-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RJr9Gt+Gv5YMHv8QusTgNtsW6Uz1zEe99XunJAZ1s6XAkK3hnK57/OOJ/W1sFwwg aTlmtUibCJjp86O0nQRPeQ== 0001144204-05-013444.txt : 20050429 0001144204-05-013444.hdr.sgml : 20050429 20050429171950 ACCESSION NUMBER: 0001144204-05-013444 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20050429 DATE AS OF CHANGE: 20050429 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MAIN STREET RESTAURANT GROUP, INC. CENTRAL INDEX KEY: 0000847466 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 112948370 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-41360 FILM NUMBER: 05787371 BUSINESS ADDRESS: STREET 1: 5050 NORTH 40TH ST STREET 2: STE 200 CITY: PHOENIX STATE: AZ ZIP: 85018 BUSINESS PHONE: 6028529000 MAIL ADDRESS: STREET 1: 5050 NORTH 40TH ST STREET 2: STE 200 CITY: PHOENIX STATE: AZ ZIP: 85018 FORMER COMPANY: FORMER CONFORMED NAME: MAIN STREET & MAIN INC DATE OF NAME CHANGE: 19931115 FORMER COMPANY: FORMER CONFORMED NAME: ASSETRONICS INC DATE OF NAME CHANGE: 19900702 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Honigfeld Bradford CENTRAL INDEX KEY: 0001324511 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: BUSINESS PHONE: 973-597-6433 MAIL ADDRESS: STREET 1: C/O THE BRIAD GROUP STREET 2: 78 OKNER PARKWAY CITY: LIVINGSTON STATE: NJ ZIP: 07039 SC 13D 1 v17258_sc13ed.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- SCHEDULE 13D (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) MAIN STREET RESTAURANT GROUP, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $.001 - -------------------------------------------------------------------------------- (Title of Class of Securities) 560345308 - -------------------------------------------------------------------------------- (CUSIP NUMBER) BRADFORD L. HONIGFELD 78 OKNER PARKWAY LIVINGSTON, NJ 07039 COPY TO: STEVEN D. DREYER, ESQ. ARENT FOX PLLC 1675 BROADWAY NEW YORK, NY 10019 (212) 484-3900 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) APRIL 20, 2005 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) -------------- If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box |_|. Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS Bradford L. Honigfeld I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* BK and OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 2,177,573 BENEFICIALLY OWNED BY --------------------------------------------- EACH REPORTING PERSON 8 SHARED VOTING POWER WITH 0 --------------------------------------------- 9 SOLE DISPOSITIVE POWER 2,177,573 --------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,177,573 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.87 - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- 2 ITEM 1. SECURITY AND ISSUER. The class of equity securities to which this statement relates is the common stock, $ .001 par value per share (the "Common Stock"), of Main Street Restaurant Group, Inc., a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 5050 North 40th Street, Suite 200, Phoenix, Arizona 85018. ITEM 2. IDENTITY AND BACKGROUND. This statement on Schedule 13D is being filed by Bradford L. Honigfeld ("Mr. Honigfeld"). Mr. Honigfeld is the owner, developer, and operator, through affiliated entities, of fast-food restaurants (Wendy's), casual dining restaurants (T.G.I. Friday's) and limited service hotels. Mr. Honigfeld's principal business address is 78 Okner Parkway, Livingston, NJ 07039. During the last five years, Mr. Honigfeld has not been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Mr. Honigfeld is a citizen of the United States. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Mr. Honigfeld has purchased the (i) 488,277 shares of Common Stock he beneficially owns in open market transactions at an aggregate purchase price of approximately $1,238,500 ("Open Market Purchases"); and (ii) 1,689,296 shares of Common Stock he beneficially owns through a private negotiated sale transaction by and between Mr. Honigfeld and Bart A. Brown, Jr. (the "Seller"), a former member of the board of directors of the Issuer, at an aggregate purchase price of approximately $5,271,491 (the "Privately Negotiated Purchase"). The terms of the Privately Negotiated Purchase, as described herein, are contained in the Amended and Restated Stock Purchase Agreement by and between Mr. Honigfeld and Seller dated as of April 20, 2005, attached hereto as Exhibit 1 (the "Stock Purchase Agreement"). Both the Open Market Purchases and the cash payment made in connection with the Privately Negotiated Purchase were funded with borrowed funds from Majestic Empire Holdings, LLC ("Majestic"), a Nevada limited liability company solely owned by Mr. Honigfeld. The terms of the loan from Majestic (the "Majestic Loan") to Mr. Honigfeld are evidenced by that certain promissory note dated as of April 20, 2005 (the "Majestic Note"). Under the terms of the Majestic Note, Mr. Honigfeld shall pay Majestic all principal and interest due under the LIBOR Note (as defined below) based on a three (3) year payment schedule with monthly payments on the first day of each month beginning on May 1, 2005. The Majestic Note is attached hereto as Exhibit 2. The source of funds for the Majestic Loan is a $6 million credit line ("Credit Line") provided by Manufacturers and Traders Trust Company (the "Bank") to Majestic pursuant to an amended commitment letter ("Commitment") and LIBOR Grid Note ("LIBOR Note"), both dated as of April 20, 2005. The form of the Commitment and LIBOR Note are attached hereto as Exhibits 3 and 4, respectively. Funds advanced under the Credit Line accrue interest, at Majestic's election, at a rate equal to LIBOR plus 167.5 basis points or the prime rate announced by the Bank. Amounts advanced under the Credit Line are due on demand. The final maturity date for the Credit Line and all amounts advanced under the Credit Line is May 1, 2009 (subject to extension by Majestic upon the satisfaction of certain conditions). Under the terms of the Credit Line, Majestic will only pay interest until demand or maturity; provided however, Majestic will pay the Bank, commencing on August 10, 2005 and the 10th day of each November, February , May and August thereafter, a fee equal to 1/4 of 1% of the average unused available 3 amount of the Credit Line during the prior calendar quarter unless the average quarterly outstanding amount of the Credit Line exceeds 50% of the maximum amount of the Credit Line during such quarter. Majestic may prepay principal upon two days notice, subject to a LIBOR breakage premium if the LIBOR rate is elected and the prepayment does not occur on a LIBOR adjustment date (as defined in the Commitment). The Credit Line is secured by a real estate mortgage covering four restaurant properties located in Queens and Kings Counties, New York owned by Majestic (the "Properties"). The form of the Credit Line Mortgage is attached hereto as Exhibit 5. The Commitment includes customary loan covenants, including financial reporting and maintenance of the Properties. It also requires that Majestic maintain a debt service coverage (as defined in the Commitment) of 115% and that Majestic not permit other mortgages or liens on the Properties. The Credit Line includes customary events of default and also specifies that it will be an event of default if Mr. Honigfeld ceases to control Majestic, fails to maintain (on a rolling 12 month average) minimum liquidity (as defined in the Commitment) of $5 million or fails to maintain a minimum net worth of at least $50 million. In connection with the Credit Line, Mr. Honigfeld executed a personal guaranty dated as of April 20, 2005 (the "Guaranty") guaranteeing the full and immediate payment and performance of Majestic's payment obligations in regard to interest and other charges (but not principal) arising from the Credit Line and any principal loss to the Bank to the extent of the Allocable Loan Amounts (as defined in the Commitment) associated with two of the Properties. The Guaranty is attached hereto as Exhibit 6. Majestic may draw the remaining available funds under the Credit Line subject to customary drawing conditions specified in the Commitment, including the following: (i) the maximum loan to value ratio, based upon an appraisal, cannot exceed 75% based upon both the property leases and the fair value of the Properties without the tenant leases, (ii) Majestic, subject to certain exceptions, cannot borrow money from any other lender, and (iii) each tenant at the Properties must maintain a ratio of earnings before interest, taxes, depreciation, amortization and rent for the property to fixed charges (as defined in the Commitment) of at least 115%. In connection with the Privately Negotiated Purchase, Mr. Honigfeld (i) paid a cash payment of $2,750,000, (ii) issued an unsecured promissory note to Seller in the amount of $370,000 that will accrue interest at 5% per annum for a period of four months from the date of purchase (the "Unsecured Note"), and (iii) issued a secured promissory note in the amount of $2,151,491.39 that will be payable over a term of 32 months, pursuant to a five year amortization schedule with interest computed thereon at the rate of 5% per annum (the "Secured Note"). Under the terms of the Unsecured Note, Mr. Honigfeld will pay to Seller equal payments of $93,465.54 commencing on May 20, 2005 and continuing monthly thereafter until August 20, 2005. Pursuant to the Secured Note, Mr. Honigfeld will pay Seller equal payments in the amount of $43,874.80 commencing on September 20, 2005 and continuing monthly thereafter until March 20, 2008. On April 20, 2008, Mr. Honigfeld will make a final payment under the Secured Note in the amount of $1,043,952.46. The Unsecured Note and the Secured Note (collectively, the "Notes") are attached hereto as Exhibits 7 and 8, respectively. In connection with the Privately Negotiated Purchase and pursuant to the Stock Pledge Agreement dated as of April 20, 2005 by and between Mr. Honigfeld and Seller (the "Pledge Agreement"), Mr. Honigfeld granted a first security interest to Seller in the shares Mr. Honigfeld acquired pursuant to the Privately Negotiated Purchase as collateral security for the prompt and complete payment and performance when due under the Secured Note. The Pledge Agreement is attached hereto as Exhibit 9. ITEM 4. PURPOSE OF TRANSACTION. Mr. Honigfeld acquired the shares of Common Stock to which this statement on Schedule 13D relates for the purpose of acquiring a significant equity position in the Issuer. 4 Mr. Honigfeld intends to review his holdings in the Issuer on a continuing basis and, depending upon the price and availability of the Common Stock, subsequent developments affecting the Issuer, the business prospects of the Issuer, general stock market and economic conditions, tax considerations and other factors deemed relevant, may at any time (as permitted by applicable law) acquire through open market purchases or otherwise additional shares of Common Stock; sell shares of Common Stock through the open market or otherwise; engage or participate in discussions with the Issuer's management and/or other stockholders of the Issuer; or engage in a transaction or series of transactions with the purpose or effect of acquiring or influencing control of the Issuer. Such discussions or transactions may take place at any time with or without prior notice and may include, without limitation, entering into one or more privately negotiated acquisitions of additional shares of Common Stock, making a tender offer for some or all of the Common Stock, waging a proxy contest for control of the board of directors of the Issuer or taking other actions that could have the purpose or effect of directly or indirectly acquiring or influencing control of the Issuer. Although the foregoing represents the range of activities presently contemplated by Mr. Honigfeld with respect to the Issuer and the Common Stock, Mr. Honigfeld has not decided whether he will seek to acquire control of the Issuer and the possible activities of Mr. Honigfeld are subject to change at any time. If Mr. Honigfeld determines to seek to acquire control of the Issuer, and in this regard engages in discussions with the Issuer's management and/or other stockholders of the Issuer regarding this intention, Mr. Honigfeld will not decide as to the specific means of obtaining such control until after such discussions have taken place. Mr. Honigfeld has engaged, and/or may in the future engage, legal and other advisors to assist him in evaluating strategic alternatives that are or may become available with respect to his holdings in the Issuer. Mr. Honigfeld previously had discussions with fewer than 10 stockholders of the Issuer concerning acquisitions of the Common Stock. However, except for the agreement between Mr. Honigfeld and Seller, no arrangements, agreements or understandings were made or reached in connection therewith. Except as set forth in this Statement, Mr. Honigfeld has no plan or proposal that relate to or would result in any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) Mr. Honigfeld has acquired and, for the purpose of Rule 13d-3 promulgated under the Exchange Act, beneficially owns 2,177,573 shares of Common Stock, representing approximately 14.87% of the outstanding shares of Common Stock of the Issuer.(1) (b) Mr. Honigfeld has sole power to vote and to dispose of 2,177,573 shares of Common Stock. (c) During the last sixty days the following shares of Common Stock were purchased by Mr. Honigfeld: DATE AMOUNT PRICE PER SHARE ---- ------ --------------- April 14, 2005 452,209 $2.5276 per share April 15, 2005 36,068 $2.6486 per share April 20, 2005 1,689,296 $3.1203 per share (d) Inapplicable. (e) Inapplicable. - -------- (1) For purposes of calculating the percentage of ownership of Common Stock held by Mr. Honigfeld, the Issuer is deemed to have 14,641,929 shares of Common Stock outstanding, as reported in its Proxy Statement on Form DEF 14A filed on April 22, 2005. 5 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. To the best knowledge of Mr. Honigfeld, except for the Stock Purchase Agreement, the Notes, and the Pledge Agreement as described in Item 3 and the arrangement between Mr. Honigfeld and Seller as described below in this Item 6, there are no other contracts, arrangements, understandings or relationships (legal or otherwise), between Mr. Honigfeld and any other person, with respect to any securities of the Issuer, including any securities pledged or otherwise subject to a contingency the occurrence of which would give another person voting power or investment power over such securities other than standard default and similar provisions contained in loan agreements. Seller holds options (the "Options") granted to him by the Issuer to purchase 1,200,000 shares of Common Stock (the "Option Shares"). Pursuant to the Stock Purchase Agreement, Seller granted an option to Mr. Honigfeld to purchase (i) all Option Shares that Seller may purchase upon exercise of the Options, or (ii) any other securities of the Issuer as converted from the Options (the "Converted Shares"). Pursuant to the Stock Purchase Agreement, on each occasion when Seller exercises any of the Options or receives any Converted Shares, he shall give written notice to Mr. Honigfeld. Upon receiving such notice, Mr. Honigfeld will have a 90-day period to purchase the Option Shares or Converted Shares from Seller at the purchase price of $3.1203 per share. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1: Amended and Restated Stock Purchase Agreement dated April 20, 2005 by and between Mr. Honigfeld and Seller; Exhibit 2: Promissory Note dated April 20, 2005 issued to Majestic from Mr. Honigfeld; Exhibit 3: Commitment Letter dated as of April 20, 2005 issued by the Bank; Exhibit 4: LIBOR Note dated as of April 20, 2005; Exhibit 5: Credit Line Mortgage dated as of April 20, 2005; Exhibit 6: Guaranty dated as of April 20, 2005; Exhibit 7: Unsecured Promissory Note dated April 20, 2005; Exhibit 8: Secured Promissory Note dated April 20, 2005; and Exhibit 9: Pledge Agreement dated April 20, 2005 by and between Mr. Honigfeld and Seller. 6 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. April 29, 2005 ---------------------------- Date /s/ Bradford L. Honigfeld ---------------------------- Signature Name: Bradford L. Honigfeld 7 EX-1 2 v17258_ex1.txt EXHIBIT 1 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT dated April 20, 2005 is between BRAD HONIGFELD ("Purchaser"), an individual resident of Nevada, and BART A. BROWN, JR. ("Brown or Seller"), an individual resident of Kentucky (this "Agreement"). RECITALS: A. Seller is the beneficial owner of 1,689,296 shares (the "Brown Shares") of common stock, $0.001 par value, of Main Street Restaurant Group, Inc. (the "Common Stock"), a publicly-traded Delaware corporation (the "Company"). In addition, Brown holds options granted to him by the Company (the "Options") to purchase 1,200,000 additional shares of Common Stock (the "Option Shares"). B. Purchaser desires to purchase from Seller, and Seller desires to sell to the Purchaser, the Brown Shares, and enter into an agreement regarding the Option Shares on the terms and conditions set forth in this Agreement. C. This Agreement amends, restates and supercedes the Stock Purchase Agreement dated April 12, 2005 executed by Seller and Purchaser. AGREEMENT: NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. PURCHASE OF SHARES. Purchaser agrees to purchase, and Seller agrees to sell to Purchaser, in accordance with the terms of this Agreement, the Brown Shares, at a purchase price of approximately $3.1203 per share (the "Purchase Price"). 2. PURCHASE PRICE AND MANNER OF PAYMENT; PLEDGE AGREEMENT. At the Closing (as defined in Section 4 hereof), the Purchase Price of the Brown Shares shall be paid to the Seller at as follows: 2.1 $2,750,000 shall be paid to the Seller by wire transfer of immediately available funds to such account as the Seller shall designate not less than two business days prior to the Closing Date (as defined in Section 4 hereof); 2.2 $370,000 shall be paid by delivery at the Closing of an unsecured promissory note made by the Purchaser to the order of the Seller in the form annexed hereto as Exhibit A (the "Unsecured Note"). The Unsecured Note shall be payable in equal monthly installments, each in the amount of $93,465.54, during the period commencing on May 20, 2005 and continuing monthly thereafter to and including August 20, 2005; and 2.3 $2,151,491.39 shall be paid by delivery at the Closing of a secured promissory note made by the Purchaser to the order of the Seller in the form annexed hereto as Exhibit B (the "Secured Note"). The Secured Note shall be payable over a term of 32 months, pursuant to a five year amortization schedule with interest computed thereon at the rate of 5% per annum, in 31 payments, each in the amount of $43,874.80, to be paid during the period commencing on September 20, 2005 and continuing monthly thereafter to and including March 20, 2008, and a final payment to be made on April 20, 2008 in the amount of $1,043,952.46. 3. DELIVERY AND PLEDGE OF THE BROWN SHARES. 3.1 Upon receipt from Purchaser of the $2,750,000 payment to be made pursuant to Section 2.1 hereof, the Unsecured Note, the Secured Note and the Pledge Agreement (as defined in Section 3.2 hereof), the Seller shall deliver to the escrow agent identified below at the Closing certificates representing the Brown Shares (the "Brown Shares Certificates") to which there shall be attached blank stock powers duly executed by the Seller and bearing the signature guaranty of a bank or brokerage firm (the "Brown Stock Powers"). Simultaneously therewith, the Seller and the Purchaser shall deliver joint written instructions to the Escrow Agent to deliver the Brown Shares Certificates and Brown Stock Powers to the Company's stock transfer agent, together with instructions to re-issue one certificate evidencing the Purchaser's ownership of the Brown Shares (the "Purchaser's Brown Shares Certificate"). 3.2 In order to secure the payment of all sums due and owing under the Secured Note, the Purchaser shall pledge the Brown Shares to the Seller by entering into and executing a pledge agreement with Seller and U.S. Bank, N.A. (the "Escrow Agent") as escrow agent. Such pledge agreement shall be substantially in the form annexed hereto as Exhibit C (the "Pledge Agreement"). Purchaser shall execute and deliver the Pledge Agreement to the Seller and the Escrow Agent at the Closing, together with a blank stock power duly executed by the Purchaser and bearing the signature guaranty of a bank or brokerage firm (the "Purchaser's Stock Power"). Upon receipt of the Purchaser's Brown Shares Certificate from the Company's transfer agent, the Escrow Agent shall affix the Purchaser's Stock Power thereto, and shall hold and distribute same in accordance with the terms of the Pledge Agreement. 3.3 In the event that the Closing shall occur prior to any meeting of the stockholders of the Company, but after the record date established for such meeting, the Seller shall (a) deliver to the Purchaser, not less than ten business days prior to such meeting, copies of all proxy materials that Seller shall receive with respect to the meeting; (b) appear (in his capacity as a stockholder of the Company) at the meeting or otherwise cause the Brown Shares to be present thereat for purposes of establishing a quorum; and (c) vote the Brown Shares, in person or by proxy, at the meeting in accordance with the Purchaser's written directions (which Purchaser shall deliver to the Seller not later than three business days prior to such meeting). If the Seller is the beneficial owner, but not the record holder, of any of the Brown Shares, he agrees to take all actions necessary to cause the record holder and any nominees to vote all of the Brown Shares held by such record holder in accordance with the directions given to the Seller by the Purchaser. 4. CLOSING. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place on such date when all of the conditions set forth in Section 10 hereof shall have been satisfied or waived 2 (such date the "Closing Date") at the offices of Arent Fox PLLC, 1675 Broadway, 34th Floor, New York, New York 10019 or on at such other location as the parties shall mutually agree upon. All actions taken at the Closing shall be deemed to have been taken simultaneously at the time the last of any such actions is taken or completed. Purchaser shall give notice to the Seller of the satisfaction or waiver of the condition set forth in Section 10 of this Agreement (the "Share Acquisition Condition") not later than 5:00 PM on the date when the Share Acquisition Condition has been satisfied or waived (the "Condition Satisfaction Notice"). The Closing shall take place two business days after the date on which the Condition Satisfaction Notice is given, or on such other date that shall be mutually acceptable to the parties, but not later than April 29, 2005. 5. OPTION SHARES. 5.1 CONVERSION OF OPTIONS. In the events that (a) the Company requests Seller to agree to convert any of the Options into other securities of the Company, or makes an offer which, if accepted by Seller, would result in the conversion of any of the Options into other securities of the Company (the "Converted Shares"); and (b) the Seller agrees to do so, then, subject to the conditions set forth in Section 5.2.4 hereof, the option granted by the Seller to the Purchaser pursuant to the provisions of Section 5.2.2 shall apply to the Converted Shares in the same manner, and to the same extent, that such provisions would have applied to the Option Shares. 5.2 EXERCISE OF OPTIONS OR RECEIPT OF CONVERTED SHARES BY SELLER. In the event that Seller exercises any of the Options, or receives any Converted Shares upon conversion of any of the Options, the following terms and conditions shall apply with respect thereto: 5.2.1 On each occasion when Seller exercises any of the Options or receives any Converted Shares, he shall give written notice to Purchaser (each, an "Exercise-Conversion Notice") specifying the date when the Option was exercised or the Converted Shares were received (each, a "Share Acquisition Date") and the number of Option Shares purchased or Converted Shares received in connection therewith. 5.2.2 Purchaser shall have the right and option to purchase not less than all of the Option Shares purchased or Converted Shares received, as specified in each Exercise-Conversion Notice during the last to occur of: (a) the 90 day period commencing on the date when Purchaser receives such Exercise-Conversion Notice; or (b) the period commencing on the date when Purchaser receives such Exercise-Conversion Notice and ending 90 days after the date when the conditions set forth in Section 5.2.4 shall have been fully satisfied or waived by the Company (each, an "Option Exercise Period"). The purchase price to be paid upon Purchaser's exercise of such option shall be $3.1203 per share. Payment of such purchase price shall be made in cash at a closing to be held not more than 10 days after the date upon which Purchaser gives written notice of exercise of such option to Seller. At such closing, Seller, upon receipt of the purchase price in cash or by wire transfer to an account designated by Purchaser, shall deliver to Purchaser the certificates evidencing the Option Shares or Converted Shares so purchased, to which there shall be attached blank stock powers duly executed by the Seller and bearing the signature guaranty of a bank or brokerage firm. 3 5.2.3 VOTING OF OPTION SHARES OR CONVERTED SHARES. In the events that (i) the date when the Purchaser pays for any Option Shares or Converted Shares shall occur prior to any meeting of the stockholders of the Company, but after the record date established for such meeting; and (ii) the Seller shall be the record owner of such Option Shares or Converted Shares on such record date, then Seller shall: (a) deliver to the Purchaser, not less than ten business days prior to such meeting, copies of all proxy materials that Seller shall receive with respect to the meeting; (b) appear (in his capacity as a stockholder of the Company) at the meeting or otherwise cause the Option Shares or Converted Shares to be present thereat for purposes of establishing a quorum; and (c) vote the Option Shares or Converted Shares, in person or by proxy, at the meeting in accordance with the Purchaser's written directions (which Purchaser shall deliver to the Seller not later than three business days prior to such meeting). 5.2.4 LIMITATIONS ON PURCHASER'S OPTION TO PURCHASE CONVERTED SHARES. Anything elsewhere contained in this Agreement to the contrary notwithstanding, Purchaser shall not be entitled to purchase any Converted Shares and, in the case of clause (a) below, the option provided for in Section 5.2.2 shall be deemed not to exist until such condition is satisfied, unless and until each of the following conditions has been satisfied or waived by the Company: (a) the grant of the option provided for in Section 5.2.2 by the Seller and the exercise thereof by the Purchaser shall not constitute a violation of any restrictions on or applicable to the Converted Shares; and (b) all restrictions that would prevent the Seller from selling the Converted Shares shall have lapsed. 5.2.5 SURVIVAL. The provisions of this Section 5 shall survive the closing of this Agreement, and shall remain in effect until 90 days after (a) the date when Seller shall receive all of the Converted Shares that he shall be entitled to receive if he elects to convert his Options into Converted Shares; or (b) if Seller does not elect to convert his Options into Converted Shares, the date of expiration of the last to expire of all of the Options held by Seller. 6. FURTHER ASSURANCES. From and after the date of this Agreement, the parties agree to take all appropriate action and to execute any documents or instruments of any kind that may be reasonably requested by a party or necessary or appropriate to facilitate consummation of the transactions contemplated hereby. 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. Seller represents and warrants to, and covenants with Purchaser, as follows: 4 7.1 AUTHORITY; BINDING EFFECT. Seller has full power, capacity and authority to execute and deliver this Agreement. Upon execution, this Agreement will constitute a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. 7.2 TITLE. Seller is the sole, record and beneficial owner of the Brown Shares and the Options, with full right, power and authority to sell and deliver the Brown Shares to Purchaser in accordance with this Agreement. The Brown Shares will be transferred by Seller to Purchaser free and clear of any liens, charges, equities, proxies, voting agreements, encumbrances, claims or any restrictions on transferability, but subject to such restrictions on resale or retransfer by the Purchaser as may be applicable pursuant to federal and state securities laws. 7.3 OWNERSHIP. The Brown Shares and the Options constitute, respectively, all of the shares of capital stock, and all other securities, of the Company beneficially owned by Seller as of the date of this Agreement. 7.4 NO CONFLICT. The execution, delivery and performance of this Agreement by Seller will not result in a violation of, or constitute a default under, any will, trust, agreement or other instrument to which Seller is a party or is bound or otherwise affecting the Brown Shares. 7.5 RESIGNATION BY SELLER. The Seller shall tender to the Company, not later than 10:00 AM on the Closing Date, his written resignation, effective immediately, from all positions he holds as an executive of the Company, and as a member of the Company's Board of Directors. 7.6 COMPLIANCE WITH LAWS. Assuming the validity of the representations made by Seller pursuant to Section 8.3 hereof, the sale of the Brown Shares to Purchaser hereunder is exempt from the registration requirements of the federal securities laws. 8. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to Seller as follows: 8.1 AUTHORITY; BINDING EFFECT. Purchaser has full power, capacity and authority to execute and deliver this Agreement. Upon execution, this Agreement will constitute a valid and binding agreement of Purchaser, enforceable against him in accordance with its terms. 8.2 NO CONFLICT. The execution, delivery and performance of this Agreement by Purchaser will not result in a violation of, or constitute a default under, any will, trust, agreement or other instrument to which Purchaser is a part or is bound. 8.3 INVESTMENT INTENT; ACCESS TO INFORMATION. 8.3.1 Purchaser has been provided with, or has access to, information about the Company sufficient to enable him to make an investment decision with respect to the Brown Shares. 5 8.3.2 Purchaser is acquiring the Brown Shares for his own account for investment, and not with a view to, or for sale in connection with, any distribution, and Purchaser does not intend to sell or otherwise dispose of the Brown Shares at any particular time. 8.3.3 Purchaser (a) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Brown Shares; and (b) is a "sophisticated investor" as such term is interpreted under the Securities Act of 1933, as amended (the "Securities Act"). 8.3.4 The Brown Shares have not been offered to Purchaser by means of a public solicitation and Purchaser is not aware of any such solicitation 8.3.5 Purchaser has been informed that (a) the Brown Shares have not been registered for resale under the Securities Act or any or any applicable state securities law and may not be transferred or otherwise disposed of unless the Brown Shares are subsequently registered under the Securities Act and any applicable state securities law or an exemption therefrom is available, such exemption being supported by an opinion reasonably acceptable to the Company's counsel; and (b) a legend to the foregoing effect may be placed upon any and all certificates evidencing Purchaser's ownership of the Brown Shares. 8.3.6 Purchaser is aware that Seller is a member of the Board of Directors of the Company and that, in such capacity, Seller has had access to non-public information concerning the Company including, but not limited to, operating results, financing options, expansion plans, management plans, budgets and discussions of potential transactions. Purchaser confirms that, in connection with the discussions that he has had with Seller regarding the transactions contemplated herein and hereby, Purchaser has not received any non-public information concerning the Company from the Seller, or any employee, agent or representative of the Seller. 9. MUTUAL COVENANTS. Purchaser and Seller hereby covenant to, and agree with, one another that they have not (a) entered into any agreements, arrangements or understandings with one another; or (b) made any plans with, or proposals to, one another with respect to a combined effort or undertaking by both of them acting together to: 9.1 acquire any of the Company' securities, or to dispose of any securities of the Company, other than the sale of the Brown Shares and the conferral of an option to purchase the Option Shares by Seller to Purchaser pursuant to the provisions of this Agreement; 9.2 engage in an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; 9.3 participate in a transaction involving a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; 9.4 effect any change in the present Board of Directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the Company's Board; 6 9.5 effect material change in the present capitalization or dividend policy of the Company; 9.6 effect any other material change in the Company's business or corporate structure; 9.7 effect any changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; 9.8 cause any class of the Company's securities to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; 9.9 cause any class of equity securities of the Company to become eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or 9.10 effect any action similar to any of those enumerated above. 10. CLOSING CONDITION. The Purchaser shall have no obligation to purchase any of the Brown Shares or any of the Option Shares unless and until the Purchaser shall have acquired beneficial ownership of not less than 500,000 shares of Common Stock, exclusive of any of the Brown Shares and any of the Option Shares. 11. INDEMNIFICATION. 11.1 BY SELLER. Seller agrees to indemnify in full Purchaser and to hold Purchaser harmless from and against any loss, liability, deficiency, damage, expense or cost (including reasonable legal expenses), incurred or threatened (collectively, "Losses"), which Purchaser may suffer, sustain or become subject to, as a result of (i) any misrepresentation in any of the representations and warranties of Seller contained in this Agreement, (ii) any breach of, or failure to perform, any agreement of Seller contained in this Agreement, or (iii) any "Claims" or threatened Claims against Purchaser arising out of (i) or (ii) above. 11.2 BY PURCHASER. Purchaser agrees to indemnify Seller and to hold Seller harmless against any Losses, which Seller may suffer, sustain or become subject to, as a result of (i) any misrepresentation in any of the representations and warranties of Purchaser contained in this Agreement, (ii) any breach of, or failure to perform, any agreement of Purchaser contained in this Agreement, or (iii) any Claims or threatened Claims against Seller arising out of (i) or (ii) above. 11.3 DEFINITION OF CLAIMS. For purposes of this Agreement, the term "Claims" means any action or proceeding, judicial or administrative, instituted by any third party for the liability, costs or expenses which constitute Losses. Notwithstanding the foregoing, the term "Claims" shall not include, and the party's indemnification obligations set forth in this Section 11 shall not apply to, any claim on behalf of the Company of a derivative or 7 similar nature or by any shareholder of the Company acting as such or as a buyer or seller of securities of the Company. 12. MISCELLANEOUS. 12.1 ENTIRE AGREEMENT. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes any prior understanding, agreements or presentations, written or oral, relating to the subject matter hereof. 12.2 EXECUTION IN COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which when taken together shall constitute but one and the same instrument. Any signature delivered by a Party by facsimile or e-mail transmission shall be deemed to be an original signature hereto. 12.3 OPINION OF SELLER'S COUNSEL. If requested by the Purchaser, the Seller shall cause his counsel to issue a letter addressed to the Company, and/or the Company's stock transfer agent and/or the Purchaser stating that, in such counsel's opinion, the Brown Shares and/or the Option Shares may be transferred to the Purchaser in the absence of any registration thereof under the Securities Act, and also stating the factual and legal basis for such opinion. 12.4 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule, the validity, legality and enforceability of the other provisions of this Agreement will not be affected or impaired thereby. 12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives and successors and assigns. 12.6 MODIFICATIONS, AMENDMENT, WAIVER OR TERMINATION. No provision of this Agreement may be modified, amended, waived or terminated except by an instrument in writing signed by the Parties to this Agreement. No course of dealing between the parties will modify, amend, waive or terminate any provision of this Agreement or any rights or obligations of any party under or by reason by this Agreement. 12.7 NOTICES. All notices, consents, requests, instructions, approvals or other communications provided for herein shall be in writing and delivered by personal delivery, overnight courier, mail, electronic facsimile or e-mail addressed to the receiving party at the address set forth herein. All such communications shall be effective when received. 8 If to Purchaser: Brad Honigfeld 70 Okner Parkway Livingston, New Jersey 07039 Tel: ************* Fax: ************* Email: *********** If to Brown: Bart A. Brown, Jr. *************** *************** Tel: *********** Fax: *********** Either party may change the address set forth above by notice to each other party given as provided herein. 12.8 HEADINGS. The headings and any table of contents contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 12.9 GOVERNING LAW. All matters relating to the interpretation, construction, validity and enforcement of this Agreement shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of laws provisions thereof. 12.10 THIRD-PARTY BENEFIT. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights, remedies, obligations or liabilities of any nature whatsoever. IN WITNESS WHEREOF, the parties have entered into this Stock Purchase Agreement as of the date first written above. PURCHASER: /s/ Brad Honigfeld -------------------------- BRAD HONIGFELD SELLER: /s/Bart A. Brown, Jr. -------------------------- BART A. BROWN, JR. 9 EXHIBIT A UNSECURED PROMISSORY NOTE [See Exhibit 7 of Schedule 13D] EXHIBIT B SECURED PROMISSORY NOTE [See Exhibit 8 of Schedule 13D] EXHIBIT C PLEDGE AGREEMENT [See Exhibit 9 to Schedule 13D] EX-2 3 v17258_ex2.txt EXHIBIT 2 NOTE This Note is made on April 20, 2005 BETWEEN the Borrower(s) BRAD HONIGFELD ("BORROWER") whose address is ************************************* referred to as "I" AND the Lender MAJESTIC EMPIRE HOLDINGS, LLC ("MAJESTIC") whose address is 78 Okner Parkway, Livingston, New Jersey 07039 referred to as the "Lender". If more than one Borrower signs this Note, the word "I" shall mean each Borrower named above. The "Lender" means the original Lender and anyone else who takes this Note by transfer. BORROWER'S PROMISE TO PAY PRINCIPAL AND INTEREST. In return for a loan that I received, I promise to pay $2,750,000 (called "Principal"), plus interest to the order of the Lender. Interest shall be the amount paid by Majestic for the outstanding Principal amount under this Note pursuant to that certain Libor Grid Note dated April 20, 2005, between Manufacturers and Traders Trust Company and Majestic, a copy of which is attached hereto as Exhibit A. PAYMENTS. I will pay Principal and interest based on a three (3) year payment schedule with monthly payments on the first day of each month beginning on May 1, 2005. I will pay all amounts owed under this Note no later than April 30, 2008. All payments will be made to Majestic at the address shown above or to a different place if required by the Lender. EARLY PAYMENTS. I have the right to make payments at any time in any amount before they are due. These early payments will mean that this Note will be paid in less time. However, unless I pay this Note in full, my monthly payments will remain the same. DEFAULT. If I fail to make any payment required by this Note within twenty (20) days after its due date, or if I fail to keep any other promise I make in this Note, the Lender may declare that I am in default on the Note. Upon default, I must immediately pay the full amount of all unpaid principal, interest, other amounts due on the Note and the Lender's costs of collection and reasonable attorney fees. WAIVERS. I give up my right to require that the Lender do the following: (a) to demand payment (called "presentment"); (b) to notify me of nonpayment (called "notice of dishonor"); and (c) to obtain an official certified statement showing nonpayment (called a "protest"). The Lender may exercise any right under this Note or under any law, even if Lender has delayed in exercising that right or has agreed in an earlier instance not to exercise that right. Lender does not waive its right to declare that I am in default by making payments or incurring expenses on my behalf. EACH PERSON LIABLE. The Lender may enforce any of the provisions of this Note against any one or more of the Borrowers who sign this Note. NO ORAL CHANGES. This Note can only be changed by an agreement in writing signed by both the Borrower(s) and the Lender. EXHIBIT A Attached. SIGNATURES. I agree to the terms of this Note. If the Borrower is a corporation, its proper corporate officers sign and its corporate seal is affixed. Witnessed or Attested by: - ------------------------------ /s/ Brad Honigfeld -------------------------------- Brad Honigfeld - ------------------------------ -------------------------------- [See Exhibit 4 of Schedule 13D] EX-3 4 v17258_ex3.txt EXHIBIT 3 MANUFACTURERS AND TRADERS TRUST COMPANY 350 Park Avenue New York, NY 1.0022 April 20, 2005 Majestic Empire Holdings, L.L,C. c/o Mr. Bradford Honigfeld The Briad Group 78 Okner Parkway Livingston, NJ 07039 Re: $6 Million Revolving Loans Dear Mr. Honigfeld: We are pleased to advise you that Manufacturers and Traders Trust Company (the "Bank") has approved an additional separate credit facility to the Borrower set forth below in the aggregate principal sum of up to SIX MILLION DOLLARS ($6,000,000) secured by, among other things, first mortgages on the land and improvements comprising 4 restaurants in NEW YORK listed on EXHIBIT C hereto (individually and collectively the "Property"). The Loan will be made and accepted subject to and in accordance with the following terms and conditions of dais commitment: 1. Terms of the Loan. Borrower: Majestic Empire Holdings, L.L.C., a Nevada limited liability company qualified to do business in, among others, the State of NEW YORK [set up as a bankruptcy remote entity] wholly owned by Bradford Honigfeld ("Bradford") provided that Bank will not unreasonably withhold its consent to (a) another person reasonably acceptable to Bank acquiring up to 49% of the equity of Borrower or to estate planning transfers as permitted on Exhibit A provided, in all cases, the entity still is controlled by Bradford or (b) in the event of Bradford's death or long term total disability a succession plan described on Exhibit A effected within six months of such event. Principal Amount: Up to $6,000,000 (the "Loan") subject to conditions as to amount as hereinafter set forth. Commitment Fee. The commitment fee due to Bank hereunder is $22,500. Quarterly Unused Availability Fee: Borrower shall pay to Bank on August 10, 2005 and the 10th of each November, February, May and August thereafter an Unused Availability Fee equal to 1/4 of 1% of the average unused availability amount of the Loan during the prior calendar quarter; provided that if the average quarterly outstanding amount of the Loan was more than 50% of the maximum amount (whether or not drawn) of the Loan during such quarter, no such fee shall be due for the quarter. Term: 4-year revolving period with a final maturity date of MAY 1, 2009. (Closing is expected on or before May 15, 2005 and, if materially delayed, the Term will be adjusted to the first day of a subsequent month with other corresponding date changes). Notwithstanding anything to the contrary state herein, the Loan shall at all times be on a demand basis. Extension Option: Borrower shall have the right to extend the term of the Loan for two (2) one (1) year option periods provided (i) it gives the Bank at least sixty (60) days prior written notice, (ii) it is not then in default beyond applicable cure periods (and there is no event which, with the passage of time or giving of notice or both, would constitute a default ["Incipient Default"]), (iii) the loan to value if the Loan were fully advanced, based upon Bank's then appraisal [Bank does not expect to do annual reappraisals of the Property but reserves the right to reappraise or to update the appraisal of any Property at any time in accordance with its commercial lending practices and policies from time to time "Policy Reappraisals"] , does not exceed 75% and (iv) with its written extension notice, Borrower pays Bank an extension fee for each extension of 1/4 of 1% of the maximum available (whether or not drawn) under the Loan. Payments: Borrower will pay interest only on the Loan. No principal payments shall be required until maturity or demand. Rate of Interest: The rate of interest will be at a Contract Rate equal to, at Borrower's election from time to time, (a) 167.5 basis points over (at closing and each subsequent Adjustment Date) 1 day reserve adjusted LIBOR as reported on each business day of the Bank, or (b) the rate announced by the Bank from time to time as its prime rate of interest ("Prime") and, in all cases, computed on the actual number of days over a 360-day year and payable monthly. If at any time Bank has 2 no announced Prime or similar rate, then such rate shall be the general prime or similar rate published by the Wall Street Journal. Interest shall commence as of the date of a disbursement. Purpose of Loan: The proceeds of the Loan will be used to pay off existing loans on the Property, if any, to back letters of credit, to provide funds for new acquisitions, construction and development, for working capital, investments and other business purposes (but not to acquire or carry "margin securities"). Funding: Advances under the Loan will be disbursed from time to time upon request of the Borrower but subject to all the conditions hereunder and the other Loan Documents, including, without limitation, the following: (i) Maximum loan to value ratio based on an appraisal [the "Appraisal"] ordered by Bank (in connection with the Closing or a Policy Reappraisal) shall be no more than 75% based on both (A) the leases with the tenants and (B) the fair market value of the Property without the tenant leases, (ii) No other moneys owed by Borrower to any party, whether or not secured by liens other than (A) monies due in the ordinary course of business and subject to normal industry terms, provided such sums are not secured by liens on the Property, (B) loans due to Beth Honigfeld ("Beth"), Bradford, the Briad Group (other than Borrower) and other entities under Bradford's control (collectively and individually the "Honigfeld Group"), all of which will have been subordinated to the Loan (as of the date hereof the Briad Group [which is not an entity but merely a defined term] includes (1) Briad Wenco, LLC, (2) Briad Restaurant Group, LLC, (3) Briad Construction Services, LLC, (4) Briad Wentwo, LLC, (5) Briad Lodging Group, LLC and (6) the Borrower), (C) guarantees by the Borrower and/or recourse obligations to the Borrower (whether or not covered by (A) above) which do not in the aggregate exceed $5 million at any one time, and (D) nonrecourse debt secured solely by assets of the Borrower other than the Property, (iii) The Franchise Agreements for Wendy's Old Fashion Hamburgers with Wendy's Old Fashioned Hamburgers of New York, Inc., or one or more of its subsidiaries (hereinafter individually and collectively called the "Franchisor") for each of the restaurants; (and the Management 3 Agreements with an affiliate of the Briad Group (the "Manager") for the Property shall continue to be in full force and effect (and the Franchisor and Manager shall have delivered to Bank consents to the assignment of their agreements to Bank, or in the case of Franchisor a tri partite or similar comfort letter from Franchisor reasonably acceptable to Bank; provided that such rights in favor of Bank may be subject to prior rights of Bank of America as Agent for itself and other lenders ["BofA"] or any replacement leasehold mortgagee [BofA or such other leasehold mortgagee, a "Leasehold Mortgagee"] which is providing financing to the tenants of each Property), (iv) Receipt by Bank at Closing of a satisfactory environmental screen for each site (and if problems are disclosed for any site a satisfactory Phase I environmental report on the site and, if required, a satisfactory Phase II report) covering, among other things, any asbestos and underground storage tanks [Bank does not expect to do annual environmental updates of the Property but reserves the right to update any environmental of any property at any time in accordance with its commercial lending practices and policies from time to time, "Policy Environmental Updates"], (v) There shall be no event of default or an Incipient Default under any of the documents relating to the Loan (the "Loan Documents"), (vi) Bank shall have received with respect to each Property either (A) an opinion from Borrower's zoning counsel, (B) a specific guaranty of zoning on the survey (with evidence satisfactory to Bank that the surveyor's malpractice policy covers such a guaranty of zoning), or (C) a title policy endorsement that the improvements comply with all zoning requirements (including wetland set backs) and any special zoning, parking or environmental regulations encompassed in any special resolutions passed by the relevant governmental authorities to the extent that such endorsements are available at a reasonable price in a state, or (D) a letter from the zoning authority satisfactory to the Bank; provided that if Borrower has at least a valid certificate of occupancy (or a temporary certificate of occupancy with only such conditions as are acceptable to Bank in its sole discretion) for a particular Property, Borrower shall have six months after closing to comply with conditions either (A), (B), (C) or (D) as to such Property. Whenever in this Commitment 4 Letter or any loan document Borrower is given a time period to comply with a requirement for a Property, if Borrower has not complied within such period (unless the requirement has been waived or the period has been extended in writing by Bank in its sole discretion), the maximum Loan amount shall be temporarily reduced by the Allocable Loan Amount (on Exhibit C) for such Property (a "Temporary Reduction") until the requirement has been met. (vii) Borrower shall deliver a certificate restating and updating its representations and warranties (and, unless Borrower gives Bank prior written notice to the contrary which is received by Bank within a reasonable time to act thereon, a request for a draw down shall be deemed an affirmation by Borrower of the continued material accuracy of such representations and warranties with the same effect as though made in a separate certificate and shall satisfy this condition). (viii)The "Guarantor" (as defined below) shall have acknowledged in writing that any additional disbursement is covered by the Guaranty (which acknowledgment will be deemed contained in the Guaranty and will remain in full force and effect and which shall satisfy this condition unless the Guarantor gives Bank written notice to the contrary which is received by Bank within a reasonable time for Bank to act in accordance therewith). (ix) Bank shall have received a signed copy of a net lease for each portion of the Property (A) on a form previously approved by Bank (B) reflecting the net rent on EXHIBIT C (C) with the tenant shown on EXHIBIT C (D) together with an estoppel letter from each tenant in a form satisfactory to Bank (E) The annual rent from all the leases for the Property shall be at least $675,000, subject to adjustments for any releases of a Property as set forth below (a lease meeting all of these requirements of (A)-(D) when all such leases meet the requirements of (E) shall be herein called an "Approved Lease"). 5 (x) Bank shall establish a lock box in the name of Bank into which all rent shall be deposited and out of which required debt service payments on the Loan shall be made each month; provided that there is no event of default or Incipient Default, after payment of debt service on the Loan, all remaining cash in the lock box account shall be transferred to Borrower's account at Bank. (xi) Each individual restaurant tenant shall maintain each calendar year EBITDAR to "Fixed Charges" of at least 115%, "EBITDAR" shall mean Net Operating Income as defined on EXHIBIT A but adding back interest, taxes, depreciation, amortization and rent for the Property. "Fixed Charges" shall mean all rent, debt service payable by the tenant, real estate taxes, income taxes of tenant and capital lease payments and capital expenses, including rent due to Borrower for the restaurant but excluding any other payments to the Honigfeld Group on any loans made to tenant and which are subordinated to all other fixed charges and payable only to the extent of available cash flow after all other expenditures. Because the provisions set forth in this and other sections as conditions for disbursements are for the benefit of Bank, Bank shall have the right, in its sole discretion, to waive any such condition on one or more occasions, provided, however, that such waiver shall be invalid unless it shall be signed by Bank and refer specifically to the provision waived and the incident or transaction involved and shall not, unless so stated, constitute a permanent waiver of the condition or provision. Prepayment: (a) Borrower will have the right to prepay the principal, on at least two (2) business days' notice, in integral multiples of $100,000 with interest computed to the day on which prepayment is received, with a LIBOR breakage prepayment premium if a LIBOR rate is in effect if the payment does not occur on an Adjustment Date. (b) Reborrowings of amounts prepaid will be permitted. (c) If at any time the Loan is secured by one or more properties located in New York State, unless the Borrower has given Bank written notice waiving any right to further advances, Borrower shall deposit with Bank with each repayment an amount equal to the mortgage recording tax that will become due when Borrower requests a readvance of the amount repaid, which sum will be held in an interest 6 bearing account at Bank and shall be additional security for the Loan (the "Recording Tax Escrow"). When Borrower requests a readvance Bank will disburse from the Recording Tax Escrow to the recording office the amount of the mortgage recording tax then due, up to the amount in the Recording Tax Escrow; any additional amount payable shall be paid by Borrower upon demand of Bank. When the Loan is repaid and all mortgage recording taxes and any other fees and charges are paid, any balance in the Recording Tax Escrow shall be released to Borrower. Guaranty: Bradford (the "Guarantor"), will guarantee under a guaranty (the "Guaranty") which will be in form and substance satisfactory to Bank and its counsel (a) the interest and other charges (but not principal) of the Loan and (b) until the 20 year use restriction of the following Properties to a Wendy's restaurant only is modified by Wendy's to the reasonable satisfaction of Bank in the event Bank is required to foreclose or otherwise take control of a Property (generally in the form of the draft Limitation on Restriction sent by Bank's counsel to Borrower (with such changes in form or substance as Wendy's may reasonably request), Guarantor shall also guarantee any principal loss to the Bank to the extent of the Allocable Loan Amounts of the Properties related to restaurants 313 and 314 to which such use restriction applies. Financial Borrower will be required to submit to Bank Reporting: (a) with respect to Borrower and on each tenant: (i) not later than one hundred twenty (120) days after each fiscal year, financial statements prepared by Borrower and certified by its chief financial officer, followed within five (5) months after each fiscal year by financial statements reviewed by an independent certified public accountant. Such annual statements must be satisfactory to Bank in all respects. (ii) copies of all tax returns filed with the federal government (and upon request any local or state flings) provided that if any tax return is on an extension, Bank shall be provided with a copy of such extension together with proof of payment and a copy of the return promptly after filing. 7 (iii) such other information as Bank shall reasonably request from time to time. (b) With respect to the Briad Group (excluding hotel properties): (i) not later than forty five (45) days after the end of each quarter, quarterly financial statements prepared internally and certified by its chief financial officer. (ii) not later than one hundred twenty (120) days after each fiscal year, financial statements prepared internally and certified by its chief financial officer, followed within five (5) months after each fiscal year by financial statements audited by an independent certified public accountant. Such statements must be reasonably satisfactory to Bank in all respects. The financial statements for the Briad Group are permitted to be presented on a consolidated basis but any nonconsolidated affiliates must have their financial statements separately prepared. (iii) copies of all tax returns filed with the federal government (and upon request any local or state filings) provided that if any tax return is on an extension, Bank shall be provided with a copy of such extension together with proof of payment and a copy of the return promptly after filing. (iv) at least annually proof of liquidity. (v) by December 15 of each year a budget for the following year of each restaurant. (vi) Such other information as Bank shall reasonably request front time to time (including without limitation more frequent financial and liquidity information). (c) With respect to Bradford: (i) not later than one hundred twenty (120) days after each fiscal year, financial statements signed by Bradford on Bank's form or such other form as may be reasonably acceptable to Bank. Such annual statements must be satisfactory to Bank in all respects. 8 (ii) copies of all tax returns filed with the federal government (and upon request any local or state filings) provided that if any tax return is on an extension, Bank shall be provided with a copy of such extension together with proof of payment and a copy of the return promptly after filing. (iii) at least annually proof of liquidity. (iv) Such other information as Bank shall reasonably request from time to time (including without limitation more frequent financial and liquidity information). Accounts: Borrower will establish, or cause the Manager to establish at closing, and maintain at Bank for the life of the Loan all of its operating accounts, security accounts (if permitted by applicable state laws), tax escrow accounts (all of which together with any local operating account at a third party bank permitted by Bank [provided that the local depositary recognizes Bank's collateral interest in the account in a form reasonably acceptable to Bank] are collectively called the "Accounts"), all of which to the extent of Borrower's interest therein, shall constitute additional security for the Loan. 2. The Property consists of 4 restaurants in NEW YORK owned in fee by Borrower and leased to the tenant and listed on EXHIBIT C. The Property will operate under the Franchise Agreement and Management Agreement. 3. Security for the Loan. The Loan will be evidenced by one or more demand grid notes (individually and collectively the "Note") in the maximum amount of the Loan, and secured by, among other things, one or more mortgages (individually and collectively the "Mortgage") which shall be a valid first lien on a good, unencumbered and marketable title in fee simple to the Property. The Loan also will be secured by, among other things, (a) a security interest duly perfected under the Uniform Commercial Code, subject to no prior or superior interest, covering all furniture, equipment, fixtures and articles of personal property, if any, of Borrower at any time affixed to, installed at, or used in connection with the operation of the Property (removable personal property with a depreciable life of 7 years or less is presumptively the property of the tenant at the Property), (b) an assignment of all leases, rents and profits of the Property, (c) an Environmental Indemnity Agreement signed by Borrower and Bradford, (d) an assignment of the Management Agreement, subject to the prior rights of the Leasehold Mortgage, (e) an assignment of the Franchise Agreement (if permitted by the Franchisor) and/or a tri-party agreement among Bank, Borrower and Franchisor, subject to prior rights of the Leasehold Mortgage, (f) a pledge of all Borrower's interest in the Accounts, and (g) all other security instruments and interests referred to in this letter or requested by Bank. All 9 documents relating to the Loan must constitute legal, valid and binding obligations of Borrower and Guarantor, enforceable in accordance with. their terms and conditions, and free from any right of set off, counterclaim or other defense. 4. Loan Documents Provisions. The Loan Documents shall be subject to the Standard Loan Terms set forth on Exhibit A attached hereto and in addition, among other things, be deemed to incorporate the following: (a) Releases. Provided there is no event of default or Incipient Default, individual portions of the Property may be released by the Borrower. (i) upon 30 days prior notice to Bank; (ii) with a reduction to the maximum amount available of the Loan (which may require a pay down of a portion of the outstanding balance of the Loan at that time) of 115% of the Allocable Loan Amount as shown on EXHIBIT C, but not more than the maximum Loan that can, if fully drawn, (A) have Debt Service Coverage (based upon the trailing 12 month results) for only the Property remaining after the release of 130% and (B) represent no more than 75(degree),% of the appraised value of the remaining Property after such release; and (iii) after the release, Borrower remaining in compliance with all other terms of the Loan. (b) Event of Default. It shall be an event of default under the Loan if, among other things, (i) Borrower is in default of any other obligations to Bank or any of its affiliates or there is a material default in any of Borrower's tenants' obligations to the Franchisor or to any Leasehold Mortgagee. (ii) there is any material adverse change in the financial condition of any of Borrower's tenants. (iii) Bradford ceases to control Borrower (except for a six month period during which Borrower is attempting to formulate an Approved Succession Plan) or Bradford (or his estate) fails at any time (A) to maintain (on a rolling 12 month average) minimum liquidity of at least $5 MILLION (personally and through wholly owned companies). As used in this paragraph, the term. "liquidity" will mean cash plus marketable securities (with U.S. Government securities and municipal bonds valued at 100% of their latest bid price, New York Stock Exchange securities valued at 70% of 10 their latest regularly traded bid price, American Stock Exchange securities valued at 60% of their latest regularly traded bid price and NASDAQ national Market System securities valued at 50% of their latest regularly traded bid price). However, all assets in IRAs, Keogh Plans or any other pension or retirement plan and all other investments of any sort will be excluded in any calculation of liquidity. The existence of such minimum liquidity shall be certified to Bank in writing at least quarterly. (B) to maintain a minimum net worth of at least $50 million (before consideration of estimated taxes an possible future property dispositions for market values in excess of their respective tax basis). (iv) Borrower shall not, without Bank's prior written consent (which shall not be unreasonably withheld or delayed), (A) terminate, waive any material term of or permit any amendment to any material term of any lease for any portion of the Property. (B) permit any change in use from that permitted by lease for any portion of the Property. (C) Permit any structural or exterior alterations or additions to any portion of the Property, except for renovations or updates from time to time in the ordinary course of business. (D) Permit any Tenant of any portion of the Property to have any self insurance or large deductible plans without Bank's prior written approval [subject to obtaining written details and its insurance consultant's final review of all relevant insurance policies, Bank anticipates approving at this time an insurance plan wherein the Briad Group has deductibles of approximately $50,000 per occurrence]. (E) Permit any assignment of the lease of any portion of the Property or permit any other person than the tenant named on a lease to occupy any portion of the Property or release any original tenant of any portion of the. Property from its obligations under such lease, (even after the permitted assignments or subleasing thereof) without in each case the prior written consent of Bank, not to be unreasonably withheld or delayed. 11 c. No Liens. No other mortgages or liens may encumber the Property without Bank's prior written consent, except leasehold mortgages (without recourse to Borrower or the Borrower's interest in the Property) in favor of BofA with respect to Approved Leases. d. Debt Service Coverage Requirement. Borrower will be in default if it does not have Debt Service Coverage tested each calendar quarter based upon results for the prior 12 months commencing with the first calendar quarter after the closing, of at least 115%, provided that, in the event the Debt Service Coverage as determined by Bank will, at any time, be less than 115%, Borrower may cure the Default by either (A) making a principal prepayment on the Loan in an amount sufficient to increase the Debt Service Coverage to 115%, or (B) keeping on deposit with Bank- at all times thereafter (until after the Debt Service Coverage shall be at least 115% for two consecutive quarters) a cash Interest Reserve (which shall constitute additional collateral for the Loan) equal to six months' interest on the Loan. e. Closing Expedited. At Borrower's request, Bank is expediting the Closing. Borrower has delivered to Bank title commitments for the Property dated on or about December 2004 and January 2005 or other recent dates and such items are being reviewed by Bank's counsel with objections noted (in a letter from Bank's counsel to Borrower prior to Closing) and with a fixed time for each item to be remedied by Borrower (generally 60 days as the time for older surveys to be rectified to Bank and most other title objections). To the extent that a title objection in Bank's counsel's letter is not remedied to Bank's counsel's reasonable satisfaction by the date required (unless waived or extended by Bank in writing), the maximum amount of the Loan shall be reduced temporarily by the Allocable Loan Amount of the Property to which the abjection related, until such objection is remedied. 5. Conditions. The obligation of Bank to make the Loan and the fundings thereof is expressly subject to: a. The satisfaction of and compliance with each of the material provisions and conditions in this Commitment, b. The satisfaction and compliance with each of the material General Conditions annexed hereto, which are an integral part of this commitment. c. Borrower shall submit to Bank and its counsel (i) the Management Agreement between the tenant under an Approved Lease and its Manager, if any, with respect to the management of the Property and (ii) the Franchise Agreement with the Franchisor and the tenant of each Approved Lease. At all times while the Loan is outstanding the Manager or the tenant under an Approved Lease shall manage the Property and the Property shall operate under the Franchise Agreement. Such Management Agreement and Franchise Agreement shall each be assigned to Bank (except that the Franchise Agreement may be the subject of a tri-party agreement among Bank, Borrower and Franchisor) and subject to prior rights of the tenant and of B of A and shall be terminable by Bank at the sole option of Bank upon foreclosure of the Mortgage or other acquisition of the Property by Bank or its assignee. 12 d. Borrower, Bradford nor any tenant of Borrower is (or will be) a person with whom Bank is restricted from doing business under regulations of the Office of Foreign Asset Control ("OFAC") of the Department of the Treasury of the United States of America ("Treasury") (including those persons named on OFAC's Specifically Designated and Blocked Persons list) or under any list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by Treasury in consultation with the federal functional regulators, or under any statute, executive order, or other governmental action, and Borrower, Bradford nor any tenant of Borrower is engaging, or shall engage, in ally dealings or transactions or shall otherwise be associated with such persons. In addition, Borrower hereby agrees to provide the Bank with any additional information that the Bank deems necessary from time to time in order to ensure compliance with all applicable laws concerning money laundering and similar activities. e. In the went of Bradford's death or long term total disability, Bank in its sole discretion may refuse to make further advances under the Loan until an Approved Succession Plan has been approved in writing by Bank, but no such advance shall constitute Bank's approval of such Plan. 6. Restrictions on Assignment. The identity of the persons with whom Bank deals is of material importance to it. Accordingly, this commitment may not be assigned or transferred. 7. Broker. Borrower represents and warrants to Bank that neither it nor any other person referred to herein has dealt with any broker with respect to the financing transaction contemplated hereby and by accepting this commitment, and Borrower agrees forever to indemnify and save Bank harmless from and against any and all claims or suits for compensation, commissions or otherwise (and all costs, losses and expenses, including, but not limited to, attorneys' fees and expenses related thereto) that may be asserted or made by any broker, person or entity claiming to have dealt with or to have been employed by Borrower or any of such other persons or representatives of them. This provision shall survive the Closing and repayment of the Loans. 8. Bank Counsel. Bank will be represented in this matter by Malman & Goldman, LLP, 152 West 57th Street, 35th Floor, New York, NY 10019 (telephone number 212-397-1100, fax number 212-265-9078) with the assistance of local counsel in each state where a site is located other than New York State. All correspondence directed to Bank's counsel should be addressed to the attention of Arthur B. Malman, Esq. 9. Closing. The closing of the Loan (the "Closing") will take place at such office as may be agreed upon by Borrower and Bank on a date an or prior to the Commitment Expiration Date (as hereinafter defined) as shall be designated by Borrower in a written notice to Bank and its counsel, given not more than thirty (30) days nor less than ten (10) days prior to the date so designated, provided a title report, survey, appraisal, phase I environmental report and any other documents and information requested by Bank or its counsel in connection with the Loan have been furnished to and are satisfactory to Bank and its counsel on or before the date such notice is given and provided all other 13 conditions to Closing have been met or will be met at the Closing. All documents required under this commitment will be executed and delivered at or prior to the Closing. 10. Expenses. The acceptance by Borrower of this commitment will constitute its unconditional agreement to pay all reasonable out of pocket fees, costs, charges and expenses with respect to the Loans, or its making or in any way connected therewith, including, without limiting tile generality thereof: the fees and expenses of Bank's counsel (and special local counsel) for the preparation of the loan documentation and the examination of title, survey, tenant leases, etc., and for closing the Loan (the fees of Malman & Goldman, LLP are initially estimated not to exceed $15,000 for the Loan covered by this commitment letter only, assuming timely comments to Loan Documents and subject to adjustment for material title issues, substantial revisions to documents, or other unforeseen problems); fees and expenses of the Consulting Engineer, title report and title insurance premiums; survey costs; recording and filing fees; credit information charges; real estate tax service charges; documentary stamps; mortgage taxes; and any and all other taxes, fees and expenses payable in connection with this transaction, including fees for any required appraisals, environmental reports, inspections and property review. Bank will not be required to pay any premium, brokerage fee or commission or similar compensation in connection. with this transaction and Borrower agrees to defend, indemnify and hold Bank harmless against and from any and all claims for any fees, charges, taxes and compensation in connection with the Loan and its making. This provision shall survive the Commitment Expiration Date and repayment of the Loan. 11. Acceptance and Expiration. Acceptance of this commitment will constitute agreement by Borrower to accept the Loan from Bank and authorization for Bank's counsel to proceed at Borrower's expense with the examination of title to the Property and to prepare for the Closing. This commitment will expire, and all obligations of Bank hereunder will terminate, on APRIL 25, 2005, if this Commitment is not signed and returned with the Commitment Fee then due, and, in any event, on AUGUST 1, 2005 ("Commitment Expiration Date"), if the Closing has not occurred on or before that date. Such dates are of the essence with respect to Borrower's and Bank's obligations hereunder. 12. Financial information. Borrower hereby represents that all financial statements, documents and income and operating expense statements which have been previously submitted to Bank in connection with the Loan are true, complete and correct in all material respects and those for the Property accurately reflect the total revenues and expenses for the Property. 13. Standard Loan Terms and General Conditions. Exhibits A and B, Standard Loan Terms and General Conditions (together with Schedules 1 and 2 thereto) are attached hereto and are incorporated herein by reference. 14. MRE. To the extent that Bank notifies Borrower that this Loan is to be funded through MRE, Bank will be acting as agent in administering and arranging loans, including this mortgage loan, to be made through its affiliate, MRE, in whose name this commercial mortgage loan will be closed. Accordingly, 14 any title insurance, hazard insurance, environmental report and the like should run in favor of M&T Real Estate Trust and all checks to be delivered in connection with the Closing should be made payable to M&T Real Estate Trust. Furthermore, MRE may, at its election, to accommodate the standard operations of its computer system adjust any variable interest rate set in reference to a base as of the first day of the month following the date on which the change occurs rather than on the date of the actual rate change in the base and compute interest based on either a 360 or 365 day year. 15. Entire Agreement. No statements, agreements or representations, oral or written, which may have been made by Bank or any employee, officer or agent acting on Bank's behalf with respect to the Loan, are of any force or effect, except to the extent stated in this commitment. This commitment, together with all representations and/or documentation heretofore furnished by borrower to Bank, embodies and constitutes the entire understanding with respect to the Loan, and supersedes all prior understandings and agreements by Borrower or on Borrower's behalf, or representations by Bank. No waiver, extension or modification of any of the terms or provisions of this commitment will be binding on Bank unless embodied in a document executed by it. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 15 THIS COMMITMENT LETTER SHALL SURVIVE THE CLOSING. IF ANY TERMS HEREOF AND THE SIMILAR TERMS OF A LOAN DOCUMENT ARE INCONSISTENT, UNLESS THE LOAN DOCUMENT SPECIFICALLY STATES OTHERWISE BY REFERENCE TO HIS COMMITMENT LETTER, THE TERMS OF THE LOAN DOCUMENT SHALL, UNLESS OTHERWISE REQUIRED TO ASSURE THE ENFORCEABILITY OF BANK'S RIGHTS THEREUNDER, BE CONSTRUED IN ACCORDANCE WITH THE TERMS HEREOF. Very truly yours, MANUFACTURERS AND TRADERS TRUST COMPANY By: ----------------------------- Name: Jason Lipiec Title: Vice President Accepted and Agreed to: Majestic Empire Holdings, L;LC. By: -------------------------------- Name: Bradford Honigfeld Title: Managing Member EIN: 20-2589084 Organizational No.: LLC2009-2005 Dated: April __, 2005 16 EXHIBIT A Standard Loan Terns CURE PERIODS, LATE CHARGE AND DEFAULT INTEREST RATE: Borrowers shall have 10 days to cure defaults in the monthly payments of principal and/or interest, or any Prepayment Premium due under the Note and defaults in the payments of escrow deposits, real estate taxes, insurance premiums, ground rents (if any) or any other payment due under the Mortgage; and (other than those defaults arising from bankruptcy and other insolvency) 30 days from the date notification is received from Bank to cure performance defaults under the Mortgage. If, however, such performance default is of a nature that it cannot be cured within such 30 day period, Borrowers shall lave a reasonable period of time after the date notice of default is received by Borrowers within which to effect such cure on the condition that Borrowers commence good faith efforts to cure within the 30 day period and demonstrates continuous diligent efforts in a manner reasonably satisfactory to Bank. If Borrowers fail to cure either the monetary or performance defaults described in this paragraph within the applicable grace period, then interest on the unpaid principal balance of the Note and all accrued interest thereon shall be collected at the rate set forth in the Note plus 5% per annum compounded monthly ("Default Rate") until the default is cured or the principal and all other amounts due under the Note and Mortgage are paid in full, whichever is earlier. In addition, if any monthly payment due on the Note is not paid in full within 10 days from the date it is due, Borrowers will pay a late charge of 3% of the amount overdue. DUE ON SALE OR ENCUMBRANCE: Except as specifically permitted herein, if (i) the Property or any part thereof, or any interest in the Property or in Borrowers is sold or conveyed; (ii) title to the Property or any interest therein is divested; (iii) the Property or any ownership interest in Borrowers is further encumbered (including my security for indebtedness other than the Note); (iv) any lease is entered into after the date hereof which gives the lessee any option to purchase the Property or any part thereof; or (v) the ownership of shares or memberships of Borrowers or any corporate or limited liability company general partner of Borrowers, or the general partnership interests in any partnership which is a general partner of Borrowers is encumbered, transferred or changed, without the prior written consent of Bank, then Bank shall have the right, at its option, to declare the indebtedness secured by the Mortgage, irrespective of the maturity date specified in the Note, immediately due and payable provided that the indebtedness shall not become due solely by virtue of such transfers as are, in the sole judgment of Bank (based upon written material presented to it for review prior to the proposed transfer), approved in writing by Bank as "reasonable estate planning transfers" by Bradford or an "Approved Succession Plan" and (A) which do not affect Bradford's control of the Borrower (except after Bradford's death or total disability), (B) the proposed transferee joins in the joint and several guarantees if so requested by Bank, (C) there is no default or Incipient Default under the Loan, (D) Bank's security position is not diminished, (E) Bank, upon request, receives an opinion of Borrower's counsel that the guaranty of all obligations due to Bank with respect to the Loan continue in full force and effect, (F) all documents are satisfactory in form and substance to Bank mid its counsel, and (G) all reasonable expenses related thereto are paid by Borrower. 17 APPROVED SUCCESSION PLAN: In the event of Bradford's death or long term total disability (as reasonably determined by Bank or as such term is defined at the time in the standard disability insurance policies offered in the United States by Prudential Insurance Company or by New York Life Insurance Company), the Borrower shall have six months thereafter to present to Bank a written plan for the management succession of Borrower and the Briad Group which shall be reasonably satisfactory to Bank (as evidenced by a writing to such effect from Bank) based upon such factors as the experience and reputation of the senior management group in businesses of similar types and size, their acceptability to the Franchisor, their degree of control over key decisions, their financial interests and exposure, and other relevant factors. LEASES: Borrowers shall not amend or cancel any lease previously approved by Bank nor enter into any leases for space in the Property without Bank's prior written approval, not to be unreasonably withheld or delayed. RECORDS AND ACCOUNTS: Borrowers will keep proper books of record and account with respect to the operation of the Property in accordance with generally accepted accounting principles. NET OPERATING INCOME: "Net Operating Income" of a person shall mean: (i) all gross receipts received by the person from the operations of its business and property during the applicable period, calculated on a cash basis which reflects only the income actually anticipated to be received during the period (for items due with respect to periods not more than thirty (30) days before or after such twelve month period) including, without limitation, all amounts received from tenants as payment of operating expenses, but not including insurance or condemnation proceeds, refundable deposits or lease termination payments included as additional rent, principal or interest payments received the person on loans to tenants or others and fees and reimbursements for work performed for tenants by the person, less: (ii) all amounts, calculated on a cash basis, for the operation and maintenance of for the applicable twelve-month period, including, without limitation, inventories, consumables, real estate, rents, equipment rentals, the cost of management (including, without limitation, all incentive compensation), maintenance, franchise fees, cleaning, security, parking, maintenance and utilities, real estate taxes and assessments and other taxes related to the operation of its business and property), insurance premiums and necessary repairs and other costs and expenses provided that capital expenditures for improvements, repairs or replacements shall be taken at the higher of (A) actual expenditures during the period or (B) 4% of gross receipts from a hotel and 2% of gross receipts from a restaurant during the period. (All expenses shall be on a basis consistent with projected expenses for its business and property as heretofore and hereafter from time to time provided to Bank.) provided that if Net Operating Income (or Debt Service Coverage) is being computed with respect to a prior period, gross receipts shall include only cash actually collected with respect to the period but expenses shall include both cash payments and any items properly accrued but unpaid. 18 DEBT SERVICE COVERAGE: "Debt Service Coverage" shall mean Net Operating Income of a person divided by interest expense (based, with respect to a floating rate loan, on the then prevailing interest rates) and amortization, if any (other than a final balloon payment), required during the applicable twelve (12) month period (whether on loans to Bank or indebtedness [including, without limitation, rent payments not otherwise included as an expense under (ii) above] to any other party with respect to its business or property excluding, however, any debt service to the Honigfeld Group on loans to such person which are subordinated to Bank provided that if such computation is being made with respect to a prior period, actual debt service shall be used. 19 EXHIBIT B GENERAL CONDITIONS 1. Title Insurance. At the Closing, Borrowers will deliver to Bank, at Borrowers' cost, an A.L.T.A. policy of title insurance for the Loan together with such endorsements as Bank may reasonably require (including ALTA 9, First Loss, Last Dollar, Waiver of Arbitration, Land Same as Survey, Access, Tie In, and others which are offered in the state at a reasonable cost), issued by a title company approved by Bank (the "Title Company"), in the principal amount of the Loan, with such reinsurance or co-insurance as Bank may require, showing good, marketable, insurable and indefeasible fee simple title to the Property (other than any ground lease) and good and marketable title to any ground lease (provided further that the form and substance thereof has been approved in writing by Bank) in Borrowers, and insuring Bank that the Mortgage is a first and prior lien, for the full amount of the Loan, subject only to such exceptions as shall be approved by Bank's counsel. If this loan is closed through an independent escrow company, Bank may require Borrowers to obtain from the Title Company an insured closing letter, in form and substance satisfactory to Bank and its counsel. Borrowers shall pay the entire cost of said examination, policy, insured closing letter, survey, recording fees, filing fees, mortgage recording taxes, municipal and departmental searches and all additional expenses and disbursements incidental to the making of the Loan and paid or incurred by Bank or its counsel. 2. Survey. Prior to the Closing, Borrowers will deliver to Bank an A.L.T.A. survey of the Property by a duly licensed engineer or surveyor, dated or redated not more than thirty (30) days prior to the Closing, which shall be certified to Bank and the Title Company in the form attached hereto as Schedule 1, and shall indicate the dimensions of the Property, the dimensions and locations of the improvements on the Property and of the easements, if any, the location of adjacent streets, and such other details as may be requested by Bank. [Bank will accept prior surveys made upon completion of the buildings within 10 years and with a representation from Borrower that there have been no further changes to the improvements which could affect the survey.] 3. Compliance with Laws. Borrowers will provide Bank with evidence reasonably satisfactory to Bank and its counsel that: (a) the Loan complies with all applicable laws, ordinances, rules and regulations of any governmental authority having jurisdiction over the Property or the Loan in force at the time of the Closing; (b) the tax lot or lots for the Property do not include any properties other than the Property, (c) a valid permanent unconditional certificate of occupancy and all other permits, licenses and other approvals required by all applicable laws and governmental authorities for the occupancy and operation of all portions of the Property have been issued and are in full force and were issued solely on the basis of the Property and not on the basis of other properties or easements or other interests that are not covered by the Mortgage (it being 20 understood that, as relates to any items which are not obtainable until after completion of Improvements, they shall be required promptly upon substantial completion). The certificates of occupancy shall cover all the improvements described in "The Property" section (Paragraph 2) of this commitment, and permit such improvements to be legally occupied for the purposes contemplated under "The Property" section hereof, (d) the Property and the operation and use thereof comply in all respects with all zoning, building, housing, subdivision, environmental, flood plan (flood insurance shall be carried by Borrower for any Property with a flood plain) and all other applicable laws, ordinances, notes and regulations and other legal requirements affecting or relating to the Property and with all applicable insurance underwriting, requirements, and there is no violation or claimed violation of any of the foregoing; and (e) the rentals and other charges payable under all leases and all other provisions of the leases, comply with all applicable laws, ordinances, rules and regulations. 4. Insurance. At least seven (7) days prior to the Closing, Borrowers will deliver to Bank original policies (or original certificates with copies of the policies if the insurance is part of a blanket policy covering multiple properties) of fire and extended coverage insurance covering the Property (and also covering all equipment, fixtures and other articles of personal property affixed to, installed at or used in connection with the operations of the Property) in such amounts as shall be required by Bank and with premiums fully paid one year in advance (unless the Property is covered under a blanket policy, in which case payment shall have been made as currently due thereunder) with appropriate endorsements showing the interest of Bank as first mortgagee (with respect to the foregoing) without contribution and with loss payable to Bank under a standard mortgagee endorsement. Such policies will be in the standard form of fire insurance policy with extended coverage and will provide coverage against such other risks as Bank may require including earthquake. At least seven (7) days prior to the Closing, Borrowers will also deliver to Bank proof satisfactory to Bank that the Property is not within a designated flood hazard area as identified by the U.S. Department of Housing and Urban Development. Borrowers will carry (a) rent insurance in an amount equal to one year's gross income from the Property, (b) comprehensive general liability insurance in an amount satisfactory to Bank against claims and liabilities for injury or damage to persons or property occurring on or about the Property, (c) "Builder's Risk" insurance during construction, and (d) such other insurance coverages as Bank shall reasonably request. Borrowers will provide a copy or certificate of all such policies to Bank not less than seven (7) days prior to the Closing. If the insurance is part of a blanket policy covering multiple property it shall specifically show Borrowers as insureds with respect to the Property. All policies and/or certificates of insurance referred to in this paragraph 4 must be reasonably satisfactory to Bank as to the amounts and types of the coverage and the companies by which such policies are issued, 21 Borrowers shall keep all of the foregoing coverages in force during the term of the Loan. 5. Leases and Estoppels. At least seven (7) days prior to the Closing, Borrowers will submit to Bank or its counsel for their approval: (a) True, complete and correct copies of all leases and occupancy agreements, if any, for the Property including all amendments thereto or extensions thereof, and any guarantees thereof (collectively, the "Lease Agreements"). The Lease Agreements must be satisfactory to Bank's counsel, in all respects, and each and every Lease Agreement will contain a provision satisfactory to Bank's counsel subordinating such Lease Agreement to the Mortgage, all advances thereunder, and any renewals, extensions, modifications or consolidations thereof or if such a self operative subordination agreement is not contained in any Lease Agreement, Bank may require such an agreement for the tenant. The Mortgage and such other agreements as Bank may require will provide for the assignment to Bank of the Lease Agreements and the rents, profits and issue thereof, as additional security for the Mortgage. All Lease Agreements entered into after the closing will be in form and substance satisfactory to Bank's counsel, will comply with all applicable laws, rules and regulations of any governmental authority having jurisdiction over such Lease Agreement, and will be assigned to Bank as additional security. (b) Estoppel certificates, in form approved by Bank and its counsel, signed by Borrowers submitting an estoppel to Bank shall be deemed a representation and warranty from Borrowers that there have been no material changes in the facts set forth therein since the date of its signing. (c) A rent roll, certified by Borrowers. (d) All management and other service contracts, if any, relating to the Property. The estoppel certificates and the rent roll shall be entirely consistent with the Lease Agreements and there shall be no material defaults under the Lease Agreements by either landlord or tenant. 6. No Change in Condition. At and as of the Closing, (a) the Property and all fixtures, furnishings and equipment will not have been destroyed or damaged, (b) no adverse change will have occurred in the income of the Property or in the financial condition of any major tenant, Borrowers or the Guarantors, and (c) no judicial or administrative proceedings will be pending against Borrowers or the Guarantors or the Property, which, if adversely determined, would, in the opinion of Bank, affect the security of the Loan. At the Closing, Borrowers will certify to the existence or non-existence of such changes in the condition of the Property, Borrowers or the Guarantors and, to the best of their knowledge, the major tenants. 22 7. Representations and Warranties. The Representations and warranties set forth in Schedule 2 to General Conditions incorporated herein by reference are and shall be true as of the date hereof and as of the date of Closing. 8. Approval by Bank's Counsel. Bank's obligations under the commitment are conditioned, among other things, upon the approval by Bank's counsel of (a) the form and substance of all documents referred to in or contemplated by this commitment or incident to the Loan, including, without limitation, the Note, the Mortgage, the Environmental Indemnity Agreement, the Lease Agreements, title insurance policies, etc., (b) all matters pertaining to the title to the Property and the marketability of such title (Bank's counsel will deliver to Borrowers any objections to the state of title within ten (10) days after receipt by it of a copy of the respective title report or update or supplement thereto), (c) Borrowers' capacity and authority to accept the Loan and to execute the Loan Documents and (d) all other legal matters relating to the Loan. The judgment of Bank's counsel with respect to all legal matters will be final and binding on all parties. 9. Taxes. All unpaid taxes, assessments and/or unmatured assessments, water, water meter and sewer charges which are a lien an the Property as of the Closing will be paid in full prior to the disbursement of any proceeds of the Loan and copies of receipted bills (or other proof acceptable to Bank) furnished to Bank's counsel. Borrowers shall, if required after a default in payment of taxes as described in the Mortgage, escrow with Bank for all such taxes and assessments during the term of the Loan. 10. Interest Rate. It is not intended by any provision of the commitment or these General Conditions to charge Borrowers interest at a rate in excess of the maximum rate of interest permitted to be charged to Borrowers under applicable law, but if, nevertheless, interest in excess of said maximum rate is paid on the Loan, the excess amount will be deemed to have been paid in error and will be automatically applied in reduction of the principal balance of the Loan. 11. Appraisal. Bank shall obtain, prior to the Closing, a current appraisal of the Property by a qualified appraiser, which appraisal will fully support Borrowers' application, but is not binding upon Bank as to the value of the Property. 12. Environmental Report. Subject to the provisions in the body of this Commitment Letter, Borrowers will deliver to Bank, prior to the Closing, a current Phase I environmental report of the Property by a qualified engineer acceptable to Bank, which report shall in all respects be satisfactory to Bank. 13. Opinion of counsel. Bank will be furnished, at Borrowers' expense, with legal opinions by Borrowers' counsel reasonably acceptable to Bank in form and substance. 14. Decisions of Bank or its Counsel. Whenever in the forgoing provisions of these general stipulations the making of the Loan is conditioned upon any matter or thing being acceptable or satisfactory to Bank or its counsel, Bank's decision thereon or the decision of Bank's counsel as the case may be, will be final, binding and conclusive for all purposes. 23 15. Governing Law. The commitment and these General Conditions will be governed by and construed in accordance with the laws of the State of New York and unless otherwise specifically provided in particular Loan Documents, they shall be similarly governed. 16. Gender, Plural. The use of any gender herein shall include the other and the neuter and any singular shall also include the plural and vice versa. 24 SCHEDULE 1 TO GENERAL CONDITIONS SURVEYOR'S GUARANTY [not required for prior surveys otherwise acceptable to Bank] I/We hereby guaranty to Manufacturers and Traders Trust Company, M&T Real Estate Trust and ____________________________ (Name of Title Insurance Company) that (a) this survey was prepared by me or under my supervision, (b) the property described hereon is the same as the property described in _________________________ Commitment No. ___________ with an effective date of ___________________, and that all easements, covenants and restrictions referenced in said title commitment or apparent from a physical inspection of the site or otherwise known to me have been plotted hereon or otherwise noted as to their effect on the subject property, (c) this survey accurately depicts the state of facts as they appear on the ground, (d) except as shown hereon, there are no improvements, encroachments, fences or roadways on any portion of the property reflected hereon, (e) tile property shown hereon has access to a publicly dedicated roadway, (f) the property is located within an area having a Zone Designation _______ by the Federal Emergency Management Agency (FEMA), on Flood Insurance Rate Map No. __________ with a date of identification of _________________, for Community No. __________ in _____________ County, State of ____________________, which is the current Flood Insurance Rate Map for the community in which said premises is situated, (g) the title lines and lines of actual possession are the same, (h) all utility services required for the operation of the property either enter the property through adjoining public streets, or this survey shows the point of entry and location of any utilities which pass through or are located on adjoining private land in accordance with easements of record, (i) this survey shows the location and direction of all storm drainage systems for the collection and disposal of all surface drainage, (j) the property surveyed contains ______ acres and _______ parking spaces, (k) any discharge into streams, rivers or other conveyance systems is shown on the survey. This map or plat and the survey on which it is based were made in accordance with laws regulating surveying in the State of_________________ and with the "Minimum Standard Detail Requirements of ALTA/ACSM Land Title Surveys," jointly established and adopted by American Land Title Associates ("ALTA") and American Congress on Surveying and Mapping ("ACSM") in 1999 and includes Items I, 2, 3, 4, 5, 6, 7(a) and (c), 8, 9, 10, 11(b), 14, 15 and 16 in Table A contained therein. Pursuant to the Accuracy Standards as adopted by ALTA and ACSM and in effect on the date of this Guaranty, undersigned further guaranties that proper field procedures, instrumentation, and adequate survey personnel were employed in order to achieve results comparable to those outlined in the "Minimum Angle, Distance and Closure Requirements for Survey Measurements Which Control Land Boundaries for ALTA/ACSM Land Title Surveys." Dated: _____________, 200__ [NAME OF SURVEYOR AND QUALIFICATION] ___________________________________________ Registration No. __________________________ 25 SCHEDULE 2 TO GENERAL CONDITIONS BORROWERS' REPRESENTATIONS AND WARRANTIES Borrowers hereby make, and shall execute a certificate dated the Closing Date which restates, the following representations and warranties: a. Borrowers will have at closing good and marketable title to the Property and good title to the personal property (if any, other than that owned by tenants under Approved Leases), free and clear of all liens or encumbrances other than those which shall be released or removed on or prior to the Closing Date and those to which Bank has specifically consented in writing. b. No actions, suits, investigations, litigation, bankruptcy, reorganization or other proceedings are pending at law or in equity or before any federal, state, territorial, municipal or other government department, commission, board, bureau, agency, courts or instrumentality, or to the best of its knowledge, are threatened, against or materially and adversely affecting of Bradford, Borrowers, or any general partner or manager therein or owner thereof, the operations of the Property or, to the best of Borrowers' knowledge (which phrase throughout shall include the knowledge of Bradford and the principals of Borrowers), or any tenant, (i) which would, as of the Closing Date, affect the validity or priority of the lien of the Mortgage, (ii) which will adversely affect the ability of any Guarantors or Borrowers to perform their obligations pursuant to and as contemplated by the terms and provisions of the commitment, or (iii) which could materially and adversely affect the operations or financial condition of any Guarantors, Borrowers, or any partner or owner thereof. c. The execution, delivery and performance of the Commitment, the Note, the Mortgage and the other Loan Documents will not constitute a breach or default under any other agreement to which Borrowers are a party or may be bound or affected, or a violation of any law or court order which may affect the Property, any part thereof, any interest therein, or the use thereof d. Borrowers are not in violation of or in default with respect to any term or provision of any other loan commitment, mortgage, deed of trust, indenture, contract, or instrument applicable to Borrowers or the Property or by which any of the foregoing is bound or with respect to any order, writ, injunction, decree or demand of any court or any governmental agency or authority. e. Borrowers have not entered into any leases nor, to the best of Borrowers' knowledge, are there any unrecorded leases or other arrangements for occupancy of space within the Property other than (i) the leases reflected in the rent roll and (ii) leases entered into after the date hereof approved in writing by Bank. 26 f No condemnation of any portion of the Property has commenced or, to the best of Borrowers' knowledge, is contemplated by any governmental authority. g. All factual information and all financial statements, operating statements, leases and rent rolls previously furnished by or on behalf of any Guarantors or Borrowers to Bank in connection with the Loan and all other submissions referred to herein or required by this Commitment are and will be true, complete and correct in all material respects, are not misleading in any material respect aid do not omit any information required to prevent such statements, loan submissions or materials from being materially misleading under the circumstances, h. No material adverse change in the operations of the Property or in the financial condition of any Guarantors or Borrowers have occurred since the date of preparation of the most recent financial statements and operating statements delivered to Bank. i. To the best of Borrowers' knowledge and except as may have been previously disclosed in writing to Lender, (i) the Property is structurally sound and the operation of the Property complies with all applicable zoning, environmental protection or control codes and fire, electrical and building codes, rules and regulations, and (ii) there is no license, approval or permit, necessary for either the lawful operation of the Property or the lawful occupancy thereof, including, without limitation, utility, building, zoning, subdivision control, land and water use, environmental protection and flood hazard permits, which has not been obtained. j. Borrowers are not in default under any lease; no tenant lease contains any option to purchase any interest in the Property; to the best of Borrowers' knowledge, no tenant has committed an uncured monetary default under its lease (except as previously disclosed in writing to Bank), all conditions precedent to any tenant's obligation to pay rent have been satisfied and, no tenant has committed any nonmonetary default under its lease (except as previously disclosed in writing to Bank). k. To the best of Borrowers' knowledge, there are no unrecorded contracts to purchase the Property or any interest therein. 1. To the best of Borrowers' knowledge, other than as may be set forth in the Environmental Report to be delivered to Bank prior to Closing: (i) no Hazardous Material (defined as those substances, including without limitation, asbestos or any substance containing asbestos and deemed hazardous under any Hazardous Material Law, the group of organic compounds known as polychlorinated biphenyls, flammable explosives, radioactive materials, chemicals known to cause cancer or reproductive toxicity, pollutants, effluents, contaminants, emissions or related materials and any items included in the definition of hazardous or toxic waste, materials or substances under any Hazardous Material Law) 27 has been installed, used, generated, manufactured, treated, handled, refined, produced, processed, stored or disposed of, in or on or under the Property, including without limitation, the surface and subsurface waters of the Property, nor has any activity been undertaken on the Property which would cause (i) the Property to become a hazardous waste treatment, storage or disposal facility within the meaning of, or otherwise bring the Property within any Hazardous Material Law (defined as any present and future local, state and federal law relating to the environment and environmental conditions including without limitation, the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss.6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. ss.ss.9601-9657, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. ss.6901, et seq., the Federal Water Pollution Control Act, 33 U.S.C. ss.ss. 1251 et seq., the Clean Air Act, 42 U.S.C. ss.ss.7401 et seq., the Clear Water Act, 33 U.S.C. ss.7401, et seq., the Toxic Substances Control Act, 15 U.S.C. ss.ss.2601-2629, the Safe Drinking Water Act, 42 U.S.C. ss.ss.300f-300j, and all the regulations, orders, decrees now or hereafter promulgated thereunder), (ii) a release or threatened release of Hazardous Material from the Property within the meaning of, or otherwise bring the Property under any Hazardous Material Law, or (iii) the discharge of Hazardous Material which would require a permit under any Hazardous Material Law, (ii) there are no conditions with respect to the Property which would cause a violation or support a claim under any Hazardous Material Law; and (iii) no underground storage talks or underground deposits of Hazardous Materials are or were located on the Property and subsequently removed or filled. m. The Property consists of a separate tax lot or lots assessed separately and apart from any other property owned by Borrowers or any other owner. n. The Property (except for those parcels covered by flood insurance) does not lie in a 100 year flood plain that has been identified by the Secretary of Housing and Urban Development or any other governmental authority. o. To the best of Borrower's knowledge, tenants' operations do not violate any exclusive use clause of any other tenant at the Property. p. The Property is being used and will be operated in accordance with all easements and restrictions of record. q. No Borrower or Guarantor is an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 and the rules and regulations promulgated thereunder ("ERISA") nor a "governmental plan" within Section 28 3(32) of ERISA and transactions by or with any Borrower or Guarantor are not subject to state statutes regulating investments of, and fiduciary obligations with respect to, governmental plans. Neither Borrowers nor Guarantors nor any other person, including any fiduciary, has engaged in any prohibited transaction (as defined in Section 4975 of the Internal Revenue Code [the "Code"] or Section 406 of ERISA] which could subject any Borrower or Guarantor or any person whom they have an obligation to indemnify to any tax or penalty imposed under Section 4975 of the Code of Section 502 of ERISA; neither Borrower nor Guarantor nor any "ERISA Affiliate" (any entity, trade or business which is under common control with another person under Section 414(b) or (c) of the Code or is required to be treated as a single employer with such person under Section 414(m) or (o) of the Code) maintains, contributes to or has any liability with respect to a Multiemployer Plan or any other plan subject to Title IV or ERISA; each Employee Benefit Plan, if any, of Borrower or Guarantor, is administered in accordance with its terms and in compliance with all applicable Laws, including any reporting requirements; each Pension Plan, if any, of Borrower or Guarantor, intended to qualify under Section 401 (a) or 401(k) of the Internal Revenue Code ("Code") does so qualify; there is no lien outstanding or security interest given in connection with any such Pension Plan; neither any Borrower nor any Guarantor nor any ERISA Affiliate has any liability with respect to an accumulated funding deficiency (whether or not waived) under Section 412 of the Code or Section 302 of ERISA; neither any Borrower nor any Guarantor has any liability for retiree medical or death benefits (contingent or otherwise) other than as required by Section 4980B of the Code; Borrowers and Guarantors do not, and no part of the funds to be used by Borrowers or Guarantors in satisfaction of their respective obligations under the Commitment and the other Loan Documents, constitute "plan assets" within the meaning of Section 4975(e)(1) of the Code, as interpreted by the Internal Revenue Service and the United States Department of Labor in rules, regulations, releases or bulletins or as interpreted under applicable case law. r. The Property complies fully with the Americans With Disabilities Act. s. No Borrower or Guarantor is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock. No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry margin stock or to extend credit to other for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose or (ii) far any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board of Governors of the Federal Reserve System, including Regulation G, U or X. t. Borrower is not (i) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (ii), a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. 29 There has been no change to the exterior dimensions of any improvements on any of the Property subsequent to the date of the survey delivered to Bank with respect to each site comprising the Property except as set forth in the survey affidavits, a complete set of which have been given to the Bank. Borrowers hereby agree and shall state in the above certificate that these representations and warranties are also made with the purpose of enabling the holders of the Mortgage and the Note, from time to time, to rely upon the truth of matters recited in these representations and warranties as of the date they were made. 30 EXHIBIT C PROPERTIES Manufacturers and Traders Trust Company 350 Park Avenue New York, New York 10022 April 28, 2005 Majestic Empire Holdings, L.L.C. c/o Bradford Honigfeld The Briad Group 78 Okner Parkway Livingston, NJ 07039 RE: $6 MILLION REVOLVING LOAN Dear Mr. Honigfeld: Reference is made to that certain Commitment Letter dated April 20, 2005 between Manufacturers and Traders Trust Company and Majestic Empire Holdings, L.LC. This letter will clarify the reference to "margin securities" in Paragraph 1, Terms of Loan, section entitled Purchase of Loan, of the Commitment Letter. Notwithstanding such reference, the proceeds of the Loan may be used to purchase and carry the securities of any privately or publicly held restaurant or hotel business. Very truly yours, Manufacturers and Traders Trust Company By: ----------------------- Name: Jason Lipiec Title: Vice President EX-4 5 v17258_ex4.txt EXHIBIT 4 [M&T Bank Manufacturers and Traders Trust Company] LIBOR GRID NOTE (Daily LIBOR) New York Buffalo, New York AS OF APRIL 20, 2005 $6,000,000.00 BORROWER: MAJESTIC EMPIRE HOLDINGS, L.L.C. a(n) individual(s) partnership corporation LIMITED LIABILITY COMPANY organized under the laws of NEVADA Address of residence/chief executive office: C/O THE BRIAD GROUP, 78 OKNER PARKWAY, LIVINGSTON, NEW JERSEY 07039 BANK: MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation with its principal banking office at One M&T Plaza, Buffalo, NY 14240. Attention: Office of General Counsel IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE TERMS OF THIS NOTE AND THE TERMS OF THE COMMITMENT LETTER DATED AS OF APRIL 20, 2005, FROM BANK TO BORROWER RELATING TO THIS LOAN (AS THE SAME MAY BE AMENDED FROM TIME TO TIME, THE "COMMITMENT LETTER"), UNLESS OTHERWISE REQUIRED TO ASSURE THE ENFORCEABILITY OF BANK'S RIGHTS HEREUNDER, THE TERMS OF THE COMMITMENT LETTER SHALL CONTROL. 1. DEFINITIONS. Each capitalized term shall have the meaning specified herein and the following terms shall have the indicated meanings: a. "AUTHORIZED PERSON" shall mean, each individually, BRADFORD HONIGFELD OR MARLENE LAVEMAN. Mention of the Authorized Person's name is for reference purposes only and the Bank may rely on a person's title to ascertain whether someone is an Authorized Person. b. "BASE RATE" shall mean ZERO (0) percentage points above the rate of interest announced by the Bank from time to time as its prime rate of interest ("Prime"). If the prior blank is not completed, the Base Rate shall be one (1) percentage point above Prime. c. "BASE RATE LOAN" shall mean a Loan which bears interest at the Base Rate. d. "BUSINESS DAY" shall mean any day of the year other than a day on which banking institutions in New York, New York are authorized or required by law or other governmental action to close. e. "CONVERSION DATE" shall mean the date on which Borrower's election to convert a Base Rate Loan to a LIBOR Rate Loan, or a LIBOR Rate Loan to a Base Rate Loan, becomes effective in accordance with this Note. f. "DRAW DATE" shall mean, in relation to any Loan, the Business Day on which such Loan is made, or to be made, to Borrower pursuant to the Note. g. "LIBOR RATE LOAN" shall mean a Loan which bears interest at the LIBOR Rate. h. "LIBOR" shall mean the rate obtained by dividing (i) the one-day (or multiple day, as applicable, in contemplation of succeeding days in which the London Interbank Eurodollar Market is expected to be closed) interest period London Interbank Offered Rate, as fixed by the British Bankers Association for United States dollar deposits in the London Interbank Eurodollar Market at approximately 11:00 a.m. London, England time (or as soon thereafter as practicable) each day (or if such day is a non-Business Day, as fixed in the same manner on the immediately preceding Business Day, which day's rate shall apply to the immediately succeeding non-Business Days), as determined by the Bank from any broker, quoting service or commonly available source utilized by the Bank, by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against "Eurocurrency Liabilities" as specified in Regulation D (or against any other category of liabilities, which includes deposits by reference to which the interest rate on LIBOR Rate Loan(s) is determined, or any category of extensions of credit or other assets which includes loans by a non-United States' office of a bank to United States' resident(s) on such date to any member bank of the Federal Reserve System, i. "LIBOR RATE" shall mean 167.5 percentage points above LIBOR. j. "LOAN" means a loan made to Borrower by the Bank pursuant to this Note. k. "MAXIMUM PRINCIPAL AMOUNT" shall mean SIX MILLION DOLLARS ($6,000,000.00). l. "OUTSTANDING PRINCIPAL AMOUNT" shall mean the actual outstanding principal amount under this Note at any time. 2. PAYMENT OF PRINCIPAL, INTEREST AND EXPENSES a. PROMISE TO PAY. For value received, and intending to be legally bound, Borrower promises to pay to the order of the Bank, on demand, the Maximum Principal Amount or the Outstanding Principal Amount, if less; plus interest as set forth below and all fees and costs (including without limitation attorneys' fees and disbursements, whether for internal or outside counsel) the Bank incurs in order to collect any amount due under this Note, to negotiate or document a workout or restructuring, or to preserve its rights or realize upon any guaranty or other security for the payment of this Note ("Expenses"). 1 b. INTEREST. Each Loan shall earn interest on the Outstanding Principal Amount thereof calculated on the basis of a 360-day year for the actual number of days of each year (365 or 366), as follows: i. LIBOR RATE LOANS. Interest shall accrue each day on a LIBOR Rate Loan, from and including the first date the LIBOR Rate Loan was made (i.e., the Draw Date or the Conversion Date, as the case may be) to, but not including, the date such LIBOR Rate Loan is paid in full or converted to a Base Rate Loan, at a rate per annum equal to the LIBOR Rate in effect that day. ii. BASE RATE LOANS. Interest shall accrue each day on a Base Rate Loan, from and including the first date the Base Rate Loan was made (i.e., the Draw Date or the Conversion Date, as the case may be) to, but not including, the day such Base Rate Loan is paid in full or converted to a LIBOR Rate Loan, at the rate per annum equal to the Base Rate in effect that day. Any change in the Base Rate resulting from a change in Prime shall be effective on the date of such change. c. MAXIMUM LEGAL RATE. It is the intent of the Bank and of Borrower that in no event shall interest be payable at a rate in excess of the maximum rate permitted by applicable law (the "Maximum Legal Rate"). Solely to the extent necessary to prevent interest under this Note from exceeding the Maximum Legal Rate, any amount that would be treated as excessive under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled, and, if received by the Bank, shall be refunded to Borrower. d. PAYMENTS; LATE CHARGE; DEFAULT RATE. Payments shall be made in immediately available United States funds at any banking office of the Bank. Absent demand for payment in full, interest shall be due and payable monthly, or as otherwise invoiced by the Bank. If payment is not received within five days of its due date, Borrower shall pay a late charge equal to the greatest of (a) 5% of the delinquent amount, (b) the Bank's then current late charge as announced by the Bank from time to time, or (c) $50.00. In addition, if the Bank has not actually received any payment under this Note within thirty days after its due date, from and after such thirtieth day the interest rate for all amounts outstanding under this Note shall automatically increase to 5 percentage points above the higher of the Base Rate or the LIBOR Rate (the "Default Rate"), and any judgment entered hereon or otherwise in connection with any suit to collect amounts due hereunder shall bear interest at such Default rate. Payments may be applied in any order in the sole discretion of the Bank but, prior to demand, shall be applied first to past due interest, Expenses, late charges, and principal payments, if any, which are past due, then to current interest and Expenses and late charges, and last to remaining principal. 3. LOANS. a. GENERAL. Any Loan hereunder shall either be in the form of a Base Rate Loan or a LIBOR Rate Loan. The Bank may make any Loan in reliance upon any oral, telephonic, written, teletransmitted or other request (the "Request(s)") that the Bank in good faith believes to be valid and to have been made by Borrower or on behalf of Borrower by an Authorized Person. The Bank may act on the Request of any Authorized Person until the Bank shall have received from Borrower, and had a reasonable time to act on, written notice revoking the authority of such Authorized Person. The Bank shall incur no liability to Borrower or to any other person as a direct or indirect result of making any Loan pursuant to this paragraph. b. REQUEST FOR LOANS. In making any Request for a Loan, Borrower shall specify the applicable interest rate (LIBOR Rate or Base Rate), aggregate amount of such Loan and the Draw Date; provided, however, if a Request is received by the Bank after 2:00 p.m. (Eastern Standard Time) on any given day, the earliest possible Draw Date will be the next Business Day; and c. DELIVERY OF REQUESTS. Delivery of a Request for a LIBOR Rate Loan or a Base Rate Loan shall be made to the Bank at the following address, or such other address designated by the Bank from time to time: Manufacturers and Traders Trust Company Attn: JASON LIPIEC Fax No. (212) 350-2112 Telephone No. (212) 350-2432 d. SECURITY. THIS NOTE IS SECURED BY, AMONG OTHER THINGS, A CREDIT LINE MORTGAGE DATED ON OR ABOUT THE DATE HEREOF. 4. CONVERSION ELECTIONS. a. CONVERSION ELECTION. An Authorized Person of Borrower may, upon irrevocable Request to the Bank, i. elect to convert on any Business Day any Base Rate Loan into a LIBOR Rate Loan; or ii. elect to convert on any Business Day any LIBOR Rate Loan into a Base Rate Loan; b. NOTICE OF CONVERSION. 2 i. For an election under Section 4(a)(i) or 4(a)(ii), an Authorized Person must deliver to the Bank by 2:00 p.m. (Eastern Standard Time) on a Business Day a Notice of Conversion ("Notice of Conversion"), specifying the aggregate amount of the Loans to be converted. ii. The Conversion Date shall be the date the Bank receives the Notice of Conversion in accordance with the foregoing Section. If a Notice of Conversion is received after 2:00 p.m. (Eastern Standard Time), the Notice of Conversion will be deemed to have been received on the next Business Day. iii. The Bank may take action on any Notice of Conversion in reliance upon any oral, telephonic, written or teletransmitted notice that the Bank in good faith believes to be valid and to have been made by Borrower or on behalf of Borrower by an Authorized Person, No Notice of Conversion may be delivered by e-mail. The Bank may act on the Notice of Conversion from any Authorized Person until the Bank shall have received from Borrower, and had a reasonable time to act on, written notice revoking the authority of such Authorized Person. The Bank shall incur no liability to Borrower or to any other person as a direct or indirect result of acting on any Notice of Conversion under this Note. The Bank, in its sole discretion, may reject any Notice of Conversion that is incomplete. c. CONVERSION UPON DEFAULT. Unless the Bank shall otherwise consent in writing, if (i) Borrower has failed to pay when due, in whole or in part, the indebtedness under the Note (whether by demand or otherwise), or (ii) there exists a condition or event which, with the passage of time, the giving of notice or both, shall constitute an event of default under any of Borrower's agreement with the Bank, if any, Borrower may not elect to have an existing Loan converted to a LIBOR Rate Loan or have any new Loan made as a LIBOR Rate Loan. Further, the Bank, in its sole discretion, may convert any LIBOR Rate Loan to a Base Rate Loan. Notwithstanding the foregoing, if Borrower commences, or has commenced against it, any proceeding or request for relief under any bankruptcy, insolvency or similar laws now or hereafter in effect in the United States of America or any state or territory thereof or any foreign jurisdiction or any formal or informal proceeding for dissolution, liquidation or the settlement of claims against or winding up of affairs of Borrower (a "Bankruptcy Event"), any outstanding LIBOR Rate Loans shall be automatically converted to Base Rate Loans without further action by the Bank and Borrower's rights to have Base Rate Loans converted under Section a(a)(i) shall be automatically terminated. Nothing herein shall be construed to be a waiver by the Bank to have any Loan accrue interest at the Default Rate of interest (which shall be calculated from the higher of the LIBOR Rate or the Base Rate, as described above). 5. SETOFF. The Bank shall have the right to set off against the amounts owing under this Note any property held in a deposit or other account with the Bank or any of its affiliates or otherwise owing by the Bank or any of its affiliates in any capacity to Borrower or any guarantor or endorser of this Note. Such set-off shall be deemed to have been exercised immediately at the time the Bank or such affiliate elects to do so. 6. DEMAND, DISCRETIONARY FACILITY. a. DISCRETIONARY FACILITY. The Bank may modify, restrict, suspend or terminate the credit under this Note at any time for any reason and without affecting Borrower's then existing obligation under this Note. Any Request for a Loan hereunder shall be limited in amount, such that the sum of (i) the principal amount of such Request; (ii) the Outstanding Principal Amount under this Note; and (iii) the aggregate face amounts of (or, if greater, Borrower's aggregate reimbursement obligations to the Bank (or any of its affiliates) in connection with) any letters of credit issued by the Bank (or any of its affiliates) at the request (or for the benefit of) Borrower, pursuant to this credit; does not exceed the Maximum Principal Amount under this Note. Notwithstanding the above, the Bank shall have the sole and absolute discretion whether to make any Loan (or any portion of any Loan) requested by Borrower, regardless of any general availability under the Maximum Principal Amount. b. DEMAND FACILITY, This Note is payable on demand, and all amounts hereunder shall become Immediately due and payable upon demand by the Bank; provided, however, that the Outstanding Principal Amount of this Note and all accrued and unpaid interest shall automatically become immediately due and payable upon the occurrence of a Bankruptcy Event with regard to Borrower or any guarantor or endorser of this Note. Borrower hereby waives protest, presentment and notice of any kind in connection with this Note. 7. BANK RECORDS CONCLUSIVE. The Bank shall set forth on a schedule attached to this Note or maintained on computer, the date and original principal amount of each Loan and the date and amount of each payment to be applied to the Outstanding Principal Amount of this Note. The Outstanding Principal Amount set forth on any such schedule shall be presumptive evidence of the Outstanding Principal Amount of this Note and of all Loans. No failure by the Bank to make, and no error by the Bank in making, any annotation on any such schedule shall affect the Borrower's obligation to pay the principal and interest of each Loan or any other obligation of Borrower to the Bank pursuant to this Note. 8. PURPOSE. Borrower certifies (a) that no Loan will be used to purchase margin stock except with the Bank's express prior written consent for each such purchase and (b) that all Loans shall be used for a business purpose, and not for any personal, family or household purpose, 9. AUTHORIZATION, Borrower, if a corporation, partnership, limited liability company, trust or other entity, represents that it is duly organized and in good standing or duly constituted in the state of its organization and is duly authorized to do business in ail jurisdictions material to the conduct of its business; that the execution, delivery and performance of this Note have been 3 duly authorized by all necessary regulatory and corporate or partnership action or by its governing instrument; that this Note has been duly executed by an authorized officer, partner or trustee and constitutes a binding obligation enforceable against Borrower and not in violation of any law, court order or agreement by which Borrower is bound; and that Borrower's performance is not threatened by any pending or threatened litigation. 10. INABILITY TO DETERMINE LIBOR RATES, INCREASED COSTS, ILLEGALITY. A. INCREASED COSTS. If the Bank shall determine that, due to either (a) the introduction of any change in law (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the LIBOR) or in the interpretation of any requirement of law or (b) the compliance requirements for any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining any LIBOR Rate Loans, then Borrower shall be liable for, and shall from time to time, upon demand therefor by the Bank and pay to the Bank such additional amounts as are sufficient to compensate the Bank for such increased costs. B. INABILITY TO DETERMINE RATES. If the Bank shall determine that for any reason adequate and reasonable means do not exist for ascertaining LIBOR with respect to a proposed LIBOR Rate Loan, the Bank will give notice of such determination to Borrower. Thereafter, the Bank may not make or maintain, as the case may be, LIBOR Rate Loans hereunder until the Bank revokes such notice in writing. Upon receipt of such notice, any Notice of Conversion received from Borrower shall be deemed withdrawn, and Borrower may revoke any Request Borrower previously made for a LIBOR Rate Loan. If Borrower does not revoke any such Request, the Bank may make the Loans, as proposed by Borrower, in the amount specified in the applicable Request submitted by Borrower, but such Loans shall be made or continued as Base Rate Loans instead of LIBOR Rate Loans. C. ILLEGALITY. If the Bank shall determine that the introduction of any law (statutory or common), treaty, rule, regulation, guideline or determination of an arbitrator or of a governmental authority or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other governmental authority has asserted that it is unlawful for the Bank to make LIBOR Rate Loans, then, on notice thereof by the Bank to Borrower, the Bank may suspend the making of LIBOR Rate Loans until the Bank shall have notified Borrower that the circumstances giving rise to such determination shall no longer exist. It the Bank shall determine that it is unlawful to maintain any LIBOR Rate Loans, Borrower shall immediately pay to the Bank the aggregate principal amount of all LIBOR Rate Loans then outstanding, together with accrued interest and related Expenses. If Borrower is required to pay off any LIBOR Rate Loan as set forth in this subsection, then concurrently with such payment, Borrower may borrow from the Bank, in the amount of such payment, a Base Rate Loan. 11. MISCELLANEOUS. This Note, together with any related loan and security agreements and guaranties, contains the entire agreement between the Bank and Borrower with respect to the Note, and supersedes every course of dealing, other conduct, oral agreement and representation previously made by the Bank. All rights and remedies of the Bank under applicable law and this Note or amendment of any provision of this Note are cumulative and not exclusive. No single, partial or delayed exercise by the Bank of any right or remedy shall preclude the subsequent exercise by the Bank at any time of any right or remedy of the Bank without notice. No waiver or amendment of any provision of this Note shall be effective unless made specifically in writing by the Bank. No course of dealing or other conduct, no oral agreement or representation made by the Bank, and no usage of trade, shall operate as a waiver of any right or remedy of the Bank. No waiver of any right or remedy of the Bank shall be effective unless made specifically in writing by the Bank. Borrower agrees that in any legal proceeding, a copy of this Note kept in the Bank's course of business may be admitted into evidence as an original. This Note is a binding obligation enforceable against Borrower and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. If a court deems any provision of this Note invalid, the remainder of the Note shall remain in effect. Section headings are for convenience only, Singular number includes plural and neuter gender includes masculine and feminine as appropriate. 12. NOTICES. Any demand or notice hereunder or under any applicable law pertaining hereto shall be in writing and duly given if delivered to Borrower (at its address on the Bank's records) or to the Bank (at the address on page one and separately to the Bank officer responsible for Borrower's relationship with the Bank). Such notice or demand shall be deemed sufficiently given for all purposes when delivered (i) by personal delivery and shall be deemed effective when delivered, or (ii) by mail or courier and shall be deemed effective three (3) Business Days after deposit in an official depository maintained by the United States Post Office for the collection of mail or one (1) Business Day after delivery to a nationally recognized overnight courier service (e.g., Federal Express). Notice by e-mail is not valid notice under this or any other agreement between Borrower and the Bank. 13. JOINT AND SEVERAL. If there is more than one Borrower, each of them shall be jointly and severally liable for all amounts which become due under this Note and the term "Borrower" shall include each as well as all of them. 14. GOVERNING LAW; JURISDICTION. This Note has been delivered to and accepted by the Bank and will be deemed to be made in the State of New York. Except as provided under federal law, this Note will be interpreted in accordance with the laws of the State of New York excluding its conflict of laws rules. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN A COUNTY OR JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH, AND CONSENTS THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT BORROWER'S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS NOTE WILL PREVENT THE BANK FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF BORROWER WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and Borrower. Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note. 4 15. WAIVER OF JURY TRIAL. BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY BORROWER AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS RELATED HERETO. BORROWER REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED. EXPRESSLY OR OTHERWISE, THAT THE BANK WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS JURY TRIAL WAIVER. BORROWER ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS NOTE BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION. PREAUTHORIZED TRANSFERS FROM DEPOSIT ACCOUNT. If a deposit account number is provided in the following blank Borrower hereby authorizes the Bank to debit available funds in Borrower's deposit account #____________________ with the Bank automatically for any amount which becomes due under this Note or as directed by an Authorized Person, by telephone. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 5 ACKNOWLEDGMENT. Borrower acknowledges that it has read and understands all the provisions of this Note, including the GOVERNING LAW, JURISDICTION and WAIVER OF JURY TRIAL, and has been advised by counsel as necessary or appropriate. TAX ID/SS # ***************** MAJESTIC EMPIRE HOLDINGS, L.L.C. ______________________________________ BY: /S/ BRADFORD HONIGFELD Signature of Witness ------------------------ NAME: BRADFORD HONIGFELD TITLE: MANAGING MEMBER - -------------------------------------- Typed Name of Witness ACKNOWLEDGMENT STATE OF NEW JERSEY) :SS. COUNTY OF ESSEX ) On the _________ day of April, in the year 2005, before me, the undersigned, a Notary Public in and for said State, personally appeared BRADFORD HONIGFELD, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose names) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. ------------------------------- Notary Public - -------------------------------------------------------------------------------- FOR BANK USE ONLY Authorization Confirmed: _______________________________________________________ Product Code: 11900 Disbursement of Funds: Credit A/C #____________ Off Ck #_____________ Payoff Obligation #____________ $------------ $------------- ------------- 6 EX-5 6 v17258_ex5.txt EXHIBIT 5 M&T BANK MANUFACTURERS AND TRADERS TRUST COMPANY CREDIT LINE MORTGAGE DATE: AS OF APRIL 20, 2005 MORTGAGOR: MAJESTIC EMPIRE HOLDINGS, L.L.C. A(n) individual(s) corporation limited liability company partnership ____________ organized and registered under the laws of the State of NEVADA Organizational Identification Number (if any): ________________ (Note: this number is not the same as the Taxpayer Identification Number.) Chief executive office/residence: C/O THE BRIAD GROUP, 78 OKNER PARKWAY, LIVINGSTON, NEW JERSEY 07039 MORTGAGEE: MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation having offices at One Fountain Plaza, Buffalo, New York 14203, Attn: General Counsel. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE TERMS OF THIS MORTGAGE AND THE TERMS OF THE COMMITMENT LETTER DATED AS OF APRIL 20, 2005, FROM MORTGAGEE TO MORTGAGOR RELATING TO THIS LOAN (AS THE SAME MAY BE AMENDED FROM TIME TO TIME, THE "COMMITMENT LETTER"), UNLESS OTHERWISE REQUIRED TO ASSURE THE ENFORCEABILITY OF MORTGAGEE'S RIGHTS HEREUNDER, THE TERMS OF THE COMMITMENT LETTER SHALL CONTROL. THIS IS A CREDIT LINE MORTGAGE PURSUANT TO SECTION 253-B OF THE TAX LAW AND SECTION 281 OF THE REAL PROPERTY LAW OF THE STATE OF NEW YORK. THE MAXIMUM PRINCIPAL AMOUNT THAT IS OR UNDER ANY CONTINGENCY MAY BE SECURED UNDER THIS MORTGAGE EQUALS $6,000,000.00 WHICH DOES NOT EXCEED THE INDEBTEDNESS (DEFINED BELOW). THE NOTE OR OTHER FINANCING AGREEMENTS CONTEMPLATE A SERIES OF ADVANCES, PAYMENTS AND RE-ADVANCES AND LIMITS THE AGGREGATE PRINCIPAL AMOUNT WHICH MAY BE OUTSTANDING AT ANY ONE TIME TO THE MAXIMUM PRINCIPAL AMOUNT THAT IS SET FORTH IN THE NOTE OR OTHER FINANCING AGREEMENTS. THIS MORTGAGE SECURES NOT ONLY ALL OF THE INDEBTEDNESS ORIGINALLY ARISING UNDER THE NOTE, BUT ALSO ALL INDEBTEDNESS CREATED BY SUBSEQUENT ADVANCES AND RE-ADVANCES UNDER THE NOTE MADE WITHIN 20 YEARS OF THE RECORDING OF THIS MORTGAGE. MORTGAGOR WARRANTS TO THE MORTGAGEE THAT THE PREMISES ARE NEITHER USED FOR RESIDENTIAL PURPOSES NOR IMPROVED BY ONE- TO SIX-FAMILY DWELLINGS. WITNESSETH, to secure the payment of an indebtedness in the principal sum of SIX MILLION Dollars ($6,000,000.00), lawful money of the United States, together with interest thereon and other charges with respect thereto, to be paid according to a certain bond, note or other obligation dated on or about APRIL 25, 2005, (i) made and delivered by Mortgagor to Mortgagee, Mortgagor hereby mortgages to Mortgagee, as continuing and collateral security for the payment of any and all indebtedness, liabilities and obligations now existing or which may hereafter arise by reason of the Note, the Guaranty, this Mortgage or any amendments, renewals, extensions, modifications or substitutions of the Note, the Guaranty or this Mortgage (collectively, the "Indebtedness"), the premises described on the attached SCHEDULES A-19 THROUGH A-22. TOGETHER with all buildings, structures and other improvements now or hereafter erected, constructed or situated upon said premises, and all fixtures and equipment and other personal property now or hereafter affixed to, or used in connection with, said premises and any and all replacements thereof and additions thereto, all of which shall be deemed to be and remain and form a part of said premises and are covered by the lien of this Mortgage (said premises, buildings, structures, other improvements, fixtures and equipment and other personal property being collectively referred to as the "Premises"), TOGETHER with all strips and gores of land adjoining or abutting the Premises, TOGETHER with all right, title and interest of Mortgagor in and to all streets, alleys, highways, waterways and public places open or proposed in front of, running through or adjoining the Premises, and all easements and rights of way, public and private, now or hereafter used in connection with the Premises, TOGETHER with all tenements, hereditaments and appurtenances and all the estate and rights of Mortgagor in and to the Premises, TOGETHER with all awards heretofore or hereafter made by any federal, state, county, municipal or other governmental authority, or by whomsoever made in any condemnation or eminent domain proceedings whatsoever, to the present or subsequent owners of the Premises or any portion thereof, for the acquisition for public purposes of the Premises or any portion thereof or any interest therein or any use thereof, or for consequential damages on account thereof, including any award for any change of grade of streets affecting the Premises or any portion thereof and any award for any damage to the Premises or any portion thereof or any interest therein or any use thereof. MORTGAGOR COVENANTS WITH MORTGAGEE SO LONG AS THIS MORTGAGE IS IN EFFECT AS FOLLOWS: 1. PAY INDEBTEDNESS. The indebtedness shall be paid as provided in the Note or Guaranty, as the case may be, and as provided herein. 2. INSURANCE. Mortgagor shall keep the Premises insured against each risk to which the Premises may from time to time be subject (including fire, vandalism and other risks covered by all risk insurance; if the Premises or any portion thereof are located in an area identified as an area having special flood hazards and in which flood insurance has been made available, flood; and loss of rents by reason of such risks) for the benefit of Mortgagee. Such insurance shall be provided in such amounts, for such periods, in such form, with such special endorsements, on such terms and by such companies and against such risks as shall be satisfactory to Mortgagee. Without limiting the generality of the preceding two sentences, each policy pursuant to which such insurance is provided shall contain a mortgagee clause, in form and substance satisfactory to Mortgagee, (a) naming Mortgagee as mortgagee and (b) providing that (i) all moneys payable pursuant to such insurance shall be payable to Mortgagee, (ii) such insurance shall not be affected by any act or neglect of Mortgagor or Mortgagee, any occupancy, operation or use of the Premises or any -2- portion thereof for purposes more hazardous than permitted by the terms of such policy, any foreclosure or other proceeding or notice of sale relating to the Premises or any portion thereof or any change in the title to or ownership of the Premises or any portion thereof and (iii) such policy and such mortgagee clause may not be canceled or amended except upon thirty (30) days' prior written notice to Mortgagee. Mortgagor hereby assigns and shall deliver each policy pursuant to which any such insurance is provided to Mortgagee. The acceptance by Mortgagee of such policies from Mortgagor shall not be deemed or construed as an approval by Mortgagee of the form, sufficiency or amount of such insurance, Mortgagee does not in any way represent that such insurance, whether in scope or coverage or limits of coverage, is adequate or sufficient to protect the business or interest of Mortgagor. In the event of the foreclosure of this Mortgage, or a transfer of title to the Premises in extinguishment of the Indebtedness, all right, title and interest of Mortgagor in and to any such policies then in force shall pass to the purchaser or grantee of the Premises. All the provisions of this Section 2 and any other provisions of this Mortgage pertaining to insurance which may be required under this Mortgage shall be construed with Section 254, Subdivision 4 of the New York Real Property Law, but, said Section 254 to the contrary notwithstanding, Mortgagor consents that Mortgagee may, without qualification or limitation by virtue of said Section 254, retain and apply the proceeds of any such insurance in satisfaction or reduction of the Indebtedness, whether or not then due and payable, or it may pay the same, wholly or in part, to any Mortgagor for the repair or replacement of the Premises or for any other purpose satisfactory to Mortgagee, without affecting the lien of this Mortgage for the full amount of the Indebtedness before the making of such payment. 3. ALTERATIONS, DEMOLITION OR REMOVAL. No building, structure, other improvement, fixture or equipment or other personal property constituting any portion of the Premises shall be MATERIALLY removed, demolished or substantially altered EXCEPT AS ANTICIPATED BY THE COMMITMENT LETTER OR without the prior written consent of Mortgagee, EXCEPT FOR MINOR WORK DONE IN THE ORDINARY COURSE OF BUSINESS AND THE REPLACEMENT OF WORN OUT FIXTURES AND PERSONAL PROPERTY WITH ITEMS OF AT LEAST EQUAL VALUE. 4. WASTE AND CHANGE IN USE. No Mortgagor shall commit any waste on the Premises or make any change in the use of the Premises which may in any MATERIAL way increase any ordinary fire, environmental or other risk arising out of construction or operation. 5. MAINTENANCE AND REPAIRS. Mortgagor shall keep and maintain all buildings, structures, other improvements, fixtures and equipment and other personal property constituting any portion of the Premises and the sidewalks and curbs abutting the Premises in good order and rentable and tenantable condition and state of repair. In the event that the Premises or any portion thereof shall be damaged or destroyed by fire or any other casualty, or in the event of the condemnation or taking of any portion of the Premises as a result of any exercise of the power of eminent domain, Mortgagor shall promptly restore, replace, rebuild or alter the same as nearly as possible to the condition immediately prior to such fire, other casualty, condemnation or taking without regard to the adequacy of any proceeds of any insurance or award received. Mortgagor shall give prompt written notice to Mortgagee of any such damage or destruction or of the commencement of any condemnation or eminent domain proceeding affecting the Premises or any portion thereof, -3- 6. EXISTENCE AND AUTHORITY. Mortgagor represents and warrants, and continues to represent and warrant as long as this Mortgage is in effect, as follows: (a) If Mortgagor is not a natural person (e.g., corporation, partnership, limited liability company), it is duly organized, validly existing and in good standing under the laws of the above-named state of organization and will do all things necessary to preserve and keep in full force and effect the existence, franchises, rights and privileges of Mortgagor as a the type business entity it was as of the date of this Mortgage, under the laws of the state of its organization; (b) Mortgagor has the full power and authority to grant the mortgage lien hereunder and to execute, deliver and perform its obligations in accordance with this Mortgage; (c) the execution and delivery of this Mortgage will not (i) violate any applicable law of any governmental authority or any judgment or order of any court, other governmental authority or arbitrator; (ii) violate any agreement to which Mortgagor is a party; or (iii) result in a lien or encumbrance on any of its assets (other than the mortgage lien hereunder); (d) Mortgagor's certificate of incorporation, by-laws, partnership agreement, articles of organization or other organizational or governing documents ("Governing Documents") do not prohibit any term or condition of this Mortgage; (d) each authorization, approval or consent from, each registration and filing with, each declaration and notice to, and each other act by or relating to, any party required as a condition of Mortgagor's execution, delivery or performance of this Mortgage (including any shareholder or board of directors or similar approvals) has been duly obtained and is in full force and effect and no other action is required under its Governing Documents or otherwise; and (e) Mortgagor has the power and authority to transact the business in which it is engaged and is duly licensed or qualified and fn good standing in each jurisdiction in which the conduct of its business or ownership of property requires such licensing or such qualifications. 7. TAXES AND ASSESSMENTS. Unless paid from an escrow established pursuant to Section 8 of this Mortgage, Mortgagor shall pay all taxes, general and special assessments and other governmental impositions with respect to the Premises before the end of any applicable grace period. Upon request by Mortgagee, Mortgagor shall promptly deliver to Mortgagee receipted bills showing payment of all such taxes, assessments and impositions within the applicable grace period. 8. ESCROW FOR TAXES, ASSESSMENTS AND INSURANCE. TO THE EXTENT REQUIRED BY THE COMMITMENT LETTER, upon request by Mortgagee, Mortgagor shall pay (a) monthly to Mortgagee on or before the first day of each and every calendar month, until the Indebtedness is fully paid, a sum equal to one-twelfth (1/12th) of the yearly taxes, general and special assessments, other governmental impositions and other liens and charges with respect to the Premises to be imposed for the ensuing year, as estimated by Mortgagee in good faith, and annual premiums for insurance on the Premises and (b) an initial payment such that, when such monthly payments are added thereto, the total of such payments will be sufficient to pay such taxes, assessments, impositions and other liens and charges and such insurance premiums on or before the date when they become due. Absent manifest error, Mortgagee's calculation as to the amount to be paid into Escrow shall be deemed conclusive. So long as no Event of Default (as hereinafter defined) shall have occurred or exists, Mortgagee shall hold such payments in trust in an account maintained with Mortgagee without obligation to pay interest thereon, except such interest as may be mandatory by any applicable statute, regulation or other law, to pay, to the extent funds are available, -4- such taxes, assessments, impositions and other liens and charges and such insurance premiums within a reasonable time after they become due; provided, however, that upon the occurrence or existence of any Event of Default, Mortgagee may apply the balance of any such payments held to the Indebtedness, If the total of such payments made by any Mortgagor shall exceed the amount of such payments made by Mortgagee, such excess shall be held or credited by Mortgagee for the benefit of Mortgagor. If the total of such payments made by any Mortgagor shall be less than the amount of such taxes, assessments, impositions and other liens and charges and such insurance premiums, then Mortgagor shall pay to Mortgagee any amount necessary to make up the deficiency on or before the date when any such amount shall be due. NOTWITHSTANDING THE FOREGOING, PRIOR TO AN EVENT OF DEFAULT OR THE FAILURE (EVEN IF CURED) OF MORTGAGOR TO KEEP ALL REQUIRED INSURANCE IN FORCE, MORTGAGOR OR AN APPROVED TENANT MAY PROVIDE COVERAGE UNDER A BLANKET POLICY COVERING MULTIPLE PROPERTIES AND WHILE SUCH BLANKET COVERAGE IS PERMITTED MORTGAGOR WILL NOT BE REQUIRED TO ESCROW FOR INSURANCE HEREUNDER. 9. LEASES. THE MORTGAGOR HAS ENTERED INTO A LEASE APPROVED IN WRITING BY MORTGAGEE FOR EACH OF THE 4 PROPERTIES ENCUMBERED HEREBY WITH EITHER BRIAD RESTAURANT GROUP, L.L.C. ("BRG") OR BRIAD WENCO, L.L.C. ("BW"; BRG AND BW ARE HEREIN INDIVIDUALLY AND COLLECTIVELY REFERRED TO AS "BRIAD TENANT"; EACH SUCH APPROVED LEASE WITH A BRIAD TENANT AND ANY FUTURE LEASE APPROVED IN WRITING BY MORTGAGEE IS HEREIN INDIVIDUALLY AND COLLECTIVELY CALLED AN "APPROVED LEASE"). Pursuant to Section 2131-f of the New York Real Property Law, Mortgagor shall NOT, EXCEPT AS PERMITTED BY THE COMMITMENT LETTER, (a) amend, cancel, abridge, terminate, or otherwise modify any lease of the Premises or of any portion thereof (OR ANY GUARANTY RELATING THERETO) or (b) accept any prepayment of installments of rent to become due thereunder for more than one month in advance, without the prior written consent of Mortgagee. Mortgagor shall NOT make any new lease in place of or any lease renewal or extension of any lease of the Premises or any portion thereof (other than those that Mortgagor as landlord may be required to grant by the terms of an existing lease) without the prior written consent of Mortgagee, Upon request by Mortgagee, Mortgagor shall promptly furnish to Mortgagee a written statement containing the names and mailing addresses of all lessees (OR ANY GUARANTORS OF THE LEASE) of the Premises or of any portion thereof, the terms of their respective leases, the space occupied and the rentals payable thereunder and copies of their respective leases (AND ANY GUARANTEES) and shall cooperate in effecting delivery of notice of this covenant to each affected lessee. 10. ASSIGNMENT OF LEASES AND RENTS. Mortgagor hereby assigns to Mortgagee all existing and future leases of the Premises or any portion thereof (including any amendments, renewals, extensions or modifications thereof) and the rents, issues and profits of the Premises including accounts receivable for use of the Premises for hotel or lodging services ("Accounts"), as further security for the payment of the Indebtedness, and Mortgagor grants to Mortgagee the right to enter upon and to take possession of the Premises for the purpose of collecting the same and to let the Premises or any portion thereof, and after payment of each cost and expense (including each fee and disbursement of counsel to Mortgagee) incurred by Mortgagee in such entry and collection, to apply the remainder of the same to the Indebtedness, without affecting its right to maintain any action theretofore instituted, or to bring any action thereafter, to enforce the payment of the Indebtedness. In the event Mortgagee exercises such rights, it shall not thereby be deemed a mortgagee in possession, and it shall not in any way be made liable for any act or omission. No Mortgagor shall assign such leases, rents, issues or profits or any interest therein or grant -5- any similar rights to any other person without Mortgagee's prior written consent. Mortgagee hereby waives the right to enter upon and to take possession of the Premises for the purpose of collecting said rents, issues and profits, and Mortgagor shall be entitled to collect the same, until the occurrence or existence of any Event of Default, but such right of Mortgagor may be revoked by Mortgagee upon the occurrence or existence of any Event of Default, Upon the occurrence or existence of any Event of Default, Mortgagor shall pay monthly in advance to Mortgagee, or to any receiver appointed to collect said rents, issues and profits, a fair and reasonable monthly rental value for the use and occupation of the Premises, and upon default in any such payment shall vacate and surrender the possession of the Premises to Mortgagee or to such receiver, and in default thereof may be evicted by summary proceedings pursuant to Article 7 of the New York Real Property Actions and Proceedings Law. The rights and remedies under this section and any separately recorded assignment of rents and/or leases in favor of Mortgagee shall be cumulative. In the event of any irreconcilable inconsistencies between such agreements and this section, the separately recorded assignment of rents and/or leases shall control. 11. SECURITY AGREEMENT. This Mortgage constitutes a security agreement under the New York Uniform Commercial Code in effect in the State of New York, as amended from time to time (the "UCC") and Mortgagor hereby grants to Mortgagee a continuing security interest in all personal property and fixtures of Mortgagor, whether now existing or owned or hereafter arising or acquired, whether or not subject to the UCC, used in connection with any portion of or constituting any portion of the Premises and in the proceeds, rents, issues, profits and Accounts arising therefrom, to secure the indebtedness. Mortgages shall have the right to file in any public office, without the signature of Mortgagor, each financing statement relating to such personal property and proceeds therefrom. With respect to such personal property and proceeds, Mortgagee shall have each applicable right and remedy of a secured party under the UCC and each applicable right and remedy pursuant to any other law or pursuant to this Mortgage. Mortgagor acknowledges and agrees that, in applying the law of any jurisdiction that at any time enacts all or substantially all of the uniform provisions of Revised Article 9 of the Uniform Commercial Code (1999 Official Text), the foregoing collateral description covers all assets of Mortgagor used in connection with any portion of or constituting any portion of the Premises. 12. NO TRANSFER. EXCEPT AS OTHERWISE PERMITTED BY THE COMMITMENT LETTER, Mortgagor shall not, without Mortgagee's prior written consent, sell, convey or transfer the Premises or any portion thereof or any interest therein or contract to do so. If any Mortgagor, OR ANY PERSON BECOMING LIABLE HEREUNDER ("Debtor') or any endorser or guarantor of the Indebtedness (a "Guarantor") is a corporation, or if any other person liable with respect to the Indebtedness or any portion thereof other than Mortgagor or any general partner of Mortgagor, Debtor or any Guarantor, is a corporation, any direct or indirect change in the beneficial ownership or number of issued and outstanding shares of any class of stock of such Mortgagor, Debtor, Guarantor or general partner, whether by operation of law or otherwise, after which the percentage of such shares beneficially owned by any person or group of persons having beneficial ownership of any such shares has changed by at least ten percent (10%) more or less than it was on the date of this Mortgage shall be deemed a sale, conveyance or transfer of the Premises within the meaning of this Section 12. If any Mortgagor, Debtor or Guarantor is a partnership, including a limited liability partnership, any change in the partnership interests of the general partners of -6- such Mortgagor, Debtor or Guarantor or in the composition of the general partners of such Mortgagor, Debtor or Guarantor, whether by operation of law or otherwise, shall be deemed a sale, conveyance or transfer of the Premises within the meaning of this Section 12. If any Mortgagor, Debtor or Guarantor is a limited liability company, any change in the direct or indirect membership interest of any member or class of members of such Mortgagor, Debtor or Guarantor, whether by operation of law or otherwise, after which the percentage of such membership interest owned by any such member or class has changed by at least ten percent (10%) more or less than it was on the date of this Mortgage shall be deemed a sale, conveyance or transfer of the Premises within the meaning of this Section 12. IF ANY MORTGAGOR OR GUARANTOR IS A LIMITED LIABILITY COMPANY, ANY CHANGE IN THE MEMBERSHIP INTERESTS OF THE MEMBERS OF SUCH MORTGAGOR OR GUARANTOR OR CHANGE IN THE MANAGING MEMBER WHETHER BY OPERATION OF LAW OR OTHERWISE, SHALL BE DEEMED A SALE OR CONVEYANCE OR TRANSFER OF THE PREMISES WITHIN THE MEANING OF THIS SECTION 72. THE PROVISIONS OF THIS SECTION 72 SHALL NOT APPLY TO THE COMMITMENT LETTER NOR TO ANY TRANSFER SPECIFICALLY PERMITTED THEREIN. 13. NO SECONDARY FINANCING OR OTHER LIENS. Mortgagor shall not, without Mortgagee's prior written consent, mortgage, pledge, assign, grant a security interest in or cause any other lien or encumbrance to be made or permit any other lien or encumbrance to exist upon the Premises or any portion thereof except for (a) taxes and assessments not yet delinquent and (b) any mortgage, pledge, security interest, assignment or other lien or encumbrance to Mortgagee or any affiliate of Mortgagee (an "Affiliate"). 14. COMPLIANCE WITH LAWS. Mortgagor represents and warrants to Mortgagee, and continues to represent and warrant as long as this Mortgage is in effect, as follows: (a) TO THE BEST OF MORTGAGOR'S knowledge, the buildings, structures and other improvements now constituting any portion of the Premises are in full compliance with all applicable statutes, regulations and other laws (including all applicable zoning, building, fire and health codes and ordinances and the Americans With Disabilities Act of 1990) and all applicable deed restrictions, if any, and is not and shall not be used for any illegal purpose; (b) such compliance is based solely upon Mortgagor's ownership of the Premises and not upon title to or interest in any other property, Mortgagor shall comply with or cause compliance with all statutes, regulations and other laws (including all applicable zoning, building, fire and health codes and ordinances and the Americans With Disabilities Acts of 1990), all other requirements of all governmental authorities whatsoever having jurisdiction aver or with respect to the Premises or any portion thereof or the use or occupation thereof and with all applicable deed restrictions, if any; provided, however, that Mortgagor may postpone such compliance if and so long as the validity or legality of any such requirement or restriction shall be contested by such Mortgagor, with diligence and in good faith, by appropriate legal proceedings and Mortgagee is satisfied that such non-compliance will not impair or adversely affect the value of its security. 15. WARRANTY OF TITLE; TITLE INSURANCE. Mortgagor represents and warrants to Mortgagee, and continues to represent and warrant as long as this Mortgage is in effect, good and marketable title in fee simple absolute to the Premises, Upon request by Mortgagee, Mortgagor shall furnish to Mortgagee at Mortgagor's own cost and expense a title insurance policy in the then amount of the Indebtedness, (a) naming Mortgagee as mortgagee, (b) covering the lien on -7- the Premises granted pursuant to this Mortgage, (c) containing no exception not approved by Mortgagee, (d) issued by a title insurance company qualified to do business in the State of New York and satisfactory to Mortgagee and (e) otherwise in form and substance satisfactory to Mortgagee. 16. CERTAIN RIGHTS AND OBLIGATIONS. (a) Mortgagee may take such action as Mortgagee deems appropriate to protect the Premises or the status or priority of the lien of this Mortgage, including: entry upon the Premises to protect the Premises from deterioration or damage, or to cause the Premises to be put in compliance with any governmental, insurance rating or contract requirements; payment of amounts due on liens having priority over this Mortgage; payment of any tax or charge for purposes of assuring the priority or enforceability of this Mortgage; obtaining insurance on the Premises (including flood insurance); or commencement or defense of any legal action or proceeding to assert or protect the validity or priority of the lien of this Mortgage. On demand, Mortgagor shall reimburse Mortgagee for all expenses in taking any such action, with interest, and the amount thereof shall be secured by this Mortgage and shall, to the extent permitted by law, be in addition to the maximum amount of the Indebtedness evidenced by the Note. (b) Mortgagor authorizes Mortgagee, without notice, demand or any reservation of rights and without affecting this Mortgage, from time to time: (i) to accept from any person or entity and hold additional collateral for the payment of the Indebtedness or any part thereof, and to exchange, enforce or refrain from enforcing, or release such collateral or any part thereof; (ii) to accept and hold any endorsement or guaranty of payment of the Indebtedness or any part thereof, and to release or substitute any such obligation of any such Guarantor or any person or entity who has given any collateral as security for the payment of the Indebtedness or any part thereof, or any other person or entity in any way obligated to pay the Indebtedness or any part thereof, and to enforce or refrain from enforcing, or compromise or modify, the terms of any obligation of any such Guarantor, person or entity; (iii) upon the occurrence of an Event of Default, to direct the order or manner of the disposition of any and all collateral and the enforcement of any and all endorsements and guaranties relating to the Indebtedness or any part thereof as Mortgagee, in its sole discretion, may determine; and (iv) upon the occurrence of an Event of Default to determine the manner, amount and time of application of payments and credits, if any, to be made on all or any part of any component or components of the Indebtedness (whether principal, interest, costs and expenses, or otherwise) including if the amount of the Indebtedness secured by this Mortgage is less than the total amount of the obligations under the Note or the Guaranty, to make any such application to such obligations, if any, in excess of the amount of the Indebtedness secured by this Mortgage. (c) Notwithstanding the occurrence of an Event of Default, this Mortgage shall remain valid, binding and enforceable: (i) without deduction by reason of any setoff, defense or counterclaim of Mortgagor, Guarantor or Debtor, (ii) without requiring protest or notice of nonpayment or notice of default to Mortgagor, to Guarantor, to Debtor, or to any other person; (iii) without demand for payment or proof of such demand; (iv) without requiring Mortgagee to resort first to Mortgagor or to any other guaranty or any collateral which Mortgagee may hold; (v) without requiring notice of acceptance hereof or assent hereto by Mortgagee; and (vi) without requiring notice that any indebtedness has been incurred or of the reliance by Mortgagee upon this Mortgage; all of which Mortgagor hereby waives. -8- (d) The enforceability of this Mortgage shall not be affected by: (i) any failure to perfect or continue the perfection of any security interest in or other lien on any other collateral securing payment of the Indebtedness; (ii) the invalidity, unenforceability, or loss or change in priority of any such security interest or other lien; (iii) any failure to protect, preserve or insure any such collateral; (iv) any defense arising by reason of the cessation from any cause whatsoever of liability of Debtor or any Guarantor; (v) any compromise of any obligation of Mortgagor, Debtor or any Guarantor; (vi) the invalidity or unenforceability of any of the Indebtedness; or (vii) any renewal, extension, acceleration, or other change in the time for payment of, or the terms of the interest on the Indebtedness or any part thereof; all of which Mortgagor hereby waives. (e) If Mortgagee shall receive from or on behalf of Mortgagor any sum less than the full amount then due and payable, Mortgagee may, but shall not be obligated to, accept the same and, if it elects to accept any such payment, it may without waiving any Event of Default: (i) apply such payment on account of the Indebtedness or any amount payable hereunder, or (ii) hold same or any part thereof, without liability for interest, in a special account and from time to time apply same or any part thereof as specified in subsection (i) of this subsection. 17. LIEN LAW COVENANT. Mortgagor shall receive the advances secured by this Mortgage and shall hold the right to receive such advances as a trust fund in accordance with the provisions of Section 13 of the New York Lien Law. 18. APPLICATION OF AND INTEREST ON CONDEMNATION AWARD. Mortgagor consents that Mortgagee may retain and apply the proceeds of any award by a condemning authority in satisfaction or reduction of the Indebtedness, whether or not then due and payable, or it may pay the same, wholly or in part, to Mortgagor for the restoration or alteration of the Premises or for any other purpose satisfactory to Mortgagee, without affecting the lien of this Mortgage for the full amount of the Indebtedness before the making of such payment. In the event of the condemnation or taking by eminent domain of the Premises or any portion thereof, Mortgagee shall not be limited to the interest paid on the award by the condemning authority, but shall be entitled to receive out of the award interest on the Indebtedness in accordance with its terms. 19. APPOINTMENT OF RECEIVER. In addition to any other remedy, upon the occurrence of any Event of Default, Mortgagee, in any action to foreclose this Mortgage, shall be entitled, without notice or demand WITHOUT GIVING BOND TO MORTGAGOR OR ANYONE CLAIMING BY, UNDER OR THROUGH MORTGAGOR and without regard to the adequacy of any security for the Indebtedness or the solvency or insolvency of any person liable for the payment thereof, to the appointment of a receiver of the rents, issues and profits of the Premises. 20. SALE IN ONE OR MORE PARCELS. In case of a foreclosure sale, the Premises may be sold in one or more parcels, any provision of any statute, regulation or other law to the contrary notwithstanding. 21. ESTOPPEL STATEMENT. Upon request by Mortgagee, Mortgagor shall furnish to Mortgagee within five (5) days if such request is made in person or within FIFTEEN (15) days if such request is otherwise made a written statement -9- duly acknowledged of the amount of the Indebtedness and whether any offsets or defenses exist against the Indebtedness. 22. RIGHT TO INSPECT AND EXAMINE. Upon request by Mortgagee, Mortgagor shall immediately permit Mortgagee and each officer, employee, accountant, attorney and other agent of Mortgagee to enter and inspect the Premises and to examine, audit, copy and extract each record of any Mortgagor relating to the Premises or any portion thereof. PRIOR TO A DEFAULT HEREUNDER MORTGAGEE WILL GIVE MORTGAGOR REASONABLE NOTICE AND SCHEDULE SUCH INSPECTIONS AND EXAMINATIONS DURING NORMAL BUSINESS HOURS. 23. FINANCIAL STATEMENTS. Mortgagor shall provide, shall cause each Guarantor and Debtor to provide, and shall use its best efforts to cause each lessee of the Premises or any material portion thereof (a "Material Lessee") to provide, to Mortgagee, in form satisfactory to Mortgagee, promptly upon request by Mortgagee, all FINANCIAL AND OTHER INFORMATION REQUIRED BY THE COMMITMENT LETTER with each statement of income, a certificate executed by such Mortgagor's chief executive and chief financial officers or managing partners or members (A) stating that the signers of the certificate have reviewed this Mortgage and the operations and condition (financial or other) of such Mortgagor and any subsidiaries during the relevant period and (B) stating that no Event of Default occurred during the period, or if an Event of Default did occur, describing its nature, the dates) of its occurrence or period of existence and what action Mortgagor has taken with respect thereto. 24. AUTHORIZATION AND POWER OF ATTORNEY. Mortgagee is irrevocably and unconditionally authorized to take, and Mortgagor irrevocably and unconditionally appoints Mortgagee as the attorney-in-fact of such Mortgagor, with full power of substitution and of revocation, to take, AFTER AN EVENT OF DEFAULT, in the name of such Mortgagor or otherwise at the sole option of Mortgagee, each action relating to the Premises or any portion thereof that, subject to this Mortgage, such Mortgagor could take in the same manner, to the same extent and with the same effect as if such Mortgagor were to take such action; provided, however, that Mortgagee shall not have the right, pursuant to such authorization or as such attorney-in-fact, to sell or otherwise dispose of the Premises or any portion thereof. Such power of attorney is coupled with an interest in favor of Mortgagee, and shall not be terminated or otherwise affected by the death, disability or incompetence of any Mortgagor. 25. FURTHER ASSURANCES. Promptly upon request by Mortgagee, Mortgagor shall execute and deliver each writing, and take each other action, that Mortgagee shall REASONABLY deem necessary or desirable at the sole option of Mortgagee (a) to perfect or accomplish any lien or security interest granted, or assignment made, pursuant to this Mortgage (b) otherwise to accomplish any purpose of this Mortgage; (c) in connection with any transaction contemplated by this Mortgage; or (d) in connection with the Premises or any portion thereof. 26. ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION. Mortgagor represents and warrants, and continues to represent and warrant as long as this Mortgage is in effect, to Mortgagee that, TO THE BEST OF MORTGAGOR'S KNOWLEDGE, EXCEPT AS SET FORTH IN ANY ENVIRONMENTAL REPORT PREVIOUSLY DELIVERED TO MORTGAGEE OR AS SET FORTH IN THE COMMITMENT LETTER OR AS SET FORTH AS THE RESTRICTIONS CURRENTLY OF RECORD AND REFLECTED IN MORTGAGEE'S TITLE POLICY, (a) Mortgagor and the Premises are in compliance with each statute, regulation or other law and each judgment, order or award of any court, agency or other governmental authority or of any arbitrator (individually an -10- "Environmental Requirement") relating to the protection of any water, water vapor, land surface or subsurface, air, fish, wildlife, biota or other natural resources or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any chemical, natural or synthetic substance, waste, pollutant or contaminant (collectively "Regulated Materials"), (b) Mortgagor has not been charged with, or has received any notice that such Mortgagor is under investigation for, the failure to comply with any Environmental Requirement, nor has Mortgagor received any notice that Mortgagor has or may have any liability or responsibility under any Environmental Requirement with respect to the Premises or otherwise, (c) TO THE BEST OF MORTGAGOR'S KNOWLEDGE, the Premises have never been used for (i) the storage, treatment, generation, transportation, processing, handling, production or disposal of Regulated Materials, except as permitted by law, (ii) a landfill or other waste disposal site or (iii) military purposes, (d) no underground storage tanks are located on the Premises, (e) the environmental media at the Premises do not contain Regulated Materials beyond any legally permitted level, (f) there has never been any release, threatened release, migration or uncontrolled presence of any Regulated Materials on, at or from the Premises or, to the knowledge of Mortgagor, within the immediate vicinity of the Premises and (g) Mortgagor has not received any notice of any such release, threatened release, migration or uncontrolled presence. Mortgagor shall not cause or permit the Premises to be used in any way that would result in any of the representations and warranties contained in the preceding sentence to be false or misleading at any future time. To the extent any such representation or warranty at any time is or becomes false or misleading, Mortgagor shall promptly notify Mortgagee thereof. If at any time Mortgagor obtains any evidence or information which suggests that potential environmental problems may exist on, at or about the Premises, Mortgagee may request Mortgagor, at Mortgagor's own cost and expense, to conduct and complete investigations, studies, sampling and testing with respect to the Premises requested by Mortgagee. Mortgagor shall promptly furnish to Mortgagee copies of all such investigations, studies, samplings and tests. Mortgagor shall (a) conduct and complete all such investigations, studies, samplings and testing, and all remedial, removal and other actions necessary with respect to the Premises, in accordance with all applicable Environmental Requirements and promptly furnish to Mortgagee copies of all documents generated in connection therewith and (b) defend, reimburse, indemnify and hold harmless Mortgagee, its employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to, the violation of, or other liability or responsibility under, any Environmental Requirements, or the release, threatened release, migration or uncontrolled presence of any Regulated Materials on, at or from the Premises including attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses. In the event this Mortgage is foreclosed, or Mortgagor tenders a deed in lieu of foreclosure which Mortgagee agrees to accept, Mortgagor shall be responsible to deliver the Premises to Mortgagee free of any and all Regulated Materials other than any that are (a) normally used in Mortgagor's business and (b) located and maintained thereon in compliance with all applicable Environmental Requirements and in a condition that conforms with all applicable Environmental Requirements. -11- The provisions of this Section 26 shall be in addition to any and all other obligations and liabilities Mortgagor may have to Mortgagee at common law or any ether agreement with Mortgagee, and shall survive the transactions contemplated in this Mortgage and the termination of this Mortgage. 27. EVENTS OF DEFAULT. (a) AN EVENT OF DEFAULT ("EVENT OF DEFAULT') WILL HAVE OCCURRED IF, EXCEPT AS OTHERWISE SET FORTH IN THE COMMITMENT LETTER: (I) ANY MORTGAGOR OR DEBTOR FAILS TO PAY WHEN DUE WHETHER BY ACCELERATION OR OTHERWISE THE INDEBTEDNESS OR ANY PORTION THEREOF OR (HERE OCCURS ANY EVENT WHICH AFTER NOTICE OR LAPSE OF TIME WILL PERMIT SUCH ACCELERATION; (II) ANY OF MORTGAGOR'S DEBTS OR THOSE OF DEBTOR OR ANY GUARANTOR (WHICH IS MATERIAL) IS ACCELERATED OR AN EVENT OCCURS WHICH AFTER NOTICE OR LAPSE OF TIME WOULD PERMIT SUCH ACCELERATION; (III) ANY MORTGAGOR, DEBTOR OR GUARANTOR BREACHES OR IS IN DEFAULT UNDER THE COMMITMENT LETTER OR THIS MORTGAGE (INCLUDING BUT NOT LIMITED TO ANY DEFAULT IN THE PAYMENT OF ANY AMOUNT ANY MORTGAGOR IS OBLIGATED TO PAY PURSUANT TO SECTIONS 2, 6, 8 OR 16 OF THIS MORTGAGE OR IN THE PERFORMANCE OF ANY OBLIGATION OF ANY MORTGAGOR PURSUANT TO SECTIONS 23 OR 26 OF THIS MORTGAGE) OR MORTGAGOR IS IN DEFAULT UNDER ANY OTHER AGREEMENT WITH THE MORTGAGEE OR MORTGAGEE'S AFFILIATES INCLUDING, WITHOUT LIMITATION, M&T REAL ESTATE TRUST; (IV) ANY MORTGAGOR, DEBTOR OR GUARANTOR IS DISSOLVED, SUSPENDS HIS, HER OR ITS PRESENT BUSINESS, AGREES TO A MERGER OR OTHER ABSORPTION OR TO TRANSFER OR OTHERWISE DISPOSE OF SUBSTANTIALLY ALL OF HIS, HER OR ITS ASSETS, MAKES OR SENDS NOTICE OF A BULK SALE, BECOMES INCOMPETENT OR INSOLVENT (HOWEVER SUCH INSOLVENCY IS EVIDENCED), GENERALLY FAILS TO PAY HIS, HER OR ITS DEBTS AS THEY BECOME DUE, FAILS TO PAY, WITHHOLD OR COLLECT ANY TAX AS REQUIRED BY LAW, HAS SERVED OR FILED AGAINST HIS, HER OR ITS ASSETS ANY LIEN OR HAS ENTERED AGAINST HIM, HER OR IF OR HIS, HER OR ITS ASSETS ANY JUDGMENT, ORDER OR AWARD; (V) A RECEIVER OR SIMILAR TRUSTEE IS APPOINTED FOR ANY MORTGAGOR, DEBTOR OR GUARANTOR OR HIS, HER OR ITS ASSETS (WITH OR WITHOUT HIS, HER OR ITS CONSENT), OR ANY MORTGAGOR, DEBTOR OR GUARANTOR MAKES AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR COMMENCES OR HAS COMMENCED AGAINST HIM, HER OR IF A PROCEEDING PURSUANT TO ANY BANKRUPTCY, INSOLVENCY, REORGANIZATION, ARRANGEMENT, READJUSTMENT OF DEBT, DISSOLUTION OR LIQUIDATION LAWS CALLING A MEETING OF CREDITORS OR OFFERING A COMPOSITION OR EXTENSION TO CREDITORS; (VI) ANY REPRESENTATION OR WARRANTY MADE IN THIS MORTGAGE OR RELATED DOCUMENTS OR OTHER STATEMENTS PROVIDED BY ANY MORTGAGOR, DEBTOR, GUARANTOR OR (IF KNOWN BY MORTGAGOR OR GUARANTOR) MATERIAL LESSEE PROVES TO HAVE BEEN INCORRECT OR MISLEADING IN ANY MATERIAL RESPECT; (VII) ANY PENSION PLAN OF ANY MORTGAGOR, DEBTOR OR GUARANTOR FAILS TO COMPLY WITH APPLICABLE LAW OR HAS VESTED UNFUNDED LIABILITIES THAT, IN THE OPINION OF THE MORTGAGEE, MIGHT HAVE A MATERIAL ADVERSE EFFECT ON ANY MORTGAGOR'S, DEBTOR'S OR GUARANTOR'S ABILITY TO REPAY HIS, HER OR ITS DEBTS; (VIII) THERE OCCURS ANY CHANGE IN THE MANAGEMENT OF ANY MORTGAGOR, DEBTOR OR GUARANTOR WHICH IS, IN THE OPINION OF THE MORTGAGEE, MATERIALLY ADVERSE TO ITS INTEREST AND WHICH REMAINS UNCORRECTED FOR THIRTY (30) DAYS AFTER THE MORTGAGEE NOTIFIES ANY MORTGAGOR OF ITS OPINION; (IX) ANY MORTGAGOR OR DEBTOR FAILS TO PAY WHEN DUE WHETHER BY ACCELERATION OR OTHERWISE ANY AMOUNT DUE TO ANY PERSON OTHER THAN THE MORTGAGEE; (X) ANY MORTGAGOR OR DEBTOR IS CONVICTED OF A FELONY; OR (XI) ANY SECURITY DOCUMENT OR GUARANTEE CEASES TO BE IN FULL FORCE AND EFFECT OR CEASES TO GIVE THE RIGHTS, POWERS AND PRIVILEGES PURPORTED TO BE CREATED THEREBY. AUTOMATICALLY UPON THE OCCURRENCE OR EXISTENCE OF ANY EVENT OF DEFAULT, THE ANNUAL INTEREST RATE APPLICABLE TO THE INDEBTEDNESS SHALL BE INCREASED BY THE DEFAULT RATE SPECIFIED IN THE NOTE OR OTHER INSTRUMENT EVIDENCING THE INDEBTEDNESS. -12- (b) Mortgagee, at its sole election, may declare all or any part of any Indebtedness not payable on demand to be immediately due and payable without demand or notice of any kind upon the happening of any Event of Default (AND AFTER ANY APPLICABLE NOTICE AND TIME TO CURE). All or any part of any Indebtedness not payable on demand shall be automatically and immediately due and payable, without demand or notice of any kind, upon the commencement of Mortgagor's or Debtor's bankruptcy if voluntary and upon the lapse of SIXTY (60) days without dismissal if involuntary, unless an order for relief is entered sooner. The provisions of this paragraph are not intended in any way to affect any rights of Mortgagee with respect to any Indebtedness which may now or hereafter be payable on demand. (c) Upon the happening of an Event of Default, whether or not foreclosure proceedings have been instituted, Mortgagor shall, upon demand, surrender possession of the Premises to Mortgagee. If Mortgagor remains in possession of the Premises after the happening of an Event of Default and demand by Mortgagee, the possession shall be as tenant of Mortgagee and Mortgagor agrees to pay in advance upon demand to Mortgagee a reasonable monthly rental for the Premises or portion so occupied. Mortgagee may dispossess, by summary proceedings or otherwise, any tenant of Mortgagor defaulting in the payment of rent. If a receiver is appointed, this covenant shall inure to the benefit of such receiver. Notwithstanding any provision of law to the contrary, Mortgagee may, at its option, foreclose this Mortgage subject to the rights of tenants of the Premises which are subordinate to the lien of this Mortgage. (d) If the Indebtedness, as evidenced by a single note or other written instrument shall exceed the amount secured by this Mortgage, or as evidenced by a combination of same that singularly or in part collectively may be less than said secured amount but combined exceed said secured amount, Mortgagee, in any foreclosure hereof, shall have the right to sue and collect the excess in the same action as commenced for the foreclosure hereof, and recover a money judgment for said excess with all the rights attendant thereto, including the issuance of an execution to the Sheriff for collection thereof, and Mortgagor hereby waives any defense based upon a claim that in doing so, Mortgages is splitting its cause of action if it seeks to foreclose this Mortgage for part of the indebtedness and recover at law for another part. (e) Upon the happening of an Event of Default, Mortgagee may pursue, take or refrain from pursuing any remedy for collection of the Indebtedness, including foreclosure of this Mortgage. (f) may, either with or without entry or taking possession of the Premises as provided in this Mortgage or otherwise, personally or by its agents or attorneys, and without prejudice to the right to bring an action of foreclosure of this Mortgage: (A) sell the Premises or any part thereof pursuant to any procedures provided by applicable law including the procedures set forth in Article 14 of the New York Real Property Actions and Proceedings Law (and any amendments or substitute statutes in regard thereto) allowing non judicial foreclosure of Mortgage by sale, and all estate, right, title, interest, claim and demand therein, and right of redemption thereof, at one or more sales as an entity or in parcels, and at such time and place upon such terms and after such notice thereof as may be required or permitted by applicable law or (B) take such steps to protect and enforce its rights whether by action, suit or proceeding in equity or at law for the specific performance of any covenant, condition or agreement in the Note or in this Mortgage, or in aid of the -13- execution of any power granted in this Mortgage, or for any foreclosure under this Mortgage, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as Mortgagee may elect. Any reference in this Mortgage to an action or right of Mortgagee in regard to or in connection with a "foreclosure proceeding" shall be deemed to include a sale and/or proceeding under this subsection, including a non-judicial foreclosure of mortgage by sale. 28. EXPENSES. Mortgagor shall pay to Mortgagee on demand all costs and expenses (including attorneys' fees and disbursements whether for internal or outside counsel) incurred by Mortgagee in connection with the Indebtedness or the Mortgage including costs of collection, of preserving or exercising any right or remedy of Mortgagee under this Mortgage or any related security agreement or guaranty, of workout or bankruptcy proceedings by or against Mortgagor, of defending against any claim asserted as a direct or indirect result of the Indebtedness or of performing any obligation of any Mortgagor pursuant to this Mortgage or otherwise (including payment of any amount any Mortgagor is obligated to pay pursuant to this Mortgage and performance of any obligation of Mortgagor pursuant to this Mortgage). Mortgagee reserves the right to have Mortgagor pay, upon demand, administrative fee(s) in regard to any administrative action Mortgagee is required or requested to take including the preparation of discharges, releases or assignments to third parties. Costs and expenses shall accrue interest at the default rate set forth in the Note from the date of demand until payment is actually received by Mortgagee. Each such cost and expense and any interest thereon shall constitute part of the Indebtedness and be secured by this Mortgage and may be added to the judgment in any suit brought by Mortgagee or its agents against any Mortgagor on this Mortgage. 29. NOTICES. Any demand or notice hereunder or under any applicable law pertaining hereto (including Article 14 of New York Real Property Actions and Proceedings Law) shall be in writing and duly given if delivered to Mortgagor (at its address on Mortgagee's records) or to Mortgagee (at the address on page one and separately to Mortgagee officer responsible for Mortgagor's relationship with Mortgagee). Such notice or demand shall be deemed sufficiently given for all purposes when delivered (i) by personal service and shall be deemed effective when delivered, or (ii) by mail or courier and shall be deemed effective three (3) business days after deposit in an official depository maintained by the United States Post Office for the collection of mail or one (1) business day after delivery to a nationally recognized overnight courier service (e.g., Federal Express). Notice by e-mail is not valid notice under this or any other agreement between Mortgagor and Mortgagee. 30. LITIGATION. Mortgagor shall promptly notify Mortgagee in writing of any litigation, proceeding, or counterclaim against, or of any investigation of, Mortgagor (or the threat thereof) if: (i) the outcome of such litigation, proceeding, counterclaim, or investigation may materially and adversely affect the finances or operations of Mortgagor or title to, or the value of, any assets secured by the Mortgage or (ii) such litigation, proceeding, counterclaim, or investigation questions the validity of the Mortgage, the Note or any document executed in connection therewith including any guaranties or any action taken, or to be taken, pursuant to any such documents. Mortgagor shall furnish to Mortgagee such information regarding any such litigation, proceeding, counterclaim, or investigation as Mortgagee shall request. -14- 31. NOTICE OF NON-COMPLIANCE. Mortgagor shall notify Mortgagee in writing of any failure by Mortgagor to comply with any provision of the Note, the Mortgage or any document executed in connection therewith immediately upon learning of such non-compliance, or if any representation, warranty or covenant contained in any such document is no longer true. Mortgagor shall also immediately notify Mortgagee in writing if there is any material adverse change in any of the information or financial statements supplied to Mortgagee to induce Mortgagee to extend credit to Mortgagor or if such information or financial statement is required under this Mortgage or any other document executed in connection therewith. 32. COVENANTS SHALL RUN WITH THE LAND. The covenants contained in this Mortgage shall run with the land and bind Mortgagor, each heir, legal representative, successor and assign of Mortgagor and each subsequent owner, encumbrancer, tenant and subtenant of the Premises or any portion thereof, and shall inure to the benefit of, and be enforceable by, Mortgagee and each successor and assign of Mortgagee. 33. NONWAIVER BY MORTGAGEE. All rights and remedies of Mortgagee under this Mortgage and its other agreements with Mortgagor are cumulative, and no right or remedy shall be exclusive of any other right or remedy. No single, partial or delayed exercise by Mortgagee or its agents of any right or remedy shall preclude full and timely exercise by Mortgagee or its agents at any time of any right or remedy of Mortgagee without notice or demand, at Mortgagee's sole option. No course of dealing or other conduct, no oral agreement or representation made by Mortgagee or its agents or usage of trade shall operate as a waiver of any right or remedy of Mortgagee. No waiver of any right or remedy of Mortgagee hereunder shall be effective unless made specifically in writing by Mortgagee. No notice or demand on Mortgagor, Debtor or Guarantor in any case shall entitle Mortgagor, Debtor or Guarantor to any other or further notice in similar or other circumstances. 34. RIGHT OF SETOFF. If an Event of Default occurs, Mortgagee and Affiliates shall also have the right to setoff against the indebtedness any property held in a deposit or other account or otherwise owing by Mortgagee or Affiliates including, in any capacity to any Mortgagor, Debtor or Guarantor in any capacity whether or not the Indebtedness or the obligation to pay such moneys owed by Mortgagee is then due, and Mortgagee shall be deemed to have exercised such right of setoff immediately at the time of such election. 35. TERM; SURVIVAL. The term of this Mortgage and Mortgagor's obligations hereunder shall continue until the Indebtedness has been fully paid to Mortgagee's satisfaction. Mortgagor's obligation to pay the costs and expenses hereunder shall survive the term of this Mortgage, Mortgagor's representations, warranties, covenants and agreements shall survive during the term of this Mortgage and shall be presumed to have been relied upon by Mortgagee. If after receipt of any payment of all or any part of the Indebtedness, Mortgagee is for any reason compelled to surrender such payment to any person or entity because such payment is determined to be void or voidable as a preference, impermissible set-off, or a diversion of trust funds, or for any other reason, this Mortgage shall continue in full force notwithstanding any contrary action which may have been taken by Mortgagee in reliance upon such payment, and any such contrary action so taken shall be without prejudice to Mortgagee's rights under this Mortgage and shall be deemed to have been conditioned upon such payment having become final and irrevocable. -15- 36. MISCELLANEOUS. This Mortgage is absolute and unconditional. This Mortgage and all documents, including the Note, any Guaranty and any other document required to be executed by Mortgagor, Debtor or Guaranty in connection with the transaction contemplated hereby constitute the entire agreement and understanding between the parties hereto with respect to such transaction and supersedes all prior negotiations, courses of dealing, understandings, and agreements between such parties with respect to such transactions. This Mortgage is a binding obligation enforceable against Mortgagor and its heirs and legal representatives and its successors and assigns and shall inure to the benefit of Mortgagee and its successors and assigns. Any reference herein to "Mortgagee" shall be deemed to include and apply to every subsequent holder of this Mortgage and any reference herein to "Mortgagor", "Debtor" or "Guarantor" shall include; (i) any successor individual or individuals, association, partnership, limited liability company or corporation to which all or substantially all of the business or assets of Debtor, Mortgagor or Guarantor, as the case may be, shall have been transferred; (ii) in the case of a partnership Debtor, Mortgagor or Guarantor (as the case may be) any new partnership which shall have been created by reason of the admission of any new partner or partners therein, or by reason of the dissolution of the existing partnership by voluntary agreement or the death, resignation or other withdrawal of any partner; and (iii) in the case of a corporate or limited liability company, Debtor, Mortgagor or Guarantor (as the case may be) any other entity into or with which Debtor, Mortgagor or Guarantor (as the case may be) shall have been merged, consolidated, reorganized, or absorbed. It is the intent of Mortgagor and Mortgagee that the provisions of this Mortgage, other than those included in the New York statutory form of mortgage, shall be construed as affording to Mortgagee rights additional to, and not exclusive of, the rights conferred under the provisions contained in such statutory form. Unless the context otherwise clearly requires, references to plural includes the singular and references to the singular include the plural; the word "or" has the inclusive meaning represented by the phrase "and/or"; the word "including", "includes" and "include" shall be deemed to be followed by the words "without limitation"; and captions or section headings are solely for convenience and not part of the substance of this Mortgage. Any representation, warranty, covenant or agreement herein shall survive execution and delivery of this Mortgage and shall be deemed continuous, Each provision of this Mortgage shall be interpreted as consistent with existing law and shall be deemed amended to the extent necessary to comply with any conflicting law. If any provision nevertheless is held invalid, the other provisions shall remain in effect. Mortgagor agrees that in any legal proceeding, a photocopy of this Mortgage kept in Mortgagee's course of business may be admitted into evidence as an original. 37. JOINT AND SEVERAL. If there is more than one Mortgagor, each of them shall be jointly and severally liable for all amounts and obligations which become due or should be performed under this Mortgage and the term "Mortgagor" shall include each as well as all of them, 38. GOVERNING LAW; JURISDICTION. This Mortgage has been delivered to and accepted by Mortgagee and will be deemed to be made in the State of New York. This Mortgage will be interpreted in accordance with the laws of the State of New York excluding its conflict of laws rules, MORTGAGOR HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN NEW YORK STATE IN A COUNTY OR JUDICIAL DISTRICT WHERE MORTGAGEE MAINTAINS A BRANCH AND CONSENTS THAT MORTGAGEE MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT -16- MORTGAGOR'S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS MORTGAGE WILL PREVENT MORTGAGEE FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST MORTGAGOR INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF MORTGAGOR WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Mortgagor acknowledges and agrees that the venue provided above is the most convenient forum for both Mortgagee and Mortgagor. Mortgagor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Mortgage. 39. WAIVER OF JURY TRIAL. MORTGAGOR AND MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY EACH WAIVE ANY RIGHT TO TRIAL BY JURY THEY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS MORTGAGE OR THE TRANSACTIONS RELATED THERETO. MORTGAGOR REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF MORTGAGEE HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT MORTGAGEE WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. MORTGAGOR ACKNOWLEDGES THAT MORTGAGEE HAS BEEN INDUCED TO ACCEPT THIS MORTGAGE BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] -17- IN WITNESS WHEREOF, this Mortgage has been duty executed by Mortgagor the day and year first above written. SIGNED, SEALED AND DELIVERED IN THE MAJESTIC EMPIRE HOLDING, LLC PRESENCE OF THESE WITNESSES: WITNESS #1: BY: /s/Bradford Honigfeld ---------------------------- ------------------------ PRINT NAME: NAME: BRADFORD HONIGFELD TITLE: MANAGING MEMBER WITNESS #2: ---------------------------- PRINT NAME: ---------------------------- ACKNOWLEDGMENT STATE OF NEW JERSEY ) : SS. COUNTY OF ESSEX ) On the 19th day of April, in the year 2005, before me, the undersigned, a Notary Public in and for said State, personally appeared BRADFORD HONIGFELD, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose names) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individuals) acted, executed the instrument. /s/ Ruth J. Ribar ---------------------------------- Notary Public RUTH J. RIBAR Notary Public, State of New Jersey My Commission Expires May 16, 2007 -18- SCHEDULE A-19 LAND DESCRIPTION ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE BOROUGH AND COUNTY OF QUEENS, CITY AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS: BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE NORTHERLY SIDE OF KISSENA BOULEVARD WITH THE NORTHWESTERLY SIDE OF 75TH AVENUE; RUNNING THENCE WESTERLY ALONG THE NORTHERLY SIDE OF KISSENA BOULEVARD, 358.57 FEET TO THE CORNER FORMED BY THE INTERSECTION OF THE NORTHERLY SIDE OF KISSENA BOULEVARD WITH THE SOUTHEASTERLY SIDE OF 73RD AVENUE, AS SAME IS SHOWN ON ALTERATION MAP NO. 4361 OF THE FINAL TOPOGRAPHICAL MAP OF THE CITY OF NEW YORK ADOPTED BY THE BOARD OF ESTIMATE ON OCTOBER 14, 1965; THENCE IN A GENERAL EASTERLY DIRECTION AS MEASURED ALONG THE AFORESAID SOUTHEASTERLY SIDE OF 73RD AVENUE THE FOLLOWING TWO COURSES AND DISTANCES; 1) ALONG THE ARC OF A CURVE BEARING TO THE RIGHT HAVING A RADIUS OF 400 FEET A DISTANCE OF 101.26 FEET; 2) ALONG THE ARC OF A CURVE BEARING TO THE LEFT HAVING A RADIUS OF 987.175 FEET, A DISTANCE OF 209.20 FEET TO THE CORNER FORMED BY THE INTERSECTION OF THE SOUTHEASTERLY SIDE OF 73RD AVENUE WITH THE SOUTHWESTERLY SIDE OF PARSONS BOULEVARD; THENCE SOUTHERLY ALONG THE SOUTHWESTERLY SIDE OF PARSONS BOULEVARD ALONG THE ARC OF A CURVE BEARING TO THE RIGHT HAVING A RADIUS OF 342.982 FEET, A DISTANCE OF 176.95 FEET; THENCE SOUTHWESTERLY ALONG THE NORTHWESTERLY SIDE OF 75TH AVENUE, 54.16 FEET TO THE FIRST MENTIONED COURSE, THE POINT OR PLACE OF BEGINNING. -19- SCHEDULE A-20 LAND DESCRIPTION ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE BOROUGH AND COUNTY OF QUEENS, CITY AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS: BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE SOUTHEASTERLY SIDE OF HILLSIDE AVENUE (173 FEET WIDE) WITH THE SOUTHWESTERLY SIDE OF BRADDOCK AVENUE (100 FEET WIDE); RUNNING THENCE SOUTHEASTERLY ALONG THE SOUTHWESTERLY SIDE OF BRADDOCK AVENUE AND FORMING AN INTERIOR ANGLE OF 124 DEGREES 30 MINUTES 08 SECONDS WITH THE SOUTHEASTERLY SIDE OF HILLSIDE AVENUE, A DISTANCE OF 187.32 FEET; THENCE RUNNING WESTERLY ALONG THE SOUTHERLY LINE OF THE HEREIN DESCRIBED PARCEL AND FORMING AN INFERIOR ANGLE OF 55 DEGREES 29 MINUTES 52 SECONDS WITH THE LAST MENTIONED COURSE A DISTANCE OF 216.10 FEET; RUNNING THENCE NORTHERLY ALONG THE WESTERLY LINE OF THE HEREIN DESCRIBED PARCEL AND FORMING AN INFERIOR ANGLE OF 90 DEGREES WITH THE LAST MENTIONED COURSE, A DISTANCE OF 154.37 FEET TO THE SOUTHEASTERLY SIDE OF HILLSIDE AVENUE; THENCE RUNNING EASTERLY ALONG THE SOUTHEASTERLY LINE OF HILLSIDE AVENUE AND FORMING AN INTERIOR ANGLE OF 90 DEGREES WITH THE LAST MENTIONED COURSE, A DISTANCE OF 110 FEET TO THE POINT OR PLACE OF BEGINNING. -20- SCHEDULE A-29 LAND DESCRIPTION ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE BOROUGH AND COUNTY OF QUEENS, CITY AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS; BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE NORTHEASTERLY SIDE OF JAMAICA AVENUE (FORMERLY KNOWN AS 89TH AVENUE, SHELTON AVENUE AND FULTON STREET) WITH THE WESTERLY SIDE OF 139TH STREET (FORMERLY KNOWN AS MAPLE AVENUE); RUNNING THENCE NORTHERLY ALONG SAID WESTERLY SIDE OF 139TH STREET, 134.58 FEET TO A POINT; RUNNING THENCE WESTERLY ALONG A LINE FORMING AN INFERIOR ANGLE OF 93 DEGREES 16 MINUTES 15 SECONDS WITH THE WESTERLY SIDE OF 139TH STREET 66.78 FEET TO A POINT; RUNNING THENCE WESTERLY ALONG A FINE FORMING AN INTERIOR ANGLE OF 185 DEGREES 06 MINUTES 34 SECONDS WITH THE LAST MENTIONED COURSE, 33.69 FEET TO A POINT; RUNNING THENCE NORTHERLY PARALLEL WITH THE EASTERLY SIDE OF QUEENS BOULEVARD (FORMERLY KNOWN AS HOFFMAN BOULEVARD), 52.12 FEET TO A POINT; RUNNING THENCE WESTERLY AT RIGHT ANGLES TO THE EASTERLY SIDE OF QUEENS BOULEVARD, 100 FEET TO THE EASTERLY SIDE OF QUEENS BOULEVARD; RUNNING THENCE SOUTHERLY ALONG THE EASTERLY SIDE OF QUEENS BOULEVARD, 100.33 FEET TO THE CORNER FORMED BY THE INTERSECTION OF THE EASTERLY SIDE OF QUEENS BOULEVARD WITH THE PRESENT NORTHEASTERLY LINE OF JAMAICA AVENUE; RUNNING THENCE SOUTHEASTERLY ALONG THE PRESENT NORTHEASTERLY LINE OF JAMAICA AVENUE AND ALONG A LINE FORMING AN INTERIOR ANGLE OF 115 DEGREES 31 MINUTES 33.1 SECONDS WITH THE EASTERLY SIDE OF QUEENS BOULEVARD, 20.15 FEET TO A POINT; -21- SCHEDULE A-22 LAND DESCRIPTION ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE BOROUGH OF BROOKLYN, COUNTY OF KINGS, CITY AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS: BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE EASTERLY SIDE OF FLATBUSH AVENUE AND THE SOUTHERLY SIDE OF EMPIRE BOULEVARD, FORMERLY KNOWN AS MALBONE STREET; RUNNING THENCE EASTERLY ALONG THE SOUTHERLY SIDE OF EMPIRE BOULEVARD, A DISTANCE OF 254 FEET 10 INCHES TO A POINT; THENCE RUNNING WEST ALONG AN ANGLE OF 24 DEGREES 03 MINUTES SOUTH A DISTANCE OF 36 FEET 7 INCHES TO A POINT; RUNNING THENCE SOUTHERLY AT A COURSE WHICH IS AT RIGHT ANGLES TO THE LAST MENTIONED COURSE, A DISTANCE OF 49 FEET 11-7/8 INCHES TO A POINT; THENCE BY RIGHT ANGLES TO THE LAST MENTIONED COURSE WESTERLY A DISTANCE OF 198 FEET 10-1/2 INCHES TO THE EASTERLY SIDE OF FLATBUSH AVENUE; THENCE NORTHERLY ALONG THE EASTERLY SIDE OF FLATBUSH AVENUE A DISTANCE OF 153 FEET 10-3/4 INCHES TO THE INTERSECTION OF FLATBUSH AVENUE AND EMPIRE BOULEVARD, THE POINT OR PLACE OF BEGINNING. -22- CREDIT LINE MORTGAGE ================================================================================ MAJESTIC EMPIRE HOLDINGS, L.L.C. - to - MANUFACTURERS AND TRADERS TRUST COMPANY ================================================================================ The within premises lie in 19 QUEENS COUNTY: SECTION 31, BLOCK 6805, LOT 100 20 QUEENS COUNTY: SECTION 47, BLOCK 10680, LOT 6 21 QUEENS COUNTY: SECTION 42, BLOCK 9620, LOTS 33 AND 40 22 KINGS COUNTY: SECTION 15, BLOCK 4591, LOT 48 RECORDED BY AND RETURN TO: MALMAN & GOLDMAN, LLP 152 West 57th Street, 35th Floor New York, New York 10019 Attn: Arthur B. Malman, Esq. -23- EXHIBIT 6 M&T BANK MANUFACTURERS AND TRADERS TRUST COMPANY CONTINUING GUARANTY (PERSONAL) NEW YORK GUARANTOR: BRADFORD HONIGFELD -------------------------------------------------------------- Name ****** -------------------------------------------------------------- Home Address BORROWER: MAJESTIC EMPIRE HOLDINGS, L.L.C. -------------------------------------------------------------- Name C/O THE BRIAD GROUP, 78 OKNER PARKWAY, LIVINGSTON, NJ 07039 -------------------------------------------------------------- Address LENDER: MANUFACTURERS AND TRADERS TRUST COMPANY, 350 Park Avenue, New York, New York 10022; Attention: Jason Lipiec. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE TERMS OF THIS GUARANTY AND THE TERMS OF THE COMMITMENT LETTER DATED APRIL 20, 2005, FROM LENDER TO BORROWER RELATING TO THIS LOAN (SUCH LETTER AS IT MAY BE AMENDED FROM TIME TO TIME IS HEREIN CALLED THE "COMMITMENT LETTER"), UNLESS OTHERWISE REQUIRED TO ASSURE THE ENFORCEABILITY OF LENDER'S RIGHTS HEREUNDER, THE TERMS OF THE COMMITMENT LETTER SHALL CONTROL. 1. GUARANTY. (a) Guarantor guarantees to the Lender the full and immediate payment and performance of all of Borrower's obligations to the Lender from time to time of every kind and nature, now existing and hereafter incurred, direct and contingent, liquidated and unliquidated, secured and unsecured, matured and unmatured, including all accrued and unpaid interest and all Expenses (defined below) even if such obligations were originally contracted with another lender or jointly with other borrowers, even if not evidenced by a writing, and even if periodically extinguished and reincurred (the "Obligations"). Guarantor will pay or perform its obligations under the Guaranty upon demand. This is a guaranty of payment, not collection. (b) Guarantor acknowledges the receipt of valuable consideration for this Guaranty and acknowledges that the Lender is relying on this Guaranty in making a financial accommodation to Borrower, whether a commitment to lend, extension, modification or replacement of, or forbearance with respect to, any Obligation, cancellation of another guaranty, purchase of Borrower's assets, or other valuable consideration. 2. CONTINUING, UNCONDITIONAL AND UNLIMITED GUARANTY. This Guaranty is irrevocable, continuing, unconditional and general without any limitation EXCEPT AS SET FORTH IN THE COMMITMENT LETTER. 3. GUARANTOR'S WAIVERS. (a) Guarantor's obligations shall not be released, impaired or affected in any way by (i) Borrower's bankruptcy, reorganization or insolvency under any law or that of any other party, or by any action of a trustee in any such proceeding; (ii) failure of any other party to perform its obligations to the Lender; or (iii) any other circumstance that might constitute a legal or equitable defense to Guarantor's or Borrower's obligations under this Guaranty, including without limitation: (A) any new agreements or obligations of Borrower with or to the Lender, amendments, changes in rate of interest, extensions of time for payments, modifications, renewals or the existence of or waivers of default as to any existing or future agreements of Borrower or any other party with the Lender; (B) any adjustment, compromise or release of any Obligations of Borrower, by the Lender or any other party; the existence or nonexistence or order of any filings, exchanges, releases, impairment or sale of, or failure to perfect a security interest in, any security for the Obligations, or the order in which payments and proceeds of collateral are applied; or acceptance by the Lender of any writing intended by any other party to create an accord and satisfaction with respect to any of the Obligations; (C) any fictitiousness, incorrectness, invalidity or unenforceability, for any reason, of any instrument or other agreement, or act of commission or omission by the Lender or Borrower; (D) any composition, extension, moratoria or other statutory relief granted to Borrower; or (E) any interruption in the business relations between the Lender and Borrower, or any dissolution or change in form of organization, name or ownership of Borrower or Guarantor. (b) WAIVERS OF NOTICE, ETC. The Guarantor waives acceptance, assent and all rights of notice or demand including without limitation (i) notice of acceptance of this Guaranty, of Borrower's default or nonpayment of any Obligation, and any changes in Borrower's financial condition; (ii) presentment, protest, notice of protest and demand for payment; and (iii) any other notice, demand or condition to which Guarantor might otherwise be entitled prior to the Lender's reliance on or enforcement of this Guaranty. (c) WAIVER OF SUBROGATION. Notwithstanding any other provision in this Guaranty, Guarantor irrevocably waives, without notice, any right it may have at law or in equity (including without limitation any law subrogating Guarantor to the rights of the Lender) to seek contribution, indemnification or any other form of reimbursement from Borrower or any other obligor or guarantor of the Obligations for any disbursement made under this Guaranty or otherwise. 4. TERMINATION; REINSTATEMENT. This Guaranty can be terminated (a) only with respect to Obligations not yet incurred, and (b) only by actual receipt by the Lender officer named above (or, if none is specified, Lender's General Counsel) of written notice of Guarantor's intent to terminate (or Guarantor's dissolution) plus (c) the lapse of a reasonable time for Lender to act on such notice. This Guaranty cannot be terminated with respect to any Obligations committed or contracted for or outstanding at the time the Lender acts on such notice, or any prior or subsequent modifications, renewals, extensions or replacements of or interest on such Obligations, or related Expenses. If any payment the Lender has received prior to termination subsequently is declared -2- fraudulent or preferential or for any other reason required to be surrendered, Guarantor's obligations under this Guaranty and any related security agreements shall be reinstated and remain in effect until the Lender has actually received payment in full of the Obligations. 5. EXPENSES. Guarantor agrees to reimburse the Lender on demand for all the Lender's REASONABLE OUT-OF-POCKET expenses, costs, damages and losses of any kind or nature, including without limitation actual attorneys' fees and disbursements whether for internal or external counsel incurred by the Lender in attempting to enforce this Guaranty, collect or restructure any of the Obligations, realize on any collateral, or for any other purpose related to the Obligations including but not limited to costs of workout, negotiations, redocumentation or bankruptcy or other legal proceedings or appeal (collectively, "Expenses"). Expenses will accrue interest at the highest legal rate until payment is actually received by the Lender. 6. FINANCIAL AND OTHER INFORMATION. Guarantor shall promptly deliver to the Lender annual personal financial statements and any other financial information requested by the Lender AS SET FORTH IN SUBDIVISION (C) OF "FINANCIAL REPORTING" OF THE COMMITMENT LETTER in form satisfactory to the Lender. Guarantor represents that his or her assets are not subject to any liens, encumbrances or contingent liabilities except as fully disclosed to the Lender in such statements. Guarantor warrants that all information Guarantor gives to the Lender at any time is correct, complete and not misleading. Guarantor resides at the above address and will notify the Lender immediately in writing upon any change in address. Guarantor understands this Guaranty and has satisfied himself or herself as to its meaning and consequences. GUARANTOR AGREES THAT GUARANTOR WILL BE DEEMED TO HAVE REAFFIRMED AS OF THE DATE OF EACH ADVANCE BY LENDER TO BORROWER THIS GUARANTY AS COVERING EACH ADDITIONAL ADVANCE AND THE REPRESENTATIONS AND WARRANTIES PERTAINING TO GUARANTOR IN THE COMMITMENT LETTER; WILL MAINTAIN ANY EQUITY, LIQUIDITY AND NET WORTH REQUIREMENTS SET FORTH THEREIN AND DELIVER THE FINANCIAL STATEMENTS AND TAX RETURNS REQUIRED FROM GUARANTOR THEREIN. 7. SECURITY; RIGHT OF SETOFF. As further security for payment of the Obligations, Expenses and any other obligations of Guarantor to the Lender, Guarantor hereby grants to the Lender a security interest in all money, securities and other property of Guarantor in the actual or constructive possession or control of the Lender including without limitation all deposits and other accounts owing at any time by the Lender in any capacity to Guarantor in any capacity (collectively, the "Property"). The Lender shall have the right AFTER AN EVENT OF DEFAULT BY BORROWER OR GUARANTOR to set off Guarantor's Property against any of Guarantor's obligations to the Lender and shall have all of the rights and remedies of a secured party under the Uniform Commercial Code in addition to those under this Guaranty and other agreements and applicable law. 8. NO TRANSFER OF ASSETS. Guarantor shall not transfer, reinvest or otherwise dispose of his assets to MATERIALLY impair Guarantor's ability to perform its obligations under this Guaranty. 9. NONWAIVER BY THE LENDER; MISCELLANEOUS. This DOCUMENT (INCLUDING THE COMMITMENT LETTER REFERRED TO HEREIN) is the entire agreement between Guarantor and the Lender with respect to the Guaranty. This Guaranty may be assigned by the Lender, shall inure to the benefit of the Lender and its successors and -3- assigns, and shall be binding upon Guarantor and its successors and assigns. All rights and remedies of the Lender are cumulative and no such right or remedy shall be exclusive of any other right or remedy. This Guaranty does not supersede any other guaranty or security granted to the Lender by Guarantor or others (except as to Guarantor's Waiver of Subrogation rights above). No single, partial or delayed exercise by the Lender of any right or remedy shall preclude exercise by the Lender at any time at its sole option of the same or any other right or remedy of the Lender without notice. No course of dealing or other conduct, no oral agreement or representation made by the Lender or usage of trade shall operate as a waiver of any right or remedy of the Lender. No waiver or amendment of any right or remedy of the Lender or release by the Lender shall be effective unless made specifically in writing by the Lender. This Guaranty shall be governed by the laws of the State of New York, without regard to its principles of conflict of laws. Each provision of this Guaranty shall be interpreted as consistent with existing law and shall be deemed amended to the extent necessary to comply with any conflicting law. If any provision is nevertheless held invalid the other provisions shall remain in effect. Captions are solely for convenience and are not part of the substance of this Guaranty. 10. JOINT AND SEVERAL; PRIMARY OBLIGATION. If there is more than one Guarantor, each Guarantor jointly and severally guarantees the payment and performance in full of all obligations under this Guaranty and agrees that the Lender need not seek payment from any source other than the undersigned Guarantor. This Guaranty is a primary obligation, Guarantor's obligations hereunder are separate and independent of Borrower's and a separate action may be brought against Guarantor whether or not action is brought or joined against or with Borrower or any other party. 11. GUARANTOR'S CONSENTS TO JURISDICTION. IN ANY ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS GUARANTY, GUARANTOR (A) CONSENTS TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR NEVADA, (B) WAIVES OBJECTION TO THE LAYING OF VENUE, (E) WAIVES PERSONAL SERVICE OF PROCESS AND SUBPOENAS, (D) CONSENTS TO SERVICE OF PROCESS AND SUBPOENAS BY REGISTERED OR CERTIFIED MAIL DIRECTED TO GUARANTOR AT THE LAST ADDRESS SHOWN IN THE LENDER'S RECORDS RELATING TO THIS GUARANTY, WITH SUCH SERVICE TO BE DEEMED COMPLETED FIVE BUSINESS DAYS AFTER MAILING, (E) WAIVES ANY RIGHT TO ASSERT ANY COUNTERCLAIMS OR SETOFF OR ANY DEFENSE BASED UPON A STATUTE OF LIMITATIONS OR UPON A CLAIM OF LACHES, (F) WAIVES ANY RIGHT TO ATTACK A FINAL JUDGMENT THAT IS OBTAINED AS A DIRECT OR INDIRECT RESULT OF ANY SUCH ACTION AND (G) CONSENTS TO EACH SUCH FINAL JUDGMENT BEING SUED UPON IN ANY COURT HAVING JURISDICTION. A SEPARATE ACTION MAY BE BROUGHT AGAINST GUARANTOR WHETHER OR NOT ACTION IS BROUGHT AGAINST OR JOINED WITH BORROWER OR ANY OTHER PARTY. 12. WAIVER OF JURY TRIAL. Guarantor and the Lender each waive any right to trial by jury in any action with respect to this Guaranty. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] -4- NOTICE: FOR PURPOSES OF THIS GUARANTY "OBLIGATIONS" IS NOT LIMITED TO PRESENTLY EXISTING INDEBTEDNESS, LIABILITIES AND OBLIGATIONS. Dated: AS OF APRIL 20, 2005 GUARANTOR: SS # ------------------ /s/ Bradford Honigfeld ____________________________ --------------------------- BRADFORD HONIGFELD ACKNOWLEDGMENT STATE OF NEW JERSEY) : SS: COUNTY OF ESSEX ) On the 19th day of APRIL in the year 2005, before me, the undersigned, a Notary Public in and for said State, personally appeared BRADFORD HONIGFELD, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. /s/Ruth J. Ribar ---------------------------------- Notary Public RUTH J. RIBAR Notary Public, State of New Jersey My Commission Expires May 16, 2007 FOR BANK USE ONLY Authorization Confirmed: - ---------------------------- Signature -5- EX-7 7 v17258_ex7.txt EXHIBIT 7 UNSECURED PROMISSORY NOTE $370,000.00 April 20, 2005 FOR VALUE RECEIVED, the sufficiency and adequacy of which is hereby acknowledged, Brad Honigfeld, a resident of Nevada ("MAKER"), promises to pay to the order of Bart A. Brown, Jr., a resident of Kentucky ("PAYEE"), the principal sum of $370,000.00, together with interest until paid, as set forth in this Note. Maker has made and issued this Note as evidence of Maker's obligation to pay the principal sum and interest accruing thereon pursuant to the terms of a certain Amended and Restated Stock Purchase Agreement of even date herewith between Maker, as purchaser thereunder, and Payee, as seller thereunder (the "Agreement"). 1. Principal and Interest Payments. The principal sum, together with interest accruing thereon at the rate of 5% per annum, shall be paid in four payments, each in the amount of $93,465.54, during the period commencing on May 20, 2005 and continuing monthly thereafter to and including August 20, 2005. 2. Default; Acceleration; Costs of Collection. 2.1 Any of the following shall constitute an "EVENT OF DEFAULT": (a) there shall occur any failure by Maker to pay, when due, any principal of or interest on the Note; or (b) any representation or warranty made by Maker in the Agreement shall prove to have been untrue or incorrect in any material respect when made; or (c) Maker shall (i) admit in writing his inability, or be generally unable, to pay his debts as the debts become due, (ii) make a general assignment for the benefit of his creditors, (iii) commence a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, or(v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under Bankruptcy Code. 2.2 Upon the occurrence of an Event of Default, the unpaid principal with interest and all other sums evidenced by this Note shall, at the option of Payee and in Payee's discretion, become immediately due and payable. 2.3 Upon and during the continuance of an Event of Default, Maker shall pay Payee's reasonable costs and expenses (including reasonable attorneys fees and expenses) incurred in collecting the principal and interest due under this Note, including, but not limited to, any reasonable attorneys fees and expenses incurred by Payee in connection with asserting, enforcing, pursuing or preserving its claim in any bankruptcy proceeding. 3. Default Rate of Interest. If Maker fails to make timely payments to Payee under this Note, Maker shall pay to Payee on demand the amounts due with interest at the rate of one and one-half percent (1.5%) per month from the due date until paid. 4. Prepayment. Maker shall be privileged to prepay this Note in whole or in part, together with all interest accrued through the date of payment, at any time without premium or penalty. All partial prepayments shall be applied in inverse order of maturity. 5. Certain Waivers. As to this Note, Maker waives all applicable exemption rights, whether under any state constitution or otherwise, and also waives valuation and appraisement, diligence, presentment, protest, demand for payment, notice of default, dishonor or nonpayment of this Note, and notice of acceleration and expressly agrees that the maturity of this Note, or any payment under this Note, may be extended from time to time without in any way affecting the liability of Maker. 6. Preservation of Payee Rights. No failure on the part of Payee to exercise any right or remedy hereunder, whether before or after the happening of an Event of Default shall constitute a waiver thereof, and no waiver of any past Event of Default shall constitute waiver of any future default or of any other Event of Default. No failure to accelerate the indebtedness evidenced hereby by reason of any Event of Default hereunder, or acceptance of a past due installment, or indulgence granted from time to time, shall be construed to be a waiver of the right to insist upon prompt payment thereafter, or shall be deemed to be a novation of this Note or as a waiver of such right of acceleration or any other right, or be construed so as to preclude the exercise of any right that Payee may have, whether by the laws of the State of New York, by agreement, or otherwise. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom such agreement is sought to be enforced. 7. Notices. Any notice required or permitted by or in connection with this Note shall be given in accordance with the notice provisions contained in the Agreement, and if so given, shall be deemed to have been sufficiently made hereunder. 8. Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed entirely in the State of New York without regard to such state's choice of law rules. In the event any legal action becomes necessary to enforce or interpret the terms of this Note, the parties agree that such action may be brought in the Supreme Court of the State of New York, County of New York, or in the U.S. District Court for the Southern District of New York sitting in New York County, and the parties hereby submit to the jurisdiction of such courts. 9. Severability. In case any provision or any part of any provision contained in this Note shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or remaining part of the affected provision 2 of this Note, but this Note shall be construed as if such invalid, illegal, or unenforceable provision or part thereof had never been contained herein but only to the extent such provision or part thereof is invalid, illegal, or unenforceable. 10. Mutual Waiver of Jury Trial. Maker and Payee waive all rights to trial by jury of any claims of any kind arising under or relating in any way to this Note. Maker and Payee acknowledge that this is a waiver of a legal right and represent to each other that these waivers are made knowingly and voluntarily after consultation with counsel of their choice. Maker and Payee agree that all such claims shall be tried before a judge of a court having jurisdiction without a jury. 11. No Usury. Anything elsewhere contained in this Note to the contrary notwithstanding, if for any reason the interest paid or payable hereunder, pursuant to the interest rate and/or default rate of interest, should exceed the maximum lawful interest that the Payee shall be permitted to receive from the Maker hereunder, the amount of such interest shall be deemed reduced to, and shall be, such maximum lawful interest, and (i) the amount which would be excessive interest shall be deemed applied to the reduction of the principal balance of the Note and not to the payment of interest, and (ii) if the obligation of the Maker evidenced by the Note has been or is thereby paid in full, the excess shall be returned to the Maker, such application to the principal balance of the Note or the refunding of excess to be a complete settlement and acquittance thereof. IN WITNESS WHEREOF, and intending to be legally bound hereby Maker executes this Note as of the date first written above. /s/ Brad Honigfeld ----------------------------- Brad Honigfeld 3 EX-8 8 v17258_ex8.txt EXHIBIT 8 SECURED PROMISSORY NOTE $2,151,491.39 April 20, 2005 FOR VALUE RECEIVED, the sufficiency and adequacy of which is hereby acknowledged, Brad Honigfeld, a resident of Nevada ("MAKER"), promises to pay to the order of Bart A. Brown, Jr., a resident of Kentucky ("Payee"), the principal sum of $2,151,491.39, together with interest until paid, as set forth in this Note. Maker has made and issued this Note as evidence of Maker's obligation to pay the principal sum and interest accruing thereon pursuant to the terms of a certain Amended and Restated Stock Purchase Agreement of even date herewith between Maker, as purchaser thereunder, and Payee, as seller thereunder (the "Agreement"). As collateral security for the performance of Maker's obligations under this Note and the Agreement, Maker has agreed to pledge certain securities to Payee pursuant to the terms of a certain Pledge Agreement of even date herewith executed by Maker and delivered to Payee (the "Pledge Agreement."). 1. Principal and Interest Payments. The principal sum, together with interest accruing thereon at the rate of 5% per annum pursuant to a five year amortization schedule, shall be paid, in accordance with the schedule annexed to this Note as Schedule A, in 31 payments, each in the amount of $43,874.80, to be paid during the period commencing on September 20, 2005 and continuing monthly thereafter to and including March 20, 2008, and a final payment to be made on April 20, 2008 in the amount of $1,043,952.46. 2. Default; Acceleration; Costs of Collection. 2.1 Any of the following shall constitute an "EVENT OF DEFAULT": (a) there shall occur any failure by Maker to pay, when due, any principal of or interest on the Note; or (b) there shall occur any default by Maker in the performance of any agreement, covenant or obligation contained in the Agreement, other than any obligation relating to the Unsecured Note delivered pursuant to Section 2.2 thereof, or in the Pledge Agreement, and such default is not cured to Payee's satisfaction within 15 days after the sooner to occur of Maker's receipt of notice of such default from Payee; provided, however, that such notice and opportunity to cure shall not apply in the case of any failure to perform, keep or observe any covenant which is not capable of being cured at all or within such 15-day period or which is a willful and knowing default by Maker; (c) any representation or warranty made by Maker in the Agreement shall prove to have been untrue or incorrect in any material respect when made; or (d) Maker shall (i) admit in writing his inability, or be generally unable, to pay his debts as the debts become due, (ii) make a general assignment for the benefit of his creditors, (iii) commence a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, or(v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under Bankruptcy Code. 2.2 Upon the occurrence of an Event of Default, the unpaid principal with interest and all other sums evidenced by this Note shall, at the option of Payee and in Payee's discretion, become immediately due and payable. 2.3 Upon and during the continuance of an Event of Default, Maker shall pay Payee's reasonable costs and expenses (including reasonable attorneys fees and expenses) incurred in collecting the principal and interest due under this Note, including, but not limited to, any reasonable attorneys fees and expenses incurred by Payee in connection with asserting, enforcing, pursuing or preserving its claim in any bankruptcy proceeding. 3. Default Rate of Interest. If Maker fails to make timely payments to Payee under this Note, Maker shall pay to Payee on demand the amounts due with interest at the rate of one and one-half percent (1.5%) per month from the due date until paid. 4. Prepayment. Maker shall be privileged to prepay this Note in whole or in part, together with all interest accrued through the date of payment, at any time without premium or penalty. All partial prepayments shall be applied in inverse order of maturity. 5. Certain Waivers. As to this Note, Maker waives all applicable exemption rights, whether under any state constitution or otherwise, and also waives valuation and appraisement, diligence, presentment, protest, demand for payment, notice of default, dishonor or nonpayment of this Note, and notice of acceleration and expressly agrees that the maturity of this Note, or any payment under this Note, may be extended from time to time without in any way affecting the liability of Maker. 6. Preservation of Payee Rights. No failure on the part of Payee to exercise any right or remedy hereunder, whether before or after the happening of an Event of Default shall constitute a waiver thereof, and no waiver of any past Event of Default shall constitute waiver of any future default or of any other Event of Default. No failure to accelerate the indebtedness evidenced hereby by reason of any Event of Default hereunder, or acceptance of a past due installment, or indulgence granted from time to time, shall be construed to be a waiver of the right to insist upon prompt payment thereafter, or shall be deemed to be a novation of this Note or as a waiver of such right of acceleration or any other right, or be construed so as to preclude the exercise of any right that Payee may have, whether by the laws of the State of New York, by agreement, or otherwise. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom such agreement is sought to be enforced. 2 7. Notices. Any notice required or permitted by or in connection with this Note shall be given in accordance with the notice provisions contained in the Agreement, and if so given, shall be deemed to have been sufficiently made hereunder. 8. Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed entirely in the State of New York without regard to such state's choice of law rules. In the event any legal action becomes necessary to enforce or interpret the terms of this Note, the parties agree that such action may be brought in the Supreme Court of the State of New York, County of New York, or in the U.S. District Court for the Southern District of New York sitting in New York County, and the parties hereby submit to the jurisdiction of such courts. 9. Severability. In case any provision or any part of any provision contained in this Note shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or remaining part of the affected provision of this Note, but this Note shall be construed as if such invalid, illegal, or unenforceable provision or part thereof had never been contained herein but only to the extent such provision or part thereof is invalid, illegal, or unenforceable. 10. Mutual Waiver of Jury Trial. Maker and Payee waive all rights to trial by jury of any claims of any kind arising under or relating in any way to this Note. Maker and Payee acknowledge that this is a waiver of a legal right and represent to each other that these waivers are made knowingly and voluntarily after consultation with counsel of their choice. Maker and Payee agree that all such claims shall be tried before a judge of a court having jurisdiction without a jury. 11. No Usury. Anything elsewhere contained in this Note to the contrary notwithstanding, if for any reason the interest paid or payable hereunder, pursuant to the interest rate and/or default rate of interest, should exceed the maximum lawful interest that the Payee shall be permitted to receive from the Maker hereunder, the amount of such interest shall be deemed reduced to, and shall be, such maximum lawful interest, and (i) the amount which would be excessive interest shall be deemed applied to the reduction of the principal balance of the Note and not to the payment of interest, and (ii) if the obligation of the Maker evidenced by the Note has been or is thereby paid in full, the excess shall be returned to the Maker, such application to the principal balance of the Note or the refunding of excess to be a complete settlement and acquittance thereof. IN WITNESS WHEREOF, and intending to be legally bound hereby Maker executes this Note as of the date first written above. /s/ Brad Honigfeld ----------------------- Brad Honigfeld 3 Principal 2,151,491.39 Schedule A Interest Month 35,858.20 Principal 2,187,349.59 Rate 5.000% Term 56 Payment 43,874.80
Additional ----------Cummulative------------ Payment # Principal Payment Interest Principal Principal Interest Principal Payments 1 2,187,349.59 43,874.80 9,113.96 34,760.84 9,113.96 34,760.84 43,874.80 2 2,152,588.75 43,874.80 8,969.12 34,905.68 18,083.08 69,666.52 87,749.60 3 2,117,683.07 43,874.80 8,823.68 35,051.12 26,906.76 104,717.64 131,624.40 4 2,082,631.95 43,874.80 8,677.63 35,197.17 35,584.39 139,914.81 175,499.19 5 2,047,434.78 43,874.80 8,530.98 35,343.82 44,115.37 175,258.63 219,373.99 6 2,012,090.96 43,874.80 8,383.71 35,491.09 52,499.08 210,749.71 263,248.79 7 1,976,599.88 43,874.80 8,235.83 35,638.97 60,734.91 246,388.68 307,123.59 8 1,940,960.91 43,874.80 8,087.34 35,787.46 68,822.25 282,176.14 350,998.39 9 1,905,173.45 43,874.80 7,938.22 35,936.58 76,760.47 318,112.72 394,873.19 10 1,869,236.87 43,874.80 7,788.49 36,086.31 84,548.96 354,199.03 438,747.99 11 1,833,150.56 43,874.80 7,638.13 36,236.67 92,187.09 390,435.70 482,622.79 12 1,796,913.89 43,874.80 7,487.14 36,387.66 99,674.23 426,823.36 526,497.58 13 1,760,526.23 43,874.80 7,335.53 36,539.27 107,009.75 463,362.63 570,372.38 14 1,723,986.96 43,874.80 7,183.28 36,691.52 114,193.03 500,054.15 614,247.18 15 1,687,295.44 43,874.80 7,030.40 36,844.40 121,223.43 536,898.55 658,121.98 16 1,650,451.04 43,874.80 6,876.88 36,997.92 128,100.31 573,896.47 701,996.78 17 1,613,453.12 43,874.80 6,722.72 37,152.08 134,823.03 611,048.55 745,871.58 18 1,576,301.04 43,874.80 6,567.92 37,306.88 141,390.95 648,355.42 789,746.38 19 1,538,994.17 43,874.80 6,412.48 37,462.32 147,803.43 685,817.75 833,621.18 20 1,501,531.84 43,874.80 6,256.38 37,618.42 154,059.81 723,436.16 877,495.97 21 1,463,913.43 43,874.80 6,099.64 37,775.16 160,159.45 761,211.32 921,370.77 22 1,426,138.27 43,874.80 5,942.24 37,932.56 166,101.69 799,143.88 965,245.57 23 1,388,205.71 43,874.80 5,784.19 38,090.61 171,885.88 837,234.49 1,009,120.37 24 1,350,115.10 43,874.80 5,625.48 38,249.32 177,511.36 875,483.81 1,052,995.17 25 1,311,865.78 43,874.80 5,466.11 38,408.69 182,977.47 913,892.50 1,096,869.97 26 1,273,457.09 43,874.80 5,306.07 38,568.73 188,283.54 952,461.22 1,140,744.77 27 1,234,888.37 43,874.80 5,145.37 38,729.43 193,428.91 991,190.66 1,184,619.56 28 1,196,158.93 43,874.80 4,984.00 38,890.80 198,412.91 1,030,081.46 1,228,494.36 29 1,157,268.13 43,874.80 4,821.95 39,052.85 203,234.86 1,069,134.31 1,272,369.16 30 1,118,215.28 43,874.80 4,659.23 39,215.57 207,894.09 1,108,349.87 1,316,243.96 31 1,078,999.72 43,874.80 4,495.83 39,378.97 212,389.92 1,147,728.84 1,360,118.76 32 1,039,620.75 1,043,952.50 4,331.75 1,039,620.75 216,721.67 2,187,349.59 2,404,071.26
EX-9 9 v17258_ex9.txt EXHIBIT 9 PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of April 20 , 2005 (this "Pledge Agreement"), made by Brad Honigfeld ("Pledgor"), in favor of Bart A. Brown, Jr. ("Pledgee") parties to the Stock Purchase Agreement referred to below. RECITALS Simultaneously herewith, the parties have closed the transactions contemplated by an Amended and Restated Stock Purchase Agreement dated April 20, 2005 (the "Stock Purchase Agreement"). It is a condition precedent to the closing of the Stock Purchase Agreement and the obligation of the Pledgee to sell the Brown Shares to the Pledgor thereunder that Pledgor shall have executed and delivered this Pledge Agreement to the Pledgee. 1. Defined Terms. (a) Unless otherwise defined herein, terms which are defined in the Stock Purchase Agreement and used herein shall have the meanings given to them in the Stock Purchase Agreement. (b) The following terms shall have the following meanings: "Code" means the Uniform Commercial Code from time to time in effect in the State of New York. "Escrow Agent" means U.S. Bank, N.A. "Event of Default" means any "Event of Default," as such term is defined in the Secured Note. "Issuer" means Main Street Restaurant Group, Inc. "Lien" means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Code or comparable law of any jurisdiction to evidence any of the foregoing). "Person" or "Persons" shall mean any one or more individuals, partnerships, corporations (including a business trust), joint stock companies, trusts, unincorporated associations, joint ventures or other entities, or a foreign state or political subdivision thereof or any agency of such state or subdivision. "Pledge Agreement" has the meaning set forth in the preamble hereto. "Pledged Collateral" means the Pledged Stock and all Proceeds. "Pledged Stock" means 1,689,296 shares of the Issuer's common stock as evidenced by the Brown Shares Certificates identified in Schedule I annexed hereto, as well as any Option Shares and/or Converted Shares(as such terms are defined in the Stock Purchase Agreement) that the Pledgor shall acquire from the Pledgee at any time prior to the payment in full of all obligations due and owing under the Secured Note. "Proceeds" means all "proceeds" as such term is defined in Section 9-102(a)(64) of the UCC and, in any event, shall include, without limitation, all dividends, distributions or other income from the Pledged Stock, or collections thereon with respect thereto. "Secured Note" means that certain promissory note of even date herewith made by the Pledgor and issued to the Pledgee in the original principal amount of $2,151,491.39, payable over a term of 32 months, pursuant to a five year amortization schedule with interest computed thereon at the rate of 5% per annum, in 31 payments, each in the amount of $43,874.80, to be paid during the period commencing on September 20, 2005 and continuing monthly thereafter to and including March 20, 2008, and a final payment to be made on April 20, 2008 in the amount of $1,043,952.46. "Secured Obligations" means the Pledgor's obligations under the Stock Purchase Agreement, other than any obligation relating to the Unsecured Note delivered pursuant to Section 2.2 thereof, and his obligation to pay all sums due and owing under the Secured Note as and when the payment thereof shall become due and owing. "Securities Act" means the Securities Act of 1933, as amended. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not to any particular provision of this Pledge Agreement, and Section, Schedule and Exhibit references are to this Pledge Agreement unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Pledge; Grant of Security Interest; Escrow and Return of Pledged Collateral. (a) Pledgor hereby delivers, pledges, assigns, and transfers, as appropriate, to the Pledgee, all the Pledged Collateral and hereby grants to the Pledgee, a first security interest in the Pledged Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations. (b) Pledgor, Pledgee and the Escrow Agent acknowledge to one another that Pledgee has delivered the Brown Shares Certificates to which there have been affixed the Brown Stock Powers, evidencing the Pledgor's ownership of the Pledged Stock to the Escrow Agent. Pledgor, Pledgee and the Escrow Agent also acknowledge to one another that Pledgor has delivered the Purchaser's Stock Power to the Escrow Agent, and that Pledgor and Pledgee have delivered joint written instructions to the Escrow Agent to deliver the Brown Shares 2 Certificates and Brown Stock Powers to the Company's stock transfer agent, together with instructions to re-issue one certificate evidencing the Pledgor's ownership of the Pledged Stock. The Escrow Agent covenants and agrees with the Pledgor and the Pledgee that, upon receipt of the Purchaser's Brown Shares Certificate from the Company's transfer agent, the Escrow Agent shall affix the Purchaser's Stock Power thereto, and shall hold and dispose of the Pledged Stock and any Proceeds derived therefrom in accordance with the terms and conditions of this Pledge Agreement. (c) Upon payment of the Secured Note in full by Pledgor, Pledgee and Pledgor shall issue a jointly executed written instruction to the Escrow Agent to deliver the Pledged Collateral to the Pledgor. 3. Transfer Powers. Concurrently with the delivery to the Pledgee of each of the certificates representing the shares the Pledged Stock, Pledgor has delivered an undated stock power covering such certificate, duly executed in blank with signature guaranteed. 4. Representations and Warranties. Pledgor represents and warrants that: (a) Pledgor shall be, upon recordation of transfer of the Pledged Stock by Pledgee to Pledgor, the record owner, and is the beneficial owner, of, and has title to, the Pledged Stock, free of any and all Liens or options in favor of, or claims of, any other Person, except the Lien created by this Pledge Agreement; and (b) upon delivery to the Pledgee of the stock certificates evidencing the Pledged Stock (and assuming the continuing possession by the Escrow Agent on behalf of the Pledgee of such certificates in accordance with the requirements of applicable law), the Lien granted pursuant to this Pledge Agreement will constitute a valid, perfected first priority Lien on the Pledged Collateral in favor of the Pledgee, enforceable as such against all creditors of the Pledgor and any Persons purporting to purchase Pledged Collateral from the Pledgor. 5. Covenants. Pledgor covenants and agrees with the Pledgee, from and after the date of this Pledge Agreement until the Secured Obligations are paid in full and the Commitments have been terminated: (a) If Pledgor shall, as a result of his ownership of the Pledged Collateral, become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution for, as a conversion of, or in exchange for any shares of the Pledged Collateral, or otherwise in respect thereof, Pledgor shall accept the same as the Pledgees' agent, hold the same in trust for the Pledgee and deliver the same forthwith to the Escrow Agent in the exact form received, duly endorsed by Pledgor to the Pledgee, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Pledgee so requests, signature guaranteed, to be held by the Escrow Agent, subject to the terms hereof as additional collateral security for the Secured Obligations. Any sums paid upon or in respect of the Pledged 3 Collateral upon the liquidation or dissolution of the Issuer shall be paid over to the Escrow Agent to be held by it hereunder as additional collateral security for the Secured Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Collateral or any property shall be distributed upon or with respect to the Pledged Collateral pursuant to the recapitalization or reclassification of the capital of the Issuer or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Escrow Agent, subject to the terms hereof, as additional collateral security for the Secured Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Collateral shall be received by Pledgor, Pledgor shall, until such money or property is paid or delivered to the Escrow Agent, hold such money or property in trust for the Pledgee segregated from other funds of Pledgor, as additional collateral security for the Secured Obligations. (b) Without the prior written consent of the Pledgee, Pledgor will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Pledged Collateral, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Pledged Collateral, or any interest therein, except for the Lien provided for by this Pledge Agreement, or (iii) enter into any agreement or undertaking restricting the right or ability of Pledgor or the Pledgee to sell, assign or transfer any of the Pledged Collateral. (c) Pledgor shall maintain the security interest created by this Pledge Agreement as a first priority, perfected security interest and shall defend such security interest against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Pledgee, and at the sole expense of the Pledgor, Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Pledgee may reasonably request for the purposes of obtaining or preserving the full benefits of this Pledge Agreement and of the rights and powers herein granted. (d) Pledgor agrees to pay, and to save the Pledgee harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Pledged Collateral or in connection with any of the transactions contemplated by this Pledge Agreement. 6. Cash Dividends; Voting Rights. Unless an Event of Default shall have occurred and be continuing and the Pledgee shall have given notice to the Pledgor and the Escrow Agent of the Pledgee's intent to exercise its corresponding rights pursuant to Section 7 below, Pledgor shall be permitted to receive all cash dividends paid in the normal course of business of the Issuer in respect of the Pledged Stock and to exercise all voting and corporate rights with respect to the Pledged Stock; provided, however, that no vote shall be cast or corporate right exercised or other action taken which would impair the Pledged Collateral or which would be inconsistent with or result in any violation of any provision of the Stock Purchase Agreement, the Secured Note or this Pledge Agreement. 4 7. Rights of the Pledgee. (a) All Proceeds while held by the Pledgor in trust for the Pledgee shall continue to be held as collateral security for all the Secured Obligations and shall not constitute payment thereof until applied as provided in Section 8(a). (b) If an Event of Default shall occur and be continuing and the Pledgee shall give notice of its intent to exercise such rights to Pledgor and the Escrow Agent: (i) the Pledgee shall have the right to receive any and all cash dividends or other cash distributions paid in respect of the Pledged Collateral and make application thereof to the Secured Obligations, and (ii) in order to facilitate the foreclosure sale of the Pledged Stock pursuant to the provisions of Section 8 hereof, at the request of the Pledgee, all shares of the Pledged Stock shall be registered in the name of the Pledgee or its nominee, and until such time as said foreclosure sale shall occur, the Pledgee or its nominee may thereafter exercise (A) all voting, corporate or other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of the Issuer or otherwise and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Collateral as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by Pledgor or the Pledgee of any right, privilege or option pertaining to such shares or interests of the Pledged Collateral, and in connection therewith, the right to deposit and deliver any and all of the Pledged Collateral with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as Pledgee may determine), all without liability except to account for property actually received by Pledgee, but the Pledgee shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. 8. Remedies. If an Event of Default shall occur and be continuing, the Pledgee shall have and be entitled to exercise all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Pledgee, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon Pledgor, the Issuer or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith deliver written instructions to the Escrow Agent to collect, receive, appropriate and realize upon the Pledged Collateral, or any part thereof, and/or may forthwith issue written instructions to the Escrow Agent to sell, assign, give option or options to purchase or otherwise dispose of and deliver the Pledged Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or office of the Pledgee or elsewhere upon such terms and conditions as Pledgee may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Pledgee shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Pledged Collateral so sold, free of any right or equity of redemption in Pledgor, which right or equity is hereby waived or released. The Pledgee shall apply any Proceeds from time to time held by it, or by the Escrow Agent for 5 Pledgee's account, and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Pledged Collateral or in any way relating to the Pledged Collateral or the rights of the Pledgee hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as the Pledgee may elect, and only after such application and after the payment by the Pledgee of any other amount required by any provision of law, including, without limitation, Section 9-615(a) of the Code, need the Pledgee account for the surplus, if any, to Pledgor. To the extent permitted by applicable law, Pledgor waives all claims, damages and demands it may acquire against the Pledgee arising out of the exercise by the Pledgee of any of its rights hereunder. If any notice of a proposed sale or other disposition of Pledged Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of Pledged Collateral are insufficient to pay the Secured Obligations and the fees and disbursements of any attorneys employed by the Pledgee to collect such deficiency. 9. Private Sales. (a) Pledgor recognizes that the Pledgee, or the Escrow Agent acting for the account of Pledgee, may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Pledgee than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Pledgee shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Issuer would agree to do so. (b) Pledgor further agrees to use its reasonable efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Pledged Stock pursuant to this Pledge Agreement valid and binding and in compliance with any and all other applicable requirements of law. Pledgor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Pledgee, that the Pledgee has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against Pledgor, and Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Stock Purchase Agreement. 6 10. Irrevocable Authorization and Instruction to Issuer. Pledgor hereby authorizes and instructs Issuer to comply with any instruction received by it from the Pledgee in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Pledge Agreement, without any other or further instructions from Pledgor, and Pledgor agrees that Issuer shall be fully protected in so complying. 11. Appointment of Pledgee and Escrow Agent as Attorneys-in-Fact. (a) During the continuance of an Event of Default, Pledgor hereby irrevocably constitutes and appoints the Pledgee and the Escrow Agent, acting for the account of the Pledgee, with full power of substitution, as his true and lawful attorneys-in-fact with full irrevocable power and authority in the place and stead of Pledgor and in the name of Pledgor or in the Pledgee's own name, from time to time in the Pledgee's discretion, for the purpose of carrying out the terms of this Pledge Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Pledge Agreement, including, without limitation, any financing statements, endorsements, assignments or other instruments of transfer. (b) Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 11(a). All powers, authorizations and agencies contained in this Pledge Agreement are coupled with an interest and are irrevocable until this Pledge Agreement is terminated and the security interest created hereby is released. 12. Limitation on Duties Regarding Pledged Collateral. The Escrow Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Pledged Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Escrow Agent deals with similar securities and property for its own account. Neither the Escrow Agent nor any of its members, partners, associates, employees or agents shall be liable for failure to demand, collect or realize upon any of the Pledged Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of Pledged Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Pledged Collateral or any part thereof. 13. Execution of Financing Statements. Pursuant to Section 9-509 of the Code, Pledgor hereby authorizes the Pledgee to file financing statements with respect to the Pledged Collateral without the signature of such Pledgor in such form and in such filing offices as the Pledgee reasonably determines appropriate to perfect the security interests of the Pledgee under this Pledge Agreement. A carbon, photographic or other reproduction of this Pledge Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 14. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Pledged Collateral are irrevocable and powers coupled with an interest. 15. Notices. All notices, consents, requests, instructions, approvals or other communications provided for herein shall be in writing and delivered by personal delivery, overnight courier, mail, electronic facsimile or e-mail 7 addressed to the receiving party at the address set forth herein. All such communications shall be effective when received. If to Pledgor: Brad Honigfeld 70 Okner Parkway Livingston, New Jersey 07039 Tel: *************** Fax: ************** Email: ************** If to Pledgee: Bart A. Brown, Jr. **************** **************** Tel: *********** Fax: *********** If to the Escrow Agent: U.S. Bank, N.A. 425 Walnut Street Cincinnati, Ohio 45202 Attention: Corporate Trust Department Fax: 513-632-5511 email: bob.jones@usbank.com 16. Rights, Duties and Responsibilities of Escrow Agent. It is understood and agreed that the duties of the Escrow Agent are purely ministerial in nature, and that: (a) The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of this Pledge Agreement or any other agreement between the parties, nor shall the Escrow Agent be responsible for the performance by the parties of their respective obligations under this Pledge Agreement. (b) The Escrow Agent shall be entitled to rely upon the accuracy, act in reliance upon the contents, and assume the genuineness of any notice, instruction, certificate, signature instrument or other document which is given to the Escrow Agent pursuant to this Pledge Agreement without the necessity of the Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not be obligated to make any inquiry as to the authority, capacity, existence or identity of any person purporting to give any such notice or instructions or to execute any such certificate, instrument or other document. 8 (c) If the Escrow Agent is uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Pledged Collateral which, in its sole determination, are in conflict either with other instructions received by it or with any provision of this Pledge Agreement, it shall be entitled to hold the Pledged Collateral, or a portion thereof, pending the resolution of such uncertainty to the Escrow Agent's sole satisfaction, by final judgment of a court or courts of competent jurisdiction in the State of New Jersey; or the Escrow Agent, at its sole option, may deposit the Pledged Collateral with the clerk of a court of competent jurisdiction in the State of New York in a proceeding to which all parties in interest are joined. Upon the deposit by the Escrow Agent of the Pledged Collateral with the clerk of such court, the Escrow Agent shall be relieved of all further obligations and released from all liability hereunder. (d) The Escrow Agent shall not be liable for any action taken or omitted hereunder, or for the misconduct of any member, partner, associate, employee, agent or attorney appointed by it, except in the case of willful misconduct or gross negligence. The Escrow Agent shall be entitled to consult with counsel of its own choosing and shall not be liable for any action taken, suffered or omitted by it in accordance with the advice of such counsel. 17. Resignation of Escrow Agent. The Escrow Agent may resign for any reason upon three (3) business days' written notice to the parties. Should the Escrow Agent resign as herein provided, it shall not be required to accept any deposit, make any disbursement or otherwise dispose of the Pledged Collateral, but its only duty shall be to hold the Pledged Collateral for a period of not more than five (5) business days following the effective date of such resignation, at which time (a) if a successor escrow agent shall have been appointed and written notice thereof (including the name and address of such successor escrow agent) shall have been given to the resigning Escrow Agent by the parties and such successor escrow agent, then the resigning Escrow Agent shall pay over to the successor escrow agent the then remaining balance of the Fund; or (b) if the resigning Escrow Agent shall not have received written notice signed by the parties and a successor escrow agent, then the resigning Escrow Agent shall promptly deposit the Pledged Collateral with the clerk of a court of competent jurisdiction in the State of New York in a proceeding to which all parties in interest are joined. Upon the deposit by the Escrow Agent of the then remaining balance of the Fund with the clerk of such court, the Escrow Agent shall be relieved of all further obligations and released from all liability hereunder. 18. Severability. Any provision of this Pledge Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 19. Paragraph Headings. The paragraph headings used in this Pledge Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 20. No Waiver; Cumulative Remedies. The Pledgee shall not by any act, delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in 9 any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Pledgee, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Pledgee of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Pledgee would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 21. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Pledge Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor, and the Pledgee; provided, that any provision of this Pledge Agreement may be waived by the Pledgee in a letter or agreement executed by the Pledgee or by telex or facsimile transmission from the Pledgee. This Pledge Agreement shall be binding upon the successors and assigns of Pledgor and shall inure to the benefit of the Pledgee and their respective successors and assigns. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 22. Execution in Counterparts. This Pledge Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which when taken together shall constitute but one and the same instrument. Any signature delivered by a Party by facsimile or e-mail transmission shall be deemed to be an original signature hereto. IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be duly executed and delivered as of the date first above written. /s/Brad Honigfeld -------------------------------------- Brad Honigfeld Acknowledged and Accepted: /s/Bart A. Brown, Jr. - ------------------------------------ Bart A. Brown, Jr. ACKNOWLEDGEMENT BY ESCROW AGENT The undersigned hereby acknowledged receipt of the Pledged Stock identified in the foregoing Escrow Agreement, and covenants and agrees to hold and dispose of the same in accordance with the terms and conditions thereof. U.S. Bank, N.A. By: ----------------------------------- 10 SCHEDULE I to Pledge Agreement A. DESCRIPTION OF PLEDGED STOCK Name of Class of Stock Certificate Number of Issuer Stock Number Shares - ----------------------- ---------- ------------------- ----------- Main Street Restaurant Common Group, Inc. 1 -----END PRIVACY-ENHANCED MESSAGE-----