreement.

22

(j) Amendment. Except as otherwise expressly provided herein, this Agreement may not be modified or amended except in writing signed by authorized officers of the Bank and the Borrower.

[SIGNATURES ON FOLLOWING PAGE]

23

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly effective as of the date first set forth above.

U.S. BANK NATIONAL ASSOCIATION		FRISCH’S RESTAURANTS, INC.
By:	/s/ Shawn Masterson		By:	/s/ Donald H. Walker
	Shawn Masterson		Donald H. Walker
	Vice President		Vice President-Finance

24

LIST OF EXHIBITS

A    -	Financial Information and Reports
B    -	Actions
C    -	Permitted Liens
D    -	Financial Covenants
E    -	Permitted Indebtedness
F    -	Construction Note
G-1  -	Form of Term Note (Cost of Funds Rate Term Loan)
G-2  -	Form of Term Note (Variable Rate Term Loan)

25

EXHIBIT 10.4

EXHIBIT A

FINANCIAL INFORMATION AND REPORTS

1. Annual Report for the year ended June 2, 2009.

2. Projections for the Borrower for the year ending June, 2010.

A-1

EXHIBIT 10.4

EXHIBIT B

ACTIONS

B-1

EXHIBIT 10.4

EXHIBIT C

PERMITTED LIENS

All obligations of the Borrower incurred in connection with any existing or future lease transactions capitalized or required to be capitalized on the Borrower’s books.

Two mortgages in favor of U.S.

C-1

EXHIBIT 10.4

EXHIBIT D

FINANCIAL COVENANTS

The Borrower agrees that it shall:

(a) Ratio of Senior Bank Debt to Adjusted EBITDA. Not permit the ratio of the Borrower’s Senior Bank Debt to Adjusted EBITDA to exceed 2.00 to 1.0 at any time.

“Senior Bank Debt” for purposes hereof shall mean the sum of all of the Borrower’s indebtedness for borrowed money that in accordance with generally accepted accounting principles would be considered as a liability, and all obligations of the Borrower incurred in connection with any existing or future lease transactions capitalized or required to be capitalized on the Borrower’s books.

“Adjusted EBITDA” for purposes hereof shall mean the Borrower’s consolidated gross (before interest, taxes, depreciation and amortization) earnings; plus losses on disposition of assets (net of abandonment losses); less gains on disposition of assets, net of abandonment losses; plus net cash proceeds from the disposition of property; less cash and non-cash extraordinary gains; plus cash and non-cash extraordinary losses, all calculated in accordance with generally accepted accounting principals and consistently applied in accordance with past practices on a rolling four (4) quarter basis.

(b) Cash Flow Coverage Ratio. Not permit the ratio of (i) the Borrower’s Adjusted EBITDA plus operating lease payments less maintenance capital expenditures equal to (50%) of depreciation less cash dividends to the Borrower’s shareholders less cash income taxes paid, to (ii) the sum of the Borrower’s scheduled principal payments on long term debt and capital lease obligations (excluding Revolving Loan principal payments) plus interest expense plus operating lease payments (in each case for the same period that the Borrower’s Adjusted EBITDA is measured), calculated in accordance with generally accepted accounting principles consistently applied in accordance with past practices on a rolling four (4) quarter basis, to be less than 1.10 to 1.0, measured quarterly on a rolling twelve month basis.

D-1

EXHIBIT 10.4

EXHIBIT E

PERMITTED INDEBTEDNESS

		Balance September 22, 2009
Indebtedness to US Bank NA
Term Loan			539,697
Revolving Loan (up to $5,000,000 may be borrowed)			4,000,000
Golden Corral Credit Facility
Construction Phase	0
Term Loans	26,999,269		26,999,269
(up to $8,000,000 more may be borrowed)
		$	31,538,966

Capitalized Leases

All obligations of the Borrower incurred in connection with any existing or future lease transactions capitalized or required to be capitalized on the Borrower’s books.

Contingent liability as assignor/guarantor of the following leases:

Location	Assignee	Remaining Lease Term
Covington, KY (Riverview Hotel) $48,072 per year (renewal options aggregating 50 years)	Remington Hotel Corporation	04/30/2020

Lease liability for closed restaurants & other non-operating property (lease not presently assigned)

Location	Remaining Lease Term	Rent Per Month
None

E-1

EXHIBIT F

NINTH AMENDED AND RESTATED PROMISSORY NOTE

$92,500,000	Cincinnati, Ohio
	October 21, 2009

FRISCH’S RESTAURANTS, INC., an Ohio corporation (the “Borrower”), for value received, hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association formerly known as Firstar Bank, N.A. and Star Bank, National Association (the “Bank”), or it successors or assigns, on or before October 21, 2010, the principal sum of Ninety Two Million Five Hundred Thousand Dollars ($92,500,000), or such portion thereof as may be outstanding from time to time, together with interest thereon as hereinafter provided.

This is the Construction Note referred to in, was executed and delivered pursuant to, and evidences indebtedness of the Borrower incurred under, that certain Second Amended and Restated Loan Agreement [Golden Corral] dated as of October 21, 2009 between the Borrower and the Bank, as the same has been and/or may be amended, restated, supplemented, renewed, or otherwise modified and in effect from time to time (the “Loan Agreement”), to which reference is hereby made for a statement of the terms and conditions under which the Construction Loans evidenced hereby were made and are to be repaid and for a statement of the Bank’s remedies upon the occurrence of an Event of Default. Capitalized terms used herein, but not otherwise specifically defined, shall have the meanings ascribed to such terms in the Loan Agreement.

As of October 21, 2009, as a result of the prior draws by the Borrower under the Loans and prior conversions of Construction Loans to Term Loans, of the maximum Ninety Two Million Five Hundred Thousand Dollar ($92,500,000) Construction Loan facility, (i) Eighty Four Million Five Hundred Thousand Dollars ($84,500,000) has been drawn by the Borrower under the Construction Loans and already been converted to Term Loans or currently remains outstanding as Construction Loans and (ii) a maximum of Eight Million Dollars ($8,000,000) still remains available to be drawn by the Borrower under the Construction Loans.

The Borrower further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate or rates from time to time applicable to the Construction Loans as determined in accordance with the Loan Agreement; provided, however, that upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the outstanding principal balance of this Note at the rate of interest applicable following the occurrence of an Event of Default as determined in accordance with the Loan Agreement.

Interest on this Note shall be payable, at the times and from the dates specified in the Loan Agreement, on the date of any prepayment hereof, at maturity, whether due by acceleration or otherwise, and as otherwise provided in the Loan Agreement. From and after the

F-1

date when the principal balance hereof becomes due and payable, whether by acceleration or otherwise, interest hereon shall be payable on demand. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Bank has received interest hereunder in excess of the highest rate applicable hereto, such excess shall be applied in accordance with the terms of the Loan Agreement.

The indebtedness evidenced by this Note is secured pursuant to the terms of the Loan Documents.

The Borrower hereby waives demand, presentment, and protest and notice of demand, presentment, protest, and nonpayment.

The Borrower further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys’ fees and legal expenses, incurred by the Bank in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.

IMPORTANT: This Note shall be deemed made in Ohio and shall in all respects be governed by and construed in accordance with the laws of the State of Ohio, including all matters of construction, validity and performance. Without limitation on the ability of the Bank to initiate and prosecute any action or proceeding in any applicable jurisdiction related to loan repayment, the Borrower and the Bank agree that any action or proceeding commenced by or on behalf of the parties arising out of or relating to this Note shall be commenced and maintained exclusively in the District Court of the United States for the Southern District of Ohio, or any other court of applicable jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and complaint commencing an action or proceeding in any such Ohio courts by or on behalf of such parties shall be properly served and shall confer personal jurisdiction on a party to which said party consents, if (a) served personally or by certified mail to the other party at any of its addresses noted herein, or (b) as otherwise provided under the laws of the State of Ohio. The interest rates and all other terms of this Note negotiated with the Borrower are, in part, related to the aforesaid provisions on jurisdiction, which the Bank deems a vital part of this loan arrangement.

This Note amends and restates the Eighth Amended and Restated Promissory Note dated as of December 3, 2007 given by the Borrower to the Bank, and evidences all amounts outstanding as of the date hereof under said Eighth Amended and Restated Promissory Note.

[remainder of page intentionally left blank]

F-2

Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived.

FRISCH’S RESTAURANTS, INC.
By:
	Donald H. Walker, Vice President-Finance
Address:	2800 Gilbert Avenue
	Cincinnati, Ohio 45206

F-3

EXHIBIT 10.4

EXHIBIT G-1

COST OF FUNDS RATE TERM LOAN

PROMISSORY NOTE

$	Cincinnati, Ohio
	1,

FRISCH’S RESTAURANTS, INC., an Ohio corporation (the “Borrower”), for value received, hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association formerly known as Firstar Bank, N.A. and Star Bank, National Association (the “Bank”), or it successors or assigns, on or before                      1,          (the “Maturity Date”), the principal sum of                      Dollars ($            ), together with interest thereon as hereinafter provided.

This Note is a “Term Note” as described in and evidences a “Cost of Funds Rate Term Loan” made under that certain Second Amended and Restated Loan Agreement [Golden Corral] dated as of October 21, 2009 between the Borrower and the Bank, as the same has been and/or may be amended, restated, supplemented, renewed, or otherwise modified and in effect from time to time (the “Loan Agreement”), and is subject to the terms and conditions thereof, including, without limitation, the terms thereof providing for acceleration of maturity of such Cost of Funds Rate Term Loan. If any term or condition of this Note conflicts with the express terms or conditions of the Loan Agreement, the terms and conditions of the Loan Agreement shall control. Terms used herein shall have the same meanings as in the Loan Agreement.

The outstanding principal balance of this Note shall bear interest at a per annum rate equal to              percent (    %). Interest on this Note shall be computed on the basis of a year consisting of three hundred sixty (360) days but applied to the actual number of days elapsed.

The Borrower shall make monthly payments of principal and interest on this Note in the amount of                      Dollars ($            ), with each such payment being applied first to accrued interest and then to principal, commencing on the first day of                     ,          and on the first day of each month thereafter through and including the Maturity Date, at which time the outstanding principal balance of and all interest on this Note shall be due and payable in full.

At the option of the Bank, (a) prior to acceleration of this Note, in the event that any interest on or principal of this Note remains unpaid past thirty (30) days of the date due, and/or (b) upon the occurrence of any other Event of Default under the Loan Agreement or upon the acceleration of this Note, interest (computed and adjusted in the same manner, and with the same effect, as interest on this Note prior to maturity) on the outstanding balance of this Note shall be payable on demand at the rate that would otherwise be in effect for such Loans from time to time as set forth in the Loan Agreement plus an additional three percent (3%) per annum

G-1-1

up to any maximum rate permitted by law, in all cases until paid and whether before or after the entry of any judgment thereon. The “Prime Rate” is that rate announced by the Bank from time to time as its prime rate, which rate is determined solely by the Bank pursuant to market factors and its own operating needs and is not necessarily the Bank’s best or most favorable rate for commercial or other loans. In addition, in the event that the Borrower should fail to make any payment hereunder within ten (10) days of the date due, the Borrower shall pay the Bank a fee in an amount of up to five percent (5%) of the amount of such payment, but in no event less than Fifty Dollars ($50.00), which fee shall be immediately due and payable without notice or demand.

All payments of principal and interest hereunder shall be made in immediately available funds to the Bank at 425 Walnut Street, Location 9150, Cincinnati, Ohio 45202, or at such other place as may be designated by the Bank to the Borrower in writing. The Bank is authorized by the Borrower to enter from time to time the balance of this Note and all payments and prepayments thereon on the reverse of this Note or in the Bank’s regularly maintained data processing records, and the aggregate unpaid amount set forth thereon or therein shall be presumptive evidence of the amount owing to the Bank and unpaid on this Note.

[This Note may not be prepaid in whole or in part except upon (i) written notice to the Bank not less than thirty (30) days prior to the date of prepayment (which notice shall specify the date and amount of prepayment), (ii) the Bank granting its consent to such prepayment, which consent the Bank may grant or withhold in its sole discretion, (iii) payment to the Bank of a “Prepayment Fee” and other amounts as specified in and calculated in accordance with the terms of the Loan Agreement, and (iv) compliance with the other terms and conditions of the Loan Agreement. /

The per annum rate of this Note includes a premium of             % over the otherwise applicable Cost of Funds-Based Rate so that the Borrower may prepay this Note in whole or in part at any time without incurring a “Prepayment Fee” as specified in and calculated in accordance with the terms of the Loan Agreement.]

IMPORTANT: This Note shall be deemed made in Ohio and shall in all respects be governed by and construed in accordance with the laws of the State of Ohio, including all matters of construction, validity and performance. Without limitation on the ability of the Bank to initiate and prosecute any action or proceeding in any applicable jurisdiction related to loan repayment, the Borrower and the Bank agree that any action or proceeding commenced by or on behalf of the parties arising out of or relating to this Note shall be commenced and maintained exclusively in the District Court of the United States for the Southern District of Ohio, or any other court of applicable jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and complaint commencing an action or proceeding in any such Ohio courts by or on behalf of such parties shall be properly served and shall confer personal jurisdiction on a party to which said party consents, if (a) served personally or by certified mail to the other party at any of its addresses noted herein, or (b) as otherwise provided under the laws of the State of Ohio. The interest rates and all other terms of this Note negotiated with the Borrower are, in part, related to the aforesaid provisions on jurisdiction, which the Bank deems a vital part of this loan arrangement.

G-1-2

Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived.

FRISCH’S RESTAURANTS, INC.
By:
Title:
Address:	2800 Gilbert Avenue
	Cincinnati, Ohio 45206

G-1-3

EXHIBIT 10.4

EXHIBIT G-2

VARIABLE RATE TERM LOAN

PROMISSORY NOTE

$	Cincinnati, Ohio
	1,

FRISCH’S RESTAURANTS, INC., an Ohio corporation (the “Borrower”), for value received, hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association formerly known as Firstar Bank, N.A. and Star Bank, National Association (the “Bank”), or it successors or assigns, on or before             1,             (the “Maturity Date”), the principal sum of             Dollars ($            ), together with interest thereon as hereinafter provided.

This is a Term Note referred to in, was executed and delivered pursuant to, and evidences a Variable Rate Term Loan made under, that certain Second Amended and Restated Loan Agreement [Golden Corral] dated as of October 21, 2009 between the Borrower and the Bank, as the same has been and/or may be amended, restated, supplemented, renewed, or otherwise modified and in effect from time to time (the “Loan Agreement”), to which reference is hereby made for a statement of the terms and conditions under which the Variable Rate Term Loan evidenced hereby was made and is to be repaid and for a statement of the Bank’s remedies upon the occurrence of an Event of Default. Capitalized terms used herein, but not otherwise specifically defined, shall have the meanings ascribed to such terms in the Loan Agreement.

The Borrower further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate or rates from time to time applicable to a Variable Rate Term Loan as determined in accordance with the Loan Agreement; provided, however, that upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the outstanding principal balance of this Note at the rate of interest applicable following the occurrence of an Event of Default as determined in accordance with the Loan Agreement.

Interest on this Note shall be payable, at the times and from the dates specified in the Loan Agreement, on the date of any prepayment hereof, at maturity, whether due by acceleration or otherwise, and as otherwise provided in the Loan Agreement for a Variable Rate Term Loan. From and after the date when the principal balance hereof becomes due and payable, whether by acceleration or otherwise, interest hereon shall be payable on demand. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Bank has received interest hereunder in excess of the highest rate applicable hereto, such excess shall be applied in accordance with the terms of the Loan Agreement.

G-2-1

The principal of this Note shall be payable in                     (            ) installments of                                  Dollars ($            ) each, commencing on the first day of                     ,          and on the first day of each month thereafter through and including the Maturity Date, at which time the outstanding principal balance of this Note shall be due and payable in full.

The indebtedness evidenced by this Note is secured pursuant to the terms of the Loan Documents.

The Borrower hereby waives demand, presentment, and protest and notice of demand, presentment, protest, and nonpayment.

The Borrower further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys’ fees and legal expenses, incurred by the Bank in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.

IMPORTANT: This Note shall be deemed made in Ohio and shall in all respects be governed by and construed in accordance with the laws of the State of Ohio, including all matters of construction, validity and performance. Without limitation on the ability of the Bank to initiate and prosecute any action or proceeding in any applicable jurisdiction related to loan repayment, the Borrower and the Bank agree that any action or proceeding commenced by or on behalf of the parties arising out of or relating to this Note shall be commenced and maintained exclusively in the District Court of the United States for the Southern District of Ohio, or any other court of applicable jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and complaint commencing an action or proceeding in any such Ohio courts by or on behalf of such parties shall be properly served and shall confer personal jurisdiction on a party to which said party consents, if (a) served personally or by certified mail to the other party at any of its addresses noted herein, or (b) as otherwise provided under the laws of the State of Ohio. The interest rates and all other terms of this Note negotiated with the Borrower are, in part, related to the aforesaid provisions on jurisdiction, which the Bank deems a vital part of this loan arrangement.

Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived.

FRISCH’S RESTAURANTS, INC.
By:
Title:
Address:	2800 Gilbert Avenue
	Cincinnati, Ohio 45206

G-2-2

EX-10.5

EXHIBIT 10.5

THIRD AMENDED AND RESTATED LOAN AGREEMENT

[REVOLVING AND BULLET LOANS]

THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT [REVOLVING AND BULLET LOANS] (this “Agreement”) is made and entered into as of the 21st day of October, 2009 by and between (i) FRISCH’ S RESTAURANTS, INC., an Ohio corporation (the “Borrower” ), and (ii) U.S. BANK NATIONAL ASSOCIATION, a national banking association formerly known as Firstar Bank, N.A. and Star Bank, National Association, and its successors and assigns (the “Bank”), and amends and restates the Second Amended and Restated Loan Agreement between the Borrower and the Bank dated as of October 15, 2004, as amended (the “Prior Loan Agreement”).

1. Representations and Warranties. To induce the Bank to enter into this Agreement and to agree to make and/or to continue the Loans described in Section 4 hereof, the Borrower makes the following representations and warranties:

(a) Existence. The Borrower is duly organized, validly existing and in good standing as a corporation under the laws of the State of Ohio, and each Subsidiary (as hereinafter defined) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The Borrower and each Subsidiary is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction in which the failure to be so qualified by the Borrower or the Subsidiary would have a material adverse effect on its business, prospects or financial condition. “Subsidiary” for purposes hereof means any corporation or other entity the majority of the voting stock of which is owned, directly or indirectly, beneficially or of record, by the Borrower or any Subsidiary, or which is otherwise controlled, directly or indirectly, by the Borrower or any Subsidiary.

(b) Authority. The Borrower and each Subsidiary has full power and authority to own its properties and to conduct its business as such business is now being conducted, and the Borrower has full power and authority to execute, deliver and perform under this Agreement, the Notes (as hereinafter described) and all other documents and instruments executed in connection with or otherwise relating to this Agreement or the Loans (as hereinafter defined) (collectively, the “Loan Documents”).

(c) Borrowing Authorization. The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents: (i) have been duly authorized by all requisite corporate action; (ii) do not and will not violate (A) any provision of any law, statute, rule or regulation, (B) any order, judgment or decree of any court, arbitrator or other agency of government, (C) the Articles of Incorporation or Code of Regulations or other organizational or governing documents of the Borrower, or (D) any provision of any agreement (including, without limitation, any agreement with stockholders) to which the Borrower or any Subsidiary is a party or subject, or by which it or any of its properties or assets are bound; (iii) do not and will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower or any Subsidiary; and (iv) do not and will not require any consent, approval or other action by or any notice to or filing with

any court or administrative or governmental body. This Agreement and the other Loan Documents have been duly executed and delivered on behalf of the Borrower and constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.

(d) Financial Information and Reports. Exhibit A to this Agreement is a complete list of the financial statements and projected financial statements furnished by the Borrower to the Bank in connection with the borrowings to be made hereunder. Each such historical financial statement fairly presents in accordance with generally accepted accounting principles the financial condition of the Borrower and its Subsidiaries and the results of their operations as of the date (or with respect to the period) noted in such financial statements. Other than any liability incident to any actions described in Exhibit B to this Agreement, neither the Borrower nor any Subsidiary has any material contingent liabilities required to be disclosed under generally accepted accounting principles which are not provided for or disclosed in such financial statements. Each such statement (including any related schedule and/or notes) is true, correct and complete in all material respects (subject, as to interim statements, to changes resulting from audits and year-end adjustments) and has been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods involved. No such statement omits to state a material fact necessary to make such statement not misleading in light of the circumstances under which it was made. There has been no material adverse change in the business, operations or condition (financial or otherwise) of the Borrower or any Subsidiary since the date of such financial statements.

(e) Indebtedness. Neither the Borrower nor any Subsidiary has any Indebtedness (as hereinafter defined) other than Permitted Indebtedness (as hereinafter defined), or has guaranteed the obligations of any other person (except by endorsement of negotiable instruments payable on sight for deposit or collection or similar banking transactions in the usual course of business), and to the best of the Borrower’s knowledge after diligent investigation, there exists no default under the provisions of any instrument evidencing any Indebtedness of the Borrower or any Subsidiary or of any agreement relating thereto. “Indebtedness” as used herein means all indebtedness for borrowed money which in accordance with generally accepted accounting principles would be considered as a liability, all rental obligations under leases required to be capitalized under generally accepted accounting principles, all guarantees and other contingent obligations in respect of, or obligations to purchase or otherwise acquire, Indebtedness of others, and Indebtedness of others secured by any lien on property owned by the Borrower or any Subsidiary, whether or not the Borrower or such Subsidiary has assumed such Indebtedness.

(f) Actions. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary before any court, arbitrator or administrative or governmental agency except for those described in Exhibit B to this Agreement, none of which might result in any material adverse change in the business, operations or condition (financial or otherwise) of the Borrower or any Subsidiary, nor, to the best of the Borrower’s knowledge after diligent investigation, is there any basis for any such action which might result in such a material adverse change.

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(g) Title to Property. The Borrower and each Subsidiary has good and marketable title to its real properties (other than properties which it leases as lessee) and good title to all of its other properties and assets, including the properties and assets reflected in the most recent balance sheet described in Exhibit A hereto (other than properties and assets disposed of in the ordinary course of business since the date thereof), free and clear of all liens, mortgages, pledges, security interests, encumbrances or charges of any kind, including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof (each, a “Lien”), other than the following (each, a “Permitted Lien”): (i) Liens described on Exhibit C hereto, (ii) leases required under generally accepted accounting principles to be capitalized on the Borrower’s or such Subsidiary’s books (“Capitalized Leases”) so long as there is no violation of any of the Financial Covenants set forth on Exhibit D hereto, and (iii) Liens in favor of the Bank. The Borrower and each Subsidiary is in undisturbed possession under all leases necessary in any material respect for the operation of its business, and no such leases contain any unusual or burdensome provisions which might materially affect or impair the Borrower’s or the Subsidiary’s operations thereunder. All such leases are valid and in full force and effect.

(h) Employee Benefit Plans. To the best of the Borrower’s knowledge after diligent investigation, no “reportable event” or “prohibited transaction,” as defined by the Employee Retirement Income Security Act of 1974 (“ERISA”) has occurred or is continuing, as to any plan of the Borrower or any of its affiliates which poses a threat of taxes or penalties against or termination of such plans (or trusts related thereto). Neither the Borrower nor any of its affiliates has violated in any material respect the requirements of any “qualified pension benefit plan,” as defined by ERISA and the Internal Revenue Code of 1986, or done anything to create any material liability under the Multi-Employee Pension Plan Amendment Act. Neither the Borrower nor any of its affiliates has incurred any material liability to the Pension Benefit Guarantee Corporation (the “PBGC”) in connection with such plans, including, but not limited to, any “funding deficiency” (as defined by ERISA).

(i) Purpose of Loans. Proceeds of the Loans shall be used to fund temporary working capital needs and to refinance certain borrowings currently outstanding under the Revolving Note. The Loans are not and shall not be secured, directly or indirectly, by any stock for the purpose of purchasing or carrying any margin stock or for any purpose which would violate either Regulation U, 12 C.F.R. Part 221, or Regulation X, 12 C.F.R. Part 224, promulgated by the Board of Governors of the Federal Reserve System.

(j) Compliance. The Borrower and each Subsidiary is in compliance in all material respects with all laws, statutes, ordinances, rules, regulations and orders of any governmental entity (including, but not by way of limitation, any such laws, statutes, ordinances, rules, regulations and orders related to ecology, human health and the environment) applicable to it.

(k) Adverse Contracts and Conditions. Neither the Borrower nor any Subsidiary is a party to any contract or agreement, or subject to any charge, restriction, judgment, decree or order, materially and adversely affecting its business, property, assets, operations or condition, financial or otherwise, nor a party to any labor dispute. There are no restrictions applicable to any Subsidiary which might limit its ability to pay dividends or make loans to the Borrower.

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(l) Taxes. The Borrower and each Subsidiary has filed all federal, state and local tax returns and other reports which it is required by law to file, has paid all taxes, assessments and other similar charges that are due and payable, other than taxes, if any, being contested by the Borrower or a Subsidiary in good faith and as to which adequate reserves have been established in accordance with generally accepted accounting principles, and has withheld all employee and similar taxes which it is required by law to withhold. Federal income tax returns of the Borrower and each Subsidiary have been examined by the taxing authorities or closed by applicable statutes and satisfied for all fiscal years prior to and including the Borrower’s 2005 fiscal year end. Federal income tax returns of the Borrower and its Subsidiaries for the Borrower’s 2006 fiscal year end and all years thereafter may still be examined by the taxing authorities.

2. Borrower’s Covenants. The Borrower agrees that, from the date of this Agreement and until the Loans are paid in full and all obligations under this Agreement are fully performed, and the commitment of the Bank to make Loans hereunder has terminated:

(a) Financial Covenants. The Borrower shall comply with each of the financial covenants set forth in Exhibit D to this Agreement (collectively, the “Financial Covenants”).

(b) Financial Statements; Periodic Reports. The Borrower shall furnish to the Bank: (i) as soon as practicable and in any event within ninety (90) days after the last day of each fiscal year of the Borrower, a copy of the annual audit report of the Borrower, prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year, and consisting of a consolidated balance sheet as at the end of such fiscal year and consolidated statements of earnings, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such fiscal year, setting forth in each case in comparative consolidated form corresponding consolidated figures from the preceding annual audit, certified by a nationally-recognized firm of independent certified public accountants, whose certificate shall be in scope and substance reasonably satisfactory to the Bank and shall include, without limitation, a certification that in auditing the Borrower, such accountant has obtained no knowledge of an Event of Default (as hereinafter defined) hereunder, or if any Event of Default exists, specifying the nature and period of existence thereof, and accompanied by such accountant’s management letter with respect thereto; (ii) as soon as practicable and in any event within forty-five (45) days after the last day of each of the Borrower’s first three fiscal quarters, a copy of the Borrower’s unaudited financial statements, prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal quarter, and consisting of a consolidated balance sheet as at the end of such fiscal quarter and consolidated statements of earnings, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for the period from the beginning of the then-current fiscal year through the end of such fiscal quarter, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, and certified by an authorized financial officer of the Borrower, subject to changes resulting from year-end adjustments; (iii) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as the Borrower shall send to its stockholders and copies of all registration statements (without exhibits) and all regulatory and periodic reports which the Borrower files with the Securities and Exchange Commission (the “SEC”) or any governmental body or agency

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succeeding to the functions of the SEC; and (iv) with reasonable promptness, such other financial data in such form as the Bank may reasonably request, provided that the Bank shall keep such data confidential to the extent required by applicable securities laws.

Together with each delivery of financial statements required under clauses (i) and (ii) above, the Borrower shall deliver a certificate of its Chief Financial Officer (A) setting forth a comparison between actual calculated results and covenanted results for each of the Financial Covenants set forth on Exhibit D hereto and (B) stating that, to the best of such Chief Financial Officer’s knowledge after diligent investigation, no Event of Default hereunder then exists, or if such an Event of Default hereunder does then exist, specifying the nature thereof, the period of existence thereof, and the action the Borrower proposes to take with respect thereto. The Borrower further agrees that promptly upon the President or Chief Financial Officer of the Borrower obtaining knowledge of an event that constitutes an Event of Default hereunder, the Borrower shall deliver to the Bank a certificate specifying the nature thereof, the period of existence thereof, and the action the Borrower proposes to take with respect thereto. The Bank is authorized to deliver a copy of any financial statement or other communication or document delivered to it pursuant to this Section 2(b) to any regulatory body having jurisdiction over it if such delivery is required by such regulatory body. The Borrower and each Subsidiary shall permit the Bank and its agents and representatives, at the expense of the Bank, to inspect its real and personal property and to verify accounts and inspect and make copies of or extracts from its books, records and files, and to discuss its affairs, finances and accounts with its principal officers, all at such reasonable times and as often as the Bank may reasonably request.

(c) Insurance. The Borrower shall, and shall cause each Subsidiary to, maintain with responsible carriers All Risk coverage for the full replacement value of all of its real and personal property, except that the Borrower and each Subsidiary may self-insure risks to its real and personal property in an amount not to exceed Five Hundred Thousand Dollars ($500,000), and maintain with responsible carriers general public liability insurance coverage including Excess liability coverage in an amount not less than Twenty-Five Million Dollars ($25,000,000), except that the Borrower and each Subsidiary may self-insure general public liability risks in an amount not to exceed Five Hundred Thousand Dollars ($500,000) per occurrence during the term of this Agreement. The Borrower shall deliver to the Bank, together with delivery of the financial statements required under Section 2(b)(i) above, a certificate specifying the details of all such insurance in effect. The Borrower shall cause the Bank to be named as lender loss payee and/or additional insured, as applicable, on its policies of insurance.

(d) Taxes. The Borrower shall, and shall cause each Subsidiary to, file all federal, state and local tax returns and other reports it is required by law to file, and shall pay when due all taxes, assessments and other liabilities, except that the Borrower and any Subsidiary shall not be obligated to pay any taxes or assessments which it is contesting in good faith, provided that adequate reserves therefor are established in accordance with generally accepted accounting principles, that such contests will not materially adversely affect the Borrower’s or any Subsidiary’s operations or financial condition, and that such taxes and assessments are promptly paid when the dispute is finally determined.

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(e) Existence and Status. The Borrower shall, and shall cause each Subsidiary to, maintain its existence in good standing under the laws of each jurisdiction described in Section 1(a) of this Agreement, provided that the Borrower or any Subsidiary may change its jurisdiction of incorporation if it shall remain in good standing under the laws thereof.

(f) Maintenance of Property. The Borrower shall, and shall cause each Subsidiary to, maintain to the extent consistent with good business practices all of its real and personal property in good condition and repair, not commit or permit any waste thereof, and not, except in the ordinary course of business, remove or permit the removal of any improvement, accession or fixture therefrom that may in any way materially impair the value of said property.

(g) Environmental Matters. The Borrower represents, warrants and covenants with the Bank that: (i) neither the Borrower nor any of its Subsidiaries nor, to the best of the Borrower’s knowledge, after due investigation, any other person or entity, has used or permitted any Hazardous Substances (as hereinafter defined) to be placed, held, stored or disposed of on any property owned or operated by the Borrower or any of its Subsidiaries (the “Designated Properties”), in violation of any Environmental Laws (as hereinafter defined); (ii) none of the Designated Properties now contains any Hazardous Substance in violation of any Environmental Laws; (iii) there have been no complaints, citations, claims, notices, information requests, orders (including but not limited to clean-up orders) or directives on environmental grounds made or delivered to, pending or served on, or anticipated by the Borrower or any of its Subsidiaries, or of which the Borrower, after due investigation, including consideration of the previous uses of the Designated Properties and meeting the standard under 42 U.S.C. Section 9601(35)(B)(1986), is aware or should be aware (A) issued by a governmental department or agency having jurisdiction over any of the Designated Properties, or (B) issued or claimed by any persons, agencies or organizations or affecting any of the Designated Properties; and (iv) neither the Borrower nor any of its Subsidiaries, so long as any of the Indebtedness under this Agreement remains unpaid, shall allow any Hazardous Substances to be placed, held, stored or disposed on any of the Designated Properties or incorporated into any improvements on any of the Designated Properties in violation of any Environmental Laws. The term “Hazardous Substance” shall mean any solid, hazardous, toxic or dangerous waste, substance or material defined as such in or for the purpose of the Comprehensive Environmental Response, Compensation and Liability Act, any so-called “Superfund” or “Super-Lien” law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree relating to, or imposing liability or standards of conduct concerning, any Hazardous Substance (the “Environmental Laws”, as now or at any time hereafter in effect).

The Borrower agrees to indemnify and hold the Bank harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever, paid, incurred or suffered by, or asserted against the Bank for, with respect to, or as a direct or indirect result of, any of the following: (i) the presence on or under or the escape, seepage, leakage, spillage, discharge, emission, discharging or release from any of the Designated Properties of any Hazardous Substance (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any of the Environmental Laws); or (ii) any liens against any of the Designated Properties or any interest or estate in any of the Designated Properties, created, permitted or imposed by the Environmental Laws, or any actual or asserted liability of or obligations of the Borrower or any of its Subsidiaries under the Environmental Laws.

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The Borrower shall immediately notify the Bank should the Borrower become aware of any Hazardous Substance on any of the Designated Properties in violation of any Environmental Laws or any claim that any of the Designated Properties may be contaminated by any Hazardous Substance in violation of any Environmental Laws. The Borrower shall, at its own cost and expense, be responsible for the cleanup of any Hazardous Substance caused, or knowingly permitted, by the Borrower or any of its Subsidiaries to be on any of the Designated Properties which is in violation of any Environmental Laws including any removal, containment and remedial actions in accordance with all applicable Environmental Laws. The Borrower’s obligations hereunder shall not be subject to any limitation of liability provided herein or in any of the other Loan Documents and the Borrower acknowledges that its obligations hereunder are not conditional and shall continue in effect so long as a valid claim may lawfully be asserted against the Bank or for so long as this Agreement, any of the other Loan Documents or any renewal, amendment, extension or modification thereto remain in effect, whichever extends for a greater period of time.

(h) Notice. The Borrower shall notify the Bank in writing, promptly upon the Borrower’s learning thereof, of: (i) any litigation, suit or administrative proceeding which may materially affect the operations, financial condition or business of the Borrower or any Subsidiary, whether or not the claim is considered by the Borrower to be covered by insurance, unless the applicable insurer has agreed to defend any such claim and cover the liability therefor; (ii) the occurrence of any material event described in Section 4043 of ERISA or any anticipated termination, partial termination or merger of a “Plan” (as defined in ERISA) or a transfer of the assets of a Plan; (iii) any labor dispute to which the Borrower or any Subsidiary may become a party; (iv) any default by the Borrower or any Subsidiary under any note, indenture, loan agreement, mortgage, lease or other similar agreement to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary or its assets are bound; and (v) any default by any obligor under any material note or other evidence of debt payable to the Borrower or any Subsidiary.

(i) Liens. The Borrower shall not, and shall not permit any Subsidiary to, create, assume or permit to exist any Lien with respect to any of its assets, whether now owned or hereafter acquired, except Permitted Liens. Furthermore, the Borrower shall not, and shall not permit any Subsidiary to, enter into any agreement with any other person or entity pursuant to which the Borrower or any Subsidiary agrees not to create, assume or permit to exist any Lien with respect to any of its assets, whether now owned or hereafter acquired.

(j) Indebtedness. The Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except the following (each, “Permitted Indebtedness”): (i) Indebtedness incurred under this Agreement and other Indebtedness to the Bank; (ii) outstanding Indebtedness reflected in the historical financial statements listed in Exhibit A attached hereto (but not any refinancing or refunding of such Indebtedness); (iii) Indebtedness described in Exhibit E attached hereto; and (iv) Indebtedness incurred in connection with Capitalized Leases so long as there is no violation of any of the Financial Covenants set forth on Exhibit D hereto.

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(k) Loans; Investments. The Borrower shall not, and shall not permit any Subsidiary to, make or permit to remain outstanding any loan or advance to, or own or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any person or entity, except that the Borrower or any Subsidiary may: (i) make or permit to remain outstanding loans or advances to any Subsidiary or the Borrower; (ii) own or acquire stock, obligations or securities of a Subsidiary or of a corporation which immediately after such acquisition will be a Subsidiary; (iii) own or acquire prime commercial paper and certificates of deposit in United States commercial banks having capital resources in excess of Fifty Million Dollars ($50,000,000), in each case due within one (1) year from the date of purchase and payable in United States Dollars, obligations of the United States Government or any agency thereof, and obligations guaranteed by the United States Government, and repurchase agreements with such banks for terms of less than (1) one year in respect of the foregoing certificates and obligations; (iv) make travel advances in the ordinary course of business to officers and employees or other advances in the ordinary course of business to officers and employees (excluding advances to employees for relocation purposes) not to exceed One Hundred Twenty-Five Thousand Dollars ($125,000) in the aggregate at any time outstanding for the Borrower and all Subsidiaries; (v) make advances to employees for relocation purposes not to exceed One Hundred Fifty Thousand Dollars ($150,000) in the aggregate at any time outstanding for the Borrower and all Subsidiaries; (vi) own or acquire money-market preferred stock in an amount not to exceed Seven Hundred Fifty Thousand Dollars ($750,000); (vii) make or permit to remain outstanding loans or advances to, or own or acquire stock, obligations or securities of, any other person or entity, provided that the aggregate principal amount of such loans and advances (excluding loans which are fully secured by real estate consisting of former restaurant locations), plus the aggregate amount of the investment (at original cost) in such stock, obligations and securities, shall not exceed Five Hundred Thousand Dollars ($500,000) at any time outstanding for the Borrower and all Subsidiaries; and (viii) make investments in the Borrower’s non-qualified executive savings plan.

(l) Merger and Sale of Assets. Without the prior written consent of the Bank, the Borrower shall not, and shall not permit any Subsidiary to, merge or consolidate with any other corporation, or sell, lease or transfer or otherwise dispose of any of its assets, including, without limitation, the stock of any Subsidiary, or sell with recourse or discount or otherwise sell for less than the face value thereof any of its notes or accounts receivable, except that without the prior written consent of the Bank: (i) any Subsidiary may merge or consolidate with the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with any one or more other Subsidiaries; (ii) any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Borrower or another Subsidiary; (iii) the Borrower or any Subsidiary may otherwise sell, lease, transfer or otherwise dispose of any of its assets having a book value of less than One Hundred Thousand Dollars ($100,000) provided that the aggregate book value of all such assets so sold, leased, transferred or otherwise disposed of by the Borrower and its Subsidiaries during any fiscal year shall not exceed Five Hundred Thousand Dollars ($500,000); and (iv) the Borrower or any Subsidiary may sell, lease, transfer or otherwise dispose of property (as hereinafter defined) and equipment in connection with remodelings and equipment

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replacements in the ordinary course of business. For purposes of this Section 2(l), “property” shall mean those components of the real estate (such as walls, electrical and plumbing) which are removed during a remodeling.

(m) Intentionally deleted.

(n) Restrictions on Transactions With Stockholders and Other Affiliates. Except as otherwise expressly permitted under this Agreement, the Borrower shall not, and shall not permit any Subsidiary to, enter into or be a party to any transaction reportable under Item 404(a) of Regulation S-K of the Securities and Exchange Commission, except in the ordinary course of business, pursuant to the reasonable requirements of its business, and upon fair and reasonable terms which are fully disclosed to the Bank and are no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary could obtain in a comparable arm’s length transaction with an unrelated third party.

(o) Books and Records. The Borrower shall, and shall cause each Subsidiary to, keep and maintain complete books of accounts, records and files with respect to its business in accordance with generally accepted accounting principles consistently applied in accordance with past practices and shall accurately and completely record all transactions therein.

(p) Business Activities. The Borrower shall, and shall cause each Subsidiary to, continue to engage in the types of business activities in which it is currently engaged or other activities involving food service and wholesaling food and related products, and shall not, and shall not permit any Subsidiary to, be engaged in any business activities other than the types in which it is currently engaged or other activities involving food service and wholesaling food and related products.

(q) Compliance with Law. The Borrower shall, and shall cause each Subsidiary to, comply at all times with all laws, statutes, ordinances, rules, regulations and orders of any governmental entity (including, but not by way of limitation, such laws, statutes, ordinances, rules, regulations, and orders relating to ecology, human health, and the environment) having jurisdiction over it or any part of its assets, where such failure to comply would have a material adverse effect on the Borrower’s or any Subsidiary’s operations or financial condition or the ability of the Borrower to perform its obligations hereunder. The Borrower and each Subsidiary shall obtain and maintain all permits, licenses, approvals and other similar documents required by any such laws, statutes, ordinances, rules, regulations or orders.

(r) Deposit Accounts. The Borrower will maintain its primary deposit accounts at the Bank so long as any obligations to the Bank, whether under the Loans or otherwise, remain outstanding.

(s) Waiver. Any variance from the covenants of the Borrower pursuant to this Section 2 shall be permitted only with the prior written consent and/or waiver of the Bank. Any such variance by consent and/or waiver shall relate solely to the variance addressed in such consent and/or waiver, and shall not operate as the Bank’s consent and/or waiver to any other variance of the same covenant or other covenants, nor shall it preclude the exercise by the Bank of any power or right under this Agreement, other than with respect to such variance.

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3. Closing Conditions. The obligation of the Bank to make the Loans, or any portion thereof, and the effectiveness of this Agreement are, at the Bank’s option, subject to the satisfaction of each of the following conditions precedent:

(a) Default. Before and after giving effect to the Loans, or any portion thereof, no Event of Default or any event which, with the passage of time or the giving of notice, might mature into an Event of Default, shall have occurred and be continuing.

(b) Warranties. Before and after giving effect to the Loans or any portion thereof, the representations and warranties in Section 1 hereof shall be true and correct as though made on the date of such Loans or portion thereof.

(c) Certification. The Borrower shall have delivered to the Bank a certificate of the President or Chief Financial Officer of the Borrower dated as of the date hereof: (i) as to the matters set forth in Sections 3(a) and 3(b) above; (ii) to the effect that the resolutions described in Section 3(d) below have not been amended or rescinded and remain in full force and effect; (iii) as to the incumbency of the individuals authorized to sign this Agreement, the Revolving Note (as hereinafter defined) and the other Loan Documents (with specimen signatures attached); and (iv) to the effect that the Articles of Incorporation and Code of Regulations of the Borrower are in full force and effect in the form delivered to the Bank.

(d) Resolutions. The Borrower shall have delivered to the Bank copies of the resolutions of the Borrower’s Board of Directors authorizing the borrowings hereunder and the execution and delivery of this Agreement, the Revolving Note and other Loan Documents.

(e) Articles and Regulations. The Borrower shall have delivered to the Bank true and correct copies of its Articles of Incorporation and Code of Regulations.

(f) Revolving Note. The Borrower shall have delivered the Revolving Note to the Bank with all blanks appropriately completed and duly executed on behalf of the Borrower.

(g) Term Note. The Borrower shall have delivered the Term Note to the Bank with all blanks appropriately completed and duly executed on behalf of the Borrower.

(h) Opinion. The Borrower shall have delivered to the Bank the opinion of outside counsel acceptable to the Bank, dated the date of this Agreement, to the effect that: (i) the Borrower is duly organized, validly existing and in good standing as a corporation under the laws of the State of Ohio; (ii) the Borrower has full power and authority to execute and deliver this Agreement, the Notes and the other Loan Documents and to perform its obligations thereunder; (iii) the execution and delivery by the Borrower of this Agreement, the Notes and the other Loan Documents, and the performance by the Borrower of its obligations thereunder, have been duly authorized by all necessary corporate action, and are not in conflict with any provision of law or of the Articles of Incorporation or Code of Regulations of the Borrower, nor in conflict with any

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agreement, order or decree binding upon the Borrower of which such counsel has knowledge; and (iv) this Agreement, the Notes and the other Loan Documents are the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as the same may be affected by bankruptcy, insolvency, moratorium or similar laws now or hereafter in effect, or by legal or equitable principles relating to or limiting creditors’ rights generally, or other rules of law or equity limiting the availability of specific performance or injunctive relief.

(i) Golden Corral Agreement. The Borrower shall have delivered the Golden Corral Agreement (as defined in Section 5(e)), and all related documents and instruments to the Bank with all blanks appropriately completed and duly executed on behalf of the Borrower.

4. Loans.

(a) Loans.

(i) Revolving Loan. Subject to the terms and conditions of this Agreement, and subject to there being no Event of Default (or event which might, with the giving of notice or the passage of time, mature into an Event of Default) hereunder, the Bank agrees to lend and relend to the Borrower, upon request by the Borrower made to the Bank in the manner described in Sections 4(b) and (c) below, during the period from the date hereof to the earlier of (A) October 21, 2010, or the termination date of any extension hereof agreed to by the Borrower and the Bank as described below, or (B) the date of the occurrence of an Event of Default, unless waived by the Bank (the earlier of such dates being referred to herein as the “Commitment Termination Date”), a principal sum of up to Five Million Dollars ($5,000,000) (the “Total Commitment Amount”), as the Borrower may from time to time request for the Borrower’s working capital needs (the “Revolving Loan”); provided, however, that the Bank shall not be required to make, and the Borrower shall not be entitled to receive, any Revolving Loan if, after giving effect thereto, the aggregate outstanding principal balance of the Revolving Loan would exceed the Total Commitment Amount.

Each Revolving Loan hereunder shall be in the amount of Five Hundred Thousand Dollars ($500,000) or a multiple thereof. The Revolving Loan shall be evidenced by an Eighteenth Amended and Restated Revolving Credit Promissory Note given by the Borrower to the Bank in substantially the form of Exhibit F attached hereto, as amended and/or restated from time to time (the “Revolving Note”). The Revolving Note shall mature and be payable in full on October 21, 2010, unless accelerated or extended as described herein. The Revolving Note shall replace the Seventeenth Amended and Restated Revolving Credit Promissory Note dated as of December 3, 2007 given by the Borrower to the Bank (the “Prior Note”), and amounts outstanding under the Prior Note shall not be deemed cancelled or satisfied, but shall be evidenced by the Revolving Note instead of by the Prior Note. If the outstanding principal balance of the Revolving Loan at any time exceeds the Total Commitment Amount, the Borrower shall immediately, without notice or demand, reduce the outstanding principal balance of the Revolving Loan such that the Total Commitment Amount is not exceeded.

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Upon request by the Borrower, the Bank may consider extensions of the Commitment Termination Date, but is not hereby committing in any way thereto. Upon any such extension, at the option of the Bank, the Borrower shall execute a new promissory note substantially identical to the Revolving Note, except reflecting the new Commitment Termination Date, which thereupon shall be the Revolving Note hereunder.

Notwithstanding anything to the contrary herein, the Borrower covenants and agrees to pay down the outstanding balance of the Revolving Loan and the Revolving Note to Zero Dollars ($0) for not less than thirty (30) consecutive days during each of the Borrower’s fiscal years, having commenced with the Borrower’s fiscal year beginning on June 3, 2002.

(ii) New Term Loan. Subject to the terms and conditions of this Agreement, on the date hereof, the Bank agrees to make a term loan to the Borrower in the amount of Four Million Dollars ($4,000,000) (the “Term Loan”) (the Term Loan, the 2007 Term Loan (as defined below), and the Revolving Loan are sometimes herein referred to together collectively as the “Loans” and each individually as a “Loan”). The Term Note (as defined below) shall mature and be payable in full on October 21, 2013, unless accelerated or extended as described herein (the “Term Loan Maturity Date”). The Term Loan is evidenced by a Promissory Note in substantially the form of Exhibit G attached hereto, as the same may be amended and/or restated from time to time (the “Term Note”) (the Term Note, the Revolving Note, and the 2007 Term Note (defined below) are sometimes hereinafter referred to collectively as the “Notes” and each individually as a “Note”).

(iii) 2007 Term Loan. As of December 27, 2002, the Bank agreed to make to the Borrower, and the Borrower borrowed from the Bank, a term loan in the aggregate amount of Ten Million Dollars ($10,000,000) (the “Bullet Loan”) to finance in part the Borrower’s working capital needs. Effective as of March 15, 2007 (the “Term-out Effective Date”), the entire remaining unpaid principal amount of the Bullet Loan of Three Million Dollars ($3,000,000) was converted into a term loan (the “2007 Term Loan”). As of the date hereof, the remaining unpaid principal amount of the 2007 Term Loan is Four Hundred Fifty Thousand Eight Hundred Sixty Eight Dollars ($450,868). The maturity date of the 2007 Term Loan is March 15, 2010 (the “2007 Term Loan Maturity Date”). The 2007 Term Loan is evidenced by that certain Promissory Note in the original principal amount of Three Million Dollars ($3,000,000) dated March 15, 2007 issued by the Borrower to the Bank, as the same may be amended and/or restated from time to time (the “2007 Term Note”). The 2007 Term Note is subject to the terms and conditions of this Agreement. Each of the Term Note and 2007 Term Note may be referred to herein as “Cost of Funds Notes” and each of the Term Loan and 2007 Term Loan may be referred to herein as “Cost of Funds Loans”. “Cost of Funds” means the rate at which the Bank would be able to borrow funds of comparable amounts in the Money Markets for a period equal to the remaining term of such Cost of Funds Loan, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, with such rate rounded upward to the nearest one-eighth percent, and the term. “Money Markets” refers to one or more wholesale funding markets available to and selected by the Bank, including negotiable certificates of deposit, commercial paper, Eurodollar deposits, bank notes, federal funds, interest rate swaps or others.

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(iv) Senior Bank Debt to Adjusted EBITDA Ratio. The Borrower shall at no time permit the ratio of (A) the sum of the outstanding principal balance of the Loans plus all other Senior Bank Debt (as defined in Exhibit D attached hereto) to (B) Borrower’s Adjusted EBITDA (as defined in Exhibit D attached hereto) to exceed 2.00 to 1.0. In the event that any of the upper limits described in the immediately preceding sentence shall at any time be exceeded, the Borrower shall immediately, without notice or demand, prepay the outstanding principal balance of the Loans such that the upper limits set forth in the immediately preceding sentence are not exceeded.

(b) Interest.

(i) Revolving Loan. Interest on each advance of the Revolving Note hereunder shall accrue at an annual rate equal to the LIBOR Rate Margin (as defined below) plus the 1, 2, or 3 month LIBOR rate quoted by the Bank from Telerate Page 3750 or any successor thereto (which shall be the LIBOR rate in effect two New York Banking Days prior to (i) commencement of the advance or (ii) the end of each Loan Period (as hereinafter defined), adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation (the “Revolving Note LIBOR Rate”).

The term “New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York.

In the event the Borrower does not timely select an interest rate option at least two New York Banking Days before the end of the Loan Period for a Loan bearing interest at the Revolving Note LIBOR Rate, the funds advanced under such Loan shall, beginning on the first day of the new Loan Period, accrue interest at the 1 month LIBOR rate in effect two New York Banking Days prior to commencement such Loan Period.

The term “Loan Period” means the period commencing on the advance date of the applicable Revolving Loan bearing interest at the Revolving Note LIBOR Rate and ending on the numerically corresponding day 1, 2, or 3 months thereafter matching the interest rate term selected by the Borrower; provided, however, (y) if any Loan Period would otherwise end on a day which is not a New York Banking Day, then the Loan Period shall end on the next succeeding New York Banking Day unless the next succeeding New York Banking Day falls in another calendar month, in which case the Loan Period shall end on the immediately preceding New York Banking Day; or (z) if any Loan Period begins on the last New York Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of the Loan Period), then the Loan Period shall end on the last New York Banking Day of the calendar month at the end of such Loan Period.

The “LIBOR Rate Margin” is currently one hundred thirty-five (135) basis points and shall be subject to adjustment on each March 1 for application to the period commencing on such date in accordance with the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA for the period commencing on the first day of the Borrower’s then-current fiscal year and ending on the last day of the second quarter of such fiscal year and on each September 1 for application to the period commencing on such date in accordance with the Borrower’s ratio of Senior Bank Debt to

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Adjusted EBITDA for the period commencing on the first day of the Borrower’s immediately preceding fiscal year and ending on the last day of such fiscal year, as follows: if the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA is 1.50 to 1.0 or greater, the LIBOR Rate Margin shall be one hundred eighty (180) basis points; if the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA is less than 1.50 to 1.0 but equal to or greater than 1.00 to 1.0, the LIBOR Rate Margin shall be one hundred fifty-five (155) basis points; and if the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA is less than 1.00 to 1.0, the LIBOR Rate Margin shall be one hundred thirty-five (135) basis points. Such adjustments shall be based upon the Borrower’s ratio of Senior Bank Debt to Adjusted EBITDA as determined from the financial statements delivered to the Bank pursuant to Section 2(b)(i) or (ii) hereof, as applicable. The foregoing provisions are not intended to, and shall not be construed to, authorize any violation by the Borrower of any Financial Covenant or constitute a waiver thereof or any commitment by the Bank to waive any violation by the Borrower of any Financial Covenant.

No Revolving Loan may extend beyond the Commitment Termination Date. In any event, if the Loan Period (as defined below) for a Revolving Loan should happen to extend beyond the Commitment Termination Date, such loan must be prepaid at the Commitment Termination Date. Each Revolving Loan shall be in a minimum principal amount of Five Hundred Thousand Dollars ($500,000) and in increments of Five Hundred Thousand Dollars ($500,000) thereafter.

(ii) The unpaid balance of the Term Loan shall bear interest at a rate of 3.47% per annum.

(iii) The unpaid balance of the 2007 Term Loan shall bear interest at a rate of 6.13% per annum.

Interest on the Loans shall be computed on the basis of a year consisting of three hundred sixty (360) days but applied to the actual number of days elapsed. The Bank’s internal records of applicable interest rates shall be determinative in the absence of manifest error.

(iv) Payments. Interest on the Revolving Loan shall be payable, in arrears, on the last day of the Loan Period applicable thereto, and when such Revolving Loan is due (whether by reason of acceleration or otherwise).

The principal of the Revolving Loan shall be due and payable in full on the Commitment Termination Date.

If a Revolving Loan bearing interest at the Revolving Note LIBOR Rate is prepaid prior to the end of the Loan Period, as defined above, for such loan, whether voluntarily or because prepayment is required due to such loan’s maturing or accelerating upon default or otherwise, the Borrower agrees to pay all of the Bank’s costs, expenses, and Interest Differential (as determined by the Bank) incurred as a result of such prepayment. The term “Interest Differential” shall mean that sum equal to the greater of zero or the financial loss incurred by the Bank resulting from prepayment, calculated as the difference between the amount of interest the Bank would have earned (from like investments in the Money Markets as of the first day of the Revolving Loan) had prepayment not occurred and the interest the Bank will actually earn (from like

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investments in the Money Markets as of the date of prepayment) as a result of the redeployment of funds from the prepayment. Because of the short-term nature of this facility, the Borrower agrees that the Interest Differential shall not be discounted to its present value. Any prepayment of a Revolving Loan shall be in an amount equal to the remaining entire principal balance of such loan. The term “Money Markets” refers to one or more wholesale funding markets available to and selected by the Bank, including negotiable certificates of deposit, commercial paper, Eurodollar deposits, bank notes, federal funds, interest rate swaps, or others.

The principal balance of the Term Loan and interest accrued thereon shall be repaid by the Borrower to the Bank by consecutive monthly payments in the amount of $89,459.47 each on the fifteenth day of each calendar month, commencing on November 15, 2009, and by a final payment on the Term Loan Maturity Date in the amount of the unpaid principal and interest balance of the Term Loan. No repayment or prepayment of the Term Loan by the Borrower shall be reason for any relending or additional lending of Term Loan to the Borrower.

The principal balance of the 2007 Term Loan and interest accrued thereon shall be repaid by the Borrower to the Bank by consecutive monthly payments in the amount of $91,585.05 each on the fifteenth day of each calendar month, having commenced on April 15, 2007, and by a final payment on the 2007 Term Loan Maturity Date in the amount of the unpaid principal and interest balance of the 2007 Term Loan. No repayment or prepayment of the 2007 Term Loan by the Borrower shall be reason for any relending or additional lending of 2007 Term Loan to the Borrower.

(iv) Default/Late Payments. At the option of the Bank, (A) prior to acceleration of the Loans, in the event that any interest on or principal of any Loan remains unpaid past thirty (30) days of the date due, and/or (B) upon the occurrence of any other Event of Default hereunder or upon the acceleration of the Loans, interest (computed and adjusted in the same manner, and with the same effect, as interest on the Loans prior to maturity) on the outstanding balance of the Loans shall be payable on demand at the rate that would otherwise be in effect for such Loans from time to time as set forth in Section 4(b) plus an additional three percent (3%) per annum up to any maximum rate permitted by law, in any and all such cases until paid and whether before or after the entry of any judgment thereon. In addition, in the event that the Borrower should fail to make any payment hereunder within ten (10) days of the date due, the Borrower shall pay the Bank a fee in an amount of up to five percent (5%) of the amount of such payment, but in no event less than Fifty Dollars ($50.00), which fee shall be immediately due and payable without notice or demand.

(c) Making of Revolving Loans.

(i) Disbursements.

1) Loans shall be effectuated by the Bank crediting an account maintained by the Borrower at the Bank, one of which shall be the corporate checking account, currently account number                (the “Corporate Checking Account”).

2) The Bank may make Revolving Loans in response to any written notice delivered by the Borrower to the Bank by 12:00 noon on the day on which

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it desires to obtain a Revolving Loan hereunder bearing interest based on the Revolving Note LIBOR Rate. Such notice may be given by telephone but shall be promptly followed by written confirmation by the Borrower to the Bank. In the case of any Revolving Loan, such notice shall specify the amount of such Revolving Loan.

3) Additionally, upon the mutual agreement of the Bank and the Borrower, upon receipt of checks drawn on the Corporate Checking Account, the Bank may make Revolving Loans when the balance in the Corporate Checking Account falls below zero, provided that the making of such Revolving Loans will not cause the aggregate outstanding principal balance of the Revolving Loans to exceed the Total Commitment Amount or the occurrence of a Default or an Event of Default hereunder. In the event that honoring such checks would cause the Total Commitment Amount to be exceeded or the occurrence of a Default or an Event of Default hereunder, the Bank may, in its sole discretion, elect to make or not to make an additional Revolving Loan to the Corporate Checking Account; the Bank will not be responsible for any checks returned for insufficient funds. Any such Revolving Loan will be equal to the negative collected funds balance and will be back-dated to the previous working day of the Bank to effectively credit the Bank for the use of its funds by the Borrowers on the previous Business Day.

(ii) Minimum Balance. Notwithstanding anything to the contrary in this Agreement or in any of the other Loan Documents, if the Bank and the Borrower agree that disbursements shall be made in accordance with Section 4(c)(i)(3) above, then until this Agreement is terminated and the Loans are repaid in full, the Borrower shall always maintain a minimum balance of $50,000 in the Corporate Checking Account, which the Bank, in its sole discretion, may apply against the Revolving Loans at any time.

(iii) Application of Excess Funds. If the Bank and the Borrower agree that disbursements shall be made in accordance with Section 4(c)(i)(3) above, then any funds deposited in the Corporate Checking Account in excess of $50,000 will be applied to obligations of the Borrower to the Bank in the order that the Bank directs and then to the reduction of the Loans.

(d) Unused Credit Fee. The Borrower shall pay the Bank an unused credit fee in an amount equal to one quarter of one percent (0.25%) per annum times the daily average of the unused Total Commitment Amount (the “Unused Credit Fee”), which fee shall be payable quarterly, in arrears, having commenced on the first day of December, 1998, and on the first day of each March, June, September and December thereafter, and when the Revolving Loan is due (whether by reason of acceleration or otherwise). The Unused Credit Fee shall be computed on the basis of a year consisting of three hundred sixty (360) days but applied to the actual number of days elapsed.

(e) Changes in Laws and Circumstances; Illegality.

(i) In the event of (A) any change in the reserve requirements and/or the assessment rates of the FDIC which are applicable to the Bank in making any or all of the Loans or (B) any change in circumstances affecting the interbank market, and the result of any such event described in clause (A) or (B) above is to increase the costs to the Bank of making the Loans, the Borrower shall promptly pay the Bank any additional amounts, upon demand accompanied by a reasonably detailed statement as to such additional amounts (which statement shall be conclusive in the absence of manifest error), which will reasonably compensate the Bank for such costs.

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(ii) If by reason of circumstances affecting the interbank market adequate and reasonable means do not exist in the reasonable judgment of the Bank for ascertaining a rate of interest for the LIBOR rate or Cost of Funds at any time, the Bank shall forthwith give notice thereof to the Borrower. Unless and until such notice has been withdrawn by the Bank, the Borrower may not thereafter elect to have any portion of the Loans bear interest at a LIBOR based rate or Cost of Funds based rate, as applicable.

(iii) If any law, rule, regulation, treaty, guideline, order or directive or any change therein or in the interpretation or application thereof shall make it unlawful for the Loans to bear interest at the LIBOR based rate or Cost of Funds based rate, the Bank shall notify the Borrower thereof and no portion of the Loans may thereafter bear interest at a LIBOR based rate or Cost of Funds based rate, as applicable. If required by law, any portion of the Loans then bearing interest at a LIBOR based rate or Cost of Funds based rate, as applicable, shall cease to bear interest at the LIBOR based rate or Cost of Funds based rate, as applicable, and shall bear interest based on the Prime Rate. The “Prime Rate” is the rate announced from time to time by the Bank as its prime rate. The Prime Rate is determined solely by the Bank pursuant to market factors and its own operating needs and is not necessarily the Bank’s best or most favorable rate for corporate, commercial, or other loans.

(f) Prepayments; Reduction of Total Commitment Amount. The Borrower may, at its option, from time to time repay or prepay part or all of the outstanding principal balance of the Revolving Loans bearing interest based on the Prime Rate without premium.

If any Revolving Loan bearing interest at the Revolving Note LIBOR Rate is prepaid prior to the end of the Loan Period for such loan, whether voluntarily (including, without limitation, any such prepayment made in connection with a reduction in the Total Commitment Amount, as described below) or because prepayment is required due to such loan’s maturing or accelerating upon default or otherwise, the Borrower agrees to pay all of the Bank’s costs, expenses, and Interest Differential (as determined by the Bank) incurred as a result of such prepayment. Any prepayment of a Revolving Loan shall be in an amount equal to the remaining entire principal balance of such loan.

The Total Commitment Amount may, at the option of the Borrower, be permanently reduced by any amount as of the last day of any of the Borrower’s fiscal quarters, by the Borrower giving the Bank written notice thereof and paying to the Bank any amount necessary so that the outstanding principal balance of the Revolving Loan will not exceed the Total Commitment Amount.

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There shall be no prepayments of any Cost of Funds Loan, provided that the Bank may consider requests for its consent with respect to prepayment of a Cost of Funds Loan, without incurring an obligation to do so, and the Borrower acknowledges that in the event that such consent is granted, the Borrower shall be required to pay the Bank, upon prepayment of all or part of the principal amount of a Cost of Funds Loan before final maturity, a prepayment indemnity (“Prepayment Fee”) equal to the greater of zero, or that amount, calculated on any date of prepayment (“Prepayment Date”), which is derived by subtracting: (a) the principal amount of such Cost of Funds Loan or portion of such Cost of Funds Loan to be prepaid from (b) the Net Present Value of such Cost of Funds Loan or portion of such Cost of Funds Loan to be prepaid on such Prepayment Date; provided, however, that the Prepayment Fee shall not in any event exceed the maximum prepayment fee permitted by applicable law.

“Net Present Value” shall mean the amount which is derived by summing the present values of each prospective payment of principal and interest which, without such full or partial prepayment, could otherwise have been received by the Bank over the remaining contractual life of such Cost of Funds Loan. The individual discount rate used to present value each prospective payment of interest and/or principal shall be the Money Market Rate at Prepayment for the maturity matching that of each specific payment of principal and/or interest.

“Money Market Rate At Prepayment” shall mean that zero-coupon rate, calculated on the Prepayment Date, and determined solely by the Bank, as the rate at which the Bank would be able to borrow funds in Money Markets for the prepayment amount matching the maturity of a specific prospective Cost of Funds Loan, as applicable, payment date, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation. A separate Money Market Rate at Prepayment will be calculated for each prospective interest and/or principal payment date.

In calculating the amount of such Prepayment Fee, the Bank is hereby authorized by the Borrower to make such assumptions regarding the source of funding, redeployment of funds, and other related matters, as the Bank may deem appropriate. If the Borrower fails to pay any Prepayment Fee when due, the amount of such Prepayment Fee shall thereafter bear interest until paid at the default rate specified in this Agreement (computed on the basis of a 360-day year, actual days elapsed). Any prepayment of principal shall be accompanied by a payment of interest accrued to date thereon; and said prepayment shall be applied to the principal installments in the inverse order of their maturities. All prepayments shall be in an amount of at least $100,000 or, if less, the remaining entire principal balance of the Cost of Funds Loan being prepaid, as applicable.

No partial prepayment of any of the Loans shall change any due date or the amount of any regularly-scheduled installment of principal thereof.

(g) Payments. All payments of principal and interest hereunder shall be made in immediately available funds to the Bank at such place as may be designated by the Bank to the Borrower in writing. The Bank is authorized by the Borrower to enter from time to time the balance of the Loans and all payments and prepayments thereon on the reverse of the Notes or in

18

the Bank’s regularly maintained data processing records, and the aggregate unpaid amount of the Loans set forth thereon or therein shall be presumptive evidence of the amount owing to the Bank and unpaid thereon. Upon request and payment by the Borrower of a reasonable fee which compensates the Bank for the cost of issuing the same, the Bank shall provide the Borrower with a statement showing all payments and prepayments on the Loans.

5. Events of Default. If any of the following events (each, an “Event of Default”) shall occur, then the Bank may, without further notice or demand, accelerate the Loans and declare them to be, and thereupon the Loans shall become, immediately due and payable (except that the Loans shall become automatically due and payable upon the occurrence of an event described in Sections 5(j), (k) and (l) below), and, to the extent the Total Commitment Amount has not yet been used or fully drawn on by the Borrower, terminate the balance of same; and the Bank shall have all rights provided herein or in any of the other Loan Documents or otherwise provided by law to realize on any collateral or security for the Loans:

(a) The Borrower does not pay the Bank any interest on the Loans within ten (10) days after the date due, whether by reason of acceleration or otherwise, or does not pay or repay to the Bank any principal of the Loans or any other obligation hereunder when due, whether by reason of acceleration or otherwise; or

(b) The Borrower defaults in the performance or observance of any agreement contained in Section 2(b), 2(c), 2(d), 2(e), 2(f), 2(g), 2(h) or 2(o) hereof and such default has not been cured by the Borrower within ten (10) days after the occurrence thereof, or the Borrower defaults in the performance or observance of any other agreement contained in Section 2 hereof; or

(c) There shall have occurred any other violation or breach of any covenant, agreement or condition contained herein or in any other Loan Document which has not been cured by the Borrower within thirty (30) days after the earlier to occur of the date the Borrower has knowledge thereof and the date the Bank gives the Borrower notice thereof; or

(d) The Borrower does not pay when due or prior to the expiration of the applicable cure period, if any, any principal or interest on any other Indebtedness in excess of One Hundred Thousand Dollars ($100,000), or the Borrower defaults in the performance or observance of any other term or condition contained in any agreement or instrument under which such Indebtedness is created, and the holder of such other Indebtedness declares, or may declare, such Indebtedness due prior to its stated maturity because of the Borrower’s default thereunder; or

(e) There shall have occurred any violation or breach of any covenant, agreement or condition contained in any other agreement between the Borrower and the Bank which has not been cured by the Borrower prior to the expiration of the applicable cure period, if any, including without limitation, the Second Amended and Restated Loan Agreement [Golden Corral] dated as of October 21, 2009 between the Borrower and the Bank, as amended from time to time (the “Golden Corral Agreement”); or

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(f) The Borrower does not perform its obligations under any agreement material to its business, and the other party to such agreement declares, or may declare, such agreement in default; or

(g) Any representation or warranty made herein or in any other Loan Document or writing furnished in connection with this Agreement shall be false or misleading in any material respect when made; or

(h) The Borrower is generally not paying its debts as they become due; or

(i) With respect to the plans referred to in Section 1(h) above, or any other similar plan, a “reportable event” or “prohibited transaction” pursuant to ERISA has occurred which results in the imposition of material taxes or penalties against the Borrower or the termination of such plans (or trusts related thereto), or the Borrower incurs any material liability to the PBGC in connection with such plans; or

(j) The Borrower makes an assignment of a material part of its assets for the benefit of creditors; or

(k) The Borrower applies for the appointment of a trustee or receiver for a material part of its assets or commences any proceedings relating to the Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or other liquidation law of any jurisdiction; or any such application is filed, or any such proceedings are commenced, against the Borrower, and the Borrower indicates its approval, consent or acquiescence thereto; or an order is entered appointing such trustee or receiver, or adjudicating the Borrower bankrupt or insolvent, or approving the petition in any such proceedings, and such order remains in effect for sixty (60) days; or

(l) Any order is entered in any proceedings against the Borrower decreeing the dissolution of the Borrower; or

(m) Any material part of the Borrower’s operations shall cease, other than temporary or seasonal cessations which are experienced by other companies in the same line of business and which would not have a material adverse effect on the Borrower’s operations or financial condition or its ability to perform its obligations hereunder; or

(n) Any final non-appealable judgment which, together with other outstanding judgments against the Borrower, causes the aggregate of such judgments in excess of confirmed insurance coverage satisfactory to the Bank to exceed Seven Hundred Fifty Thousand Dollars ($750,000), shall be rendered against the Borrower; or

(o) Any event of default occurs under any other agreement to which the Borrower and the Bank are parties or under any document or instrument running to the benefit of the Bank from the Borrower.

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The above recitation of Events of Default shall be interpreted in all respects in favor of the Bank. To the extent any cure-of-default period is provided above, the Bank may nevertheless, at its option pending completion of such cure, suspend its obligation to consider further disbursement of the Loans hereunder.

6. General.

(a) Reasonable Actions. The Bank agrees that in taking any action which it is permitted or empowered to take under this Agreement, it will act reasonably under what it believes are the facts and circumstances existing at such time.

(b) Delay. No delay, omission or forbearance on the part of the Bank in the exercise of any power or right shall operate as a waiver thereof, nor shall any single or partial delay, omission or forbearance in the exercise of any other power or right. The rights and/or remedies of the Bank herein provided are cumulative, shall be interpreted in all respects in favor of the Bank and are not exclusive of any other rights and/or remedies provided by law.

(c) Notice. Except as otherwise expressly provided in this Agreement, any notice hereunder shall be in writing and shall be deemed to be given when personally delivered or when sent by certified mail, postage prepaid, and addressed to the parties at their addresses set forth below:

Bank:	U.S. Bank National Association
	425 Walnut Street
	Cincinnati, Ohio 45202
	Attention:	Shawn Masterson
		Vice President
With a copy to:	Jeffrey S. Schloemer, Esq.
	Taft, Stettinius & Hollister LLP
	425 Walnut Street, Suite 1800
	Cincinnati, Ohio 45202
Borrower:	Frisch’s Restaurants, Inc.
	2800 Gilbert Avenue
	Cincinnati, Ohio 45206
	Attention:	Mr. Donald H. Walker
		Vice President - Finance
With copies to:	Craig F. Maier, President
	Frisch’s Restaurants, Inc.
	2800 Gilbert Avenue
	Cincinnati, Ohio 45206

and

	Donald A. Bodner
	Frisch’s Restaurants, Inc.
	2800 Gilbert Avenue
.	Cincinnati, Ohio 45206

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The Borrower or the Bank may, by written notice to the other as provided herein, designate another address for purposes hereunder.

(d) Expenses; Indemnity. The Borrower shall pay all reasonable out-of-pocket expenses incurred by the Bank, including the reasonable fees, charges and disbursements of outside-counsel for the Bank (determined on the basis of such counsel’s generally applicable rates, which may be higher than the rates such counsel charges the Bank in certain matters) and/ or the allocated costs of in-house counsel incurred from time to time by the Bank in entering into and closing this Agreement and preparing the documentation in connection herewith, administering the obligations of the Borrower hereunder or under any of the other Loan Documents, and enforcing the obligations of the Borrower hereunder or under any of the other Loan Documents, and the Borrower agrees to pay the Bank upon demand for the same. The Borrower agrees to defend, indemnify and hold the Bank harmless from any liability, obligation, cost, damage or expense (including reasonable attorneys’ fees and legal expenses) for taxes (other than income taxes), fees or third party claims which may arise or be related to the execution, delivery or performance of this Agreement or any of the other Loan Documents, except in the case of negligence or willful misconduct on the part of the Bank. The Borrower further agrees to indemnify and hold harmless the Bank from any loss or expense which the Bank may sustain or incur as a consequence of default by the Borrower in payment of any principal of or interest on the Loans, including, without limitation, any such loss or expense arising from interest or fees payable by the Bank to lenders of funds obtained by it in order to maintain interest rates on the Cost of Funds Loans.

(e) Survival. All covenants and agreements of the Borrower made herein or otherwise in connection with the transactions contemplated hereby shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall remain in effect so long as any obligations of the Borrower are outstanding hereunder or under any of the other Loan Documents.

(f) Severability. Any provision of this Agreement or any of the other Loan Documents which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition of enforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

(g) Law. IMPORTANT: The Loans shall be deemed made in Ohio and this Agreement and all other Loan Documents, and all of the rights and obligations of the Borrower and the Bank hereunder and thereunder, shall in all respects be governed by and construed in accordance with the laws of the State of Ohio, including all matters of construction, validity and performance. Without limitation on the ability of the Bank to initiate and prosecute any action or proceeding in any applicable jurisdiction related to loan repayment, the Borrower and the Bank

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agree that any action or proceeding commenced by or on behalf of the parties arising out of or relating to the Loans and/or this Agreement and/or any of the other Loan Documents shall be commenced and maintained exclusively in the District Court of the United States for the Southern District of Ohio, or any other court of applicable jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and complaint commencing an action or proceeding in any such Ohio courts by or on behalf of such parties shall be properly served and shall confer personal jurisdiction on a party to which said party consents, if (i) served personally or by certified mail to the other party at any of its addresses noted herein, or (ii) as otherwise provided under the laws of the State of Ohio. The interest rates and all other terms of the Loans negotiated with the Borrower are, in part, related to the aforesaid provisions on jurisdiction, which the Bank deems a vital part of this loan arrangement.

(h) Successors. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Bank and their respective successors and assigns. The Borrower shall not assign its rights or delegate its duties hereunder without the prior written consent of the Bank.

(i) Amendment and Restatement. This Agreement amends and restates the Prior Loan Agreement and amounts outstanding under the Prior Loan Agreement shall not be deemed cancelled or satisfied, but shall be evidenced by this Agreement instead of by the Prior Loan Agreement.

(j) Amendment. Except as otherwise expressly provided herein, this Agreement may not be modified or amended except in writing signed by authorized officers of the Bank and the Borrower.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly effective as of the date first set forth above.

U.S. BANK NATIONAL ASSOCIATION		FRISCH’S RESTAURANTS, INC.
By:	/s/ Shawn Masterson	By:	/s/ Donald H. Walker
	Shawn Masterson		Donald H. Walker
	Vice President		Vice President-Finance

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LIST OF EXHIBITS

A	–	Financial Information and Reports
B	–	Actions
C	–	Permitted Liens
D	–	Financial Covenants
E	–	Permitted Indebtedness
F	–	Revolving Note
G	–	Term Note

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EXHIBIT 10.5

EXHIBIT A

FINANCIAL INFORMATION AND REPORTS

1. Annual Report for the year ended June 2, 2009.

2. Projections for the Borrower for the fiscal year ending June, 2010.

A-1

EXHIBIT 10.5

EXHIBIT B

ACTIONS

B-1

EXHIBIT 10.5

EXHIBIT C

PERMITTED LIENS

All obligations of the Borrower incurred in connection with any existing or future lease transactions capitalized or required to be capitalized on the Borrower’s books.

Two mortgages in favor of U.S. Bank

C-1

EXHIBIT 10.5

EXHIBIT D

FINANCIAL COVENANTS

The Borrower agrees that it shall:

(a) Ratio of Senior Bank Debt to Adjusted EBITDA. Not permit the ratio of the Borrower’s Senior Bank Debt to Adjusted EBITDA to exceed 2.00 to 1.0 at any time.

“Senior Bank Debt” for purposes hereof shall mean the sum of all of the Borrower’s indebtedness for borrowed money that in accordance with generally accepted accounting principles would be considered as a liability, and all obligations of the Borrower incurred in connection with any existing or future lease transactions capitalized or required to be capitalized on the Borrower’s books.

“Adjusted EBITDA” for purposes hereof shall mean the Borrower’s consolidated gross (before interest, taxes, depreciation and amortization) earnings; plus losses on disposition of assets (net of abandonment losses); less gains on disposition of assets, net of abandonment losses; plus net cash proceeds from the disposition of property; less cash and non-cash extraordinary gains; plus cash and non-cash extraordinary losses, all calculated in accordance with generally accepted accounting principals and consistently applied in accordance with past practices on a rolling four (4) quarter basis.

(b) Cash Flow Coverage Ratio. Not permit the ratio of (i) the Borrower’s Adjusted EBITDA plus operating lease payments less maintenance capital expenditures equal to (50%) of depreciation less cash dividends to the Borrower’s shareholders less cash income taxes paid, to (ii) the sum of the Borrower’s scheduled principal payments on long term debt and capital lease obligations (excluding Revolving Loan principal payments) plus interest expense plus operating lease payments (in each case for the same period that the Borrower’s Adjusted EBITDA is measured), calculated in accordance with generally accepted accounting principles consistently applied in accordance with past practices on a rolling four (4) quarter basis, to be less than 1.10 to 1.0, measured quarterly on a rolling twelve month basis.

D-1

EXHIBIT 10.5

EXHIBIT E

PERMITTED INDEBTEDNESS

		Balance as of September 22, 2009
Indebtedness to US Bank NA
Term Loan			539,697
Revolving Loan (up to $5,000,000 may be borrowed)			4,000,000
Golden Corral Credit Facility
Construction Phase	0
Term Loans (up to $8,000,000 more may be borrowed)	26,999,269		26,999,269
		$	31,538,966

Capitalized Leases

All obligations of the Borrower incurred in connection with any existing or future lease transactions capitalized or required to be capitalized on the Borrower’s books.

Contingent liability as assignor/guarantor of the following leases:

Location			Assignee	Remaining Lease Term
Covington, KY (Riverview Hotel) (renewal options aggregating 50 years)	$	48,072 per year	Remington Hotel Corporation	04/30/2020

Lease liability for closed restaurants & other non-operating property (lease not presently assigned)

Location	Remaining Lease Term	Rent Per Month
None

E-1

EXHIBIT 10.5

EXHIBIT F

EIGHTEENTH AMENDED AND RESTATED

REVOLVING CREDIT PROMISSORY NOTE

$5,000,000.00	Cincinnati, Ohio
	October 21, 2009

FRISCH’S RESTAURANTS, INC., an Ohio corporation (the “Borrower”), for value received, hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association formerly known as Firstar Bank, N.A. and Star Bank, National Association (the “Bank”), or it successors or assigns, on or before October 21, 2010, the principal sum of FIVE MILLION DOLLARS ($5,000,000), or such portion thereof as may be outstanding from time to time, together with interest thereon as hereinafter provided.

This is the Revolving Note referred to in, was executed and delivered pursuant to, and evidences indebtedness of the Borrower incurred under, that certain Second Amended and Restated Loan Agreement [Revolving and Bullet Loans] dated as of October 15, 2004 between the Borrower and the Bank, as the same has been and/or may be amended, restated, supplemented, renewed, or otherwise modified and in effect from time to time (the “Loan Agreement”), to which reference is hereby made for a statement of the terms and conditions under which the Revolving Loan evidenced hereby was made and is to be repaid and for a statement of the Bank’s remedies upon the occurrence of an Event of Default. Capitalized terms used herein, but not otherwise specifically defined, shall have the meanings ascribed to such terms in the Loan Agreement.

The Borrower further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate or rates from time to time applicable to the Revolving Loan as determined in accordance with the Loan Agreement; provided, however, that upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the outstanding principal balance of this Revolving Note at the rate of interest applicable following the occurrence of an Event of Default as determined in accordance with the Loan Agreement.

Interest on this Revolving Note shall be payable, at the times and from the dates specified in the Loan Agreement, on the date of any prepayment hereof, at maturity, whether due by acceleration or otherwise, and as otherwise provided in the Loan Agreement. From and after the date when the principal balance hereof becomes due and payable, whether by acceleration or otherwise, interest hereon shall be payable on demand. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Bank has received interest hereunder in excess of the highest rate applicable hereto, such excess shall be applied in accordance with the terms of the Loan Agreement.

F-1

The indebtedness evidenced by this Revolving Note is secured pursuant to the terms of the Loan Documents.

The Borrower hereby waives demand, presentment, and protest and notice of demand, presentment, protest, and nonpayment.

The Borrower further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys’ fees and legal expenses, incurred by the Bank in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.

IMPORTANT: This Revolving Note shall be deemed made in Ohio and shall in all respects be governed by and construed in accordance with the laws of the State of Ohio, including all matters of construction, validity and performance. Without limitation on the ability of the Bank to initiate and prosecute any action or proceeding in any applicable jurisdiction related to loan repayment, the Borrower and the Bank agree that any action or proceeding commenced by or on behalf of the parties arising out of or relating to this Revolving Note shall be commenced and maintained exclusively in the District Court of the United States for the Southern District of Ohio, or any other court of applicable jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and complaint commencing an action or proceeding in any such Ohio courts by or on behalf of such parties shall be properly served and shall confer personal jurisdiction on a party to which said party consents, if (a) served personally or by certified mail to the other party at any of its addresses noted herein, or (b) as otherwise provided under the laws of the State of Ohio. The interest rates and all other terms of this Revolving Note negotiated with the Borrower are, in part, related to the aforesaid provisions on jurisdiction, which the Bank deems a vital part of this loan arrangement.

This Note amends and restates the Seventeenth Amended and Restated Revolving Credit Promissory Note dated as of December 3, 2007 given by the Borrower to the Bank, and evidences all amounts outstanding as of the date hereof under said Seventeenth Amended and Restated Revolving Credit Promissory Note.

Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived.

FRISCH’S RESTAURANTS, INC.

By:

	Donald H. Walker, Vice President-Finance
Address:	2800 Gilbert Avenue Cincinnati, Ohio 45206

F-2

EXHIBIT 10.5

EXHIBIT G

TERM PROMISSORY NOTE

$4,000,000.00	Cincinnati, Ohio
	October 21, 2009

FRISCH’S RESTAURANTS, INC., an Ohio corporation (the “Borrower”), for value received, hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association formerly known as Firstar Bank, N.A. and Star Bank, National Association (the “Bank”), at the office of the Bank at 425 Walnut Street, Cincinnati, Ohio 45202, or at such other place as the holder of this Term Promissory Note (this “Term Note”) may from time to time designate in writing, in lawful money of the United States of America and in immediately available funds, the principal sum of FOUR MILLION DOLLARS ($4,000,000.00), at such times as are specified in Section 4(b)(iii) of the Loan Agreement described below.

This is the Term Note referred to in, was executed and delivered pursuant to, and evidences indebtedness of the Borrower incurred under, that certain Third Amended and Restated Loan Agreement [Revolving and Bullet Loans] dated as of October 21, 2009 between the Borrower and the Bank, as the same has been and/or may be amended, restated, supplemented, renewed, or otherwise modified and in effect from time to time (the “Loan Agreement”), to which reference is hereby made for a statement of the terms and conditions under which the Term Loan evidenced hereby was made and is to be repaid and for a statement of the Bank’s remedies upon the occurrence of an Event of Default. Capitalized terms used herein, but not otherwise specifically defined, shall have the meanings ascribed to such terms in the Loan Agreement.

The Borrower further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate or rates from time to time applicable to the Term Loan as described in Section 4(b)(iii) of the Loan Agreement; provided, however, that upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the outstanding principal balance of this Term Note at the rate of interest applicable following the occurrence of an Event of Default as determined in accordance with the Loan Agreement.

Interest on this Term Note shall be payable, at the times and from the dates specified in the Loan Agreement, on the date of any prepayment hereof, at maturity, whether due by acceleration or otherwise, and as otherwise provided in the Loan Agreement. From and after the date when the principal balance hereof becomes due and payable, whether by acceleration or otherwise, interest hereon shall be payable on demand. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Bank has received interest hereunder in excess of the highest rate applicable hereto, such excess shall be applied in accordance with the terms of the Loan Agreement.

G-1

The indebtedness evidenced by this Term Note is secured pursuant to the terms of the Loan Documents.

The Borrower hereby waives demand, presentment, and protest and notice of demand, presentment, protest, and nonpayment.

The Borrower further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys’ fees and legal expenses, incurred by the Bank in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.

IMPORTANT: This Term Note shall be deemed made in Ohio and shall in all respects be governed by and construed in accordance with the laws of the State of Ohio, including all matters of construction, validity and performance. Without limitation on the ability of the Bank to initiate and prosecute any action or proceeding in any applicable jurisdiction related to loan repayment, the Borrower and the Bank agree that any action or proceeding commenced by or on behalf of the parties arising out of or relating to this Term Note shall be commenced and maintained exclusively in the District Court of the United States for the Southern District of Ohio, or any other court of applicable jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank also agree that a summons and complaint commencing an action or proceeding in any such Ohio courts by or on behalf of such parties shall be properly served and shall confer personal jurisdiction on a party to which said party consents, if (a) served personally or by certified mail to the other party at any of its addresses noted herein, or (b) as otherwise provided under the laws of the State of Ohio. The interest rates and all other terms of this Revolving Note negotiated with the Borrower are, in part, related to the aforesaid provisions on jurisdiction, which the Bank deems a vital part of this loan arrangement.

Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived.

FRISCH’S RESTAURANTS, INC.

By:

	Donald H. Walker, Vice President-Finance
Address:	2800 Gilbert Avenue Cincinnati, Ohio 45206

G-2

EX-15

EXHIBIT 15

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Frisch’s Restaurants, Inc.

We have reviewed the accompanying interim consolidated balance sheet of Frisch’s Restaurants, Inc. (an Ohio Corporation) and subsidiaries as of September 22, 2009, and the related consolidated statements of earnings, shareholders’ equity and cash flows for each of the sixteen week periods ended September 22, 2009 and September 23, 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of June 2, 2009, and the related consolidated statements of earnings, shareholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated July 24, 2009, we expressed an unqualified opinion on those consolidated financial statements.

/s/ Grant Thornton LLP

Cincinnati, Ohio

October 26, 2009

EX-31.1

EXHIBIT 31.1

CERTIFICATION    RULE 13a–14(a)/15d–14 (a)

I, Craig F. Maier, President and Chief Executive Officer of Frisch’s Restaurants, Inc., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Frisch’s Restaurants, Inc. (the “Registrant”);

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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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;

b) Designed such internal control over financial reporting, or caused such disclosure controls and procedures to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

d) Disclosed in this Quarterly Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

DATE   October 24, 2009  

            /s/ Craig F. Maier

Craig F. Maier, President and Chief

Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION    RULE 13a–14(a)/15d–14 (a)

I, Donald H. Walker, Vice President-Finance and Chief Financial Officer of Frisch’s Restaurants, Inc., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Frisch’s Restaurants, Inc. (the “Registrant”);

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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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;

b) Designed such internal control over financial reporting, or caused such disclosure controls and procedures to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles ;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

d) Disclosed in this Quarterly Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

DATE   October 23, 2009  

            /s/ Donald H. Walker

Donald H. Walker, Vice President-Finance and

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION of CHIEF EXECUTIVE OFFICER

PURSUANT to SECTION 1350 of CHAPTER 63 of TITLE 18 of the UNITED STATES CODE,

as ADOPTED PURSUANT to

SECTION 906 of THE SARBANES-OXLEY ACT OF 2002

In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of Frisch’s Restaurants, Inc. (the “Registrant”) on Form 10-Q for the quarter ended September 22, 2009 (the “Report”), the undersigned officer of the Registrant certifies, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(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 Registrant.

October 24, 2009	By:	/s/ Craig F. Maier
		Craig F. Maier
		Chief Executive Officer

This certification is being furnished as required by Rule 13a – 14(b) under the Securities Exchange Act of 1934 (“Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as other otherwise stated in such filing.

EX-32.2

EXHIBIT 32.2

CERTIFICATION of CHIEF FINANCIAL OFFICER

PURSUANT to SECTION 1350 of CHAPTER 63 of TITLE 18 of the UNITED STATES CODE,

as ADOPTED PURSUANT to

SECTION 906 of THE SARBANES-OXLEY ACT OF 2002

In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of Frisch’s Restaurants, Inc. (the “Registrant”) on Form 10-Q for the quarter ended September 22, 2009 (the “Report”), the undersigned officer of the Registrant certifies, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(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 Registrant.

October 23, 2009	By:	/s/ Donald H. Walker
		Donald H. Walker
		Vice President-Finance and
		Chief Financial Officer

This certification is being furnished as required by Rule 13a – 14(b) under the Securities Exchange Act of 1934 (“Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as other otherwise stated in such filing.