-----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, UUFiB8Kd69OhWt3UsFoXnyqrMrf66ZCk83ClSWhEJqVHuFxlrZVhQqVUifnjAG53 zIKwPsTS45mxJQU/wXCAnw== 0000950130-98-004596.txt : 19980921 0000950130-98-004596.hdr.sgml : 19980921 ACCESSION NUMBER: 0000950130-98-004596 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 27 FILED AS OF DATE: 19980918 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NE RESTAURANT CO INC CENTRAL INDEX KEY: 0001061588 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775 FILM NUMBER: 98711913 BUSINESS ADDRESS: STREET 1: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: 80 A TURNPIKE RD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS INC CENTRAL INDEX KEY: 0000874971 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 042947209 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-01 FILM NUMBER: 98711914 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FORMER COMPANY: FORMER CONFORMED NAME: BERTUCCIS HOLDING CORP DATE OF NAME CHANGE: 19600201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS RESTAURANT CORP CENTRAL INDEX KEY: 0001069012 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042844750 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-02 FILM NUMBER: 98711915 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS SECURITIES CORP CENTRAL INDEX KEY: 0001069013 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043132772 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-03 FILM NUMBER: 98711916 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERESTCO INC CENTRAL INDEX KEY: 0001069015 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043173720 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-04 FILM NUMBER: 98711917 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAL & VINNIES SICILLIAN STEAKHOUSE INC CENTRAL INDEX KEY: 0001069016 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043260622 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-05 FILM NUMBER: 98711918 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS OF ANNE ARUNDEL COUNTY INC CENTRAL INDEX KEY: 0001069017 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521854761 STATE OF INCORPORATION: MD FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-06 FILM NUMBER: 98711919 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS OF COLUMBIA INC CENTRAL INDEX KEY: 0001069018 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521854761 STATE OF INCORPORATION: MD FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-07 FILM NUMBER: 98711920 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS OF BALTIMORE COUNTY INC CENTRAL INDEX KEY: 0001069019 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521819001 STATE OF INCORPORATION: MD FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-08 FILM NUMBER: 98711921 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS OF BEL AIR INC CENTRAL INDEX KEY: 0001069021 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521854759 STATE OF INCORPORATION: MD FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-09 FILM NUMBER: 98711922 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERTUCCIS OF WHITE MARSH INC CENTRAL INDEX KEY: 0001069022 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521854760 STATE OF INCORPORATION: MD FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-62775-10 FILM NUMBER: 98711923 BUSINESS ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5088709200 MAIL ADDRESS: STREET 1: C/O NE RESTAURANT CO INC STREET 2: 80A TURNPIKE ROAD CITY: WESTBOROUGH STATE: MA ZIP: 01581 S-4/A 1 AMENDMENT NO. 1 TO FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998 REGISTRATION STATEMENT NO. 333-62775 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- NE RESTAURANT COMPANY, INC. AND THE GUARANTORS LISTED IN SCHEDULE A (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) --------------- SEE SCHEDULE A SEE SCHEDULE A SEE SCHEDULE A (STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER JURISDICTION INDUSTRIAL IDENTIFICATION NUMBER) OF INCORPORATION OR CLASSIFICATION CODE ORGANIZATION) NO.) --------------- 80A TURNPIKE ROAD WESTBOROUGH, MASSACHUSETTS 01581 (508) 870-9200 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) DENNIS PEDRA PRESIDENT AND CHIEF EXECUTIVE OFFICER NE RESTAURANT COMPANY, INC. 80A TURNPIKE ROAD WESTBOROUGH, MASSACHUSETTS 01581 (508) 870-9200 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) WITH A COPY TO: DAVID H. KAUFMAN, ESQ. STROOCK & STROOCK & LAVAN LLP 180 MAIDEN LANE NEW YORK, NEW YORK 10038 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE - ------------------------------------------------------------------------------- 10 3/4% Senior Notes due 2008................... $100,000,000 100% $100,000,000 $29,500(2) - ------------------------------------------------------------------------------- Guarantees of the 10 3/4% Senior Notes due 2008................... $100,000,000 N/A N/A (3)
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f). (2) Paid upon the initial filing of the Registration Statement on September 2, 1998. (3) This Registration Statement covers the Guarantees to be issued under the 10 3/4% Senior Notes due 2008. Such Guarantees are to be issued for no additional consideration and therefore no registration fee is required. --------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SCHEDULE A
STATE OR OTHER JURISDICTION PRIMARY STANDARD OF INCORPORATION OR INDUSTRIAL CLASSIFICATION I.R.S. EMPLOYER REGISTRANT ORGANIZATION CODE NO. IDENTIFICATION NUMBER ---------- --------------------------- ------------------------- --------------------- NE Restaurant Company, Inc.................... Delaware 5812 06-1311266 STATE OR OTHER JURISDICTION PRIMARY STANDARD OF INCORPORATION OR INDUSTRIAL CLASSIFICATION I.R.S. EMPLOYER GUARANTORS ORGANIZATION CODE NO. IDENTIFICATION NUMBER ---------- --------------------------- ------------------------- --------------------- Bertucci's, Inc......... Massachusetts 5812 04-2947209 Bertucci's Restaurant Corp................... Massachusetts 5812 04-2844750 Bertucci's Securities Corporation............ Massachusetts 6719 04-3132772 Berestco, Inc........... Massachusetts 9999 04-3173720 Sal & Vinnie's Sicilian Steakhouse, Inc........ Massachusetts 5812 04-3260622 Bertucci's of Anne Arundel County, Inc.... Maryland 5812 52-1854761 Bertucci's of Columbia, Inc.................... Maryland 5812 52-1854758 Bertucci's of Baltimore County, Inc............ Maryland 5812 52-1819001 Bertucci's of Bel Air, Inc.................... Maryland 5812 52-1854759 Bertucci's of White Marsh, Inc............. Maryland 5812 52-1854760
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION ------- ----------- 2.1* Agreement and Plan of Merger, dated as of May 13, 1998 among Bertucci's, Inc., NE Restaurant Company, Inc. ("NERCO") and NERC Acquisition Corp. 3.1* Certificate of Incorporation of NERCO. 3.2* Certificate of Amendment of Certificate of Incorporation of NERCO, dated August 1, 1998. 3.3* Certificate of Amendment of Certificate of Incorporation of NERCO, dated August 20, 1998. 3.4* By-laws of NERCO. 4.1* Indenture, dated July 20, 1998 between NERCO and United States Trust Company of New York ("U.S. Trust") as Trustee (including the form of 10 3/4% Senior Note due July 15, 2008). 4.2* Supplemental Indenture, dated as of July 21, 1998 by and among Bertucci's, Inc., Bertucci's Restaurant Corp., Bertucci's Securities Corporation, Berestco, Inc., Sal & Vinnie's Sicilian Steakhouse, Inc., Bertucci's of Anne Arundel County, Inc., Bertucci's of Columbia, Inc., Bertucci's of Baltimore County, Inc., Bertucci's of Bel Air, Inc. and Bertucci's of White Marsh, Inc. (collectively, the "Guarantors"), NERCO and U.S. Trust. 4.3* Purchase Agreement, dated July 13, 1998 by and among NERCO, Chase Securities Inc. and BancBoston Securities Inc. 4.4* Amendment No. 1 to the Purchase Agreement, dated July 21, 1998 by and among NERCO, Chase Securities Inc., BancBoston Securities Inc. and the Guarantors. 4.5* Exchange and Registration Rights Agreement, dated July 20, 1998 by and among NERCO, Chase Securities Inc. and BancBoston Securities Inc. 4.6* Amendment No. 1 to Exchange and Registration Rights Agreement, dated July 21, 1998 by and among NERCO, Chase Securities Inc., BancBoston Securities Inc. and the Guarantors. 4.7* Form of Stockholders Agreement, dated as of December 31, 1993 between the stockholders of NERCO and NERCO. 4.8* Form of Stockholders Agreement, dated September 15, 1997 by and among certain stockholders of NERCO and NERCO. 5.1** Opinion of Stroock & Stroock & Lavan LLP as to the legality of the Exchange Notes. 10.1* 1997 Equity Incentive Plan of NERCO, dated September 15, 1997 for certain key employees and directors of NERCO. 10.2** Form of NE Restaurant Company, Inc. 401(k) Profit Sharing Plan, dated January 1, 1996. 10.3** Form of NE Restaurant Company Deferred Compensation Plan for certain eligible executives of NERCO. 10.4* Employment Agreement by and between NE Restaurant Company Limited Partnership, NE Restaurant (Glastonbury) Limited Partnership and NE Restaurant (Cambridge) Limited Partnership (collectively, the "Partnerships"), the respective general partners of the Partnerships, NERCO, NE Restaurant (Connecticut), Inc. and NE Restaurant (Cambridge), Inc. and Dennis D. Pedra, dated September 30, 1991 (the "Pedra Employment Agreement"). 10.5* Employment Agreement by and between NE Restaurant Company Limited Partnership, NE Restaurant (Glastonbury) Limited Partnership and NE Restaurant (Cambridge) Limited Partnership (collectively, the "Partnerships"), the respective general partners of the Partnerships, NERCO, NE Restaurant (Connecticut), Inc. and NE Restaurant (Cambridge), Inc. and Paul V. Hoagland, dated September 30, 1991 (the "Hoagland Employment Agreement"). 10.6* Amendment to the Pedra Employment Agreement, dated December 31, 1993. 10.7* Amendment to the Hoagland Employment Agreement, dated December 31, 1993. 10.8** Form of Chili's Grill & Bar Restaurant Development Agreement, dated May 17, 1994 between Brinker International, Inc. and NERCO. 10.9** On The Border Restaurant Development Agreement, dated June 23, 1997 between Brinker International, Inc. and NERCO (including form of Franchise Agreement). 10.10** Lease of Headquarters of the Company at 80A Turnpike Road, Westborough, Massachusetts, dated September 30, 1997, as amended on March 25, 1998.
II-1
EXHIBIT NO. DESCRIPTION ------- ----------- 10.11* Form of Credit Agreement among BankBoston, N.A., Chase Bank of Texas, N.A., NERCO, the Guarantors and Bertucci's of Montgomery County, Inc., dated as of July 21, 1998. 10.12* Form of Management Incentive Agreement. 10.13** Loan Agreement, dated August 6, 1997 by and between FFCA Acquisition Corporation and NERC Limited Partnership. 10.14** First Amendment to Loan Agreement, dated August 6, 1997 by and between FFCA Acquisition Corporation and NERC Limited Partnership. 10.15** Form of Promissory Note between FFCA Acquisition Corporation and NERC Limited Partnership. 10.16** Custom Distribution Agreement between Bertucci's Restaurant Corp., Inc. and Ferraro Foods, Inc., dated May 13, 1998. 10.17** Distribution Agreement between NE Restaurant Company, Inc. and Alliant Foodservice, Inc., dated June 25, 1997. 10.18** Form of Amendment to NE Restaurant Company, Inc. 401(k) Profit Sharing Plan, dated April 29, 1996. 10.19** Form of Amendment of Chili's Grill & Bar Restaurant Development Agreement, dated as of June 1, 1997 by and between Brinker International, Inc. and NE Restaurant Company, Inc. 10.20** Form of Chili's Grill & Bar Restaurant Franchise Agreement between Brinker International, Inc. and NE Restaurant Company, Inc. 10.21** Financial Advisory Services Agreement, dated July 21, 1998 by and between the Company and Jacobson Partners. 10.22** Loan Agreement, dated June 30, 1998 by and between FFCA Acquisition Corporation and NERC Limited Partnership II. 10.23** Form of Promissory Note between FFCA Acquisition Corporation and NERC Limited Partnership II. 12.1* Statement Regarding Computation of Ratio of Earnings to Fixed Charges. 21.1* Subsidiaries of Registrant. 23.1** Consent of Arthur Andersen LLP. 23.2** Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.1). 24.1* Power of Attorney of certain officers and directors of NERCO (included in signature page). 25.1** Form T-1 Statement of Eligibility of U.S. Trust to act as Trustee under the Indenture. 27.1** Financial Data Schedule of NERCO. 27.2** Financial Data Schedule of Bertucci's, Inc. 99.1** Form of Letter of Transmittal. 99.2** Form of Notice of Guaranteed Delivery. 99.3** Form of Letter to Nominees. 99.4** Form of Letter to Clients. 99.5** Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
- -------- * Previously filed ** Filed herewith II-2 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON SEPTEMBER 18, 1998. NE RESTAURANT COMPANY, INC. ("NERCO") AND THE GUARANTORS LISTED ON ANNEX A-1 * By: _________________________________ NAME: PAUL HOAGLAND TITLE: VICE PRESIDENT, FINANCE OF NERCO, BERTUCCI'S, INC., BERTUCCI'S RESTAURANT CORP., BERTUCCI'S SECURITIES CORPORATION, BERESTCO, INC. AND SAL & VINNIE'S SICILIAN STEAKHOUSE, INC. AND TREASURER OF BERTUCCI'S OF ANNE ARUNDEL COUNTY, INC. AND BERTUCCI'S OF COLUMBIA, INC. THE GUARANTORS LISTED ON ANNEX A-2 (AND, TOGETHER WITH THE GUARANTORS LISTED ON ANNEX A-1, THE "GUARANTORS") * By: _________________________________ NAME: GARY SCHWAB TITLE: PRESIDENT OF BERTUCCI'S OF BEL AIR, INC. AND VICE PRESIDENT OF BERTUCCI'S OF BALTIMORE COUNTY, INC. AND BERTUCCI'S OF WHITE MARSH, INC. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON SEPTEMBER 18, 1998.
SIGNATURE CAPACITY --------- -------- * Treasurer and Director of ______________________________________ NERCO and Bertucci's, Inc., BENJAMIN R. JACOBSON Chairman of the Board of Directors and Treasurer of each Guarantor listed on Annex B and Director of Bertucci's of Anne Arundel County, Inc. * President and Director of ______________________________________ NERCO and each Guarantor DENNIS D. PEDRA listed on Annex C.
II-3
SIGNATURE CAPACITY --------- -------- * Vice President-Finance, ______________________________________ Assistant Treasurer and PAUL V. HOAGLAND Director of NERCO and Bertucci's, Inc., Vice President, Finance and Director of each Guarantor listed on Annex B, Director of Bertucci's of Baltimore County, Inc., Bertucci's of White Marsh, Inc. and Bertucci's of Bel Air, Inc., and Treasurer, Secretary and Director of Bertucci's of Anne Arundel County, Inc. and Bertucci's of Columbia, Inc. /s/ David A. Roosevelt Director of each Guarantor ______________________________________ listed on Annex D. DAVID A. ROOSEVELT * Vice President, Secretary ______________________________________ and Director of Bertucci's GARY S. SCHWAB of Baltimore County, Inc. and Bertucci's of White Marsh, Inc. and President and Director of Bertucci's of Bel Air, Inc. * President, Treasurer and ______________________________________ Director of Bertucci's of PAUL J. SEIDMAN Baltimore County, Inc. and Bertucci's of White Marsh, Inc. and Vice President, Treasurer and Director of Bertucci's of Bel Air, Inc.
*By /s/ David A. Roosevelt ______________________________________ DAVID A. ROOSEVELT ATTORNEY-IN-FACT II-4 ANNEX A-1 Bertucci's, Inc. Bertucci's Restaurant Corp. Bertucci's Securities Corporation Berestco, Inc. Sal & Vinnie's Sicilian Steakhouse, Inc. Bertucci's of Anne Arundel County, Inc. Bertucci's of Columbia, Inc. A-1 ANNEX A-2 Bertucci's of Baltimore County, Inc. Bertucci's of Bel Air, Inc. Bertucci's of White Marsh, Inc. A-2 ANNEX B Bertucci's Restaurant Corp. Bertucci's Securities Corporation Berestco, Inc. Sal & Vinnie's Sicilian Steakhouse, Inc. B-1 ANNEX C Bertucci's, Inc. Bertucci's Restaurant Corp. Bertucci's Securities Corporation Berestco, Inc. Sal & Vinnie's Sicilian Steakhouse, Inc. Bertucci's of Anne Arundel County, Inc. Bertucci's of Columbia, Inc. C-1 ANNEX D Bertucci's, Inc. Bertucci's Restaurant Corp. Bertucci's Securities Corporation Berestco, Inc. Sal & Vinnie's Sicilian Steakhouse, Inc. Bertucci's of Anne Arundel County, Inc. D-1 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ------- ----------- 2.1* Agreement and Plan of Merger, dated as of May 13, 1998 among Bertucci's, Inc., NE Restaurant Company, Inc. ("NERCO") and NERC Acquisition Corp. 3.1* Certificate of Incorporation of NERCO. 3.2* Certificate of Amendment of Certificate of Incorporation of NERCO, dated August 1, 1998. 3.3* Certificate of Amendment of Certificate of Incorporation of NERCO, dated August 20, 1998. 3.4* By-laws of NERCO. 4.1* Indenture, dated July 20, 1998 between NERCO and United States Trust Company of New York ("U.S. Trust") as Trustee (including the form of 10 3/4% Senior Note due July 15, 2008). 4.2* Supplemental Indenture, dated as of July 21, 1998 by and among Bertucci's, Inc., Bertucci's Restaurant Corp., Bertucci's Securities Corporation, Berestco, Inc., Sal & Vinnie's Sicilian Steakhouse, Inc., Bertucci's of Anne Arundel County, Inc., Bertucci's of Columbia, Inc., Bertucci's of Baltimore County, Inc., Bertucci's of Bel Air, Inc. and Bertucci's of White Marsh, Inc. (collectively, the "Guarantors"), NERCO and U.S. Trust. 4.3* Purchase Agreement, dated July 13, 1998 by and among NERCO, Chase Securities Inc. and BancBoston Securities Inc. 4.4* Amendment No. 1 to the Purchase Agreement, dated July 21, 1998 by and among NERCO, Chase Securities Inc., BancBoston Securities Inc. and the Guarantors. 4.5* Exchange and Registration Rights Agreement, dated July 20, 1998 by and among NERCO, Chase Securities Inc. and BancBoston Securities Inc. 4.6* Amendment No. 1 to Exchange and Registration Rights Agreement, dated July 21, 1998 by and among NERCO, Chase Securities Inc., BancBoston Securities Inc. and the Guarantors. 4.7* Form of Stockholders Agreement, dated as of December 31, 1993 between the stockholders of NERCO and NERCO. 4.8* Form of Stockholders Agreement, dated September 15, 1997 by and among certain stockholders of NERCO and NERCO. 5.1** Opinion of Stroock & Stroock & Lavan LLP as to the legality of the Exchange Notes. 10.1* 1997 Equity Incentive Plan of NERCO, dated September 15, 1997 for certain key employees and directors of NERCO. 10.2** Form of NE Restaurant Company, Inc. 401(k) Profit Sharing Plan, dated January 1, 1996. 10.3** Form of NE Restaurant Company Deferred Compensation Plan for certain eligible executives of NERCO. 10.4* Employment Agreement by and between NE Restaurant Company Limited Partnership, NE Restaurant (Glastonbury) Limited Partnership and NE Restaurant (Cambridge) Limited Partnership (collectively, the "Partnerships"), the respective general partners of the Partnerships, NERCO, NE Restaurant (Connecticut), Inc. and NE Restaurant (Cambridge), Inc. and Dennis D. Pedra, dated September 30, 1991 (the "Pedra Employment Agreement"). 10.5* Employment Agreement by and between NE Restaurant Company Limited Partnership, NE Restaurant (Glastonbury) Limited Partnership and NE Restaurant (Cambridge) Limited Partnership (collectively, the "Partnerships"), the respective general partners of the Partnerships, NERCO, NE Restaurant (Connecticut), Inc. and NE Restaurant (Cambridge), Inc. and Paul V. Hoagland, dated September 30, 1991 (the "Hoagland Employment Agreement"). 10.6* Amendment to the Pedra Employment Agreement, dated December 31, 1993. 10.7* Amendment to the Hoagland Employment Agreement, dated December 31, 1993. 10.8** Form of Chili's Grill & Bar Restaurant Development Agreement, dated May 17, 1994 between Brinker International, Inc. and NERCO. 10.9** On The Border Restaurant Development Agreement, dated June 23, 1997 between Brinker International, Inc. and NERCO (including form of Franchise Agreement). 10.10** Lease of Headquarters of the Company at 80A Turnpike Road, Westborough, Massachusetts, dated September 30, 1997, as amended on March 25, 1998.
1
EXHIBIT NO. DESCRIPTION ------- ----------- 10.11* Form of Credit Agreement among BankBoston, N.A., Chase Bank of Texas, N.A., NERCO, the Guarantors and Bertucci's of Montgomery County, Inc., dated as of July 21, 1998. 10.12* Form of Management Incentive Agreement. 10.13** Loan Agreement, dated August 6, 1997 by and between FFCA Acquisition Corporation and NERC Limited Partnership. 10.14** First Amendment to Loan Agreement, dated August 6, 1997 by and between FFCA Acquisition Corporation and NERC Limited Partnership. 10.15** Form of Promissory Note between FFCA Acquisition Corporation and NERC Limited Partnership. 10.16** Custom Distribution Agreement between Bertucci's Restaurant Corp., Inc. and Ferraro Foods, Inc., dated May 13, 1998. 10.17** Distribution Agreement between NE Restaurant Company, Inc. and Alliant Foodservice, Inc., dated June 25, 1997. 10.18** Form of Amendment to NE Restaurant Company, Inc. 401(k) Profit Sharing Plan, dated April 29, 1996. 10.19** Form of Amendment of Chili's Grill & Bar Restaurant Development Agreement, dated as of June 1, 1997 by and between Brinker International, Inc. and NE Restaurant Company, Inc. 10.20** Form of Chili's Grill & Bar Restaurant Franchise Agreement between Brinker International, Inc. and NE Restaurant Company, Inc. 10.21** Financial Advisory Services Agreement, dated July 21, 1998 by and between the Company and Jacobson Partners. 10.22** Loan Agreement, dated June 30, 1998 by and between FFCA Acquisition Corporation and NERC Limited Partnership II. 10.23** Form of Promissory Note between FFCA Acquisition Corporation and NERC Limited Partnership II. 12.1* Statement Regarding Computation of Ratio of Earnings to Fixed Charges. 21.1* Subsidiaries of Registrant. 23.1** Consent of Arthur Andersen LLP. 23.2** Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.1). 24.1* Power of Attorney of certain officers and directors of NERCO (included in signature page). 25.1** Form T-1 Statement of Eligibility of U.S. Trust to act as Trustee under the Indenture. 27.1** Financial Data Schedule of NERCO. 27.2** Financial Data Schedule of Bertucci's, Inc. 99.1** Form of Letter of Transmittal. 99.2** Form of Notice of Guaranteed Delivery. 99.3** Form of Letter to Nominees. 99.4** Form of Letter to Clients. 99.5** Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
- -------- * Previously filed ** Filed herewith 2 EX-5.1 2 OPINION OF STROOK & STROOK & LAVAN LLP EXHIBIT 5.1 STROOCK & STROOCK & LAVAN LLP 180 Maiden Lane New York, New York 10038 September 18, 1998 NE Restaurant Company, Inc. 80A Turnpike Road Westborough, MA 01581 Re: Registration Statement on Form S-4 (File No. 333-62775) ------------------ Ladies and Gentlemen: We have acted as special counsel to NE Restaurant Company, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-4 (the "Registration Statement") relating to (i) the offer (the "Exchange Offer") by the Company to exchange $1,000 principal amount of its 10 3/4% Senior Notes due 2008 (the "Exchange Notes") for each $1,000 principal amount of its outstanding 10 3/4% Senior Notes due 2008 (the "Private Notes"), of which $100,000,000 aggregate principal amount was issued and sold on July 20, 1998 in a transaction exempt from registration under the Act and is outstanding on the date hereof and (ii) the registration by the Subsidiary Guarantors (as defined in the Registration Statement) of certain guarantees of the Exchange Notes (the "Subsidiary Guarantees"). The Private Notes were issued, and the Exchange Notes are to be issued, under the Indenture dated as of July 20, 1998 between the Company and United States Trust Company of New York, as trustee (the "Trustee"), as supplemented by the Supplemental Indenture dated as of July 21, 1998 by and among the Company, the Subsidiary Guarantors and the Trustee (such Indenture and Supplemental Indenture are collectively referred to herein as the "Indenture"). As such counsel, we have examined originals or copies of (i) the Certificate of Incorporation and By-Laws of the Company and the Subsidiary Guarantors, each as amended to date, (ii) the Indenture and (iii) the Registration Statement. We have also examined original, reproduced or certified copies of all such records of the Company, such agreements and such certificates of officers and representatives of the Company and others, and such statutes and authorities, as we have deemed relevant and necessary to form the basis of the opinions hereinafter expressed. In such examinations, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of the copies of documents supplied to us as copies thereof. As to various matters of fact material to the opinions hereinafter expressed, we have relied on representations, statements and certificates of officers and representatives of the Company and others. NE Restaurant Company, Inc. September 18, 1998 Page 2 For purposes of the opinions hereinafter expressed, we have assumed that (a) each party (other than the Company and the Subsidiary Guarantors) to any document, including, without limitation, the Indenture, has the power to enter into and perform all its obligations thereunder, (b) each such party (other than the Company and the Subsidiary Guarantors) has taken all necessary actions to authorize the due execution, delivery and performance of such document by it, and (c) each such document is the legal, valid and binding obligation of each such party (other than the Company and the Subsidiary Guarantors) thereto. Attorneys involved in the preparation of this opinion are admitted to practice law in the State of New York and the Commonwealth of Massachusetts and we do not purport to express any opinion herein concerning any laws other than the laws of the State of New York, the Commonwealth of Massachusetts, the federal laws of the United States of America and the Delaware General Corporation Law. For purposes of the opinions hereinafter expressed, we have assumed that, insofar as applicable, the corporate law of the State of Maryland is in all material respects identical to the Delaware General Corporation Law. With respect to the opinions set forth in numbered paragraphs 1, 2 and 3 below, we express no opinion as to the validity or enforceability of rights of indemnity or contribution, or both. Moreover, our opinions in such paragraphs are subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the rights of creditors generally and to general principles of equity. Based upon and subject to the foregoing, we are of the opinion that: 1. The execution and delivery of the Indenture have been duly authorized by the Company and the Subsidiary Guarantors and the Indenture constitutes a valid and binding obligation of the Company and the Subsidiary Guarantors, enforceable against the Company and each Subsidiary Guarantor in accordance with its terms. 2. The Exchange Notes have been duly and validly authorized and, when duly executed by the proper officers of the Company, duly authenticated by the Trustee and issued by the Company in accordance with the terms of the Indenture and the Exchange Offer, will constitute the legal, valid and binding obligations of the Company and will be entitled to the benefits of the Indenture. 3. Each Subsidiary Guarantee has been duly and validly authorized by all necessary action on the part of the applicable Subsidiary Guarantor and when made and delivered as described in the Registration Statement and Indenture, such Subsidiary Guarantee will constitute the valid and binding obligation of the applicable Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms. NE Restaurant Company, Inc. September 18, 1998 Page 3 We consent to being named in the Registration Statement and related prospectus as counsel who are passing upon the legality of the Exchange Notes for the Company and to the reference to our name under the caption "Legal Matters" in such prospectus. We also consent to the filing of this opinion as an exhibit to the Registration Statement or any amendment thereto. In giving such consents, we do not admit hereby that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. No one other than the addressee indicated first above shall be entitled to rely on this opinion. Very truly yours, /s/ STROOCK & STROOCK & LAVAN LLP STROOCK & STROOCK & LAVAN LLP EX-10.2 3 FORM OF NE RESTAURANT COMPANY, 401 (K) PROFIT EXHIBIT 10.2 ------------------------------------------------------------- FORM OF MERRILL LYNCH ------------- SPECIAL ------------- PROTOTYPE DEFINED CONTRIBUTION PLAN ADOPTION AGREEMENT ------------------------------------------------------------- 401(K) PLAN EMPLOYEE THRIFT PLAN PROFIT-SHARING PLAN LETTER SERIAL NUMBER: D359287B NATIONAL OFFICE LETTER DATE: 6/29/93 THIS PROTOTYPE PLAN AND ADOPTION AGREEMENT ARE IMPORTANT LEGAL INSTRUMENTS WITH LEGAL AND TAX IMPLICATIONS FOR WHICH THE SPONSOR, MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED, DOES NOT ASSUME RESPONSIBILITY. THE EMPLOYER IS URGED TO CONSULT WITH ITS OWN ATTORNEY WITH REGARD TO THE ADOPTION OF THIS PLAN AND ITS SUITABILITY TO ITS CIRCUMSTANCES. ADOPTION OF PLAN The Employer named below hereby establishes or restates a profit-sharing plan that includes a |X|401(k), |X|profit-sharing and/or |_| thrift plan feature (the "Plan") by adopting the Merrill Lynch Special Prototype Defined Contribution Plan and Trust as modified by the terms and provisions of this Adoption Agreement. EMPLOYER AND PLAN INFORMATION Employer Name:* N.E. RESTAURANT COMPANY, INC. Business Address: 300 POND STREET RANDOLPH, MASSACHUSETTS 02368 Telephone Number: (617) 986-4600 Employer Taxpayer ID Number: 06-1311266 Employer Taxable Year ends on: DECEMBER 31ST Plan Name: N.E. RESTAURANT COMPANY, INC. 401(K) PROFIT SHARING PLAN Plan Number: 001 Profit 401(k) Sharing Thrift Effective Date of Adoption or Restatement: 01/01/96 01/01/96 Tax Reform Act of 1986 Restatement Date: Original Effective Date: 09/01/92 09/01/92 IF THIS PLAN IS A CONTINUATION OR AN AMENDMENT OF A PRIOR PLAN, ALL OPTIONAL FORMS OF BENEFITS PROVIDED IN THE PRIOR PLAN MUST BE PROVIDED UNDER THIS PLAN TO ANY PARTICIPANT WHO HAD AN ACCOUNT BALANCE, WHETHER OR NOT VESTED, IN THE PRIOR PLAN. - ---------------------- * If there are any Participating Affiliates in this Plan, list below the proper name of each Participating Affiliate. ARTICLE I. DEFINITIONS A. "COMPENSATION" (1) With respect to each Participant, except as provided below, Compensation shall mean the (select all those applicable for each column): 401(K) AND/ Profit OR THRIFT Sharing |_| |_| (a) amount reported in the "Wages Tips and Other Compensation" Box on Form W-2 for the applicable period selected in Item 5 below. |_| |_| (b) compensation for Code Section 415 safe-harbor purposes (as defined in Section 3.9.1(H)(i) of basic plan document #03) for the applicable period selected in Item 5 below. |X| |X| (c) amount reported pursuant to Code Section 3401(a) for the applicable period selected in Item 5 below. |_| |_| (d) all amounts received (under either option (a) or (b) above) for personal services rendered to the Employer but excluding (select one): |_| overtime |_| bonuses |_| commissions |_| amounts in excess of $ |_| other (specify) _____. (2) Treatment of Elective Contributions (select one): |X| (a) For purposes of contributions, Compensation shall include Elective Deferrals and amounts excludable from the gross income of the Employee under Code Section 125, Code Section 402(e)(3), Code Section 402(h) or Code Section 403(b) ("elective contributions"). |_| (b) For purposes of contributions, Compensation shall not include "elective contributions." (3) CODA Compensation (select one): |X| (a) For purposes of the ADP and ACP Tests, Compensation shall include "elective contributions." |X| (b) For purposes of the ADP and ACP Tests, Compensation shall not include "elective contributions." (4) With respect to Contributions to an Employer Contributions Account, Compensation shall include all Compensation (select one): |_| (a) during the Plan Year in which the Participant enters the Plan. |X| (b) after the Participant's Entry Date. (5) The applicable period for determining Compensation shall be (select one): |X| (a) the Plan Year. |_| (b) the Limitation Year. |_| (c) the consecutive 12-month period ending on ___________. B. "DISABILITY" (1) DEFINITION Disability shall mean a condition which results in the Participant's (select one): |_| (a) inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. |X| (b) total and permanent inability to meet the requirements of the Participant's customary employment which can be expected to last for a continuous period of not less than 12 months. |_| (c) qualification for Social Security disability benefits. |_| (d) qualification for benefits under the Employer's long-term disability plan. (2) CONTRIBUTIONS DUE TO DISABILITY (select one): |X| (a) No contributions to an Employer Contributions Account will be made on behalf of a Participant due to his or her Disability. |_| (b) Contributions to an Employer Contributions Account will be made on behalf of a Participant due to his or her Disability PROVIDED THAT: the Employer elected option (a) or (c) above as the definition of Disability, contributions are not made on behalf of a Highly Compensated Employee, the contribution is based on the Compensation each such Participant would have received for the Limitation Year if the Participant had been paid at the rate of Compensation paid immediately before his or her Disability, and contributions made on behalf of such Participant will be nonforfeitable when made. C. "EARLY RETIREMENT" is (select one): |X| (1) not permitted. |_| (2) permitted if a Participant terminates Employment before Normal Retirement Age and has (select one): |_| (a) attained age ____. |_| (b) attained age ____ and completed _____ Years of Service. |_| (c) attained age ____ and completed _____ Years of Service as a Participant. D. "ELIGIBLE EMPLOYEES" (select one): |_| (1) All Employees are eligible to participate in the Plan. |X| (2) The following Employees are not eligible to participate in the Plan (select all those applicable): |X| (a) Employees included in a unit of Employees covered by a collective bargaining agreement between the Employer or a Participating Affiliate and the Employee representatives (not including any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer or Participating Affiliate) in the negotiation of which retirement benefits were the subject of good faith bargaining, unless the bargaining agreement provides for participation in the Plan. |X| (b) non-resident aliens who received no earned income from the Employer or a Participating Affiliate which constitutes income from sources within the United States. |_| (c) Employees of an Affiliate. |X| (d) Employees employed in or by the following specified division, plant, location, job category or other identifiable individual or group of Employees: HOURLY PAID EMPLOYEES. If item (d) above is checked, certain employees who are not Eligible Employees shall become Participants under the following circumstances: If, in any calendar quarter, there is no day on which the percentage test described in Internal Revenue Code section 410(b) is met, additional Employees shall become Participants (or, if an Employee previously became a Participant, shall resume participation) as of the beginning of the Plan Year, or if later, the date such Employee would have become a Participant under Article I, Section E, below. Said Employees shall become Participants in order of decreasing length of service beginning with such Employees having the longest service as of the end of such calendar quarter, until the percentage test is met. E. "ENTRY DATE" Entry Date shall mean (select as applicable): 401(K) AND/ Profit- OR THRIFT Sharing |_| |_| (1) If the initial Plan Year is less than twelve months, the __ day of ____________ and thereafter: |_| |_| (2) the first day of the Plan Year following the date the Employee meets the eligibility requirements. If the Employer elects this option (2) establishing only one Entry Date, the eligibility "age and service" requirements elected in Article II must be no more than age 20-1/2 and 6 months of service. |X| |X| (3) the first day of the month following the date the Employee meets the eligibility requirements. |_| |_| (4) the first day of the Plan Year and the first day of the seventh month of the Plan Year following the date the Employee meets the eligibility requirements. |_| |_| (5) the first day of the Plan Year, the first day of the fourth month of the Plan Year, the first day of the seventh month of the Plan Year, and the first day of the tenth month of the Plan Year following the date the Employee meets the eligibility requirements. |_| |_| (6) other: ________. provided that the Entry Date or Dates selected are no later than any of the options above. F. "HOURS OF SERVICE" Hours of Service for the purpose of determining a Participant's Period of Severance and Year of Service shall be determined on the basis of the method specified below: (1) ELIGIBILITY SERVICE: For purposes of determining whether a Participant has satisfied the eligibility requirements, the following method shall be used (select one): 401(K) AND/ Profit- OR THRIFT Sharing |X| |X| (a) elapsed time method |_| |_| (b) hourly records method (2) VESTING SERVICE: A Participant's nonforfeitable interest shall be determined on the basis of the method specified below (select one): |_| (a) elapsed time method |X| (b) hourly records method |_| (c) If this item (c) is checked, the Plan only provides for contributions that are always 100% vested and this item (2) will not apply. (3) HOURLY RECORDS: For the purpose of determining Hours of Service under the hourly record method (select one): |X| (a) only actual hours for which an Employee is paid or entitled to payment shall be counted. |_| (b) an Employee shall be credited with 45 Hours of Service if such Employee would be credited with at least 1 Hour of Service during the week. G. "INTEGRATION LEVEL" |X| (1) This Plan is not integrated with Social Security. |_|(2) This Plan is integrated with Social Security. The Integration Level shall be (select one): |_| (a) the Taxable Wage Base. |_| (b) $________ (a dollar amount less than the Taxable Wage Base). |_| (c) ______% of the Taxable Wage Base (not to exceed 100%). |_| (d) the greater of $10,000 or 20% of the Taxable Wage Base. H. "LIMITATION COMPENSATION" For purposes of Code Section 415, Limitation Compensation shall be compensation as determined for purposes of (select one): |_| (1) Code Section 415 Safe-Harbor as defined in Section 3.9.1(H)(i) of basic plan document #03. |_| (2) the "Wages, Tips and Other Compensation" Box on Form W-2. |X| (3) Code Section 3401(a) Federal Income Tax Withholding. I. "LIMITATION YEAR" For purposes of Code Section 415, the Limitation Year shall be (select one): |X| (1) the Plan Year. |_| (2) the twelve consecutive month period ending on the _____ day of the month of -----. J. "NET PROFITS" are (select one): |X| (1) not necessary for any contribution. |_| (2) necessary for (select all those applicable): |_| (a) Profit-Sharing Contributions. |_| (b) Matching 401(k) Contributions. |_| (c) Matching Thrift Contributions. K. "NORMAL RETIREMENT AGE" Normal Retirement Age shall be (select one): |X| (1) attainment of age 65 (not more than 65) by the Participant. |_| (2) attainment of age ____ (not more than 65) by the Participant or the _____ anniversary (not more than the 5th) of the first day of the Plan Year in which the Eligible Employee became a Participant, whichever is later. |_| (3) attainment of age ____ (not more than 65) by the Participant or the _____ anniversary (not more than the 5th) of the first day on which the Eligible Employee performed an Hour of Service, whichever is later. L. "PARTICIPANT DIRECTED ASSETS" ARE: 401(K) AND/ Profit- OR THRIFT Sharing |_| |_| (1) permitted. |X| |X| (2) not permitted. M. "PLAN YEAR" The Plan Year shall end on the 31ST day of DECEMBER. N. "PREDECESSOR SERVICE" Predecessor service will be credited (select one): |X| (1) only as required by the Plan. |_| (2) to include, in addition to the Plan requirements and subject to the limitations set forth below, service with the following predecessor employer(s) determined as if such predecessors were the Employer: _______. Service with such predecessor employer applies [select either or both (a) and/or (b); (c) is only available in addition to (a) and/or (b)]: |_| (a) for purposes of eligibility to participate; |_| (b) for purposes of vesting; |_| (c) except for the following service: ______. O. "VALUATION DATE" Valuation Date shall mean (select one for each column, as applicable): 401(K) AND/ Profit- OR THRIFT Sharing |_| |_| (1) the last business day of each month. |_| |_| (2) the last business day of each quarter within the Plan Year. |X| |X| (3) the last business day of each semi-annual period within the Plan Year. |_| |_| (4) the last business day of the Plan Year |_| |_| (5) other: ______. ARTICLE II. PARTICIPATION PARTICIPATION REQUIREMENTS An Eligible Employee must meet the following requirements to become a Participant (select one or more for each column, as applicable): 401(K) AND/ Profit- OR THRIFT Sharing |_| |_| (1) Performance of one Hour of Service. |X| |X| (2) Attainment of age 21 (maximum 20 1/2) and completion of 1/2 (not more than 1/2) Years of Service. If this item is selected, no Hours of Service shall be counted. |_| |_| (3) Attainment of age 21 (maximum 21) and completion of 1 Year(s) of Service. If more than one Year of Service is selected, the immediate 100% vesting schedule must be selected in Article VII of this Adoption Agreement. |_| |_| (4) Attainment of age ____(maximum 21) and completion of ___ Years of Service. If more than one Year of Service is selected, the immediate 100% vesting schedule must be selected in Article VII of this Adoption Agreement. |X| |X| (5) Each Employee who is an Eligible Employee on 09/01/92 will be deemed to have satisfied the participation requirements on the effective date without regard to such Eligible Employee's actual age and/or service. ARTICLE III. 401(K) CONTRIBUTIONS AND ACCOUNT ALLOCATION A. ELECTIVE DEFERRALS If selected below, a Participant's Elective Deferrals will be (select all applicable): |X| (1) a dollar amount or a percentage of Compensation, as specified by the Participant on his or her 401(k) Election form, which may not exceed 20% of his or her Compensation. |_| (2) with respect to bonuses, such dollar amount or percentage as specified by the Participant on his or her 401(k) Election form with respect to such bonus. B. MATCHING 401(K) CONTRIBUTIONS If selected below, the Employer may make Matching 401(k) Contributions for each Plan Year (select one): |X| (1) Discretionary Formula: Discretionary Matching 401(k) Contribution equal to such a dollar amount or percentage of Elective Deferrals, as determined by the Employer, which shall be allocated (select one): |_| (a) based on the ratio of each Participant's Elective Deferral for the Plan Year to the total Elective Deferrals of all Participants for the Plan Year. If inserted, Matching 401(k) Contributions shall be subject to a maximum amount of $____ for each Participant or ____% of each Participant's Compensation. |X| (b) in an amount not to exceed 50% of each Participant's first 20% of Compensation contributed as Elective Deferrals for the Plan Year. If any Matching 401(k) Contribution remains, it is allocated to each such Participant in an amount not to exceed _____% of the next ____% of each Participant's Compensation contributed as Elective Deferrals for the Plan Year. Any remaining Matching 401(k) Contribution shall be allocated to each such Participant in the ratio that such Participant's Elective Deferral for the Plan Year bears to the total Elective Deferrals of all such Participants for the Plan Year. If inserted, Matching 401(k) Contributions shall be subject to a maximum amount of $_____ for each Participant or ______% of each Participant's Compensation. |_| (2) Nondiscretionary Formula: A nondiscretionary Matching 401(k) Contribution for each Plan Year equal to (select one): |_| (a) ____% of each Participant's Compensation contributed as Elective Deferrals. If inserted, Matching 401(k) Contributions shall be subject to a maximum amount of $______ for each Participant or ____% of each Participant's Compensation. |_| (b) ____% of the first ____% of the Participant's Compensation contributed as Elective Deferrals and ___% of the next ______% of the Participant's Compensation contributed as Elective Deferrals. If inserted, Matching 401(k) Contributions shall be subject to a maximum amount of $_______ for each Participant or ___% of each Participant's Compensation. C. PARTICIPANTS ELIGIBLE FOR MATCHING 401(K) CONTRIBUTION ALLOCATION The following Participants shall be eligible for an allocation to their Matching 401(k) Contributions Account (select all those applicable): |_| (1) Any Participant who makes Elective Deferrals. |X| (2) Any Participant who satisfies those requirements elected by the Employer for an allocation to his or her Employer Contributions Account as provided in Article IV Section C. |_| (3) Solely with respect to a Plan in which Matching 401(k) Contributions are made quarterly (or on any other regular interval that is more frequent than annually) any Participant whose 401(k) Election is in effect throughout such entire quarter (or other interval). D. QUALIFIED MATCHING CONTRIBUTIONS If selected below, the Employer may make Qualified Matching Contributions for each Plan Year (select all those applicable): (1) In its discretion, the Employer may make Qualified Matching Contributions on behalf of (select one): |X| (a) all Participants who make Elective Deferrals in that Plan Year. |_| (b) only those Participants who are Nonhighly Compensated Employees and who make Elective Deferrals for that Plan Year. (2) Qualified Matching Contributions will be contributed and allocated to each Participant in an amount equal to: |_| (a) ______% of the Participant's Compensation contributed as Elective Deferrals. If inserted, Qualified Matching Contributions shall not exceed ____% of the Participant's Compensation. |X| (b) Such an amount, determined by the Employer, which is needed to meet the ACP Test. (3) In its discretion, the Employer may elect to designate all or any part of Matching 401(k) Contributions as Qualified Matching Contributions that are taken into account as Elective Deferrals -- included in the ADP Test and excluded from the ACP Test -- on behalf of (select one): |X| (a) all Participants who make Elective Deferrals for that Plan Year. |_| (b) Only Participants who are Nonhighly Compensated Employees who make Elective Deferrals for that Plan Year. E. QUALIFIED NONELECTIVE CONTRIBUTIONS If selected below, the Employer may make Qualified Nonelective Contributions for each Plan Year (select all those applicable): (1) In its discretion, the Employer may make Qualified Nonelective Contributions on behalf of (select one): |_| (a) all Eligible Participants. |X| (b) only Eligible Participants who are Nonhighly Compensated Employees. (2) Qualified Nonelective Contributions will be contributed and allocated to each Eligible Participant in an amount equal to (select one): |_| (a) ____% (no more than 15%) of the Compensation of each Eligible Participant eligible to share in the allocation. |X| (b) Such an amount determined by the Employer, which is needed to meet either the ADP Test or ACP Test. (3) At the discretion of the Employer, as needed and taken into account as Elective Deferrals included in the ADP Test on behalf of (select one): |_| (a) all Eligible Participants. |X| (b) only those Eligible Participants who are Nonhighly Compensated Employees. F. ELECTIVE DEFERRALS USED IN ACP TEST (select one): |X| (1) At the discretion of the Employer, Elective Deferrals may be used to satisfy the ACP Test. |_| (2) Elective Deferrals may not be used to satisfy the ACP Test. G. MAKING AND MODIFYING A 401(K) ELECTION An Eligible Employee shall be entitled to increase, decrease or resume his or her Elective Deferral percentage with the following frequency during the Plan Year (select one): |_| (1) annually. |_| (2) semi-annually. |X| (3) quarterly. |_| (4)monthly. |_| (5) other (specify): ______. Any such increase, decrease or resumption shall be effective as of the first payroll period coincident with or next following the first day of each period set forth above. A Participant may completely discontinue making Elective Deferrals at any time effective for the payroll period after written notice is provided to the Administrator. ARTICLE IV. PROFIT-SHARING CONTRIBUTIONS AND ACCOUNT ALLOCATION A. PROFIT-SHARING CONTRIBUTIONS If selected below, the following contributions for each Plan Year will be made: Contributions to Employer Contributions Accounts (select one): |X| (a) Such an amount, if any, as determined by the Employer. |_| (b) _____% of each Participant's Compensation. B. ALLOCATION OF CONTRIBUTIONS TO EMPLOYER CONTRIBUTIONS ACCOUNTS (select one): |X| (1) Non-Integrated Allocation The Employer Contributions Account of each Participant eligible to share in the allocation for a Plan Year shall be credited with a portion of the contribution, plus any forfeitures if forfeitures are reallocated to Participants, equal to the ratio that the Participant's Compensation for the Plan Year bears to the Compensation for that Plan Year of all Participants entitled to share in the contribution. |_| (2) Integrated Allocation Contributions to Employer Contributions Accounts with respect to a Plan Year, plus any forfeitures if forfeitures are reallocated to Participants, shall be allocated to the Employer Contributions Account of each eligible Participant as follows: (a) First, in the ratio that each such eligible Participant's Compensation for the Plan Year bears to the Compensation for that Plan Year of all eligible Participants but not in excess of 3% of each Participant's Compensation. (b) Second, any remaining contributions and forfeitures will be allocated in the ratio that each eligible Participant's Compensation for the Plan Year in excess of the Integration Level bears to all such Participants' excess Compensation for the Plan Year but not in excess of 3%. (c) Third, any remaining contributions and forfeitures will be allocated in the ratio that the sum of each Participant's Compensation and Compensation in excess of the Integration Level bears to the sum of all Participants' Compensation and Compensation in excess of the Integration Level, but not in excess of the Maximum Profit-Sharing Disparity Rate (defined below). (d) Fourth, any remaining contributions or forfeitures will be allocated in the ratio that each Participant's Compensation for that year bears to all Participants' Compensation for that year. The Maximum Profit-Sharing Disparity Rate is equal to the lesser of: (a) 2.7% or (b) The applicable percentage determined in accordance with the following table: IF THE INTEGRATION LEVEL IS (AS A % OF THE TAXABLE WAGE BASE ("TWB")). THE APPLICABLE PERCENTAGE IS: 20% (or $10,000 if greater) or less of the TWB 2.7% More than 20% (but not less than $10,001 but not more than 80% of the TWB 1.3% More than 80% but not less than 100% of the TWB 2.4% 100% of the TWB 2.7% C. PARTICIPANTS ELIGIBLE FOR EMPLOYER CONTRIBUTION ALLOCATION The following Participants shall be eligible for an allocation to their Employer Contributions Account (select all those applicable): |_| (1) Any Participant who was employed during the Plan Year. |_| (2) In the case of a Plan using the hourly record method for determining Vesting Service, any Participant who was credited with a Year of Service during the Plan Year. |_| (3) Any Participant who was employed on the last day of the Plan Year. |_| (4) Any Participant who was on a leave of absence on the last day of the Plan Year. |_| (5) Any Participant who during the Plan Year died or became Disabled while an Employee or terminated employment after attaining Normal Retirement Age. |_| (6) Any Participant who was credited with at least 501 Hours of Service whether or not employed on the last day of the Plan Year. |_| (7) Any Participant who was credited with at least 1,000 Hours of Service and was employed on the last day of the Plan Year. ARTICLE V. THRIFT CONTRIBUTIONS THIS ARTICLE IS NOT APPLICABLE A. EMPLOYEE THRIFT CONTRIBUTIONS If selected below, Employee Thrift Contributions, which are required for Matching Thrift Contributions, may be made by a Participant in an amount equal to (select one): |_| (1) A dollar amount or a percentage of the Participant's Compensation which may not be less than ___% nor may not exceed _____% of his or her Compensation. |_| (2) An amount not less than ___% of and not more than ___% of each Participant's Compensation. B. MAKING AND MODIFYING AN EMPLOYEE THRIFT CONTRIBUTION ELECTION A Participant shall be entitled to increase, decrease or resume his or her Employee Thrift Contribution percentage with the following frequency during the Plan Year (select one): |_| (1) annually |_| (2) semi-annually |_| (3) quarterly |_| (4) monthly |_| (5) other (specify): ______. Any such increase, decrease or resumption shall be effective as of the first payroll period coincident with or next following the first day of each period set forth above. A Participant may completely discontinue making Employee Thrift Contributions at any time effective for the payroll period after written notice is provided to the Administrator. C. THRIFT MATCHING CONTRIBUTIONS If selected below, the Employer will make Matching Thrift Contributions for each Plan Year (select one): |_| (1) Discretionary Formula: A discretionary Matching Thrift Contribution equal to such a dollar amount or percentage as determined by the Employer, which shall be allocated (select one): |_| (a) based on the ratio of each Participant's Employee Thrift Contribution for the Plan Year to the total Employee Thrift Contributions of all Participants for the Plan Year. If inserted, Matching Thrift Contributions shall be subject to a maximum amount of $______ for each Participant or _____% of each Participant's Compensation. |_| (b) in an amount not to exceed ______% of each Participant's first ___% of Compensation contributed as Employee Thrift Contributions for the Plan Year. If any Matching Thrift Contribution remains, it is allocated to each such Participant in an amount not to exceed ___% of the next ___% of each Participant's Compensation contributed as Employee Thrift Contributions for the Plan Year. Any remaining Matching Thrift Contribution shall be allocated to each such Participant in the ratio that such Participant's Employee Thrift Contributions for the Plan Year bears to the total Employee Thrift Contributions of all such Participants for the Plan Year. If inserted, Matching Thrift Contributions shall be subject to a maximum amount of $___ for each Participant or __% of each Participant's Compensation. |_| (2) Nondiscretionary Formula: A nondiscretionary Matching Thrift Contribution for each Plan Year equal to (select one): |_| (a) ___% of each Participant's Compensation contributed as Employee Thrift Contributions. If inserted, Matching Thrift Contributions shall be subject to a maximum amount of $___ for each Participant or ___% of each Participant's Compensation. |_| (b) ___% of the first ___% of the Participant's Compensation contributed as Employee Thrift Contributions and ___% of the next ___% of the Participant's Compensation contributed as Employee Thrift Contributions. If inserted, Matching Thrift Contributions shall be subject to a maximum amount of $___ for each Participant or ___% of each Participant's Compensation. D. QUALIFIED MATCHING CONTRIBUTIONS If selected below, the Employer may make Qualified Matching Contributions for each Plan Year (select all those applicable): (1) In its discretion, the Employer may make Qualified Matching Contributions on behalf of (select one): |_| (a) all Participants who make Employee Thrift Contributions. |_| (b) only those Participants who are Nonhighly Compensated Employees and who make Employee Thrift Contributions. (2) Qualified Matching Contributions will be contributed and allocated to each Participant in an amount equal to: |_| (a) ___% of the Participant's Employee Thrift Contributions. If inserted, Qualified Matching Contributions shall not exceed _______% of the Participant's Compensation. |_| (b) such an amount, determined by the Employer, which is needed to meet the ACP Test. ARTICLE VI. PARTICIPANT CONTRIBUTIONS PARTICIPANT VOLUNTARY NONDEDUCTIBLE CONTRIBUTIONS Participant Voluntary Nondeductible Contributions are (select one): |_| (a) permitted. |X| (b) not permitted. ARTICLE VII. VESTING A. EMPLOYER CONTRIBUTION ACCOUNTS (1) A Participant shall have a vested percentage in his or her Profit-Sharing Contributions, Matching 401(k) Contributions and/or Matching Thrift Contributions, if applicable, in accordance with the following schedule (Select one): MATCHING 401(K) AND/OR MATCHING THRIFT PROFIT-SHARING CONTRIBUTIONS CONTRIBUTIONS |_| |_| (a) 100% vesting immediately upon participation. |_| |_| (b) 100% after ___ (not more than 5) years of Vesting Service. |X| |X| (c) Graded vesting schedule: 20% 20% after 1 year of Vesting Service; -- -- 40% 40% after 2 years of Vesting Service; -- -- 100% 100% (not less than 20%) after 3 years of Vesting Service; --- --- % % (not less than 40%) after 4 years of Vesting Service; -- % % (not less than 60%) after 5 years of Vesting Service; -- % % (not less than 80%) after 6 years of Vesting Service; -- 100% after 7 years of Vesting Service. (2) Top Heavy Plan MATCHING 401(K) AND/OR MATCHING THRIFT PROFIT-SHARING CONTRIBUTIONS CONTRIBUTIONS Vesting Schedule (Select one): |_| |_| (a) 100% vesting immediately upon participation. |_| |_| (b) 100% after - (not more than 3) years of Vesting Service. |X| |X| (c) Graded vesting schedule: 20% 20% after 1 year of Vesting Service; -- -- 40% 40% (not less than 20%) after 2 years of Vesting Service; -- -- 100% 100% (not less than 40%) after 3 years of Vesting Service; --- --- % % (not less than 60%) after 4 years of Vesting Service; -- % % (not less than 80%) after 5 years of Vesting Service; -- 100% after 6 years of Vesting Service. Top Heavy Ratio: (a) If the adopting Employer maintains or has ever maintained a qualified defined benefit plan, for purposes of establishing present value to compute the top-heavy ratio, any benefit shall be discounted only for mortality and interest based on the following: Interest Rate: 5% Mortality Table: GAM (b) For purposes of computing the top-heavy ratio, the valuation date shall be the last business day of each Plan Year. B. ALLOCATION OF FORFEITURES Forfeitures shall be (select one from each applicable column): MATCHING 401(K) AND/OR MATCHING PROFIT-SHARING THRIFT CONTRIBUTIONS CONTRIBUTIONS |X| |X| (1) used to reduce Employer contributions for succeeding Plan Year. |_| |_| (2) allocated in the succeeding Plan Year in the ratio which the Compensation of each Participant for the Plan Year bears to the total Compensation of all Participants entitled to share in the Contributions. If the Plan is integrated with Social Security, forfeitures shall be allocated in accordance with the formula elected by the Employer. C. VESTING SERVICE For purposes of determining Years of Service for Vesting Service [select (1) or (2) and/or (3)]: |X| (1) All Years of Service shall be included. |_| (2) Years of Service before the Participant attained age 18 shall be excluded. |_| (3) Service with the Employer prior to the effective date of the Plan shall be excluded. ARTICLE VIII. DEFERRAL OF BENEFIT DISTRIBUTIONS, IN-SERVICE WITHDRAWALS AND LOANS A. DEFERRAL OF BENEFIT DISTRIBUTIONS 401(k) and/ PROFIT- OR THRIFT SHARING |_| |_| If this item is checked, a Participant's vested benefit in his or her Employer Accounts shall be payable as soon as practicable after the earlier of: (1) the date the Participant terminates Employment due to Disability or (2) the end of the Plan Year in which a terminated Participant attains Early Retirement Age, if applicable, or Normal Retirement Age. B. IN-SERVICE DISTRIBUTIONS |X| (1) In-service distributions may be made from any of the Participant's vested Accounts, at any time upon or after the occurrence of the following events (select all applicable): |X| (a) a Participant's attainment of age 59-1/2. |X| (b) due to hardships as defined in Section 5.9 of the Plan. |_| (2) In-service distributions are not permitted. C. LOANS ARE: 401(k) and/ Profit OR THRIFT SHARING |X| |X| (1) permitted. |_| |_| (2) not permitted. ARTICLE IX. GROUP TRUST |_| If this item is checked, the Employer elects to establish a Group Trust consisting of such Plan assets as shall from time to time be transferred to the Trustee pursuant to Article X of the Plan. The Trust Fund shall be a Group Trust consisting of assets of this Plan plus assets of the following plans of the Employer or of an Affiliate: ____________. ARTICLE X. MISCELLANEOUS A. IDENTIFICATION OF SPONSOR The address and telephone number of the Sponsor's authorized representative is 800 Scudders Mill Road, Plainsboro, New Jersey 08536; (609) 282-2272. This authorized representative can answer inquiries regarding the adoption of the Plan, the intended meaning of any Plan provisions, and the effect of the opinion letter. The Sponsor will inform the adopting Employer of any amendments made to the Plan or the discontinuance or abandonment of the Plan. B. PLAN REGISTRATION 1. INITIAL REGISTRATION This Plan must be registered with the Sponsor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, in order to be considered a Prototype Plan by the Sponsor. Registration is required so that the Sponsor is able to provide the Administrator with documents, forms and announcements relating to the administration of the Plan and with Plan amendments and other documents, all of which relate to administering the Plan in accordance with applicable law and maintaining compliance of the Plan with the law. The Employer must complete and sign the Adoption Agreement. Upon receipt of the Adoption Agreement, the Plan will be registered as a Prototype Plan of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Adoption Agreement will be countersigned by an authorized representative and a copy of the countersigned Adoption Agreement will be returned to the Employer. 2. REGISTRATION RENEWAL Annual registration renewal is required in order for the Employer to continue to receive any and all necessary updating documents. There is an annual registration renewal fee in the amount set forth with the initial registration material. The adopting Employer authorizes Merrill Lynch, Pierce, Fenner & Smith Incorporated, to debit the account established for the Plan for payment of agreed upon annual fee; provided, however, if the assets of an account are invested solely in Participant-Directed Assets, a notice for this annual fee will be sent to the Employer annually. The Sponsor reserves the right to change this fee from time to time and will provide written notice in advance of any change. C. PROTOTYPE REPLACEMENT PLAN This Adoption Agreement is a replacement prototype plan for the (1) Merrill Lynch Special Prototype Defined Contribution Plan and Trust - 401(k) Plan #03-004 and (2) Merrill Lynch Asset Management, Inc., Special Prototype Defined Contribution Plan and Trust - 401(k) Plan Adoption Agreement #03-004. D. RELIANCE The adopting Employer may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that this Plan is qualified under Code Section 401. In order to obtain reliance, the Employer must apply to the appropriate Key District Director of the Internal Revenue Service for a determination letter with respect to the Plan. EMPLOYER'S SIGNATURE Name of Employer:___________________________ By: _____________________________________ Authorized Signature ------------------------------------- Print Name ------------------------------------- Title Dated: ________________, 19__ TO BE COMPLETED BY MERRILL LYNCH: SPONSOR ACCEPTANCE: Subject to the terms and conditions of the Prototype Plan and this Adoption Agreement, this Adoption Agreement is accepted by Merrill Lynch, Pierce, Fenner & Smith Incorporated as the Prototype Sponsor. Authorized Signature: _________________________________________________ TRUSTEE(S) SIGNATURE This Trustee Acceptance is to be completed only if the Employer appoints one or more Trustees and does not appoint a Merrill Lynch Trust Company as Trustee. The undersigned hereby accept all of the terms, conditions, and obligations of appointment as Trustee under the Plan. If the Employer has elected a Group Trust in this Adoption Agreement, the undersigned Trustee(s) shall be the Trustee(s) of the Group Trust. AS TRUSTEE: __________________________ ___________________________________ (Signature) (print or type name) __________________________ ___________________________________ (Signature) (print or type name) __________________________ ___________________________________ (Signature) (print or type name) __________________________ ___________________________________ (Signature) (print or type name) Dated:____________, 19__ 27 THE MERRILL LYNCH TRUST COMPANIES AS TRUSTEE This Trustee Acceptance and designation of Investment Committee are to be completed only when a Merrill Lynch Trust Company is appointed as Trustee. TO BE COMPLETED BY THE EMPLOYER: DESIGNATION OF INVESTMENT COMMITTEE The Investment Committee for the Plan is (print or type names): Name:_____________________________________ Name:_____________________________________ Name:_____________________________________ Name:_____________________________________ TO BE COMPLETED BY MERRILL LYNCH TRUST COMPANY: ACCEPTANCE BY TRUSTEE: The undersigned hereby accept all of the terms, conditions, and obligations of appointment as Trustee under the Plan. If the Employer has elected a Group Trust in this Adoption Agreement, the undersigned Trustee(s) shall be the Trustee(s) of the Group Trust. SEAL MERRILL LYNCH TRUST COMPANY [________________] By:______________________________________ DATED:__________, 19__ THE MERRILL LYNCH TRUST COMPANIES AS ONE OF THE TRUSTEES This Trustee Acceptance is to be completed only if, in addition to a Merrill Lynch Trust Companies as Trustee, the Employer appoints an additional Trustee of a second trust fund. The undersigned hereby accept all of the terms, conditions, and obligations of appointment as Trustee under the Plan. If the Employer has elected a Group Trust in this Adoption Agreement, the undersigned Trustee(s) shall be the Trustee(s) of the Group Trust. AS TRUSTEE ________________________________ ________________________________ (Signature) (print or type name) DATED: ________________, 19_____ SEAL MERRIL LYNCH TRUST COMPANY [__________________________] _______________________________________________________ DATED: ________________, 19_____ DESIGNATION OF INVESTMENT COMMITTEE The Investment Committee for the Plan is (print or type name): ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ EX-10.3 4 FORM OF NE RESTAURANT COMPANY DEFERRED COMP. EXHIBIT 10.3 FORM OF NE RESTAURANT COMPANY DEFERRED COMPENSATION PLAN THE MERRILL LYNCH SPECIAL NON-QUALIFIED DEFERRED COMPENSATION PLAN ARTICLE 1 - INTRODUCTION 1.1 PURPOSE OF PLAN The Employer has adopted the Plan set forth herein to provide a means by which certain employees may elect to defer receipt of designated percentages or amounts of their Compensation and to provide a means for certain other deferrals of compensation. 1.2 STATUS OF PLAN The Plan is intended to be "a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), and shall be interpreted and administered to the extent possible in a manner consistent with that intent. ARTICLE 2 - DEFINITIONS Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context: 2.1 ACCOUNT means, for each Participant, the account established for his or her benefit under Section 5.1. 2.2 ADOPTION AGREEMENT means the Merrill Lynch Special Deferred Compensation Plan for Select Employees Adoption Agreement signed by the Employer to establish the Plan and containing all the options selected by the Employer, as the same may be amended from time to time. 2.3 CHANGE OF CONTROL means (a) the purchase or other acquisition in one or more transactions other than from the Employer, by any individual, entity or group of persons, within the meaning of section 13(d)(3) or 14(d) of the Securities Exchange Act of 1934 or any comparable successor provisions, of beneficial ownership (within the meaning of Rule 13d-3 of Securities Exchange Act of 1934) of 50 percent or more of either the outstanding shares of common stock or the combined voting power of the Employer's then outstanding voting securities entitled to vote generally, or (b) the approval by the stockholders of the Employer of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of the Employer immediately prior to such reorganization, merger or consolidation do not immediately thereafter own more than 50 percent of the combined voting power of the reorganized, merged or consolidated Employer's then outstanding securities that are entitled to vote generally in the election of directors or (c) sale of substantially all of the Employer's assets. 2.4 CODE means the Internal Revenue Code of 1986, as amended from time to time. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. 2.5 COMPENSATION has the meaning elected by the Employer in the Adoption Agreement. 2.6 EFFECTIVE DATE means the date chosen in the Adoption Agreement as of which the Plan first becomes effective. 2.7 ELECTION FORM means the participation election form as approved and prescribed by the Plan Administrator. 2.8 ELECTIVE DEFERRAL means the portion of Compensation which is deferred by a Participant under Section 4.1. 2.9 ELIGIBLE EMPLOYEE means, on the Effective Date or on any Entry Date thereafter, each employee of the Employer who satisfies the criteria established in the Adoption Agreement. 2.10 EMPLOYER means the corporation referred to in the Adoption Agreement, any successor to all or a major portion of the Employer's assets or business which assumes the obligations of the Employer, and each OTHER ENTITY THAT IS AFFILIATED WITH THE EMPLOYER which adopts the Plan with the consent of the Employer, PROVIDED THAT THE EMPLOYER THAT SIGNS THE ADOPTION AGREEMENT SHALL HAVE THE SOLE POWER TO AMEND THIS PLAN AND SHALL BE THE PLAN ADMINISTRATOR IF NO OTHER PERSON OR ENTITY IS SO SERVING AT ANY TIME. 2.11 ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. 2.12 INCENTIVE CONTRIBUTION means a discretionary additional contribution made by the Employer as described in Section 4.3. 2.13 INSOLVENT means either (i) the Employer is unable to pay its debts as they become due, or (ii) the Employer is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 2.14 MATCHING DEFERRAL means a deferral for the benefit of a Participant as described in Section 4.2. 2.15 PARTICIPANT means any individual who participates in the Plan in accordance with Article 3. 2.16 PLAN means the Employer's plan in the form of The Merrill Lynch Special Deferred Compensation Plan for Select Employees and the Adoption Agreement and all amendments thereto. 2.17 PLAN ADMINISTRATOR means the person, persons or entity designated by the Employer in the Adoption Agreement to administer the Plan AND TO SERVE AS THE AGENT FOR "COMPANY" WITH RESPECT TO THE TRUST AS CONTEMPLATED BY THE AGREEMENT ESTABLISHING THE TRUST. If no such person or entity is so serving at any time, the Employer shall be the Plan Administrator. 2.18 PLAN YEAR means the 12-month period chosen in the Adoption Agreement. 2.19 TOTAL AND PERMANENT DISABILITY means the inability of a Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of note less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Plan Administrator. 2.20 TRUST means the trust established by the Employer that identifies the Plan as a plan with respect to which assets are to be held by the Trustee. 2.21 TRUSTEE means the trustee or trustees under the Trust. 2.22 YEAR OF SERVICE means the computation period and service requirement elected in the Adoption Agreement. ARTICLE 3 - PARTICIPATION 3.1 COMMENCEMENT OF PARTICIPATION Any individual who elects to defer the part of his or her Compensation in accordance with Section 4.1 shall become a Participant IN THE PLAN AS OF THE DATE SUCH DEFERRALS COMMENCE IN ACCORDANCE WITH SECTION 4.1: Any individual who is not already a Participant and whose Account is credited with an Incentive Contribution shall become a Participant as of the date such amount is credited. 3.2 CONTINUED PARTICIPATION A Participant in the Plan shall continue to be a Participant so long as any amount remains credited to his or her Account. ARTICLE 4--ELECTIVE AND MATCHING DEFERRALS 4.1 ELECTIVE DEFERRALS An individual who is an Eligible Employee on the Effective Date MAY, BY COMPLETING AN ELECTION FORM AND FILING IT WITH THE PLAN ADMINISTRATOR WITHIN 30 DAYS FOLLOWING THE EFFECTIVE DATE, ELECT to defer a percentage or dollar amount of one or more payments of Compensation, on such terms as the Plan Administrator may permit, which are payable to the Participant after the date on which the individual files the Election Form. ANY INDIVIDUAL WHO BECOMES AN ELIGIBLE EMPLOYEE AFTER THE EFFECTIVE DATE MAY, BY COMPLETING AN ELECTION FORM AND FILING IT WITH THE PLAN ADMINISTRATOR WITHIN 30 DAYS FOLLOWING THE DATE ON WHICH THE PLAN ADMINISTRATOR GIVES SUCH INDIVIDUAL WRITTEN NOTICE THAT THE INDIVIDUAL IS AN ELIGIBLE EMPLOYEE, ELECT to defer a percentage or dollar amount of one or more payments of Compensation, on such terms as the Plan Administrator may permit, which are payable to the Participant after the date on which the individual files the Election Form. ANY ELIGIBLE EMPLOYEE WHO HAS NOT OTHERWISE INITIALLY ELECTED TO DEFER COMPENSATION IN ACCORDANCE WITH THIS PARAGRAPH 4.1 MAY ELECT TO DEFER A PERCENTAGE OR DOLLAR AMOUNT OF ONE OR MORE PAYMENTS OF COMPENSATION, ON SUCH TERMS AS THE PLAN ADMINISTRATOR MAY PERMIT, COMMENCING WITH COMPENSATION PAID IN THE NEXT SUCCEEDING PLAN YEAR, BY COMPLETING AN ELECTION FORM PRIOR TO THE FIRST DAY OF SUCH SUCCEEDING PLAN YEAR. In addition, a Participant may defer all or part of the amount of any elective deferral, or matching contribution that were made on his or her behalf to the Employer's 401(k) plan for the prior Plan Year but which were treated as an excess deferral, an excess contribution or otherwise limited by the application of the limitations of sections 401(k), 401(m), 415 or 402(q) of the Code, so long as the Participant so indicates on an Election Form. A Participant's Compensation shall be reduced in accordance with the Participant's election hereunder and amounts deferred hereunder shall be paid by the Employer to the Trust as soon as administratively feasible and credited to the Participant's Account as of the date the amounts are received by the Trustee. An election to defer a percentage or dollar amount of Compensation for any Plan Year shall apply for subsequent Plan Years unless changed or revoked. A Participant may change or revoke his or her deferral election as of the first day of any Plan Year by giving written notice to the Plan Administrator before such first day (or any such earlier date as the Plan Administrator may prescribe). 4.2 MATCHING DEFERRALS After each payroll period, monthly, quarterly, or annually, at the Employer's discretion, the Employer shall contribute to the Trust Matching Deferrals equal to the rate of Matching Contribution selected by the Employer and multiplied by the amount of the Elective Deferrals credited to the Participants' Accounts for such period under Section 4.1. Each Matching Deferral will be credited, as of the later of the date it is received by the Trustee or the date the Trustee receives from the Plan Administrator such instructions as the Trustee may reasonably require to allocate the amount received among the asset accounts maintained by the Trustee, to the Participants' Accounts pro rata in accordance with the amount of Elective Deferrals of each Participant which are taken into account in calculating the Matching Deferral. 4.3 INCENTIVE CONTRIBUTIONS In addition to other contributions provided for under the Plan, the Employer may, in its sole discretion, select one or more Eligible Employees to receive an Incentive Contribution to his or her Account on such terms as the Employer shall specify at the time it makes the contribution. For example, the Employer may contribute an amount to a Participant's Account and condition the payment of that amount and accrued earnings thereon upon the Participant remaining employed by the Employer for an additional specified period of time. The terms specified by the Employer shall supersede any other provision of this Plan as regards Incentive Contributions and earnings with respect thereto, provided that if the Employer does not specify a method of distribution, the Incentive Contribution shall be distributed in a manner consistent with the election last made by the particular Participant prior to the year in which the Incentive Contribution is made. The Employer, in its discretion, may permit the Participant to designate a distribution schedule for a particular Incentive Contribution provided that such designation is made prior to the time that the Employer finally determines that the Participant will receive the Incentive Contribution. ARTICLE 5--ACCOUNTS 5.1 ACCOUNTS The Plan Administrator shall establish an Account for each Participant reflecting Elective Deferrals. Matching Deferrals and Incentive Contributions made for the Participant's benefit together with any adjustments for income, gain or loss and any payments from the Account. The Plan Administrator may cause the Trustee to maintain and invest separate asset accounts corresponding to each Participant's Account. The Plan Administrator shall establish sub-accounts for each Participant that has more than one election in effect under Section 7.1 and such other sub-accounts as are necessary for the proper administration of the Plan. As of the last business day of each calendar quarter, the Plan Administrator shall provide the Participant with a statement of his or her Account reflecting the income, gains and losses (realized and unrealized), amounts of deferrals, and distributions of such Account since the prior statement. 5.2 INVESTMENTS The assets of the Trust shall be invested in such investments as the Trustee shall determine. The Trustee may (but is not required to) consider the Employer's or a Participant's investment preferences when investing the assets attributable to a Participant's Account. ARTICLE 6--VESTING 6.1 GENERAL A participant shall be immediately vested in, i.e., shall have a nonforfeitable right to, all Elective Deferrals, and all income and gain attributable thereto, credited to his or her Account. A Participant shall become vested in the portion of his or her Account attributable to Matching Deferrals and income and gain attributable thereto in accordance with the schedule selected by the Employer in the Adoption Agreement, subject to earlier vesting in accordance with Sections 6.3, 6.4, and 6.5. 6.2 VESTING SERVICE For purposes of applying the vesting schedule in the Adoption Agreement, a Participant shall be considered to have completed a Year of Service for each complete year of full-time service with the Employer of an Affiliate, measured from the Participant's first date of such employment, unless the Employer also maintains a 401(k) plan that is qualified under section 401(a) of the Internal Revenue Code in which the Participant participates, in which case the rules governing vesting service under that plan shall also be controlling under this Plan. 6.3 CHANGE OF CONTROL A Participant shall become fully vested in his or her Account immediately prior to a Change of Control of the Employer. 6.4 DEATH OR DISABILITY A Participant shall become fully vested in his or her Account immediately prior to termination of the Participant's employment by reason of the Participant's death or Total and Permanent Disability. Whether a Participant's termination of employment is by reason of the Participant's Total and Permanent Disability shall be determined by the Plan Administrator in its sole discretion. 6.5 INSOLVENCY A Participant shall become fully vested in his or her Account immediately prior to the Employer becoming Insolvent, in which case the Participant will have the same rights as a general creditor of the Employer with respect to his or her Account balance. ARTICLE 7 - PAYMENTS 7.1 ELECTION AS TO TIME AND FORM OF PAYMENT A Participant shall elect (on the Election Form used to elect to defer Compensation under Section 4.1) the date at which the Elective Deferrals and vested Matching Deferrals (including any earnings attributable thereto) will commence to be paid to the Participant. The Participant shall also elect thereon for payments to be paid in either: a. a single lump-sum payment; or b. annual installments over a period elected by the Participant up to 10 years, the amount of each installment to equal the balance of his or her Account immediately prior to the installment divided by the number of installments remaining to be paid. Each such election will be effective for the Plan Year for which it is made and succeeding Plan Years, unless changed by the Participant. Any change will be effective only for Elective Deferrals and Matching Deferrals made for the first Plan Year beginning after the date on which the Election Form containing the change is filed with the Plan Administrator. Except as provided in Sections 7.2 , 7.3, 7.4, or 7.5, payment of a Participant's Account shall be made in accordance with the Participant's elections under this Section 7.1. 7.2 CHANGE OF CONTROL As soon as possible following a Change of Control of the Employer, each Participant shall be paid his or her entire Account balance (including any amount vested pursuant to Section 6.3) in a single lump sum. 7.3 TERMINATION OF EMPLOYMENT Upon termination of a Participant's employment for any reason other than death and prior to the attainment of the Retirement Age specified in the Adoption Agreement, the vested portion of the Participant's Account (including any portion vested pursuant to Section 6.4 as a consequence of the Participant's Total and Permanent Disability) shall be paid to the Participant in a single lump sum as soon as practicable following the date of such termination; provided, however, that the Plan Administrator, in its sole discretion, may pay out a Participant's Account balance in annual installments if the Participant's employment terminates by reason of the Participant's Total and Permanent Disability. 7.4 DEATH If a Participant dies prior to the complete distribution of his or her Account, the balance of the Account shall be paid as soon as practicable to the Participant's designated beneficiary or beneficiaries, in the form elected by the Participant under either of the following options: a. a single lump-sum payment; or b. annual installments over a period elected by the Participant up to 10 years, the amount of each installment to equal the balance of the Account immediately prior to the installment divided by the number of installments remaining to be paid. Any designation of beneficiary and form of payment to such beneficiary shall be made by the Participant on an Election Form filed with the Plan Administrator and may be changed by the Participant at any time by filing another Election Form containing the revised instructions. If no beneficiary is designated or no designated beneficiary survives the Participant, payment shall be made to the Participant's surviving spouse, or, if none, to his or her issue per stirpes, in a single payment. If no spouse or issue survives the Participant, payment shall be made in a single lump sum to the Participant's estate. 7.5 UNFORESEEN EMERGENCY If a Participant suffers an unforeseen emergency, as defined herein, the Plan Administrator, in its sole discretion, may pay to the Participant only that portion, if any, of the vested portion of his or her Account which the Plan Administrator determines is necessary to satisfy the emergency need, including any amounts necessary to pay any federal, state or local income taxes reasonably anticipated to result from the distribution. A Participant requesting an emergency payment shall apply for the payment in writing in a form approved by the Plan Administrator and shall provide such additional information as the Plan Administrator may require. For purposes of this paragraph, "unforeseen emergency" means an immediate and heavy financial need resulting from any of the following: a. expenses which are not covered by insurance and which the Participant or his or her spouse or dependent has incurred as a result of, or is required to incur in order to receive, medical care; b. the need to prevent eviction of a Participant from his or her principal residence or foreclosure on the mortgage of the Participant's principal residence; or c. any other circumstance that is determined by the Plan Administrator in its sole discretion to constitute an unforeseen emergency which is not covered by insurance and which cannot reasonably be relieved by the liquidation of the Participant's assets. 7.6 FORFEITURE OF NON-VESTED AMOUNTS To the extent that any amounts credited to a Participant's Account are not vested at the time such amounts are otherwise payable under Sections 7.1 or 7.3, such amounts shall be forfeited and shall be used to satisfy the Employer's obligation to make contributions to the Trust under the Plan. 7.7 TAXES All federal, state or local taxes that the Plan Administrator determines are required to be withheld from any payments made pursuant to this Article 7 shall be withheld. ARTICLE 8 - PLAN ADMINISTRATOR 8.1 PLAN ADMINISTRATION AND INTERPRETATION The Plan Administrator shall oversee the administration of the Plan. The Plan Administrator shall have complete control and authority to determine the rights and benefits and all claims, demands and actions arising out of the provisions of the Plan of any Participant, beneficiary, deceased Participant, or other person having or claiming to have any interest under the Plan. The Plan Administrator shall have complete discretion to interpret the Plan and to decide all matters under the Plan. Such interpretation and decision shall be final, conclusive and binding on all Participants and any person claiming under or through any Participant, in the absence of clear and convincing evidence that the Plan Administrator acted arbitrarily and capriciously. Any individual(s) serving as Plan Administrator who is a Participant will not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Plan Administrator shall be entitled to rely on information furnished by a Participant, a beneficiary; the Employer or the Trustee. The Plan Administrator shall have the responsibility for complying with any reporting and disclosure requirements of ERISA. 8.2 POWERS, DUTIES, PROCEDURES, ETC. The Plan Administrator shall have such powers and duties, may adopt such rules and tables, may act in accordance with such procedures, may appoint such officers or agents, may delegate such powers and duties, may receive such reimbursements and compensation, and shall follow such claims and appeal procedures with respect to the Plan as it may establish. 8.3 INFORMATION To enable the Plan Administrator to perform its functions, the Employer shall supply full and timely information to the Plan Administrator on all matters relating to the compensation of Participants, their employment, retirement, death, termination of employment, and such other pertinent facts as the Plan Administrator may require. 8.4 INDEMNIFICATION OF PLAN ADMINISTRATOR The Employer agrees to indemnify and to defend to the fullest extent permitted by law any officer(s) or employee(s) who serve as Plan Administrator (including any such Individual who formerly served as Plan Administrator) against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. ARTICLE 9 - AMENDMENT AND TERMINATION 9.1 AMENDMENTS The Employer shall have the right to amend the Plan from time to time, subject to Section 9.3, by an instrument in writing which has been executed on the Employer's behalf by its duly authorized officer. 9.2 TERMINATION OF PLAN This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer and any Eligible Employee (or any other employee) or a consideration for, or an inducement or condition of employment for, the performance of the services by any Eligible Employee (or other employee). The Employer reserves the right to terminate the Plan at any time, subject to Section 9.3, by an instrument in writing which has been executed on the Employer's behalf by its duly authorized officer. Upon termination, the Employer may (a) elect to continue to maintain the Trust to pay benefits hereunder as they become due as if the Plan had not terminated or (b) direct the Trustee to pay promptly to Participants (or their beneficiaries) the vested balance of their Accounts. For purposes of the preceding sentence, in the event the Employer chooses to implement clause (b), the Account balances of all Participants who are in the employ of the Employer at the time the Trustee is directed to pay such balances shall become fully vested and nonforfeitable. After Participants and their beneficiaries are paid all Plan benefits to which they are entitled, all remaining assets of the Trust attributable to Participants who terminated employment with the Employer prior to termination of the Plan and who were not fully vested in their Accounts under Article 6 at that time, shall be returned to the Employer. 9.3 EXISTING RIGHTS No amendment or termination of the Plan shall adversely affect the rights of any Participant with respect to amounts that have been credited to his or her Account prior to the date of such amendment or termination. ARTICLE 10 - MISCELLANEOUS 10.1 NO FUNDING The Plan constitutes a mere promise by the Employer to make payments in accordance with the terms of the Plan and Participants and beneficiaries shall have the status of general unsecured creditors of the Employer. Nothing in the Plan will be construed to give any employee or any other person rights to any specific assets of the Employer or of any other person. In all events, it is the intent of the Employer that the Plan be treated as unfunded for tax purposes and for purposes of Title I of ERISA. 10.2 NON- ASSIGNABILITY None of the benefits, payments, proceeds or claims of any Participant or beneficiary shall be subject to any claim of any creditor of any Participant or beneficiary and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor of such Participant or beneficiary, nor shall any Participant or beneficiary have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise, under the Plan. 10.3 LIMITATION OF PARTICIPANTS' RIGHTS Nothing contained in the Plan shall confer upon any person a right to be employed or to continue in the employ of the Employer, or interfere in any way with the right of the Employer to terminate the employment of a Participant in the Plan at any time, with or without cause. 10.4 PARTICIPANTS BOUND Any action with respect to the Plan taken by the Plan Administrator or the Employer or the Trustee or any action authorized by or taken at the direction of the Plan Administrator, the Employer or the Trustee shall be conclusive upon all Participants and beneficiaries entitled to benefits under the Plan. 10.5 RECEIPT AND RELEASE Any payment to any Participant or beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Employer, the Plan Administrator and the Trustee under the Plan, and the Plan Administrator may require such Participant or beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. If any Participant or beneficiary is determined by the Plan Administrator to be incompetent by reason of physical or mental disability (including minority) to give a valid receipt and release, the Plan Administrator may cause the payment or payments becoming due to such person to be made to another person for his or her benefit without responsibility on the part of the Plan Administrator, the Employer or the Trustee to follow the application of such funds. 10.6 GOVERNING LAW The Plan shall be construed, administered, and governed in all respects under and by the laws of the state in which the Employer maintains its primary place of business. If any provision shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 10.7 HEADINGS AND SUBHEADINGS Headings and subheadings in this Plan are inserted for convenience only and are not to be considered in the construction of the provisions hereof. EX-10.8 5 FORM OF CHILI'S GRILL & BAR DEVELOPMENT AGMT EXHIBIT 10.8 FORM OF CHILI'S GRILL & BAR(R) RESTAURANT DEVELOPMENT AGREEMENT #2 (Successor Agreement) CHILI'S GRILL & BAR(R) RESTAURANT DEVELOPMENT AGREEMENT TABLE OF CONTENTS PAGE I. GRANT..............................................................2 II. DEVELOPMENT FEE....................................................2 III. SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS..............3 IV. SITE SELECTION AND CONSTRUCTION....................................4 V. TERM...............................................................7 VI. DUTIES OF THE PARTIES..............................................8 VII. DEFAULT...........................................................13 VIII. TRANSFER OF INTEREST..............................................15 IX. COVENANTS.........................................................22 X. NOTICES...........................................................24 XI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION........................25 XII. APPROVALS.........................................................27 XIII. NON-WAIVER........................................................28 XIV. SEVERABILITY AND CONSTRUCTION.....................................28 XV. ENTIRE AGREEMENT; APPLICABLE LAW..................................29 XVI. ACKNOWLEDGEMENTS..................................................31 GUARANTY ATTACHMENT A - FRANCHISE AGREEMENT ATTACHMENT B - AGREEMENT FOR PROTECTION OF TRADE SECRETS REGARDING THE DEVELOPMENT AND/OR OPERATION OF A RESTAURANT USING THE CHILI'S SYSTEM ATTACHMENT C - STATEMENT OF OWNERSHIP INTERESTS CHILI'S GRILL & BAR(R) RESTAURANT DEVELOPMENT AGREEMENT This Development Agreement is made and entered into as of the 17th day of May, 1994, between BRINKER INTERNATIONAL, INC., a Delaware corporation (hereinafter "Franchisor"), and NE RESTAURANT COMPANY LIMITED PARTNERSHIP, a Massachusetts limited partnership (hereinafter "Developer"). W I T N E S S E T H: WHEREAS, Franchisor, as the result of the expenditure of time, skill, effort and money, has developed and owns a unique and distinctive system (hereinafter "System") relating to the establishment and operation of full-service restaurants featuring a specialized menu and full-bar service; WHEREAS, the distinguishing characteristics of the System include, without limitation, distinctive exterior and interior design, decor, color scheme and furnishings; special recipes and menu items; uniform standards, specifications and procedures for operations; quality and uniformity of products and services offered; procedures for inventory and management control; training and assistance; and advertising and promotional programs; all of which may be changed, improved and further developed by Franchisor from time to time; WHEREAS, Franchisor identifies the System by means of certain trade names, service marks, trademarks, emblems and indicia of origin, including but not limited to the mark "Chili's" and such other trade names, service marks and trademarks as are now designated (and may hereafter be designated by Franchisor in writing) for use in connection with the System (hereinafter referred to as "Proprietary Marks"); WHEREAS, Franchisor continues to develop, use and control the use of such Proprietary Marks in order to identify for the public the source of services and products marketed thereunder and under the System, and to represent the System's high standards of quality, appearance and service; WHEREAS, Developer wishes to obtain certain development rights to operate Chili's Grill & Bar restaurants (hereinafter "Restaurants" or "franchised businesses") under the System in the territory described in this Development Agreement; NOW, THEREFORE, the parties in consideration of the undertakings and commitments of each party to the other party set forth herein, hereby agree as follows: I. GRANT A. Franchisor hereby grants to Developer and Developer accepts, pursuant to the terms and conditions of this Development Agreement, development rights to obtain licenses to establish and operate fifteen (15) Restaurants, and to use the System solely in connection therewith, at specific locations to be designated in separate Chili's Grill & Bar Restaurant franchise agreements (hereinafter "Franchise Agreements") executed as provided in Section III.A. hereof, and pursuant to the development schedule set forth in Section III.B. hereof. Each Restaurant developed hereunder shall be located in the area described below (hereinafter "Territory"). The States of Connecticut, New Hampshire, Maine, Massachusetts, Rhode Island, and Vermont in their entirety, and the County of Westchester in the State of New York. B. Each of the fifteen (15) new Restaurants for which a development right is granted hereunder shall be established and operated pursuant to a Franchise Agreement to be entered into between Developer and Franchisor in accordance with Section III.A. hereof. C. Subject to Developer's compliance with the terms and conditions of this Agreement and any Franchise Agreement (as defined in Section III) and except as otherwise provided in this Agreement, Franchisor shall not establish, nor license anyone other than Developer to establish, a Restaurant under the System in the Territory during the term of this Agreement. Notwithstanding the foregoing, Franchisor, any franchisee of franchisor and any other authorized person or entity may, at any time, advertise or promote the System and fulfill customer orders in the Territory. Franchisor may also offer and sell to the public or authorize any person or entity to offer and sell products and services in the Territory to the public, other than through a Chili's Grill & Bar restaurant, which may be similar to those offered by the Restaurants, under the Proprietary Marks (e.g., prepackaged food items, T-shirts and other Chili's memorabilia) or under other names and marks. D. This Agreement is not a franchise agreement, and does not grant to Developer any right to use Franchisor's Proprietary Marks or System. E. Developer shall have no right under this Agreement to license others under the Proprietary Marks or System. II. DEVELOPMENT FEE In consideration of the development rights granted herein Developer shall pay to Franchisor on or before the Commencement Date (as defined in PARAGRAPH V of this Agreement) a non-refundable Development Fee of One Hundred Fifty Thousand Dollars ($150,000.00) representing payment of Ten Thousand Dollars ($10,000) for each Restaurant to be developed hereunder. The Development Fee shall be fully earned by Franchisor upon the Commencement Date of this Agreement, for administrative and other expenses incurred by Franchisor and for the development opportunities lost or deferred as a result of the rights granted Developer herein. III. SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS A. Developer shall exercise each development right granted herein only by executing a separate Franchise Agreement for each Restaurant at a site approved by Franchisor in the Territory as hereinafter provided. The Franchise Agreement for each development right exercised hereunder shall be in the form of the franchise agreement attached hereto as Attachment A. The initial franchise fee to be paid by Developer shall be Forty Thousand Dollars ($40,000) for each Franchise Agreement executed by Developer for any Restaurant to be located in the Territory during the term of this Agreement. B. Recognizing that time is of the essence, Developer agrees to exercise each of the development rights granted hereunder in the manner specified in Section III.A. hereof, and to satisfy the development schedule set forth below: Cumulative Total Number of Restaurants Which Developer Shall Have Open and in Operation (Including 15 Restaurants Currently BY (DATE) OPEN FOR BUSINESS) --------- ---------------------------------- Commencement Date 25 Commencement Date & 1 year 28 Commencement Date & 2 years 31 Commencement Date & 3 years 34 Commencement Date & 4 years 37 Commencement Date & 5 years 40 If Developer fails to adhere to the development schedule, Developer will pay a late fee designed to compensate Franchisor for its lost fees and royalties otherwise payable pursuant to separate Franchise Agreements in an amount equal to Two Hundred Twenty Dollars ($220) per day multiplied by the amount by which the cumulative total number of Restaurants set forth above exceeds the actual number of Restaurants which Developer has in operation. This late fee shall be payable by Developer to Franchisor weekly and in immediately available funds for one hundred eighty (180) days or until Developer has met the development schedule set forth above, whichever first occurs. Failure by Developer to adhere to the development schedule within such one hundred eighty (180) day period shall constitute a material event of default under this Agreement as provided in Section VII.D. hereof. IV. SITE SELECTION AND CONSTRUCTION A. Developer assumes all cost, liability, expense and responsibility for locating, obtaining and developing sites for Restaurants, and for constructing and equipping Restaurants at such sites. The development of a Restaurant at any site must be approved by Franchisor, which approval shall not be unreasonably withheld or delayed, in accordance with the then existing site approval procedures including, but not limited to, the procedures set forth below. Developer acknowledges that Franchisor's approval of a prospective site and the rendering of assistance in the selection of a site does not constitute a representation, promise, warranty or guarantee by Franchisor that a Restaurant operated at that site will be profitable or otherwise successful. (1) Prior to acquisition by lease or purchase of a site for a Restaurant in the Territory, Developer shall submit to Franchisor for each Restaurant, in the form prescribed by Franchisor, a description of the site, a market feasibility study for the site which shall include, but not be limited to, demographic information, traffic counts, site plans and other information reasonably requested by Franchisor, and such other information or materials as Franchisor may reasonably require, together with a letter of intent or other evidence satisfactory to Franchisor which confirms Developer's favorable prospects for obtaining the site. Recognizing that time is of the essence, Franchisee agrees that it must submit such information and materials for each proposed site to Franchisor in writing for its approval. Franchisor shall have thirty (30) days after receipt of such information and materials from Developer to approve or disapprove the proposed site as the location for a Restaurant, which approval shall not be unreasonably withheld. No site shall be deemed approved unless it has been expressly approved in writing by Franchisor. (2) After the location for a Restaurant is approved by Franchisor and leased or acquired by Developer in accordance with the requirements of this Section IV., Developer shall execute a Franchise Agreement relating to the Restaurant and its street address shall be recorded in Attachment A to the applicable Franchise Agreement. B. If the Developer will purchase the premises for any Restaurant, Developer shall submit the contract of sale prior to its execution to Franchisor for its written approval and shall furnish to Franchisor a copy of the executed contract of sale within ten (10) days after execution thereof. If the Developer will occupy the premises of any Restaurant under a lease, Developer shall furnish to Franchisor a copy of the executed lease within ten (10) days after execution thereof. Prior to such execution, Developer shall submit the lease to Franchisor for its written approval. Unless Developer has obtained Franchisor's written consent to the exclusion of a required provision, the lease shall include the following terms and conditions. Notwithstanding the foregoing, in the case of the provision set forth in Section IV.B. (6) below, Developer shall use its best efforts to include such provision into the lease and shall provide Developer with written notice of any failure to so include such provision in the lease. (1) That the premises shall be used for the operation of the Restaurant; (2) That the lessor consents to the use of such Proprietary Marks and signs, decor, color scheme and related components of the System as Franchisor may prescribe for the franchised business; (3) That the lessor agrees to furnish Franchisor with copies of any and all letters and notices sent to Developer pertaining to the lease and the premises, at the same time that such letters and notices are sent to Developer; (4) That Developer may not sublease or assign all or any part of its occupancy rights, or extend the term of or renew the lease, without Franchisor's prior written consent, which shall not be unreasonably withheld; (5) That Franchisor shall have the right to enter the premises to make any modification necessary to protect Franchisor's Proprietary Marks or to cure any default under the lease or under this Agreement or the Franchise Agreement; (6) That Developer may assign the lease to Franchisor without the lessor having any right to impose conditions on such assignment or to obtain payment in connection therewith and that Franchisor shall have the option to assume Developer's occupancy rights, and the right to sublease, for all or any part of the term of the lease; and (7) That Developer and lessor shall not amend or otherwise modify the lease in any manner that would materially affect any of the foregoing requirements without Franchisor's prior written consent. C. Before commencing any construction of the Restaurants, Developer, at its expense, shall comply, to Franchisor's reasonable satisfaction, with all of the following requirements: (1) Developer shall employ a qualified architect or engineer who is reasonably acceptable to Franchisor to prepare, for Franchisor's approval, preliminary plans and specifications for site improvement and construction of each Restaurant based upon prototype drawings furnished by Franchisor. (2) Developer shall be responsible for obtaining all zoning classifications and clearance which may be required by the state or local laws, ordinances, or regulations or which may be necessary or advisable owing to any restrictive covenants relating to each Restaurant location. After having obtained such approvals and clearances, Developer shall submit to Franchisor, for Franchisor's approval, final plans for construction based upon the preliminary plans and specifications. Franchisor shall approve or provide comments to such final plans within fifteen (15) business days after it has received such final plans from Developer. Once approved by Franchisor, such final plans shall not thereafter be materially changed or modified without the prior written permission of Franchisor. (3) Developer shall obtain all permits and certifications required for the lawful construction and operation of each Restaurant and shall certify in writing to Franchisor that all such permits and certifications have been obtained. (4) Developer shall employ a qualified licensed general contractor who is reasonably acceptable to Franchisor to construct each Restaurant and to complete all improvements. Developer shall obtain and maintain in force during the entire period of construction Builder's Risks insurance in form and amount and written by a carrier or carriers reasonably satisfactory to Franchisor. D. (1) Developer shall commence or make every diligent attempt toward commencement of construction of a Restaurant including acquisition of all necessary permits and licenses within one hundred fifty (150) days after approval by Franchisor of Developer's site or, if the approved location is occupied by an existing tenant on the date of execution of the lease for the premises, then immediately upon obtaining possession of the premises. (2) Developer shall provide written notice to Franchisor of the date construction of each Restaurant commenced within ten (10) days after commencement. For the purposes of this Agreement and the Franchise Agreement, construction shall be deemed to commence on the date on which excavation for footings is begun. Developer agrees that Franchisor and its agents shall have the right to inspect the construction at all reasonable times for the purpose of ascertaining that all work complies with the final plans approved by Franchisor. (3) Developer shall maintain reasonably continuous construction of each Restaurant and its premises and shall complete construction (including all exterior and interior carpentry, electrical, painting, and finishing work, and installation of all furniture, fixtures, equipment and signs) in accordance with the approved final plans, at Developer's expense, within two hundred ten (210) days after commencement of construction (exclusive of time lost by reason of strikes, lockouts, fire, other casualties, acts of God, weather and other factors beyond the reasonable control of Developer). (4) Developer shall notify Franchisor of the date it makes application for a certificate of occupancy for the Restaurant and, within five (5) business days thereafter, Franchisor shall at its option conduct a final inspection of each Restaurant and its premises. Developer acknowledges and agrees that Developer shall not open a Restaurant for business without the express written authorization of Franchisor, and that Franchisor's authorization to open shall be conditioned upon Developer's strict compliance with the specifications of the approved final plans and with the standards of the System. Franchisor shall grant such authorization or set forth in writing why such authorization is being withheld, within five (5) business days after receipt of the written notice of the making of the application for a certificate of occupancy for the Restaurant. The failure by Franchisor to grant such authorization, or set forth in writing why such authorization is being withheld within the five (5) business day period set forth above, shall be deemed to grant Developer the authority to open the Restaurant for business as if Franchisor's authorization had been granted. Notwithstanding the foregoing, the failure by Franchisor to grant such authorization within such five (5) business day period shall not be construed as a waiver by Franchisor of its rights to inspect the Restaurant and to require compliance of all parts of the Restaurant with the standards for the System, whether such rights are exercised before or after the opening of the Restaurant. (5) Upon such authorization by Franchisor, Developer shall promptly open a Restaurant for business after the completion of construction. The parties agree that time is of the essence in the construction and opening of each Restaurant. V. TERM A. Unless sooner terminated in accordance with the provisions of this Agreement, the term of this Agreement and all rights granted by Franchisor hereunder shall commence upon the date on which Developer successfully, in a timely manner, completes the Development Schedule contained in the Development Agreement dated October 8, 1991 (the "Commencement Date"), and shall expire on the date on which Developer successfully and in a timely manner has completed the development schedule set forth in Section III.B. hereof. B. Rights of Renewal: Provided and upon condition that: i) Developer, its principals, successors, assigns and affiliates, complies with all obligations of this Agreement, all obligations of any franchise agreements, and any other agreements with Franchisor; and, ii) Developer provides Franchisor with written notice that Developer is exercising its rights of renewal hereunder, upon the earlier of, a) 24 months prior to the expiration of this Development Agreement, or b) completion of the 37th restaurant under this Development Agreement. Developer shall have the right to one renewal of this Agreement for a period of 15 years upon substantially the same terms and conditions as contained herein except that Attachment A to the Development Agreement shall be the Franchisor's then-current standard franchise agreement and the development schedule pursuant to Section III-B shall be as follows: Cumulative Total Number of Restaurants Which Developer Shall Have Open and in Operation (Including 15 Restaurants Currently BY (DATE) OPEN FOR BUSINESS) --------- ----------------------------------- Commencement Date 40 Commencement Date & 1 year 43 Commencement Date & 2 years 46 Commencement Date & 3 years 49 Commencement Date & 4 years 52 Commencement Date & 5 years 55 VI. DUTIES OF THE PARTIES A. Franchisor shall furnish to Developer the following: (1) Site selection guidelines and criteria, and such site selection counseling and assistance as Franchisor may deem advisable. Franchisor will from time to time, at its option, make available to Developer reports containing demographic and market data and real estate analyses at a reasonable cost. (2) Such on-site evaluation as Franchisor may deem advisable in response to Developer's requests for site approval; provided, however, that Franchisor shall not provide on-site evaluation for any proposed site prior to the receipt of all required information and materials concerning such site prepared pursuant to Section IV. hereof. Franchisor will provide at no additional charge to Developer an on-site evaluation for the first Restaurant to be developed by Developer pursuant to Section III.B. of this Agreement. Thereafter, if additional on-site evaluation is requested by Developer, Developer shall pay a reasonable fee for each such evaluation and shall reimburse Franchisor for all reasonable expenses incurred by Franchisor in connection with such on-site evaluation, including, without limitation, the cost of travel, lodging and meals. (3) Standard plans and specifications for the construction of a Restaurant and for the exterior and interior design and layout, fixtures, furnishings and signs. Developer shall adapt, at Developer's expense, the standard plans and specifications to each Restaurant location approved pursuant to Section IV. of this Agreement. (4) Such initial and continuing training as Franchisor deems advisable, at the times and places designated by Franchisor. B. Developer makes the following representations, warranties and covenants and accepts the following obligations: (1) Developer shall comply with all terms and conditions set forth in this Agreement. (2) In the event Developer is a corporation or a partnership, Developer represents, warrants and covenants that: (a) Developer is duly organized and validly existing under the state law of its formation; (b) Developer is duly qualified and is authorized to do business in each jurisdiction in which its business activities or the nature of the properties owned by it require such qualification; (c) Developer's corporate charter or written partnership agreement shall at all times provide that the activities of Developer are confined exclusively to the development of Restaurants unless otherwise consented to by Franchisor in writing; (d) The execution of this Agreement and the transactions contemplated hereby are within Developer's corporate power, or if Developer is a partnership, permitted under Developer's written partnership agreement; (e) If Developer is a corporation, copies of Developer's Articles of Incorporation, Bylaws, other governing documents and any amendments thereto, including the resolution of the Board of Directors authorizing entry into and performance of this Agreement have been furnished to Franchisor; or, if Developer is a partnership, copies of Developer's written partnership agreement, other governing documents and any amendments thereto have been furnished to Franchisor, including evidence of consent or approval of the entry into and performance of this Agreement by the requisite number or percentage of partners, if such approval or consent is required by Franchisee's written partnership agreement; (f) If Developer is a corporation or a partnership, all interests in Developer are owned as set forth in Attachment F hereto. In addition, if Developer is a corporation, Developer shall maintain a current list of all owners of record and all beneficial owners of any class of voting securities of the corporation; or if Developer is a partnership, Developer shall maintain a current list of all owners of an interest in the partnership. Such lists shall be furnished to Franchisor upon request. Developer shall execute an addendum to Attachment F as deemed necessary by Franchisor in order to ensure the information contained in Attachment F is true, accurate and complete at all times; (g) If Developer is a corporation, Developer shall maintain stop-transfer instructions against the transfer on its records of any equity securities and each stock certificate of the corporation shall have conspicuously endorsed upon its face a statement in a form satisfactory to Franchisor that it is held subject to and that further assignment or transfer thereof is subject to all restrictions imposed upon assignments by this Agreement; provided, however, that the requirements of this Section VI.B. (2) (g) shall not apply to a publicly-held corporation as defined in Section VIII.B. (1). If Developer is a partnership, its written partnership agreement shall provide that ownership of an interest in the partnership is held subject to and that further assignment or transfer is subject to all restrictions imposed upon assignments by this Agreement. If Developer is a limited partnership, its Agreement of Limited Partnership may not provide for more than one (1) general partner and if such general partner is a corporation, such corporation shall comply with the provisions of Section VI.B.(2)(e) and the first sentence of this Section VI.B.(2)(g); (h) If any Developer's Principal (as defined in Section XIV.F.), officer or director of Developer shall cease to serve as such or any individual shall become a Developer's Principal subsequent to the execution of this Agreement, Developer agrees to provide Franchisor with notice thereof within ten (10) days subsequent to such change. Any new Developer's Principal shall execute an addendum to this Agreement agreeing to be individually bound by all obligations of Developer's Principals hereunder. If Developer is a limited partnership having a corporation as its sole general partner, then those individuals who would be Developer's Principals if such corporation was the Developer hereunder shall comply with all of the provisions of this Section VI.B.(2)(h); (i) Benjamin Jacobson, Dennis Pedra and Paul Hoagland (collectively, the "Guarantors") shall jointly and severally guarantee Developer's performance hereunder and shall bind themselves to the terms of this Agreement pursuant to the terms and conditions of the Guaranty attached hereto; and (j) Developer acknowledges and agrees that the representations, warranties and covenants set forth above at Sections VI.B. (2) (a) - (i) are continuing obligations of Developer and that any failure to comply with such representations, warranties and covenants shall constitute a material event of default under Section VII.D. of this Agreement. Developer shall cooperate with Franchisor in any efforts made by Franchisor to verify compliance with such representations, warranties and covenants. (3) Developer shall designate and retain an individual to serve as the "Operating Principal" of Developer. The Operating Principal shall meet the following qualifications: (a) (i) If Developer is a corporation, the Operating Principal shall, at all times during which he serves as Operating Principal, be entitled, under its governing documents, to cast a sufficient number of votes to require such corporation to take or omit to take any action which such corporation is required to take or omit to take under the express terms of this Agreement. The Operating Principal must, directly or indirectly, at all times during which he serves as Operating Principal, own at least five percent (5%) of each class of Developer's capital stock issued and outstanding. Direct or indirect ownership shall include, but not be limited to (a) shares in Developer owned by a partnership consisting solely of the Operating Principal and his or her relatives, or (b) shares in Developer owned by a trust established by the Operating Principal for the benefit of his or her spouse and/or children, provided that, in the case of (a), the Operating Principal has voting control over all such shares and, in the case of (b), the ownership interest of such trust in Developer is not more than five-tenths percent (0.5%). Upon the written request of Franchisor, the Operating Principal shall provide evidence reasonably satisfactory to Franchisor of the ownership and voting control described in this Section VI.B.(3)(a)(i). (ii) If Developer is a partnership, the Operating Principal shall, at all times during which he serves as Operating Principal, be entitled under the partnership agreement or applicable law to act on behalf of the partnership [ (x) in his individual capacity by being either (A) the sole managing partner of a general partnership, or (B) the sole general partner of a limited partnership, or (y) by being the sole shareholder of a corporation which is the sole general partner of a limited partnership] without the approval or consent of any other partners of the partnership or be able to cast a sufficient number of votes to require such partnership to take or omit to take any action which such partnership is required to take or omit to take under the express terms of this Agreement. The Operating Principal must, directly or indirectly, at all times during which he serves as Operating Principal, own at least five percent (5%) of the partnership interests in such partnership (unless the limited partnership interests of the Operating Principal are diluted on a pro-rata basis with all of the other limited partners in the partnership pursuant to a transaction described in Section VIII.B.3. (iii) hereof) and must own and control all of the issued and outstanding capital stock of the corporate general partner or corporate managing partner of such partnership. Direct or indirect ownership shall include, but not be limited to (a) partnership interests in Developer owned by a partnership consisting solely of' the Operating Principal and his or her relatives, or (b) partnership interests in Developer owned by a trust established by the Operating Principal for the benefit of his or her spouse and/or children, provided that, in the case of (a), the Operating Principal has voting control over all such partnership interests and, in the case of (b), the ownership interest of such trust in Developer is not more than five-tenths percent (0.5%). Upon the written request of Franchisor, the Operating Principal shall provide evidence reasonably satisfactory to Franchisor of the ownership and voting control described in this Section VI.B.(3)(a)(ii). (iii) Except as may otherwise be provided in this Agreement, the Operating Principal's interest in Developer shall be and shall remain free of any pledge, mortgage, hypothecation, lien, charge, encumbrance, voting agreement, proxy, security interest or purchase right or options. (b) The Operating Principal or such other designee of Developer approved or rejected in writing by Franchisor in its sole and absolute discretion ("Operating Designee"), shall devote full time and best efforts to the supervision and conduct of the development activities contemplated hereunder, shall execute this Agreement, and shall be individually bound by all obligations of Developer and the Operating Principal hereunder. Dennis Pedra shall initially be the approved Operating Designee acting on behalf of Developer and Operating Principal. The Operating Designee must, directly or indirectly, at all times during which he serves as Operating Designee, own at least three-tenths percent (.3%) of (i) each class of Developer's capital stock issued and outstanding, or (ii) the partnership interests in Developer (unless the limited partnership interests of the Operating Designee are diluted on a pro-rata basis with all of the other limited partners in the partnership pursuant to a transaction described in Section VIII.B.3. (iii) hereof). The Operating Principal shall be responsible for insuring that the obligations of the Operating Principal as provided herein are fully performed in accordance with this Agreement by the Operating Principal or the Operating Designee, as applicable. (c) The Operating Principal shall be a person acceptable to both Developer and Franchisor. The granting or withholding by Franchisor of approval of a proposed Operating Principal shall be within the sole and absolute discretion of Franchisor. Benjamin Jacobson shall be the initial Operating Principal. If, at any time or for any reason, the Operating Principal, or the Operating Designee if applicable, no longer qualifies to act as such, Developer shall promptly designate another Operating Principal or a successor Operating Designee, as appropriate, subject to the approval of Franchisor and to the satisfaction of the qualifications listed above. Any sale, transfer or assignment of the Operating Principal's or Operating Designee's interest in Developer, or any portion thereof shall be subject to the restrictions on transfer described in Section VIII. hereof, and any failure to comply with such requirements shall be deemed a material event of default by Developer under Section VII.D. hereof. (4) Developer, the Operating Principal, or the Operating Designee, shall complete, to Franchisor's satisfaction, all initial and continuing training required by Franchisor hereunder or in Section V.F. of the Franchise Agreement attached hereto as Attachment A and shall bear all expenses (including travel, lodging and food) of such training. Developer, the Operating Principal, or the operating Designee may attend such optional training as Franchisor may offer from time to time, subject to Developer's payment of a reasonable training fee to Franchisor upon request, in addition to the expenses described above. (5) Neither Developer, the Operating Principal, the Operating Designee, nor Developer's Principals shall, during the term of this Agreement or thereafter, communicate, divulge or use for the benefit of any other person, persons, partnership, association or corporation any confidential information, knowledge or know-how concerning the Restaurants which may be communicated to Developer, the Operating Principal, the Operating Designee, or Developer's Principals or of which they may be apprised under this Agreement. Developer, the Operating Principal, the Operating Designee, and Developer's Principals shall disclose such confidential information only to such of Developer's employees or agents who must have access to it in connection with their employment and who are either the Operating Principal, the Operating Designee, a Developer's Principal, or who have signed an agreement substantially in the form attached hereto as Attachment B, C, D, or E. Any and all information, drawings, knowledge, know-how, and techniques used in or related to the System which Franchisor communicates in writing, or otherwise to Franchisee, including but not limited to, software licensed or provided by Franchisor, the MOD Manual (as defined in the Franchise Agreement), recipes, plans and specifications, marketing information and strategies, and site evaluation and selection techniques, shall be deemed confidential for the purposes of this Agreement. Neither Developer nor Developer's Principals shall at any time, without Franchisor's prior written consent, information, in whole or in part, nor otherwise make the same available to any unauthorized person. Failure by Developer or Developer's Principals to comply with the requirements of this Section VI.B. (5) shall constitute a material event of default under this Agreement as provided in Section VII.D. hereof. (a) Developer shall require its restaurant managers, members of its advisory board or Board of Directors (except for Developer's Principals), any other person or entity having access to any confidential information of Franchisor, and any corporation directly or indirectly controlling Developer, if Developer is a corporation (or of any corporate general partner and any individual or corporation directly or indirectly controlling a general partner of Developer, if Developer is a partnership), to execute covenants that they will maintain the confidentiality of information they receive in connection with their relationship with Developer. Such covenants shall be substantially in the form contained in Attachment B for Developer's restaurant managers and other persons having access to confidential information of Franchisor. (b) Developer, the Operating Principal and Developer's Principals acknowledge that any failure to comply with the requirements of this Section VI.B. (5), or the willful and knowing aiding or abetting of a third party in an action which would be a breach of Section VI.B. (5) or a breach of the agreement attached hereto as Attachment B if such third party had been a party to either this Agreement, or the agreement attached hereto as Attachment B, respectively, shall constitute a material event of default under Section VII.D. and will cause Franchisor irreparable injury; and, therefore, Developer, the Operating Principal, the Operating Designee, and Developer's Principals agree to pay all court costs and reasonable attorneys' fees incurred by Franchisor in obtaining specific performance of, or an injunction against violation of, the requirements of this Section. (6) Developer shall comply with all requirements of federal, state and local laws, rules and regulations. VII. DEFAULT A. Developer acknowledges and agrees that each of the Developer's obligations described in this Agreement is a material and essential obligation of Developer; that nonperformance of such obligations will adversely and substantially affect the Franchisor and the System; and agrees that the exercise by Franchisor of the rights and remedies set forth herein are appropriate and reasonable. B. The rights granted to Developer in this Agreement have been granted in reliance on Developer's representations and assurances, among others, that the conditions set forth in Sections I., III. and IV. of this Development Agreement will be met by Developer in a timely manner. C. Developer shall be deemed to be in default under this Agreement, and all rights granted herein shall automatically terminate without notice to Developer, if Developer shall become insolvent or make a general assignment for the benefit of creditors; or if Developer files a voluntary petition under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state thereof, or admits in writing its inability to pay its debts when due; or if Developer is adjudicated a bankrupt or insolvent in proceedings filed against Developer under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state thereof; or if a bill in equity or other proceeding for the appointment of a receiver of Developer or other custodian for Developer's business or assets is filed and consented to by Developer; or if a receiver or other custodian (permanent or temporary) of Developer's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; or if proceedings for a composition with creditors under any state or federal law should be instituted by or against Developer and are not dismissed within thirty (30) days; or if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless supersedeas bond is filed); or if Developer is dissolved; or if execution is levied against Developer's business or property and such execution is not lifted, released, or dismissed within thirty (30) days; or if suit to foreclose any lien or mortgage against the premises or equipment of any Restaurant developed hereunder is instituted against Developer and not dismissed within thirty (30) days; or if the real or personal property of any Restaurants developed hereunder shall be sold after levy thereupon by any sheriff, marshal or constable; or if any legal entity affiliated with Developer (or having the same or substantially similar management and ownership composition to Developer) which is the developer under a separate Development Agreement with Franchisor, is in default under any similar provision or provisions of such other Development Agreement. If Developer is a limited partnership, all of the events of default described in this Section VII.C. shall be read to include similar events involving Developer's general partner. D. If Developer fails to comply with the development schedule set forth in Section III.B. hereof; Developer fails to lease or purchase and construct and open each Restaurant pursuant to the time limits as provided in Section IV. hereof; Developer fails to comply with the terms of Section VI.B. (2); Developer fails to comply with requirements regarding the Operating Principal, the Operating Designee, or their replacements as set forth under Section VI.B. (3); Developer, the Operating Principal, the Operating Designee, or Developer's Principals fails to comply with the restrictions on confidential information set forth in Section VI.B. (5) or the requirements of Section IX. concerning certain other covenants (including in-term covenants not to compete); Developer or any partner or shareholder in Developer makes or attempts to make a transfer or assignment in violation of Section VIII. hereof; Developer or any parent company, affiliate, subsidiary or other principal of Developer, fails to comply with any terms and conditions of the Franchise Agreement or the terms of any other franchise agreements or any other development agreement (including the Development Agreement dated October 8, 1991) between Developer and Franchisor. Upon such default, Franchisor, in its discretion, may do any one or more of the following: (1) Terminate this Agreement and all rights granted hereunder without affording Developer any opportunity to cure the default, effective immediately upon notice to Developer; (2) Reduce the number of Restaurants which Developer may establish pursuant to Section I. of this Agreement; (3) Terminate or modify any territorial exclusivity granted Developer in Section I.C. hereof; (4) Reduce the area of territorial exclusivity granted Developer hereunder; or (5) Accelerate the development schedule set forth in Section III.B. hereof. E. (1) Upon termination of this Agreement, Developer shall have no right to establish or operate any Restaurant for which a Franchise Agreement has not been executed by Franchisor and delivered to Developer at the time of termination; (2) If Franchisor elects to terminate the territorial exclusivity granted to Developer in Section I.C., modify such territorial exclusivity or reduce the area of territorial exclusivity, Developer shall continue to develop Restaurants in accordance with the development schedule set forth in Section III.B., except insofar as the number of Restaurants which Developer is required to develop is reduced by Franchisor pursuant to Section VII.D.(2); (3) If Franchisor exercises any of its rights in D.(2), (3) or (4) above, Franchisor shall be entitled to establish, and to license others to establish, Restaurants in the Territory or in the portion thereof no longer part of the Territory or pursuant to any other modifications of Developer's territorial exclusivity, except as may be otherwise provided under any Franchise Agreement which is then in effect between Franchisor and Developer. F. Franchisor's exercise of its options under Section VII.D. (2), (3), (4) or (5) shall not, in the event of a default, constitute a waiver by Franchisor to exercise its option to terminate this Agreement at any time with respect to any subsequent event of default of a similar or different nature. G. No default under this Development Agreement shall thereby constitute a default under any Franchise Agreement between the parties hereto. H. No right or remedy herein conferred upon or reserved to Franchisor is exclusive of any other right or remedy provided or permitted by law or in equity. VIII. TRANSFER OF INTEREST A. TRANSFER BY FRANCHISOR Franchisor shall have the right to transfer or assign this Agreement and all or any part of its rights or obligations herein to any person or legal entity. Specifically, and without limitation to the foregoing, Developer agrees that Franchisor may sell its assets, the Proprietary Marks or the System to a third party; may offer its securities or be acquired by another corporation; may undertake a refinancing, recapitalization, leveraged buyout or other economic or financial restructuring; and with regard to any or all of the above sales, assignments and dispositions, Developer expressly and specifically waives any claims, demands, or damages against Franchisor arising from or related to the transfer of the Proprietary Marks (or any variation thereof) or the System from Franchisor to any other party. Nothing contained in this Agreement shall require Franchisor to offer any services or products, whether or not bearing the Proprietary Marks, to Developer if Franchisor assigns its rights in this Agreement. B. TRANSFER BY DEVELOPER (1) Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer, and that Franchisor has granted such rights in reliance on the business skill, financial capacity, and personal character of Developer and any guarantor of Developer. Accordingly, neither Developer nor any initial or subsequent successor or assign to any part of Developer's interest in this Agreement, nor any individual, partnership, corporation, or other entity which directly or indirectly has or owns any interest in this Agreement or in Developer shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in this Agreement or in any entity which owns this Agreement without the prior written consent of Franchisor; provided, however, that Franchisor's prior written consent shall not be required for a transfer of less than a one per cent (1%) interest in a publicly-held corporation, and further, Franchisor's prior written consent for a Minority Interest Transfer (as hereinafter defined) shall be exclusively based upon the requirements enumerated in Section VIII.B.(3) hereof. A publicly-held corporation is a corporation having its securities registered pursuant to Section 12 under the Securities Exchange Act of 1934, as amended, or a corporation subject to the reporting requirements of Section 15(d) under the Securities Exchange Act of 1934, as amended. Any purported assignment or transfer, by operation of law or otherwise, not having the written consent of Franchisor required by this Section VIII.B.(1) shall be null and void and shall constitute a material breach of this Agreement. (2) Franchisor shall not unreasonably withhold its consent to a transfer of any interest in Developer or in this Agreement. Franchisor may, in its sole discretion, require any or all of the following as conditions of its approval: (a) All of Developer's accrued monetary obligations and all other outstanding obligations to Franchisor, its subsidiaries, and its affiliates shall have been satisfied; (b) Developer is not in default of any provision of this Agreement, any amendment hereof or successor hereto, or any other agreement between Developer and Franchisor, or its subsidiaries and affiliates; (c) The transferor shall have executed a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its officers, directors, shareholders, and employees, in their corporate and individual capacities, including, without limitation, claims arising under this Agreement and federal, state, and local laws, rules, and ordinances; (d) If the transferee is the Operating Principal or the Operating Designee, then the requirements of Section VI.B. (3) shall be satisfied by such transferee; (e) If the transferee is a Developer's Principal, then the requirements of Section VI.B. (2) (h) shall be satisfied by such transferee; (f) The transferee shall enter into a written agreement, in a form satisfactory to Franchisor, assuming full, unconditional, joint and several liability for and agreeing to perform from the date of the transfer, all obligations, covenants and agreements contained in this Agreement which the transferor was obligated to perform. If, however, the transferee is to become an Operating Principal, Operating Designee, or Developer's Principal, such transferee shall be required to enter into a written agreement, in a form reasonably satisfactory to Franchisor, assuming full, unconditional, joint and several liability for and agreeing to perform from the date of the transfer, all obligations, covenants, and agreements contained in this Agreement; (g) The transferee shall demonstrate to Franchisor's satisfaction that transferee meets the criteria considered by Franchisor when reviewing a prospective developer's application for development rights, including but not limited to Franchisor's educational, managerial and business standards; transferee's good moral character, business reputation and credit rating; transferee's aptitude and ability to conduct the business contemplated hereunder (as may be evidenced by prior related business experience or otherwise); that transferee has adequate financial resources and capital to meet the development schedule set forth in Section III.B. hereof; and the geographic proximity of other Chili's Grill & Bar restaurants owned or operated by transferee and the territories or areas with respect to which transferee is obligated to develop Chili's Grill & Bar restaurants pursuant to any development agreement between Franchisor and Franchisee, in relation to development of the Restaurants. (h) The transferee shall execute (and/or, upon Franchisor's request, shall cause all interested parties to execute), the standard form development agreement then being offered to new System developers or form of this Agreement, as Franchisor determines, and such other ancillary agreements as Franchisor may require, which agreements shall supersede this Agreement and its ancillary documents in all respects and the terms of which agreements may differ from the terms of this Agreement; (i) At the transferee's expense, the transferee, the transferee's manager, the transferee's Operating Principal, and the transferee's Operating Designee, if applicable, shall complete any training programs then in effect for System developers upon such terms and conditions as Franchisor may reasonably require; (j) Developer shall pay a transfer fee in an amount sufficient to reimburse Franchisor for its reasonable costs and expenses associated with reviewing the application to transfer, including, without limitation, legal and accounting fees; and (k) If transferee is a corporation or a partnership, transferee shall make and will be bound by any or all of the representations, warranties and covenants set forth at Section VI.B.(2) as Franchisor requests. Transferee shall provide to Franchisor evidence satisfactory to Franchisor that the terms of Section VI.B.(2) have been satisfied and are true and correct on the date of transfer. (3) Franchisor will apply the transfer requirements set forth in Section VIII.B.(2) to all transfers requiring Franchisor's consent except a Minority Interest Transfer (as hereinafter defined). Franchisor shall not unreasonably withhold its consent to a transfer of any interest in Developer or in this Agreement. Minority Interest Transfer shall be defined as a transfer or transfers by an interest holder or holders in Developer wherein such interest holder(s) do not include the Operating Principal and the Operating Designee. Notwithstanding the foregoing, the Operating Principal and the Operating Designee shall be permitted to transfer any direct or indirect ownership interest in Developer provided that the voting control and minimum ownership requirements set forth in Section VI.B. (3) of this Agreement continue to be satisfied. Minority Interest Transfer shall be defined further to exclude any transfer by an interest holder or holders in Developer, which transfer(s) is/are reasonably calculated to be made in conjunction with, as a part of, reasonably contemporaneous with, or in the same transaction with, any transfer by the Operating Principal or Operating Designee. Franchisor may, in its sole discretion, require any or all of the following as conditions of its approval of a Minority Interest Transfer (except for a Minority Interest Transfer or a series of Minority Interest Transfers (i) from Holdings Group, Inc. to an investment partnership controlled by the controlling shareholder of Tiger Management Corporation, (ii) in which, in the aggregate, ten percent (10%) or less of the interest of the transferor is to be transferred to (x) a partnership consisting solely of the transferor and his or her relatives, or (y) a trust established by the transferor for the benefit of his or her spouse or children), or (iii) in which additional limited partnership interests in Developer are issued to certain key employees of, or consultants to, Developer pursuant to Section 2.2 of Developer's Agreement of Limited Partnership in an amount not to exceed fifteen percent (15%) of the aggregate limited partnership interests in Developer (after taking such issuance into consideration), provided that each such transferee is already a limited partner in Developer and will not become the operating Principal, Operating Designee, or a Developer's Principal: (a) All of Developer's accrued monetary obligations and all other outstanding obligations to Franchisor, its subsidiaries, and its affiliates shall have been satisfied; (b) Developer is not in material default of any provision of this Agreement, any amendment hereof or successor hereto, or any other agreement between Developer and Franchisor, or its subsidiaries and affiliates; (c) The transferor shall have executed a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its officers, directors, shareholders, and employees, in their corporate and individual capacities, including, without limitation, claims arising under this Agreement and federal, state, and local laws, rules, and ordinances; (d) The transferee, if such person is to become the Operating Principal or the Operating Designee, or if a person or entity described in Section VI.B.(5)(a) of this Agreement (and, upon Franchisor's request, all interested parties) , shall enter into a written agreement, in a form satisfactory to Franchisor, assuming full, unconditional, joint and several liability for and agreeing to perform from the date of the transfer the obligations, covenants, and agreements contained in Section VI.B. (5) and Section IX.B-H of this Agreement; (e) The transferee shall demonstrate to Franchisor's satisfaction the following: that transferee meets the criteria considered by Franchisor when reviewing a prospective developer's application for development rights, including, but not limited to, Franchisor's educational, managerial, and business standards; that transferee possesses a good moral character, business reputation, and credit rating; that transferee (if such transferee is to serve as the Operating Principal, the operating Designee, or as a Developer's Principal) has the aptitude and ability to conduct the business contemplated hereunder (as may be evidenced by prior related business experience or otherwise); and that transferee (if such transferee is to serve as the operating Principal, the Operating Designee, or as a Developer's Principal) has adequate financial resources and capital to meet the development schedule set forth in Section III.B. hereof; (f) The transferor shall pay a transfer fee in an amount sufficient to reimburse Franchisor for its actual and reasonable costs and expenses associated with reviewing the application to transfer, including, without limitation, legal and accounting fees; and (g) If transferee is a corporation or a partnership, transferee shall make and will be bound by any or all of the representations, warranties and covenants set forth at Section VI.B.(2) as Franchisor requests. Transferee shall provide to Franchisor evidence satisfactory to Franchisor that the terms of Section VI.B. (2) have been satisfied and are true and correct on the date of transfer. (4) Developer acknowledges and agrees that each condition which must be met by the transferee is reasonable and necessary to assure such transferee's full performance of the obligations hereunder. C. TRANSFER FOR CONVENIENCE OF OWNERSHIP In the event the proposed transfer is to a corporation or partnership formed solely for the convenience of ownership, Franchisor's consent may be conditioned upon any of the requirements set forth at Section VIII.B.(2), except that the requirements set forth at Sections VIII.B.(2)(c), (g), (h), (i) and (j) shall not apply. With respect to a transfer to a corporation or partnership formed for the convenience of ownership, Developer shall be the owner of all of the voting stock or interest of the corporation and if Developer is more than one individual, each individual shall have the same proportionate ownership interest in the corporation as he had in Developer prior to the transfer. D. RIGHT OF FIRST REFUSAL (1) Any party holding any interest in Developer or in this Agreement and who desires to accept any BONA FIDE offer from a third party to purchase such interest shall promptly notify Franchisor in writing of each such offer, and shall provide such information and documentation relating to the offer as Franchisor may require. Franchisor shall have the right and option, exercisable within thirty (30) days after receipt of such written notification, to send written notice to the seller that Franchisor intends to purchase the seller's interest on the same terms and conditions offered by the third party. In the event that Franchisor elects to purchase the seller's interest, closing on such purchase must occur within thirty (30) days from the date of notice to the seller of the election to purchase by Franchisor. Any material change in the terms of any offer prior to closing shall constitute a new offer subject to the same rights of first refusal by Franchisor as in the case of an initial offer. Failure of Franchisor to exercise the option afforded by this Section VIII.D. shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Section VIII., with respect to a proposed transfer. (2) In the event an offer from a third party provides for payment of consideration other than cash or involves certain intangible benefits, Franchisor may elect to purchase the interest proposed to be sold for the reasonable equivalent in cash. If the parties cannot agree within a reasonable time on the reasonable equivalent in cash of the non-cash part of the offer, then Franchisor shall appoint an independent appraiser and Developer shall appoint an independent appraiser. In the event both parties do not select the same appraiser, the two appraisers shall select a third appraiser which shall, within thirty (30) days of appointment, determine the fair market value of the non-cash-part of the offer and its determination shall be binding. If, however, due to the comparative tax consequences of such transactions, Franchisor's cash offer compares unfavorably to an offer made by a third party including, in whole or in part, non-cash consideration, then Developer may elect to rescind its acceptance of such third party offer and Franchisor shall have no right of first refusal with respect to such offer. (3) Notwithstanding anything in this Section VIII.D. to the contrary, Franchisor agrees to waive the right of first refusal described herein with respect to Minority Interest Transfers and transfers by the Operating Principal and Operating Designee if the Operating Principal and the Operating Designee will continue to satisfy the voting control and minimum ownership requirements set forth in Section VI.B.(3) of this Agreement. E. TRANSFER UPON DEATH OR PERMANENT DISABILITY (1) Upon the death of any person with an interest in this Agreement or in Developer (the "Deceased") , the executor, administrator or other personal representative of the Deceased shall transfer such interest to a third party approved by Franchisor and meeting the requirements set forth in this Agreement within twelve (12) months after the death. If no personal representative is designated or appointed or no probate proceedings are instituted with respect to the estate of the Deceased, then the distributee of such interest must be approved by Franchisor. If the distributee is not approved by Franchisor, then the distributee shall transfer such interest to a third party approved by Franchisor within twelve (12) months after the death of the Deceased. (2) Upon the permanent disability of any person with an interest in this Agreement or in Developer, Franchisor may, in its sole discretion, require such interest to be transferred to a third party meeting the requirements set forth in this Agreement in accordance with the conditions described in this Section VIII. within twelve (12) months after notice to Developer. "Permanent disability" shall mean any physical, emotional or mental injury, illness or incapacity which would prevent a person from performing the obligations set forth in this Agreement, or in the Guaranty attached to this Agreement, for at least ninety (90) consecutive days and from which condition recovery within ninety days from the date of determination of disability is unlikely. Permanent disability shall be determined by a licensed practicing physician selected by Franchisor upon examination of the person; or if the person refuses to submit to an examination, then such person shall be automatically deemed permanently disabled as of the date of such refusal for the purpose of this Section VIII. The costs of any examination required by this Section VIII.E.(2) shall be paid by Franchisor. (3) Upon the death or claim of permanent disability of any person with an interest in this Agreement or in Developer, Developer or a representative of Developer must promptly notify Franchisor of such death or claim of permanent disability. Any transfer upon death or permanent disability shall be subject to the same terms and conditions as described in Section VIII. for any INTER VIVOS transfer. If an interest is not transferred upon death or permanent disability as required in this Section VIII.E., in accordance with the terms and conditions of Section VIII., Franchisor may terminate this Agreement. F. NON-WAIVER OF CLAIMS Franchisor's consent to a transfer of any interest in Developer or in this Agreement shall not constitute a waiver of any claims it may have against the transferring party, nor shall it be deemed a waiver of Franchisor's right to demand exact compliance with any of the terms of this Agreement by the transferee. G. OFFERINGS BY DEVELOPER Securities or partnership interests in Developer may be offered to the public, by private offering or otherwise, only with the prior written consent of Franchisor (whether or not Franchisor, s consent is required under Section VIII.B. hereof) , which consent shall not be unreasonably withheld. All materials required for such offering by federal or state law shall be submitted to Franchisor for a limited review as discussed below prior to their being filed with any government agency; and any materials to be used in any exempt offering shall be submitted to Franchisor for such review prior to their use. No Developer offering shall imply (by use of the Proprietary Marks or otherwise) that Franchisor is participating in an underwriting, issuance, or offering of Developer's or Franchisor's securities; and Franchisor's review of any offering shall be limited solely to the subject of the relationship between Developer and Franchisor. Franchisor may, at its option, require Developer's offering materials to contain a written statement prescribed by Franchisor concerning the limitations described in the preceding sentence. Developer and the other participants in the offering must fully indemnify Franchisor in connection with the offering. For each proposed offering, Developer shall pay to Franchisor a nonrefundable fee of Five Thousand Dollars ($5,000), or such greater amount as is necessary to reimburse Franchisor for its reasonable costs and expenses associated with reviewing the proposed offering, including, without limitation, legal and accounting fees. Developer shall give Franchisor written notice at least thirty (30) days prior to the date of commencement of any offering or other transaction covered by this Section VIII.G. IX. COVENANTS A. Developer and the Operating Principal covenant that during the term of this Agreement except as otherwise approved in writing by Franchisor, Developer, and either the Operating Principal or the Operating Designee shall devote full time, energy, and best efforts to the management and operation of the business contemplated hereunder. B. Developer, the Operating Principal, the Operating Designee, and Developer's Principals specifically acknowledge that, pursuant to this Agreement, Developer, the Operating Principal, the Operating Designee, and Developer's Principals will receive valuable trade secrets and confidential information, including, without limitation, information regarding the site selection and marketing methods and techniques of Franchisor and the System which is beyond the present skills and experience of Developer, the Operating Principal, the Operating Designee, and Developer's Principals and Developer's managers and employees, and that Developer has the exclusive right and the obligation, arising from this Agreement, to identify sites and develop the Territory for the benefit of the System. Developer, the Operating Principal, the Operating Designee, and Developer's Principals acknowledge that such trade secrets and confidential information provide a competitive advantage and will be valuable to them in the development of the franchised businesses, and that gaining access to such trade secrets and confidential information is, therefore, a primary reason why they are entering into this Agreement. In consideration for such trade secrets, confidential information and rights, Developer, the Operating Principal, the Operating Designee, and Developer's Principals covenant that during the term of this Agreement (or, with respect to the Operating Principal, during the term of this Agreement for so long as such person owns any interest in Developer; or, with respect to the Operating Designee, during the term of this Agreement for so long as such person serves as the Operating Designee on behalf of Developer and the Operating Principal; or, with respect to each of Developer's Principals, during the term of this Agreement for so long as such individual or entity satisfies the definition of "Developer's Principals" as described in Section XIV.F. of this Agreement), and for a continuous uninterrupted period commencing upon the expiration or termination of this Agreement, regardless of the cause for termination (or, with respect to the Operating Principal and each of Developer's Principals, commencing upon the earlier of: (i) the expiration or termination of this Agreement or (ii) with respect to the Operating Principal, the termination of all of such person's interest in Developer; or, with respect to the Operating Designee, during the term of this Agreement for so long as such person serves as the Operating Designee on behalf of Developer and the Operating Principal; or, with respect to each of Developer's Principals, the time such individual or entity ceases to satisfy the definition of "Developer's Principals" as described in Section XIV.F. of this Agreement) and continuing for two (2) years thereafter (except in the case of restaurant managers, to whom such two (2) year period shall not be applicable), and as otherwise approved in writing by Franchisor, neither Developer, the Operating Principal, the Operating Designee, nor Developer's Principals shall, directly or indirectly, for themselves, or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation: (1) Divert or attempt to divert any business or customer of the franchised businesses to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with Franchisor's Proprietary Marks and the System. (2) Employ or seek to employ any person who is at that time employed by Franchisor or by any other developer or franchisee of Franchisor, or otherwise directly or indirectly induce such person to leave his or her employment. (3) Own, maintain, operate, engage in, or have any interest in any business in the United States which is in the full-service casual dining market segment of the restaurant industry having as a primary menu item any of the following: hamburgers or other sandwiches, salads, barbecue ribs, fajitas and other Southwestern and Mexican-style cuisine. The current seven percent (7%) ownership interest of Dennis Pedra in Uno Concepts, Inc. shall not be deemed to be a violation of this Section IX.B.(3) although no new or additional investments in Uno Concepts, Inc. or in any other restaurant business except through Developer, its successors or assigns, shall be permitted by Dennis Pedra. C. Section IX.B.(3) shall not apply to ownership of less than ten percent (10%) beneficial interest in the outstanding equity securities of any publicly-held corporation. D. The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Section IX. is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Franchisor is a party, Developer, the operating Principal, the Operating Designee, and Developer's Principals expressly agree to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Section IX. E. Developer, the Operating Principal, the Operating Designee, and Developer's Principals understand and acknowledge that Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in Section IX.B. in this Agreement, or any portion thereof, without their consent, effective immediately upon notice to Developer; and Developer, the Operating Principal, the Operating Designee, and Developer's Principals agree that they shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section XV. hereof. F. Developer, the Operating Principal, the Operating Designee, and Developer's Principals expressly agree that the existence of any claims they may have against Franchisor, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Franchisor of the covenants in this Section IX. If either Franchisor or Developer institutes any action or proceeding seeking legal or equitable relief in connection with enforcement of this Section IX. then the nonprevailing party in such action or proceeding shall reimburse the prevailing party for its reasonable expenses, attorneys' fees, investigation costs, and all costs and disbursements incurred herein by the prevailing party, including without limitation, any such reasonable fees, costs, or disbursements incurred on any appeal from such action or proceeding. G. Failure to comply with the requirements of this Section IX. shall constitute a default under this Agreement as provided in Section VII.D. hereof. Developer, the Operating Principal, the Operating Designee, and Developer's Principals acknowledge that a violation of the terms of this Section IX. or the willful and knowing aiding and abetting of a third party in an action which would be a violation of this Section IX. If such third party was a party to this Agreement would result in irreparable injury to Franchisor for which no adequate remedy at law may be available, and Developer, the Operating Principal, the Operating Designee, and Developer's Principals accordingly consent to the issuance of an injunction prohibiting any conduct by Developer, the Operating Principal, the Operating Designee, or Developer's Principals in violation of the terms of this Section IX. H. At Franchisor's request, Developer shall require and obtain execution of covenants similar to those set forth in this Section IX. (including covenants applicable upon the termination of a person's relationship with Developer) from its restaurant managers, members of its advisory board, any other person or entity who has received or will receive training or confidential information from Franchisor, and any corporation directly or indirectly controlling Developer, if Developer is a corporation (or of any corporate general partner and any individual or corporation directly or indirectly controlling a general partner of Developer, if Developer is a partnership) . The covenants required by this Section IX.H. shall be substantially in the form contained in Attachment B for Developer's restaurant managers and other persons having access to confidential information of Franchisor, Attachment C for Lee Ainslie (and his successors on Developer's advisory board), Attachment D for Alan McDowell, and Attachment E for Thomas Devlin. Failure by Developer to obtain execution of the covenants required by this Section IX.H. shall constitute a default under Section VII.D. hereof. X. NOTICES Any and all notices required or permitted under this Agreement shall be in writing and shall be personally delivered or mailed by expedited delivery service or certified or registered mail, return receipt requested, or sent by prepaid telex or facsimile (provided the sender confirms the telex or facsimile by sending an original confirmation copy thereof by certified or registered mail or expedited delivery service within three (3) business days after transmission thereof) to the respective parties at the following addresses unless and until a different address has been designated by written notice to the other party: Notices to Franchisor: Brinker International, Inc. 6820 LBJ Freeway Dallas, Texas 75240 Attention: General Counsel Notices to Developer and NE Restaurant Company Limited Developer's Principals: Partnership 300 Pond Street Randolph, Massachusetts 02368 Any notice shall be deemed to have been given at the time of personal delivery or, in the case of facsimile or telex, upon receipt (provided confirmation is sent as described above) or, in the case of expedited delivery service or registered or certified mail, three (3) business days after the date and time of mailing. Business day for the purpose of this Section X. excludes Saturday, Sunday, and the following national holidays: New Year's Day, Martin Luther King Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving, and Christmas. XI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION A. It is understood and agreed by the parties hereto that this Agreement does not create a fiduciary relationship between them, that Developer is an independent contractor, and that nothing in this Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of the other for any purposes whatsoever. B. Developer shall hold itself out to the public to be an independent contractor operating pursuant to this Agreement. Developer agrees to take such actions as shall be necessary to that end. C. Developer understands and agrees that nothing in this Agreement authorizes Developer or any of Developer's Principals to make any contract, agreement, warranty, or representation on Franchisor's behalf, or to incur any debt or other obligation in Franchisor's name, and that Franchisor shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action, or by reason of any act or omission of Developer or Developer's Principals or any claim or judgment arising therefrom against Developer, any of Developer's Principals or Franchisor. D. Developer and each of Developer's Principals shall, at all times, indemnify and hold harmless to the fullest extent permitted by law Franchisor, its subsidiaries, affiliates, successors and assigns and their respective officers, directors, shareholders, partners, agents, representatives, independent contractors and employees ("Indemnitees"), from all "losses and expenses" (as defined in Section XI.G(2) below) incurred in connection with any action, suit, proceeding, claim, demand, investigation or inquiry (formal or informal), or any settlement thereof (whether or not a formal proceeding or action has been instituted) which arises out of or is based upon any of the following: (1) The infringement, alleged infringement, or any other violation or alleged violation by Developer or any of Developer's Principals of any patent, mark or copyright or other proprietary right owned or controlled by third parties; (2) The violation, breach or asserted violation or breach by Developer or any of Developer's Principals of any federal, state or local law, regulation, ruling, standard or directive or any industry standard; (3) Libel, slander or any other form of defamation of Franchisor, the System or any developer or franchisee operating under the System, by Developer or by any of Developer's Principals; (4) The violation or breach by Developer or by any of Developer's Principals of any warranty, representation, agreement or obligation in this Agreement or in any other agreement between Developer, its subsidiaries and affiliates and Franchisor, its subsidiaries and affiliates or the officers, directors, shareholders, partners, agents, representatives independent contractors and employees thereof; and (5) Acts, errors, or omissions of Developer, any of Developer's subsidiaries or affiliates and any of Developer's Principals and the officers, directors, shareholders, partners, agents, representatives, independent contractors and employees of Developer and its subsidiaries and affiliates in connection with the development and construction of any Restaurant. E. Developer and each of Developer's Principals agree to give Franchisor notice of any such action, suit, proceeding, claim, demand or investigation. At the expense and risk of Developer and each of Developer's Principals, Franchisor may elect to assume (but under no circumstance is obligated to undertake) or associate counsel of its own choosing with respect to, the defense and/or settlement of any such action, suit, proceeding, claim, demand, inquiry or investigation. Such an undertaking by Franchisor shall, in no manner or form, diminish the obligation of Developer and each of Developer's Principals to indemnify the Indemnitees and to hold them harmless. F. In order to protect persons or property, or its reputation or goodwill, or the reputation or goodwill of others, Franchisor may, at any time and without notice, as it, in its judgment deems appropriate, consent or agree to settlements or take such other remedial or corrective actions it deems expedient with respect to the action, suit, proceeding, claim, demand, inquiry or investigation if, in Franchisor's sole judgment, there are reasonable grounds to believe that: (1) any of the acts or circumstances enumerated in Section XI.D(l)-(4) above have occurred; or (2) any act, error, or omission as described in Section XI.D(5) may result directly or indirectly in damage, injury, or harm to any person or any property. G. (1) All losses and expenses incurred under this Section XI. shall be chargeable to and paid by Developer or any of Developer's Principals pursuant to its obligations of indemnity under this Section, regardless of any actions, activity or defense undertaken by Franchisor or the subsequent success or failure of such actions, activity, or defense. (2) As used in this Section XI. , the phrase "losses and expenses" shall include, without limitation, all losses, compensatory, exemplary or punitive damages, fines, charges, costs, expenses, lost profits, reasonable attorney's fees, court costs, settlement amounts, judgments, compensation for damages to the Franchisor's reputation and goodwill, costs of changing, substituting or replacing the same, and any and all expenses of recall, refunds, compensation, public notices and other such amounts incurred in connection with the matters described. H. The Indemnitees do not assume any liability whatsoever for acts, errors, or omissions of those with whom Developer, any of Developer's Principals, Developer's subsidiaries and affiliates or any of the officers, directors, shareholders, partners, agents, representatives, independent contractors and employees of Developer, its subsidiaries or affiliates may contract, regardless of the purpose. Developer and each of Developer's Principals shall hold harmless and indemnify the Indemnitees for all losses and expenses which may arise out of any acts, errors or omissions of Developer, Developer's Principals, Developer's subsidiaries and affiliates, the officers, directors, shareholders, partners, agents, representatives, independent contractors and employees of Developer and its subsidiaries and affiliates and any such other third parties without limitation and without regard to the cause or causes thereof or the negligence of Franchisor or any other party or parties arising in connection therewith, and whether such negligence be sole, joint or concurrent, or active or passive. I. Under no circumstances shall the Indemnitees be required or obligated to seek recovery from third parties or otherwise mitigate their losses in order to maintain a claim against Developer or any of Developer's Principals. Developer and each of Developer's Principals agree that the failure to pursue such recovery or mitigate loss will in no way reduce the amounts recoverable from Developer or any of Developer's Principals by the Indemnitees. J. Developer and Developer's Principals expressly agree that the terms of this Section XI. shall survive the termination, expiration or transfer of this Agreement or any interest herein. XII. APPROVALS A. Whenever this Agreement requires the prior approval or consent of Franchisor, Developer shall make a timely written request to Franchisor therefor, and except as may be otherwise expressly provided herein, any approval or consent granted shall be in writing. B. Franchisor makes no warranties or guarantees upon which Developer, the Operating Principal, the Operating Designee, or Developer's Principals may rely and assumes no liability or obligation to Developer or any third party to which it would not otherwise be subject, by providing any waiver, approval, advice, consent, or services to Developer, the Operating Principal, the Operating Designee, or Developer's Principals in connection with this Agreement, or by reason of any neglect, delay, or denial of any request therefor. XIII. NON-WAIVER No failure of Franchisor to exercise any power reserved to it in this Agreement or to insist upon compliance by Developer, the Operating Principal, the Operating Designee, or Developer's Principals with any obligation or condition in this Agreement, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Franchisor's rights to demand exact compliance with the terms of this Agreement. Waiver by Franchisor of any particular default shall not affect or impair Franchisor's right with respect to any subsequent default of the same or of a different nature; nor shall any delay, forbearance, or omission of Franchisor to exercise any power or right arising out of any breach or default by Developer, the Operating Principal, the Operating Designee, or Developer's Principals of any of the terms, provisions, or covenants of this Agreement affect or impair Franchisor's rights; nor shall such constitute a waiver by Franchisor of any rights hereunder or rights to declare any subsequent breach or default. XIV. SEVERABILITY AND CONSTRUCTION A. Except as expressly provided to the contrary herein, each portion, section, part, term, and/or provision of this Agreement shall be considered severable; and if, for any reason, any section, part, term, and/or provision herein is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation by a court or agency having valid jurisdiction, such shall not impair the operation of, or have any other effect upon, such other portions, sections, parts, terms, and/or provisions of this Agreement as may remain otherwise intelligible, and the latter shall continue to be given full force and effect and bind the parties hereto; and said invalid portions, sections, parts, terms, and/or provisions shall be deemed not to be part of this Agreement. B. Except as expressly provided to the contrary herein, nothing in this Agreement is intended, nor shall be deemed, to confer upon any person or legal entity other than Developer, Franchisor, Franchisor's officers, directors, and employees, and such of Developer's and Franchisor's respective successors and assigns as may be contemplated (and, as to Developer, permitted) by Section VIII. hereof, any rights or remedies under or by reason of this Agreement. C. Developer, the Operating Principal, the Operating Designee, and Developer's Principals, as applicable, expressly agree to be bound by any promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms of any provision hereof, as though it were separately articulated in and made a part of this Agreement, that may result from striking from any of the provisions hereof any portion or portions which a court may hold to be unreasonable and unenforceable in a final decision to which Franchisor is a party, or from reducing the scope of any promise or covenant to the extent required to comply with such a court order. D. All captions in this Agreement are intended solely for the convenience of the parties, and none shall be deemed to affect the meaning or construction of any provision hereof. E. All references herein to the masculine, neuter, or singular shall be construed to include the masculine, feminine, neuter, or plural, where applicable; and, without limiting the obligations individually undertaken by the Operating Principal and Developer's Principals hereunder, all acknowledgments, promises, covenants, agreements, and obligations herein made or undertaken by Developer shall be deemed jointly and severally undertaken by all those executing this Agreement on behalf of Developer. F. The term "Developer's Principals" as used in this Agreement shall include, collectively or individually, Developer's spouse, if Developer is an individual; all officers and directors of, and all other holders of a beneficial interest of fifteen percent (15%) or more of the securities of, Developer and any corporation directly or indirectly controlling Developer, if Developer is a corporation; the general partners of Developer and the officers and directors of, and all other holders of a beneficial interest of fifteen percent (15%) or more of the securities of, a corporate general partner of Developer and any individual or corporation which controls, directly or indirectly, any general partner, if Developer is a partnership; and members of Developer's advisory board. For purposes of this definition, the Operating Principal, the operating Designee, Thomas R. Devlin, Alan McDowell, and Holdings Group, Inc. shall not be considered to be Developer's Principals. G. This Agreement may be executed in triplicate, and each copy so executed shall be deemed an original. H. If at any time during the term of this Agreement either Franchisor or Franchisee shall institute any action or proceeding against the other relating to the provisions of this Agreement or any default hereunder, the non-prevailing party in such action or proceeding shall reimburse the prevailing party for its reasonable expenses, attorneys' fees, investigation costs, and all costs and disbursements incurred herein by the prevailing party, including without limitation any such reasonable fees, costs, or disbursements incurred on any appeal from such action or proceeding. XV. ENTIRE AGREEMENT; APPLICABLE LAW A. This Agreement, the documents referred to herein, and the Attachments hereto, constitute the entire, full, and complete agreement between Franchisor and Developer concerning the subject matter hereof and shall supersede any and all prior agreements. Except for those permitted to be made unilaterally by Franchisor hereunder, no amendment, change, or variance from this Agreement shall be binding on either party unless mutually agreed to by the parties and executed by their authorized officers or agents in writing. B. THE PARTIES AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT (AND ATTACHMENTS) OR THE RELATIONSHIP CREATED BY THIS AGREEMENT TO NONBINDING MEDIATION PRIOR TO BRINGING SUCH CLAIM, CONTROVERSY OR DISPUTE IN A COURT. THE MEDIATION SHALL BE CONDUCTED THROUGH EITHER AN INDIVIDUAL MEDIATOR OR A MEDIATOR APPOINTED BY A MEDIATION SERVICES ORGANIZATION OR BODY, EXPERIENCED IN THE MEDIATION OF FOOD SERVICE BUSINESS DISPUTES, AGREED UPON BY THE PARTIES AND, FAILING SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME AFTER EITHER PARTY HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK MEDIATION OF ANY CLAIM, CONTROVERSY OR DISPUTE (NOT TO EXCEED FIFTEEN (15) DAYS) , BY THE AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE WITH ITS RULES GOVERNING MEDIATION, AT FRANCHISOR'S CORPORATE HEADQUARTERS IN DALLAS, TEXAS. THE COSTS AND EXPENSES OF MEDIATION, INCLUDING COMPENSATION OF THE MEDIATOR, SHALL BE BORNE BY THE PARTIES EQUALLY. IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR DISPUTE WITHIN NINETY (90) DAYS AFTER THE MEDIATOR HAS BEEN APPOINTED, THEN EITHER PARTY MAY BRING A LEGAL PROCEEDING UNDER SECTION XV.C BELOW TO RESOLVE SUCH CLAIM, CONTROVERSY OR DISPUTE UNLESS SUCH TIME PERIOD IS EXTENDED BY WRITTEN AGREEMENT OF THE PARTIES. NOTWITHSTANDING THE FOREGOING, FRANCHISOR MAY BRING AN ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF, OR (3) INVOLVING THE POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO, REAL PROPERTY IN A COURT HAVING JURISDICTION AND IN ACCORDANCE WITH SECTION XV.C BELOW, WITHOUT SUBMITTING SUCH ACTION TO MEDIATION. C. WITH RESPECT TO ANY CLAIMS, CONTROVERSIES OR DISPUTES WHICH ARE NOT FINALLY RESOLVED THROUGH MEDIATION OR AS OTHERWISE PROVIDED ABOVE, DEVELOPER AND DEVELOPER'S PRINCIPALS HEREBY IRREVOCABLY SUBMIT THEMSELVES TO THE JURISDICTION OF THE STATE COURTS OF DALLAS COUNTY, TEXAS AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. DEVELOPER AND DEVELOPER'S PRINCIPALS HEREBY WAIVE ALL QUESTIONS OF PERSONAL JURISDICTION FOR THE PURPOSE OF CARRYING OUT THIS PROVISION. DEVELOPER AND DEVELOPER'S PRINCIPALS HEREBY IRREVOCABLY AGREE THAT SERVICE OF PROCESS MAY BE MADE UPON ANY OF THEM IN ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP CREATED BY THIS AGREEMENT BY ANY MEANS ALLOWED BY TEXAS OR FEDERAL LAW. DEVELOPER AND DEVELOPER'S PRINCIPALS AGREE THAT VENUE FOR ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE IN DALLAS COUNTY, TEXAS; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF OR (3) INVOLVING POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO, REAL PROPERTY, FRANCHISOR MAY BRING SUCH ACTION IN ANY STATE OR FEDERAL DISTRICT COURT WHICH HAS JURISDICTION. WITH RESPECT TO ALL CLAIMS, CONTROVERSIES, DISPUTES OR ACTIONS, THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED UNDER TEXAS LAW (WITHOUT REGARD TO TEXAS CHOICE OF LAW RULES). D. DEVELOPER AND FRANCHISOR ACKNOWLEDGE THAT THE PARTIES' AGREEMENT REGARDING CHOICE OF APPLICABLE STATE LAW AND FORUM SET FORTH IN SECTION XV.C. ABOVE PROVIDE EACH OF THE PARTIES WITH THE MUTUAL BENEFIT OF UNIFORM INTERPRETATION OF THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF THE PARTIES' RELATIONSHIP CREATED BY THIS AGREEMENT. EACH OF DEVELOPER AND FRANCHISOR FURTHER ACKNOWLEDGE THE RECEIPT AND SUFFICIENCY OF MUTUAL CONSIDERATION FOR SUCH BENEFIT. E. DEVELOPER AND FRANCHISOR ACKNOWLEDGE THAT THE EXECUTION OF THIS AGREEMENT BY FRANCHISOR OCCURRED IN DALLAS, TEXAS AND FURTHER ACKNOWLEDGE THAT THE PERFORMANCE OF CERTAIN OBLIGATIONS OF DEVELOPER ARISING UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE PAYMENT OF MONIES DUE HEREUNDER, SHALL OCCUR IN DALLAS, TEXAS. XVI. ACKNOWLEDGEMENTS A. Developer, the Operating Principal, the Operating Designee, and Developer's Principals acknowledge that they have conducted an independent investigation of the business venture contemplated by this Agreement and recognize that such business involves substantial business risks and that Developer's success will be largely dependent upon the ability of Developer, the Operating Principal, the Operating Designee, and its Developer's Principals as independent business people. Franchisor expressly disclaims the making of, and Developer, the Operating Principal, the Operating Designee, and Developer's Principals acknowledge not having received, any warranty or guarantee, express or implied as to the potential volume, profits, or success of the business venture contemplated by this Agreement. B. Developer acknowledges that Developer has received, read, and understood this Agreement, the Attachments hereto, and agreements relating hereto, if any; and that Franchisor has accorded Developer ample time and opportunity to consult with advisors of Developer's own choosing about the potential benefits and risks of entering into this Agreement. C. Developer acknowledges that it received a complete copy of this Agreement, the Attachments hereto, and agreements relating hereto, if any, at least five (5) business days prior to the date on which this Agreement was executed. Developer further acknowledges that it has received the disclosure document required by the Trade Regulation Rule of the Federal Trade Commission entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" at least ten (10) business days prior to the date on which this Agreement was executed. [THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY.] IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and delivered this Agreement in triplicate on the day and year first above written. BRINKER INTERNATIONAL, INC., a Delaware corporation SEAL ___________________________ By:_______________________________ Assistant Secretary Title: Executive Vice President, General Counsel and Secretary NE RESTAURANT COMPANY LIMITED PARTNERSHIP a Massachusetts limited partnership By: NE Restaurant Company, Inc. a Massachusetts corporation, in its individual capacity and as general partner SEAL _____________________________ By:__________________________ Secretary Benjamin Jacobson, Chairman of the Board _____________________________ ____________________________________ Witness Benjamin Jacobson, Operating Principal _____________________________ ____________________________________ Witness Dennis Pedra, Operating Designee Each of the undersigned acknowledges and agrees as follows: (1) Each has read the terms and conditions of this Development Agreement; (2) Each is included in the term "Developer's Principals" as described in Section XIV.F. of this Development Agreement; and (3) Each individually, jointly and severally makes all of the covenants, representations and agreements of Developer's Principals set forth in this Development Agreement and is obligated to perform thereunder. ATTEST: DEVELOPER'S PRINCIPALS _____________________________ ____________________________________ Witness Paul Hoagland _____________________________ ____________________________________ Witness Dennis Pedra NE RESTAURANT COMPANY, INC., a Massachusetts corporation __________________________ By:_________________________________ Witness Benjamin Jacobson, Chairman of the Board GUARANTY As an inducement to BRINKER INTERNATIONAL, INC. ("Franchisor") to execute the foregoing Development Agreement, including the Attachments thereto of even date, the undersigned, jointly and severally, hereby agree to be bound by all the terms and conditions of the above Development Agreement including any amendments or modifications thereto whenever made (hereinafter the "Agreement") and unconditionally and irrevocably guarantee to Franchisor and its successors and assigns that all of Developer's obligations under the Agreement will he punctually paid and performed. Upon default by Developer or notice from Franchisor, the undersigned will immediately make each payment and perform each obligation required of Developer under this Agreement. Without affecting the obligations of the undersigned under this Guaranty, Franchisor may, without notice to the undersigned, renew, extend, modify, amend, or release any indebtedness or obligation of Developer, or settle, adjust, or compromise any claims against Developer. The undersigned waive all demands and notices of every kind with respect to this Guaranty and the Agreement, including, without limitation, notice of: the amendment or modification of this Guaranty or the Agreement, the demand for payment or performance by Developer, any default by Developer or any guarantor, and any release of any guarantor or other security for the Agreement or the obligations of Developer. Franchisor may pursue its rights against the undersigned without first exhausting its remedies against Developer and without joining any other guarantor hereto and no delay on the part of Franchisor in the exercise of any right or remedy shall operate as a waiver of such right or remedy, and no single or partial exercise by Franchisor of any right or remedy shall preclude the further exercise of such right or remedy. Upon receipt by Franchisor of notice of the death of an individual guarantor, the estate of such guarantor will be bound by this Guaranty but only for defaults and obligations hereunder existing at the time of death, and the obligations of the other guarantors hereunder will continue in full force and effect. Notwithstanding anything herein to the contrary, this Guaranty shall terminate and have no further force and effect as of one (1) year from the date of execution of this Guaranty and the joint and several liability of the undersigned for payments hereunder is limited to a total of Two Hundred Thousand and No/100 Dollars ($200,000.00) (I. E., the aggregate liability for all of the undersigned for payments hereunder is limited to $200,000). IN WITNESS WHEREOF, the undersigned have signed this Guaranty this ______ day of ______________, 199__. GUARANTORS: ATTEST/WITNESS: By: - --------------------------- ------------------------------- Benjamin Jacobson ATTEST/WITNESS: By: - --------------------------- -------------------------------- Dennis Pedra ATTEST/WITNESS: By: - --------------------------- ------------------------------- Paul Hoagland EX-10.9 6 ON THE BORDER RESTAURANT DEVELOPMENT AGMT Exhibit 10.9 ON THE BORDER RESTAURANT DEVELOPMENT AGREEMENT N.E. RESTAURANT COMPANY, INC. (New England and Upstate New York) ON THE BORDER RESTAURANT DEVELOPMENT AGREEMENT TABLE OF CONTENTS ------------------ PAGE 1. GRANT...............................................................2 1.1 SUPERSEDE NEW ENGLAND DEVELOPMENT AGREEMENT................2 1.2 GRANT; NEW ENGLAND TERRITORY...............................2 1.3 GRANT; UPSTATE NEW YORK TERRITORY..........................2 1.4 FRANCHISE AGREEMENT........................................3 1.5 TERRITORIAL EXCLUSIVITY....................................3 1.6 COMPETITION WITH OTHER BRINKER RESTAURANTS INCLUDING "COZY AND "CHILI'S" RESTAURANTS..................4 1.7 AGREEMENT NOT A FRANCHISE..................................4 1.8 DEVELOPER'S POST-TERM PROTECTED RADIUS.....................4 2. DEVELOPMENT FEE.....................................................5 2.1 DEVELOPMENT FEE............................................5 3. SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS...............5 3.1 EXECUTION OF FRANCHISE AGREEMENT; FRANCHISE FEE............5 3.2 DEVELOPMENT SCHEDULE.......................................5 4. SITE SELECTION AND CONSTRUCTION.....................................6 4.1 SITE SELECTION; APPROVAL...................................6 4.2 REVIEW OF LEASE DOCUMENTS..................................7 4.3 PRE-CONSTRUCTION REQUIREMENTS..............................7 4.4 CONSTRUCTION...............................................8 5. TERM................................................................9 5.1 TERM.......................................................9 5.2 RIGHTS OF RENEWAL..........................................9 6. DUTIES AND REPRESENTATIONS OF THE PARTIES..........................10 6.1 DUTIES OF BRINKER.........................................10 6.2 REPRESENTATIONS OF DEVELOPER..............................11 7. DEFAULT............................................................12 7.1 OBLIGATIONS MATERIAL......................................12 7.2 RELIANCE BY BRINKER.......................................12 7.3 DEFAULTS WHICH TRIGGER AUTOMATIC TERMINATION..............12 7.4 OTHER DEFAULTS............................................13 7.5 NO WAIVER.................................................14 7.6 RIGHTS AND DUTIES UPON TERMINATION........................14 7.7 NOT A DEFAULT UNDER FRANCHISE AGREEMENT...................15 7.8 REMEDIES NOT EXCLUSIVE....................................15 8. ASSIGNMENT: CONDITIONS AND LIMITATIONS.............................15 8.1 TRANSFER BY BRINKER.......................................15 8.2 TRANSFER BY DEVELOPER.....................................15 8.3 Right of First Refusal....................................18 8.4 NON-WAIVER OF CLAIMS......................................20 9. UNFAIR COMPETITION AND RESTRICTIVE COVENANT........................20 9.1 UNFAIR COMPETITION........................................20 9.2 RESTRICTIVE COVENANT......................................21 9.3 COVENANTS OF OWNER........................................21 10. NOTICES............................................................21 10.1 NOTICES TO BRINKER........................................21 10.2 NOTICES TO DEVELOPER......................................22 10.3 DATE OF DELIVERY..........................................22 11. INDEPENDENT CONTRACTOR AND INDEMNIFICATION.........................22 11.1 INDEPENDENT CONTRACTOR AND INDEMNIFICATION................22 12. MISCELLANEOUS: GENERAL CONDITIONS..................................23 12.1 INTERPRETATION............................................23 12.2 NON-WAIVER................................................23 12.3 MEDIATION, APPLICABLE LAW AND ENTIRE AGREEMENT............23 12.4 SEVERABILITY..............................................25 12.5 MODIFICATION..............................................25 12.6 BINDING EFFECT............................................25 12.7 SURVIVAL..................................................25 12.8 ATTORNEY'S FEES...........................................26 12.9 ENTIRE AGREEMENT..........................................26 EXHIBIT A - ON THE BORDER RESTAURANT FRANCHISE AGREEMENT EXHIBIT B - ON THE BORDER RESTAURANT AGREEMENT REGARDING UNFAIR COMPETITION AND RESTRICTIVE COVENANT EXHIBIT C - LIST OF OWNER ON THE BORDER RESTAURANT DEVELOPMENT AGREEMENT This Development Agreement (hereinafter, the "Agreement" or the "Development Agreement") is made and entered into as of June 23, 1997, between BRINKER INTERNATIONAL, INC., a Delaware corporation (hereinafter "Brinker"), N. E. RESTAURANT COMPANY, INC., a Delaware corporation (hereinafter "Developer"). W I T N E S S E T H: WHEREAS, Brinker is the exclusive owner or licensee of certain trademarks and service marks, including "ON THE BORDER", which is registered or pending with the United States Patent and Trademark Office, and is the owner or exclusive licensee of other marks authorized for use in On The Border restaurants (the "On The Border Marks"). WHEREAS, Brinker has developed a comprehensive restaurant format and operating system, including the On The Border Marks, a recognized design, equipment system, color scheme and style of building, signs, uniform standards, specifications and procedures of operation, quality and uniformity of products and services offered, and procedures for inventory control and management (the "On The Border System") and is engaged in the business of operating and granting rights to develop restaurants ("On The Border Restaurants") using the On The Border System and the On The Border Marks. WHEREAS, Brinker has established a high reputation and a positive image with the public as to the quality of products and services available at On The Border Restaurants, which reputation and image have been and continue to be unique benefits to Brinker and its developers and franchisees. WHEREAS, Developer recognizes the benefits to be derived from being identified with and receiving rights to develop On The Border Restaurants from Brinker and being able to utilize the On The Border System which Brinker makes available to its developers and franchisees. WHEREAS, Brinker and Developer have previously entered into a certain On The Border Restaurant Development Agreement dated May 9, 1995 (the "New England Development Agreement"), whereby Developer obtained certain development rights to operate On the Border Restaurants under the On the Border System in the territory described therein (the "New England Territory"). WHEREAS, Developer wishes to obtain certain additional development rights to operate On The Border Restaurants (sometimes referred to herein collectively with the On The Border Restaurants described in the New England Development Agreement as the "franchised businesses") under the On The Border System in the additional territory described in this Development Agreement (the "Upstate New York Territory"). WHEREAS, Brinker and Developer have agreed to combine the New England Development Agreement into this Agreement for additional development rights for franchised businesses in the Upstate New York Territory, and to that end intend for this Agreement to amend, modify, restate, supersede and replace the New England Development Agreement. WHEREAS, Developer acknowledges that he has received a copy of the Uniform Franchise Offering Circular of Brinker and has had a full and adequate opportunity to be thoroughly advised of the terms and conditions of this Agreement by counsel of his own choosing at least ten (10) business days, excluding weekends and Federal holidays ("Business Days") prior to its execution, and is entering into this Agreement after having made an independent investigation of Brinker's operations and not upon any representation as to the profits and/or sales volume which Developer might be expected to realize, nor upon any representations or promises by Brinker which are not contained in this Agreement. NOW, THEREFORE, the parties in consideration of the undertakings and commitments of each party to the other party set forth herein, hereby agree as follows: 1. GRANT 1.1 SUPERSEDE NEW ENGLAND DEVELOPMENT AGREEMENT. This Agreement amends, modifies, restates, supersedes and replaces the New England Development Agreement. 1.2 GRANT; NEW ENGLAND TERRITORY. Brinker hereby grants to Developer and Developer accepts, pursuant to the terms and conditions of this Development Agreement, development rights to obtain licenses to establish and operate fifteen (15) On The Border Restaurants (with rights for ten (l0) additional units pursuant to the renewal option contained in Section 5.2 hereof), and to use the On The Border System solely in connection therewith, at specific locations to be designated in separate On The Border Restaurant franchise agreements (hereinafter "Franchise Agreement(s)") executed as provided in SECTION 3.1 hereof, and pursuant to the development schedule set forth in SECTION 3.2 hereof. Each On The Border Restaurant developed under this Section 1.2 shall be located in the area described below (hereinafter "New England Territory"): The States of Connecticut, New Hampshire, Maine, Massachusetts, Rhode Island, and Vermont in their entirety, and the County of Westchester in the State of New York. 1.3 GRANT; UPSTATE NEW YORK TERRITORY. Brinker hereby grants to Developer and Developer accepts, pursuant to the terms and conditions of this Development Agreement, development rights to obtain licenses to establish and operate six (6) On The Border Restaurants, and to use the On The Border System solely in connection therewith, at specific locations to be designated in separate Franchise Agreement(s) executed as provided in SECTION 3.1 hereof, and pursuant to the development schedule set forth in SECTION 3.2 hereof. Each On The Border Restaurant developed under this Section 1.3 shall be located in the area described below (hereinafter "Upstate New York Territory") (the New England Territory and the Upstate New York Territory are collectively referred to herein as the "Territory"): The following counties in the State of New York: Albany Genesee Oswego Allegany Greene Otsego Broome Hamilton Rensselaer Cattaragus Herkimer Saratoga Cayuga Jefferson Schenectady Chatauqua Lewis Schoharie Chemung Livingston Schuyler Chenango Madison Seneca Clinton Monroe St. Lawrence Columbia Montgomery Steuben Cortland Niagara Tioga Delaware Oneida E. Tompkins Dutchess Oneida W. Warren Erie Onondaga Washington Essex Ontario Wayne Franklin Orleans Wyoming Fulton Yates 1.4 FRANCHISE AGREEMENT. Each On The Border Restaurant for which a development right is granted hereunder shall be established and operated pursuant to a Franchise Agreement to be entered into between Developer and Brinker in accordance with SECTION 3.1 hereof. 1.5 TERRITORIAL EXCLUSIVITY. Subject to Developer's compliance with the terms and conditions of this Agreement and any Franchise Agreement and except as otherwise provided in this Agreement, Brinker shall not establish, nor license anyone other than Developer to establish, an On The Border Restaurant under the On The Border System in the Territory during the term of this Agreement. Notwithstanding the foregoing, Brinker, any franchisee of Brinker and any other authorized person or entity may, at any time, advertise or promote the On The Border System and fulfill customer orders (other than in restaurant patron's orders) in the Territory. Brinker reserves the right to establish restaurants (other than On The Border Restaurants) in the Territory whether directly or through one or more franchisees. Brinker may also offer and sell to the public or authorize any person or entity to offer and sell products and services (but not placement of an On The Border Restaurant) in the Territory to the public or on a wholesale or retail basis, which may be the same or similar to those offered by the On The Border Restaurants, under the On The Border Marks (e.g., prepackaged food items, salsa, margarita mix, chips, T-shirts and other On The Border memorabilia or food products) or under other names and marks. 1.6 COMPETITION WITH OTHER BRINKER RESTAURANTS INCLUDING "COZYMEL'S" AND "CHILI'S" RESTAURANTS. DEVELOPER ACKNOWLEDGES THAT BRINKER CURRENTLY OWNS AND/OR FRANCHISES OTHER RESTAURANT CONCEPTS INCLUDING, BUT NOT LIMITED TO, COZYMEL'S AND CHILI'S AND MAY, IN THE FUTURE ACQUIRE, OWN, FRANCHISE OR OPERATE OTHER RESTAURANT CONCEPTS WHICH MAY BE CONSIDERED AS DIRECT OR INDIRECT COMPETITORS WITH AN ON THE BORDER RESTAURANT. BRINKER RESERVES THE RIGHT, AND DEVELOPER AGREES THAT BRINKER MAY AT ANY TIME OR AT ANY LOCATION, PROCEED TO FRANCHISE, DEVELOP, CONSTRUCT, OPEN OR OPERATE, RESTAURANTS OTHER THAN ON THE BORDER RESTAURANTS INCLUDING, BUT NOT LIMITED TO, "COZYMEL'S" OR "CHILI'S". DEVELOPER UNDERSTANDS AND AGREES THAT BRINKER'S DEVELOPMENT AND OPERATION OF OTHER RESTAURANT CONCEPTS IN COMPETITION WITH DEVELOPER MAY OCCUR IN CLOSE PROXIMITY TO THE DEVELOPER'S ON THE BORDER RESTAURANT LOCATION(S). DEVELOPER ACKNOWLEDGES THAT BRINKER'S RIGHTS UNDER THIS PARAGRAPH WERE A SIGNIFICANT PART OF THE CONSIDERATION FOR THIS AGREEMENT AND IN THE ABSENCE OF SUCH RIGHTS, BRINKER WOULD HAVE SOUGHT, AMONG OTHER THINGS, SIGNIFICANTLY INCREASED FEES AND/OR ROYALTIES TO OFFSET ITS LOST DEVELOPMENT OPPORTUNITIES. 1.7 AGREEMENT NOT A FRANCHISE. This Agreement is not a franchise agreement, and does not grant to Developer any right to use Brinker's On The Border Marks. 1.8 DEVELOPER'S POST-TERM PROTECTED RADIUS. Notwithstanding anything else in this Agreement to the contrary, upon expiration or termination of this Agreement, neither Brinker nor any other Brinker/On The Border franchisee shall be entitled to operate an On The Border Restaurant within two (2) miles (as measured on a strait line basis from the front door entrance of Developer's On The Border Restaurant) of any of the On The Border Restaurants developed by Developer pursuant hereto (but only while such On The Border Restaurants are open and operating pursuant to a valid Franchise Agreement). This paragraph does not apply to any On The Border Restaurants within the boundaries of the Interstate 95 highway surrounding the City of Boston, Massachusetts. Should there be any gaps in the Interstate 95 loop around Boston or should it otherwise have incomplete segments, a straight line between the gaps shall be used as the boundary line. This paragraph applies only to On The Border Restaurants and nothing in the paragraph or any agreement between the parties prohibits or limits Brinker from developing, opening or operating any other restaurants except On The Border Restaurants in any area or territory. 2. DEVELOPMENT FEE 2.1 DEVELOPMENT FEE. In consideration of the development rights to the New England Territory granted herein, Developer has previously paid to Brinker a non-refundable Development Fee of One Hundred Fifty Thousand United States Dollars (U.S. $150,000.00). In consideration of the development rights to the Upstate New York Territory granted herein, Developer shall pay to Brinker upon execution of this Agreement a nonrefundable Development Fee of One Hundred Twenty Thousand United States Dollars (U.S. $120,000.00). The aforementioned Development Fees shall be fully earned by Brinker upon execution of this Agreement, for administrative and other expenses incurred by Brinker and for the development opportunities lost or deferred as a result of the rights granted Developer herein. 3. SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS 3.1 EXECUTION OF FRANCHISE AGREEMENT; FRANCHISE FEE. Developer shall exercise each development right granted herein only by executing a separate Franchise Agreement for each On The Border Restaurant at a site approved by Brinker in the Territory as hereinafter provided. The Franchise Agreement for each development right exercised hereunder shall be in the form of the franchise agreement attached hereto as EXHIBIT A. The initial franchise fee to be paid by Developer shall be Forty Thousand and No/100 United States Dollars (U.S. $40,000.00) for each Franchise Agreement executed by Developer for any On The Border Restaurant to be located in the Territory during the term of this Agreement. Each Franchise Agreement shall be executed by Developer and one-half (2) ($20,000) of the initial franchise fee shall be delivered to Brinker on or prior to commencement of construction. The Franchise Agreement shall be delivered to Franchisee prior to commencement of construction. Construction shall be deemed to have commenced on the date on which excavation for footings is begun. The remaining one-half (2) ($20,000) of the initial franchise fee shall be delivered to Brinker at least ten (10) days prior to restaurant opening. 3.2 DEVELOPMENT SCHEDULE. Recognizing that time is of the essence, Developer agrees to exercise each of the development rights granted hereunder in the manner specified in SECTION 3.1 hereof, and to satisfy the development schedule set forth below: By (Date) Cumulative Total Number of On The Border Restaurants Which Developer Shall Have Open and in Operation in the Territory - -------------------------------------------------------------------------- January 1, 1998 2 January 1, 1999 4 January 1, 2000 6 July 1, 2000 9 January 1, 2001 11 January 1, 2002 16 January 1, 2003 21 ============================================================================ Developer agrees that, of the twenty one (21) On The Border Restaurants it is obligated to have open and in operation by January 1, 2003, fifteen (15) On The Border Restaurants shall be open and in operation in the New England Territory and six (6) On the Border Restaurants shall be open and in operation in the Upstate New York Territory. Failure by Developer to adhere to the development schedule set forth above shall constitute a material event of default under this Agreement as provided in SECTION 7.4 hereof. 4. SITE SELECTION AND CONSTRUCTION 4.1 SITE SELECTION; APPROVAL. Developer assumes all cost, liability, expense and responsibility for locating, obtaining and developing sites for On The Border Restaurants, and for constructing and equipping On The Border Restaurants at such sites. The development of an On The Border Restaurant at any site must be approved by Brinker in accordance with Brinker's then existing site approval procedures including, but not limited to, the procedures set forth below. Developer acknowledges that Brinker's approval of a prospective site and the rendering of assistance in the selection of a site does not constitute a representation, promise, warranty or guarantee by Brinker that an On The Border Restaurant operated at that site will be profitable or otherwise successful. (a) Prior to acquisition by lease or purchase of a site for an On The Border Restaurant in the Territory, Developer shall submit to Brinker for each On The Border Restaurant, in the form prescribed by Brinker, a description of the site, demographic information, traffic counts and patterns, site plans, relationship of the site to potential competition as well as relationship of the site to existing On The Border Restaurants and other information requested by Brinker, together with a letter of intent or other evidence satisfactory to Brinker which confirms Developer's favorable prospects for obtaining the site. Recognizing that time is of the essence, Developer agrees that it must submit such information and materials for each proposed site to Brinker in writing for its approval. Brinker shall have thirty (30) days after receipt of such information and materials from Developer to approve or disapprove the proposed site as the location for an On The Border Restaurant, which approval shall not be unreasonably withheld. No site shall be deemed approved unless it has been expressly approved in writing by Brinker. (b) After the location for an On The Border Restaurant is approved by Brinker and leased or acquired by Developer in accordance with the requirements of this ARTICLE 4, Developer shall execute a Franchise Agreement relating to the On The Border Restaurant and its street address shall be recorded in ATTACHMENT A to the applicable Franchise Agreement. 4.2 REVIEW OF LEASE DOCUMENTS. Unless Brinker gives its written consent to the exclusion of any provision required below, where Developer is occupying the premises of any On The Border Restaurant under a lease, Developer shall use reasonable efforts to have such lease include the following terms and conditions: (a) That the premises shall be used for the operation of the On The Border Restaurant; (b) That the lessor consents to the use of such On The Border Marks and signs, decor, color scheme and related components of the On The Border System as Brinker may prescribe for the franchised business; (c) That the lessor agrees to furnish Brinker with copies of any and all letters and notices sent to Developer pertaining to the lease and the premises, at the same time that such letters and notices are sent to Developer; (d) That Developer may not sublease or assign all or any part of its occupancy rights, or extend the term of or renew the lease, without Brinker's prior written consent, which shall not be unreasonably withheld; (e) That Brinker shall have the right to enter the premises to make any modification necessary to protect Brinker's On The Border Marks or to cure any default under the lease or under this Agreement or the Franchise Agreement; (f) That Developer shall have the right to assign the lease to the Brinker, and Brinker shall have the option to assume Developer's occupancy rights, and the right to sublease, for all or any part of the term of the lease, subject to Developer's obligations thereunder, without the lessor having any right to impose conditions on such assignment or assumption or to obtain payment in connection therewith; and (g) That Developer and lessor shall not amend or otherwise modify the lease in any manner that would materially affect any of the foregoing requirements without Brinker's prior written consent. 4.3 PRE-CONSTRUCTION REQUIREMENTS. Before commencing any construction of the On The Border Restaurants, Developer, at its expense, shall comply, to Brinker's reasonable satisfaction, with all of the following requirements: (a) Developer shall employ a qualified architect or engineer who is reasonably acceptable to Brinker to prepare, for Brinker's approval, preliminary plans and specifications for site improvement and construction of each On The Border Restaurant based upon prototype drawings furnished by Brinker. (b) Developer shall be responsible for obtaining all zoning classifications and clearances which may be required by the state, provincial or local laws, ordinances, or regulations or which may be necessary or advisable owing to any restrictive covenants relating to each On The Border Restaurant location. After having obtained such approvals and clearances, Developer shall submit to Brinker, for Brinker's approval, final plans for construction based upon the preliminary plans and specifications. Once approved by Brinker, such final plans shall not thereafter be materially changed or modified without the prior written permission of Brinker (which shall not be unreasonably withheld or delayed). (c) Developer shall obtain all permits and certifications required for the lawful construction and operation of each On The Border Restaurant and shall certify in writing to Brinker that all such permits and certifications have been obtained. (d) Developer shall employ a qualified licensed general contractor who is reasonably acceptable to Brinker to construct each On The Border Restaurant and to complete all improvements. Developer shall obtain and maintain in force during the entire period of construction Builders Risk (or equivalent local) insurance in forms and amounts and written by a carrier or carriers reasonably satisfactory to Brinker. 4.4 CONSTRUCTION. (a) Developer shall commence or make every diligent attempt toward commencement of construction of an On The Border Restaurant including acquisition of all necessary permits and licenses within one hundred fifty (150) days after approval by Brinker of Developer's site or, if the approved location is occupied by an existing tenant on the date of execution of the lease for the premises, then immediately upon obtaining possession of the premises. (b) Developer shall provide written notice to Brinker of the date construction of each On The Border Restaurant commenced within ten (10) days after commencement. For the purposes of this Agreement and the Franchise Agreement, construction shall be deemed to commence on the date on which excavation for footings is begun. Developer agrees that Brinker and its agents shall have the right to inspect the construction at all reasonable times for the purpose of ascertaining that all work complies with the final plans approved by Brinker. (c) Developer shall maintain reasonably continuous construction of each On The Border Restaurant and its premises and shall complete construction (including all exterior and interior carpentry, electrical, painting, and finishing work, and installation of all furniture, fixtures, equipment and signs) in accordance with the approved final plans, at Developer's expense, within two hundred ten (210) days after commencement of construction (exclusive of time lost by reason of strikes, lockouts, fire, other casualties, acts of God, weather and other factors beyond the reasonable control of Developer). (d) Developer shall notify Brinker of the date of completion of construction and, within a reasonable time thereafter, Brinker shall at its option conduct a final inspection of each On The Border Restaurant and its premises. Developer acknowledges and agrees that Developer shall not open an On The Border Restaurant for business without the express written authorization of Brinker (which shall not be unreasonably withheld or delayed), and that Brinker's authorization to open shall be conditioned upon Developer's strict compliance with the specifications of the approved final plans and with the standards of the On The Border System. (e) Upon such authorization by Brinker, Developer shall promptly open an On The Border Restaurant for business after the completion of construction. The parties agree that time is of the essence in the construction and opening of each On The Border Restaurant. 5. TERM 5.1 TERM. Unless sooner terminated or renewed in accordance with the provisions of this Agreement, the term of this Agreement and all rights granted by Brinker hereunder shall expire thirty (30) days after the date on which Developer successfully and in a timely manner has completed the development schedule set forth in SECTION 3.2 hereof. 5.2 RIGHTS OF RENEWAL. Provided and upon condition that: (a) Developer, its owners, successors, assigns and affiliates, complies with all obligations of this Agreement, all obligations of any franchise agreements, and any other agreements with Brinker; (b) Developer provides Brinker with written notice that Developer is exercising its rights of renewal hereunder, upon the earlier of (i) 12 months prior to the expiration of this Development Agreement, or (ii) completion of the 11th restaurant under this Agreement in the New England Territory; and (c) Developer pays Brinker $100,000 representing the Development Fee for the ten (10) restaurants to be developed in the New England Territory under the renewal term. Developer shall have the right to one renewal of this Agreement (but only with respect to the New England Territory) for a period of 3 years upon substantially the same terms and conditions as contained herein except that Exhibit A to the Agreement shall be Brinker's then-current standard franchise agreement and the development schedule pursuant to Section 3.2 shall be as follows: By (Date) Cumulative Total Number of On The Border Restaurants Which Developer Shall Have Open and in Operation in the New England Territory (including 15 On The Border Restaurants Open and in Operation in the New England Territory Under Original Agreement Term) - ------------------------------------------------------------------------------ Renewal Commencement Date 15 Renewal Commencement Date and 1 Year 18 Renewal Commencement Date and 2 Years 21 Renewal Commencement Date and 3 Years 25 ============================================================================== 6. DUTIES AND REPRESENTATIONS OF THE PARTIES 6.1 DUTIES OF BRINKER. Brinker shall furnish to Developer the following, at the times specified below: (a) On the date of execution of this Development Agreement, site selection guidelines and criteria, and such site selection counseling and assistance as Brinker may deem advisable. Additionally, Brinker may from time to time, at its option, make available to Developer, at a reasonable cost, reports containing demographic and market data and real estate analyses. (b) Such on-site evaluation for the first On The Border Restaurant to be developed as Brinker may deem advisable; provided, however, that Brinker shall not provide on-site evaluation for any proposed site prior to the receipt of all required information and materials concerning such site prepared pursuant to ARTICLE 4 hereof. Brinker may, in its sole discretion, elect to make on-site evaluations for subsequent On The Border Restaurant sites at Brinker's sole cost and expense. If on-site evaluation is requested by Developer, Developer shall pay a reasonable fee for each such evaluation and shall reimburse Brinker for all reasonable expenses incurred by Brinker in connection with such on-site evaluation, including, without limitation, the cost of travel, lodging and meals. (c) On the date of execution of this Development Agreement, a reproducible copy of standard architectural building plans and specifications for the current approved free-standing building to be constructed. Any modifications of the standard plans and specifications, whether requested or required by planning and zoning boards, building codes or otherwise, must be approved in writing by Brinker (which shall not be unreasonably withheld or delayed) and are to be paid for by the Developer. 6.2 REPRESENTATIONS OF DEVELOPER. (a) The individuals listed in EXHIBIT C to this Agreement are the "Owners" of Developer for purposes of this Agreement. Developer acknowledges its understanding of Brinker's requirement that an individual "Managing Owner' be named who, throughout the term of this Agreement, lives in the Territory. The Managing Owner (i) must have a minimum five percent (5%) unencumbered equity ownership (including profits) and a minimum five percent (5%) controlling interest through any voting apparatus in Developer, (ii) must be authorized by the Developer to bind the Developer in any dealings with Brinker or Brinker's Affiliates (as defined in the Guidelines), and authorized distributors, suppliers and contractors of Developer, (iii) must be authorized by the Developer to direct any actions necessary to ensure compliance with the Development Agreement or with any Franchise Agreement, and (iv) must devote his full time and best efforts to day to day development activities with no operational or management commitments in other businesses (except other restaurants operated under franchises granted by Brinker). The Developer has not taken and agrees that it will not hereafter take, whether directly or indirectly, any action to avoid the authority requirements of the Managing Owner through the entry of limiting board resolutions, management agreements, amendment of governing documents (as defined in the Guidelines) or any other similar device or arrangement. Developer agrees to furnish Brinker with such evidence as Brinker may request from time to time for the purpose of assuring Brinker that the Managing Owner's authority remains as represented herein. No change in the Managing Owner may be made without the prior written consent of Brinker. If the Managing Owner dies or becomes incapacitated, then within sixty (60) days thereafter, Developer shall name a new Managing Owner approved by Brinker (not to be unreasonably withheld or delayed) pursuant to Brinker's then current criteria for approving Managing Owners. Notwithstanding the foregoing, if the Managing Owner does not intend to devote his full time and best efforts to the day to day development of On The Border Restaurants or if the Managing Owner lives outside the Territory, then Developer must also designate an individual "Managing Director" who must be approved by Brinker and be totally involved in the day to day development of the On The Border Restaurants with no operational or management commitments to other businesses (except other restaurants operated under franchises granted to the Developer by Brinker). The Managing Director must live in the Territory. (b) Developer shall notify Brinker of, and at Brinker's request provide copies of, any amendments to the articles of incorporation, bylaws, or other governing documents of Developer. No amendment to such governing documents may be made, nor may any resolution be adopted by the board of directors of Developer, if Developer is a corporation, without the prior written consent of an authorized officer of Brinker, if such amendment or resolution would (a) change the description of the Developer's purposes or authorized activity, (b) change the designation of or the procedures for designating a Managing Owner, (c) change the authority delegated to the Managing Owner or (d) materially alter promises or representations contained in the Distribution Plan approved by Brinker. (c) If requested, Developer shall provide Brinker annually with an updated list of all shareholders or general and limited partners of Developer and its parent, if any. 7. DEFAULT 7.1 OBLIGATIONS MATERIAL. Developer acknowledges and agrees that each of the Developer's obligations described in this Agreement is a material and essential obligation of Developer; that nonperformance of such obligations will adversely and substantially affect Brinker and the On The Border Restaurant System; and agrees that the exercise by Brinker of the rights and remedies set forth herein are appropriate and reasonable. 7.2 RELIANCE BY BRINKER. The rights granted to Developer in this Agreement have been granted in reliance on Developer's representations and assurances, among others, that the conditions set forth in ARTICLES 1, 3 AND 4 of this Agreement will be met by Developer in a timely manner. 7.3 DEFAULTS WHICH TRIGGER AUTOMATIC TERMINATION. Developer shall be deemed to be in default under this Agreement, and all rights granted herein shall automatically terminate without notice to Developer, in the event any one of the following events occurs: (a) Developer or any Owner files a petition or application seeking any type of relief under the Bankruptcy Code or any state insolvency or similar law, or someone files a petition or application seeking to have such party adjudicated a bankrupt, or seeking other relief against such party under the Bankruptcy Code or any state insolvency or similar law and the petitioner application is not dismissed within ninety (90) days after it is filed. Subject to the applicable law, this Agreement shall terminate without notice or cure period upon the occurrence of this act of default as if that date were the expiration date and Developer expressly and knowingly waives any rights that he may have under the provisions of the Bankruptcy Code and consents to the termination of this Agreement or any other relief which may be sought in a Complaint filed by Brinker to lift the provisions of the automatic stay of the Bankruptcy Code. Additionally, Developer agrees not to seek an Injunctive Order from any court in any jurisdiction relating to insolvency, reorganization or arrangement proceedings which would have the effect of staying or enjoining this provision. (b) Developer or any Owner admits in writing his inability to pay his debts as they mature or makes an assignment for the benefit of creditors, or a receiver (permanent or temporary) for any part of his property is appointed by a court of competent authority. (c) A final judgment against Developer or any Owner remains unsatisfied of record for thirty (30) days (unless a supersedeas or other appeal bond has been filed) or if a levy of execution is made upon the rights granted by this Agreement or upon any property used in the On The Border Restaurant, and it is not discharged within five (5) days of said levying. (d) Conviction of Developer or any Owner in a court of competent jurisdiction of an indictable offense punishable by a term of imprisonment in excess of one (1) year. (e) Developer or any Owner uses or duplicates the On The Border System or engages in unfair competition or discloses any trade secrets of Brinker or acquires an interest in a restaurant business in violation of ARTICLE 9 hereof. 7.4 OTHER DEFAULTS. Developer shall be deemed to be in default under this Agreement in the event any one of the following events occurs (and Brinker may, upon notice to Developer, exercise one or more of the rights and remedies set forth in (v) through (z) below): (a) If Developer fails to comply with the development schedule set forth in SECTION 3.2 hereof; (b) Developer fails to lease or purchase and construct and open each On The Border Restaurant pursuant to the time limits as provided in ARTICLE 4 hereof; (c) Developer fails to comply with the terms of SECTION 6.2 hereof; (d) Failure by Developer to maintain a responsible credit rating by failing to make prompt payment of undisputed bills, invoices and statements from suppliers of goods and services to Developer. (e) The sale, assignment or transfer of any interest of Developer or any Owner in this Agreement in violation of SECTION 8.2. (f) Developer or any Owner, without the written consent of Brinker, enters into a management agreement or consulting arrangement relating to the development rights and obligations of Developer hereunder. (g) The knowing and intentional submission by Developer or any Owner of a franchise application and/or management commitment form which contains any statements or omits any material fact. (h) Repeated breaches of material provisions of this Agreement. (i) Failure by Developer or any Owner to comply with any other material provisions of this Agreement. (j) Developer or any Owner fails to comply with any terms and conditions of any On The Border Franchise Agreement or any On The Border development agreement between Developer and Brinker. If an act of default under this SECTION 7.4 is committed by Developer or any Owner, Brinker may, at its option and without prejudice to any other rights and remedies provided for hereunder or by law, do any one or more of the following after expiration of a thirty (30) day written notice to Developer of such default and opportunity to cure: (v) Terminate this Agreement and all rights granted hereunder without affording Developer any opportunity to cure the default, effective immediately upon notice to Developer; (w) Reduce the number of On The Border Restaurants which Developer may establish pursuant to ARTICLE 1 or SECTION 5.2 of this Agreement; (x) Terminate or modify any territorial exclusivity granted Developer in SECTION 1.3 hereof; or (y) Reduce the area of territorial exclusivity granted Developer hereunder. 7.5 NO WAIVER. The failure of Brinker to terminate this Agreement upon the occurrence of one or more events of default enumerated in SECTIONS 7.3 OR 7.4 above will not constitute a waiver or otherwise affect the right of Brinker to terminate this Agreement because of a continuing or subsequent failure to cure one or more of the aforesaid events of default or any other default. 7.6 RIGHTS AND DUTIES UPON TERMINATION. (a) Upon termination of this Agreement, Developer shall have no right to establish or operate any On The Border Restaurant for which a Franchise Agreement has not been executed by Brinker and delivered to Developer at the time of termination. Developer shall not thereafter identify himself as a former On The Border developer or use any of Brinker's trade secrets, except pursuant to any Franchise Agreement nor shall Developer disclose any of Brinker's trade secrets. (b) If Brinker elects to terminate the territorial exclusivity granted to Developer in SECTION 1.3, modify such territorial exclusivity or reduce the area of territorial exclusivity, Developer shall continue to develop On The Border Restaurants in accordance with the development schedule set forth in SECTION 3.2, except insofar as the number of On The Border Restaurants which Developer is required to develop is reduced by Brinker pursuant to SECTION 7.4(W). (c) If Brinker exercises any of its rights in 7.4(V), (X) or (Y) above, Brinker shall be entitled to establish, and to license others to establish, On The Border Restaurants in the Territory or in the portion thereof no longer part of the Territory or pursuant to any other modifications of Developer's territorial exclusivity, except as may be otherwise provided under any Franchise Agreement which is then in effect between Brinker and Developer. 7.7 NOT A DEFAULT UNDER FRANCHISE AGREEMENT. No default under this Development Agreement shall thereby constitute a default under any Franchise Agreement between the parties hereto. 7.8 REMEDIES NOT EXCLUSIVE. The foregoing shall be in addition to any other rights or remedies of Brinker that exist under statute, regulation or common law. 8. ASSIGNMENT: CONDITIONS AND LIMITATIONS 8.1 TRANSFER BY BRINKER. Brinker shall have the right to transfer or assign this Agreement and all or any part of its rights or obligations herein to any person or legal entity. 8.2 TRANSFER BY DEVELOPER. (a) Any purported assignment or transfer not in full compliance with this SECTION 8.2 shall be null and void and shall constitute a material breach of this Agreement, for which Brinker may immediately terminate without opportunity to cure pursuant to ARTICLE 7 of this Agreement. THE GOVERNING DOCUMENTS OF THE DEVELOPER ENTITY AND THE PARENT, IF APPLICABLE, MUST STATE THAT THE ENTITY'S SOLE BUSINESS ACTIVITY WILL BE THE DEVELOPMENT AND OPERATION OF ON THE BORDER RESTAURANTS OR OTHER BRINKER FRANCHISED RESTAURANTS. IN ADDITION, THE GOVERNING DOCUMENTS MUST MANDATE THE DESIGNATION OF A MANAGING OWNER AND DESCRIBE THE MANAGING OWNER'S AUTHORITY, AS DEFINED IN THE GUIDELINES FOR APPROVAL OF DEVELOPER OWNERSHIP DISTRIBUTION PLANS, TO BIND THE DEVELOPER ENTITY AND TO DIRECT ANY ACTIONS NECESSARY TO ENSURE COMPLIANCE WITH THE DEVELOPMENT AGREEMENT, ANY FRANCHISE AGREEMENT OR ANCILLARY AGREEMENT (AS DEFINED IN THE GUIDELINES). NO AMENDMENTS INCONSISTENT WITH THE GUIDELINES FOR APPROVAL OF DEVELOPER OWNERSHIP DISTRIBUTION PLANS MAY BE MADE TO THE ARTICLES OF INCORPORATION, BY-LAWS, PARTNERSHIP AGREEMENT, OR OTHER GOVERNING DOCUMENTS OF THE DEVELOPER ENTITY OR THE PARENT, IF APPLICABLE. EACH SUCH ENTITY MUST NOTIFY BRINKER, AND AT BRINKER'S REQUEST PROVIDE COPIES, OF ANY AMENDMENTS TO ITS GOVERNING DOCUMENTS. (b) All stock certificates shall include the following legend: THE OWNERSHIP AND TRANSFER OF THIS STOCK IS SUBJECT TO THE TERMS AND CONDITIONS OF THE ARTICLES OF INCORPORATION AND THE BY-LAWS OF THIS CORPORATION AND OF A DEVELOPMENT AGREEMENT WITH BRINKER INTERNATIONAL, INC. REFERENCE IS MADE TO SUCH DEVELOPMENT AGREEMENT AND THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS OF THIS CORPORATION, COPIES OF WHICH ARE ON FILE WITH THE RECORDS OF THE CORPORATION. (c) In the adoption of any corporate name or partnership name, Developer shall not use any of the On The Border Marks, any variations or abbreviations, or any words confusingly similar to the On The Border Marks. (d) TRANSFER BY DEVELOPER. Except with the prior written consent of an authorized officer of Brinker, such consent not to be unreasonably withheld but may be withheld if Brinker determines such proposed transfer not to be in the best interest of the On The Border System, Developer shall not (1) assign or pledge this Agreement, or assign any of Developer's rights or delegate any of its duties hereunder; or (2) sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any equity securities of Developer; or (3) sell, assign, transfer, convey or give away substantially all of the assets of Developer or any On The Border Restaurant. (e) TRANSFER BY OWNERS. Except with the prior written consent of an authorized officer of Brinker or as set forth in the Franchise Agreement, no Owner shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Developer, which would leave an Owner with less than five percent (5%) unencumbered equity and interest in Developer (which consent shall not be unreasonably withheld). (f) TRANSFER OF EQUITY SECURITIES. Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer and that Brinker has granted such rights in reliance on the business skill, financial capability, and personal character of Developer and Developer's Owners and any guarantor of Developer. Accordingly, neither Developer nor any initial subsequent successor or assignee to any part of Developer's interest in this Agreement, nor any individual, partnership, corporation, or other entity which directly or indirectly has or owns any interest in this Agreement or in the Developer shall sell, assign, transfer, convey, give away, pledge, mortgage or otherwise encumber any direct or indirect interest in this Agreement or in any entity which owns this Agreement without the prior written consent of Brinker except as set forth in the Guidelines of Brinker in effect from time to time. Any purported assignment or transfer, by operation of law or otherwise, not having the written consent of Brinker required by this SECTION 8.2(F) shall be null and void and shall constitute a material breach of this Agreement. (g) NOTICE OF PROPOSED TRANSFER. Brinker may condition its consent to the proposed transfer of an interest referred to in this Section before the proposed transfer is to take place, and Developer shall provide such information and documentation relating to the proposed transfer as Brinker may reasonably require. (h) CONDITIONS OF CONSENT. Brinker may condition its consent to the proposed transfer of an interest referred to in this Section on satisfaction of any or all of the following requirements: (i) That all Developer's accrued monetary obligations and all other outstanding obligations to Brinker and its affiliates have been satisfied; (ii) That Developer is not in default of any material provision of this Agreement, any amendment hereof or successor hereto, or any other On the Border agreement between Developer and Brinker or its affiliates; (iii) That the transferee (or, if applicable, such owners of the transferee as Brinker may request), in Brinker's sole judgment, satisfies all of Brinker's business standards and requirements; has the aptitude and ability to perform the obligations of Developer under this Development Agreement; and has adequate financial resources and capital to do so; (iv) That the transferee, at Brinker's election, consistent with then current Brinker policy, (a) enter into a written assignment, in a form satisfactory to Brinker, assuming and agreeing to discharge all of Developer's obligations under this Agreement, or (b) execute, for a term ending on the expiration date of this Agreement, Brinker's then-current On The Border Restaurant Development Agreement applicable to such transferee and such ancillary agreements as Brinker may require. If the transferee is required to execute a new development agreement, such agreement shall supersede this Agreement in all respects; (v) That the transferee (or, if applicable, such owners of the transferee as Brinker may request) meet all of the Brinker requirements then applicable to developers and execute a guarantee of the performance of Developer's obligations to Brinker and Brinker's affiliates; (vi) That the Developer and each transferor execute a general release, in a form satisfactory to Brinker, of any and all claims against Brinker, its affiliates and their respective officers, directors, agents, and employees, in their corporate and individual capacities; (vii) That the transferee (or, if applicable, the owners of the transferee, its restaurant managers and its proposed Managing Owner or Director), at the transferee's expense, complete any applicable orientation and training programs (if any) then required by Brinker; (viii) That the transferor pay a transfer fee of Four Thousand Dollars ($4,000) in consideration of Brinker's expenses in reviewing the proposed transfer for the first On The Border Restaurant involved in the transaction and One Thousand Dollars ($1,000) for each additional On The Border Restaurant involved in the same transaction; (ix) Approval by Brinker of the terms of the contract of sale which impact the sufficiency of cash flow from the business after payment of debt service for the purposes of completing the obligations of Developer hereunder. (i) DEATH OR MENTAL INCAPACITY. Upon the death or mental incapacity of an Owner, the executor, administrator, or personal representative of such Owner shall transfer the Owner's interest in Developer or the Parent to a third party approved by Brinker within a reasonable time after the Owners death or mental incapacity (such consent not to be unreasonably withheld). Such transfers, including, without limitation, transfers by devise or inheritance, shall be subject to Brinker's right of first refusal under SECTION 8.3, or, if such right is not exercised, the same conditions as may be imposed on any inter vivos transfer under this SECTION 8.2. In the case of transfer by devise or inheritance, if the heir is not approved or there is no heir, the executor shall use best efforts to transfer the Owner's interest to another party approved by Brinker within twelve (12) months from the date of the Owner's death. If the conveyance of the Owner's interest to a party acceptable to Brinker has not taken place within the twelve (12) month period, Brinker shall have the option to purchase the Owner's interest at fair market value. 8.3 RIGHT OF FIRST REFUSAL. (a) In the event Developer or any Owner receives an acceptable bona fide offer from a third party to purchase the development rights granted herein, or any franchised On The Border Restaurant, or any portion thereof or interest therein, Developer or Owner shall give Brinker written notice setting forth the name and address of the prospective purchaser, the price and terms of the offer together with a franchisee application completed by the prospective purchaser, a copy of the purchase and sale agreement, executed by both Developer or Owner, as applicable, and purchaser, and all exhibits, copies of any real estate purchase agreement or agreements, proposed security agreements and related promissory notes, assignment documents, title insurance commitment and any other information that Brinker may request in order to evaluate the offer. Brinker shall then have the prior option to purchase such interest covered by the offer at the price and upon the same terms of the offer. If the consideration is not money, the purchase price shall be cash equal to the fair market value of the consideration. Brinker shall have thirty (30) business days after receipt of Developer's or Owner's notice of offer and the furnishing of all reasonably requested information within which to notify Developer or Owner in writing of its intent to accept or reject the offer. Silence on the part of Brinker shall constitute rejection. Neither Developer nor Owner may rely upon any notice from Brinker of its intention to accept or reject the offer nor shall such notice be effective unless such notice is in writing and signed by an authorized officer of Brinker. If the proposed sale includes assets of Developer or Owner not related to the development and operation of franchised On The Border Restaurants, Brinker may, at its option, elect to purchase only the assets related to the development and operation of franchised On The Border Restaurants and an equitable purchase price shall be allocated to each asset included in the proposed sale. If the proposed sale includes Brinker-franchised restaurants other than On The Border restaurants ("Brinker Non-OTB Restaurants"), Brinker may, at its election purchase: (i) only the Brinker Non-OTB Restaurants; (ii) only the On The Border restaurants; or (iii) any combination of Brinker Non-OTB Restaurants or On The Border restaurants whether on an individual restaurant basis or on an aggregate basis; and an equitable purchase price shall be allocated to each restaurant. To the extent any other franchise or other agreements relating to other Brinker Non-OTB Restaurants owned by Developer may be inconsistent with, or conflict with the terms of the right of first refusal contained herein, the terms of this right of first refusal shall control. This right of first refusal shall apply to any transfer, conveyance, assignment, consolidation, merger or any other transaction in which legal or beneficial ownership of the rights granted by this Agreement is vested in other than the individual Developer; provided, however, it shall not apply if Developer consists of more than one person and the transfer or assignment is from one partner to another, both of whom are signatories to this Agreement as of the date hereof, so long as (i) the Operating Partner continues to satisfy the requirements set forth in SECTION 6.2 hereof, and (ii) Brinker is given written notice thereof prior to such transfer. If this Agreement has been assigned to a Corporation in accordance with SECTION 8.2(C) of this Agreement, then this right of first refusal shall also apply if Voting Common Stock in the Corporation is sold, assigned or transferred to individuals or entities other than those approved by Brinker as owners of the Voting Common Stock. (b) The election by Brinker not to exercise its right of first refusal as to any offer shall not affect its right of first refusal as to any subsequent offer. (c) Any sale, attempted sale, assignment or other transfer of the rights granted effected without first giving Brinker the right of first refusal described above shall be void and of no force and effect. (d) If Brinker does not accept the offer to purchase the interests or On The Border Restaurant(s) proposed to be sold by Developer or Owner, Developer or Owner may conclude the sale to the purchaser who made the offer provided Brinker's consent to the assignment be first obtained, which consent will not be unreasonably withheld upon compliance with the conditions imposed by Brinker on the assignment. Conditions on assignment may include, but are not limited to, the following: (i) All accrued monetary obligations and all other outstanding obligations of Developer to Brinker, whether arising under this Agreement or otherwise, must be satisfied at the time of such sale or assignment. (ii) Prospective purchaser must complete and be approved through Brinker's standard developer selection process including satisfactorily demonstrating to Brinker that he meets the financial, character, managerial, equity ownership and such other criteria and conditions as Brinker shall then be applying in considering applications for new developers. (iii) Approval by Brinker of the terms and conditions in the contract of sale which affect the sufficiency of cash flow after payment of debt service necessary for completing the obligations of Developer hereunder. (iv) Developer seller shall pay Brinker an assignment fee of Four Thousand Dollars ($4,000) for the costs and expenses incurred by Brinker in connection with the transfer of the first On The Border Restaurant involved in the transaction and One Thousand Dollars ($1,000) for each additional On The Border Restaurant, involved in the same transaction. (v) Execution by Developer or Owner of a general release of Brinker in a form satisfactory to Brinker. (e) In addition, Developer and each Owner agrees that, prior to acquiring any other On The Border Restaurant development rights or franchise which may be offered to it for sale or which it may offer to purchase, such development rights or franchise will first be offered to Brinker on the same terms, conditions and price. 8.4 NON-WAIVER OF CLAIMS. Brinker's consent to a transfer of any interest in Developer, any Owner or in this Agreement shall not constitute a waiver of any claims it may have against the transferring party, nor shall it be deemed a waiver of Brinker's right to demand exact compliance with any of the terms of this Agreement by the transferee. 9. UNFAIR COMPETITION AND RESTRICTIVE COVENANT 9.1 UNFAIR COMPETITION. Developer acknowledges the uniqueness of the On The Border System and that Brinker is making its knowledge, know-how and expertise available to him for the purpose of developing and operating the On The Border Restaurant. Developer agrees that it would be an unfair method of competition for Developer to use or duplicate or to allow others to use or duplicate any of the knowledge, know-how and expertise received from Brinker for any use other than for the development and operation of franchised On The Border Restaurants. Developer, therefore, warrants that during the term of this Agreement, it will utilize its best and continuing efforts to promote and develop the System and during the term hereof and at all times thereafter will not directly or indirectly engage in the operation of any restaurant, other than On The Border Restaurants developed hereunder, which utilizes or duplicates the On The Border System, any trade secrets of Brinker, the On The Border Marks or the present or any former On The Border Current Image (as defined in ARTICLE 4 of the Franchise Agreement), or divulge such confidential information to any person other than his employees and then only to the extent necessary for the development of an On The Border Restaurant hereunder, unless such information has been independently developed by Developer, independently acquired or is already in the public domain, and, specifically, that Developer will not permit anyone to use, reproduce, copy, or exhibit any trade secrets of Brinker. Developer acknowledges that Brinker is currently engaged in the business of operating other full-service restaurants selling or leasing similar products, food items and services under the On The Border name and under other names and marks, and Brinker expressly reserves the right to continue such operations and to operate additional full-service restaurants and restaurant concepts in the future, and Developer hereby agrees that such businesses operated by Brinker do not constitute any breach of this Agreement or any implied covenant hereof. 9.2 RESTRICTIVE COVENANT. Developer covenants and agrees that during the term of this Agreement he will not own, operate or have any interest in any Mexican restaurant business except other franchised On The Border Restaurants. Developer further covenants and agrees that for a period of one (1) year after any sale, assignment, transfer, termination or expiration of this Agreement, Developer will not own, operate or have any interest in any Mexican restaurant business, except other franchised On The Border Restaurants, either at or within three (3) miles of the premises of any franchised On The Border Restaurant. 9.3 COVENANTS OF OWNER. Developer acknowledges that Brinker may require each Owner to execute an agreement in the form attached hereto as EXHIBIT B, containing the covenants set forth in SECTIONS 9.1 AND 9.2. 10. NOTICES 10.1 NOTICES TO BRINKER. All notices to Brinker shall be in writing and shall be hand delivered or sent by registered or certified mail, postage fully prepaid, addressed to it at its offices at 6820 LBJ Freeway, Dallas, Texas 75240, Attention: General Counsel, or at such other address as Brinker shall from time to time designate in writing, 10.2 NOTICES TO DEVELOPER. All notices to Developer shall be in writing and shall be hand delivered or sent by registered or certified mail, postage fully prepaid, or telegraph, addressed to Developer at Developer's last designated in writing mailing address: --------------------------------- --------------------------------- --------------------------------- --------------------------------- 10.3 DATE OF DELIVERY. Notices shall be deemed delivered on the earlier of actual receipt or the third (3rd) day after being deposited in the U.S. Mail. 11. INDEPENDENT CONTRACTOR AND INDEMNIFICATION 11.1 INDEPENDENT CONTRACTOR AND INDEMNIFICATION. (a) Developer is responsible for all losses or damages and contractual liabilities to third persons arising out of or in connection with development, possession, ownership or operation of the franchised On The Border Restaurants franchised to Developer, and for all claims or demands for damages to property or for injury, illness or death of persons directly or indirectly resulting therefrom. Developer agrees to defend, indemnify and save Brinker and its subsidiaries, its affiliated and parent companies, its employees, officers, shareholders and directors harmless of, from and with respect to any such claims, demands, losses, obligations, costs, expenses, liabilities, debts or damages unless resulting from the negligence, willful misconduct or failure to perform of Brinker or defects in goods manufactured by Brinker. Brinker shall notify Developer of any claims, and Developer shall be given the opportunity to assume the defense of the matter. If Developer fails to assume the defense, Brinker may defend the action in the manner it deems appropriate, and Developer shall pay to Brinker all costs, including attorneys fees, incurred by Brinker in effecting such defense, in addition to any sum which Brinker may pay by reason of any settlement or judgment against Brinker. Brinker's right to indemnity under this Agreement shall arise and be valid notwithstanding that joint or concurrent liability may be imposed on Brinker by statute, ordinance, regulation or other law. (b) Providing Developer is properly using the On The Border Marks and/or the elements of the On The Border System deemed proprietary by Brinker and providing Developer has not changed or modified the On The Border Marks or proprietary elements of the On The Border System, Brinker agrees to indemnify, defend and save Developer and its subsidiaries, affiliates and parent companies, its employees, officers, shareholders and directors, harmless of, from and with respect to any claims, demands, losses, obligations, costs, expenses, liabilities, debts or damages arising from any third party claimant based upon alleged violations of the Lanham Act or similar state statute arising from the authorized use by Developer of the On The Border Marks or elements of the On The Border System deemed proprietary by Brinker. 12. MISCELLANEOUS: GENERAL CONDITIONS 12.1 INTERPRETATION. The Introduction shall be considered a part of this Agreement. Paragraph captions are used only for convenience and are in no way to be construed as part of this Agreement or as a limitation of the scope of the particular paragraphs to which they refer. Words of any gender used in this Agreement shall include any other gender, and words in the singular shall include the plural, where the context requires. 12.2 NON-WAIVER. (a) The failure of Brinker to exercise any right or option given to it under this Agreement, or to insist upon strict compliance by Developer with the terms and conditions of this Agreement shall not constitute a waiver of any terms or conditions of this Agreement with respect to any other or subsequent breach, nor a waiver by Brinker of its right at any time thereafter to require exact and strict compliance with the terms and conditions of this Agreement. The rights or remedies set forth in this Agreement are in addition to any other rights or remedies which may be granted by law. (b) The failure of Developer to exercise any right or option given to it under this Agreement, or to insist upon strict compliance by Brinker with the terms and conditions of this Agreement shall not constitute a waiver of any terms or conditions of this Agreement with respect to any other or subsequent breach, nor a waiver by Developer of its right at any time thereafter to require exact and strict compliance of the terms and conditions of this Agreement. The rights or remedies set forth in this Agreement are in addition to any other rights or remedies which may be granted by law. 12.3 MEDIATION, APPLICABLE LAW AND ENTIRE AGREEMENT. (A) THE PARTIES AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT (AND ATTACHMENTS) OR THE RELATIONSHIP CREATED BY THIS AGREEMENT TO NON-BINDING MEDIATION PRIOR TO BRINGING SUCH CLAIM, CONTROVERSY OR DISPUTE IN A COURT. THE MEDIATION SHALL BE CONDUCTED THROUGH EITHER AN INDIVIDUAL MEDIATOR OR A MEDIATOR APPOINTED BY A MEDIATION SERVICES ORGANIZATION OR BODY, EXPERIENCED IN THE MEDIATION OF FOOD SERVICE BUSINESS DISPUTES, AGREED UPON BY THE PARTIES AND, FAILING SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME AFTER EITHER PARTY HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK MEDIATION OF ANY CLAIM, CONTROVERSY OR DISPUTE (NOT TO EXCEED FIFTEEN (15) DAYS), BY THE AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE WITH ITS RULES GOVERNING MEDIATION, AT BRINKER'S CORPORATE HEADQUARTERS IN DALLAS, TEXAS. THE COSTS AND EXPENSES OF MEDIATION, INCLUDING COMPENSATION OF THE MEDIATOR, SHALL BE BORNE BY THE PARTIES EQUALLY. IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR DISPUTE WITHIN NINETY (90) DAYS AFTER THE MEDIATOR HAS BEEN APPOINTED, THEN EITHER PARTY MAY BRING A LEGAL PROCEEDING UNDER SECTION (B) BELOW TO RESOLVE SUCH CLAIM, CONTROVERSY OR DISPUTE UNLESS SUCH TIME PERIOD IS EXTENDED BY WRITTEN AGREEMENT OF THE PARTIES. NOTWITHSTANDING THE FOREGOING, BRINKER MAY BRING AN ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF, OR (3) INVOLVING THE POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO, REAL PROPERTY IN A COURT HAVING JURISDICTION AND IN ACCORDANCE WITH SECTION (B) BELOW, WITHOUT SUBMITTING SUCH ACTION TO MEDIATION. (B) WITH RESPECT TO ANY CLAIMS, CONTROVERSIES OR DISPUTES WHICH ARE NOT FINALLY RESOLVED THROUGH MEDIATION OR AS OTHERWISE PROVIDED ABOVE, DEVELOPER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE COURTS OF DALLAS COUNTY, TEXAS AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. DEVELOPER HEREBY WAIVES ALL QUESTIONS OF PERSONAL JURISDICTION FOR THE PURPOSE OF CARRYING OUT THIS PROVISION. DEVELOPER HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP CREATED BY THIS AGREEMENT BY ANY MEANS ALLOWED BY TEXAS OR FEDERAL LAW. DEVELOPER AGREES THAT VENUE FOR ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE IN DALLAS COUNTY, TEXAS; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF OR (3) INVOLVING POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO, REAL PROPERTY, BRINKER MAY BRING SUCH ACTION IN ANY STATE OR FEDERAL DISTRICT COURT WHICH HAS JURISDICTION. WITH RESPECT TO ALL CLAIMS, CONTROVERSIES, DISPUTES OR ACTIONS, THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED UNDER TEXAS LAW (WITHOUT REGARD TO TEXAS CHOICE OF'LAW RULES). (C) DEVELOPER AND BRINKER ACKNOWLEDGE THAT THE PARTIES' AGREEMENT REGARDING CHOICE OF APPLICABLE STATE LAW AND FORUM SET FORTH IN SECTION (B) ABOVE PROVIDE EACH OF THE PARTIES WITH THE MUTUAL BENEFIT OF UNIFORM INTERPRETATION OF THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF THE PARTIES' RELATIONSHIP CREATED BY THIS AGREEMENT. EACH OF DEVELOPER AND BRINKER FURTHER ACKNOWLEDGE THE RECEIPT AND SUFFICIENCY OF MUTUAL CONSIDERATION FOR SUCH BENEFIT. (D) DEVELOPER AND BRINKER ACKNOWLEDGE THAT THE EXECUTION OF THIS AGREEMENT OCCURRED IN DALLAS, TEXAS AND FURTHER ACKNOWLEDGE THAT THE PERFORMANCE OF CERTAIN OBLIGATIONS OF DEVELOPER ARISING UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE PAYMENT OF MONIES DUE HEREUNDER, SHALL OCCUR IN DALLAS, TEXAS. (e) Anything in this Agreement to the contrary notwithstanding, Developer shall conduct its business in a lawful manner and faithfully comply with applicable laws or regulations of the state, city or other political subdivision in which any franchised On The Border Restaurant developed hereunder is located. 12.4 SEVERABILITY. Brinker and Developer agree that if any provision of this Agreement may be construed in two ways, one of which would render the provision illegal or otherwise voidable or unenforceable and the other of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. The language of all provisions of this Agreement shall be construed according to its fair meaning and not strictly against Brinker or Developer. It is the desire and intent of Brinker and Developer that the provisions of this Agreement be enforced to the fullest extent, and should any provision be invalid or unenforceable under Texas law, but valid under the laws of the state where any On The Border Restaurant developed hereunder is located, the provision shall be governed by the law of that state. In the event any court shall determine that any provision in this Agreement is not enforceable as written, Brinker and Developer agree that the provision shall be amended so that it is enforceable to the fullest extent permissible under the laws of the jurisdiction in which enforcement is sought. The provisions of this Agreement are severable and this Agreement shall be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained in the Agreement, and partially valid and enforceable provisions shall be enforced to the extent that they are valid and enforceable. 12.5 MODIFICATION. This Agreement may only be modified or amended by a written document executed by Brinker and Developer. 12.6 BINDING EFFECT. This Agreement shall be binding upon the parties, their heirs, executors, personal representatives, successors or assigns. 12.7 SURVIVAL. Any provisions of this Agreement which impose an obligation after termination or expiration of this Agreement shall survive the termination or expiration of this Agreement and be binding on the parties. 12.8 ATTORNEY'S FEES. In any litigation to enforce the terms of this Agreement, all costs and all reasonable attorney's fees (including those incurred on appeal) incurred as a result of the legal action shall be paid to the prevailing party by the other party. 12.9 ENTIRE AGREEMENT. This Agreement, together with the Franchise Application, Management Commitment Form and Capitalization Plan submitted by Developer to Brinker upon which Brinker is relying in granting the development rights, constitute the entire agreement of the parties and supersedes all prior negotiations, commitments, representations and undertakings of the parties with respect to the subject matter of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BRINKER: [S E A L] Brinker International, Inc., a Delaware corporation ATTEST: /s/ Barbara L. Mahoney By: /s/ Roger F. Thomson - ----------------------- ----------------------------- By: Barbara L. Mahoney Its: Executive Vice President Assistant/Secretary DEVELOPER: [S E A L] N.E. RESTAURANT COMPANY, INC., ATTEST: a Delaware corporation NE Restaurant Co. Inc. By: /s/ Dennis Pedra - ------------------------ ------------------- By:____________________ Its: President Assistant/Secretary EXHIBIT A ON THE BORDER RESTAURANT FRANCHISE AGREEMENT ON THE BORDER RESTAURANT FRANCHISE AGREEMENT N.E. RESTAURANT COMPANY, INC. (___ [franchise location] ___) ON THE BORDER RESTAURANT FRANCHISE AGREEMENT TABLE OF CONTENTS PAGE 1. GRANT.............................................................2 1.1 GRANT; TERM AND LOCATION.....................................2 1.2. NO TERRITORIAL PROTECTION....................................2 1.3 COMPETITION WITH OTHER BRINKER RESTAURANTS INCLUDING "COZYMEL'S" AND "CHILI'S" RESTAURANTS........................3 2. FRANCHISE FEE.....................................................3 2.1 FRANCHISE FEE................................................3 3. REPRESENTATIONS OF FRANCHISEE.....................................4 3.1 REPRESENTATIONS OF FRANCHISEE................................4 4. STANDARDS AND UNIFORMITY OF OPERATION.............................5 4.1 ON THE BORDER SYSTEM.........................................5 4.2 SUGGESTIONS FROM FRANCHISEE..................................5 4.3 MOD MANUAL...................................................5 4.4 BUILDING AND PREMISES........................................6 4.5 SIGNS........................................................6 4.6 EQUIPMENT....................................................6 4.7 VENDING MACHINES, ETC........................................7 4.8 MENU AND SERVICE.............................................7 4.9 HOURS OF OPERATION...........................................7 4.10 DRESS CODE...................................................7 4.11 ADVERTISING AND PROMOTIONAL MATERIALS........................8 4.12 RIGHT OF ENTRY AND INSPECTION................................8 4.13 INTERFERENCE WITH EMPLOYMENT RELATIONS OF OTHERS.............8 5. SERVICES AVAILABLE TO FRANCHISEE..................................8 5.1 SERVICES PROVIDED BY BRINKER.................................8 6. PREMISES..........................................................9 6.1 USE OF PREMISES..............................................9 6.2 CASUALTY.....................................................9 7. TRAINING..........................................................9 7.1 PERSONNEL REQUIRED TO COMPLETE..............................10 7.2 COSTS OF PARTICIPATION......................................10 7.3 CONTINUOUS TRAINING PROGRAMS................................10 7.4 EMPLOYEES OF FRANCHISED RESTAURANT..........................10 8. ROYALTY AND ADVERTISING CONTRIBUTION.............................10 8.1 ROYALTY.....................................................10 8.2 ADVERTISING AND PUBLIC RELATIONS............................11 8.3 GROSS SALES.................................................12 8.4 LATE CHARGE.................................................12 8.5 PAYMENT.....................................................12 9. ACCOUNTING PROCEDURES: RIGHT OF AUDIT............................13 9.1 ACCOUNTING..................................................13 9.2 ANNUAL FINANCIAL STATEMENTS.................................13 9.3 AUDITS......................................................13 10. LIMITATIONS OF FRANCHISEE........................................14 10.1 TRADEMARKS, TRADENAMES, SERVICES MARKS AND TRADE SECRETS....14 10.2 INDEPENDENT CONTRACTOR......................................15 11. UNFAIR COMPETITION...............................................15 11.1 UNFAIR COMPETITION..........................................15 11.2 COVENANTS OF OWNER..........................................16 12. INSURANCE: INDEMNIFICATION.......................................16 12.1 INSURANCE REQUIRED..........................................16 12.2 INDEMNIFICATION.............................................16 13. TAXES............................................................17 13.1 TAXES.......................................................17 14. ASSIGNMENT: CONDITIONS AND LIMITATIONS...........................17 14.1 TRANSFER BY BRINKER.........................................17 14.2 TRANSFER BY FRANCHISEE......................................17 15. RIGHT OF FIRST REFUSAL...........................................20 15.1 RIGHT OF FIRST REFUSAL......................................21 16. OPTION TO OBTAIN SUCCESSOR FRANCHISE AGREEMENT...................23 16.1 OPTION TO OBTAIN SUCCESSOR FRANCHISEE AGREEMENT.............23 17. DEFAULT AND EFFECT OF TERMINATION................................24 17.1 DEFAULT.....................................................24 17.2 RIGHTS AND DUTIES UPON TERMINATION..........................27 18. RESTRICTIVE COVENANT.............................................28 18.1 RESTRICTIVE COVENANT........................................28 18.2 COVENANTS OF OWNER..........................................28 19. MISCELLANEOUS: GENERAL CONDITIONS................................28 19.1 INTERPRETATION..............................................28 19.2 NON-WAIVER..................................................28 19.3 MEDIATION AND APPLICABLE LAW................................29 19.4 SEVERABILITY................................................30 19.5 NOTICES.....................................................31 19.6 MODIFICATION................................................31 19.7 BINDING EFFECT..............................................31 19.8 SURVIVAL....................................................31 19.9 ATTORNEY'S FEES.............................................31 19.10 ENTIRE AGREEMENT............................................31 EXHIBIT A - PREMISES EXHIBIT B - ON THE BORDER RESTAURANT AGREEMENT REGARDING UNFAIR COMPETITION AND RESTRICTIVE COVENANT EXHIBIT C - LIST OF OWNERS EXHIBIT D - GUARANTY AND INDEMNIFICATION ON THE BORDER RESTAURANT FRANCHISE AGREEMENT This Franchise Agreement (hereinafter the "Franchise Agreement", or the "Agreement") is made and entered into __________________, 19__ ("Effective Date"), by and between BRINKER INTERNATIONAL, INC., a Delaware corporation ("Brinker") and N.E. RESTAURANT COMPANY, INC., a Delaware corporation ("Franchisee"). W I T N E S S E T H: WHEREAS, Brinker is the exclusive owner or licensee of certain trademarks and service marks, including "ON THE BORDER", which is registered or pending with the United States Patent and Trademark Office, and is the owner or exclusive licensee of other marks authorized for use in On The Border restaurants (the "On The Border Marks"). WHEREAS, Brinker has developed a comprehensive restaurant format and operating system, including the On The Border Marks, a recognized design, equipment system, color scheme and style of building, signs, uniform standards, specifications and procedures of operation, quality and uniformity of products and services offered, and procedures for inventory control and management (the "On The Border System") and is engaged in the business of operating and granting franchises to operate restaurants ("On The Border Restaurants") using the On The Border System and the On The Border Marks. WHEREAS, Brinker has established a high reputation and a positive image with the public as to the quality of products and services available at On The Border Restaurants, which reputation and image have been and continue to be unique benefits to Brinker and its franchisees. WHEREAS, Franchisee recognizes the benefits to be derived from being identified with and receiving a franchise from Brinker and being able to utilize the On The Border System and the On The Border Marks which Brinker makes available to its franchisees. WHEREAS, Franchisee desires to acquire a franchise to operate an On The Border Restaurant at the location for the entire Term (as defined in SECTION 1.1 hereof) specified in this Agreement. Franchisee acknowledges that he has received a copy of the Uniform Franchise Offering Circular of Brinker and has had a full and adequate opportunity to be thoroughly advised of the terms and conditions of this Agreement by counsel of his own choosing at least ten (10) business days, excluding weekends and Federal holidays ("Business Days") prior to its execution, and is entering into this Agreement after having made an independent investigation of Brinker's operations and not upon any representation as to the profits and/or sales volume which Franchisee might be expected to realize, nor upon any representations or promises by Brinker which are not contained in this Agreement. In consideration of the mutual covenants contained in this Agreement, the parties agree as follows: 1. GRANT 1.1. GRANT; TERM AND LOCATION. Brinker hereby grants to Franchisee and Franchisee accepts, pursuant to the terms and conditions of this Franchise Agreement, a franchise for a period of twenty (20) years to use the On The Border System and the On The Border Marks only in the operation of an On The Border Restaurant ("Franchised Restaurant") located at ____________, specified in EXHIBIT A attached hereto (the "Premises"). The term of this Agreement shall commence on the Effective Date and shall expire twenty (20) years (the "Term") after the date the Franchised Restaurant opens for business ("Royalty Commencement Date") unless sooner terminated in accordance with the provisions of this Agreement. Franchisee agrees to operate the Franchised Restaurant at the specified location for the entire twenty (20) year Term. Franchisee accepts this franchise with the full and complete understanding that the franchise grant contains no promise or assurance of renewal. The sole and entire conditions under which Franchisee will have the opportunity of obtaining a successor On The Border Franchise Agreement at expiration are those set forth in ARTICLE 16 hereof. This franchise is for the specified location only and as set forth in Paragraphs 1.2 and 1.3 below, does not in any way grant or imply any exclusivity, area, market or territorial rights proprietary to Franchisee. 1.2. NO TERRITORIAL PROTECTION. UNLESS OTHERWISE AGREED TO IN WRITING BY BRINKER, BRINKER MAY ESTABLISH AN ON THE BORDER RESTAURANT, OR GRANT ANY PERSON OR ENTITY A FRANCHISE OR LICENSE TO ADOPT OR USE FRANCHISOR'S MARKS IN THE OPERATION OF AN ON THE BORDER RESTAURANT ANYWHERE OTHER THAN AT THE PREMISES, AND SUCH ACTION SHALL NOT CONSTITUTE A BREACH OR DEFAULT UNDER THIS AGREEMENT OR OF ANY OTHER OBLIGATION, EXPRESS OR IMPLIED, WHICH BRINKER MAY OWE TO FRANCHISEE AT LAW OR IN EQUITY. FRANCHISEE HAS NO EXCLUSIVE TERRITORIAL RIGHTS, PROTECTED TERRITORY OR OTHER RIGHT TO EXCLUDE, CONTROL OR IMPOSE CONDITIONS ON THE LOCATION OR DEVELOPMENT OF OTHER OR FUTURE FRANCHISES UNDER THE ON THE BORDER MARKS OR ON BRINKER'S ACTIVITIES. WITHOUT LIMITING THE FOREGOING, BRINKER ALSO RESERVES THE RIGHT TO ESTABLISH FRANCHISES AND/OR FRANCHISOR-OWNED OUTLETS SELLING SIMILAR PRODUCTS AND PROVIDING SIMILAR SERVICES UNDER NAMES AND SYMBOLS INCLUDING THE ON THE BORDER MARKS, AND TO SELL, OR TO LICENSE OTHERS TO SELL, PRODUCTS BEARING THE ON THE BORDER MARKS THROUGH OTHER MEANS OF DISTRIBUTION, INCLUDING, WITHOUT LIMITATION, SUPERMARKETS AND WAREHOUSE CLUBS, BY MAIL OR FULL OR PARTIAL SERVICE RESTAURANTS, OR DELIVERY OR CATERING SERVICES. 1.3. COMPETITION WITH OTHER BRINKER RESTAURANTS INCLUDING "COZYMEL'S" AND "CHILI'S" RESTAURANTS. FRANCHISEE ACKNOWLEDGES THAT BRINKER CURRENTLY OWNS AND/OR FRANCHISES OTHER RESTAURANT CONCEPTS INCLUDING, BUT NOT LIMITED TO, COZYMEL'S AND CHILI'S AND MAY, IN THE FUTURE ACQUIRE, OWN, FRANCHISE OR OPERATE OTHER RESTAURANT CONCEPTS WHICH MAY BE CONSIDERED AS DIRECT OR INDIRECT COMPETITORS WITH AN ON THE BORDER RESTAURANT. BRINKER RESERVES THE RIGHT, AND FRANCHISEE AGREES THAT BRINKER MAY AT ANY TIME OR AT ANY LOCATION, PROCEED TO FRANCHISE, DEVELOP, CONSTRUCT, OPEN OR OPERATE, RESTAURANTS OTHER THAN ON THE BORDER RESTAURANTS INCLUDING, BUT NOT LIMITED TO, "COZYMEL'S" OR "CHILI'S". FRANNCHISEE UNDERSTANDS AND AGREES THAT BRINKER'S DEVELOPMENT AND OPERATION OF OTHER RESTAURANT CONCEPTS IN COMPETITION WITH FRANCHISEE MAY OCCUR IN CLOSE PROXIMITY TO THE FRANCHISEE'S ON THE BORDER RESTAURANT LOCATION(S). FRANCHISEE ACKNOWLEDGES THAT BRINKER'S RIGHTS UNDER THIS PARAGRAPH WERE A SIGNIFICANT PART OF THE CONSIDERATION FOR THIS AGREEMENT AND IN THE ABSENCE OF SUCH RIGHTS, BRINKER WOULD HAVE SOUGHT, AMONG OTHER THINGS, SIGNIFICANTLY INCREASED FEES AND/OR ROYALTIES TO OFFSET ITS LOST DEVELOPMENT OPPORTUNITIES. 2. FRANCHISE FEE 2.1. FRANCHISE FEE. Franchisee acknowledges that the grant of this franchise constitutes the consideration for the payment by Franchisee to Brinker of Forty Thousand and No/100 Dollars ($40,000.00) (the "Franchise Fee"), and that this sum shall be fully earned by Brinker and payable to Franchisor in two (2) installments as follows: (i) $20,000 shall be paid to Franchisor on or before commencement of construction on the Premises. "Commencement of construction" shall be defined as the date on which excavation for footings has begun; and (ii) $20,000 shall be paid to Franchisor no less than ten (10) days prior to the Franchised Restaurant opening for business. Each installment of the Franchise Fee shall be deemed fully earned and nonrefundable upon payment to Franchisor in consideration for administrative and other expenses incurred by Franchisor in granting this franchise and for Franchisor's loss or deferred opportunity to franchise to others. 3. REPRESENTATIONS OF FRANCHISEE 3.1. REPRESENTATIONS OF FRANCHISEE. (a) The individuals listed in EXHIBIT C to this Agreement are the "Owners" of Franchisee for purposes of this Agreement. Franchisee acknowledges its understanding of Brinker's requirement that the Owners guarantee all the obligations of the Franchisee hereunder in accordance with take Guaranty Agreement attached hereto as EXHIBIT D which shall be executed contemporaneously with this Franchise Agreement. In addition, an individual "Managing Owner" shall be named who, throughout the term of this Agreement, lives in the Territory. The Managing Owner (i) must have a minimum five percent (5%) unencumbered equity ownership (including profits) and a minimum five percent (5%) controlling interest through any voting apparatus in Franchisee, (ii) must be authorized by the Franchisee to bind the Franchisee in any dealings with Brinker or Brinker's Affiliates (as defined in the Guidelines), and authorized distributors, suppliers and contractors of Franchisee, (iii) must be authorized by the Franchisee to direct any actions necessary to ensure compliance with the Franchise Agreement, and (iv) must devote his full time and best efforts to day to day development activities with no operational or management commitments in other businesses (except other restaurants operated under franchises granted by Brinker). The Franchisee has not taken and agrees that it will not hereafter take, whether directly or indirectly, any action to avoid the authority requirements of the Managing Owner through the entry of limiting board resolutions, management agreements, amendment of governing documents (as defined in the Guidelines) or any other similar device or arrangement. Franchisee agrees to furnish Brinker with such evidence as Brinker may request from time to time for the purpose of assuring Brinker that the Managing Owner's authority remains as represented herein. No change in the Managing Owner may be made without the prior written consent of Brinker. If the Managing Owner dies or becomes incapacitated, then within sixty (60) days thereafter, Franchisee shall name a new Managing Owner approved by Brinker pursuant to Brinker's then current criteria for approving Managing Owners. Notwithstanding the foregoing, if the Managing Owner does not intend to devote his full time and best efforts to the day to day operation of On The Border Restaurants or if the Managing Owner lives outside the Territory, then Franchisee must also designate an individual "Managing Director" who must be approved by Brinker and be totally involved in the day to day operation of the On The Border Restaurants with no operational or management commitments to other businesses (except other On The Border Restaurants operated under franchises granted to the Franchisee by Brinker). The Managing Director must live in the Territory. (b) Franchisee shall notify Brinker of, and at Brinker's request provide copies of, any amendments to the articles of incorporation, bylaws, or other governing documents of Franchisee. No amendment to such governing documents may be made, nor may any resolution be adopted by the board of directors of Franchisee, if Franchisee is a corporation, without the prior written consent of an authorized officer of Brinker, if such amendment or resolution would (a) change the description of the Franchisee's purposes or authorized activity, (b) change the designation of or the procedures for designating a Managing Owner, (c) change the authority delegated to the Managing Owner or (d) materially alter promises or representations contained in the Distribution Plan approved by Brinker. (c) Franchisee shall provide Brinker, upon request, annually with an updated list of all shareholders or general and limited partners of Franchisee and its parent, if any. 4. STANDARDS AND UNIFORMITY OF OPERATION 4.1. ON THE BORDER SYSTEM. The On The Border System is a comprehensive restaurant format and operating system for the sale of uniform and quality food products, emphasizing prompt and courteous service in a pleasant atmosphere. The establishment and maintenance of a close personal relationship between Brinker and Franchisee in the operation of the Franchised Restaurant and adherence to the principles of the On The Border System constitute the basic underlying substance of this franchise. 4.2. SUGGESTIONS FROM FRANCHISEE. Suggestions from Franchisee for improving elements of the On The Border System, such as products, equipment, uniforms, restaurant facilities, service format and advertising, are encouraged and will be considered by Brinker when adopting or modifying standards, specifications and procedures for the On The Border System. Franchisee acknowledges that any such suggestions made by Franchisee hereunder shall become the exclusive property of Brinker. Brinker shall have no obligation to utilize suggestions or provide compensation for any suggestion. Franchisee may not utilize any such suggestions in the Franchised Restaurant without the prior written consent of Brinker. 4.3. MOD MANUAL. (a) Subject to the standards as set forth in SUBSECTION 4.3(B) below, Franchisee acknowledges and agrees that prompt adoption of and adherence to Brinker's comprehensive restaurant format and operating system, including a standardized design, decor, equipment system, color scheme and style of building and signage, uniform standards, specifications and procedures of operation, quality and uniformity of product and services offered, and the provisions of the Manual of Operating Data (the "MOD Manual"), as amended from time to time, are reasonable, necessary and essential to the image and success of all On The Border Restaurants (the "On The Border Restaurant System"). The MOD Manual contains the official mandatory restaurant operating standards, specifications and procedures prescribed from time to time by Brinker for the operation of an On The Border Restaurant. Brinker expressly reserves the right to modify the MOD Manual and all other materials pertaining to the System at its sole discretion. The MOD Manual shall be kept at the Franchised Restaurant at all times and all changes or additions made by Brinker shall be inserted upon receipt. In the event of any conflict between the MOD Manual kept at the Franchised Restaurant and the master copy maintained by Brinker in Dallas, Texas (or such other place as may be designated by Brinker), the master copy shall control. (b) Franchisee agrees that changes in the standards, specifications and procedures may become necessary and desirable from time to time and agrees to accept and comply with such modifications, revisions and additions to the MOD Manual which Brinker in the good faith exercise of its judgment believes to be desirable and reasonably necessary. The material and information set forth in the MOD Manual is confidential and proprietary to Brinker and is to be used by Franchisee only in connection with the operation of the Franchised Restaurant and other franchised On The Border Restaurants. The MOD Manual and other specifications, standards and operating procedures communicated in writing to Franchisee shall be deemed a part of this Agreement. 4.4. BUILDING AND PREMISES. The building will be constructed and the premises improved in the manner authorized and approved by Brinker, and the appearance of the building and premises will not thereafter be altered except as may be approved in writing by Brinker. Further, Franchisee shall at its expense maintain the building and premises in first class condition and shall make all improvements, alterations and remodelings as may be determined by Brinker to be reasonably necessary to reflect the then current On The Border Restaurant image as reasonably changed and defined from time to time by Brinker ("Current Image"). Franchisee shall undertake repairs requested by Brinker within the reasonable time as may be specified by Brinker. 4.5. SIGNS. The On The Border Marks will only be erected and displayed in the manner and at such locations as are approved and authorized by Brinker. Franchisee agrees to maintain and display signs reflecting the Current Image of On The Border Restaurants and shall not place additional signs or posters on the premises without the prior written consent of Brinker. Only signs from sources approved by Brinker may be utilized at the premises. Franchisee shall discontinue the use of and destroy such signs as are declared obsolete by Brinker within the reasonable time specified by Brinker. Such signs are fundamental to the On The Border Restaurant System and Franchisee hereby grants to Brinker the right to enter the building and premises to remove and destroy unapproved or obsolete signs in the event that Franchisee has failed to do so within thirty (30) days after the written request of Brinker. 4.6. EQUIPMENT. Only equipment approved by Brinker which meets the criteria and performance standards of the On The Border Restaurant System may be used in the Franchised Restaurant. The equipment shall be maintained in a condition that meets operational standards specified in the MOD Manual and, as equipment becomes obsolete or inoperable, Franchisee will replace the equipment with the types and kinds of equipment as are then approved for use in On The Border Restaurants. If Brinker determines that additional or replacement equipment is needed because of a change in menu items or method of preparation and service or because of health or safety considerations, Franchisee will install the additional equipment or replacement equipment within ninety (90) days from the date Brinker delivers notice to Franchisee as specified in SECTION 19.5 hereof. 4.7. VENDING MACHINES, ETC. Newspaper racks, juke boxes, cigarette, gum and candy machines, rides, lottery ticket terminals, video games or any other games, or vending or amusement machines will not be installed on the premises without the prior written approval of Brinker. If such items are installed on the premises after approval from Brinker is obtained, then all sums received by Franchisee in connection with these items shall be included within "gross sales" as defined in SECTION 8.3 hereof. 4.8. MENU AND SERVICE. All menu items which Brinker may deem appropriate to take full advantage of the potential market and achieve standardization in the On The Border Restaurant System will be served, and no items which are not set forth in the MOD Manual or otherwise authorized and approved by Brinker in writing will be served. Franchisee shall only sell the approved menu items at retail to consumers from and through the Franchised Restaurant and shall not sell such items for redistribution or resale. Franchisee shall adhere to all specifications contained in the MOD Manual or as otherwise prescribed by Brinker as to ingredients, methods of preparation and service, weight and dimensions of products served, and standards of cleanliness, health and sanitation. All food, drink and other items will be served and sold in packaging that meets Brinker's specifications. Only food, supplies, paper products and packaging from sources approved by Brinker shall be used in the Franchised Restaurant. 4.9. HOURS OF OPERATION. The Franchised Restaurant shall be open for business at a minimum from 11:00 a.m. to 10:00 p.m., seven (7) days a week, fifty-two (52) weeks a year, unless otherwise authorized or directed by Brinker. The Franchised Restaurant may be closed on Thanksgiving Day and/or Christmas Day if a majority of the On The Border Restaurants in the market area ("ADI") in which the Franchised Restaurant is located elect to close on the holiday. 4.10. DRESS CODE. All employees shall comply with the dress code as is from time to time specified by Brinker. 4.11. ADVERTISING AND PROMOTIONAL MATERIALS. Only those advertising and promotional materials or items which are authorized by Brinker in writing prior to use shall be used, sold or distributed, and no display or use of the On The Border Marks shall be made without the prior written approval of Brinker. All materials on which the On The Border Marks are used must include the designation (R) or such other designation as Brinker may specify. 4.12. RIGHT OF ENTRY AND INSPECTION. To ensure compliance with this Agreement, Brinker shall have the unrestricted right to enter the Franchised Restaurant to conduct such activities as it deems necessary to ascertain compliance with this Agreement. The inspections may be conducted without prior notice at any time when Franchisee or one of his employees is at the Franchised Restaurant. The inspections will be performed in a manner which minimizes interference with the operation of the Franchised Restaurant. 4.13. INTERFERENCE WITH EMPLOYMENT RELATIONS OF OTHERS. Neither Brinker nor Franchisee will attempt, directly or indirectly, to entice or induce, or attempt to entice or induce any employee of the other or of another franchisee of Brinker to leave such employment, or employ such employee within six (6) months after his or her termination of employment with such employer, except with the prior written consent of such employer. 5. SERVICES AVAILABLE TO FRANCHISEE 5.1. SERVICES PROVIDED BY BRINKER. Brinker agrees to periodically advise and consult with Franchisee in connection with the operation of the Franchised Restaurant and to provide at no additional cost to Franchisee, except as expressly provided below: (a) A reproducible copy of the standard architectural building plans and specifications for current approved free-standing buildings. Any modifications of the standard plans and specifications, whether requested or required by planning and zoning boards, building codes or otherwise, must be approved in writing by Brinker and are to be paid for by Franchisee. (b) A pre-opening training program conducted at Brinker training facilities and/or On The Border Restaurants. (c) Pre-opening and opening supervision and assistance by personnel of Brinker at the Franchised Restaurant for a period of time as Brinker, in its discretion, deems appropriate. Franchisee shall bear all costs, including salary and benefits of, reasonable costs of lodging, food and travel, for all Brinker personnel utilized for pre-opening and opening supervision. (d) One (1) Brinker MOD Manual, a copy of which will be loaned to Franchisee for the Term of this Agreement. (e) Such merchandising, marketing and advertising research data and advice as may be developed from time to time by Brinker and deemed by it to be helpful in the operation of an On The Border Restaurant. (f) Standardized cost control and inventory control procedures. (g) Communication of new developments, techniques and improvements of Brinker in food preparation, equipment, food products, packaging, service and restaurant management which are relevant to the operation of an On The Border Restaurant. 6. PREMISES 6.1. USE OF PREMISES. During the Term of this Agreement the Premises shall be used exclusively for the purpose of operating a franchised On The Border Restaurant. 6.2. CASUALTY. In the event the building shall be damaged or destroyed by fire or other casualty, or be required to be repaired or reconstructed by any governmental authority, Franchisee shall, at its own expense, repair or reconstruct the building within a reasonable time under the circumstances. The minimum acceptable appearance for the restored building will be that which existed just prior to the casualty; however, every effort should be made to have the restored building reflect the then Current Image, and the then current design and specifications of On The Border restaurants. If the building is substantially destroyed by fire, or other casualty, Franchisee may, with agreement from Brinker, not to be unreasonably withheld or delayed taking into account the needs of the On The Border System and the franchised businesses, terminate the Agreement in lieu of Franchisee reconstructing the building. 7. TRAINING 7.1. PERSONNEL REQUIRED TO COMPLETE. As a condition precedent to the Franchised Restaurant opening, the Managing Owner or Managing Director, as applicable, and at least three (3) and up to five (5) restaurant managers, must have successfully completed Brinker's training program in Dallas, Texas or at such other locations as may be specified by Brinker. 7.2. COSTS OF PARTICIPATION. There shall be no charge for participation in the training program; however, Franchisee shall be responsible for all travel and living expenses, compensation of and worker's compensation insurance for the Managing Owner or Managing Director, as applicable, and the managers while enrolled in the training program and any other personal expenses, course materials, and training facility charges, if any. 7.3. CONTINUOUS TRAINING PROGRAMS. The Managing Owner or Managing Director, as applicable, shall undertake and complete continuing training programs from time to time as may be directed by Brinker in order to implement current operational standards. Such programs may be in Dallas, Texas, or at such other locations as may be specified by Brinker. Brinker expressly reserves the right to impose reasonable fees for such additional training as Brinker shall determine in its sole discretion. 7.4. EMPLOYEES OF FRANCHISED RESTAURANT. Franchisee shall implement a training program for Franchised Restaurant employees in accordance with training standards and procedures prescribed by Brinker and shall staff the Franchised Restaurant at all times during the Term of this Agreement with a sufficient number of trained employees including at least one (1) manager who has, within six (6) months prior to becoming manager, successfully completed Brinker's training program for restaurant managers at an accredited location to ensure that the On The Border operational standards are met. 8. ROYALTY AND ADVERTISING CONTRIBUTION 8.1. ROYALTY. Franchisee agrees to pay to Brinker a royalty of four percent (4%) of gross sales for the use of the On The Border System and the On The Border Marks. Royalties shall be paid monthly by the tenth (10th) day of each month based upon gross sales, as hereinafter defined in SECTION 8.3, for the preceding month. 8.2. ADVERTISING AND PUBLIC RELATIONS. (a) Until Brinker has, in its sole discretion, established a cooperative ("Cooperative") or a National Advertising Fund ("Fund") as defined herein, Franchisee shall pay the sums set forth below: (i) Franchisee shall be obligated to spend two percent (2%) of the gross sales of the On The Border Restaurant on appropriate local advertising approved by Brinker. Brinker shall have the right to require reasonable documentation, on a semi-annual basis, to evidence that expenditures by Franchisee have been made or contracted for. Franchisee shall have the discretion to expend such funds as and when Franchisee reasonably deems appropriate, so long as the Franchisee's expenditure schedule is acceptable to Brinker in its reasonable discretion. Notwithstanding the above, in the event such funds have not been spent or committed by Franchisee as scheduled, Brinker may require the Franchisee to remit such funds to Brinker to be spent on advertising. (ii) One-half of one percent (1/2%) of the gross sales of the Franchised Restaurant shall be paid to Brinker on the tenth (10th) day of each month, based on gross sales of Franchisee for the preceding month, to be used for the purpose of maintaining, administrating, directing and preparing advertising, sales promotion, and public relations for the benefit of the On The Border System, including creative, production, media, and clearance costs of advertising and sales promotion materials and those market research expenditures directly related to the development and evaluation of the effectiveness of advertising and sales promotion. All such expenditures shall be at the discretion of Brinker. (b) Franchisee agrees that Brinker, in its sole discretion, shall have the right to designate any geographical area as a "Designated Marketing Area" (f/k/a "ADI") for the purposes of establishing an advertising Cooperative, or may establish a Fund (as defined below). Franchisee shall be obligated to join any such cooperative established for a geographical area in which the Franchised Restaurant is located. At such time as Brinker, in its sole discretion, has established a Cooperative or Fund, Franchisee shall pay to Brinker an amount equal to four percent (4%) of Franchisee's monthly gross sales for the preceding month (in addition to the 1/2% under Paragraph 8.2(a)(ii)). This sum, less direct administrative expenses, will be used for advertising, sales promotion and public relations both in the ADI in which the Franchised Restaurant is located and on a national basis including creative, production, media, and clearance costs of advertising and sales promotion materials and those market research expenditures directly related to the development and evaluation of the effectiveness of advertising and sales promotion. All such expenditures shall be at the discretion of Brinker. (c) For purposes of this Agreement, a Cooperative shall mean one or more On The Border restaurants operated by Brinker and one or more On The Border restaurants operated by one or more franchisees in any geographical area. A Fund shall be a fund whereby all On The Border restaurants shall contribute the required sum for advertising, sales promotion, and public relations of On The Border restaurants in the ADI and on a national basis. Certain franchised locations in institutional locations (such as airports) may be exempted from a Cooperative or a Fund. (d) From time to time Brinker may advance additional funds to Brinker advertising accounts to fund additional necessary advertising campaigns. Such sums advanced by Brinker to the advertising account shall be reimbursed to Brinker. The reimbursed amounts, which may include interest, shall be paid from subsequent fees. Brinker reserves the right, in its sole discretion, to increase the sum payable pursuant to SECTIONS 8.2(A) AND (B) to an amount not to exceed five and one-half percent (5 1/2%) of the gross sales of at least the majority of all On The Border franchisees' consent in writing to increase such sums; provided, however, that the sum so payable may be increased without regard to the five and one-half percent (5 1/2%) limitation referenced herein if at least seventy-five percent (75%) of all On The Border franchisees consent in writing to increase such sum. 8.3. GROSS SALES. The term "gross sales" as used in this Agreement includes all sums charged by Franchisee for goods, merchandise or services sold at or from the Franchised Restaurant, including all premiums unless exempted by Brinker. The sale of On The Border products away from the Franchised Restaurant is not authorized; however, should any such sales be approved in the future, they will be included within the definition of gross sales. Gross sales excludes any federal, state, county or city tax, excise tax, or other similar taxes collected by Franchisee from customers based upon sales, and cash received as payment in credit transactions where the extension of credit itself has already been included in the figure upon which the royalty and advertising contribution is computed. 8.4. LATE CHARGE. Any royalty, advertising, or other charges due Brinker by Franchisee not paid when due shall bear a late charge at the maximum rate allowed by Texas law or, if no maximum rate relating to this transaction is in effect in the State of Texas, eighteen percent (18%) per annum. Nothing in this Agreement shall be construed to mean that Franchisee is to pay, or has contracted to pay, any sum in excess of that which may lawfully be charged or contracted for under any applicable law. The intention of the parties is to conform strictly to applicable usury laws and it is agreed that if an excess is inadvertently collected it shall be applied to reduce the amount owed under this ARTICLE 8. 8.5. PAYMENT. All payments required to be made to Brinker under this Agreement shall be made in Dallas, Texas, or at such addresses and to such parties as Brinker may designate in writing from time to time. At the sole discretion of Brinker, upon written notice to Franchisee such payments will be made by electronic transfer of funds to the account of Brinker. 9. ACCOUNTING PROCEDURES: RIGHT OF AUDIT 9.1. ACCOUNTING. Franchisee agrees to keep true, accurate and complete records of his business in such form as Brinker now or hereafter may require and to furnish Brinker with a monthly and fiscal year to date profit and loss statement in the format prescribed by Brinker. Franchisee shall also submit to Brinker a balance sheet for the period ending on the first (1st) day of the third (3rd) month after the Franchised Restaurant opens, and thereafter Franchisee shall submit to Brinker quarterly balance sheets for the calendar quarters ending the last day of each March, June, September and December. All profit and loss statements and balance sheets should be prepared in accordance with generally accepted accounting principles and shall be submitted to Brinker within ten (10) days after the end of the period covered by the report. In addition, Franchisee shall retain for a period of at least twenty-four (24) months and upon request submit to Brinker copies of all state sales tax returns and all supporting data and records relating to sales made at or from the Franchised Restaurant and such other records as Brinker may reasonably request from time to time. 9.2. ANNUAL FINANCIAL STATEMENTS. Within one hundred twenty (120) days after the close of each fiscal year, Franchisee shall submit a full disclosure of all persons with any interest in the Franchised Restaurant and a complete annual financial statement for the Franchised Restaurant, which statement, if requested by Brinker, shall be certified by a Certified Public Accountant. 9.3. AUDITS. Franchisee agrees that Brinker or its representatives, at Brinker's expense, shall, at all reasonable times, have the right to examine or audit the books, records, state sales tax returns or accounts of Franchisee. Brinker shall similarly have the right to examine or audit the books, records, state sales tax returns or accounts of any and all persons or entities who are guarantors, who have personal liability, or who have joint and severable liability under this Agreement in those instances in which Franchisee has failed to make payments of the royalty or advertising fees in a timely fashion or has otherwise defaulted under this Agreement. In the event the audit discloses an understatement of gross sales which exceeds five (5%) percent for any period or periods, Franchisee shall, within fifteen (15) days after the receipt of the audit report, pay Brinker the royalty fee and the advertising fee in the amount of each understatement plus the late charge identified in SECTION 8.4 of this Agreement from the date such payments were originally due, plus Franchisee shall reimburse Brinker for all costs of the audit including travel, lodging and wages, reasonably incurred. 10. LIMITATIONS OF FRANCHISEE 10.1. TRADEMARKS, TRADENAMES, SERVICES MARKS AND TRADE SECRETS. (a) Franchisee acknowledges that ownership of all right, title and interest to the On The Border System and the On The Border Marks, are and shall remain vested solely in Brinker and Franchisee disclaims any right or interest therein or the good will derived therefrom. Franchisee agrees that all materials loaned or otherwise made available to him and all disclosures made to Franchisee and not to the general public by or at the direction of Brinker at any time before or during the Term of this Agreement relating to the On The Border System, including, without limitation, the MOD Manual in its entirety, financial information, marketing strategy and marketing programs are to be considered trade secrets of Brinker for purposes of this Agreement and shall be kept confidential and used by Franchisee only in connection with the operation of the Franchised Restaurant and other franchised On The Border Restaurants. Franchisee agrees not to divulge any of the trade secrets to any person other than his employees and then only to the extent necessary for the operation of the Franchised Restaurant and, specifically, that Franchisee will not, nor permit anyone to, use, reproduce, copy or exhibit any portion of the MOD Manual or any other trade secrets of Brinker. (b) Franchisee will not, directly or indirectly, at any time during the Term of this Agreement or thereafter, do or cause to be done any act or thing disputing, attacking or in any way impairing or tending to impair Brinker's right, title or interest in the On The Border Marks or the On The Border System. Franchisee shall immediately notify Brinker of all infringements or imitations of the On The Border Marks which come to its attention or challenges to Franchisee's use of any of the On The Border Marks, and Brinker shall exercise absolute discretion in deciding what action, if any, should be taken. Franchisee agrees to cooperate in the prosecution of any action to prevent the infringement, imitation, illegal use or misuse of the On The Border Marks and agrees to be named as a party in any such action if so requested by Brinker. Brinker agrees to bear the legal expenses incident to Franchisee's participation in such action, except for fees, expenses and other costs of Franchisee's personal legal counsel if Franchisee elects to be represented by counsel of his own choosing. (c) In the adoption of a corporate or partnership name, Franchisee shall not use any of the On The Border Marks, any variations or abbreviations, or any words confusingly similar to the On The Border Marks. (d) Providing Franchisee is properly using the On The Border Marks and/or the elements of the On The Border System deemed proprietary by Brinker and providing Franchisee has not changed or modified the On The Border Marks and/or the proprietary elements of the On The Border System, Brinker agrees to indemnify, defend and save Franchisee and its subsidiaries, its affiliates and parent companies, its employees, officers, shareholders and directors, harmless of, and only with respect to, any actual out of pocket costs, expenses or damages arising out of any final judgments of third party claimants based on alleged violations of the Lanham Act or similar state statute arising by the authorized use by Franchisee of the On The Border Marks or the elements of the On The Border System deemed proprietary by Brinker. In no event shall Franchisee be entitled to any prospective damages, lost profits, consequential damages and similar type liabilities. 10.2. INDEPENDENT CONTRACTOR. (a) Franchisee is an independent contractor and is not an agent, partner, joint venturer or employee of Brinker, and no fiduciary relationship between the parties exists. Neither Franchisee nor Brinker shall have any right to bind or obligate the other in any way nor represent that it has any right to do so. Neither party shall have control over the terms and conditions of employment of the other party's employees. (b) In all public records and in Franchisee's relationship with other persons, on stationery, business cards, business forms and checks Franchisee shall indicate independent ownership of the Franchised Restaurant and that it is operated under a Franchise granted by Brinker. (c) Franchisee shall exhibit on the premises in such places as may be designated by Brinker, a notification that the Franchised Restaurant is operated by an independent operator and not by Brinker. 11. UNFAIR COMPETITION 11.1. UNFAIR COMPETITION. Franchisee acknowledges the uniqueness of the On The Border System and that Brinker is making its knowledge, know-how and expertise available to him for the purpose of operating the Franchised Restaurant. Franchisee agrees that it would be an unfair method of competition for Franchisee to use or duplicate or to allow others to use or duplicate any of the knowledge, know-how and expertise received from Brinker for any use other than for the operation of franchised On The Border Restaurants. Franchisee, therefore, warrants that during the Term of this Agreement, it will utilize its best and continuing efforts to promote and develop the business at the Franchised Restaurant and during the Term hereof and at all times thereafter will not directly or indirectly engage in the operation of any restaurant, other than the Franchised Restaurant and other On The Border Restaurants franchised from Brinker, which utilizes or duplicates the On The Border System, any trade secrets of Brinker, the On The Border Marks or the present or any former On The Border Current Image (as defined in ARTICLE 4 hereof), or divulge such confidential information to any person other than his employees and then only to the extent necessary for the operation of an On The Border Restaurant hereunder, unless such information has been independently developed by Franchisee, independently acquired or is already in the public domain and, specifically, that Franchisee will not permit anyone to use, reproduce, copy, or exhibit any trade secrets of Brinker. Franchisee acknowledges that Brinker is currently engaged in the business of operating other full-service restaurants selling or leasing similar products, food items and services under the On The Border name and under other names and marks, and Brinker expressly reserves the right to continue such operations and to operate additional full-service restaurants and restaurant concepts in the future, and Franchisee hereby agrees that such businesses operated by Brinker do not constitute any breach of this Agreement or any implied covenant hereof. 11.2. COVENANTS OF OWNER. Franchisee acknowledges that Brinker may require each Owner to execute an agreement in a form attached hereto as EXHIBIT B containing the covenants set forth herein. 12. INSURANCE: INDEMNIFICATION 12.1. INSURANCE REQUIRED. (a) Franchisee agrees to carry at its expense during the Term of this Agreement, Comprehensive General Liability insurance, including Products Liability and Broad Form Contractual Liability, and Liquor Liability (Dram Shop), issued by a reputable insurance carrier approved by Brinker, such approval not to be unreasonably withheld, in an amount of not less than ONE MILLION AND NO/100 DOLLARS ($1,000,000,00) per occurrence for bodily injury and FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) per occurrence for property damage, or in such increased amounts as Brinker may reasonably request from time to time during the Term of this Agreement. Each policy will name Brinker and its subsidiaries, its affiliated and parent companies as additional insureds, will provide that the policy cannot be canceled without thirty (30) days prior written notice to Brinker, and shall insure the contractual liability of Franchisee under SECTION 12.2 hereof. Prior to the Royalty Commencement Date, Franchisee shall furnish to Brinker a Certificate of Insurance reflecting that the insurance coverage is in effect. All policies shall be renewed, and a renewal Certificate of Insurance mailed to Brinker in Dallas, Texas, or at such other location as may be specified by Brinker prior to the expiration date of the policies. (b) Franchisee agrees to secure and pay premiums on a Worker's Compensation policy covering himself and all his employees, as required by law. 12.2. INDEMNIFICATION. Franchisee is responsible for all losses or damages and contractual liabilities to third persons arising out of or in connection with possession, ownership or operation of the Franchised Restaurant, and for all claims or demands for damages to property or for injury, illness or death of persons directly or indirectly resulting therefrom. Franchisee agrees to defend, indemnify and save Brinker and its subsidiaries, its affiliated and parent companies, its employees, officers, shareholders and directors harmless of, from and with respect to any such claims, demands, losses, obligations, costs, expenses, liabilities, debts or damages unless resulting from the negligence or willful misconduct of Brinker or defects in goods manufactured by Brinker. Brinker shall notify Franchisee of any claims, and Franchisee shall be given the opportunity to assume the defense of the matter. If Franchisee fails to assume the defense, Brinker may defend the action in the manner it deems appropriate, and Franchisee shall pay to Brinker all costs, including attorneys fees, incurred by Brinker in effecting such defense, in addition to any sum which Brinker may pay by reason of any settlement or judgment against Brinker. Brinker's right to indemnity under this Agreement shall arise and be valid notwithstanding that joint or concurrent liability may be imposed on Brinker by statute, ordinance, regulation or other law. 13. TAXES 13.1. TAXES. Franchisee shall pay when due all taxes levied or assessed in connection with the possession, ownership or operation of the Franchised Restaurant or in connection with amounts paid or received under this Agreement, including without limitation any sales, use or other ad valorem taxes (other than any tax that is measured by or related to the net income of Brinker or to its corporate status in a state) as well as any and all employee payroll and employment taxes. If any such tax shall be paid by Brinker, Franchisee shall promptly reimburse Brinker the amount paid. In the event of any bona fide dispute as to the liability for a tax assessed against Franchisee, Franchisee may contest the validity or the amount of the tax in accordance with procedures of the taxing authority. Franchisee shall not permit a tax sale or seizure against the premises or equipment. 14. ASSIGNMENT: CONDITIONS AND LIMITATIONS 14.1. TRANSFER BY BRINKER. Brinker shall have the right to transfer or assign this Agreement and all or any part of its rights or obligations herein to any person or legal entity. 14.2. TRANSFER BY FRANCHISEE. (a) Any purported assignment or transfer not in full compliance with this SECTION 14.2 shall be null and void and shall constitute a material breach of this Agreement, for which Brinker may immediately terminate without opportunity to cure pursuant to ARTICLE 17 of this Agreement. THE GOVERNING DOCUMENTS OF THE FRANCHISEE ENTITY AND THE PARENT, IF APPLICABLE, MUST STATE THAT THE ENTITY'S SOLE BUSINESS ACTIVITY WILL BE THE OPERATION OF ON THE BORDER RESTAURANTS OR OTHER BRINKER FRANCHISED RESTAURANTS. IN ADDITION, THE GOVERNING DOCUMENTS MUST MANDATE THE DESIGNATION OF A MANAGING OWNER AND DESCRIBE THE MANAGING OWNER'S AUTHORITY, AS DEFINED IN THE GUIDELINES FOR APPROVAL OF FRANCHISEE OWNERSHIP DISTRIBUTION PLANS, TO BIND THE FRANCHISEE ENTITY AND TO DIRECT ANY ACTIONS NECESSARY TO ENSURE COMPLIANCE WITH THE FRANCHISE AGREEMENT OR ANCILLARY AGREEMENT (AS DEFINED IN THE GUIDELINES). NO AMENDMENTS INCONSISTENT WITH THE GUIDELINES FOR APPROVAL OF FRANCHISEE OWNERSHIP DISTRIBUTION PLANS MAY BE MADE TO THE ARTICLES OF INCORPORATION, BY-LAWS, PARTNERSHIP AGREEMENT, OR OTHER GOVERNING DOCUMENTS OF THE FRANCHISEE ENTITY OR THE PARENT, IF APPLICABLE. EACH SUCH ENTITY MUST NOTIFY BRINKER, AND AT BRINKER'S REQUEST PROVIDE COPIES, OF ANY AMENDMENTS TO ITS GOVERNING DOCUMENTS. (b) All stock certificates shall include the following legend: THE OWNERSHIP AND TRANSFER OF THIS STOCK IS SUBJECT TO THE TERMS AND CONDITIONS OF THE ARTICLES OF INCORPORATION AND THE BY-LAWS OF THIS CORPORATION AND OF A FRANCHISEE AGREEMENT WITH BRINKER INTERNATIONAL, INC. REFERENCE IS MADE TO SUCH FRANCHISEE AGREEMENT AND THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS OF THIS CORPORATION, COPIES OF WHICH ARE ON FILE WITH THE RECORDS OF THE CORPORATION. (c) In the adoption of any corporate name or partnership name, Franchisee shall not use any of the On The Border Marks, any variations or abbreviations, or any words confusingly similar to the On The Border Marks. (d) TRANSFER BY FRANCHISEE. Except with the prior written consent of an authorized officer of Brinker, such consent not to be unreasonably withheld but may be withheld if Brinker determines such proposed transfer not to be in the best interest of the On The Border System, Franchisee shall not (1) assign or pledge this Agreement, or assign any of Franchisee's rights or delegate any of its duties hereunder; or (2) sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any equity securities of Franchisee; or (3) sell, assign, transfer, convey or give away substantially all of the assets of Franchisee or any On The Border Restaurant. (e) TRANSFER BY OWNERS. Except with the prior written consent of an authorized officer of Brinker or as set forth herein, no Owner shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Franchisee; provided, however, that Owner may transfer its interest to another Owner upon receiving the consent of Brinker, not to be unreasonably withheld. (f) TRANSFER OF EQUITY SECURITIES. Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Franchisor has granted such rights in reliance on the business skill, financial capacity and personal character of Franchisee and Franchisee's Owners and any guarantor of Franchisee. Accordingly, neither Franchisee nor any initial or subsequent successor assignee to any part of Franchisee's interest in this Agreement, or any individual, partnership, corporation, or other entity which directly or indirectly has or owns any interest in this Agreement or in Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in this Agreement or in any entity which owns this Agreement without the prior written consent of Franchisor except as set forth in the Guidelines of Franchisor in effect from time to time. Any purported assignment or transfer, by operation of law or otherwise not having the written consent of Franchisor required by this SECTION 14.2(F) shall be null and void and shall constitute a material breach of this Agreement. (g) NOTICE OF PROPOSED TRANSFER. The proposed transferor shall notify Brinker in writing of any proposed transfer of an interest referred to in this Section before the proposed transfer is to take place, and Franchisee shall provide such information and documentation relating to the proposed transfer as Brinker may reasonably require. (h) CONDITIONS OF CONSENT. Brinker may condition its consent to the proposed transfer of an interest referred to in this Section on satisfaction of any or all of the following requirements: (i) That all Franchisee's accrued monetary obligations and all other outstanding obligations to Brinker and its Affiliates have been satisfied; (ii) That Franchisee is not in default of any provision of this Agreement, any amendment hereof or successor hereto, or any other agreement between Franchisee and Brinker or its affiliates; (iii) That the transferee (or, if applicable, such owners of the transferee as Brinker may request), in Brinker's sole judgment, satisfies all of Brinker's business standards and requirements; has the aptitude and ability to perform the obligations of Franchisee under this Franchise Agreement; and has adequate financial resources and capital to do so; (iv) That the transferee, at Brinker's election, consistent with then current Brinker policy, (a) enter into a written assignment, in a form satisfactory to Brinker, assuming and agreeing to discharge all of Franchisee's obligations under this Agreement, or (b) execute, for a term ending on the expiration date of this Agreement, Brinker's then-current On The Border Restaurant Franchise Agreement applicable to such transferee and such ancillary agreements as Brinker may require. If the transferee is required to execute a new franchise agreement, such agreement shall supersede this Agreement in all respects; (v) That the transferee (or, if applicable, such owners of the transferee as Brinker may request) meet all of the Brinker requirements then applicable to franchisees and execute a guarantee of the performance of Franchisee's obligations to Brinker and Brinker's affiliates; (vi) That the Franchisee and each transferor execute a general release, in a form satisfactory to Brinker, of any and all claims against Brinker, its affiliates, and their respective officers, directors, agents, and employees, in their corporate and individual capacities; (vii) That the transferee (or, if applicable, the owners of the transferee, its restaurant managers and its proposed Managing Owner or Director), at the transferee's expense, complete any applicable orientation and training programs (if any) then required by Brinker; (viii) That the transferor pay a transfer fee of Four Thousand Dollars ($4,000) in consideration of Brinker's expenses in reviewing the proposed transfer for the first On The Border Restaurant involved in the transaction and One Thousand Dollars ($1,000) for each additional On The Border Restaurant involved in the same transaction; (ix) Approval by Brinker of the terms of the contract of sale which impact the sufficiency of cash flow from the business after payment of debt service necessary for reinvestment in the business for, among other things, refurnishing, maintaining and remodeling the premises. (i) DEATH OR MENTAL INCAPACITY. Upon the death or mental incapacity of an Owner, the executor, administrator, or personal representative of such Owner shall transfer the Owner's interest in Franchisee or the Parent to a third party approved by Brinker within a reasonable time after the Owner's death or mental incapacity. Such transfers, including, without limitation, transfers by devise or inheritance, shall be subject to Brinker's right of first refusal under ARTICLE 15, or, if such right is not exercised, the same conditions as may be imposed on any inter vivos transfer under this SECTION 14.2. In the case of transfer by devise or inheritance, if the heir is not approved or there is no heir, the executor shall use best efforts to transfer the Owner's interest to another party approved by Brinker within twelve (12) months from the date of the Owner's death. If the conveyance of the Owner's interest to a party acceptable to Brinker has not taken place within the twelve (12) month period, Brinker shall have the option to purchase the Owner's interest at fair market value. 15. RIGHT OF FIRST REFUSAL 15.1. RIGHT OF FIRST REFUSAL. (a) In the event Franchisee or any Owner receives an acceptable bona fide offer from a third party to purchase the Franchised Restaurant or any portion thereof or interest therein. Franchisee or Owner shall give Brinker written notice setting forth the name and address of the prospective purchaser, the price and terms of the offer together with a franchisee application completed by the prospective purchaser, a copy of the purchase and sale agreement, executed by both Franchisee or Owner, as applicable, and purchaser, and all exhibits, copies of any real estate purchase agreement or agreements, proposed security agreements and related promissory notes, assignment documents, title insurance commitment and any other information that Brinker may request in order to evaluate the offer. Brinker shall then have the prior option to purchase such interest covered by the offer at the price and upon the same terms of the offer. If the consideration is not money, the purchase price shall be cash equal to the fair market value of the consideration. Brinker shall have thirty (30) calendar days after receipt of Franchisee's or Owner's notice of offer and the furnishing of all reasonably requested information within which to notify Franchisee or Owner in writing of its intent to accept or reject the offer. Silence on the part of Brinker shall constitute rejection. Neither Franchisee nor Owner may rely upon any notice from Brinker of its intention to accept or reject the offer nor shall such notice be effective unless such notice is in writing and signed by an officer of Brinker. If the proposed sale includes assets of Franchisee not related to the operation of franchised On The Border Restaurants, Brinker may, at its option, elect to purchase only the assets related to the operation of franchised On The Border Restaurants and an equitable purchase price shall be allocated to each asset included in the proposed sale. If the proposed sale includes Brinker-franchised restaurants other than On The Border restaurants ("Brinker Non-OTB Restaurants"), Brinker may, at its election purchase: (i) only the Brinker Non-OTB Restaurants; (ii) only the On The Border restaurants; or (iii) any combination of Brinker Non-OTB Restaurants or On The Border restaurants whether on an individual restaurant basis or on an aggregate basis; and an equitable purchase price shall be allocated to each restaurant. To the extent any other franchise or other agreements relating to other Brinker Non-OTB Restaurants owned by Franchisee may be inconsistent with, or conflict with the terms of the right of first refusal contained herein, the terms of this right of first refusal shall control. This right of first refusal shall apply to any transfer, conveyance, assignment, consolidation, merger or any other transaction in which legal or beneficial ownership of the franchise granted by this Agreement is vested in other than the individual Franchisee; provided, however, it shall not apply if Franchisee consists of more than one person and the transfer or assignment is from one partner to another, both of whom are signatories to this Agreement as of the date hereof, so long as (i) the Operating Partner continues to satisfy the requirements set forth in SECTION 3.1 hereof, and (ii) Brinker is given written notice thereof prior to such transfer. If this Agreement has been assigned to a Corporation in accordance with SECTION 14.2(C) of this Agreement, then this right of first refusal shall also apply if Voting Common Stock in the Corporation is sold, assigned or transferred to individuals or entities other than those approved by Brinker as owners of the Voting Common Stock. (b) The election by Brinker not to exercise its right of first refusal as to any offer shall not affect its right of first refusal as to any subsequent offer. (c) Any sale, attempted sale, assignment or other transfer of the franchise grant effected without first giving Brinker the right of first refusal described above shall be void and of no force and effect. (d) If Brinker does not accept the offer to purchase the interests or On The Border Restaurant(s) proposed to be sold by Franchisee or Owner, Franchisee or Owner may conclude the sale to the purchaser who made the offer provided Brinker's consent to the assignment be first obtained, which consent will not be unreasonably withheld upon compliance with the conditions imposed by Brinker on the assignment. Conditions on assignment may include, but are not limited to, the following: (i) All accrued monetary obligations and all other outstanding obligations of Franchisee to Brinker, whether arising under this Agreement or otherwise, must be satisfied at the time of such sale or assignment. (ii) Prospective purchaser must complete and be approved through Brinker's standard franchisee selection process including satisfactorily demonstrating to Brinker that he meets the financial, character, managerial, equity ownership and such other criteria and conditions as Brinker shall then be applying in considering applications for new franchises. (iii) Prospective purchaser shall submit to and satisfactorily complete Brinker's training for new franchisees. (iv) Approval by Brinker of the terms and conditions in the contract of sale which affect the sufficiency of cash flow from the business after payment of debt service necessary for reinvestment in the business for, among other things, refurnishing, maintaining and remodeling the premises. (v) Franchisee seller shall remain personally liable to Brinker for royalty and advertising payments, unless the sale is for one hundred percent (100%) cash, or if the contract of sale provides that installment payments of the purchase price are subordinate to the royalty and advertising payments called for in this Agreement, in which circumstance, the Franchisee seller will be released from personal liability to Brinker. (vi) Franchisee seller shall pay Brinker an assignment fee of Four Thousand Dollars ($4,000) for the costs and expenses incurred by Brinker in connection with the transfer of the first On The Border Restaurant involved in the transaction and One Thousand Dollars ($1,000) for each additional On The Border Restaurant involved in the same transaction. (vii) Execution by Franchisee or Owner seller of a general release of Brinker in a form satisfactory to Brinker. (e) In addition, Franchisee agrees that, prior to acquiring any other On The Border Restaurant franchise which may be offered to it for sale or which it may offer to purchase, such franchise will first be offered to Brinker on the same terms, conditions and price. (f) Brinker's consent to a transfer of any interest in Franchisee, any Owner or in this Agreement shall not constitute a waiver of any claims it may have against the transferring party, nor shall it be deemed a waiver of Brinker's right to demand exact compliance with any of the terms of this Agreement by the transferee. 16. OPTION TO OBTAIN SUCCESSOR FRANCHISE AGREEMENT 16.1. OPTION TO OBTAIN SUCCESSOR FRANCHISEE AGREEMENT. Franchisee shall have, exercisable on the expiration date of the Term of this Agreement, an option to obtain a Successor On The Border Franchise Agreement ("Successor Franchise Agreement") for a term of twenty (20) years, provided that each of the conditions in (a) through (f) below are satisfied by Franchisee: (a) Franchisee has given Brinker written notice ("Notice") of its intention to exercise its option to obtain a Successor Franchise Agreement during the second (2nd) year prior to the expiration of the Term of this Agreement. (b) Franchisee, at the time of the Notice and at the time of the expiration of the Term of this Agreement, is not in default of and has substantially complied with the terms and conditions of this Agreement consistently and throughout its Term, including but not limited to the following: (i) Franchisee has operated the Franchised Restaurant in accordance with the terms and conditions of this Agreement, including, but not limited to, operating the Franchised Restaurant in compliance with the operating standards and specifications established from time to time by Brinker as to quality of service, cleanliness, health and sanitation; and (ii) Franchisee has satisfied, in a timely fashion, all financial obligations in accordance with the terms and conditions of this Agreement; and (iii) Franchisee has maintained, improved, altered and remodeled the restaurant building, premises, signs and equipment throughout the Term of this Agreement in accordance with the terms and conditions of this Agreement. (c) Within one hundred and twenty (120) days after receipt of the Notice, Brinker shall advise Franchisee in writing if Franchisee is not eligible to obtain a Successor Franchise Agreement, specifying the reasons for such ineligibility and identifying whether such deficiencies are capable of cure, and the cure period, if applicable. Between the date of the Notice and the expiration date of the Term of this Agreement, if any act, circumstance or omission causes Franchisee to become ineligible to obtain a Successor Franchise Agreement then Brinker shall advise Franchisee in writing thereof, specifying the deficiency and identifying a cure period if applicable. (d) Franchisee has the right to remain in possession of the premises for the term of the Successor Franchise Agreement. (e) Franchisee shall execute the then current form of Successor Franchise Agreement, which may differ as to royalty and advertising contributions, as well as other terms and conditions. Franchisee shall, upon execution of the Successor Franchise Agreement, pay to Brinker the then current Franchise Fee. (f) Franchisee and Brinker shall execute general mutual releases of each other in a form satisfactory to Brinker, except as to any claim which may be based on fraud or misrepresentation or is the subject matter of litigation or other documented dispute resolution process in existence on the date Brinker receives notice set forth in SECTION 16.1(A) hereof or at the time of expiration of the Term of this Agreement. 17. DEFAULT AND EFFECT OF TERMINATION 17.1. DEFAULT. If an act of default hereunder is committed by Franchisee, and Franchisee fails to cure the default after any required notice and within the cure period applicable, Brinker may, at its option and without prejudice to any other rights or remedies provided for hereunder or by law, terminate the Franchise Agreement by written notice or otherwise. The applicable cure period shall be as described below but, if a cure period is not specifically mentioned, it shall be thirty (30) days. In some cases, as identified below, no cure period is allowed and no notice may be required. If any applicable law or rule requires a longer notice period or a longer cure period than that provided herein, then the period required under the law or rule shall be substituted for the requirements herein. The following are material acts of default and shall be good cause for termination: (a) Franchisee fails to operate the Franchised Restaurant in accordance with the operating standards and specifications established from time to time by Brinker as to service, cleanliness, health and sanitation. Franchisee shall have five (5) days after notification to cure the default. (b) Franchisee sells any product which does not conform to Brinker's specifications. Franchisee shall have two (2) days after notification to cure the default. (c) Franchisee fails to sell products designated by Brinker. Franchisee shall have two (2) days after notification to cure the default. (d) Franchisee sells products not approved by Brinker. Franchisee shall have two (2) days after notification to cure the default. (e) Franchisee uses equipment, uniforms or decor not approved by Brinker. (f) Franchisee fails to maintain the building and premises in conformance with the Current Image. (g) Franchisee fails to pay when due any royalty or advertising fee or any other sums required to be paid under this Agreement. Franchisee shall have ten (10) days after notification to cure the delinquency. (h) Franchisee fails to submit any information required by SECTION 9.1 above ("Accounting Procedures") or submits a financial statement which understates gross sales. (i) Franchisee abandons the franchise relationship without the prior consent of Brinker at any time during the Term of this Agreement. The cessation of operation of the Franchised Restaurant on the premises other than with the consent of Brinker, whether the premises remain vacant or are converted to another use, shall be considered abandonment of the franchise relationship. (j) Franchisee ceases to occupy the premises. If the loss of possession is the result of governmental exercise of eminent domain, Franchisee may, with Brinker's consent and subject to availability, relocate to other premises in the same market area for the balance of the term of this Agreement. (k) Franchisee or any Owner files a petition or application seeking any type of relief under the Bankruptcy Code or any state insolvency or similar law, or someone files a petition or application seeking to have such party adjudicated a bankrupt, or seeking other relief against such party under the Bankruptcy Code or any state insolvency or similar law and the petitioner application is not dismissed within ninety (90) days after it is filed. Subject to the applicable law, this Agreement shall terminate without notice or cure period upon the occurrence of this act of default as if that date were the expiration date and Franchisee expressly and knowingly waives any rights that he may have under the provisions of the Bankruptcy Code and consents to the termination of this Agreement or any other relief which may be sought in a Complaint filed by Brinker to lift the provisions of the automatic stay of the Bankruptcy Code. Additionally, Franchisee agrees not to seek an Injunctive Order from any court in any jurisdiction relating to insolvency, reorganization or arrangement proceedings which would have the effect of staying or enjoining this provision. (l) Franchisee or any Owner admits in writing his inability to pay his debts as they mature or makes an assignment for the benefit of creditors, or a receiver (permanent or temporary) for any part of his property is appointed by a court of competent authority. If this act of default shall occur, Brinker shall have the right to immediately terminate this Agreement without notice or cure period. (m) A final judgment against Franchisee or any Owner remains unsatisfied of record for thirty (30) days (unless a supersedeas or other appeal bond has been filed) or if a levy of execution is made upon the franchise granted by this Agreement or upon any property used in the Franchised Restaurant, and it is not discharged within five (5) days of said levying. (n) Conviction of Franchisee or any Owner in a court of competent jurisdiction of an indictable offense punishable by a term of imprisonment in excess of one (1) year and such felony conviction would reasonably be deemed by Brinker to likely have a negative impact on the On The Border System or the Franchised businesses. If this act of default shall occur, Brinker shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee but with no opportunity to cure. (o) Franchisee or any Owner uses or duplicates the On The Border System or engages in unfair competition in violation of SECTION 11.1 or discloses any trade secrets of Brinker in violation of SECTION 10.1. If this act of default shall occur, Brinker shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee but with no opportunity to cure. (p) Franchisee denies Brinker the right to inspect the Franchised Restaurant or to audit the sales and accounting records of the Franchised Restaurant. (q) Conduct by Franchisee or any Owner which is deleterious to or reflects unfavorably on Franchisee or the On The Border Restaurant System by exhibiting a reckless disregard for the physical and mental well being of employees, customers, Brinker representatives or the public at large including, but not limited to, battery, assault, sexual harassment, public health or safety issues, or other forms of threatening, outrageous or unacceptable behavior and is not cured within two (2) days after notice. (r) Failure by Franchisee to maintain a responsible credit rating by failing to make prompt payment of undisputed bills, invoices and statements from suppliers of goods and services to the Franchised Restaurant. (s) The sale, assignment or transfer of any interest of Franchisee or any Owner in this Agreement in violation of ARTICLES 3, 14 OR 15. (t) Franchisee or any Owner, without the written consent of Brinker, enters into a management agreement or consulting arrangement relating to the Franchised Restaurant. (u) Failure to restore the building after damage or destruction as provided in SECTION 6.2. (v) The knowing and intentional submission by Franchisee or any Owner of a franchise application and/or management commitment form which contains any false or misleading statements or omits any material fact. If this act of default shall occur, Brinker shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee but with no opportunity to cure. (w) Repeated breaches of provisions of this Agreement. (x) The acquisition of an interest in a restaurant business in violation of SECTION 18.1. (y) Failure by Franchisee or any Owner to comply with any other provisions of this Agreement. The failure of Brinker to terminate this Agreement upon the occurrence of one or more events of default will not constitute a waiver or otherwise affect the right of Brinker to terminate this Agreement because of a continuing or subsequent failure to cure one or more of the aforesaid events of default or any other default. 17.2. RIGHTS AND DUTIES UPON TERMINATION. (a) Upon termination or expiration of this Agreement, Franchisee's right to use the On The Border Marks and the On The Border System shall terminate. Except as to any other Agreement then in effect, Franchisee shall not thereafter identify himself as an On The Border franchisee or a former On The Border franchisee or use any of Brinker's trade secrets, promotional materials, the On The Border Marks or any mark confusingly similar, nor shall Franchisee disclose any of Brinker's trade secrets. Upon termination or expiration of this Agreement, Franchisee shall immediately return to Brinker the MOD Manual loaned to him, together with all other material containing trade secrets. (b) Franchisee grants to Brinker, upon termination or expiration of this Agreement, the option to purchase all usable paper goods, containers, printed menus and any and all materials bearing the On The Border Marks at Franchisee's cost, and to purchase the restaurant equipment, furniture, and fixtures at fair market value. (c) If the parties do not enter into a Successor Franchise Agreement, Franchisee agrees to immediately upon termination or expiration of this Agreement, make such removals or changes in signs and the building as Brinker shall request, so as to effectively distinguish the building and premises from its former appearance and from any other On The Border Restaurant. In the event Franchisee fails to make the changes, Franchisee consents to Brinker entering the building and premises to make non-structural changes at Franchisee's expense. (d) In the event of termination for any default of Franchisee, any damage suffered by Brinker shall be a lien in favor of Brinker against the personal property, machinery, fixtures and equipment owned by Franchisee on the premises at the time of default. (e) The foregoing shall be in addition to any other rights or remedies of Brinker that exist under statute, regulation or common law. 18. RESTRICTIVE COVENANT 18.1. RESTRICTIVE COVENANT. Franchisee covenants and agrees that during the Term of this Agreement it will not own, operate or have any interest in any Mexican restaurant business except other franchised On The Border Restaurants. Franchisee further covenants and agrees that for a period of one (1) year after any sale, assignment, transfer, termination or expiration of this Agreement, Franchisee will not own, operate or have any interest in any Mexican restaurant business, except other franchised On The Border Restaurants, either at or within three (3) miles of the premises of the Franchised Restaurant. 18.2. COVENANTS OF OWNER. Franchisee acknowledges that Brinker may require each Owner to execute an agreement in a form attached hereto as EXHIBIT B containing the covenants set forth herein. 19. MISCELLANEOUS: GENERAL CONDITIONS 19.1. INTERPRETATION. The Introduction shall be considered a part of this Agreement. Paragraph captions are used only for convenience and are in no way to be construed as part of this Agreement or as a limitation of the scope of the particular paragraphs to which they refer. Words of any gender used in this Agreement shall include any other gender, and words in the singular shall include the plural, where the context requires. 19.2. NON-WAIVER. (a) The failure of Brinker to exercise any right or option given to it under this Agreement, or to insist upon strict compliance by Franchisee with the terms and conditions of this Agreement shall not constitute a waiver of any terms or conditions of this Agreement with respect to any other or subsequent breach, nor a waiver by Brinker of its right at any time thereafter to require exact and strict compliance with the terms and conditions of this Agreement. The rights or remedies set forth in this Agreement are in addition to any other rights or remedies which may be granted by law. (b) The failure of Franchisee to exercise any right or option given to it under this Agreement, or to insist upon strict compliance by Brinker with the terms and conditions of this Agreement shall not constitute a waiver of any terms or conditions of this Agreement with respect to any other or subsequent breach, nor a waiver by Franchisee of its right at any time thereafter to require exact or strict compliance with the terms and conditions of this Agreement. The rights or remedies set forth in this Agreement are in addition to any other rights or remedies which may be granted by law. 19.3. MEDIATION AND APPLICABLE LAW (A) THE PARTIES AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT (AND ATTACHMENTS) OR THE RELATIONSHIP CREATED BY THIS AGREEMENT TO NON-BINDING MEDIATION PRIOR TO BRINGING SUCH CLAIM, CONTROVERSY OR DISPUTE IN A COURT. THE MEDIATION SHALL BE CONDUCTED THROUGH EITHER AN INDIVIDUAL MEDIATOR OR A MEDIATOR APPOINTED BY A MEDIATION SERVICES ORGANIZATION OR BODY, EXPERIENCED IN THE MEDIATION OF FOOD SERVICE BUSINESS DISPUTES, AGREED UPON BY THE PARTIES AND, FAILING SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME AFTER EITHER PARTY HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK MEDIATION OF ANY CLAIM, CONTROVERSY OR DISPUTE (NOT TO EXCEED FIFTEEN (15) DAYS), BY THE AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE WITH ITS RULES GOVERNING MEDIATION, AT BRINKER'S CORPORATE HEADQUARTERS IN DALLAS, TEXAS. THE COSTS AND EXPENSES OF MEDIATION, INCLUDING COMPENSATION OF THE MEDIATOR, SHALL BE BORNE BY THE PARTIES EQUALLY. IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR DISPUTE WITHIN NINETY (90) DAYS AFTER THE MEDIATOR HAS BEEN APPOINTED, THEN EITHER PARTY MAY BRING A LEGAL PROCEEDING UNDER SECTION (C) BELOW TO RESOLVE SUCH CLAIM, CONTROVERSY OR DISPUTE UNLESS SUCH TIME PERIOD IS EXTENDED BY WRITTEN AGREEMENT OF THE PARTIES. NOTWITHSTANDING THE FOREGOING, BRINKER MAY BRING AN ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF, OR (3) INVOLVING THE POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO, REAL PROPERTY IN A COURT HAVING JURISDICTION AND IN ACCORDANCE WITH SECTION (C) BELOW, WITHOUT SUBMITTING SUCH ACTION TO MEDIATION. (B) WITH RESPECT TO ANY CLAIMS, CONTROVERSIES OR DISPUTES WHICH ARE NOT FINALLY RESOLVED THROUGH MEDIATION OR AS OTHERWISE PROVIDED ABOVE, FRANCHISEE HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE COURTS OF DALLAS COUNTY, TEXAS AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. FRANCHISEE HEREBY WAIVES ALL QUESTIONS OF PERSONAL JURISDICTION FOR THE PURPOSE OF CARRYING OUT THIS PROVISION. FRANCHISEE HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP CREATED BY THIS AGREEMENT BY ANY MEANS ALLOWED BY TEXAS OR FEDERAL LAW. FRANCHISEE AGREES THAT VENUE FOR ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE IN DALLAS COUNTY, TEXAS; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF OR (3) INVOLVING POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO, REAL PROPERTY, BRINKER MAY BRING SUCH ACTION IN ANY STATE OR FEDERAL DISTRICT COURT WHICH HAS JURISDICTION. WITH RESPECT TO ALL CLAIMS, CONTROVERSIES, DISPUTES OR ACTIONS, THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED UNDER TEXAS LAW (WITHOUT REGARD TO TEXAS CHOICE OF LAW RULES). (C) FRANCHISEE AND BRINKER ACKNOWLEDGE THAT THE PARTIES' AGREEMENT REGARDING APPLICABLE STATE LAW AND FORUM SET FORTH IN SECTIONS (A) AND (B) ABOVE PROVIDE EACH OF THE PARTIES WITH THE MUTUAL BENEFIT OF UNIFORM INTERPRETATION OF THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR THE PARTIES' RELATIONSHIP CREATED BY THIS AGREEMENT. EACH OF FRANCHISEE AND BRINKER FURTHER ACKNOWLEDGE THE RECEIPT AND SUFFICIENCY OF MUTUAL CONSIDERATION FOR SUCH BENEFIT. (D) FRANCHISEE AND BRINKER ACKNOWLEDGE THAT THE EXECUTION OF THIS AGREEMENT BY FRANCHISOR OCCURRED IN DALLAS, TEXAS AND FURTHER ACKNOWLEDGE THAT THE PERFORMANCE OF CERTAIN OBLIGATIONS OF FRANCHISEE ARISE UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE PAYMENT OF MONIES DUE HEREUNDER AND THE SATISFACTION OF CERTAIN TRAINING REQUIREMENTS OF BRINKER, SHALL OCCUR IN DALLAS, TEXAS. 19.4. SEVERABILITY. Brinker and Franchisee agree that if any provision of this Agreement may be construed in two ways, one of which would render the provision illegal or otherwise voidable or unenforceable and the other of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. The language of all provisions of this Agreement shall be construed according to its fair meaning and not strictly against Brinker or Franchisee. It is the desire and intent of Brinker and Franchisee that the provisions of this Agreement be enforced to the fullest extent, and should any provision be invalid or unenforceable under Texas law, but valid under the laws of the state where the Franchised Restaurant is located, the provision shall be governed by the law of that state. In the event any court shall determine that any provision in this Agreement is not enforceable as written, Brinker and Franchisee agree that the provision shall be amended so that it is enforceable to the fullest extent permissible under the laws of the jurisdiction in which enforcement is sought. The provisions of this Agreement are severable and this Agreement shall be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained in the Agreement, and partially valid and enforceable provisions shall be enforced to the extent that they are valid and enforceable. 19.5. NOTICES. (a) All notices to Brinker shall be in writing and shall be delivered or sent by registered or certified mail, postage fully prepaid, addressed to it at its offices at 6820 LBJ Freeway, Dallas, Texas 75240, Attention: General Counsel, or at such other address as Brinker shall from time to time designate in writing. (b) All notices to Franchisee shall be in writing and shall be hand delivered or sent by registered or certified mail, postage fully-prepaid, or telegraph, addressed to Franchisee at the Franchised Restaurant premises or Franchisee's last designated in writing mailing address. (c) Notices shall be deemed delivered on the earlier of actual receipt or the third (3rd) day after being deposited in the U.S. Mail. 19.6. MODIFICATION. This Agreement may only be modified or amended by a written document executed by Brinker and Franchisee. 19.7. BINDING EFFECT. This Agreement shall be binding upon the parties, their heirs, executors, personal representatives, successors or assigns. 19.8. SURVIVAL. Any provisions of this Agreement which impose an obligation after termination or expiration of this Agreement shall survive the termination or expiration of this Agreement and be binding on the parties. 19.9. ATTORNEY'S FEES. In any litigation to enforce the terms of this Agreement, all costs and all attorney's fees (including those incurred on appeal) incurred as a result of the legal action shall be paid to the prevailing party by the other party. 19.10. ENTIRE AGREEMENT. This Agreement, together with the Franchise Application, Management Commitment Form and Capitalization Plan submitted by Franchisee to Brinker upon which Brinker is relying in granting this franchise, constitute the entire agreement of the parties and supersedes all prior negotiations, commitments, representations and undertakings of the parties with respect to the subject matter of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BRINKER: [S E A L] Brinker International, Inc., a Delaware corporation ATTEST:_________________ By:________________________ By:______________________ Assistant/Secretary Its:_______________________ FRANCHISEE: [S E A L] N.E. Restaurant Company, Inc., ATTEST: a Delaware corporation _________________________ By:_________________________ By:______________________ Assistant/Secretary Its:________________________ EXHIBIT A PREMISES EXHIBIT B ON THE BORDER RESTAURANT AGREEMENT REGARDING UNFAIR COMPETITION AND RESTRICTIVE COVENANT FOR FRANCHISE AGREEMENT (ENTITY) THIS ON THE BORDER RESTAURANT AGREEMENT REGARDING UNFAIR COMPETITION AND RESTRICTIVE COVENANT (the "Agreement") is made and entered into ________________, 19__, by and between BRINKER INTERNATIONAL, INC., a Delaware corporation ("Brinker"), ________________, a _________ corporation ("Franchisee") and __________________ ("Owner"). W I T N E S S E T H: WHEREAS, on ______________, 19__, Brinker and Franchisee entered into that certain On The Border Restaurant Franchise Agreement (Entity) (the "Franchise Agreement") pursuant to which Franchisee has been granted a franchise to operate a On The Border restaurant (the "Franchised Restaurant") for the term and upon the provisions set forth in the Franchise Agreement; and WHEREAS, Owner is the owner of an interest in Franchisee; and WHEREAS, Brinker has requested that Owner execute this Agreement pursuant to Sections 11.2 and 18.2 of the Franchise Agreement. NOW THEREFORE, for Ten Dollars ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. UNFAIR COMPETITION. Owner acknowledges the uniqueness of the On The Border System (as defined in the Franchise Agreement) and that Brinker is making its knowledge, know-how and expertise available to Owner as the owner of an interest in the Franchisee operating the Franchised Restaurant. Owner agrees that it would be an unfair method of competition for Owner to use or duplicate or to allow others to use or duplicate any of the knowledge, know-how and expertise received from Brinker for any use other than for the ownership and operation of franchised On The Border Restaurants. Owner, therefore, warrants that during the Term (as defined in the Franchise Agreement) of the Franchise Agreement, it will utilize its best and continuing efforts to promote and develop the business at the Franchised Restaurant and during the Term and at all times thereafter will not directly or indirectly engage in the operation of any restaurant, other than the Franchised Restaurant and other On The Border Restaurants franchised from Brinker, which utilizes or duplicates the On The Border System, any trade secrets of Brinker, the On The Border Marks (as defined in the Franchise Agreement) or the present or any former On The Border Current Image (as defined in ARTICLE IV of the Franchise Agreement), or divulge such confidential information to any person and, specifically, that Owner will not permit anyone to use, reproduce, copy, or exhibit any trade secrets of Brinker. Owner acknowledges that Brinker is currently engaged in the business of operating other full-service restaurants selling or leasing similar products, food items and services under the On The Border(R) name and under other names and marks, and Brinker expressly reserves the right to continue such operations and to operate additional full-service restaurants and restaurant concepts in the future, and Owner hereby agrees that such businesses operated by Brinker do not constitute any breach of the Franchise Agreement or any implied covenant thereof. During the term of this Agreement, including any renewals hereof, and for a period of two (2) years thereafter, Owner shall not, on his own behalf or on behalf of any other person, partnership, entity, association or corporation, hire, solicit, or seek to hire any employee of Brinker or any other franchisee of Brinker or in any other manner attempt, directly or indirectly, to influence, induce or encourage any such employee to leave the employment of, or association with, Brinker or any other franchisee of Brinker. 2. RESTRICTIVE COVENANT. Owner covenants and agrees that during the Term of the Franchise Agreement it will not own, operate or have any interest in any Tex-Mex restaurant business except other franchised On The Border Restaurants. Owner further covenants and agrees that for a period of one (1) year after any sale, assignment, transfer, termination or expiration of the Franchise Agreement or Owner's interest therein or in Franchisee, Owner will not own, operate or have any interest in any Tex-Mex restaurant business, except other franchised On The Border Restaurants, either at or within two (2) miles of the premises of the Franchised Restaurant. 3. BREACH BY OWNER. Owner agrees that in the event of a breach of this Agreement, Brinker would be irreparably injured and be without an adequate remedy at law. Therefore, in the event of such a breach, or threatened or attempted breach of any of the provisions hereof, Brinker shall be entitled to enforce the provisions of this Agreement and shall be entitled, in addition to any other remedies which are made available to it at law or in equity, including the right to terminate the Franchise Agreement, to a temporary and/or permanent injunction and a decree for the specific performance of the terms of this Agreement, without the necessity of showing actual or threatened harm, and without being required to furnish a bond or other security. 4. EXPENSES OF BRINKER. Owner agrees to pay all expenses (including court costs and reasonable attorneys' fees) incurred by Brinker and Franchisee in enforcing this Agreement. 5. WAIVER. Any failure by Brinker to object to or take action with respect to any breach of any provision of this Agreement by Owner shall not operate or be construed as a waiver of or consent to that breach or any subsequent breach by Owner. 6. APPLICABLE LAW. EXCEPT AS STATED BELOW, OWNER HEREBY IRREVOCABLY SUBMITS HIMSELF TO THE JURISDICTION OF THE STATE COURTS OF DALLAS COUNTY, TEXAS AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. OWNER HEREBY WAIVES ALL QUESTIONS OF PERSONAL JURISDICTION FOR THE PURPOSE OF CARRYING OUT THIS PROVISION. OWNER HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON HIM IN ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP CREATED BY THIS AGREEMENT BY ANY MEANS ALLOWED BY TEXAS OR FEDERAL LAW. OWNER AGREES THAT VENUE FOR ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE IN DALLAS COUNTY, TEXAS; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF, BRINKER MAY BRING SUCH ACTION IN ANY STATE OR FEDERAL DISTRICT COURT WHICH HAS JURISDICTION. WITH RESPECT TO ALL CLAIMS, CONTROVERSIES, DISPUTES, OR ACTIONS, THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED UNDER TEXAS LAW (WITHOUT REGARD TO TEXAS CHOICE OF LAW RULES). 7. INDEPENDENT COVENANTS. The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Agreement is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Brinker is a party, Owner expressly agrees to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Agreement. 8. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties regarding the subject matter hereof. This Agreement may be modified only by a duly authorized writing executed by all parties. 9. NOTICES. All notices to Brinker shall be in writing and shall be hand delivered or sent by registered or certified mail, postage fully prepaid, addressed to it at its offices at 6820 LBJ Freeway, Dallas, Texas 75240, Attention: General Counsel, or at such other address as Brinker shall from time to time designate in writing. All notices to Owner shall be in writing and shall be hand delivered or sent by registered or certified mail, postage fully prepaid, or telegraph, addressed to Owner at Owner's last designated in writing mailing address. 10. ASSIGNABILITY. The rights and remedies of Brinker under this Agreement are fully assignable and transferable and shall inure to the benefit of its successors, assigns and transferees. The obligations of the Owner hereunder are personal in nature and may not be assigned by the Owner without the prior written consent of Brinker. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the day above first written. BRINKER: BRINKER INTERNATIONAL, INC., a Delaware corporation By: ---------------------- Its:---------------------- FRANCHISEE: By: ----------------------- Its: ---------------------- OWNER: -------------------------- EXHIBIT C Dennis Pedra Paul Hoagland Benjamin R. Jacobson EXHIBIT D GUARANTY AND INDEMNIFICATION - FRANCHISE AGREEMENT As an inducement to BRINKER INTERNATIONAL, INC., a Delaware corporation ("Brinker") to execute the On The Border Restaurant Franchise Agreement (Entity) between Brinker and N.E. RESTAURANT COMPANY, INC., a Delaware corporation ("Franchisee") dated ______________, 19__ (the "Agreement"), the undersigned owners ("Owners"), jointly and severally, hereby unconditionally guarantee to Brinker and its successors and assigns that all Franchisee's obligations under the Agreement, will be punctually paid and performed. Upon demand by Brinker, the undersigned Owners will immediately make each payment required of Franchisee under the Agreement. The undersigned Owners hereby waive any right to require Brinker to: (a) proceed against Franchisee for any payment required under the Agreement; (b) proceed against or exhaust any security from Franchisee; or (c) pursue or exhaust any remedy, including any legal or equitable relief, against Franchisee. Without affecting the obligations of the undersigned Owners under this Guaranty, Brinker may, without notice to the undersigned, extend, modify, or release any indebtedness or obligation of Franchisee, or settle, adjust, or compromise any claims against Franchisee. The undersigned Owners waive notice of amendment of the Agreement and notice of demand for payment by Franchisee, and agree to be bound by any and all such amendments and changes to the Agreement. The undersigned Owners hereby agree to defend, indemnify, and save Brinker and its officers, directors, agents, employees, attorneys and accountants, its subsidiaries, affiliated and parent companies harmless of, from and with respect to any and all claims, damages, losses, obligations, costs, expenses, liabilities, or debts any of them may incur (including, but not limited to, reasonable attorney's fees) resulting from, consisting of, or arising out of or in connection with any failure by Franchisee to perform any obligation of Franchisee under the Agreement, any amendment thereto, or any other agreement by Franchisee referred to therein. In the event any of the undersigned Owners transfers his/her interest in Franchisee in accordance with the Agreement, such Owner's obligations and liabilities under this Guaranty shall terminate on the latter of: (i) two (2) years from the effective date of the transfer; or (ii) the term under which the Owner is receiving any payments or consideration under a purchase money note or other similar instrument relative to such transfer. Unless terminated as to any Owner, pursuant to the terms of the Agreement, this Guaranty shall terminate upon the termination or expiration of the Agreement, except that all obligations and liabilities of the undersigned Owners which arose from events which occurred on or before the effective date of such termination shall remain in full force and effect until satisfied or discharged by the undersigned, and all covenants which by their terms continue in force after the expiration or termination of the Agreement shall remain in force according to their terms. Upon the death of an individual Owner, the estate of such Owner shall be bound by this Guaranty, but only for defaults and obligations hereunder existing at the time of death; and the obligations of the other Owners will continue in full force and effect. Unless specifically stated otherwise, the terms used in this Guaranty shall have the same meaning as in the Agreement and shall be interpreted and construed in accordance with SECTION 19 of the Agreement. This Guaranty shall be interpreted and construed under the laws of the State of Texas. In the event of any conflict of law, the laws of Texas shall prevail, without regard to the application of Texas conflict of law rules. The undersigned Owners and Brinker acknowledge and agree that the U.S. District Court for the Northern District Court of Texas, or if such court lacks jurisdiction, the District (or its successor) in and for Dallas County, Texas, shall be the venue and exclusive proper forum in which to adjudicate any case or controversy arising either directly or indirectly, under or in connection with this Guaranty and/or the Agreement and the parties further agree that, in the event of litigation arising out of or in connection with this Guaranty and/or the Agreement in these courts, they will not contest or challenge the jurisdiction or venue of these courts. All notices or Brinker under this Guaranty shall be in writing and shall be delivered or sent by registered or certified mail, postage fully paid, addressed to it at its offices at 6820 LBJ Freeway, Dallas, Texas 75240, Attention: General Counsel, or at such other address as Brinker shall from time to time designate in writing. All notices to the undersigned Owners shall be in writing and shall be hand delivered or sent by registered, express or certified mail or telegraph to the following addresses: NAME ADDRESS Dennis Pedra ______________________________________ Paul Hoagland ______________________________________ Benjamin R. Jacobson ______________________________________ Notices shall be deemed delivered on the earlier of actual receipt or the third (3rd) day after being deposited in the U.S. Mail. IN WITNESS WHEREOF, each of the undersigned Owners has signed this Guaranty as the date of the Agreement. OWNERS ---------------------------------------- Dennis Pedra ---------------------------------------- Paul Hoagland ---------------------------------------- Benjamin R. Jacobson EX-10.10 7 LEASE OF HEADQUARTERS OF THE COMPANY EXHIBIT 10.10 Lease by and between OTARI MANUFACTURING CORPORATION Landlord and NE RESTAURANT COMPANY, INC. Tenant Dated September 30, 1997 Premises at 80 Turnpike Road, Westboro, Massachusetts LEASE AGREEMENT ARTICLE I REFERENCE DATA 1.1 SUBJECTS REFERRED TO. Each reference in this Lease to any of the following subjects shall be construed to incorporate the data stated for that subject in this Section 1.1. Brokers: Peter Elliot LLC ("Peter Elliot") and Parsons Commercial Group, Inc. ("Parsons"). Commencement Date: The earlier of (a) 45 days after the obtaining of all permits specified in Section 3.2 hereof or (b) the substantial completion of all Tenant Improvements and Landlord Improvements as specified in Section 3.1 and Section 3.2 hereof, respectively (SO AS TO ENABLE TENANT TO OBTAIN CERTIFICATE OF OCCUPANCY). Fixed Rent: $73,500 ($5.25 per rentable square foot) per annum payable in twelve (12) equal monthly installments of $6,125 each, during each of the first five (5) years of the Initial Term. $87,500 ($6.25 per rentable square foot) per annum payable in twelve (12) equal monthly installments of $7,291.67 each, during each of the sixth through the tenth year of the Initial Term. The Fixed Rent during the Renewal Terms will be negotiated at the end of the Initial Term of the Lease. Initial Term: Ten (10) years. Landlord: Otari Manufacturing Corporation. Landlord Improvements: As set forth in Section 3.1. Lease: Shall mean this Lease. Original Address of Landlord: Otari Manufacturing Corporation, c/o Otari Corporation, 378 Vintage Park Drive, Foster City, California 94404. Original Address of Tenant: NE Restaurant Company, Inc., 300 Pond Street, Randolph, MA 02368 Attention: Paul V. Hoagland Permitted Uses: Office space. Premises: That certain approximately 14,000 square feet of rentable area on the second floor of a building (the "Building") located on the lot (the "Lot", together with the Building, the "Property"). The Lot is described on Exhibit A and the Property is known as 80 Turnpike Road, Westboro, MA. Public Liability Insurance Limits (per occurrence): Bodily Injury: $1,000,000, or greater amount reasonably required by Landlord from time to time. Property Damage: $1,000,000, or greater amount as reasonably required by Landlord from time to time. Renewal Terms: Two (2) consecutive three (3) year optional renewal terms beginning at the expiration of the Initial Term. Security Deposit: $6,125.00 Tenant: N.E. Restaurant Company, Inc. Tenant Improvements: As set forth in Section 3.2. Term: Shall mean collectively, the Initial Term and the Renewal Terms (if applicable), or any of them as the context may require. 1.2 EXHIBITS. The Exhibits listed below in this Section are incorporated in this Lease by reference and are to be construed as a part of this Lease: EXHIBIT A: Lot ARTICLE II PREMISES AND TERM 2.1 PREMISES. Landlord hereby leases and demises to Tenant and Tenant hereby leases from Landlord, subject to any and all existing encumbrances, conditions, covenants, easements, restrictions, rights of way and other matters of record including, without limitation, driveway easements over the Property for the benefit of 78, 8OB and 82 Turnpike Road and to such matters as may be disclosed by inspection or survey and subject to and with the benefit of the terms, covenants, conditions and provisions of this Lease, the Premises. 2.2 TERM. TO HAVE AND TO HOLD for an Initial Term beginning on the Commencement Date and terminating on the day prior to the tenth anniversary of the Commencement Date, unless sooner terminated as hereinafter provided. 2.3 OPTION TO EXTEND TERM. So long as Tenant is not in default under Article 7 beyond the applicable grace periods set forth in Article 7, Tenant may extend the Term of this Lease for two (2) extension periods of three (3) years each, (each, a "Renewal Term") by giving notice to Landlord of its election to extend at least six (6) months in advance of the commencement of the applicable Renewal Term. Except as otherwise hereinafter set forth, all terms and conditions of this Lease shall remain in full force and effect with respect to each such Renewal Term, provided, however, that Tenant shall be entitled to no further right to extend the Term of this Lease. With respect to each such Renewal Term, Fixed Rent shall be increased to the fair market rent of the Premises taking into account the Landlord Improvements but not the Tenant Improvements for such period (further taking into account the fact that the base amounts applicable to the computation of Additional Rent under Section 4.2 are not to be modified). In the event that the parties have not mutually agreed upon said fair market rent in writing within thirty (30) days following Tenant's exercise of the applicable option, the same shall be determined by appraisers, one to be chosen by Landlord, one to be chosen by Tenant and a third to be selected by the two first chosen. All appraisers chosen or selected thereunder shall be independent of the parties, shall have received the M.A.I. (Member, Appraisal Institute) designation from the American Institute of Real Estate Appraisers and shall have had at least five (5) years of experience in appraising commercial office space comparable to the Premises. The unanimous written decision of the two first chosen, without selection and participation of a third appraiser, or otherwise the written decision of a majority of the three appraisers chosen and selected as aforesaid, shall be conclusive and binding upon Landlord and Tenant. Landlord and Tenant shall each notify the other of its chosen appraiser within fifteen (15) days following expiration of the aforesaid thirty (30) day period and, unless such two appraisers shall have reached a unanimous decision within forty-five (45) days from said expiration they shall within a further fifteen (15) days elect a third appraiser and notify Landlord and Tenant thereof. Landlord and Tenant shall each bear the expense of the appraiser chosen by it and shall equally bear the expense of the third appraiser (if any). If, as contemplated by this Section, Fixed Rent with respect to any Renewal Term shall not have been determined prior to commencement of such Renewal Term, then said Renewal Term may commence, and from and after such date until the amount of such Fixed Rent is determined. Tenant shall make payments of Fixed Rent at the current rates then applicable, subject to retroactive adjustment in conformity with and within thirty (30) days of the determination of Fixed Rent pursuant to this Section. In no event shall the determination of Fixed Rent pursuant to this Section result in a reduction thereof or any modification of the base amounts applicable to the computation of Additional Rent under Section 4.2. ARTICLE III PREPARATION OF THE PREMISES 3.1 PREMISES LEASED AS-IS; WHERE IS; TENANT IMPROVEMENTS. "Landlord has leased the Premises to Tenant in their "as-is" and "where is" condition as of the Commencement Date, and Landlord shall have no further obligations during the term of this Lease to renovate, repair or maintain the Premises or any portion thereof. Notwithstanding the foregoing, Landlord agrees to (a) do the following, at its own expense, prior to the Commencement Date (collectively, "Landlord Improvements"): (i) remove all Landlord's personal property from the Premises, (ii) repave and reline the parking area, upgrade the landscaping of the Property and provide all necessary and sufficient base heating, air conditioning, electrical, sprinkler, water and sewer systems for the proper use and operation of the Premises, (iii) ensure that the building is in compliance with all applicable provisions of the Americans with Disabilities Act ("ADA") and (iv) obtain the special permit and/or variance required for Tenant's use of the Premises, and (b) at its sole cost and expense, during the Term of the Lease, be responsible for any and all work done on the Building facade. Landlord shall use reasonable efforts to achieve substantial completion of Landlord Improvements on or before November 1, 1997. Tenant acknowledges that this Lease is on an "absolutely net" basis and that all obligations to renovate, repair or maintain the Premises or any portion thereof shall be performed by Tenant, at its sole cost and expense, subject to the qualifying provisions of Sections 5.1.3, 5.1.4 and 5.15 of this Lease. Furthermore, and in specific recognition of Tenant's obligations to so maintain and repair the Premises, Tenant waives the provisions of any statute or regulation or judicial decision which under the laws of the Commonwealth of Massachusetts may require Landlord to maintain the Premises in a tenantable condition and to make repairs for such purpose or which may permit Tenant to make such repairs and deduct the expenses of such repairs from the payment of any rent. 3.2 TENANT IMPROVEMENTS. Commencing on the date of execution of this Agreement and prior to the Commencement Date, Tenant will, at its sole cost and expense, build-out the Premises per its specific requirements which shall include, without limitation, the installation of windows on the exterior walls of the Premises ("Tenant Improvements"). The Tenant Improvements shall be subject to the prior written approval of the Landlord based on Landlord's review of Tenant's plans and specifications for the Tenant Improvements, which approval shall not be unreasonably withheld or delayed. Tenant shall use reasonable efforts to achieve substantial completion of Tenant Improvements on or before November 1, 1997. Landlord, where necessary, will join with the Tenant in applying for all permits required by law, building, occupancy or otherwise ("Permits"); provided, however, that all costs incurred in connection with the applying for and obtaining the Permits shall be borne solely by the Tenant. Tenant shall have the right to enter on to the premises, commencing on the date of execution of this Agreement and prior to the Commencement Date for the purpose of undertaking the Tenant Improvements. However, prior to doing so, Tenant shall take out and maintain during such period comprehensive liability insurance indemnifying Landlord and Tenant against all claims and demands for any injury to person or property which may be claimed to have occurred on the Premises, in amounts which shall be at least equal to the limits set forth in Section 1.1. 3.3 TENANT'S WORK. After the Commencement Date, Tenant may make additional modifications, installations, alterations or additions in, to or on the Premises to accommodate the operation of its business thereon all at the sole cost and expense of Tenant, however, no such modification, installation, alteration or addition (collectively, the "Modifications") shall be undertaken by Tenant unless Tenant complies with the following conditions: (a) Tenant shall receive Landlord's prior written approval before Tenant undertakes any Modifications that could have an effect on the structure of the Building or any of the systems in the Building (including, without limitation, the plumbing and HVAC systems), which approval shall not be unreasonably withheld or delayed; (b) All Modifications shall be performed subject to all Requirements for Tenant's Work set forth in Section 5.1.5 of this Lease; and (c) Landlord may require the preparation, at Tenant's sole cost and expense, of architectural plans, construction drawings, written specifications and any other necessary background materials for any Modifications with a cost of greater than $25,000 and Landlord shall have sufficient time to review such materials prior to approving or disapproving any such Modifications. ARTICLE IV RENT 4.1 THE FIXED RENT. Tenant covenants and agrees to pay to Landlord at the Original Address of Landlord or at such other place or to such other person or entity as Landlord may by notice to Tenant from time to time direct, the Fixed Rent, as set forth in Article 1, in advance, on the first day of each calendar month included in the Term of the Lease, commencing with the payment of the Fixed Rent for the first month on the Commencement Date. 4.2 ADDITIONAL RENT. In order that the Fixed Rent shall be absolutely net to Landlord, Tenant covenants and agrees to pay, as Additional Rent, its pro-rata share of taxes, municipal or state betterment assessments, insurance costs and utility charges with respect to the Property as follows: 4.2.1 REAL ESTATE TAXES. Tenant shall pay, directly to Landlord: (i) its pro-rata share of all taxes, assessments (special or otherwise), levies, fees, water and sewer rents, and all other government levies and charges, general and special, ordinary and extraordinary, foreseen and unforeseen, which are, at any time during the Term hereof, imposed or levied upon or assessed against (A) the Property, (B) any Fixed Rent, Additional Rent or other sum payable hereunder, provided, however, that Tenant shall not be required to pay any of Landlord's income taxes, estate, succession or inheritance taxes, or (C) this Lease, or the leasehold estate hereby created, or which arise in respect of the operation, possession or use of the Premises; (ii) all gross receipts or similar taxes imposed or levied upon, assessed against or measured by any Fixed Rent, Additional Rent or other sum payable hereunder; (iii) all sales, value added, use and similar taxes at any time levied, assessed or payable on account of the acquisition, leasing or use of the Premises; and (iv) all charges for utilities furnished to the Premises which may become a lien on the Property (collectively "taxes and assessments" or if singular "tax or assessment"). For each tax or assessment period, or installment period thereof included in the Term, all such payments shall be made by Tenant not less than fifteen days prior to the last date on which the same may be paid without interest or penalty. For any fraction of a tax or assessment period, or installment period thereof, included in the Term at the beginning or end thereof, Tenant shall pay to Landlord, within ten (10) days after receipt of invoice therefor, the fraction of taxes and assessments so levied or assessed or becoming payable which is allocable to such included period. Nothing contained in this Lease shall, however, require Tenant to pay any of Landlord's income taxes, estate, succession or inheritance taxes. Landlord shall furnish to Tenant a copy of any notice of any public, special or betterment assessment received by Landlord concerning the Property. 4.2.2 INSURANCE. 4.2.2.1 INSURANCE TAKEN OUT BY TENANT. Tenant shall, as Additional Rent, take out and maintain throughout the Term the following insurance: (a) Comprehensive liability insurance indemnifying Landlord and Tenant against all claims and demands for any injury to person or property which may be claimed to have occurred on the Premises, in amounts which shall, at the beginning of the Term, be at least equal to the limits set forth in Section 1.1, and, from time to time during the term, shall be for such higher limits, if any, as are reasonably required by Landlord; and (b) Worker's compensation insurance with statutory limits covering all of Tenant's employees working at the Premises. 4.2.2.2 INSURANCE TAKEN OUT BY LANDLORD. Landlord shall take out and maintain throughout the Term all risk fire and casualty insurance on a replacement value, agreed amount basis, comprehensive liability insurance indemnifying Landlord against all claims and demands for any injury to person or property which may be claimed to have occurred on the side walk or ways adjoining the Building and in the common areas of the Building, and boiler insurance in the so called "broad form", in such amounts as Landlord may consider appropriate, and insurance against such other hazards and in such amounts as may from time to time be required by any bank, or other lending institution holding a mortgage on the Premises. Landlord shall have no obligation to insure Tenant's personal property or chattels, including without limitation, Tenant's trade fixtures. 4.2.2.3 TENANT REIMBURSEMENT OF INSURANCE TAKEN OUT BY LANDLORD. Tenant shall from time to time reimburse Landlord within thirty days of Landlord's invoice of Landlord's costs incurred in providing the insurance described in Section 4.2.2.2 of this Lease, equitably prorated in the case of blanket policies to reflect the insurance coverage reasonably attributable to the Premises, and Tenant shall also reimburse Landlord for all of Landlord's costs incurred in providing such insurance which is attributable to any special endorsement or increase in premium resulting from the business or operations of Tenant, and any special or extraordinary risks or hazards resulting therefrom. 4.2.2.4 CERTAIN REQUIREMENTS APPLICABLE TO INSURANCE POLICIES. Policies for insurance provided for under the provisions of Sections 4.2.2.2 shall, in case of loss, be first payable to the holders of any mortgages on the Premises under a standard mortgagee's clause, and shall be deposited with the holder of any mortgage or with Landlord, as Landlord may elect. All policies for insurance required under the provisions of Section 4.2.2.1 shall be obtained from responsible companies qualified to do business in the Commonwealth of Massachusetts and in good standing therein, which companies and the amount of insurance allocated thereto shall be subject to Landlord's approval. Tenant agrees to furnish Landlord with copies of policies (or insurance company certificates thereof if the policy has not been issued by the insurer, provided that a copy of such policy shall be furnished to Landlord as soon as the same is issued) of all such insurance which Tenant is obligated to obtain pursuant to Section 4.2.2.1 prior to the beginning of the Term hereof and of each renewal policy at least thirty (30) days prior to the expiration of the policy it renews. Each such policy shall be noncancellable with respect to the interest of Landlord and such mortgagees without at least thirty (30) days' prior written notice thereto. If requested by Tenant, Landlord shall provide Tenant with certificates evidencing Landlord's insurance policies. 4.2.2.5 WAIVER OF SUBROGATION. All insurance which is carried by either party with respect to the Property or to furniture, furnishings, fixtures or equipment on the Premises or alterations or improvements thereto, whether or not required, shall include provisions which either designate the other party as one of the insured or deny to the insurer acquisition by subrogation of rights of recovery against the other party to the extent such rights have been waived by the insured party prior to occurrence of loss or injury, insofar as, and to the extent that such provisions may be effective without making it impossible to obtain insurance coverage from responsible companies qualified to do business in the Commonwealth of Massachusetts (even though extra premium may result therefrom) and without voiding the insurance coverage in force between the insurer and the insured party. Each party shall be entitled to have duplicates or certificates of any policies containing such provisions. Each party hereby waives all rights of recovery against the other for loss or injury against which the waiving party is protected by insurance containing said provisions, reserving, however, any rights with respect to any excess of loss or injury over the amount recovered by such insurance. 4.2.3 UTILITIES. Except as otherwise required in Section 4.2.1(iv), Tenant shall pay to Landlord its pro-rata share of all charges for water, sewer, gas, electricity, telephone, heating, venting, air conditioning and other utilities or services used or consumed on the Property, whether called charge, tax, assessment, fee or otherwise, including, without limitation, water and sewer use charges and taxes, if any, all such charges to be paid as the same from time to time become due. 4.2.4 COMMON AREA MAINTENANCE. Tenant shall pay its pro-rata share of the actual operating costs for the Property on a quarterly basis. Landlord shall bill Tenant for such pro rata share Operating expenses shall include common area maintenance (landscaping, snowplowing, trash removal, etc.), insurance and common area utilities. Any operating expenses paid by the Tenant pursuant to this Section, other than on an annual basis, shall be reconciled annually by Landlord and shall be subject to an audit by Tenant for up to 90 days after such annual reconciliation. Such audit shall be conducted at the sole cost and expense of the Tenant. However, Landlord agrees, at its own expense, to keep in good order, condition and repair, and to replace as necessary, the common areas of the Building, structural portions such as the roof and exterior walls, the mechanical systems, HVAC, plumbing, electrical, elevator and other building systems, excluding, however, any windows installed by Tenant. Landlord shall in no event be responsible to Tenant for any condition in the Premises or the Building caused by any act or neglect of Tenant or any contractor, agent, employee or invitee of Tenant, or anyone claiming by, through or under Tenant. Landlord shall not be responsible to make any improvements or repairs to the Building or the Premises other than as expressed in this Section unless otherwise expressly provided in this Lease. 4.3 SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with Landlord $6,125 as a Security Deposit for the performance by Tenant of the provisions of this Lease. If Tenant is in default, Landlord may use the Security Deposit or any portion of it, to cure the default or to compensate Landlord for all damage sustained by Landlord resulting from Tenant's default. Tenant shall immediately on demand pay Landlord a sum equal to the portion of the Security Deposit expended or applied by Landlord as provided in this Section 4.3 so as to maintain the Security Deposit in the sum initially deposited with Landlord. As soon as reasonably practicable upon the expiration or earlier termination of this Lease, Landlord shall (i) inspect the Premises, (ii) make such payments from the Security Deposit as may be required to cure any outstanding Event of Default hereunder, and (iii) if no Event of Default is then continuing and the Premises are "broom clean" and are in the same condition as at the beginning of the term or as the same may be put in during the term, reasonable use and wear only excepted, pay the balance of the Security Deposit to Tenant. Landlord may maintain the Security Deposit separate and apart from Landlord's general funds or may commingle the Security Deposit with Landlord's general and other funds. Landlord shall not be required to pay Tenant interest on the Security Deposit. Landlord may assign the Security Deposit to any subsequent owner of the Premises and thereafter Landlord shall have no further liability to Tenant with respect to the Security Deposit, and Tenant agrees to look solely to such subsequent owner of the Premises with respect to such Security Deposit. ARTICLE V TENANT'S ADDITIONAL COVENANTS 5.1 AFFIRMATIVE COVENANTS. Tenant covenants at its expense at all times during the Term and for such further time as Tenant occupies the Premises or any part thereof: 5.1.1 PERFORM OBLIGATIONS. To perform promptly all of the obligations of Tenant set forth in this Lease; and to pay when due the Fixed Rent and Additional Rent and all charges, rates and other sums which by the terms of this Lease are to be paid by Tenant. 5.1.2 USE. To use the Premises only for the Permitted Uses, and from time to time to procure all licenses and permits necessary therefor at Tenant's sole expense. Tenant's use of the Premises shall not violate any current or future ordinance, law or regulation of any governmental body. 5.1.3 REPAIR AND MAINTENANCE. To keep the Premises in good order, condition and repair and in at least as good order, condition and repair as they are in on the Commencement Date or may be put in during the term, fire and other casualty (which shall be governed by the provisions of Article VI of this Lease) and reasonable use and wear only excepted; to keep in a safe, secure and sanitary condition all trash and rubbish temporarily stored at the Premises, to arrange for and be responsible for all of the costs of a trash and rubbish removal service in connection with Tenant's use of the Premises; and to make all repairs and replacements and to do all other work necessary for the foregoing purposes whether the same may be ordinary or extraordinary, foreseen or unforeseen. The exception of reasonable use and wear shall not apply so as to permit Tenant to keep the Premises in anything less than suitable, tenantable, and efficient and usable condition considering the nature of the Premises and the use reasonably made thereof, or in less than good and tenantable repair. 5.1.4 COMPLIANCE WITH LAW AND INSURANCE REQUIREMENTS. To make all repairs, alterations, additions or replacements to the Premises required by any law or ordinance or any order or regulation of any public authority arising from Tenant's use of the Premises; to keep the Premises equipped with all safety appliances so required; to pay all municipal, county, or state taxes assessed against the leasehold interest hereunder, or against personal property of any kind on or about the Premises; not to dump, flush, or in any way introduce any hazardous substances or any other toxic substances into the septic, sewage or other waste disposal system serving the Premises, not to generate, store or dispose of hazardous substances in or on the Property or dispose of hazardous substances from the Premises to any other location without the prior written consent of Landlord and then only in compliance with all applicable federal, state and/or local statutes, ordinances, bylaws, codes, rules and/or regulations, now or hereafter enacted, pertaining to any aspect of the environment or human health, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. ss. 6901, et seq., the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss. 6901, et seq., the Federal Water Pollution Control Act, the Federal Clean Air Act and the Massachusetts Hazardous Materials Release Prevention and Response Act, M.G.L. c.21E (collectively, the "Environmental Laws") and all other applicable codes, regulations, ordinances and laws, and to comply with the orders and regulations of all governmental authorities with respect to zoning, building, fire, health and other codes, regulations, ordinances or laws applicable to the Property. For purposes of this Section, "hazardous substances" shall mean any oil, "hazardous material", "hazardous waste" or "hazardous substance" as the foregoing terms are defined in the Environmental Laws. Tenant agrees to protect, indemnify and hold Landlord and its successors and assigns harmless from and against all loss, cost, liability and damage, including attorneys' fees and the costs of litigation, arising from the presence of any hazardous material, hazardous waste or hazardous substance in or on the Property and arising from any act or omission of Tenant, its agents, servants or contractors. Landlord shall have the right, at Tenant's expense, to make such inspections as Landlord shall reasonably elect from time to time to determine if Tenant is complying with the preceding paragraph. Tenant shall comply promptly with the recommendations of any insurer, foreseen or unforeseen, ordinary as well as extraordinary, which may be applicable to the Premises, by reason of Tenant's use thereof. In the event Tenant does not comply with the recommendations of any insurer, Tenant shall be liable for the payment of any increase in the amount of any insurance premium caused by any such non-compliance; provided, however, in no event shall any activity be conducted by Tenant on the Premises which may give rise to any cancellation of any insurance policy or make any insurance unobtainable. 5.1.5 REQUIREMENTS FOR TENANT'S WORK. To procure at Tenant's sole expense all necessary permits and licenses before undertaking any work on the Premises, to do all such work in compliance with the applicable provisions of Section 3.2 hereof; to do all such work in a good and workmanlike manner employing materials of good quality and so as to conform with all applicable zoning, building, fire, health and other codes, regulations, ordinances and laws and the requirements of any insurers of the Premises; to keep the Premises at all times free of liens for labor and materials; to require all contractors employed by Tenant to carry worker's compensation insurance in accordance with statutory requirements and comprehensive public liability insurance covering such contractors on or about the Premises in amounts that at least equal the limits set forth in Section 1.1 and to submit certificates evidencing such coverage to Landlord prior to the commencement of such work; and to save Landlord harmless and indemnified from all injury, loss, claims or damage to any person or property occasioned by or growing out of such work. 5.1.6 INDEMNITY. To defend, with counsel selected by the insurance company (which insurance company shall have at least an "A" rating) and approved by Landlord, all actions against Landlord, any partner, trustee, stockholder, officer, director, employee or beneficiary of Landlord, holders of mortgages secured by the Property and any other party having interest in the Property (Indemnified Parties) with respect to, and to pay, protect, indemnify and save harmless, to the extent permitted by law, all Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands or judgments of any nature to which any Indemnified Party is subject because of its estate or interest in the Property, not caused by the Landlord, its agents, servants or contractors and arising from (i) injury to or death of any person, or damage to or loss of property, on the Premises, or connected with the use, condition or occupancy of the Premises, (ii) any violation of this Lease, or (iii) any act, fault, omission, or other misconduct of Tenant or its agents, contractors, licensees, sublessees or invitees. 5.1.7 LANDLORD'S RIGHT TO ENTER. To permit Landlord and its agents to enter the Premises at reasonable times and upon reasonable notice to examine the Premises, make such repairs and replacements as Landlord may elect, without however, any obligation to do so, and show the Premises to prospective purchasers and lenders, and, during the last year of the term, to show the Premises to prospective tenants and to keep affixed in suitable places notices of availability of the Premises; provided, however, that Landlord shall not post any signs on the Premises as to the availability of the Premises prior to ninety (90) days before the expiration of the Term of this Lease. 5.1.8 PERSONAL PROPERTY AT TENANT'S RISK. All of the furnishings, fixtures, equipment, effects and property of every kind, nature and description of Tenant and of all persons claiming by, through or under Tenant which, during the continuance of this Lease or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may be on the Premises, shall, as between the parties, be at the sole risk and hazard of Tenant and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft or from any other cause, no part of said loss or damage is to be charged to or to be borne by Landlord. 5.1.9 PAYMENT OF LANDLORD'S COST OF ENFORCEMENT. To pay on demand Landlord's expenses, including reasonable attorney's fees, incurred in enforcing any obligation of Tenant under this Lease or in curing any default by Tenant under this Lease as provided in Section 7.4. 5.1.10 YIELD UP. At the expiration of the Term of this Lease, or earlier termination of this Lease: to surrender all keys to the Premises, to remove all of its trade fixtures and personal property in the Premises, to remove such installations and improvements made by Tenant as Landlord may request and all Tenant's signs wherever located, to repair all damage caused by such removal and to yield up the Premises (including all installations and improvements made by Tenant except for trade fixtures and such of said installations or improvements as Landlord shall request Tenant to remove) broom-clean and in the same good order and repair in which Tenant is obliged to keep and maintain the Premises by the provisions of this Lease. Any property not so removed shall be deemed abandoned and may be removed and disposed of by Landlord in such manner as Landlord shall determine and Tenant shall pay Landlord the entire cost and expense incurred by it in effecting such removal and disposition and in making any incidental repairs and replacements to the Premises and for use and occupancy during the period after the expiration of the Term and prior to Tenant's performance of its obligations under this Section 5.1.10. Tenant shall further indemnify Landlord against all loss, cost and damage resulting from Tenant's failure and delay in surrendering the Premises as above provided. 5.1.11 ESTOPPEL CERTIFICATE. Within five (5) business days of receipt of notice from Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect and that except as stated therein Tenant has no knowledge of any defenses. offsets or counterclaims against its obligations to pay the Fixed Rent and Additional Rent and any other charges and to perform its other covenants under this Lease (or, if there have been any modifications that the same is in full force and effect as modified and stating the modifications and, if there are any defenses, offsets or counterclaims, setting them forth in reasonable detail), the dates to which the Fixed Rent and Additional Rent and other charges have been paid and a statement that Landlord is not in default hereunder (or if in default, the nature of such default, in reasonable detail). Any such statement delivered pursuant to this Section 5.1.11 may be relied upon by any prospective purchaser or mortgagee of the Property, or any prospective assignee of any such mortgage. 5.1.12 LANDLORD EXPENSES RE CONSENTS. To reimburse Landlord promptly on demand for all reasonable legal and other expenses incurred by Landlord in connection with all requests by Tenant for consent or approval hereunder. 5.1.13 HOLDING OVER. Tenant covenants that it will vacate the Premises immediately upon the expiration of the Term or sooner termination of this Lease. If Tenant retains possession of the Premises or any part thereof after the termination of the Term without Landlord's express consent, Tenant shall pay Landlord rent at double the Fixed Rent for the time Tenant thus remains in possession plus all Additional Rent and, in addition thereto, shall pay Landlord for all damages, consequential as well as direct, sustained by reason of Tenant's retention of possession. The provisions of this Section do not exclude Landlord's rights of re-entry or any other right hereunder, including without limitation, the right to refuse double the monthly rent and instead to remove Tenant through summary proceedings for holding over beyond the expiration of the term of this Lease. 5.2 NEGATIVE COVENANTS. Tenant covenants at all times during the Term and for such further time as Tenant occupies the Premises or any part thereof: 5.2.1 ASSIGNMENT AND SUBLETTING. Except as provided below, not to, without on each occasion first obtaining the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed, assign, transfer, or pledge this Lease, or sublease all or part of the Premises, or permit the occupancy of the Premises by anyone other than Tenant. No assignment, transfer, sublease or other encumbrance, whether or not approved, and no indulgence granted by Landlord to any assignee or sublessee, shall in any way impair the continuing primary liability (which after an assignment shall be Joint and several with the assignee) of Tenant hereunder, and no approval in a particular instance shall be deemed to be a waiver of the obligation to obtain Landlord's approval in the case of any other assignment or subletting. The consent by Landlord shall not constitute a waiver of the necessity for such consent to any subsequent assignment. Notwithstanding the foregoing provisions, Tenant may, without Landlord's approval, at any time, and from time to time during the Term thereof, assign this Lease or sublet the Premises to (i) any corporation or other entity owned by or under common ownership with Tenant, (ii) any corporation or entity resulting from the consolidation or merger of Tenant with any other business or organization, or (iii) any person, entity or corporation acquiring a majority of Tenant's issued and outstanding capital stock or partnership interests or substantially all of Tenant's assets; provided that Tenant shall provide Landlord not less than ninety (90) days prior written notice of any such sublease or assignment (which notice will describe in detail the net worth, structure and identity of the assignee) and in each instance the succeeding person, entity or corporation shall assume all the obligations of the Tenant hereunder, and Tenant shall provide Landlord with a copy of such instrument of assignment and assumption. Tenant shall remain fully and primarily liable hereunder and shall not be released from performing any of the terms of this Lease including, but not limited to, the payment of Fixed Rent due or to become due hereunder, unless Tenant ceases to exist as a result of such consolidation, merger or sale. Further, notwithstanding the foregoing, in the event that Tenant's voting stock is publicly traded on the New York, American or Over-the-Counter Stock Exchanges, Tenant shall have the right, without Landlord's consent, to transfer shares of stock in Tenant. Notwithstanding the foregoing, Tenant shall have the right to mortgage its leasehold interest in the Premises. If for any assignment or sublease so approved by Landlord, Tenant receives rent or other consideration, either initially or over the term of the assignment or sublease, in excess of the rent called for hereunder, or in case of sublease of part, in excess of such rent allocable to the part, after appropriate adjustments to assure that all other payments called for hereunder are appropriately taken into account, Tenant shall pay to Landlord as Additional Rent 100% of such excess of such payment of rent or other consideration received by Tenant promptly after its receipt. Tenant shall reimburse Landlord for any costs or expenses incurred pursuant to any request by Tenant for consent to any such assignment or subletting. 5.2.2 OVERLOADING AND NUISANCE. Not to injure, overload, deface or otherwise harm the Premises, nor commit any nuisance, nor permit the emission of any objectionable noise, vibration or odor; nor make, allow or suffer any waste, nor make any use of the Premises which is improper, offensive or contrary to any law or ordinance or which will invalidate any of Landlord's insurance. ARTICLE VI LANDLORD'S ADDITIONAL COVENANTS 6.1 AFFIRMATIVE COVENANTS. Landlord covenants at all times during the Term to: 6.1.1 HVAC: Have in place a heating and air conditioning system that is sufficient to air condition the Premises to a temperature of 70(degree) on a 100(degree) day and to heat the Premises to a temperature of 70(degree) on a 0(degree) day. 6.1.2 MAINTENANCE. Adequately maintain the parking areas, landscaping, lighting and other common areas and facilities in good and clean condition typical of well maintained suburban office conditions. 6.1.3 ADA. If an enforcement action is commenced against Landlord or Tenant, by any person, for failure to comply with any applicable provision of the ADA, remedy the situation so as to ensure compliance with the applicable provisions of the ADA. ARTICLE VII CASUALTY OR TAKING 7.1 TERMINATION. In case during the Term greater than fifteen (15%) percent of the Property shall be taken by any public authority or for any public use or destroyed by the action of any public authority (hereinafter referred to as "Taking"), then this Lease may be terminated by Landlord effective on the effective date of the Taking. Such election by Landlord which may be made notwithstanding the fact that Landlord's entire interest may have been divested, shall be made by the giving of notice by Landlord to Tenant within thirty (30) days after Landlord shall receive notice of the Taking. Landlord shall give Tenant notice of any Taking. In the case of any Taking of less than or equal to fifteen (15%) percent of the Property, a just proportion of the Fixed Rent and other charges payable hereunder shall be abated for the remainder of the Term according to the nature or extent of the damages (if any) sustained by the Premises. 7.2 RESTORATION. In case during the Term, the Property shall be substantially destroyed or damaged by fire or casualty (hereinafter referred to as "Casualty") then this Lease may be terminated by Landlord effective as of the date of such Casualty. If Landlord does not exercise the election to terminate provided in Section 6.1 for a Taking or in this Section 6.2 for a Casualty or in the event of a Casualty which does not substantially damage the Property, this Lease shall continue in force and a just proportion of the Fixed Rent and other charges hereunder, according to the nature and extent of the damages (if any) sustained by the Premises shall be abated from the date of Casualty or Taking until the Premises, or what may remain thereof, shall be put by Landlord in proper condition for use subject to zoning and building laws or ordinances then in existence, which, unless Landlord has exercised its option to terminate pursuant to Section 6.1 or 6.2, Landlord covenants to do with reasonable diligence at Landlord's expense, provided that Landlord's obligations with respect to restoration shall not require Landlord to expend more than the net proceeds of insurance recovered or damages awarded for such Casualty or Taking. "Net proceeds of insurance recovered or damages awarded" refers to the gross amount of such insurance or damages less the reasonable expenses of Landlord in connection with the collection of the same, including without limitation, fees and expenses for legal and appraisal services. Within thirty (30) days after any such Casualty or Taking, Landlord shall notify Tenant of its good faith estimate of the time to complete such restoration. If such estimated time to complete restoration exceeds ninety (90) days (sixty (60) days if such Casualty or Taking occurs during the last two (2) years of the Term of this Lease), upon notice given within the following thirty (30) days, Tenant may terminate this Lease. 7.3 AWARD. Irrespective of the form in which recovery may be had by law, all rights to damages or compensation shall belong to Landlord in all cases, provided, however, that (a) during the first five years of the Initial Term of the Lease any monetary compensation received by Landlord from a taking of the Premises shall be apportioned pro rata between the Landlord and the Tenant in accordance with the ratio (the "Ratio") that the fair market Value of the Premises (without including Tenant Improvements) bears to the fair market Value of the Tenant Improvements, both determined as of the date of the award of such monetary compensation, provided, however, that if the Landlord and the Tenant have not mutually agreed upon the Ratio in writing within thirty (30) days following receipt by Landlord of such monetary compensation, the same shall be determined by appraisers, one to be chosen by Landlord, one to be chosen by Tenant, and a third to be selected by the two first chosen; all appraisers chosen or selected thereunder shall be independent of the parties, shall have received the M.A.I. (Member, Appraisal Institute) designation from the American Institute of Real Estate Appraisers and shall have had at least five (5) years of experience in appraising commercial office space comparable to the Premises; the unanimous written decision of the two first chosen, without selection and participation of a third appraiser, or otherwise the written decision of a majority of the three appraisers chosen and selected as aforesaid, shall be conclusive and binding upon Landlord and Tenant; Landlord and Tenant shall each notify the other of its chosen appraiser within fifteen (15) days following expiration of the aforesaid thirty (30) day period and, unless such two appraisers shall have reached a unanimous decision within forty-five (45) days from said expiration, they shall within a further fifteen (15) days elect a third appraiser and notify Landlord and Tenant thereof; Landlord and Tenant shall each bear the expense of the appraiser chosen by it and shall equally bear the expense of the third appraiser (if any); and (b) the Tenant shall not be prevented from pursuing any claim for business damages against the condemning authority, so long as such claim will not diminish Landlord's award. Subject to the foregoing sentence, Tenant hereby grants to Landlord all of Tenant's rights to such damages and compensation and covenants to deliver such further assignments thereof as Landlord may from time to time request. ARTICLE VIII DEFAULTS 8.1 EVENTS OF DEFAULT. (a) If Tenant shall default in the performance of any of its obligations to pay the Fixed Rent or Additional Rent hereunder and if such default shall continue for ten (10) days or (b) if any other default or defaults shall occur on the part of Tenant under this Lease and continue for thirty (30) days after notice from Landlord to Tenant specifying such default or defaults, (provided that if Tenant has commenced diligently to correct the default or defaults so specified, Tenant shall have an additional thirty (30) day period within which to effect a cure of such default or defaults), or (c) if any assignment for the benefit of creditors shall be made by Tenant, or (d) if Tenant's leasehold interest shall be taken on execution or other process of law in any action against Tenant, or (e) if a lien or other involuntary encumbrance is filed against Tenant's leasehold interest, and is not discharged within ten (10) days thereafter, or (f) if a petition is filed by Tenant for liquidation, or for reorganization or for any other similar relief under any provision of the Bankruptcy Code as then in force and effect, or (g) if an involuntary petition under any of the provisions of said Bankruptcy Code is filed against Tenant or Guarantor and such involuntary petition is not dismissed within thirty (30) days thereafter, then, and in any of such cases, Landlord and the agents and servants of Landlord lawfully may, in addition to and not in derogation of any remedies for any preceding breach of covenant, immediately or at any time thereafter and without demand or notice and with or without process of law (forcibly, if necessary) enter into and upon the Premises or any part thereof in the name of the whole, or mail a notice of termination addressed to Tenant, and repossess the same as of Landlord's former estate and expel Tenant and those claiming through or under Tenant and remove its and their effects (forcibly, if necessary) without being deemed guilty of any manner of trespass and without prejudice to any remedies which might otherwise be used for arrears of rent or prior breach of covenant, and upon such entry or mailing as aforesaid this Lease shall terminate, Tenant hereby waiving all statutory rights (including, without limitation, rights of redemption, if any) to the extent such rights may be lawfully waived, and Landlord, without notice to Tenant, may store Tenant's effects, and those of any person claiming through or under Tenant at the expense and risk of Tenant, and, if Landlord so elects, may sell such effects at public auction or private sale and apply the net proceeds to the payment of all sums due to Landlord from Tenant, if any, and pay over the balance, if any, to Tenant. 8.2 REMEDIES. In the event that this Lease is terminated under any of the provisions contained in Section 7.1, Tenant covenants to pay forthwith to Landlord, as compensation, the excess of the total rent reserved for the residue of the Term over the fair market rental value of the Premises for the residue of the Term. In calculating the rent reserved there shall be included, in addition to the Fixed Rent and Additional Rent. the value of all other considerations agreed to be paid or performed by Tenant during the residue. Tenant further covenants as additional and cumulative obligations after any such termination to pay punctually to Landlord all the sums and to perform all the obligations which Tenant covenants in this Lease to pay and to perform in the same manner and to the same extent and at the same time as if this Lease had not been terminated, including, without limitation, the payment of all Fixed Rent and Additional Rent. In calculating the amounts to be paid by Tenant pursuant to the preceding sentence, Tenant shall be credited with any amount paid to Landlord as compensation as provided in this Section 7.2 and also with the net proceeds of any rent obtained by Landlord by reletting the Premises, after deducting all of Landlord's reasonable expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, fees for legal services and expenses of preparing the Premises for such reletting, it being agreed by Tenant that Landlord may (i) relet the Premises or any part or parts thereof for a term or terms which may at Landlord's option be equal to or less than or exceed the period which would otherwise have constituted the balance of the term hereof and may grant such concessions and free rent as Landlord in its reasonable Judgment considers advisable or necessary to relet the same and (ii) make such alterations, repairs and decorations in the Premises as Landlord in its reasonable judgment considers advisable or necessary to relet the same, and no action of Landlord in accordance with the foregoing or failure to relet or to collect rent under reletting shall operate or be construed to release or reduce Tenant's liability as aforesaid. Landlord agrees to reasonably cooperate with any efforts by Tenant to relet the Premises. Nothing contained in this Lease shall, however, limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater than, equal to, or less than the amount of the loss or damages referred to above. 8.3 REMEDIES CUMULATIVE. Except as otherwise expressly provided herein, any and all rights and remedies which Landlord may have under this Lease, and at law and equity, shall be cumulative and shall not be deemed inconsistent with each other, and any two or more of all such rights and remedies may be exercised at the same time insofar as permitted by law. 8.4 LANDLORD'S RIGHT TO CURE DEFAULTS. Landlord may, but shall not be obligated to, cure, at any time following ten (10) days' prior notice to Tenant (except in cases of emergency when no notice shall be required), any default by Tenant under this Lease; and whenever Landlord so elects, all costs and expenses incurred by Landlord, including reasonable attorneys' fees, in curing a default shall be paid by Tenant to Landlord as Additional Rent on demand, together with interest thereon at the rate provided in Section 7.7 from the date of payment by Landlord to the date of payment by Tenant. 8.5 EFFECT OF WAIVERS OF DEFAULT. Any consent or permission by Landlord to any act or omission which otherwise would be a breach of any covenant or condition herein, or any waiver by Landlord of the breach of any covenant or condition herein, shall not in any way be held or construed (unless expressly so declared) to operate so as to impair the continuing obligation of any covenant or condition herein, or otherwise, except as to the specific instance, operate to permit similar acts or omissions. The failure of Landlord to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of rent with knowledge of the breach of any covenant of this Lease shall not be deemed to have been a waiver of such breach by Landlord. No consent or waiver, express or implied, by Landlord to or of any breach of any agreement or duty shall be construed as a waiver or consent to or of any other breach of the same or any other agreement or duty. 8.6 NO ACCORD AND SATISFACTION. No acceptance by Landlord of a lesser sum than the Fixed Rent, Additional Rent or any other charge then due shall be deemed to be other than on account of the earliest installment of such rent or charge due, unless Landlord elects by notice to Tenant to credit such sum against the most recent installment due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent or other charge be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy provided in this Lease. 8.7 INTEREST ON OVERDUE SUMS. If Tenant falls to pay Fixed Rent, Additional Rent and other charges payable by Tenant to Landlord within ten business days after the due date thereof (without regard to any requirement of notice from Landlord or any period of grace allowed to Tenant under this Lease before Landlord is allowed to exercise any remedy on account thereof), the amount so unpaid shall bear interest at a rate (the "Delinquency Rate") equal to three percent (3%) in excess of the Base Rate of BankBoston, N.A., so-called, from time to time in effect or, if such rate is in excess of any maximum interest rate permissible under applicable law, the Delinquency Rate shall be the maximum interest rate permissible under applicable law, commencing with the due date and continuing through the day preceding the date on which payment of such delinquent payment with interest thereon is paid. ARTICLE IX MORTGAGES 9.1 RIGHTS OF MORTGAGE HOLDERS. The word "mortgage" as used herein includes mortgages, deeds of trust or other similar instruments evidencing other voluntary liens or encumbrances, and modifications, consolidations, extensions, renewals, replacements and substitutes thereof. The word "holder" shall mean a mortgagee, and any subsequent holder or holders of a mortgage. No Fixed Rent, Additional Rent or any other charge shall be paid more than thirty (30) days prior to the due dates thereof if, and only if such prohibition on the earlier payment of rent is required by the terms of any mortgage affecting the Property. If any mortgage affecting the Property includes such requirement, then payments made in violation of this provision shall (except to the extent that such payments are actually received by a mortgagee in possession or in the process of foreclosing its mortgage) be a nullity as against such mortgagee and Tenant shall be liable for the amount of such payments to such mortgagee. In the event of any act or omission by Landlord which would give Tenant the right to terminate this Lease or to claim a partial or total eviction, Tenant shall not exercise any such right (a) until it shall have given notice, by certified or registered mail, of such act or omission to the holder of any mortgage encumbering the Property whose name and address shall have been furnished to Tenant in writing, at the last address so furnished, and (b) until a reasonable period of time for remedying such act or omission shall have elapsed following the giving of such notice, provided that following the giving of such notice, Landlord or such holder shall, with reasonable diligence, have commenced and continued to remedy such act or omission or to cause the same to be rendered. In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage now or hereafter encumbering the Property, or any part thereof, Tenant shall attorn to the purchaser upon such foreclosure or sale or upon any grant of a deed in lieu of foreclosure and recognize such purchaser as Landlord under this Lease if so requested by such purchaser. 9.2 SUPERIORITY OF LEASE; OPTION TO SUBORDINATE. Unless Landlord exercises the option set forth below in this Section 8.2, this Lease shall be superior to and shall not be subordinate to any mortgage placed on the Property after the date of this Lease. Landlord shall have the option to subordinate this Lease to any mortgage of the Property provided that the holder of record thereof enters into an agreement with Tenant, in such holder's customary form, by the terms of which such holder will agree (a) to recognize the rights of Tenant under this Lease, (b) to perform Landlord's obligations hereunder arising after the date of such holder's acquisition of title, and (c) as long as Tenant is not in default under the terms of the Lease, to accept Tenant as tenant of the Premises under the terms and conditions of this Lease in the event of acquisition of title by such holder through foreclosure proceedings or otherwise and Tenant will agree to recognize the holder of such mortgage as Landlord in such event, which agreement shall be made expressly to bind and inure to the benefit of the successors and assigns of Tenant and of the holder and upon anyone purchasing said Property at any foreclosure sale. Tenant and Landlord agree to execute and deliver any appropriate instruments necessary to carry out the agreements contained in this Section 8.2. Any such mortgage to which this Lease shall be subordinated may contain such terms, provisions and conditions as the holder deems usual or customary. ARTICLE X MISCELLANEOUS PROVISIONS 10.1 NOTICES FROM ONE PARTY TO THE OTHER. All notices required or permitted hereunder shall be in writing and addressed, if to Tenant, at the Original Address of Tenant or such other address as Tenant shall have last designated by notice in writing to Landlord and, if to Landlord, at the Original Address of Landlord or such other address as Landlord shall have last designated by notice in writing to Tenant. Any notice shall be deemed duly given three days after mailing to such address, postage prepaid, registered or certified mail, return receipt requested, or when delivered to such address by hand. 10.2 QUIET ENJOYMENT. Landlord agrees that upon Tenant's paying the rent and performing and observing the terms, covenants, conditions and provisions on its part to be performed and observed, Tenant shall and may peaceably and quietly have, hold and enjoy the Premises during the term without any manner of hindrance or molestation from Landlord or anyone claiming under Landlord, subject, however, to the terms of this Lease. 10.3 EASEMENTS. Landlord reserves the right, from time to time, to grant easements affecting the Property so long as such easements do not unreasonably interfere with Tenant's use of the Premises. In exercising its rights under this Section 9.3, Landlord shall make reasonable efforts not to unreasonably interfere with Tenant's use of the Premises. 10.4 LEASE NOT TO BE RECORDED. Tenant agrees that it will not record this Lease. Both parties shall, upon the request of either, execute, deliver and record a notice of this Lease in such form, if any, as may be permitted by applicable statute. If this Lease is terminated before the originally scheduled expiration of the Term, the parties shall execute, deliver and record an instrument acknowledging such fact and the actual date of termination of this Lease, and Tenant hereby appoints Landlord its attorney-in-fact, coupled with an interest, with full power of substitution to execute such instrument. 10.5 BIND AND INURE; LIMITATION LANDLORD'S LIABILITY. The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No owner of the Property shall be liable under this Lease except for breaches of Landlord's obligations occurring while owner of the Property. The obligations of Landlord shall be binding upon the assets of Landlord which comprise the Property but not upon any other assets of Landlord. No individual partner, trustee, stockholder, officer, director, employee or beneficiary of Landlord shall be personally liable under this Lease and Tenant shall look solely to Landlord's interest in the Property in pursuit of its remedies upon an event of default hereunder, and the general assets of Landlord and its partners, trustees, stockholders, officers, employees or beneficiaries of Landlord shall not be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Tenant; provided that the foregoing provisions of this sentence shall not constitute a waiver of any obligation evidenced by this Lease and provided further that the foregoing provisions of this sentence shall not limit the right of Tenant to name Landlord or any partner or trustee thereof as party defendant in any action or suit in connection with this Lease so long as no personal money judgment shall be asked for or taken against any partner, trustee, stockholder, officer, employee or beneficiary of Landlord. 10.6 ACTS OF GOD. In any case, where either party hereto is required to do any act, delays caused by or resulting from acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, shortages of labor, materials or equipment, government regulations, unusually severe weather, or other causes beyond such party's reasonable control shall not be counted in determining the time during which such act shall be completed, whether such time be designated by a fixed date, a fixed time or a "reasonable time", and such time shall be deemed to be extended by the period of such delay. 10.7 LANDLORD'S DEFAULT. Landlord shall not be deemed to be in default in the performance of any of its obligations hereunder, unless it shall fail to perform such obligations and unless within thirty (30) days after notice from Tenant to Landlord specifying such default, Landlord has not commenced diligently to correct the default so specified or has not thereafter diligently pursued such correction to completion. Tenant shall have no right, for any default by Landlord, to offset or counterclaim against any rent due hereunder. Subject to Section 9.5, if Tenant recovers a judgment against Landlord in a court of competent jurisdiction for a breach of Landlord's obligations under this Lease, Tenant shall be entitled to recover Tenant's reasonable expenses, including attorneys' fee in recovering such judgment. 10.8 SIGNAGE. Landlord shall provide street signage of which Tenant shall have a pro-rata share. Tenant may, at Tenant's sole cost and expense, erect or place identifying signs or logos on the Premises so long as the same comply with all applicable building and zoning codes and, in the reasonable Judgment of Landlord, are consistent with the character of the Property. 10.9 BROKERAGE. Each of Tenant and Landlord warrants and represents to the other that it has had no dealings with any broker or agent in connection with this Lease other than the Brokers set forth in Article I and covenants to defend with counsel approved by the other, hold harmless and indemnify the other from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent other than the Brokers set forth in Article I with respect to its dealings in connection with this Lease or the negotiation thereof. Landlord shall compensate Parsons and Peter Elliot for their brokerage services. 10.10 APPLICABLE LAW AND CONSTRUCTION. This Lease shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. If any term, covenant, condition or provision of this Lease or the application thereof to any person or circumstances shall be declared invalid, or unenforceable by the final ruling of a court of competent jurisdiction having final review, the remaining terms, covenants, conditions and provisions of this Lease and their application to persons or circumstances shall not be affected thereby and shall continue to be enforced and recognized as valid agreements of the parties, and in the place of such invalid or unenforceable provision, there shall be substituted a like, but valid and enforceable provision which comports to the findings of the aforesaid court and most nearly accomplishes the original intention of the parties. There are no prior oral or written agreements between Landlord and Tenant affecting this Lease. This Lease may be amended, and the provisions hereof may be waived or modified, only by instruments in writing executed by Landlord and Tenant. The titles of the several Articles and Sections contained herein are for convenience only and shall not be considered in construing this Lease. Unless repugnant to the context, the words "Landlord" and "Tenant" appearing in this Lease shall be construed to mean those named above and their respective heirs, executors, administrators, successors and assigns, and those claiming through or under them respectively. If there be more than one tenant the obligations imposed by this Lease upon Tenant shall be joint and several. 10.11 SUBMISSION NOT AN OFFER. The submission of a draft of this Lease or a summary of some or all of its provisions does not constitute an offer to lease or demise the Premises, it being understood and agreed that neither Landlord nor Tenant shall be legally bound with respect to the leasing of the Premises unless and until this Lease has been executed by both Landlord and Tenant and a fully executed copy delivered. 10.12 ACCESS. Employees of Tenant shall have access to the premises 24 hours a day, seven days a week, fifty-two weeks a year. The Landlord shall provide a card key access system and shall not restrict such access by the employees of Tenant unless otherwise permitted by the provisions of this Lease. 10.13 PARKING. During the Term of the Lease, Landlord shall provide Tenant with forty (40) reserved parking spaces for sole use by the Tenant in an area to be designated by Landlord and acceptable to Tenant. Once designated by Landlord and accepted by Tenant, such parking spaces shall not be substantially relocated by Landlord or Tenant. WITNESS the execution hereof under seal as of the 30th day of September, 1997. Tenant: NE RESTAURANT COMPANY, INC. By:/s/ Paul V. Hoagland ------------------------- Name: Paul V. Hoagland Title: Vice President Landlord: OTARI MANUFACTURING CORPORATION By: /s/ Jack Soma ------------------------ Name: Jack Soma Title: President EXHIBIT A Description of the Lot Parcel C-R containing approximately 64,276 square feet and shown on a plan entitled "Plan of Land in Westborough, MA Owner: Otari Manufacturing Corp." dated July 14, 1995, prepared by Guerard Survey Co. & Assoc. and recorded in the Worcester Registry of Deeds in Plan Book 697, Plan 104. AMENDMENT TO LEASE AGREEMENT Whereas, on September 30, 1997, a certain Lease Agreement was entered between Otari Manufacturing Corporation, ("Lessor") and New England Restaurant Company, Inc. ("Lessee") covering certain space being 14,000 square feet on the second floor at 80 Turnpike Road in Westboro, Massachusetts. Whereas, it is the desire of the parties to amend the Lease, in certain particulars. Now, therefore, for and in consideration of value received, the undersigned Lessor (Eighty Turnpike, LLC) and Lessee confirm their agreement as follows: Lessee shall have the right to use in common the loading dock and adjacent area as per attached plan Exhibit "B". Lessor shall have exclusive right to use the freight elevator. In all other respects, the terms and conditions of the Original Lease shall remain in full force and effect. Parties hereto, their successors and assigns and is hereby made a part of the above described Lease Agreement. EXECUTED AND DELIVERED this 25th day of , 1998. Lessor: Lessee: Eighty Turnpike L.L.C. New England Restaurant Co. By: /S/ JOHN R. PARSONS, JR. By: /S/ PAUL HOAGLAND, VICE PRESIDENT John R. Parsons, Jr. Duly Authorized, Title Managing Member EX-10.13 8 LOAN AGREEMENT, DATED AUGUST 6, 1997 EXHIBIT 10.13 LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made as of August 6, 1997, by and between FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and NERC LIMITED PARTNERSHIP, a Delaware limited partnership ("Debtor"), whose address is 300 Pond Street, Randolph, Massachusetts 02368. PRELIMINARY STATEMENT: Unless otherwise expressly provided herein, all defined terms used in this Agreement shall have the meanings set forth in Section 1. Debtor has requested from FFCA, and applied for, the Loans to provide long-term financing for the Premises, and for no other purpose whatsoever. Each Loan will be evidenced by a Note and secured by a first priority security interest in the corresponding Premises pursuant to a Mortgage. FFCA has committed to make the Loans pursuant to the terms and conditions of the Commitment, this Agreement and the other Loan Documents. AGREEMENT: In consideration of the mutual covenants and provisions of this Agreement, the parties agree as follows: 1. DEFINITIONS. The following terms shall have the following meanings for all purposes of this Agreement: "ACTION" has the meaning set forth in Section 10.A(4). "ADDITIONAL ENTERPRISE VALUE FINANCING" means the additional enterprise value financing (or a modification of existing enterprise value financing) in an amount not less than $20,000,000 to Lessee from BankBoston, N.A. or any other lender acceptable to Debtor or Lessee. "AFFILIATE" means any Person which directly or indirectly controls, is under common control with, or is controlled by any other Person. For purposes of this definition, "controls," "under common control with" and "controlled by" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or otherwise. "ASSIGNMENT OF RENTS AND LEASES" or "ASSIGNMENTS OF RENTS AND LEASES" means, as the context may require, the assignment of rents and leases or assignments of rents and leases to be executed by Debtor in favor of FFCA, as the same may be amended from time to time. An Assignment of Rents and Leases will be executed for each Premises. "CHILI'S RESTAURANTS" means all of the Premises other than the On the Border Restaurant. "CLOSING" shall have the meaning set forth in Section 4. "CLOSING DATE" means the date specified as the closing date in Section 4. "CODE" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 ET SEQ., as amended. "COMMITMENT" means that certain Commitment Letter dated May 21, 1997 between FFCA and Lessee with respect to the transaction described in this Agreement, and any amendments or supplements thereto. "COUNSEL" means legal counsel to Debtor and Lessee, licensed in the state(s) in which (i) the Premises are located, (ii) Lessee is incorporated or formed and (iii) Debtor and/or Lessee maintain principal places of business, as applicable, as selected by Debtor and Lessee, as the case may be, and approved by FFCA. "DE MINIMIS AMOUNTS" shall mean, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form or combination of forms which does not constitute a violation of any Environmental Laws and is customarily employed in, or associated with, similar businesses located in the state in which the Premises is located. "DISCLOSURES" has the meaning set forth in Section 13.P. "ENVIRONMENTAL CONDITION" means any condition with respect to soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air and any environmental medium comprising or surrounding the Premises, whether or not yet discovered, which could or does result in any damage, loss, cost, expense, claim, demand, order or liability to or against Debtor, Lessee or FFCA by any third party (including, without limitation, any Governmental Authority), including, without limitation, any condition resulting from the operation of Debtor's or Lessee's business and/or the operation of the business of any other property owner or operator in the vicinity of the Premises and/or any activity or operation formerly conducted by any person or entity on or off the Premises. "ENVIRONMENTAL INDEMNITY AGREEMENT" or "ENVIRONMENTAL INDEMNITY AGREEMENTS" means, as the context may require, the environmental indemnity agreement or environmental indemnity agreements dated as of the date of this Agreement executed by Debtor for the benefit of FFCA, as the same may be amended from time to time. An Environmental Indemnity Agreement will be executed for each Premises. "ENVIRONMENTAL LAWS" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to Hazardous Materials and/or the protection of human health or the environment by reason of a Release or a Threatened Release of Hazardous Materials or relating to liability for or costs of Remediation or prevention of Releases. "Environmental Laws" includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. "Environmental Laws" also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law: conditioning transfer of property upon a negative declaration or other approval of a Governmental Authority with respect to Hazardous Materials; requiring notification or disclosure of Releases or other environmental condition of the Premises to any Governmental Authority or other person or entity, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements relating to Hazardous Materials in connection with permits or other authorization for lawful activity; relating to nuisance, trespass or other causes of action related to Hazardous Materials; and relating to wrongful death, personal injury, or property or other damage in connection with the physical condition or use of the Premises by reason of the presence of Hazardous Materials in, on, under or above the Premises. "EVENT OF DEFAULT" has the meaning set forth in Section 10. "EXISTING LEASES" means, collectively, all ground leases, building leases, subleases and overleases which are in existence as of the date hereof relating to the Leased Premises and all modifications, amendments and supplements thereto disclosed in the Lease Estoppel Certificate and Consents delivered with respect thereto, and all modifications, amendments and supplements consented to by FFCA pursuant to the terms of the Mortgages. The term "Existing Leases" does not include the Operating Leases. "EXISTING LESSORS" means the lessors under the Existing Leases. "FCCR AMOUNT" has the meaning set forth in Section 10.A(7). "FEE" means an underwriting, site assessment, valuation, processing and commitment fee equal to 1% of the sum of the Loan Amounts for all of the Premises, which Fee shall be payable as set forth in Section 3. "FRANCHISOR" means Brinker International, Inc., a Delaware corporation, and its successors. "FRANCHISOR CERTIFICATE" has the meaning set forth in Section 9.L. "FRANCHISOR RESTAURANT" means (i) with respect to the Chili's Restaurants, a Chili's restaurant, and (ii) with respect to the On the Border Restaurant, an On the Border restaurant. "GOVERNMENTAL AUTHORITY" means any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority of the United States, the states where the Premises are located or any political subdivision thereof. "HAZARDOUS MATERIALS" means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant or contaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contains dielectric fluid containing levels of polychlorinated biphenyls in excess of federal, state or local safety guidelines, whichever are more stringent, or any petroleum product; (c) any substance, gas, material or chemical which is or may be defined as or included in the definition of "hazardous substances, " "toxic substances, " "hazardous materials, " hazardous wastes" or words of similar import under any Environmental Laws; and (d) any other chemical, material, gas or substance the exposure to or release of which is or may be prohibited, limited or regulated by any Governmental Authority that asserts or may assert jurisdiction over the Premises or the operations or activity at the Premises, or any chemical, material, gas or substance that does or may pose a hazard to the health and/or safety of the occupants of the Premises or the owners and/or occupants of property adjacent to or surrounding the Premises. "INDEMNIFIED PARTIES" has the meaning set forth in Section 12. "LEASED PREMISES" means those Premises identified on SCHEDULE I hereto. "LEASE ESTOPPEL CERTIFICATE AND CONSENTS" has the meaning set forth in Section 9.M. "LEASES" means those certain Leases dated as of the date of this Agreement between Debtor and Lessee with respect to the Premises. "LESSEE" means NE Restaurant Company, Inc., a Delaware corporation, and its successors and permitted assigns. "LOAN" or "LOANS" means, as the context may require, the loan for each Premises, or the loans for all of the Premises, described in Section 2. Each Loan will be evidenced by a Note and secured by a Mortgage. "LOAN AMOUNT" or "LOAN AMOUNTS" means, as the context may require, the aggregate amount set forth in Section 2 or, with respect to each Premises, the individual amount set forth in EXHIBIT A. "LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the Mortgages, the Environmental Indemnity Agreements, the Assignments of Rents and Leases, the UCC-1 Financing Statements and all other documents executed in connection therewith or contemplated thereby. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) a Premises, including, without limitation, its operation as a Franchisor Restaurant and/or its value, (ii) Debtor's ability to perform under any of the Loan Documents, or (iii) Lessee's ability to perform under any of the Leases. "MORTGAGE" OR "MORTGAGES" means, as the context may require, the mortgage or mortgages dated as of the date of this Agreement to be executed by Debtor for the benefit of FFCA, as the same may be amended from time to time. A Mortgage will be executed for each Premises. "NONDISTURBANCE AGREEMENTS" has the meaning set forth in Section 9.M. "NOTE" or "NOTES" means, as the context may require, the promissory note or notes dated as of the date of this Agreement to be executed by Debtor in favor of FFCA, as such Note or Notes may be amended from time to time, including, without limitation, as a result of the payment of the FCCR Amount pursuant to Section 10. A Note in the corresponding Loan Amount will be executed for each Premises. "ON THE BORDER RESTAURANT" means the Premises located at 19 Commerce Way, Woburn, Massachusetts. "OPERATING LEASE" or "OPERATING LEASES" means, as the context may require, the lease or leases to be executed by Debtor, as lessor, and Lessee, as lessee, for the lease or sublease, as the case may be, of the Premises. An Operating Lease will be executed for each of the Premises. "PARTICIPATION" has the meaning set forth in Section 13.P. "PERMITTED EXCEPTIONS" means those recorded easements, restrictions, liens and encumbrances set forth as exceptions in the title insurance policies issued by Title Company to FFCA and approved by FFCA in connection with the Loans. "PERSON" shall mean any individual, corporation, partnership, limited liability company, trust, unincorporated organization, Governmental Authority or any other form of entity. "PREMISES" means the parcel or parcels of real estate corresponding to the FFCA File Numbers, NERC PC Numbers and addresses identified on EXHIBIT A attached hereto, together with all rights, privileges and appurtenances associated therewith and all buildings, fixtures, and tangible personal property (including, without limitation, restaurant equipment) and other improvements now or hereafter located thereon (whether or not affixed to such parcels), including, without limitation, parking areas. As used herein, the term "Premises" shall mean either a singular property or all of the properties collectively, as the context may require. "RELEASE" means any presence, release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials. "REMEDIATION" means any response, remedial, removal, or corrective action, any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous Material, any actions to prevent, cure or mitigate any Release, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials. "SECURITIZATION" has the meaning set forth in Section 13.P. "THREATENED RELEASE" means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air or any other environmental medium comprising or surrounding the Premises which may result from such Release. "TITLE COMPANY" means the title insurance company described in Section 4. "TRANSFER" has the meaning set forth in Section 13.P. "UCC-1 FINANCING STATEMENTS" means such UCC-I Financing Statements as FFCA shall require to be executed and delivered by Debtor and Lessee with respect to the Premises. 2. TRANSACTION. On the terms and subject to the conditions set forth in the Loan Documents, FFCA shall make the Loans. The Loans will be evidenced by the Notes and secured by the Mortgages. Debtor shall repay the outstanding principal amount of the Loans together with interest thereon in the manner and in accordance with the terms and conditions of the Notes and the other Loan Documents. The aggregate Loan Amount shall be $22,400,000.00 allocated among the Premises as set forth on the attached Exhibit A. The Loans shall be advanced at the Closing in cash or otherwise immediately available funds subject to any prorations and adjustments required by this Agreement. Each Premises will be leased to Lessee pursuant to an Operating Lease and Debtor will assign each Operating Lease to FFCA pursuant to a Mortgage and an Assignment of Rents and Leases. 3. UNDERWRITING, SITE ASSESSMENT, VALUATION, PROCESSING AND COMMITMENT FEE. Lessee paid FFCA one-half of the Fee pursuant to the Commitment, and such portion was deemed fully earned when received. The remainder of the Fee shall be paid at the Closing and shall be deemed nonrefundable and fully earned upon the Closing. The Fee constitutes FFCA's underwriting, site assessment, valuation, processing and commitment fee. 4. CLOSING. (a) The Loan shall be closed (the "Closing") within 10 days following the satisfaction of all of the terms and conditions contained in this Agreement, but no later than August 29, 1997 (the date on which the Closing is scheduled to occur is referred to herein as the "Closing Date"). Notwithstanding anything to the contrary contained in this Agreement, Debtor's obligation to close the transaction contemplated hereunder is conditioned on the closing of the Additional Enterprise Value Financing occurring simultaneously with or prior to the Closing. (b) Debtor has ordered a title insurance commitment for each Premises from Lawyers Title Insurance Corporation ("Title Company"). On or prior to the Closing Date, the parties hereto shall deposit with Title Company all documents and moneys necessary to comply with their obligations under this Agreement. Title Company shall not cause the transaction to close unless and until it has received written instructions from FFCA to do so. All costs of such transaction shall be borne by Debtor, including, without limitation, the cost of title insurance and endorsements, the attorneys' fees of Debtor, attorneys' fees and expenses of FFCA (provided that FFCA shall advise Debtor prior to the commencement of any legal work for which extraordinary fees would be payable (i.e., in excess of $80,000) and discuss with Debtor the most cost effective means to proceed), the cost of the surveys, the cost of the environmental reports to be delivered pursuant to Section 9.E, FFCA's in-house site inspection costs and fees, stamp taxes, mortgage taxes, transfer taxes, and escrow, filing and recording fees. All real and personal property and other applicable taxes and assessments and other charges relating to the Premises which are due and payable on or prior to the Closing Date as well as taxes and assessments due and payable subsequent to the Closing Date but which Title Company requires to be paid at Closing as a condition to the issuance of the title insurance policy described in Section 9.C, shall be paid by Debtor at or prior to the Closing. The Closing documents shall be dated as of the Closing Date. Debtor and FFCA hereby employ Title Company to act as escrow agent in connection with this transaction. Debtor and FFCA will deliver to Title Company all documents, pay to Title Company all sums and do or cause to be done all other things necessary or required by this Agreement, in the reasonable judgment of Title Company, to enable Title Company to comply herewith and to enable any title insurance policy provided for herein to be issued. Title Company is authorized to pay, from any funds held by it for FFCA's or Debtor's respective credit all amounts necessary to procure the delivery of such documents and to pay, on behalf of FFCA and Debtor, all charges and obligations payable by them, respectively. Debtor will pay all charges payable by it to Title Company. Title Company is authorized, in the event any conflicting demand is made upon it concerning these instructions or the escrow, at its election, to hold any documents and/or funds deposited hereunder until an action shall be brought in a court of competent jurisdiction to determine the rights of Debtor and FFCA or to interplead such documents and/or funds in an action brought in any such court. Deposit by Title Company of such documents and funds, after deducting therefrom its charges and its expenses and attorneys' fees incurred in connection with any such court action, shall relieve Title Company of all further liability and responsibility for such documents and funds. Title Company's receipt of this Agreement and opening of an escrow pursuant to this Agreement shall be deemed to constitute conclusive evidence of Title Company's agreement to be bound by the terms and conditions of this Agreement pertaining to Title Company. Disbursement of any funds shall be made by check, certified check or wire transfer, as directed by FFCA. Title Company shall be under no obligation to disburse any funds represented by check or draft, and no check or draft shall be payment to Title Company in compliance with any of the requirements hereof, until it is advised by the bank in which such check or draft is deposited that such check or draft has been honored. Title Company is authorized to act upon any statement furnished by the holder or payee, or a collection agent for the holder or payee, of any lien on or charge or assessment in connection with the Premises, concerning the amount of such charge or assessment or the amount secured by such lien, without liability or responsibility for the accuracy of such statement. The employment of Title Company as escrow agent shall not affect any rights of subrogation under the terms of any title insurance policy issued pursuant to the provisions thereof. 5. REPRESENTATIONS AND WARRANTIES OF FFCA. The representations and warranties of FFCA contained in this Section are being made by FFCA as of the date of this Agreement and the Closing Date to induce Debtor to enter into this Agreement and consummate the transactions contemplated herein, and Debtor has relied, and will continue to rely, upon such representations and warranties from and after the execution of this Agreement and the Closing. FFCA represents and warrants to Debtor as follows: A. ORGANIZATION OF FFCA. FFCA has been duly formed, is validly existing and has taken all necessary action to authorize the execution, delivery and performance by FFCA of this Agreement. B. AUTHORITY OF FFCA. The person who has executed this Agreement on behalf of FFCA is duly authorized so to do. C. ENFORCEABILITY. Upon execution by FFCA, this Agreement shall constitute the legal, valid and binding obligation of FFCA, enforceable against FFCA in accordance with its terms. All representations and warranties of FFCA made in this Agreement shall survive the Closing. 6. REPRESENTATIONS AND WARRANTIES OF DEBTOR. The representations and warranties of Debtor contained in this Section are being made by Debtor as of the date of this Agreement and the Closing Date to induce FFCA to enter into this Agreement and consummate the transactions contemplated herein, and FFCA has relied, and will continue to rely, upon such representations and warranties from and after the execution of this Agreement and the Closing. Debtor represents and warrants to FFCA as follows: A. INFORMATION AND FINANCIAL STATEMENTS. Debtor has delivered to FFCA Lessee's financial statements (either audited financial statements or, if Debtor does not have audited financial statements, certified financial statements) and certain other information concerning Lessee, which financial statements and other information are true, correct and complete in all material respects; and no material adverse change has occurred with respect to any such financial statements and other information provided to FFCA since the date such financial statements and other information were prepared or delivered to FFCA. Debtor understands that FFCA is relying upon such financial statements and information and Debtor represents that such reliance is reasonable. All such financial statements were prepared in accordance with generally accepted accounting principles consistently applied and accurately reflect as of the date of this Agreement and the Closing Date, the financial condition of each individual or entity to which they pertain. B. ORGANIZATION AND AUTHORITY OF DEBTOR AND LESSEE. (1) Each of Debtor and Lessee is duly organized or formed, validly existing and in good standing under the laws of its state of organization or formation, and qualified as a foreign corporation or limited partnership, as applicable, to do business in each of the states where the Premises are located. All necessary corporate or limited partnership action has been taken to authorize the execution, delivery and performance of this Agreement and of the other documents, instruments and agreements provided for herein. (2) The person(s) who have executed this Agreement on behalf of the general partner of Debtor are duly authorized so to do. C. ENFORCEABILITY OF DOCUMENTS. Upon execution by Debtor or Lessee, as applicable, this Agreement and the other documents, instruments and agreements to be executed in connection with this Agreement, shall constitute the legal, valid and binding obligations of Debtor and Lessee, respectively, enforceable against Debtor and Lessee in accordance with their respective terms. D. LITIGATION. There are no suits, actions, proceedings or investigations pending or, to the best of Debtor's knowledge, threatened against or involving Debtor, Lessee or the Premises before any court, arbitrator, or Governmental Authority which might reasonably result in any material adverse change in the contemplated business, condition, worth or operations of Debtor, Lessee or the Premises. E. ABSENCE OF BREACHES OR DEFAULTS. Debtor and/or Lessee are not, and the authorization, execution, delivery and performance of this Agreement and the documents, instruments and agreements provided for herein will not result, in any breach or default under any other document, instrument or agreement to which Debtor and/or Lessee are a party or by which Debtor, Lessee, the Premises or any of the property of Debtor or Lessee is subject or bound, except such breach or default which would not have a Material Adverse Effect. The authorization, execution, delivery and performance of this Agreement and the documents, instruments and agreements provided for herein will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order. F. UTILITIES. The Premises are served by ample public utilities to permit full utilization of the Premises for their intended purpose and all utility connection fees and use charges will have been paid in full. G. INTENDED USE AND ZONING; COMPLIANCE WITH LAWS. Debtor intends that Lessee will use the Premises solely for the operation of Franchisor Restaurants, and related ingress, egress and parking, and for no other purposes, other than as may be contemplated by the Mortgages. Each of the Premises are in material compliance with all applicable zoning requirements. Debtor has no actual knowledge that the use of any of the Premises as a Franchisor Restaurant constitutes a nonconforming use under applicable zoning requirements which would prevent a Franchisor Restaurant from being re-built and operated on such Premises in the event that the existing Franchisor Restaurant is subject to a casualty. The Premises comply with all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders and approvals of each Governmental Authority having jurisdiction over the Premises, including, without limitation, all health, building, fire, safety and other codes, ordinances and requirements, all applicable standards of the National Board of Fire Underwriters and the Americans With Disabilities Act of 1990 and all policies or rules of common law, in each case, as amended, and any judicial or administrative interpretation thereof, including any judicial order, consent, decree or judgment applicable to Debtor or Lessee, except to the extent the failure with which to comply would not have a Material Adverse Effect. H. AREA DEVELOPMENT; WETLANDS. No condemnation or eminent domain proceedings affecting the Premises have been commenced or, to the best of Debtor's knowledge, are contemplated. To the best of Debtor's knowledge, the areas where the Premises are located have not been declared blighted by any Governmental Authority. The Premises and/or the real property bordering the Premises are not designated by any applicable Governmental Authority as a wetlands. I. LICENSES AND PERMITS; ACCESS. Debtor or Lessee has all required licenses and permits, both governmental and private, to use and operate the Premises in the intended manner. There are adequate rights of access to public roads and ways available to the Premises to permit full utilization of the Premises for their intended purposes and all such public roads and ways have been completed and dedicated to public use. J. CONDITION OF PREMISES. The Premises, including the equipment located thereon, are of good workmanship and materials, fully equipped and operational, in good condition and repair, free from known structural defects, clean, orderly and sanitary, safe, well-lit, landscaped, decorated, attractive and well-maintained. K. ENVIRONMENTAL. Debtor is fully familiar with the present use of the Premises, and, to the extent that Debtor or Lessee has previously obtained a Phase I environmental report with respect to any of the Premises, Debtor has become generally familiar with the prior uses of such Premises. During the period in which Debtor or Lessee has had a fee or leasehold interest in the Premises, and except as disclosed in the reports delivered pursuant to Section 9.E (the "Reports"), (i) no Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred or disposed of at or on the Premises, except in De Minimis Amounts and in compliance with all applicable Environmental Laws, and (ii) no Release or Threatened Release has occurred at or on the Premises. Furthermore, Debtor has no actual knowledge that, during the period prior to Lessee's acquisition of a fee or leasehold interest in the Premises, and except as disclosed in the Reports, (i) any Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred or disposed of at or on the Premises, except in De Minimis Amounts and in compliance with all applicable Environmental Laws, or (ii) any Release or Threatened Release has occurred at or on the Premises. The activities, operations and business undertaken on, at or about the Premises during the period in which Debtor or Lessee has had a fee or leasehold interest in the Premises, including, but not limited to, any past or ongoing alterations or improvements at the Premises, are and have been in compliance with all Environmental Laws, except such noncompliance as would not have a Material Adverse Effect and except as disclosed in the Reports, and Debtor has no actual knowledge that any such activities, operations or business undertaken on, at or about the Premises during the period prior to Lessee's acquisition of a fee or leasehold interest in the Premises were not in compliance with all Environmental Laws except such noncompliance as would not have a Material Adverse Effect and except as disclosed in the Reports. No further action is required to remedy any Environmental Condition or violation of, or to be in full compliance with, any Environmental Laws, and no lien has been imposed on the Premises by any Governmental Authority in connection with any Environmental Condition, the violation or threatened violation of any Environmental Laws or the presence of any Hazardous Materials on or off the Premises during the period in which Debtor or Lessee has had a fee or leasehold interest in the Premises or, to Debtor's actual knowledge, during the period prior to Lessee's acquisition of a fee or leasehold interest in the Premises. There is no pending or, to the best of Debtor's knowledge, threatened litigation or proceeding before any court, administrative agency or Governmental Authority in which any person or entity alleges the violation or threatened violation of any Environmental Laws or the presence, Release, Threatened Release or placement on or at the Premises of any Hazardous Materials, or of any facts which would give rise to any such action, nor has Debtor (a) received any notice (and Debtor has no actual knowledge) that any Governmental Authority or any employee or agent thereof has determined, threatens to determine or requires an investigation to determine that there has been a violation of any Environmental Laws at, on or in connection with the Premises or that there exists a presence, Release, Threatened Release or placement of any Hazardous Materials on or at the Premises, or the use, handling, manufacturing, generation, production, storage, treatment, processing, transportation or disposal of any Hazardous Materials at or on the Premises; (b) received any notice under the citizen suit provision of any Environmental Law in connection with the Premises or any facilities, operations or activities conducted thereon, or any business conducted in connection therewith; or (c) received any request for inspection, request for information, notice, demand, administrative inquiry or any formal or informal complaint or claim with respect to or in connection with the violation or threatened violation of any Environmental Laws or existence of Hazardous Materials relating to the Premises or any facilities, operations or activities conducted thereon or any business conducted in connection therewith. L. TITLE TO PREMISES; FIRST PRIORITY LIEN. Fee title to each of the Premises is vested in Debtor, free and clear of all hens, encumbrances, charges and security interests of any nature whatsoever, except the Permitted Exceptions, provided that, with respect to the Leased Premises, Debtor is the holder of a leasehold interest in the land relating thereto and the holder of either a fee or leasehold interest in the buildings and improvements relating thereto, as indicated in the Lease Estoppel Certificate and Consent relating thereto. Upon Closing, FFCA shall have a first priority lien upon and security interest in Debtor's right, title and interest in and to each of the Premises pursuant to the Mortgages and the UCC-1 Financing Statements. M. NO OTHER AGREEMENTS AND OPTIONS. Neither Debtor, Lessee nor the Premises are subject to any commitment, obligation, or agreement, including, without limitation, any right of first refusal, option to purchase or lease granted to a third party, which could or would prevent or hinder FFCA in making the Loans or prevent or hinder Debtor from fulfilling its obligations under this Agreement or the other Loan Documents, other than those agreements with Existing Lessors for which FFCA shall have received a Lease Estoppel Certificate and Consent prior to Closing and the franchise, license and/or area development agreements with Franchisor for which FFCA shall have received a Franchisor Certificate prior to Closing. N. NO MECHANICS' LIENS. There are no outstanding accounts payable, mechanics' liens, or rights to claim a mechanics' lien in favor of any materialman, laborer, or any other person or entity in connection with labor or materials furnished to or performed on any portion of the Premises; no work has been performed or is in progress nor have materials been supplied to the Premises or agreements entered into for work to be performed or materials to be supplied to the Premises prior to the date hereof, which will not have been fully paid for on or before the Closing Date or which might provide the basis for the filing of such liens against the Premises or any portion thereof; Debtor shall be responsible for any and all claims for mechanics' liens and accounts payable that have arisen or may subsequently arise due to agreements entered into for and/or any work performed on, or materials supplied to the Premises prior to the Closing Date; Debtor has made no contract or arrangement of any kind the performance of which by the other party thereto would give rise to a lien on the Premises; and Debtor shall and does hereby agree to defend, indemnify and forever hold FFCA and FFCA's designees harmless from and against any and an such mechanics' lien claims, accounts payable or other commitments relating to the Premises. O. NO RELIANCE. Debtor acknowledges that FFCA is not affiliated with, and has no business relationship with, Franchisor, other than landlord/tenant and/or creditor/debtor relationships unrelated to the transaction set forth in this Agreement, and that FFCA did not prepare or assist in the preparation of any of the projected financial information used by Debtor in analyzing the economic viability and feasibility of the transaction contemplated by this Agreement. Furthermore, Debtor acknowledges that it has not relied upon, nor may it hereafter rely upon, the analysis undertaken by FFCA in determining the Loan Amounts, and such analysis will not be made available to Debtor. P. FRANCHISOR PROVISIONS. Lessee has entered into franchise, license and/or area development agreements with Franchisor for the conduct of business at the Premises. Such franchise, license and/or area development agreements will be in full force and effect, will permit Lessee to operate the Premises as Franchisor Restaurants, and will have terms which, together with renewal options, will not expire before the scheduled maturity date of the Notes. Q. EXISTING LEASES. Debtor has delivered to FFCA a certified true, correct and complete copy of the Existing Leases. The Existing Leases have not been modified, amended, supplemented or otherwise revised. The Existing Leases to which Lessee is a party (which Existing Leases shall be assigned by Lessee to Debtor prior to the Closing) are the only leases or agreements between the Existing Lessors and Debtor or Lessee with respect to the Leased Premises. The Existing Leases to which Lessee is a party are in full force and effect and constitute the legal, valid and binding obligations of Lessee, enforceable against Lessee in accordance with their terms and, at Closing, such Existing Leases shall constitute the legal, valid and binding obligations of Debtor enforceable against Debtor in accordance with their terms. Debtor and Lessee have not assigned, transferred, mortgaged or hypothecated any of the Existing Leases or any interest therein, except for liens that will be released at Closing, and Debtor and Lessee have not received any notice that any of the Existing Lessors have made any assignment, pledge or hypothecation of all or any part of their interests in any of the Existing Leases. No event has occurred and no condition exists which, with the giving of notice or the lapse of time or both, would constitute a default by any of the Existing Lessors, Debtor or Lessee under those Existing Leases which will be assigned to Debtor prior to Closing, except such default as would not have a Material Adverse Effect. R. NONCONSOLIDATION. (1) Debtor maintains correct and complete books and records of account separate from all other Persons. Where necessary or appropriate, Debtor has disclosed the nature of the transaction contemplated by the Loan Documents and Debtor's independent status to its creditors. The Premises and related restaurant equipment represent all of the assets owned or leased by Debtor as of the date hereof, and Debtor has not commingled its assets and its liabilities with those of any other Person. (2) Debtor maintains its own checking account or accounts with commercial banking institutions separate from other Persons. (3) To the extent that Debtor shares the same employees with other Persons, the salaries of and the expenses related to providing benefits to such employees have been fairly and nonarbitrarily allocated among such Persons, with the result that each such Person bears its fair share of the salary and benefit costs associated with all such common employees. (4) To the extent that Debtor jointly contracts with other Persons to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing are, and at all times shall be, fairly and nonarbitrarily allocated among such Persons, with the result that each such Person bears its fair share of such costs. To the extent that Debtor contracts or does business with vendors or service providers where the goods or services provided are or shall be partially for the benefit of other Persons, the costs incurred in so doing are fairly and nonarbitrarily allocated to or among such Persons for whose benefit the goods or services are provided, with the result that each such Person bears its fair share of such costs. (5) To the extent that Debtor or other Persons have offices in the same location, there is a fair, appropriate and nonarbitrary allocation of overhead among them, with the result that each such Person bears its fair share of such expenses. (6) Debtor has not incurred any indebtedness, secured or unsecured, direct or indirect, absolute or contingent, including, without limitation, liability for the debts of any other Person (and Debtor has not held itself out as being liable for the debts of any other Person), other than the Loans and trade and operational debt incurred in the ordinary course of business with trade creditors and in amounts as are normal and reasonable under the circumstances. Debtor is not a guarantor of any obligations. (7) Other than is contemplated herein, Debtor is not presently a party to a pledge of its assets for the benefit of other Persons. Debtor has not made any loans or advances to any third party (including any Affiliate or constituent party of Debtor). (8) Debtor has conducted its affairs strictly in accordance with its organizational documents including Debtor's corporate general partner's organizational documents and has observed all necessary, appropriate and customary formalities. (9) Debtor does not hold itself out to the public or to any of its individual creditors as being a unified entity with assets and liabilities in common with any other Person. (10) Debtor (i) is solvent, (ii) is able to pay its obligations as they become due and (iii) is not and shall not be engaged in any business or transaction for which its remaining capital is or may be unreasonably small. (11) Debtor has no actual intent to hinder, delay or defraud creditors in connection with any of the transactions contemplated herein or intent to incur (or belief that it is incurring) debts beyond its ability to pay the same as they mature. (12) Debtor has not, as to itself or as to other Persons, (a) commenced any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to Debtor or other Persons or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to Debtor or its debts or other Persons or their debts or (b) sought appointment of a receiver, trustee, custodian or other similar official for Debtor or for all or any substantial part of its or other Person's assets or made a general assignment for the benefit of Debtor's creditors. All representations and warranties of Debtor made in this Agreement shall survive the Closing. 7. COVENANTS. Debtor covenants to FFCA from and after the Closing Date as follows: A. INSPECTIONS. Debtor shall, and Debtor shall cause Lessee to, at all reasonable times and upon reasonable prior notice from FFCA (except in the event of an emergency), (i) provide FFCA and FFCA's officers, employees, agents, advisors, attorneys, accountants, architects, and engineers with access to the Premises, all drawings, plans, and specifications for the Premises in possession of Debtor and Lessee, all engineering reports relating to the Premises in the possession of Debtor and Lessee, the files and correspondence relating to the Premises, and the financial books and records, including lists of delinquencies, relating to the ownership, operation, and maintenance of the Premises, and (ii) allow such persons to make such inspections, tests, copies and verifications as FFCA considers necessary; provided that such access, inspections, tests, copies and verifications shall not unreasonably interfere with Lessee's business operations at the Premises. B. FIXED CHARGE COVERAGE RATIO. Until such time as all of Debtor's obligations under the Notes and the other Loan Documents are paid, satisfied and discharged in full, Debtor shall cause to be maintained a Fixed Charge Coverage Ratio at each of the Premises of at least 1.25:1, as determined on each December 31. For purposes of this Section, the term "Fixed Charge Coverage Ratio" shall mean with respect to the twelve month period of time immediately preceding the date of determination, the ratio calculated for such period of time of (a) the sum of Net Income, Depreciation and Amortization, Interest Expense and Operating Lease Expense, less a corporate overhead allocation in an amount equal to 5% of Gross Sales, to (b) the sum of the FFCA Payments, the Equipment Payment Amount and the Ground Lease Expense. For purposes of this Section, the following terms shall be defined as set forth below: "CAPITAL LEASE" shall mean any lease of any property (whether real, personal or mixed) by Lessee with respect to the subject Premises which lease would, in conformity with generally accepted accounting principles consistently applied, be required to be accounted for as a capital lease on the balance sheet of Lessee. The term "Capital Lease" shall not include any operating lease, including, without limitation, the Operating Leases. "DEBT" shall mean as directly related to the subject Premises and the period of determination (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds., indentures, notes or similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations under leases which should be, in accordance with generally accepted accounting principles consistently applied, recorded as Capital Leases, and (v) obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. "DEPRECIATION AND AMORTIZATION" shall mean with respect to the subject Premises the depreciation and amortization accruing during any period of determination with respect to Debtor as determined in accordance with generally accepted accounting principles consistently applied. "EQUIPMENT PAYMENT AMOUNT" shall mean for any period of determination the sum of all amounts payable during such period of determination under all (i) leases for equipment located at the subject Premises and (ii) all loans secured by equipment located at the subject Premises. "FFCA PAYMENTS" shall mean with respect to the period of determination, the sum of all amounts payable under the Note corresponding to the subject Premises. "GROSS SALES" shall mean the sales (less any discounts) or other income arising from all business conducted at the subject Premises during the period of determination, less sales tax and any amounts received from not-for-profit sales of all non-food items approved for use in connection with promotional campaigns, if any, pursuant to the franchise, license and/or area development agreements with Franchisor for the subject Premises. "GROUND LEASE EXPENSE" shall mean, for any period of determination, the sum of all amounts payable by Debtor under any Existing Lease with respect to the subject Premises. "INTEREST EXPENSE" shall mean for any period of determination, the sum of all interest accrued or which should be accrued in respect of all Debt of Lessee allocable to the subject Premises and all business operations thereon during such period (including interest attributable to Capital Leases), as determined in accordance with generally accepted accounting principles consistently applied. "NET INCOME" shall mean with respect to the period of determination, the net income or net loss of Lessee allocable to the subject Premises. In determining the amount of Net Income, (i) adjustments shall be made for nonrecurring gains and losses allocable to the period of determination, (ii) deductions shall be made for, among other things, Depreciation and Amortization, Interest Expense and Operating Lease Expense allocable to the period of determination, and (iii) no deductions shall be made for (x) income taxes or charges equivalent to income taxes allocable to the period of determination, as determined in accordance with generally accepted accounting principles consistently applied, or (y) corporate overhead expense allocable to the period of determination. "OPERATING LEASE EXPENSE" shall mean the expenses incurred by Lessee under any Operating Lease with respect to the subject Premises and the business operations thereon during the period of determination, as determined in accordance with generally accepted accounting principles consistently applied. Notwithstanding the foregoing, FFCA shall have the option at any time while any of the Notes are outstanding, upon notice to Debtor, to require that Debtor cause to be maintained an aggregate Fixed Charge Coverage Ratio of at least 1.25:1 at all of the Premises relating to the Loans which have been or are about to be the subject of a Securitization (the "Securitized Loans"), instead of a Fixed Charge Coverage Ratio of at least 1.25:1 at each of such Premises. If FFCA exercises such option, the definitions relating to the Fixed Charge Coverage Ratio for such Securitized Loans shall be deemed to be modified as applicable to provide for the calculation of the aggregate Fixed Charge Coverage Ratio for all of the Premises relating to the Securitized Loans. C. LOST NOTE. Debtor shall, if any Note is mutilated, destroyed, lost or stolen (a "Lost Note"), promptly deliver to FFCA, upon receipt of an affidavit from FFCA stipulating that such Note has been mutilated, destroyed, lost or stolen, in substitution therefor, a new promissory note containing the same terms and conditions as such Lost Note with a notation thereon of the unpaid principal and accrued and unpaid interest. Debtor shall provide fifteen (15) days' prior notice to FFCA before making any payments to third parties in connection with a Lost Note. Except as a result of the gross negligence or intentional misconduct of Debtor, FFCA shall indemnify Debtor for all reasonable costs, expenses, damages, claims and liabilities incurred by Debtor as a result of a Lost Note. D. NONCONSOLIDATION. (1) Debtor shall at all times maintain correct and complete books and records of account separate from all other Persons. Where necessary or appropriate, Debtor will disclose the nature of the transaction contemplated by the Loan Documents and Debtor's independent status to its creditors. Debtor shall not own or lease any assets other than the Premises and related restaurant equipment, nor engage in any business other than owning and leasing the Premises and related restaurant equipment, including financing the Premises with FFCA. Debtor shall not commingle its assets and its liabilities with those of any other Person. (2) Debtor shall maintain its own checking account or accounts with commercial banking institutions separate from other Persons. (3) To the extent that Debtor shares the same employees with other Persons, the salaries of and the expenses related to providing benefits to such employees, at all times shall be, fairly and nonarbitrarily allocated among such Persons, with the result that each such Person shall bear its fair share of the salary and benefit costs associated with all such common employees. (4) To the extent that Debtor jointly contracts with other Persons to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing at all times shall be, fairly and nonarbitrarily allocated among such Persons, with the result that each such Person shall bear its fair share of such costs. To the extent that Debtor contracts or does business with vendors or service providers where the goods or services provided are or shall be partially for the benefit of other Persons, the costs incurred in so doing at all times shall be, fairly and nonarbitrarily allocated to or among such Persons for whose benefit the goods or services are provided, with the result that each such Person shall bear its fair share of such costs. All transactions between Debtor and other Persons shall be only on an arm's-length basis. (5) To the extent that Debtor or other Persons have offices in the same location, there shall be a fair, appropriate and nonarbitrary allocation of overhead among them, with the result that each such Person shall bear its fair share of such expenses. (6) Debtor will not incur any indebtedness, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation or assuming liability for the debts of any other Person (and Debtor will not hold itself out as being liable for the debts of any other Person), other than the Loans and trade and operational debt incurred in the ordinary course of business with trade creditors and in amounts as are normal and reasonable under the circumstances. No indebtedness other than the Loans may be secured (subordinate or pari passu) by the Premises. (7) Debtor shall not enter into any contract or agreement with any Affiliate of Debtor, any constituent party of Debtor or any Affiliate of any constituent party of Debtor except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any such party. (8) Except with respect to the Loan Documents, Debtor shall not pledge its assets for the benefit of other Persons. (9) Debtor shall issue separate financial statements prepared not less frequently than annually and prepared according to generally accepted accounting principles consistently applied. (10) Debtor shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character in light of its contemplated business operations. (11) Debtor shall conduct its affairs strictly in accordance with its organizational documents, including Debtor's corporate general partner's organizational documents and shall observe all necessary, appropriate and customary formalities. The books, records and accounts of Debtor shall at all times be maintained in a manner permitting the assets and liabilities of Debtor to be easily separated and readily ascertained from those of any other Person and Debtor shall file its own tax returns. (12) Debtor shall not hold itself out to the public or to any of its individual creditors as being a unified entity with assets and liabilities in common with any other Person. Debtor shall maintain and utilize separate stationery, invoices and checks. (13) Debtor shall not make any loans or advances to any third party (including any Affiliate of Debtor or constituent party of Debtor). (14) Debtor shall not, as to itself or as to other Persons, (i) commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to Debtor or other Persons or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to Debtor or its debts or other Persons or their debts or (ii) seek appointment of a receiver, trustee, custodian or other similar official for Debtor or for all or any substantial part of its or other Person's assets or make a general assignment for the benefit of Debtor's creditors. Debtor shall not take any action in furtherance of, or indicating its consents to, approval of or acquiescence in, any of the acts set forth above. Debtor shall not be unable to, or admit in writing its inability to, pay its debts. E. EXISTING LEASE MODIFICATIONS. The Existing Leases which will be assigned to Debtor prior to Closing shall not be modified, amended, terminated, cancelled or surrendered without FFCA's prior consent, which consent shall not be unreasonably withheld or delayed with respect to modifications or amendments as long as the proposed modification or amendment does not shorten the term of the Existing Lease or increase the amount of rent to be paid thereunder. 8. TRANSACTION CHARACTERIZATION. This Agreement is a contract to extend a financial accommodation (as such term is used in the Code) for the benefit of Debtor. It is the intent of the parties hereto that the business relationship created by this Agreement, the Notes, the Mortgages and the other Loan Documents is solely that of creditor and debtor and has been entered into by both parties in reliance upon the economic and legal bargains contained in the Loan Documents. None of the agreements contained in the Loan Documents is intended, nor shall the same be deemed or construed, to create a partnership between Debtor and FFCA, to make them joint venturers, to make Debtor an agent, legal representative, partner, subsidiary or employee of FFCA, nor to make FFCA in any way responsible for the debts, obligations or losses of Debtor. 9. CONDITIONS OF CLOSING. The obligation of FFCA to consummate the transaction contemplated by this Agreement is subject to the fulfillment or waiver of each of the following conditions: A. TITLE. Fee title to each of the Premises shall be vested in Debtor, free of all liens, encumbrances, restrictions, encroachments and easements, except the Permitted Exceptions and the liens created by the Mortgages and the UCC-1 Financing Statements, provided that, with respect to the Leased Premises, Debtor shall be the holder of a leasehold interest in the land relating thereto and the holder of either a fee or leasehold interest in the buildings and improvements relating thereto, as indicated in the Lease Estoppel Certificate and Consent relating thereto. Upon Closing, FFCA will obtain a valid and perfected first priority lien upon and security interest in Debtor's right, title and interest in and to each of the Premises. B. CONDITION OF PREMISES. FFCA shall have inspected and approved the Premises, the Premises and the equipment located thereon shall be in good condition and repair and of good workmanship and materials, and the Premises shall be fully equipped and operational, clean, orderly, sanitary, safe, well-lit, landscaped, decorated, attractive and with a suitable layout, physical plant, traffic pattern and location, all as determined by FFCA in its sole discretion. C. EVIDENCE OF TITLE. FFCA shall have received for each of the Premises a preliminary title report and irrevocable commitment to insure title by means of a mortgagee's, ALTA extended coverage policy of title insurance (or its equivalent, in the event such form is not issued in the jurisdiction where the Premises is located) issued by Title Company showing good and marketable fee or leasehold title, as the case may be, in such Premises in Debtor, committing to insure FFCA's first priority lien upon and security interest in such Premises subject only to liens, encumbrances, restrictions and easements approved by FFCA, and containing such endorsements as FFCA may require. D. SURVEY. FFCA shall have received a current ALTA survey of each of the Premises, the form and substance of which shall be satisfactory to FFCA in its sole discretion. Debtor shall have provided FFCA with evidence satisfactory to FFCA that the location of each of the Premises is not within the 100-year flood plain or identified as a special flood hazard area as defined by the Federal Insurance Administration, or if any Premises is in such a flood plain or special flood hazard area, Debtor shall provide FFCA with evidence of flood insurance maintained on such Premises in amounts and on terms and conditions satisfactory to FFCA. E. ENVIRONMENTAL. FFCA shall have received a Phase I environmental report (and a Phase II environmental report, if necessary, as determined by FFCA in its sole discretion) for each of the Premises, the form, substance and conclusions of which shall be satisfactory to FFCA in its sole discretion. F. ZONING. Debtor shall have provided FFCA with evidence satisfactory to FFCA that each of the Premises is properly zoned for its use as a Franchisor Restaurant, including evidence that the use of any of the Premises as a Franchisor Restaurant would not constitute a nonconforming use under applicable zoning requirements which would prevent a Franchisor Restaurant from being re-built and operated on such Premises in the event that the existing Franchisor Restaurant is subject to a casualty. G. COMPLIANCE WITH REPRESENTATIONS, WARRANTIES AND COVENANTS. ALL obligations of Debtor under this Agreement shall have been fully performed and complied with, and no event shall have occurred or condition shall exist which would, upon the Closing Date, or, upon the giving of notice and/or passage of time, constitute a breach or default hereunder or under the Loan Documents, the franchise, license and/or area development agreements with Franchisor for the Premises or any other agreement between or among FFCA, Debtor, Lessee or Franchisor pertaining to the subject matter hereof, and no event shall have occurred or condition shall exist or information shall have been disclosed by Debtor or discovered by FFCA which has had or would have a material adverse effect on the Premises, Debtor or Lessee, and accordingly, FFCA's willingness to consummate the transaction contemplated by this Agreement, as determined by FFCA in its sole and absolute discretion. H. PROOF OF INSURANCE. Debtor shall have delivered to FFCA copies of insurance policies showing that all insurance required by the Loan Documents and providing coverage and limits satisfactory to FFCA are in full force and effect. I. OPINION OF COUNSEL TO DEBTOR AND LESSEE. Debtor and Lessee shall have caused Counsel to prepare and deliver an opinion in form and substance satisfactory to FFCA and its counsel. J. ASSIGNMENTS OF RENTS AND LEASES. Debtor shall have executed and delivered an Assignment of Rents and Leases for each Premises. K. AVAILABILITY OF FUNDS. FFCA presently has sufficient funds to discharge its obligations under this Agreement. In the event that the transaction contemplated by this Agreement does not close on or before the date established for Closing under Section 4(a) hereof, FFCA does not warrant that it will thereafter have sufficient funds to consummate the transaction contemplated by this Agreement. L. FRANCHISE AGREEMENT. FFCA shall have received a certificate, consent and agreement from Franchisor in form and substance acceptable to FFCA in its sole discretion with respect to the Premises, the Existing Leases and the franchise, license and/or area development agreements between Lessee and Franchisor relating to the Premises (the "Franchisor Certificate"). M. EXISTING LEASES. Each of the Existing Leases shall be in full force and effect and Debtor shall be entitled to occupy the Premises corresponding thereto. FFCA shall have approved each Existing Lease in its sole discretion and Debtor shall have delivered to FFCA an estoppel certificate and consent from each Existing Lessor, the form and substance of which shall be satisfactory to FFCA in its sole discretion (the "Lease Estoppel Certificate and Consents"). If any mortgages or deeds of trust (or other similar security agreements) encumber fee simple title to any Leased Premises, the holders of such instruments shall have delivered nondisturbance agreements to Debtor and FFCA with respect to the Existing Leases in form and substance acceptable to FFCA in its reasonable discretion (the "Nondisturbance Agreements"). N. CLOSING DOCUMENTS. At or prior to the Closing Date, FFCA and/or Debtor and/or Lessee, as may be appropriate, shall execute and deliver or cause to be executed and delivered to Title Company or FFCA, as may be appropriate, all documents required to be delivered by this Agreement, and such other documents, payments, instruments and certificates, as FFCA may require in form acceptable to FFCA, including, without limitation, the following: (1) Notes (2) Mortgages; (3) Operating Leases; (4) Assignments of Rents and Leases; (5) Franchisor Certificate; (6) Proof of Insurance; (7) Opinion of Counsel to Debtor and Lessee; (8) Evidence of satisfactory zoning; (9) UCC-1 Financing Statements; (10) Environmental Indemnity Agreements; (11) Lease Estoppel Certificate and Consents; and (12) Nondisturbance Agreements, as applicable. O. ADDITIONAL ENTERPRISE VALUE FINANCING. FFCA shall have received and approved the terms and conditions of the Additional Enterprise Value Financing. P. DUE DILIGENCE. FFCA shall have completed its due diligence of Debtor and Lessee to FFCA's satisfaction in its sole and absolute discretion. Upon fulfillment or waiver of all of the above conditions, FFCA shall deposit funds necessary to close this transaction with the Title Company and this transaction shall close in accordance with the terms and conditions of this Agreement. 10. DEFAULT AND REMEDIES A. Each of the following shall be deemed an event of default by Debtor (each, an "Event of Default"): (1) If any representation or warranty of Debtor set forth in any of the Loan Documents is false in any material respect, or if Debtor renders any intentionally false statement or account. (2) If any principal, interest or other monetary sum due under the Notes, the Mortgages or any other Loan Document is not paid within five days after the date when due; provided, however, notwithstanding the occurrence of such an Event of Default, FFCA shall not be entitled to exercise its rights and remedies set forth below unless and until FFCA shall have given Debtor notice thereof and a period of five days from the delivery of such notice shall have elapsed without such Event of Default being cured. (3) If Debtor fails to observe or perform any of the other covenants (except with respect to a breach of the Fixed Charge Coverage Ratio, which breach is addressed in subitem (7) below), conditions, or obligations of this Agreement; provided, however, if any such failure does not involve the payment of any monetary sum to FFCA, is not willful, does not place any rights or property of FFCA in immediate jeopardy, and is within the reasonable power of Debtor to promptly cure after receipt of notice thereof, all as determined by FFCA in its reasonable discretion, then such failure shall not constitute an Event of Default hereunder, unless otherwise expressly provided herein, unless and until FFCA shall have given Debtor notice thereof and a period of 30 days shall have elapsed, during which period Debtor may correct or cure such failure, upon failure of which an Event of Default shall be deemed to have occurred hereunder without further notice or demand of any kind. If such failure cannot reasonably be cured within such 30-day period, as determined by FFCA in its reasonable discretion, and Debtor is diligently pursuing a cure of such failure, then Debtor shall have a reasonable period to cure such failure beyond such 30-day period, which shall not exceed 90 days after receiving notice of such failure from FFCA. If Debtor shall fail to correct or cure such failure within such 90-day period, an Event of Default shall be deemed to have occurred hereunder without further notice or demand of any kind being required. (4) If Debtor or Lessee becomes insolvent within the meaning of the Code, files or notifies FFCA that it intends to file a petition under the Code, initiates a proceeding under any similar law or statute relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts (collectively, an "Action"), becomes the subject of either an involuntary Action or petition under the Code without such involuntary Action or petition being dismissed within 90 days of filing, or is not generally paying its debts as the same become due. (5) If there is an "Event of Default" under any Operating Lease or any other Loan Document, or if there is a breach or default, after the passage of all applicable notice and cure or grace periods, under any other agreement or instrument, including, without limitation, promissory notes and guaranties, between, among or by (1) Debtor, Lessee and/or any subsidiary or Affiliate of Debtor or Lessee, and, or for the benefit of, (2) FFCA and/or any subsidiary or Affiliate of FFCA or Franchise Finance Corporation of America, a Delaware corporation; provided, however, that (x) a breach or default, after the passage of all applicable notice and cure or grace periods, under any such Operating Lease, Loan Document, agreement or instrument which relates to a loan or sale/leaseback transaction which has not been the subject of a Securitization shall not constitute an Event of Default under any such Operating Lease, Loan Document, agreement or instrument which relates to a loan or sale/leaseback transaction which has been the subject of a Securitization, and (y) a breach or default, after the passage of all applicable notice and cure or grace periods, under any such Operating Lease, Loan Document, agreement or instrument which relates to a loan or sale/leaseback transaction which has been the subject of a Securitization transaction shall not constitute an Event of Default under any such Operating Lease, Loan Document, agreement or instrument which relates to a loan or sale/leaseback transaction which has been the subject of a different Securitization transaction. (6) If there is a breach or default, after the passage of any applicable notice and grace period, under an), franchise, license and/or area development agreement with Franchisor with respect to any of the Premises which breach or default would have a Material Adverse Effect, or if such franchise, license and/or area development agreement terminates or expires prior to the payment in full of the Note corresponding to such Premises in accordance with its terms and a substitute agreement for the terminated or expired agreement is not entered into prior to such expiration or termination, which substitute agreement shall be in form and substance reasonably satisfactory to FFCA. (7) If there is a breach of the Fixed Charge Coverage Ratio and FFCA shall have given Debtor notice thereof and Debtor shall have failed within a period of 30 days from the delivery of such notice to pay to FFCA the FCCR Amount (without premium or penalty) with respect to each of those Premises for which the Fixed Charge Coverage Ratio is below 1.25:1 (each, a "Subject Premises"). For purposes of this subsection, "FCCR Amount" means that sum of money which, when subtracted from the outstanding principal amount of the Note corresponding to a Subject Premises, and assuming the resulting principal balance is reamortized over the remaining term of such Note, will result in an adjusted Fixed Charge Coverage Ratio for such Subject Premises of at least 1.25:1 based on the prior year's operations. Promptly after Debtor's payment of the FCCR Amount, Debtor and FFCA agree to execute an amendment to each such Note in form and substance reasonably acceptable to FFCA reducing the principal amount payable to FFCA under such Note and reamortizing the principal amount of such Note over the then remaining term of such Note. Notwithstanding the foregoing, if FFCA shall have exercised its option to require that Debtor cause to be maintained an aggregate Fixed Charge Coverage Ratio of at least 1.25:1 at all of the Premises relating to the Securitized Loans, then, in order to prevent an Event of Default from occurring by reason of a breach of such Fixed Charge Coverage Ratio, Debtor must pay to FFCA the Aggregate FCCR Amount (without premium or penalty) within the aforesaid 30 day period with respect to such of the Premises (as selected by Debtor) necessary to cure the breach of such Fixed Charge Coverage Ratio and for which a Fixed Charge Coverage Ratio of at least 1.25:1 is not being maintained (with the definitions relating to the Fixed Charge Coverage Ratio being modified as applicable to provide for a calculation of the Fixed Charge Coverage Ratio on an individual basis for each such Premises) (each a "Selected Premises"). For purposes of the preceding sentence, "Aggregate FCCR Amount" means that sum of money which, when subtracted from the aggregate outstanding principal balance of each Note relating to the Securitized Loans and corresponding to a Selected Premises, and assuming the resulting principal balance is reamortized over the remaining term of such Note, will result in an adjusted aggregate Fixed Charge Coverage Ratio for all of the Premises relating to the Securitized Loans of at least 1.25:1 based on the prior year's operations. (8) If an Existing Lease terminates or expires prior to the scheduled maturity date of the Note corresponding to the Premises to which the Existing Lease relates. B. Upon and during the continuance of an Event of Default, subject to the limitations set forth in subsection A, FFCA may declare all or any part of the obligations of Debtor under the Notes, this Agreement and any other Loan Document to be due and payable, and the same shall thereupon become due and payable without any presentment, demand, protest or notice of any kind except as otherwise expressly provided herein, and Debtor hereby waives notice of intent to accelerate the obligations secured by the Mortgages. Thereafter, FFCA may exercise, at its option, concurrently, successively or in any combination, all remedies available at law or in equity, including without limitation any one or more of the remedies available under the Notes, the Mortgages or any other Loan Document. Neither the acceptance of this Agreement nor its enforcement shall prejudice or in any manner affect FFCA's right to realize upon or enforce any other security now or hereafter held by FFCA, it being agreed that FFCA shall be entitled to enforce this Agreement and any other security now or hereafter held by FFCA in such order and manner as it may in its absolute discretion determine. No remedy herein conferred upon or reserved to FFCA is intended to be exclusive of any other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Loan Documents to FFCA, or to which FFCA may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by FFCA. 11. ASSIGNMENTS. A. Subsequent to the funding of the Loans by FFCA, FFCA may assign in whole or in part its rights under this Agreement, including, without limitation, in connection with any Transfer, Participation and/or Securitization. Upon any unconditional assignment of FFCA's entire right and interest hereunder, FFCA shall automatically be relieved, from and after the date of such assignment, of liability for the performance of any obligation of FFCA contained herein. B. Debtor shall not, without the prior written consent of FFCA, sell, assign, transfer, mortgage, convey, encumber or grant any easements or other rights or interests of any kind in the Premises, any of Debtor's rights under this Agreement or any interest in Debtor, whether voluntarily, involuntarily or by operation of law or otherwise, including, without limitation, by merger, consolidation, dissolution or otherwise, except, subsequent to the Closing, as expressly permitted by the Mortgage. 12. INDEMNITY. Debtor agrees to indemnify, hold harmless and defend FFCA and its directors, officers, shareholders, employees, successors, assigns, agents, contractors, subcontractors, experts, licensees, affiliates, lessees, lenders, mortgagees, trustees and invitees, as applicable (collectively, the "Indemnified Parties"), from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees (collectively, "Losses"), arising as the result of an Environmental Condition and/or a breach of any of the representations, warranties, covenants, agreements or obligations of Debtor set forth in this Agreement. Without limiting the generality of the foregoing, such indemnity shall include, without limitation, any engineering, governmental inspection and reasonable attorneys' fees and expenses that the Indemnified Parties may incur by reason of any representation set forth in this Agreement being false, or by reason of any investigation or claim of any Governmental Authority in connection therewith. Notwithstanding the foregoing, Debtor shall not be obligated to indemnify, hold harmless and defend the Indemnified Parties with respect to those Losses caused by an Environmental Condition which directly resulted from affirmative acts taken with respect to a Premises by any Person (other than Debtor, Lessee or an Affiliate of Debtor or Lessee) after the completion of a foreclosure of the Mortgage corresponding to such Premises by FFCA or the acceptance by FFCA of a deed-in-lieu thereof, it being expressly understood and agreed that Debtor shall be obligated to indemnify, hold harmless and defend the Indemnified Parties with respect to any Environmental Condition arising or accruing prior to the completion of the foreclosure of such Mortgage by FFCA or the acceptance by FFCA of a deed-in-lieu thereof even if such Environmental Condition is not discovered until after the completion of such foreclosure or acceptance of a deed-in-lieu thereof. 13. MISCELLANEOUS PROVISIONS. A. NOTICES. All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Agreement shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express overnight delivery service or (iv) certified or registered mail, return receipt requested, and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c) the next business day, if delivered by express overnight delivery service, or (d) the third business day following the day of deposit of such notice with the United States Postal Service, if sent by certified or registered mail, return receipt requested. Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below: If to Debtor: 300 Pond Street Randolph, MA 02368 Attention: Mr. Paul Hoagland Telephone: (617) 986-4600 Telecopy: (617) 986-0358 with a copy to: Brown, Rudnick, Freed and Gesmer One Financial Center Boston, MA 02111 Attention: Carl E. Axelrod, Esq. Telephone: (617) 856-8200 Telecopy: (617) 856-8201 If to FFCA: Dennis L. Ruben, Esq. Executive Vice President and General Counsel FFCA Acquisition Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Telephone: (602) 585-4500 Telecopy: (602) 585-2226 B. REAL ESTATE COMMISSION. FFCA and Debtor represent and warrant to each other that they have dealt with no real estate or mortgage broker, agent, finder or other intermediary in connection with the transactions contemplated by this Agreement. FFCA and Debtor shall indemnify and hold each other harmless from and against any costs, claims or expenses, including attorneys' fees, arising out of the breach of their respective representations and warranties contained within this Section. C. WAIVER AND AMENDMENT. No provisions of this Agreement shall be deemed waived or amended except by a written instrument unambiguously setting forth the matter waived or amended and signed by the party against which enforcement of such waiver or amendment is sought. Waiver of any matter shall not be deemed a waiver of the same or any other matter on any future occasion. D. CAPTIONS. Captions are used throughout this Agreement for convenience of reference only and shall not be considered in any manner in the construction or interpretation hereof. E. FFCA'S LIABILITY. Notwithstanding anything to the contrary provided in this Agreement, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Agreement by FFCA, that (i) there shall be absolutely no personal liability on the part of any shareholder, director, officer or employee of FFCA, with respect to any of the terms, covenants and conditions of this Agreement or the other Loan Documents, (ii) Debtor waives all claims, demands and causes of action against FFCA's officers, directors, employees and agents in the event of any breach by FFCA of any of the terms, covenants and conditions of this Agreement or the other Loan Documents to be performed by FFCA and (iii) Debtor shall look solely to the assets of FFCA for the satisfaction of each and every remedy of Debtor in the event of any breach by FFCA of any of the terms, covenants and conditions of this Agreement or the other Loan Documents to be performed by FFCA, such exculpation of liability to be absolute and without any exception whatsoever. F. SEVERABILITY. The provisions of this Agreement shall be deemed severable. If any part of this Agreement shall be held unenforceable, the remainder shall remain in full force and effect, and such unenforceable provision shall be reformed by such court so as to give maximum legal effect to the intention of the parties as expressed therein. G. CONSTRUCTION GENERALLY. This is an agreement between parties who are experienced in sophisticated and complex matters similar to the transaction contemplated by this Agreement and is entered into by both parties in reliance upon the economic and legal bargains contained herein and shall be interpreted and construed in a fair and impartial manner without regard to such factors as the party which prepared the instrument, the relative bargaining powers of the parties or the domicile of any party. Debtor and FFCA were each represented by legal counsel competent in advising them of their obligations and liabilities hereunder. H. OTHER DOCUMENTS. Each of the parties agrees to sign such other and further documents as may be appropriate to carry out the intentions expressed in this Agreement. I. ATTORNEYS' FEES. In the event of any judicial or other adversarial proceeding between the parties concerning this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and other costs in addition to any other relief to which it may be entitled. References in this Agreement to the attorneys' fees and/or costs of FFCA shall mean both the reasonable fees and costs of independent outside counsel retained by FFCA with respect to this transaction and the costs (but not the fees) of FFCA's in-house counsel incurred in connection with this transaction. J. ENTIRE AGREEMENT. This Agreement and the other Loan Documents, together with any other certificates, instruments or agreements to be delivered in connection therewith, constitute the entire agreement between the parties with respect to the subject matter hereof, and there are no other representations, warranties or agreements, written or oral, between Debtor and FFCA with respect to the subject matter of this Agreement. Notwithstanding anything in this Agreement to the contrary, upon the execution and delivery of this Agreement by Debtor and FFCA, the terms and conditions of this Agreement shall control over the terms and conditions of the Commitment notwithstanding that such terms and conditions may be inconsistent with or vary from those set forth in the Commitment. K. FORUM SELECTION; JURISDICTION; VENUE; CHOICE OF LAW. Debtor acknowledges that this Agreement was substantially negotiated in the State of Arizona, the Agreement was signed by FFCA in the State of Arizona and delivered by Debtor in the State of Arizona, all payments under the Notes will be delivered in the State of Arizona and there are substantial contacts between the parties and the transactions contemplated herein and the State of Arizona. For purposes of any action or proceeding arising out of this Agreement, the parties hereto hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and Debtor consents that it may be served with any process or paper by registered mail or by personal service within or without the State of Arizona in accordance with applicable law. Furthermore, Debtor waives and agrees not to assert in any such action, suit or proceeding that it is not personally subject to the jurisdiction of such courts, that the action, suit or proceeding is brought in an inconvenient forum or that venue of the action, suit or proceeding is improper. It is the intent of the parties hereto that all provisions of this Agreement shall be governed by and construed under the laws of the State of Arizona. To the extent that a court of competent jurisdiction finds Arizona law inapplicable with respect to any provisions hereof, then, as to those provisions only, the laws of the states where the Premises are located shall be deemed to apply. Nothing in this Section shall limit or restrict the right of FFCA to commence any proceeding in the federal or state courts located in the states in which the Premises are located to the extent FFCA deems such proceeding necessary or advisable to exercise remedies available under this Agreement or the other Loan Documents. L. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. M. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of Debtor and FFCA and their respective successors and permitted assigns, including, without limitation, any United States trustee, any debtor in possession or any trustee appointed from a private panel. N. SURVIVAL. Except for the conditions of Closing set forth in Sections 2 and 9, which shall be satisfied or waived as of the Closing Date, all representations, warranties, agreements, obligations and indemnities of Debtor and FFCA set forth in this Agreement shall survive the Closing. O. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES. DEBTOR AND FFCA HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. P. TRANSFERS, PARTICIPATIONS AND SECURITIZATION. A material inducement to FFCA's willingness to complete the transactions contemplated by the Loan Documents is Debtor's agreement that FFCA may, at any time after the funding of each of the Loans, sell, transfer or assign any Note, Mortgage and any of the other Loan Documents, and any or all servicing rights with respect thereto (each, a "Transfer"), or grant participations therein (each, a "Participation"), or complete an asset securitization vehicle selected by FFCA, in accordance with all requirements which may be imposed by the investors or the rating agencies involved in such securitized financing transaction, as selected by FFCA, or which may be imposed by applicable securities, tax or other laws or regulations, including, without limitation, laws relating to FFCA's status as a real estate investment trust (each, a "Securitization"). Debtor agrees to cooperate in good faith with FFCA in connection with any Transfer, Participation and/or Securitization, including, without limitation, (i) providing such documents, financial and other data, and other information and materials (the "Disclosures") which would typically and reasonably be required with respect to Debtor and Lessee by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or the Securitization, as applicable; provided, however, Debtor and Lessee shall not be required to make Disclosures of any confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws; and (ii) amending the terms of the transactions evidenced by the Loan Documents and the Operating Leases to the extent necessary so as to satisfy the requirements of purchasers, transferees, assignees, servicers, participants, investors or selected rating agencies involved in any such Transfers, Participations or Securitization, so long as such amendments would not have a material adverse effect upon Debtor, Lessee or the transactions contemplated hereunder. Debtor consents to FFCA providing the Disclosures, as well as any other information which FFCA may now have or hereafter acquire with respect to the Premises or the financial condition of Debtor and Lessee, to each purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to each Transfer, Participation and/or Securitization, as applicable; provided that, to the extent that any of such Disclosures or other information include confidential information, FFCA shall take reasonable steps to advise all Persons to whom confidential information is disclosed by FFCA that the information being disclosed is confidential. FFCA and Debtor (and their respective Affiliates) shall each pay their own attorneys fees and other out-of-pocket expenses incurred in connection with the performance of their respective obligations under this Section. Notwithstanding anything to the contrary contained herein, Debtor shall not be required to: (i) amend or change any documents evidencing or securing any Loan which would modify (A) the interest rate payable under any Note, (B) the stated maturity of any Note, (C) the amortization of principal or prepayment rights with respect to any Note, (D) the recourse provisions of any Loan, or (E) any other material economic term of any Loan which would have a material adverse effect on Debtor or the transactions contemplated by this Agreement; or (ii) bear any cost or expense (other than nominal costs or expenses) for updated title insurance endorsements, surveys, environmental reports, legal opinions or any other similar cost or expense relating to such Transfers, Participations or Securitizations except for its own attorney's fees in reviewing documents drafted or proposed by FFCA or its counsel with respect thereto. Q. STATE SPECIFIC PROVISIONS. DEBTOR ACKNOWLEDGES THAT THE TRANSACTION CONTEMPLATED HEREIN IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF SECTION 52-278a OF THE CONNECTICUT GENERAL STATUTES, AND THAT IN ANY ACTION UPON THIS TRANSACTION, FFCA MAY AVAIL ITSELF OF AND PURSUE ITS RIGHTS TO OBTAIN A PREJUDGMENT REMEDY IN ACCORDANCE WITH SECTION 52-278f OF THE CONNECTICUT GENERAL STATUTES. DEBTOR HAS BEEN ADVISED BY COUNSEL OF ITS RIGHTS WITH RESPECT TO PREJUDGMENT REMEDIES UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED, INCLUDING SECTIONS 52-278a TO 52-278g. DEBTOR HEREBY KNOWINGLY AND WILLING WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ALL RIGHTS OF NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER IN CONNECTION WITH THE OBTAINING BY FFCA OF ANY PREJUDGMENT REMEDY WITH RESPECT TO THIS AGREEMENT, OR PURSUANT TO ANY OTHER DOCUMENT EXECUTED BY DEBTOR IN CONNECTION WITH THIS TRANSACTION, INCLUDING ANY AMENDMENTS OR EXTENSIONS HEREOF OR THEREOF. FURTHER, DEBTOR WAIVES ANY REQUIREMENT OF FFCA TO POST A BOND OR ANY OTHER SECURITY, OR TO SHOW SOME EXIGENCY, IN CONNECTION WITH THE OBTAINING BY FFCA OF ANY SUCH PREJUDGMENT REMEDY. IN WITNESS WHEREOF, Debtor and FFCA have entered into this Agreement as of the date first above written. FFCA: FFCA ACQUISITION CORPORATION, a Delaware corporation By /s/ Stephen G. Schmitz Printed STEPHEN G. SCHMITZ Its EXECUTIVE VICE PRESIDENT AND Chief Investment Officer DEBTOR: NERC LIMITED PARTNERSHIP, a Delaware limited partnership By NERC SPE INC., a Delaware corporation, its general partner By /s/ Paul V. Hoagland Paul V. Hoagland Vice President, Finance and Assistant Treasurer STATE OF ARIZONA ] ] SS. COUNTY OF MARICOPA ] The foregoing instrument was acknowledged before me on August 4, 1997 by Stephen G. Schmitz, EVP and CIO of FFCA Acquisition Corporation, a Delaware corporation, on behalf of the corporation. /s/ Michelle Stewart Notary Public My Commission Expires: COMMONWEALTH OF MASSACHUSETTS ] ] SS. COUNTY OF SUFFOLK ] On this, the 5th day of August, 1997, before me, the undersigned officer, personally appeared Paul V. Hoagland, who acknowledged himself to be Vice President, Finance and Assistant Treasurer of NERC SPE, Inc., a Delaware corporation, the general partner of NERC Limited Partnership, a Delaware limited partnership, and that he as such Vice President, Finance and Assistant Treasurer, being authorized to do so, executed the foregoing for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Paul L. Bauer Notary Public My Commission Expires: EXHIBIT A
- ------------------------------------------------------------------------------------------------------------------------------------ FFCA PC PROPERTY LOAN NO. No. ADDRESS CITY STATE AMOUNT - ------------------------------------------------------------------------------------------------------------------------------------ 8000-5408 22 11 Spring Street Southington CT $ 2,550,000.00 8000-5409 17 285 Daniel Webster Highway Nashua NH $ 2,550,000.00 8000-5410 19 845 West Main Road Middletown RI $ 2,550,000.00 8000-5411 2 Airport Rotary; 545 Route 132 Hyannis MA $ 1,950,000.00 8000-5412 29 81 Newton Road Danbury CT $ 2,150,000.00 8000-5416 15 Shaws Plaza; 255 Collyer Street Providence RI $ 900,000.00 8000-5419 4 6 Whiting Street Hingham MA $ 900,000.00 8000-5420 24 930 Providence Highway Dedham MA $ 500,000.00 8000-5423 23 1175 Riverdale Street W. Springfield MA $ 900,000.00 8000-5424 21 2100 Dixwell Avenue Hamden CT $ 950,000.00 8000-5425 26 297 South Broadway Salem NH $ 900,000.00 8000-5426 28 3 New Rochester Road Dover NH $ 900,000.00 8000-5427 32 1071 South Willow Street Manchester NH $ 950,000.00 8000-5428 31 426 Russell Street, Route 9 Hadley MA $ 950,000.00 8000-5429 34 Ivory Plaza, 170 Pearl Street Braintree MA $ 900,000.00 8000-5430 201 19 Commerce Way Woburn MA $ 950,000.00 8000-5529 20 465 Maine Mall Road S. Portland ME $ 950.000.00 =============== $22,440,000.99 - ------------------------------------------------------------------------------------------------------------------------------------
FFCA STREET ADDRESS CITY STATE 8000-5408 11 Spring Street Southington CT 8000-5413 3107 Berlin Turnpike & Newington CT Pascone Avenue 8000-5415 2855 Main Street Glastonbury CT
FFCA STREET ADDRESS CITY STATE 8000-5416 Shaws Plaza; 255 Collyer Providence RI Street 8000-5419 6 Whiting Street Hingham MA 8000-5420 930 Providence Highway Dedham MA 8000-5421 108 Middlesex Turnpike Burlington MA 8000-5422 291 Boston Turnpike Shrewsbury MA 8000-5423 1175 Riverdale Street West MA Springfield 8000-5424 2100 Dixwell Avenue Hamden CT 8000-5425 297 South Broadway Salem NH 8000-5426 Weeks Traffic Circle Dover NH 8000-5427 1071 South Willow Street Manchester NH 8000-5428 426 Russell Street; Route 9 Hadley MA 8000-5429 Ivory Plaza, 170 Pearl Street Braintree MA 8000-5430 19 Commerce Way Woburn MA 8000-5529 Maine Mall Road South ME Portland
EX-10.14 9 FIRST AMENDMENT TO LOAN AGREEMENT DTD 8/6/97 EXHIBIT 10.14 FIRST AMENDMENT TO LOAN AGREEMENT THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made as of August 6, 1997, by and between FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and NERC LIMITED PARTNERSHIP, a Delaware limited partnership ("Debtor"), whose address is 300 Pond Street, Randolph, Massachusetts 02368. PRELIMINARY STATEMENT FFCA and Debtor executed that certain Loan Agreement dated as of August 6, 1997 (the "Agreement") pursuant to which FFCA provided Debtor with mortgage loan financing for 17 restaurant properties (the "Initial Premises"). Initially capitalized terms not otherwise defined in this Amendment have the meanings set forth in the Agreement. FFCA and Debtor executed that certain letter agreement dated as of August 12, 1997 (the "Letter Agreement") pursuant to which FFCA agreed to provide mortgage loan financing for up to an additional five restaurant properties (the "Additional Premises") substantially on the terms and conditions of the Agreement, provided that the terms and conditions of the Commitment Letter dated May 21, 1997 between FFCA and NE Restaurant Company, Inc. shall control with respect to the interest rate applicable to such loans, FFCA's approval of the Additional Premises and the determination of the loan amounts. Debtor has requested that FFCA provide mortgage loan financing for three of the Additional Premises, with the mortgage loans for the remaining two Additional Premises to be funded at a later date in accordance with the Letter Agreement. Debtor and FFCA desire to amend the Agreement to include the mortgage loans for such three Additional Premises within the terms and conditions of the Agreement. AGREEMENT Section 1. AMENDMENTS. The Agreement is amended as follows: (a) The aggregate "Loan Amount" set forth in Section 2 of the Agreement shall be $24,250,000.00. (b) EXHIBIT A attached to the Agreement is deleted and replaced with EXHIBIT A attached to this Amendment. The term "Premises" as used in the Agreement shall include the Additional Premises. SCHEDULE I attached to the Agreement is deleted and replaced with SCHEDULE I attached to this Amendment. (c) For purposes of the Loans to be made for the Additional Premises, the term "Closing Date" as used in the Agreement shall mean the date of this Amendment. Section 2. INTEREST RATE; INTEREST ACCRUAL DATE. (a) The interest rate set forth in each of the Notes corresponding to the Additional Premises is 9.701% per annum. Debtor authorizes FFCA to revise the Notes and the other Loan Documents, as applicable, executed by Debtor with respect to the Additional Premises to reflect such interest rate and the applicable monthly payment of principal and interest. (b) Debtor and FFCA agree that notwithstanding that each of the Notes is dated August 6, 1997, the date interest began to accrue under the Notes corresponding to the Initial Premises was August 12, 1997 and the date interest will begin to accrue under the Notes corresponding to the Additional Premises is the date of this Amendment. Section 3. CONDITIONS PRECEDENT. Debtor agrees that FFCA's obligation to fund the Loans corresponding to the Additional Premises shall be conditioned upon the satisfaction by Debtor of the conditions precedent set forth in Section 9 of the Agreement with respect to the Additional Premises. Section 4. REPRESENTATIONS AND WARRANTIES. Debtor affirms that the representations and warranties set forth in the Agreement with respect to the Premises, including the Additional Premises, are true, correct and complete as of the date of this Amendment. Section 5. WAIVER AND AMENDMENT. NO provisions of this Amendment shall be deemed waived or amended except by a written instrument unambiguously setting forth the matter waived or amended and signed by the party against which enforcement of such waiver or amendment is sought. Waiver of any matter shall not be deemed a waiver of the same or any other matter on any future occasion. Section 6. CAPTIONS. Captions are used throughout this Amendment for convenience of reference only and shall not be considered in any manner in the construction or interpretation hereof. Section 7. SEVERABILITY. The provisions of this Amendment shall be deemed severable. If any part of this Amendment shall be held unenforceable, the remainder shall remain in full force and effect and such unenforceable provision shall be reformed by such court so as to give maximum legal effect to the intention of the parties as expressed therein. Section 8. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original. Section 9. BINDING EFFECT. This Amendment shall be binding upon and inure to the benefit of Debtor and FFCA and their respective successors and permitted assigns, including, without limitation, any United States trustee, any debtor in possession or any trustee appointed from a private panel. IN WITNESS WHEREOF, Debtor and FFCA have entered into this Amendment as of the date first above written. FFCA: FFCA ACQUISITION CORPORATION, a Delaware corporation By /s/ Mark E. Wood Printed Name Mark E. Wood Its Vice President DEBTOR: NERC LIMITED PARTNERSHIP, a Delaware limited partnership By NERC SPE Inc., a Delaware corporation, its general partner By /s/ Dennis Pedra Dennis Pedra President STATE OF ARIZONA ] ] SS. COUNTY OF MARICOPA ] The foregoing instrument was acknowledged before me on August 29, 1997 by Mark E. Wood, Vice President of FFCA Acquisition Corporation, a Delaware corporation, on behalf of the corporation. /s/ Michelle Stewart Notary Public My Commission Expires: - --------------------------------------------- COMMONWEALTH OF MASSACHUSETTS ] ] SS. COUNTY OF SUFFOLK ] On this, the 27th day of August, 1997, before me, the undersigned officer, personally appeared Dennis Pedra, who acknowledged himself to be President of NERC SPE, Inc., a Delaware corporation, the general partner of NERC Limited Partnership, a Delaware limited partnership, and that he as such President, being authorized to do so, executed the foregoing as his free act and deed and the free act and deed of said corporation for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Richard Beyge Notary Public: My Commission Expires: - ----------------------------------------- Notary Public EXHIBIT A
- ----------------------------------------------------------------------------------------------------------------------------------- FFCA PC PROPERTY LOAN NO. NO. ADDRESS CITY STATE AMOUNT - ----------------------------------------------------------------------------------------------------------------------------------- 8000-5408 22 11 Spring Street Southington CT $ 2,550,000.00 8000-5409 17 285 Daniel Webster Highway Nashua NH $ 2,550,000.00 8000-5410 19 845 West Main Road Middletown RI $ 2,550,000.00 8000-5411 2 Airport Rotary; 545 Route 132 Hyannis MA $ 1,950,000.00 8000-5412 29 81 Newtown Road Danbury CT $ 2,150,000.00 8000-5413 14 3017 Berlin Newington CT $ 250,000.00 Turnpike & Pascone Avenue 8000-5415 13 2855 Main Street Glastonbury CT $ 650,000.00 8000-5416 15 Shaws Plaza; 255 Providence RI $ 900,000.00 Collyer Street 8000-5419 4 6 Whiting Street Hingham MA $ 900,000.00 8000-5420 24 930 Providence Dedham MA $ 500,000.00 Highway 8000-5422 18 291 Boston Turnpike Shrewsbury MA $ 950,000.00 8000-5423 23 1175 Riverdale MA $ 900,000.00 Street W. Springfield 8000-5424 21 2100 Dixwell Avenue Hamden CT $ 950,000.00 8000-5425 26 297 South Broadway Salem NH $ 900,000.00 8000-5426 28 3 New Rochester Road Dover NH $ 900,000.00 8000-5427 32 1071 South Willow Manchester NH $ 950,000.00 Street 8000-5428 31 426 Russell Street; Hadley MA $ 950,000.00 Route 9 8000-5429 34 Ivory Plaza, 170 Braintree MA $ 900,000.00 Pearl Street 8000-5430 201 19 Commerce Way Woburn MA $ 950,000.00 8000-5529 20 466 Maine Mall Road S. Portland ME $ 950,000.00 -------------------------- $24,250,000.00 - -----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE I LEASED PREMISES
- ------------------------------------------------------------------------------------------------------------------------------- FFCA NO. Street Address City State - ------------------------------------------------------------------------------------------------------------------------------- 8000-5408 11 Spring Street Southington CT - ------------------------------------------------------------------------------------------------------------------------------- 8000-5413 3107 Berlin Turnpike & Newington CT Pascone Avenue - ------------------------------------------------------------------------------------------------------------------------------- 8000-5415 2855 Main Street Glastonbury CT - ------------------------------------------------------------------------------------------------------------------------------- 8000-5416 Shaws Plaza; 255 Collyer Providence RI Street - ------------------------------------------------------------------------------------------------------------------------------- 8000-5419 6 Whiting Street Hingham MA - ------------------------------------------------------------------------------------------------------------------------------- 8000-5420 930 Providence Highway Dedham MA - ------------------------------------------------------------------------------------------------------------------------------- 8000-5422 291 Boston Turnpike Shrewsbury MA - ------------------------------------------------------------------------------------------------------------------------------- 8000-5423 1175 Riverdale Street West Springfield MA - ------------------------------------------------------------------------------------------------------------------------------- 8000-5424 2100 Dixwell Avenue Hamden CT - ------------------------------------------------------------------------------------------------------------------------------- 8000-5425 297 South Broadway Salem NH - ------------------------------------------------------------------------------------------------------------------------------- 8000-5426 Weeks Traffic Circle Dover NH - ------------------------------------------------------------------------------------------------------------------------------- 8000-5427 1071 South Willow Street Manchester NH - ------------------------------------------------------------------------------------------------------------------------------- 8000-5428 426 Russell Street; Route 9 Hadley MA - ------------------------------------------------------------------------------------------------------------------------------- 8000-5429 Ivory Plaza, 170 Pearl Braintree MA Street - ------------------------------------------------------------------------------------------------------------------------------- 8000-5430 19 Commerce Way Woburn MA - ------------------------------------------------------------------------------------------------------------------------------- 8000-5529 Maine Mall Road South Portland ME - -------------------------------------------------------------------------------------------------------------------------------
EX-10.15 10 PROMISSORY NOTE, DATED AUGUST 6, 1997 EXHIBIT 10.15 FORM OF PROMISSORY NOTE Dated as of August 6, 1997 $1,950,000.00 Scottsdale, Arizona NERC LIMITED PARTNERSHIP, a Delaware limited partnership ("Debtor"), for value received, hereby promises to pay to FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, or order, on or before September 1, 2017, as herein provided, the principal sum of ONE MILLION NINE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($1,950,000.00), and interest on the unpaid principal amount of this Note from the date hereof to maturity at the rate of 9.67% per annum. (the "Base Interest Rate") on the basis of a 360-day year of twelve 30-day months, such principal and interest to be paid in immediately available funds and in lawful money of the United States, Initially capitalized terms which are not otherwise defined in this Note shall have the meanings set forth in that certain Loan Agreement dated as of the date of this Note between Debtor and FFCA (the "Loan Agreement"). Interest on the principal amount of this Note for the period commencing with the date set forth above through the last day in the month in which this Note is dated shall be due and payable upon execution of this Note. Thereafter, principal and interest shall be payable in consecutive monthly installments of EIGHTEEN THOUSAND THREE HUNDRED NINETY-THREE AND 58/100 DOLLARS ($18,393.58) commencing on October 1, 1997, and continuing on the first day of each month thereafter until maturity of this Note on September 1, 2017, at which time, the outstanding principal and unpaid accrued interest shall be due and payable. Prior to the fifth anniversary of this Note, except as expressly permitted below, Debtor may not prepay this Note. From and after the fifth anniversary of this Note, Debtor may prepay this Note in full, but not in part, including all accrued but unpaid interest hereunder and all sums advanced by FFCA pursuant to the Loan Documents, provided that (i) no default is continuing under this Note and no "Event of Default" is continuing under any of the other Loan Documents, (ii) any such prepayment shall only be made on a regularly scheduled payment date upon not less than 30 days prior written notice from Debtor to FFCA, and (iii) any such prepayment shall be made together with payment of a prepayment premium equal to: (a) 5% of the amount prepaid if the prepayment is made on or following the fifth anniversary of this Note but prior to the sixth anniversary of this Note; (b) 4% of the amount prepaid if the prepayment is made on or following the sixth anniversary of this Note but prior to the seventh anniversary of this Note; (c) 3% of the amount prepaid if the prepayment is made on or following the seventh anniversary of this Note but prior to the eighth anniversary of this Note; (d) 2% of the amount prepaid if the prepayment is made on or following the eighth anniversary of this Note but prior to the ninth anniversary of this Note; and (e) 1% of the amount prepaid if the prepayment is made on or following the ninth anniversary of this Note but prior to the tenth anniversary of this Note. If this Note is prepaid on or following the tenth anniversary of this Note there shall be no prepayment premium. The foregoing prepayment premium shall be due and payable if this Note is prepaid prior to the tenth anniversary of this Note regardless of whether such prepayment is the result of a voluntary prepayment by Debtor or as a result of FFCA declaring the unpaid principal balance of this Note, accrued interest and all other sums due under this Note, the Mortgage encumbering the Premises corresponding to this Note, the other Loan Documents and any other document further securing this Note, due and payable as contemplated below (the "Acceleration"); provided, however, the prohibition on prepayment and such prepayment premium shall not be applicable with respect to a prepayment of this Note as a result of the application of condemnation or casualty proceeds as contemplated by the Mortgage encumbering the Premises corresponding to this Note or as contemplated by the Loan Agreement as a result of a breach of the Fixed Charge Coverage Ratio. If this Note is prepaid as a result of an Acceleration prior to the fifth anniversary of this Note, except as expressly contemplated in the preceding sentence and in the following paragraph, a prepayment premium of 5% of the principal amount prepaid shall be due and payable to FFCA by Debtor at the time of such prepayment. Notwithstanding the foregoing, if, prior to the fifth anniversary of the date of this Note, Debtor and NE Restaurant Company, Inc., a Delaware corporation ("Company"), complete the sale or transfer of all or substantially all of their assets to an independent third party or complete the sale or transfer of all of the partnership interests of Debtor and the stock of company to an independent third party, Debtor may prepay this Note in full, but not in part, including all accrued but unpaid interest hereunder and all sums advanced by FFCA pursuant to the Loan Documents, provided that (i) no default is continuing under this Note and no "Event of Default" is continuing under any of the other Loan Documents, (ii) any such prepayment shall only be made on a regularly scheduled payment date upon not less than 30 days prior written notice from Debtor to FFCA, and (iii) any such prepayment shall be made together with payment of a prepayment premium equal to the Yield Maintenance Amount. "Yield Maintenance Amount" means the difference between (a) the present value computed at the Reinvestment Rate (as defined below) of the stream of monthly principal and interest payments calculated at the Base Interest Rate from the date of prepayment through the scheduled maturity date and (b) the unpaid principal amount of this Note; provided, however, if such difference is a negative number, the Yield Maintenance Amount shall be zero. "Reinvestment Rate" means an interest rate equal to 100 basis points above the current yield of United States Treasury Bonds, Notes and Bills having a weighted average life to maturity closest to the regularly scheduled maturity date of this Note. Upon execution of this Note, Debtor shall establish arrangements whereby all payments of principal and interest hereunder are transferred by wire or other means directly from Debtor's bank account to such account as FFCA may designate or as FFCA may otherwise designate. Each payment of principal and interest hereunder shall be applied first toward any past due payments under this Note (including payment of in costs (as herein defined)), then to accrued interest, and the balance, after the payment of such accrued interest, if any, shall be applied to the unpaid principal balance of this Note; provided, however, each payment hereunder while a default under this Note has occurred and is continuing shall be applied towards any of Debtor's obligations under the Loan Documents or with respect to the Premises in such priority and amounts as FFCA in its sole discretion may determine. This Note is secured by the Mortgages. If any principal, interest or other monetary sum due under this Note is not paid within five days after the date when due and FFCA shall have given Debtor notice thereof and a period of five days from the delivery of such notice shall have elapsed without such past-due sum being paid, or upon the occurrence of an "Event of Default" under any of the Loan Documents, then, in any of such events, time being of the essence hereof, FFCA may declare the entire unpaid principal balance of this Note, accrued interest, if any, and all other sums due under this Note, the Mortgages, the other Loan Documents and any other document further securing this Note, due and payable at once without written notice to Debtor. All past-due principal and/or interest shall bear interest from the due date to the date of actual payment at the lesser of the highest rate for which the undersigned may legally contract, or the rate of 18% per annum (the "Default Rate"), and such Default Rate shall continue to apply following a judgment in favor of FFCA under this Note. If Debtor fails to make any payment or installment due under this Note within five days of its due date, Debtor shall pay to FFCA in addition to any other sum due FFCA under this Note or any other Loan Document a late charge equal to 5% of such past-due payment or installment. All payments of principal and interest due hereunder shall be made (i) without deduction of any present and future taxes, levies, imposts, deductions, charges or withholdings, which amounts shall be paid by Debtor, and (ii) without any other right of abatement, reduction, setoff, defense, counterclaim, interruption, deferment or recoupment for any reason whatsoever. Debtor will pay the amounts necessary such that the gross amount of the principal and interest received by FFCA is not less than that required by this Note. No delay or omission on the part of FFCA in exercising any remedy, right or option under this Note shall operate as a waiver of such remedy, right or option. In any event, a waiver on any one occasion shall not be construed as a waiver or bar to any such remedy, right or option on a future occasion. Debtor hereby waives presentment, demand for payment, notice, of dishonor, notice of protest, and protest, and all other notices or demands in connection with delivery, acceptance, performance, default or endorsement of this Note. All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Note shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express overnight delivery service or (iv) certified or registered mail, return receipt requested, and shall, be deemed to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c) the next business day, if delivered by express overnight delivery service, or (d) the third business day following the day of deposit of such notice with the United States Postal Service, if sent by certified or registered mail, return receipt requested. Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below: If to Debtor: 300 Pond Street Randolph, MA 02368 Attention: Mr. Paul Hoagland Telephone: (617) 986-4600 Telecopy: (617) 986-0358 with a copy to: Brown, Rudnick, Freed and Gesmer One Financial Center Boston, MA 02111 Attention: Carl E. Axelrod, Esq. Telephone: (617) 856-8200 Telecopy: (617) 856-8201 If to FFCA: Dennis L. Ruben, Esq. Executive Vice President and General Counsel FFCA Acquisition Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Telephone: (602) 585-4500 Telecopy: (602) 585-2226 or to such other address or such other person as either party may from time to time hereafter specify to the other party in a notice delivered in the manner provided above. Should any indebtedness represented by this Note be collected at law or in equity, or in bankruptcy or other proceedings, or should this Note be placed in the hands of attorneys for collection after default, Debtor shall pay, in addition to the principal and interest due and payable hereon, all costs of collecting or attempting to collect this Note (the "Costs"), including reasonable attorneys' fees and expenses of FFCA (including those fees and expenses incurred in connection with any appeal and those expenses (but not fees) of FFCA's in-house counsel) whether or not a judicial action is commenced by FFCA. This Note may not be amended or modified except by a written agreement duly executed by Debtor and FFCA. In case any one or more of the provisions contained in this Note shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, and this Note shall be construed as if such provision bad never been contained herein or therein. Notwithstanding anything to the contrary contained in any of the Loan Documents, the obligations of Debtor to FFCA under this Note and any Loan Documents are subject to the limitation that payments of interest and late charges to FFCA shall not be required to the extent that receipt of any such payment by FFCA would be contrary to provisions of applicable law limiting the maximum rate of interest that may be charged or collected by FFCA. The portion of any such payment received by FFCA that is in excess of the maximum interest permitted by such provisions of law shall be credited to the principal balance of this Note or if such excess portion exceeds the outstanding principal balance of this Note, then such excess portion shall be refunded to Debtor. All interest paid or agreed to be paid to FFCA shall, to the extent permitted by applicable law, be amortized, prorated, allocated and/or spread throughout the full term of this Note (including, without limitation, the period of any renewal or extension thereof) so that interest for such full term shall not exceed the maximum amount permitted by applicable law. It is the intent of the parties hereto that the business relationship created by this Note and the other Loan Documents is solely that of creditor and debtor and has been entered into by both parties in reliance upon the economic and legal bargains contained in the Loan Documents. None of the agreements contained in the Loan Documents is intended, nor shall the same be deemed or construed, to create a partnership between FFCA and Debtor, to make them joint venturers, to make Debtor an agent, legal representative, partner, subsidiary or employee of FFCA, nor to make FFCA in any way responsible for the debts, obligations or losses of Debtor. Debtor acknowledges that FFCA (or any affiliate of FFCA) and Franchisor are not affiliates, agents, partners or joint venturers, nor do they have any other legal, representative or fiduciary relationship other than debtor/creditor and/or landlord/tenant relationships unrelated to the transactions contemplated by the Loan Documents. FFCA, by accepting this Note, and Debtor acknowledge and warrant to each other that each has been represented by independent counsel and Debtor has executed this Note after being fully advised by said counsel as to its effect and significance. This Note shall be interpreted and construed in a fair and impartial manner without regard to such factors as the party which prepared the instrument, the relative bargaining powers of the parties or the domicile of any party. Debtor acknowledges that this Note was substantially negotiated in the State of Arizona, the executed Note was delivered in the State of Arizona, all payments under this Note will be delivered in the State of Arizona and there are substantial contacts between the parties and the transactions contemplated herein and the State of Arizona. For purposes of any action or proceeding arising out of this Note, the parties hereto expressly submit to the jurisdiction of all federal and state courts locked in the State of Arizona. Debtor consents that it may be served with any process or paper by registered mail or by personal service within or without the State of Arizona in accordance with applicable law. Furthermore, Debtor waives and agrees not to assert in any such action, suit or proceeding that it is not personally subject to the jurisdiction of such courts, that the action, suit or proceeding is brought in an inconvenient forum or that venue of the action, suit or proceeding is improper. It is the intent of Debtor and PFCA that all provisions of this Note shall be governed by and construed under the laws of the State of Arizona. Nothing contained in this paragraph shall limit or restrict the right of FFCA to commence any proceeding in the federal or state courts located in the state in which the Premises corresponding to this Note is located to the extent FFCA deems such proceeding necessary or advisable to exercise remedies available under the Loan Documents. FFCA, BY ACCEPTING THIS NOTE, AND DEBTOR HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, THE RELAT1ONSHIP OF FFCA AND DEBTOR, DEBTOR'S USE OR OCCUPANCY OF THE PREMISES CORRESPONDING TO THIS NOTE, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. This obligation shall bind Debtor and its successors and assigns, and the benefits hereof shall inure to FFCA and its successors and assigns. FFCA may assign its rights under this Note as set forth in the Loan Agreement. IN WITNESS WHEREOF, Debtor has executed delivered this Note under seal effective as of the date first set forth above. DEBTOR: NERC LIMITED PARTNERSHIP, a Delaware limited partnership By NERC SPE Inc., a Delaware corporation, its general partner By --------------------------- [SEAL] Paul V. Hoagland Vice President Finance and Assistant Treasurer EX-10.16 11 CUSTOM DISTRIBUTION AGREEMENT Exhibit 10.16 BERTUCCI'S B R I C K O V E N P I Z Z E R I A(R) BERTUCCI'S RESTAURANT CORP. CUSTOM DISTRIBUTION AGREEMENT WITH FERRARO FOODS INC. MAY 13, 1998 14 Audubon Road o Wakefield, MA 01880 o (781) 246-6700 FAX: (781) 246-2224 TABLE OF CONTENTS PAGE NO. 1. CUSTOM DISTRIBUTION CONTRACT DOCUMENTS....................................5 RECITALS...................................................................5 2. SCOPE OF AGREEMENT........................................................6 2.1 PRODUCT CATEGORIES.....................................................6 2.2 SERVICE LEVELS AND OPERATIONAL PERFORMANCE.............................6 2.3 SERVICE LEVEL REPORTING................................................7 3. SERVICE AGREEMENT.........................................................7 3.1 SUPPORT PERSONNEL/ASSIGNMENTS BY FERRARO...............................7 3.2 COMMUNICATIONS.........................................................7 4. DELIVERY SCHEDULES........................................................8 4.1 DELIVERY FREQUENCY.....................................................8 4.2 DELIVERY PARAMETERS/WINDOWS............................................9 4.3 EMERGENCY DELIVERIES...................................................9 4.4 DELIVERY CRITERIA......................................................9 4.5 DELIVERY DRIVER AND HELPER RESPONSIBILITY.............................10 4.6 FUEL CHARGES..........................................................10 5. ORDERING PROCEDURES......................................................10 5.1 ORDER GUIDE...........................................................10 5.2 CUSTOMER SERVICE REPRESENTATIVE.......................................11 5.3 ORDER FREQUENCIES.....................................................11 5.4 ORDER CONFIRMATION....................................................11 5.5 ELECTRONIC ORDER ENTRY................................................11 5.6 INVOICING REQUIREMENTS................................................12 6. PRICING POLICIES AND FORMULATIONS.........................................12 6.1 DEFINITION OF DISTRIBUTOR COST........................................12 6.2 CALCULATION OF DISTRIBUTOR SELL PRICE.................................13 6.3 FORMULATION...........................................................14 6.4 MARKET SENSITIVE COMMODITIES/CONTRACT PURCHASES.......................14 6.5 PRICE ADJUSTMENTS.....................................................14 7. DISTRIBUTOR BUYING AND RECEIVING SERVICES................................15 7.1 BUYING SERVICES.......................................................15 8. FERRARO: MANUFACTURER/PACKER VENDOR & BERTUCCI'S RELATIONSHIP............16 8.1 PAYMENT OBLIGATIONS...................................................16 8.2 VENDOR LEAD TIME/STOCK LEVELS.........................................16 9. VERIFICATION/AUDIT PROCEDURES............................................16 9.1 PRICING...............................................................16 9.2 FACILITY..............................................................16 10. TERMS AND CONDITIONS....................................................17 10.1 PAYMENT TERMS........................................................17 10.2 GUARANTEE............................................................17 10.3 CREDITS..............................................................17 10.4 DEFINITIONS..........................................................18 10.5 SUBSTITUTIONS........................................................19 11. REPORTING SERVICES......................................................19 11.1 REPORTING............................................................20 12. INSURANCE...............................................................20 12.1 CERTIFICATE OF INSURANCE.............................................20 12.2 INDEMNIFICATION......................................................21 12.3 HOLD HARMLESS AGREEMENT AND GUARANTY/WARRANTY OF PRODUCT.............21 13. PROPRIETARY/CONTRACT PRODUCT AGREEMENT..................................21 14. OTHER INCOME............................................................22 14.1 REBATES/VOLUME DISCOUNTS/MASTER JOBBER DISCOUNTS/BROKERAGE AND ALLOWANCES...................................22 14.2 CASH DISCOUNTS - VENDOR..............................................22 15. RECALLS.................................................................22 16. TERM....................................................................22 16.1 TERM OF AGREEMENT....................................................22 16.2 OPTION PERIOD........................................................23 17. TERMINATION.............................................................23 17.1 TERMINATION BY BERTUCCI'S FOR CAUSE..................................23 18. COMPLIANCE WITH INDUSTRY STANDARDS/LAWS.................................23 18.1 SANITATION STANDARDS.................................................23 18.2 REGULATORY REQUIREMENTS..............................................23 19. TRADEMARKS AND CONFIDENTIALITY..........................................24 20. NOTICES.................................................................24 21. ASSIGNMENT..............................................................25 22. MISCELLANEOUS...........................................................25 22.1 TRAINING.............................................................25 22.2 NATIONAL ACCOUNT REPRESENTATIVE......................................25 22.3 ANNUAL HOLIDAY GIFT BOX PROMOTION....................................25 22.4 ROLL-OUTS............................................................26 22.5 COMPETITIVE RESTRICTIONS.............................................26 22.6 INITIAL INVENTORY....................................................26 22.7 BEVERAGE PROGRAM.....................................................26 23. PRESS RELEASE...........................................................26 24. GOVERNING LAW...........................................................27 25. ENTIRE AGREEMENT........................................................27 26. EXHIBIT INDEX............................................................. I. Bertucci's Locations/Addresses/Phone Numbers Personnel II. Product List by Category III. Product List by Vendor IV. Hold Harmless Agreement V. Non-Disclosure Agreement VI. Current "Sample" Invoice VII. Fiscal 1998 Calendar VIII. Current "Sample" Order Guide IX. Vendor Address List X. Current Truk Routing XI. Pricing Worksheet XII. Insurance Certificate(s) XIII. Vendor Incident Report 1. CUSTOM DISTRIBUTION CONTRACT DOCUMENTS THESE DOCUMENTS ARE PROPRIETARY IN NATURE AND ARE SUBJECT TO THE NON-DISCLOSURE AGREEMENT EXECUTED BETWEEN THE PARTIES. RECITALS WHEREAS, Bertucci's Restaurant Corp., (herein after referred to as "Bertucci's") operates Bertucci's Brick Oven Pizzeria's throughout certain regions of the United States, as more particularly described on Exhibit "I" attached hereto and made a part hereof this Agreement. WHEREAS, Bertucci's is desirous of entering into a "Custom Distribution Agreement", with Ferraro Foods, Inc., (herein after referred to as Ferraro) pursuant to the terms and conditions as defined and contained herein, for the purpose of procuring for it's existing and contemplated Bertucci's Brick Oven Pizzeria's, with such products as described in the Bertucci's Comprehensive Products List, attached hereto and made a part hereof, this Agreement, as Exhibit II. Ferraro shall sell only the products authorized by Bertucci's for the Bertucci's operations. Bertucci's proprietary products and agreements with manufacturers, distributors and importers shall remain confidential between Ferraro and Bertucci's. 2. SCOPE OF AGREEMENT 2.1 PRODUCT CATEGORIES: Products covered under this Agreement shall be listed into the following product categories: o Cheese (all) o Dairy o Dry Groceries o Meat, Poultry, Seafood o Paper, Plastics, Disposables o Beverages o Beverages: Syrup Post Mix o Prepared Foods o Desserts o Cleaning Supplies o Smallwares o Store Operating Supplies 2.2 SERVICE LEVELS AND OPERATIONAL PERFORMANCE The following Service Level Performance Tracking table and Operational Performance Standard shall be used in measuring the effectiveness of Ferraro. The benchmarks set forth shall be the minimum acceptable levels allowed by Bertucci's for servicing it's operations. 2.2.1 SERVICE LEVELS: All levels are listed as a percentage of total pieces ordered. (TOTAL PIECES ORDERED = 100%) Shortage on Truck 0.15% Damaged Product at Receiving 0.05% Wrong Product Selected 0.1% Product Ordered Wrong 0.05% Concealed Damage 0.05% Service Level (PIECE COUNT 99.6%* FILL RATE) 2.2.2. OPERATIONAL PERFORMANCE: The benchmark for 100% complete orders. Listed as a percentage of overall deliveries made based on approved delivery schedule. (EXCLUDES CORRECTIVE DELIVERIES RESULTING FROM DISTRIBUTOR ERROR) "100% COMPLETE" OPERATIONAL BENCHMARK 90%* Failure to maintain these minimum standards (*) may result in termination of this Agreement as described herein. 2.3 SERVICE LEVEL REPORTING All reporting shall be pursuant to Bertucci's Fiscal Calendar reporting periods provided herein, attached hereto as Exhibit VII. 3. SERVICE AGREEMENT 3.1 SUPPORT PERSONNEL/ASSIGNMENTS BY FERRARO Ferraro shall assign personnel to the following key positions for the purpose of managing the Bertucci's account: o Customer Service Representative/Account Coordinator (Store Activity - day/day) o National Account Representative (shall visit 5 stores /month at random and follow with a Corporate visit) o MIS Director o Purchasing/Material Management Director o Traffic/Dispatch Supervisor o Emergency Contact (24 hours/7 days) The above referenced positions are considered essential for the successful execution of this Agreement. PERSONNEL ASSIGNED MUST BE IDENTIFIED IN THE AGREEMENT. It is encouraged that these positions be filled with personnel experienced in managing multiunit operations. Furthermore, turn-over of personnel in these positions would be considered a hindrance to the successful operations of Bertucci's. Ferraro shall provide cross-training in these positions to ensure continuity of' operations in the case of vacations, sickness or turn-over. Ferraro shall provide a one-time quarterly update following the commencement date for this agreement and biannually subsequent to the initial update on personnel cross-training programs concerning these positions. 3.2 COMMUNICATIONS 3.2.1 Ferraro shall provide a Personnel Contact Directory to each Bertucci's location. The directory shall include all Ferraro departments, personnel, phone numbers, extensions, emergency phone numbers, a dedicated Bertucci's beeper, facsimile numbers, and after-hour/weekend/holiday phone numbers, including personnel on call during these periods. 3.2.2 Ferraro shall cooperate with the requirements to provide all labor, material, software, equipment, training for its part in the current and contemplated on-line communications activity not limited to the following: A. Electronic Order Entry, Electronic Order Confirmation, E-mail, Electronic Transfer of Funds, Invoices and Credit Memo's, Electronic Download for monthly pricing update and Order Guide maintenance. B. Ferraro shall activate all systems required by Bertucci's on July 1, 1998 or pursuant to a schedule submitted by Bertucci's. In support of the initial transition of this transaction, Ferraro shall cooperate with Bertucci's personnel or their assigns in the implementation of any system. C. Electronic Communication capability is considered essential to this Agreement. D. Bertucci's at its sole discretion, may implement this or any other electronic commerce system pursuant to a schedule developed by Bertucci's and subject to change exclusively at the discretion of Bertucci's. E. Any Ferraro cost incurred in the implementation of these support systems shall be born solely by the Ferraro. F. Bertucci's shall be responsible for all costs related to its Corporate and Unit Level expense. G. Bertucci's shall not be obligated to participate in a proprietary system in order to meet the requirements of this clause. H. If a third party provider is essential to execute the necessary implementation, Bertucci's shall participate fully in the selection process of this party. Bertucci's reserves the right to select the party independently if that decision is essential to support the corporate goals of Bertucci's. Ferraro agrees to coordinate with that provider without prejudice. I. Costs related to a third party provider shall be allocated by mutual consent of the parties. 4. DELIVERY SCHEDULES 4.1 DELIVERY FREQUENCY Ferraro shall deliver to each Bertucci's location during the term of this Agreement, twice a week, with exceptions. Deliveries shall be conducted in accordance with the delivery schedule provided herein, attached hereto as Exhibit X, dated April 1, 1998. Requests for modifications to delivery schedules by Ferraro shall be submitted in writing to Bertucci's for approval. 4.2 DELIVERY PARAMETERS/WINDOWS Deliveries will be accepted at the unit level between the hours of 6:00 am - 5:00 pm, except between the hours of 11:30 am - 1:30 pm. 4.3 EMERGENCY DELIVERIES 4.3.1 Emergency deliveries as a result of any Ferraro occurrence as listed herein (see Article 2.1) shall be delivered to the unit(s) in the time frame determined by the Bertucci's Purchasing Department or the unit manager in charge. All expenses related to this type of delivery shall be borne by Ferraro. 4.3.2 Emergency deliveries as a result of a Bertucci's occurrence shall be delivered to the Bertucci's unit(s) in the time frame designated by Bertucci's. All extraordinary expenses associated with the delivery shall be charged at cost, with evidence, to the unit or account as directed by Bertucci's. 4.3.3 All such occurrences shall require immediate notification to the Bertucci's unit and Corporate. 4.4 DELIVERY CRITERIA A. The Ferraro drivers shall stage their vehicle so as not to obstruct traffic, or block customer vehicles or vehicles conducting business on Bertucci's property. Should there be an occurrence when the above can not be avoided, the Ferraro driver shall on demand move or relocate vehicle to the satisfaction of the Bertucci's manager in charge. B. The Ferraro driver and helper ("helper" is defined as an employee of the Ferraro that accompanies the driver for the purposes of assisting with deliveries to Bertucci's locations) shall conduct themselves in a professional manner at all times. The Ferraro driver and helper shall never confront a guest of Bertucci's. C. The Ferraro driver and helper shall never confront Bertucci's personnel in an argumentative manner. Discrepancies not resolved at the location level shall be directed to the designated Corporate Bertucci's and Ferraro personnel immediately. D. All incidents shall be reported by the Bertucci's unit manager (on the Bertucci's Delivery Incident Form attached hereto and made a part hereof as Exhibit XV) which will in turn be forwarded to Ferraro management for disposition. E. The Ferraro drivers and helpers shall dress in professional uniforms representing Ferraro. F. Repeated conduct problems will result in an immediate request for personnel change by Bertucci's. G. Ferraro shall change drivers and/or helpers, immediately upon request by Bertucci's. H. The Ferraro drivers shall not consume, request, or purchase, any products offered by the Bertucci's Restaurant during the delivery. I. Pre- and post delivery purchase and consumption of Bertucci's products are allowed. J. Consumption of such products are not allowed inside kitchen, dining or common areas of Bertucci's. 4.5 DELIVERY DRIVER AND HELPER RESPONSIBILITY The driver and helper shall deliver frozen products first, followed by refrigerated products and dry goods. The products shall be rolled or carried to the portal or delivery storage area in each designated area inside the Bertucci's unit through the designated delivery door or pathway. Bertucci's shall provide personnel to check-in product. The Ferraro driver and the Bertucci's manager in charge shall be present during the final check-in and inspection. All cases shall be factory sealed, no re-packs, and without visible damage. Any damage, shortage or error shall be noted on the receiving ticket/invoice and counter signed by the driver and receiving personnel. Flour and sauce shall be rotated and stocked in their appropriate storage space by the driver and helper of Ferraro. 4.6 FUEL CHARGES In the event of "National Oil Crisis" (relating to Commercial Vehicular Transportation Fuel), Ferraro shall, with adequate evidence, submit for consideration a fuel surcharge request pursuant to the guidelines representative of the Transportation Industry at that time; governed by the Department of Energy. Ferraro shall not charge Bertucci's, at any time during the term of this Agreement, any additional freight, fuel or miscellaneous charges without the written prior approval of an authorized designate of Bertucci's. The acknowledgment of this request shall not be construed as an approval by Bertucci's, nor shall bind Bertucci's to any inferred charges submitted by Ferraro. 5. ORDERING PROCEDURES 5.1 ORDER GUIDE Ferraro, with assistance from Bertucci's will prepare a specific Order Guide to be used by Bertucci's corporate and operating units for placing orders. This guide will be issued and distributed every four weeks by Ferraro to arrive at least three (3) days prior to the start of the next reporting period. A current sample Order Guide is provided as Exhibit VIII. The schedule for Order Guide completion is week 3 of each 4 week period as outlined in the Bertucci's Fiscal Calendar enclosed herein and attached hereto as Exhibit VII. 5.2 CUSTOMER SERVICE REPRESENTATIVE In the event Bertucci's and Ferraro at any time are not linked "electronically" for the purpose of "Electronic Order Entry" then, Ferraro shall provide adequate "Customer Service Representative(s)" to contact each Bertucci's operating unit between 7:30 am and 10:30 am, twice a week, for the purpose of obtaining orders for products covered under this Agreement, more specifically identified on Exhibit "II" attached hereto and made a part hereof this agreement. 5.3 ORDER FREQUENCIES Orders for products shall be placed twice a week by each Bertucci's unit one (1) calendar day before the actual receipt of goods corresponding to the contracted delivery schedule. Ferraro shall contact at pre-prescribed times each Bertucci's unit, for their respective order. Ferraro and Bertucci's will mutually agree on order cut-off times and "special order" requests which will be incorporated by Addendum to this Agreement. A "checksum" procedure must be incorporated in the ordering procedure to insure accurate communication of the order from the Bertucci's manager to the Ferraro Customer Service Representative. The Bertucci's manager must state the checksums, total line items and total units to be ordered, prior to commencing the order placement. At the end of the order the Ferraro representative will verify the order against these "checksums" for accuracy. 5.4 ORDER CONFIRMATION In the event of "Electronic Order Entry", immediate Order Confirmation via a transmitted unit, "hard copy" in real time, shall be designed into the system mutually between Bertucci's and Ferraro. 5.5 ELECTRONIC ORDER ENTRY Ferraro will provide at its sole expense, unit level computer (Personnel computer type compatible) software to place orders directly with Ferraro. Order Entry System shall include as a base minimum system, but not limited to the list below: o Direct Order Entry o Immediate Order Confirmation at Unit Level o Suggested Order Levels (established by Bertucci's Management) o Master Order Template o Lock-Out Quantity o Lock-Out of Non-authorized products access o Immediate Total Order Cost o Immediate Stock Status o Corporate level access to Bertucci's data on-line o Order/Check summary o Year 2000 compliant (no later than December, 1998) 5.6 INVOICING REQUIREMENTS 5.6.1 Ferraro shall provide Bertucci's, two (2) part hard copy delivery tickets evidencing the following data in the form acceptable to Bertucci's. SAMPLE INVOICE MUST BE INCLUDED IN THE AGREEMENT. Invoices must represent the unit order "as placed" and the actual quantity shipped. 5.6.2 Pursuant to the product categories as described herein, under Article 2, Ferraro shall categorize the entire invoice, in addition to the product recap using these product designators, (provide sample invoice, as Exhibit VI). 5.6.3 In the event Bertucci's and Ferraro operate using "Electronic Voucher Matching," the categories described herein shall still be in effect for both the delivery tickets and the "Electronic Vouchers." 6. PRICING POLICIES AND FORMULATIONS 6.1 DEFINITION OF DISTRIBUTOR COST 6.1.1 Ferraro's cost shall be defined as manufacturer/packer invoice to Ferraro, less manufacturer/packer's promotional allowances plus freight, if applicable, for the period of promotion and/or case discounts. 6.1.2 Rebates, volume discounts, master jobber discounts, product allowances, and any other incomes not reflected in the product cost on the Vendor Invoice shall be subject to guidelines pursuant to Article 14. 6.2 CALCULATION OF DISTRIBUTOR SELL PRICE All "sell" pricing covered under the Term of this Custom Distribution Agreement, shall be based on the true landed cost, as described above. This agreement is a set formulated Cost Plus (mark-up) over the Ferraro landed cost. The "sell" price of each product category, under this Agreement shall be determined by the formulations as provided herein: MARK-UP (%) -------------- Cheese 8.5% Dairy 8.5% Dry Groceries 8.5% Meat, Poultry, Seafood 8.5% Paper, Plastics, Disposables 8.5% Beverages 8.5% Beverages: Syrup 8.5% Prepared Foods 8.5% Desserts 8.5% Cleaning Supplies 8.5% Smallwares 8.5% Store Operating Supplies 8.5% Overage Freight Mark-Up ------- -------- ------- Frozen Shredded Mozzarella $0.05 $0.015 8.5% Mozzarella is formula based pricing reflected as a cost per pound over the block market. 6.3 FORMULATION 6.3.1 As part of this Agreement, the formulation basis has been provided as indicated, ($) or (%) mark up over base landed cost. 6.3.2 LANDED COSTS FOR ALL PRODUCTS ARE LISTED ON THE WORKSHEET PROVIDED HEREIN, ATTACHED HERETO AS EXHIBIT XI. This cost information will verified upon initial delivery of inventory to Ferraro and is subject to change in the interim. 6.3.3 All Bertucci's units shall be charged the same pricing regardless of geographic location. 6.4 MARKET SENSITIVE COMMODITIES/CONTRACT PURCHASES Contained in the Bertucci's products listing are various items which are "Market Sensitive" and "Contracted". These items vary in their frequency of procurement and use. Below listed are items which fall in one of these categories: LEPRINO MOZZARELLA CHEESE - The weekly sell price to Bertucci's shall be based on the previous Thursday's Block Market close, with pricing implemented on deliveries the following Monday. (i.e. April 6, 1998 Monday pricing is based on the Block Market close of April 2, 1998.) NO ADDITIONAL PRODUCTS HAVE BEEN IDENTIFIED BY FERRARO AS ELIGIBLE "MARKET SENSITIVE" ITEMS. 6.5 PRICE ADJUSTMENTS 6.5.1 Price adjustments for the "Contract" purchased inventory shall be as follows: Mutually, the Bertucci's and the Ferraro buyer will evaluate the on hand quantities and usage reports to establish a "Run-out" date of the specific product and/or price concerned in the Ferraro warehouse. Based on a mutually agreed upon date, and remaining inventories notwithstanding, Ferraro shall implement pricing to Bertucci's effective on the above referenced date. 6.5.2 Requests for price adjustments for other than "Market or Contract" products shall be by notification of at least 30 days in advance by official correspondence by the Vendor to Bertucci's. This notification allows for Bertucci's and Ferraro to evaluate the current situation. Ferraro shall respect "buy in" positions for price protection as directed by Bertucci's and corresponding to product cycles. Price adjustments other than those prescribed above shall be prohibited under this Agreement. 7. DISTRIBUTOR BUYING AND RECEIVING SERVICES 7.1 BUYING SERVICES 7.1.1 Ferraro shall act as "Buying Agent" as/when directed by Bertucci's. Ferraro shall perform all functions typical of a Distributor/Buying Agent. Bertucci's from time to time may request products other than contained herein this Agreement. Those items requested by Bertucci's which are not covered under this Agreement, Exhibit "II" shall be accompanied by a written requisition approved by the Bertucci's buyer. 7.1.2 Ferraro will provide samples of manufacturers products, as requested, for evaluation by Bertucci's. 7.1.3 Ferraro, as a condition of this agreement, shall purchase, on behalf of Bertucci's, the remaining proprietary inventories mutually agreed upon by the incumbent distributor and Ferraro. 7.1.4 The purchase price for these inventories shall be negotiated by Bertucci's and the incumbent distributor. A. Bertucci's shall establish the final inventory list. B. Bertucci's shall arrange the transaction date(s) between Ferraro and the current distributor. C. Ferraro shall arrange to pick-up at Bertucci's current distributor said inventories and transport to the approved Ferraro warehouse for inventory staging purposes, D. Bertucci's shall bear no costs in the pick-up, transportation and stocking of these products. 7.1.5 Ferraro shall instruct Bertucci's current distributor as to the sequence and palletizing methods it desires (i.e., shrink wrapping, etc.). Ferraro shall be obligated to pay Bertucci's current distributor net 14 days of invoice pick up date. Ferraro shall merge the Bertucci's current distributor inventory, quantities and pricing into the current new Ferraro/Bertucci's inventories. The merging of the quantities and pricing shall be implemented using the "weighted average" system if price is different. 8. FERRARO: MANUFACTURER/PACKER VENDOR & BERTUCCI'S RELATIONSHIP 8.1 PAYMENT OBLIGATIONS 8.1.1 Ferraro, the Manufacturer/Packer(vendor) and Bertucci's are independent contractors. Bertucci's shall have no contractual obligation to pay vendor(s) directly. Ferraro shall pay all Vendors directly within their terms and conditions. There shall be no interruption in product flow as a result of credit hold by either Ferraro or Vendor. 8.1.2 Credit hold shall be cause for termination (see Article 17). 8.2 VENDOR LEAD TIME/STOCK LEVELS 8.2.1 Ferraro and vendor(s) shall communicate to establish acceptable stock levels in order to maintain the flow of products that corresponds to the replenishment needs of Bertucci's. 8.2.2 Ferraro and Vendor shall take into consideration all factors affecting products in transit. The guarantee of product availability for an "on demand" shipment, pursuant to the acceptable Order Completion Benchmark is essential to the success of this Proposal. Ferraro shall respect Vendor lead times and maintain a proper safety stock level to compensate for potential transportation delays due to weather, holidays, etc. 9. VERIFICATION/AUDIT PROCEDURES 9.1 PRICING 9.1.1 Bertucci's shall have the right to verify via audit, pricing and product specifications quarterly with a three business day written notice. Ferraro shall furnish to Bertucci's, at the Ferraro offices, Vendor invoices, freight bills, receiving documents and any other supporting documentation pertinent to vendor transactions or as requested by the audit team. Discrepancies in favor of Bertucci's shall be credited to Bertucci's Corporate account immediately at time of discovery. 9.2 FACILITY 9.2.1 Bertucci's shall have the right during the term of this Agreement, to enter the Ferraro warehouses without notice at any time, during the normal working hours of Ferraro for the purpose of inspecting the inventories, products, facilities and fleet. Facility inspection shall be conducted in such a manner as not to interrupt the business of Ferraro. A Ferraro representative shall be present at all times. 9.2.2 Ferraro shall maintain its facilities in accordance with local, state, and industry standards and codes pursuant to Article 18. 10. TERMS AND CONDITIONS 10.1 PAYMENT TERMS 10.1.1 Bertucci's shall remit to Ferraro for all products received in good order and invoiced by the Ferraro. Invoices shall be payable via Electronic AB routing to the Ferraro bank every 14 days. Payments will be executed every Wednesday for all Ferraro invoices from the week ended on two Saturdays prior. 10.1.2 Ferraro must collect and report "all applicable" taxes for each state where Bertucci's conducts business. Ferraro must obtain and maintain a tax reporting ID number for each of these states as required, and submit such evidence to Bertucci's. 10.1.3 Bertucci's will entertain frequency of payments with appropriate cash discounts applicable. 10.2 GUARANTEE Non Applicable 10.3 CREDITS 10.3.1 Credits for the following conditions shall be handled ONLY at the time of delivery, by both the Ferraro driver and the Bertucci's manager: o Shortage on Truck o Damaged Product at the Time of Receiving o Wrong Product Selected o Product Ordered Wrong o Concealed Damage 10.3.2 In the event that any of these occur, the Ferraro driver will make the appropriate notation on the delivery invoice ticket, initial the changes and require the manager to countersign and date the delivery invoice ticket. Ferraro will then be required to make the corresponding change at their office. Concurrently Ferraro will immediately transmit by hard copy or electronic transfer the exception to the invoice for final processing by Bertucci's. 10.4 DEFINITIONS 10.4.1 SHORTAGE ON TRUCK 1. An item ordered by the Unit but not on the truck at the time of delivery. o Shorted items shall not be automatically re-shipped. o Ferraro is obligated to provide next day delivery of all shorted products. 10.4.2 DAMAGED PRODUCT AT THE TIME OF RECEIVING A. Product damaged prior to loading, in transit, or during the unloading process. B. Acceptance of the product is at the Unit Manager's discretion. o Damaged items shall not be automatically re-shipped. o Ferraro is obligated to replace the product in accordance with the requirements of the Manager on duty. C. Ferraro shall remove or leave the product at the sole discretion of Bertucci's. 10.4.3 WRONG PRODUCT SELECTED A. Product picked in error instead of the item originally ordered. Acceptance of the incorrect product is at the Unit Manager's discretion. B. If the Unit Manager accepts the incorrect product, it must properly be noted on the Invoice, countersigned by both parties (see Article 10.3.2). o Originally ordered items shall not be automatically shipped. o Ferraro is obligated to replace the product in accordance with the requirements of the Manager on duty. 10.4.4 PRODUCT ORDERED WRONG A. Product improperly ordered by the Unit Manager. B. Acceptance of the incorrect product is at the Unit Manager's discretion. C. If the Unit Manager accepts the incorrect product, it must be properly noted on the Invoice, countersigned by both parties (see Article 10.3.2). o Originally ordered items shall not be automatically shipped. o Ferraro is obligated to replace the product in accordance with the requirements of the Manager on duty at Bertucci's expense. D. Ferraro shall communicate estimated shipping costs to the Manager for approval prior to the shipping and record those costs on the Invoice. 10.4.5 CONCEALED DAMAGE A. Damage not apparent at time of delivery. B. Ferraro shall pick-up for inspection, products that are found with hidden damage or defects with notification by Bertucci's for disposition by the Ferraro. C. Disposition shall not be considered a credit memo. D. After evaluation, Ferraro shall advise Bertucci's of it's decision, and if warranted, issue a credit memo. E. Bertucci's may appeal all dispositions. F. Credits or pick-ups shall be authorized by Ferraro on products delivered within the prior five (5) days. G. In the event Bertucci's over orders, then Bertucci's has the right to return a specified quantity for a re-stocking charge. RE-STOCKING CHARGE $2.00 PER UNIT 10.5 SUBSTITUTIONS 10.5.1 Product(s) available that have been approved by Bertucci's Corporate are acceptable for substitution if the following condition(s) exist: A. Manufacture/packer defect. B. Manufacture/packer recall. C. Unavailability of original product through no fault of Ferraro. 10.5.2 Ferraro has the obligation to advise the Bertucci's manager of the problem either at the time of order or the day of shipment of the conditions above if they exist. 10.5.3 All substitutions must be reported to Bertucci's Corporate prior to the order shipping or immediately thereafter. 10.5.4 Substitutions are subject to a "back order" penalty for the purposes of Service Level Tracking. 10.5.5 The Invoice must show the original product ordered and the item substituted. 11. REPORTING SERVICES All reporting shall coincide to Bertucci's Fiscal Calendar reporting periods provided herein, attached hereto Exhibit VII. 11.1 REPORTING Ferraro shall provide Bertucci's the following reports as part of it's Information Transmittal obligation under this Agreement. The list below represents the information required by Bertucci's. The requirements may change from time to time. Bertucci's shall provide input regarding the format of all reports. 11.1.1 PERIOD PRICING, PRODUCT AND INVENTORY GUIDES - Color coordinated and dated. Period Pricing Guide will be distributed by Ferraro to the units three (3) days prior to the first day of the period or effective date of new pricing. In addition Ferraro shall provide as needed the period order template for use at the unit level in electronic order entry. 11.1.2 USAGE REPORTS BY BERTUCCI'S UNIT - This report is by period providing usage for the previous period. This report is due to Bertucci's corporate by the 10th day of the following period. 11.1.3 USAGE REPORT BY VENDOR - This report is by period providing usage for the previous period. This report is due to Bertucci's corporate by the 10th day of the following period. 11.1.4 DESCENDING DOLLAR/PRODUCT REPORT - This report is by period providing usage by descending dollar/product. This report is due to Bertucci's corporate by the 10th day of the following period. 11.1.5 FERRARO INVENTORY ON HAND REPORT BY PRODUCT - This report encompasses product on hand weekly in the Ferraro warehouse. This report shall be submitted by Facsimile to Bertucci's Corporate every Friday by 4:00 p.m. 11.1.6 PRODUCT VELOCITY/CONSUMPTION REPORTS - This report illustrates the movement of all Bertucci's products for a given period. This report is due to Bertucci's on the 10th day of the following period. 11.1.7 EXCEPTION REPORTS - As designed and as needed by Bertucci's. 12. INSURANCE 12.1 CERTIFICATE OF INSURANCE 12.1.1 Ferraro shall provide evidence of insurance on a Certificate of Insurance form, with companies acceptable to Bertucci's, with the following coverage, naming in all cases Bertucci's, Inc., et al. as additional insured. 12.1.2 Comprehensive general liability insurance, including automobile/truck liability coverage for owned, non-owned, leased or rented to be used in the performance of this Agreement, with minimum limits of Two Million Dollars ($2,000,000) combined single limit per occurrence. Such liability insurance shall provide Blanket Broad Form contractual coverage. Property damage insurance shall include a policy endorsement providing an extension of the policy for Broad Form Property Damage coverage. 12.1.3 Workers' compensation insurance in a form prescribed by the laws of the Commonwealth of Massachusetts and the states(s) where Ferraro is located. 12.2 INDEMNIFICATION 12.2.1 Ferraro shall indemnify Bertucci's from and against any and all claims, suits, judgments, damages, losses and expenses (including attorney's fees) of any nature whatsoever arising directly or indirectly out of, or resulting, either in whole or in part from this Agreement. 12.3 HOLD HARMLESS AGREEMENT AND GUARANTY/WARRANTY OF PRODUCT 12.3.1 Ferraro shall request from each and every Bertucci's appointed or designated vendor and each and every Ferraro vendor doing business with Bertucci's currently or contemplated, a Hold Harmless Agreement in the form acceptable to Bertucci's, as illustrated on Exhibit "IV" attached hereto and made a part hereof, this Agreement. This is a prerequisite for all vendors doing business with Bertucci's. Bertucci's will not defend Ferraro or vendor against any claim. 13. PROPRIETARY/CONTRACT PRODUCT AGREEMENT Bertucci's has provided Ferraro with written evidence of existing agreements with product manufacturers, in which the manufacturers have agreed on prices they will charge distributors for products to be resold to Bertucci's. The Vendors are identified in Exhibit "II" attached hereto and made a part hereof, this Agreement. This list will be updated by the Bertucci's buyer as changes warrant. 14. OTHER INCOME 14.1 REBATES/VOLUME DISCOUNTS/MASTER JOBBER DISCOUNTS/BROKERAGE AND ALLOWANCES 14.1.1 All Vendors which offer rebates/volume discounts/master jobber discounts and allowances for Bertucci's products shall pass them directly to the benefit of Bertucci's from the Vendor in a manner designated by Bertucci's. 14.1.2 Any product which includes one of the above programs during the term of this agreement, involving a product which Bertucci's uses and may not have full knowledge of, shall be offered to Bertucci's. 14.2 CASH DISCOUNTS - VENDOR 14.2.1 Discounts offered by Vendors and successfully achieved by Ferraro. 14.2.2 Ferraro shall retain such discounts as long as a cash discount is not a "catch-all" for other allowances. 15. RECALLS In the event of a product recall, for ANY reason, Ferraro shall at it's sole expense retrieve product from Bertucci's units at no cost to Bertucci's. Ferraro will notify all Units of the lot codes subject to the recall and convey instructions regarding the proper disposition of the product. If product should be required to be returned to the vendor then any expenses incurred shall be handled between the Vendor and Ferraro. As "recalls" are sometimes critical. "Time is of the Essence" with regards to this situation. 16. TERM 16.1 TERM OF AGREEMENT The term of this Agreement shall be for a period of four (4) years, which shall commence on July 15, 1998, hereafter referred to as the Commencement Date. 16.2 OPTION PERIOD Provided this Agreement is not in default hereunder Bertucci's shall have the right to extend this Agreement for an additional two (2) years pursuant to the terms and conditions contained herein and in effect at the time of option notification. To be effective Bertucci's must by evidence of a written notice advise Ferraro of it's intent to option an additional two years with a 90 day written notice. Should however Ferraro wish not to enter into the option under the same terms and conditions then Ferraro shall advise Bertucci's within 10 days of receipt of option notice by Bertucci's. 17. TERMINATION 17.1 TERMINATION BY BERTUCCI'S FOR CAUSE If Ferraro should become insolvent, file any bankruptcy proceedings, make a general assignment for the benefit of creditors, suffer or allow appointment of a receiver, refuse, fail or be unable to make prompt payment to Vendors, disregard applicable laws, ordinances, governmental orders or regulations or the instructions of Bertucci's, or if Ferraro should otherwise be guilty of a violation of, or in default under, any provision of this Agreement, then Bertucci's may, without prejudice to any other right or remedy available to Bertucci's, and after giving Ferraro 30 days written notice, terminate this Agreement, take possession of any products or materials in which title by virtue of valid invoice has been passed to Bertucci's. 18. COMPLIANCE WITH INDUSTRY STANDARDS/LAWS 18.1 SANITATION STANDARDS The Ferraro warehouses shall maintain standards acceptable to the American Institute of Bakeries with a score of (900+), the National Sanitation Foundation, Local Health Departments, any federal, state and local inspecting agency having jurisdiction over this type of facility. 18.2 REGULATORY REQUIREMENTS Ferraro shall comply with all applicable federal, state and local laws and executive order and regulations issued pursuant hereto, including without limitation all laws relating to equal employment opportunity. All Ferraro vehicles will meet or exceed the requirements of the U.S. Department of Transportation and display applicable Road Tax permits on Ferraro vehicles as required by each state. 19. TRADEMARKS AND CONFIDENTIALITY Ferraro acknowledges that during the term of this agreement information concerning Bertucci's may be obtained which may include valuable, proprietary and confidential matter or information relating to trade secrets, recipes, concepts, formulas, product configurations, designs, specifications, manufacturing processes, operational processes, equipment, suppliers, customers, employees, research projects, inventions, engineering, marketing, merchandising, purchasing, finances, and other information of a valuable and confidential nature which are owned by Bertucci's and which are the basis for Bertucci's business ("Confidential Matter") and shall be used by Ferraro only pursuant to the terms and for purposes of this Agreement. Ferraro shall comply with reasonably prudent procedures designed to maintain in confidence, safeguard as Bertucci's property, not use except consistent with this Agreement or in any other manner agreed to by Bertucci's in writing and prevent disclosure to others of, Confidential Matter. Ferraro has executed a Disclosee and Confidentiality Agreement provided by Bertucci's and executed by Ferraro on March 11, 1998, found on Exhibit "V" attached hereto and made a part hereof this Agreement and will remain in effect as described in the Disclosee Confidentiality Agreements. 20. NOTICES Any notice or consent required to be given by or on behalf of either party upon the other shall be in writing and shall be given by mailing such notice or consent by prepaid registered mail or certified mail addressed to the other party at the following address: For Bertucci's: Mr. Edward Buice, Vice-President and General Counsel BERTUCCI'S RESTAURANT CORP. 14 Audubon Road Wakefield, MA 01880 For Ferraro: Mr. Michael Giammarino, President & C.E.O FERRARO FOODS, INC. 701 Hadley Road So. Plainfield, NJ 07080 21. ASSIGNMENT This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their successors and assigns. Notwithstanding the foregoing, this Agreement may not be assigned by Ferraro. Bertucci's reserves the right to assign the Agreement as required. 22. MISCELLANEOUS 22.1 TRAINING Ferraro shall provide adequate training for all it's personnel effected in the event of the acceptance of this Bid. Ferraro shall use all available means to insure a transition with minimal problems. This training should include but not limited to the following; o Familiarity of Bertucci's Products o Warehouse Handling/Receiving of Product o Driver Routing o Customer Service o Purchasing Leadtimes o MIS Department/Bertucci's Link-up 22.2 NATIONAL ACCOUNT REPRESENTATIVE The Ferraro National Account representative responsible for Bertucci's shall visit the Bertucci's Corporate office, at 14 Audubon Road, Wakefield, Massachusetts no less than once a month or as may be called on from time to time to handle situations not easily managed by telephone. The representative shall visit five (5) Bertucci's locations, at random, per month. (S)he shall also report findings, in person, at Bertucci's Corporate once per month. 22.3 ANNUAL HOLIDAY GIFT BOX PROMOTION Ferraro shall deliver biannually Bertucci's gift boxes containing certificates to each operating unit. Ferraro, shall as part of this obligation pick-up at Bertucci's or its assign, deliver as required and inventory gift boxes as requested by Bertucci's. Each unit will order certificates using a product number assigned to said certificates for tracking and order purposes. At completion of promotion The Ferraro shall pick-up and re-deliver to Bertucci's all surplus certificates. A product control form shall be issued by Bertucci's to manage this function. There shall be no cost to Bertucci's as a result of this requirement. 22.4 ROLL-OUTS Periodically, Bertucci's will engage Ferraro to distribute marketing, promotional, and training kits throughout the company. Distribution of these kits (referred to as "roll- outs") shall be coordinated by Bertucci's Corporate with Ferraro. BERTUCCI'S WILL ACKNOWLEDGE A $1.75 DRAYAGE CHARGE PER CASE FOR THE DISTRIBUTION OF THESE KITS. 22.5 COMPETITIVE RESTRICTIONS Ferraro et al., shall not offer to sell, solicit, engage in negotiations or contemplate to enter into any transactions whatsoever with Pizzeria Uno, The Italian Oven, or California Pizza Kitchen or its subsidiaries and affiliates for the term of this agreement without the express written permission of a Bertucci's Corporate Officer. 22.6 INITIAL INVENTORY Ferraro, as a condition of this Agreement, shall have all Bertucci's inventory as illustrated, in Exhibit II, at the levels designated, available for shipment 15 days prior to the commencement date of the contract. Specific products which are date sensitive shall be enroute during this period. For purposes of this Agreement, this date shall be June 30, 1998. 22.7 BEVERAGE PROGRAM In the event Bertucci's enters into an Agreement with the Coca Cola Company or PepsiCo for the purpose of dispensing their products at Bertucci's, then Ferraro shall concurrently enter into a distribution agreement with Coca Cola or PepsiCo for stocking and distribution of such products to Bertucci's. Vendor allowance paid to Ferraro for distribution shall be determined jointly by the Coca Cola Company or PepsiCo and Bertucci's. 23. PRESS RELEASE Bertucci's and Ferraro mutually agree to disseminate a press release to the Industry National Trade Publications concerning the award of this Agreement. This and any other future press release must be reviewed by Bertucci's prior to its distribution. 24. GOVERNING LAW The Agreement shall be construed in accordance with and governed by the Laws of the Commonwealth of Massachusetts. 25. ENTIRE AGREEMENT This Agreement contains the entire understanding between the parties and any Agreement hereafter made shall be ineffective to change, modify or discharge it in whole or in part unless such Agreement is in writing and signed by the party against whom enforcement of the change, modification or discharge is sought. IN WITNESS WHEREOF, BERTUCCI'S RESTAURANT CORP. AND FERRARO have executed the Agreement as set forth below, to be effective as of the date first above written. WITNESS/ATTEST FERRARO FOODS, INC. /S/ Michael GIAMMARINO BY: MICHAEL GIAMMARINO TITLE: PRESIDENT & C.E.O DATE: May 10, 1998 WITNESS/ATTEST BERTUCCI'S RESTAURANT CORP., INC. BY: THEODORE BARBER TITLE: C.O.O DATE: May 13, 1998 26. EXHIBITS (I THROUGH XIII) (INSERT EXHIBIT XII - CERTIFICATE OF INSURANCE) (INSERT EXHIBIT V1 - SAMPLE INVOICE) EX-10.17 12 DISTRIBUTION AGREEMENT B/W NE RESTAURANT EXHIBIT 10.17 June 25, 1997 Mr. Paul Seidman Director Food & Procurement New England Restaurant Company Inc. 300 Pond Street Randolph, MA 02368 Dear Paul: Based upon the terms of this letter agreement, Alliant Foodservice, Inc. (sometimes "we" or "Alliant") offer to sell to your unit(s) products carried by the Alliant Foodservice, Inc. distribution centers serving your account, subject to the availability of product, for the term of this agreement. The conditions of our offer to sell are as follows: The average order size per unit per delivery will be $4500 per drop. We recognize that there will be exceptions; however, this program is based on the condition that the average order size over a reasonable period of time will be maintained at $4500 per drop. Upon thirty (30) days advance notice to you and your failure to correct the deficiency within such time period, Alliant reserves the right at any time to adjust the terms of this agreement, including margins, upon prior notice if there is a significant change in product mix or a failure to regularly meet the average order size measured in dollar value per drop. The above parameters are based on information which you have provided to us. This proposal is also based upon an "open time window" of (6:00 AM to 11:00 AM) and (1:00 PM to 4:00 PM). "Key Drop" deliveries are available upon request. Alliant will receive 80% of the purchases made by you in each category referenced under the "PRICING" section of this agreement. If Alliant does not receive 80% of your purchases in a referenced category, then Alliant may convert that category to a different margin schedule at Alliant's option. II. All Other Products - Invoice cost or local market replacement cost, at Alliant Foodservice's option, plus freight (where applicable). Cost may include a fee for national procurement activities which provide procurement leverage, order consolidation and administration, product marketing and quality assurance. Forward purchases and consigned products may include applicable storage and finance charges or shall be based on local market replacement cost, at Alliant's option. For purposes of this paragraph, local market replacement cost will reflect invoice cost. Invoice cost will be the invoice issued by the vendor or Alliant's Central Logistical Services Department. III. Produce - Total market cost plus freight (where applicable). Total market cost is set by the respective Alliant Foodservice distribution center on a district-wide basis and is intended to reflect the local market replacement cost or current market average cost of procured products. SUBSIDIARIES - This agreement expressly excludes City Meat and Provisions Company, Inc., a subsidiary of Alliant Foodservice, Inc. and any other subsidiaries or affiliates of Alliant which are manufacturers, fabricators or processors (collectively, "manufacturing subsidiaries"). In the event you wish to purchase products from manufacturing subsidiaries, those products' cost shall be determined by the manufacturing subsidiaries' price lists. A distribution fee, if applicable, may be added to the manufacturing subsidiaries' price list amount. FREIGHT - Unless in-bound freight is included in vendor's delivered pricing, freight charges will be based on market conditions and will not exceed the freight rate normally payable by the Alliant Distribution Center for inbound shipments of regular quantity requirements of such products. Freight charges may include common or contract carrier charges by the product vendor or a carrier, or charges billed by Alliant for its freight management service. PRICE CHANGES - Prices are subject to change monthly except for certain categories that are subject to volatile cost fluctuations (i.e. meat, poultry, coffee, oils, sugar, flour, etc.), which will be priced weekly or as market conditions dictate. In the event of any significant market cost changes resulting in a reduction of our margin by more than 3.0 percent, we reserve the right to immediately reestablish selling prices by applying applicable margins against the increased cost of the product. PROMOTIONAL ALLOWANCES - Only promotional allowances exclusively negotiated by you or on your behalf will be passed through to you. There will be no promotional allowances given on Kraft-Branded products under this agreement. Alliant shall be entitled to cash discounts and other supplier incentives. Because of the competitive nature of our pricing and other terms of sale, Alliant has no additional marketing monies to fund special customer requests (for example, customer-sponsored events, donations to customer-directed causes, etc.). Alliant does agree to assist in a product or monetary donation for New England Restaurant Association's Annual Picnic. METHODS MARGINS - defined as a percent reflect a percent markup over cost. To accommodate minimum handling expenses, Alliant reserves the right to impose a minimum fee of $.87 per unit of sale transaction. ROUNDING - To simplify pricing, receiving and inventory valuation, Alliant rounds all prices with calculated penny fractions to the next highest penny per unit of sale. SUBSTITUTIONS - will be priced in accordance with the applicable category margin with same or lower delivered cost adjusted for pack size variance. Alliant reserves the right in the event that New England Restaurant Company specified vendors cannot meet product demand to price per contract mark up. SPLIT CASE SURCHARGE - To help defray additional handling expenses and increased damage loss experience, products sold in amounts less than manufacturer's standard containers shall be upcharged $.50 per unit. JOINT BUYING DECISIONS - Forward purchases made with your concurrence will be priced to you as follows: During the first calendar month the product is in Alliant's warehouse, the price will be Landed Cost plus the applicable category margin. During each additional calendar month that the product remains in Alliant's warehouse, the price will be increased by an amount determined by mutual consent on a per event basis. SERVICE CHARGE - If invoices are not paid within the terms specified in this agreement, a service charge will be assessed of 1-1/2% per month, or such lesser charge if required by law. Unpaid invoice balances and finance charges due to Alliant will be deducted from any credits due to you. ALLIANT-LINK - Upon signing of the contract and prior to placement of the first order this contract is binding on the stipulation that the Remax/AlliantLink interface has occurred and Alliant will cover all reasonable costs associated with this interface. If Alliant agrees to provide you with one or more AlliantLink terminal installations, any such installations will be conditioned on a continuing obligation to meet a minimum purchase requirement of $250,000 per year per installed location. Each Alliant-Link installation will require that you sign and return a standard AlliantLink contract for each location. The AlliantLink hardware provided to New England Restaurant Co., Inc. is wholly owned by Alliant Foodservice, Inc. In the event either party should exit from the relationship at any time during the first three years of the contract, New England Restaurant Co., Inc. will be given the opportunity to purchase the hardware from Alliant Foodservice, Inc. at the current book value. The date of the three year tenure will commence as of the signing date of the contracted agreement between New England Restaurant Co., Inc. and Alliant Foodservice, Inc. Additionally, if an exit does occur and New England Restaurant Co., Inc. decides not to purchase the equipment, Alliant Foodservice will allow New England Restaurant Co., Inc. 60 days use of said equipment to assure a smooth transition to a new system. Please note the attached depreciation schedule for the AlliantLink hardware. PRICE SUBSTANTIATION - RIGHT TO AUDIT - Upon reasonable notice and during regular business hours, but no more frequently than once every six months, you may examine, at the local Alliant Foodservice, Inc. distribution center servicing your operations, documentation to support pricing of products sold to you pursuant to this agreement; provided, however, that any such audit shall be limited to no more than 25 items with one price point verification per item. If such documentation is not available at the distribution center office, Alliant's computer generated reports will be made available to you at the distribution center office or the audit may be conducted at our processing center, at Alliant's option. The audited period shall be limited to the thirteen (13) weeks immediately preceding such audit. The applicable price list for Kraft- Branded Products and Alliant Exclusive Brands will be made available to you to verify the contract cost of such products. PAYMENT - Terms are net EOM - 10 days, measured from invoice delivery date to date of our receipt of payment. Alliant reserves the right at any time to adjust the payment terms or take any other appropriate action regarding payment or terms as it deems appropriate in its reasonable judgment, including the execution and delivery of a security agreement for extension of credit. We reserve the right to require the annual or more frequent submission of audited financial statements, including a statement of cash flow, in order to ensure confirmation of the approved payment terms. You agree to reimburse Alliant for all costs and expenses (including reasonable attorneys' fees) incurred in enforcing its right to payment hereunder. EFFICIENCY INCENTIVES o Transition Allowance - To help defray any costs incurred due to New England Restaurant Co., Inc. impending transition, Alliant offers a 0.5%, 60 day transitional allowance incentive on all purchases. This allowance will be off invoice. Additionally, we will offer to double this allowance if we do not meet your expectation for service as defined by the Performance Agreement established prior to start-up. o Prompt Pay Incentive: Your payment terms are net EOM - 10 days. If you elect to take advantage of this incentive then Alliant will authorize deductions equal to the specified rebate amount from your designated margins, off invoice. Net Payment Days Incentive 15-21 0.30% 10-14 0.50% 9 or less 1.0% As an example, in order for New England Restaurant Association to take advantage of the 1.0% rebate opportunity we propose to implement the following process upon your approval. Weekly statements will be faxed to your office on Thursdays. These statements will reflect purchases from Thursday through Wednesday. These invoices must be paid in full and posted by the following Friday. o Off Peak Delivery Incentive - Alliant offers a 0.50% rebate for Monday deliveries (where applicable). Incentive excludes holiday weeks. TERM - This agreement shall commence as of the date first written above and shall continue until either party elects to terminate, which shall require thirty (30) days prior written notice to the other party. Certain circumstances, such as tardiness in payment, are grounds for immediate termination. Alliant may discontinue service to one or more of your locations and may terminate this agreement if an overdue payment is not received immediately upon notification. Either party may request changes to this agreement by giving thirty (30) days prior written notice of such request to the other party. RETAIL-CLASSIFIED PRODUCTS - To the extent that we sell you products packaged under trademarks owned by Kraft Foods, Inc. and/or its subsidiaries and sold at retail (excluding Kraft, Inc. foodservice products), you agree, that all such products are for the sole use within your units as food preparation ingredients or to be directly served to your patrons, and in any event you agree that such products will not be resold or exchanged in their original individual or case-lot packaging. CUSTOMER INVENTORY - To effectively service our customers, Alliant is obligated to maximize warehouse capacity and limit inventory proliferation. Accordingly, we reserve the right not to stock any special or proprietary inventory which does not meet our minimum velocity requirement of 20 cases/unit per four (4) week period and 12 turns annually. We also request that our customers afford us the opportunity to present alternatives to customer-requested special and/or proprietary products. Upon termination of this agreement for any reason, you agree to purchase at Cost plus applicable category margin, all products that Alliant has in inventory, in transit, or for which unconditional orders have been placed, that have been purchased, transferred or consigned at your request, or otherwise for your account, including but not limited to customer-labeled or other proprietary products. In addition to the foregoing, you agree that at any time, with respect to any obsolete products purchased specially for you (which includes specially ordered and proprietary products), you will either purchase such products directly or advise us how to dispose of such products. In either event, we will be entitled to the full price, including the applicable normal margin, which we would otherwise be entitled to under this agreement. For purposes of this agreement, for each Alliant distribution center, obsolete products shall mean those which have a sales velocity of less than the above stated minimum velocity requirement. Upon 30 days notice from New England Restaurant Co., Inc. regarding elimination of said items New England Restaurant Co., Inc. will be relieved of this obligation except for joint buying decisions. CUSTOMER-SPECIFIED VENDORS - If you specify a particular vendor for your account which is not currently authorized by Alliant, then such vendor will be required to complete our standard vendor documentation before purchases can be made by Alliant for resale to your unit(s). DEVIATED COST PROGRAMS - Alliant agrees to maintain deviated costing programs in its contract pricing system when deviated cost(s) has been negotiated directly between you and vendors. Alliant will only maintain those deviated cost programs documented by the vendor and communicated to Alliant via notice on vendor letterhead or by completion of an Alliant "Deviated Cost Program" form. The communication shall, at a minimum, contain: o Adequate lead time of ten (10) working days o Program start/end dates o Information pertaining to deviated cost type (delivered to distributor, allowance, f.o.b. origin) o Information on specific products covered, including manufacturer product code o Signature of vendor representative authorized to offer program o Vendor contact. Alliant will not be responsible for collection, payment or any reimbursement of monies due to you as a result of vendors supplying inadequate information, communication received after program start date, predated or retroactive programs. Further, as Alliant acts as an administrator regarding negotiated deviated cost programs negotiated by you, Alliant will not be held liable for any vendor omissions or errors in maintaining the programs and all such related recoveries shall be from the involved vendor. Alliant may impose a charge upon vendors providing deviated costing in part to help defray additional administrative systems, financing and other costs incurred by Alliant in handling products subject to cost deviations. REPORTS/ORDER GUIDES - Alliant will provide the following reports upon your request: 1. Customized Order/Inventory Guides. One copy will be furnished to each purchasing location. 2. Monthly or Quarterly Standardized Usage Report. One copy will be furnished to the location of your choice. 3. Customized Reports (ie. Fill rate, price change). FORCE MAJEURE - Either party hereto shall be relieved of its obligations under this agreement for so long as such party is prevented from fulfilling its obligations by causes outside its reasonable control, including but not limited to casualty, labor strikes and serious adverse weather conditions. This provision shall not be interpreted to relieve either party of its obligations to make any payments due hereunder. MISCELLANEOUS - You agree that you will not assign this agreement, in whole or in part, or otherwise extend the benefits of this agreement to any third party, without our prior written consent. At Alliant's option, the provisions of this agreement shall not apply to any unit(s) following the transfer or sale of such unit(s). This agreement constitutes and contains the entire agreement of the parties and cancels and supersedes any and all prior negotiations, correspondence and agreements, whether oral or written, between you and Alliant respecting the subject matter hereof. If this offer is acceptable to you, please sign both copies of this agreement and return one to us. By your signature you represent that these margins/prices quoted herein are competitive with margins/prices quoted your account by others for similar products. NOTICES - Any written notice called for in this agreement may be given by personal delivery, first class mail, overnight delivery service or facsimile transmission. Notices given by personal delivery will be effective on delivery; by overnight services on the next business day, by first class mail three business days after mailing; and by facsimile when transmission is complete. The address of each party is set forth below. GOVERNING LAW - This agreement shall be governed by, and interpreted in accordance with the laws of the State of Illinois, U.S., except any such law mandating the application of the law(s) of a different jurisdiction. Sincerely, ALLIANT FOODSERVICE, INC. 755 Pierce Road Clifton Park, NY 12065 By: /s/ David Patterson 9-10-97 Market President Attention: David Patterson Telephone: 518-877-3900 Facsimile: 518-877-3929 ACCEPTED: New England Restaurant Co., Inc. /s/ Paul Seidman 300 Pond Street (Name of Customer) Randolph, MA 02368 Attention: Paul Seidman Telephone: 617-986-4600 /s/ Paul Seidman Facsimile: 617-986-0358 (Customer Signature) Director of F&B& Purchasing (Customer Title) (Date) EX-10.18 13 FORM OF AMENDMENT TO NE RESTAURANT 401(K) EXHIBIT 10.18 April 29, 1996 Merrill Lynch BFS 1 G 800 Scudder Mill Road Plainsboro, NJ 08536 To Whom It May Concern: Please use this letter as authorization to amend Section C of The New England Restaurant Company 401k Plan. It should state that employees are only eligible to receive a 401k match from N.E. Restaurant as long as they are employed by New England Restaurant on 12/31 of that plan year. Any employee who terminates employment before the end of the year, will not be eligible for a company match for that year. The account number of this plan is 818-08S03. Thank you for your attention to this matter. Sincerely, _________________________________________ Paul V. Hoagland Vice Preident and Chief Financial Officer N.E. England Restaurant Company ______________________________________________________________________________ EMPLOYER'S RESOLUTION OF PLAN RESTATEMENT ______________________________________________________________________________ WHEREAS, the Employer did establish a 401k plan for its employees known as the NE Restaurant Company 401k Profit Sharing Plan (the "Plan") effective , 19 __; and, NOW THEREFORE, BE IT RESOLVED, that the Plan be and it is hereby amended and restated in its entirety, effective January 1, 1996, in order to qualify under the provisions of the Internal Revenue Code of 1986, and any amendments thereto, and under any rulings or regulations adopted by the Department of Labor and/or the Department of the Treasury. FURTHER RESOLVED, that such sums of money as the Employer may determine to contribute in its sole discretion, and as may be necessary according to the said agreement or agreements to meet the expenses incurred in the administration thereof shall, from time to time, be paid out of the funds of the Employer to the order of the Trustee(s); and FURTHER RESOLVED, that the proper officers of the Employer are hereby authorized and directed in the name of and on behalf of the Corporation, to execute and deliver such amendment, and to execute any documents which may be otherwise deemed necessary and proper in order to implement the foregoing resolutions. Date:_____________________ _____________________________________ Signature _____________________________________ Title EX-10.19 14 FORM OF CHILI'S GRILL DEVELOPMENT AGREEMENT EXHIBIT 10.19 AMENDMENT OF DEVELOPMENT AGREEMENT THIS AMENDMENT OF DEVELOPMENT AGREEMENT (this "Amendment") is executed to be effective as of June 1, 1997 by and between BRINKER INTERNATIONAL, INC., a Delaware corporation ("Brinker") and N.E. RESTAURANT COMPANY, INC., a Delaware corporation ("NERCO") R E C I T A L S A. As of May 17, 1994, Brinker and NE Restaurant Company Limited Partnership ("NERCO LP") entered into a certain Development Agreement (the "Development Agreement") relating to certain rights to develop and operate Chili's Grill and Bar restaurants. B. Pursuant to a certain Consent to assignment of Development Agreement dated as of May 17, 1994 (the "Assignment"), NERCO assumed all of the rights and obligations of NERCO LP under the Development Agreement and Brinker consented to such assumption. C. NERCO has requested, and Brinker has agreed, that the development schedule set forth in Section 111.B. of the Development Agreement be modified as set forth herein. NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, Brinker and NERCO hereby agree as follows: 1. EXTENSION OF DEVELOPMENT SCHEDULE. The development schedule set forth in Section 111.B. of the Development Agreement is hereby replaced with the following: Cumulative Total Number Restaurants in the Territory Which Developer Shall Have Open and In Operation (Including 15 BY DATE RESTAURANTS CURRENTLY OPEN FOR BUSINESS) ------- ------------------------------------------ September 5, 1995 25 September 5, 1996 28 September 5, 1997 31 September 5, 1998 33 September 5, 1999 35 September 5, 2000 37 September 5, 2001 40 2. RATIFICATION. Except as modified hereby, the Development Agreement is unchanged and is hereby ratified and confirmed by the parties hereto. This Agreement is executed by the Brinker and NERCO to be effective as of the date first set forth above. BRINKER: BRINKER INTERNATIONAL, INC. a Delaware corporation By: ------------------------------ Print: ROBERT F. THOMSON Title: EXECUTIVE VICE PRESIDENT NERCO: N.E. RESTAURANT COMPANY, INC. a Delaware corporation By: ------------------------------- Print: PAUL V. HOAGLAND ------------------------------ Title: VICE PRESIDENT ------------------------------ EX-10.20 15 FORM OF CHILI'S RESTAURANT FRANCHISE AGREEMENT Exhibit 10.20 FORM OF CHILI'S GRILL & BAR(R) RESTAURANT FRANCHISE AGREEMENT CHILI'S GRILL & BAR(R) RESTAURANT FRANCHISE AGREEMENT TABLE OF CONTENTS PAGE I. GRANT...........................................................2 II. TERM AND RENEWAL................................................2 III. DUTIES OF FRANCHISOR............................................3 IV. FEES............................................................4 V. DUTIES, REPRESENTATIONS, WARRANTIES AND COVENANTS OF FRANCHISEE......................................................5 VI. PROPRIETARY MARKS..............................................12 VII. CONFIDENTIAL MANUAL OF OPERATING DATA..........................14 VIII. CONFIDENTIAL INFORMATION.......................................15 IX. ACCOUNTING AND RECORDS.........................................16 X. ADVERTISING....................................................17 XI. INSURANCE......................................................20 XII. TRANSFER OF INTEREST...........................................22 XIII. DEFAULT AND TERMINATION........................................28 XIV. OBLIGATIONS UPON TERMINATION OR EXPIRATION.....................32 XV. COVENANTS......................................................34 XVI. TAXES, PERMITS AND INDEBTEDNESS................................37 XVII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION.....................37 XVIII. APPROVALS AND WAIVERS..........................................38 XIX. NOTICES........................................................38 XX. ENTIRE AGREEMENT...............................................39 XXI. SEVERABILITY AND CONSTRUCTION..................................39 XXII. APPLICABLE LAW.................................................41 XXIII. ACKNOWLEDGMENTS................................................41 GUARANTY ATTACHMENT A-APPROVED LOCATION ATTACHMENT B-STATEMENT OF OWNERSHIP INTERESTS CHILI'S GRILL & BAR(R) RESTAURANT FRANCHISE AGREEMENT THIS AGREEMENT is made and entered into as of the 22nd day of September, 1997 between BRINKER INTERNATIONAL, INC., a Delaware corporation (hereinafter "Franchisor") and NE RESTAURANT COMPANY, INC., a Delaware corporation (hereinafter "Franchisee"). W I T N E S S E T H: WHEREAS, Franchisor, as the result of the expenditure of time, skill, effort and money, has developed and owns and shall continue to develop in its reasonable business judgment, a unique and distinctive system (hereinafter "System") relating to the establishment and operation of full service, adult-oriented restaurants featuring a specialized menu and full-bar service; WHEREAS, the distinguishing characteristics of the System include, without limitation, distinctive exterior and interior design, decor, color scheme, and furnishings; special recipes and menu items; uniform standards, specifications, and procedures for operations; quality and uniformity of products and services offered; procedures for inventory and management control; training and assistance; and advertising and promotional programs; all of which may be changed, improved, and further developed by Franchisor from time to time; WHEREAS, Franchisor identifies the System by means of certain trade names, service marks, trademarks, logos, emblems and indicia of origin, including, but not limited to, the mark "CHILI'S," and such other trade names, service marks, and trademarks as are now designated (and may hereafter be designated by Franchisor in writing) for use in connection with the System (hereinafter referred to as "Proprietary Marks"); WHEREAS, Franchisor continues to develop, use and control the use of such Proprietary Marks in order to identify for the public the source of services and products marketed thereunder and under the System, and to represent the System's high standards of quality, appearance and service; WHEREAS, Franchisor and Franchisee have entered into a Development Agreement dated October 1, 1991 (the "Development Agreement"), relating to the development by Franchisee of Chili's Grill & Bar restaurants; WHEREAS, Franchisee understands and acknowledges the importance of Franchisor's high standards of quality, cleanliness, appearance and service and the necessity of operating the business franchised hereunder in conformity with Franchisor's standards and specifications; and WHEREAS, Franchisee desires to use the System in connection with the operation of a Chili's Grill & Bar restaurant at the location specified in Attachment A hereto, as well as to receive the training and other assistance provided by Franchisor in connection therewith; NOW, THEREFORE, the parties, in consideration of the undertakings and commitments of each party to the other party set forth herein, hereby agree as follows: I. GRANT A. Franchisor hereby grants to Franchisee, upon the terms and conditions herein contained, the right and franchise, and Franchisee undertakes the obligation, to operate a Chili's Grill & Bar restaurant (hereinafter referred to as "Restaurant" or "franchised business") and to use solely in connection therewith the Proprietary Marks and the System, as it may be changed, improved and further developed from time to time, only at the approved location as provided in Section I.B. B. The street address of the location approved pursuant to Section IV. of the Development Agreement shall be set forth in Attachment A hereto. Franchisee shall not relocate the franchised business without the express prior written consent of Franchisor. C. Except as provided below, this franchise is non-exclusive and is granted subject to the terms of Section VI.C.(6) hereof. Subject to compliance with the terms and conditions of this Agreement, Franchisor shall not establish, nor authorize anyone other than Franchisee to establish a Chili's Grill & Bar Restaurant within a two (2) mile radius of the Restaurant. In the event "gross sales" (hereinafter defined) from the Restaurant are less than the average gross sales of the restaurants comprising the System, this radius restriction shall be increased to three (3) miles. The grant of this franchise does not imply the grant of rights to any other location or territory. II. TERM AND RENEWAL A. Except as otherwise provided herein, the terms of this Agreement shall expire twenty (20) years from the date on which the Restaurant is opened for business; provided, however, this Agreement shall expire at the earlier of twenty (20) years from the date of opening for business or upon expiration or termination of the initial term or renewal term or terms of the lease. B. Franchisee may, at its option, renew this Agreement for one (1) additional consecutive term of twenty (20) years, subject to the following conditions which must be met prior to renewal: (1) Franchisee shall give Franchisor written notice of Franchisee's election to renew not less than twelve (12) months nor more than twenty-four (24) months prior to the end of the initial term; (2) Franchisee shall make or provide for, in a manner satisfactory to Franchisor, such renovation and modernization of the Restaurant premises as Franchisor may reasonably require, including, without limitation, renovation of signs, furnishings, fixtures and decor, to reflect the then-current standards and image of the System; (3) Franchisee shall not be in material default of any provision of this Agreement, any amendment hereof or successor hereto, any other agreement between Franchisee and Franchisor or its subsidiaries and affiliates, or any agreement between a legal entity affiliated with Franchisee (or having the same or substantially similar management and ownership composition as Franchisee) and Franchisor; and Franchisee shall have substantially complied with all the terms and conditions of such agreements during the terms thereof; (4) Franchisee shall have satisfied all monetary obligations owed by Franchisee to Franchisor and its subsidiaries and affiliates and shall have timely met those obligations throughout the term of this Agreement; (5) Franchisee shall present satisfactory evidence that Franchisee has the right to remain in possession of the approved location for the duration of the renewal term of this Agreement; (6) Franchisee shall execute Franchisor's then-current form of renewal franchise agreement, which agreement shall supersede this Agreement in all respects, and the terms of which may differ from the terms of this Agreement, but shall not cause an increase in the percentage royalty fee and advertising contribution; provided, however, that Franchisee shall pay, in lieu of an initial franchise fee, a renewal fee not to exceed fifty percent (50%) of the then- current initial franchise fee then being charged to new franchisees under the System; (7) Franchisee shall execute a general release, in a form prescribed by Franchisor, of any and all claims against Franchisor and its subsidiaries and affiliates, and their respective officers, directors, agents and employees; and (8) Franchisee shall comply with Franchisor's then-current qualification and training requirements. III. DUTIES OF FRANCHISOR A. Franchisor shall provide an initial training program for either Franchisee's Operating Principal or Operating Designee (as described herein) and up to four (4) of Franchisee's managers, and shall make available such other training programs as it deems appropriate. All training provided by Franchisor shall be subject to the terms set forth in Section V.F. of this Agreement. B. Franchisor shall provide such on-site pre-opening and opening supervision and assistance (which may include, at Franchisee's expense, an opening crew as described in Section V.E. hereof) as Franchisor deems advisable, subject (as to timing) to the availability of personnel. Franchisor shall provide such continuing advisory assistance to Franchisee in the operation of the franchised business as Franchisor deems advisable. C. Franchisor shall make available, from time to time, research data relating to merchandising, marketing, and advertising; and, at Franchisee's expense, promotional materials for local advertising by Franchisee. Franchisor shall have the right to review and approve or disapprove all advertising and promotional materials which Franchisee proposes to use, pursuant to Section X.D. hereof. D. Franchisor shall provide Franchisee, on loan, one copy (or such other number as Franchisor deems appropriate) of the Confidential Manual of Operating Data. The Confidential Manual of Operating Data shall consist of a Food & Beverage Manual, Operations Manual, Managers' Training Manual, Employee and Management Training Guide, and an Equipment and Design Specifications Book (collectively the "MOD Manual"). E. Franchisor shall provide to Franchisee, from time to time as Franchisor deems appropriate, advice and written materials concerning techniques of managing and operating the franchised business, including new developments and improvements in restaurant equipment, food products, packaging and preparation. F. Franchisor shall seek to maintain the high standards of quality, appearance and service of the System, and to that end shall conduct, as it deems advisable, inspections of the Restaurant franchised hereunder, and evaluations of the products sold and services rendered therein. IV. FEES A. Franchisee shall pay to Franchisor an initial franchise fee of FORTY THOUSAND DOLLARS ($40,000), payable as follows: (1) On or before the date of commencement of construction (as defined in Section IV. of the Development Agreement), TWENTY THOUSAND DOLLARS ($20,000); and (2) At least ten (10) days prior to the date on which the Restaurant opens for business, TWENTY THOUSAND DOLLARS ($20,000). Upon payment of each portion of the initial franchise fee, that portion shall be deemed fully earned and nonrefundable in consideration for administrative and other expenses incurred by Franchisor in granting this franchise and for Franchisor's lost or deferred opportunity to franchise to others. B. During the initial term of this Agreement, Franchisee shall pay to Franchisor a continuing monthly royalty fee in an amount equal to four percent (4%) of the gross sales of the Restaurant, as defined in Section IV.D. hereof. C. All monthly payments required by this Section IV. and Sections X.A.(1), X.B.(1)(e) and X.C.(1) shall be paid by the tenth (10th) day of each month on the gross sales for the preceding calendar month, and shall be submitted to Franchisor at the address provided under Section XIX. hereof, in care of the "Treasurer," together with any reports or statements required under Section IX.B. hereof. Franchisee shall not be entitled to withhold payments due Franchisor on grounds of alleged non-performance by Franchisor of obligations under this Agreement. Any payment or report not actually received by Franchisor on or before such date shall be deemed overdue. If any payment is overdue, Franchisee shall pay Franchisor, in addition to the overdue amount, interest on such amount from the date it was due until paid at the rate of eighteen percent (18%) per annum, or the maximum rate permitted by law, whichever is less. Entitlement to such interest shall be in addition to any other remedies Franchisor may have. D. As used in this Agreement, "gross sales" shall include all revenue from the sale of all services and products and all other income of every kind and nature related to the franchised business, whether for cash or credit and regardless of collection in the case of credit; provided, however, that "gross sales" shall not include any (i) sales taxes or other taxes collected from customers by Franchisee for transmittal to the appropriate taxing authority, (ii) amounts received directly by Franchisee's employees from customers as gratuities or tips for services rendered, (iii) promotional discount sales or coupons to the extent Franchisee realizes no revenue therefrom through issuance, redemption, or otherwise, or (iv) receipts from cigarette vending machines or pay telephones; provided that the exclusions permissionable pursuant to clauses (iii) and (iv) above shall in no event exceed four percent (4%) of Gross Receipts. V. DUTIES, REPRESENTATIONS, WARRANTIES AND COVENANTS OF FRANCHISEE A. Franchisee understands and acknowledges that every detail of the franchised business is important to Franchisee, Franchisor and other franchisees in order to develop and maintain high operating standards, to increase the demand for the services and products sold by all franchisees, and to protect Franchisor's reputation and goodwill. B. In the event Franchisee is a corporation or a partnership, Franchisee represents, warrants and covenants that: (1) Franchisee is duly organized and validly existing under the state law of its formation; (2) Franchisee is duly qualified and is authorized to do business in each jurisdiction in which its business activities or the nature of the properties owned by it require such qualification; (3) Franchisee's corporate charter or written partnership agreement shall at all times provide that the activities of Franchisee are confined exclusively to operating Chili's Grill & Bar restaurants as franchised herein unless otherwise consented to by Franchisor in writing; (4) The execution of this Agreement and the transactions contemplated hereby are within Franchisee's corporate power, or if Franchisee is a partnership, permitted under Franchisee's written partnership agreement; (5) If Franchisee is a corporation, copies of Franchisee's Articles of Incorporation, Bylaws, other governing documents and any amendments thereto, including the resolution of the Board of Directors authorizing entry into and performance of this Agreement have been promptly furnished to Franchisor; or, if Franchisee is a partnership, copies of Franchisee's written partnership agreement, other governing documents and any amendments thereto have been promptly furnished to Franchisor, including evidence of consent or approval of the entry into and performance of this Agreement by the requisite number or percentage of partners, if such approval or consent is required by Franchisee's written partnership agreement; (6) If Franchisee is a corporation or a partnership, all interests in Franchisee are owned as set forth in Attachment F hereto. In addition, if Franchisee is a corporation, Franchisee shall maintain a current list of all owners of record and all beneficial owners of any class of voting securities of the corporation; or if Franchisee is a partnership, Franchisee shall maintain a current list of all owners of an interest in the partnership. Such lists shall be furnished to Franchisor upon request. Franchisee shall execute an addendum to Attachment F as deemed necessary by Franchisor in order to ensure the information contained in Attachment F is true, accurate and complete at all times; (7) If Franchisee is a corporation, Franchisee shall maintain stop-transfer instructions against the transfer on its records of any equity securities and each stock certificate of the corporation shall have conspicuously endorsed upon its face a statement in a form satisfactory to Franchisor that it is held subject to and that further assignment or transfer thereof is subject to all restrictions imposed upon assignments by this Agreement; provided, however, that the requirements of this Section V.B.(7) shall not apply to a publicly-held corporation. If Franchisee is a partnership, its written partnership agreement shall provide that ownership of an interest in the partnership is held subject to and that further assignment or transfer is subject to all restrictions imposed upon assignments by this Agreement. If Franchisee is a limited partnership, its Agreement of Limited Partnership may not provide for more than one (1) general partner and if such general partner is a corporation, such corporation shall comply with the provisions of Section V.B.(5) and the first sentence of this Section V.B.(7); (8) If any Franchisee's Principal (as defined in Section XXI.F.), officer or director of Franchisee shall cease to serve as such or any individual shall become a Franchisee's Principal subsequent to the execution of this Agreement, Franchisee agrees to provide Franchisor with notice thereof within ten (10) days subsequent to such change. Any new Franchisee's Principal shall execute an addendum to this Agreement agreeing to be individually bound by all obligations of Franchisee's Principals hereunder. If Franchisee is a limited partnership having a corporation as its sole general partner, then those individuals who would be Franchisee's Principals if such corporation was the Franchisee hereunder shall comply with all of the provisions of this Section V.B.(8); (9) Benjamin Jacobson, Dennis Pedra, and Paul Hoagland (collectively, the "Guarantors") shall jointly and severally guarantee Franchisee's performance hereunder and shall bind themselves to the terms of this Agreement pursuant to the terms and conditions of the Guaranty attached hereto; and (10) Franchisee acknowledges and agrees that the representations, warranties and covenants set forth above at Sections V.B.(1) - (9) are continuing obligations of Franchisee and that any failure to comply with such representations, warranties and covenants shall constitute a material event of default under Section XIII.C. pursuant to which Franchisor may terminate this Agreement. C. Prior to opening for business, Franchisee shall comply with all pre-opening requirements set forth in this Agreement, Section IV. of the Development Agreement, the MOD Manual, and/or any other reasonable requirements set forth elsewhere in writing by Franchisor. D. Franchisee shall designate and retain an individual to serve as the "Operating Principal" of the franchised business. The Operating Principal shall meet the following qualifications: (1) (a) If Franchisee is a corporation, the Operating Principal shall, at all times during which he serves as Operating Principal, be entitled, under its governing documents, to cast a sufficient number of votes to require such corporation to take or omit to take any action which such corporation is required to take or omit to take under the express terms of this Agreement. The Operating Principal must, directly or indirectly, at all times during which he serves as Operating Principal, own at least seven and eight-tenths percent (7.8%) of each class of Franchisee's capital stock issued and outstanding. Direct or indirect ownership shall include, but not be limited to (a) shares in Franchisee owned by a partnership consisting solely of the Operating Principal and his or her relatives, or (b) shares in Developer owned by a trust established by the Operating Principal for the benefit of his or her spouse and/or children, provided that, in the case of (a), the Operating Principal has voting control over all such shares and, in the case of (b), the ownership interest of such trust in Developer is not more than three-tenths percent (0.3%). Upon the written request of Franchisor, the Operating Principal shall provide evidence reasonably satisfactory to Franchisor evidencing the ownership and voting control described in this Section V.D.(l)(a). (b) If Franchisee is a partnership, the Operating Principal shall, at all times during which he serves as Operating Principal be entitled under the partnership agreement or applicable law to act on behalf of the partnership [(x) in his individual capacity by being either (A) the sole managing partner of a general partnership, or (B) the sole general partner of a limited partnership, or (y) by being the sole shareholder of a corporation which is the sole general partner of a limited partnership] without the approval or consent of any other partners of the partnership or be able to cast a sufficient number of votes to require such partnership to take or omit to take any action which such partnership is required to take or omit to take under the express terms of this Agreement. The Operating Principal must, directly or indirectly, at all times during which he serves as Operating Principal, own at least seven and eight-tenths percent (7.8%) of the partnership interests in such partnership (unless the limited partnership interests of the Operating Principal are diluted on a pro-rata basis with all of the other limited partners in the partnership pursuant to a transaction described in Section XII.B.3.(iii) hereof) and must own and control all of the issued and outstanding capital stock of the corporate general partner or corporate managing partner of such partnership. Direct or indirect ownership shall include, but not be limited to (a) partnership interests in Developer owned by a partnership consisting solely of the Operating Principal and his or her relatives, or (b) partnership interests in Developer owned by a trust established by the Operating Principal for the benefit of his or her spouse and/or children, provided that, in the case of (a), the Operating Principal has voting control over all such partnership interests and, in the case of (b), the ownership interest of such trust in Developer is not more than three-tenths percent (0.3%). Upon the written request of Franchisor, the Operating Principal shall provide evidence reasonably satisfactory to Franchisor of the ownership and voting control described in this Section VI.B.(3)(a)(ii). (c) Except as may otherwise be provided in this Agreement, the Operating Principal's interest in Franchisee shall be and shall remain free of any pledge, mortgage, hypothecation, lien, charge, encumbrance, voting agreement, proxy, security interest or purchase right or options. (2) The Operating Principal, or such other designee of Franchisee approved or rejected in writing by Franchisor in its sole and absolute discretion ("Operating Designee"), shall devote full time and best efforts to the supervision and conduct of the business franchised hereunder, shall execute this Agreement, and shall be individually bound by all obligations of Franchisee and the Operating Principal hereunder. Dennis Pedra shall initially be the approved Operating Designee acting on behalf of the Franchisee and the Operating Principal. The Operating Designee must, directly or indirectly, at all times during which he serves as Operating Designee, own at least one and two-tenths percent (1.2%) of (i) each class of Franchisee's capital stock issued and outstanding, or (ii) the partnership interests in Franchisee (unless the limited partnership interests of the Operating Designee are diluted on a pro-rata basis with all of the other limited partners in the partnership pursuant to a transaction described in Section XII.B.3.(iii) hereof). The Operating Principal shall be responsible for insuring that the obligations of the Operating Principal as provided herein are fully performed in accordance with this Agreement by the Operating Principal or the Operating Designee, as applicable. (3) The Operating Principal shall be a person acceptable to both Franchisee and Franchisor. The granting or withholding by Franchisor of approval of a proposed Operating Principal shall be within the sole and absolute discretion of Franchisor. Benjamin Jacobson shall be the initial Operating Principal. If, at any time or for any reason, the Operating Principal or the Operating Designee, if applicable, no longer qualifies to act as such, Franchisee shall promptly designate another Operating Principal or a successor Operating Designee, as appropriate, subject to the approval of Franchisor and to the satisfaction of the qualifications listed above. Any sale, transfer or assignment of the Operating Principal's or Operating Designee's interest in Franchisee, or any portion thereof shall be subject to the restrictions on transfer described in Section XII. hereof, and any failure to comply with such requirements shall be deemed a material event of default by Franchisee under Section XIII.C.(5) hereof. E. In connection with the opening of the Restaurant, Franchisee shall conduct, at Franchisee's expense, such promotional and advertising activities as Franchisor may reasonably require. Franchisee agrees that Franchisor, in its reasonable business judgment, may require that the Restaurant be staffed, in whole or in part, by an opening crew composed of specially trained representatives of Franchisor, for a total period not to exceed twelve (12) days before or after the date of opening of the Restaurant. If and only if Franchisee has an insufficient number of employees who have been trained to serve as members of an opening crew pursuant to the criteria set forth in the MOD Manual, then Franchisee further agrees to reimburse Franchisor for all reasonable expenses incurred in providing such opening crew for the Restaurant, including costs of transportation, lodging, meals and wages. F. Franchisee agrees that it is important to the operation of the System and the Restaurant franchised hereunder that Franchisee and Franchisee's employees receive such training as Franchisor may require, and to that end agrees as follows: (1) a. Prior to the opening of the Restaurant, the Operating Principal or Operating Designee and at least two (2) of Franchisee's managers (up to a maximum of 4 managers) shall attend and complete, to Franchisor's satisfaction, the initial training program conducted by Franchisor and/or employees of Franchisee who have satisfied the initial training program criteria set forth in the MOD Manual. Except as provided in V.F.(1)b., Franchisor shall provide instructors and training materials for the pre-opening initial training of five (5) representatives of Franchisee. Any person subsequently employed by Franchisee in the position of manager and each subsequent Operating Principal or Operating Designee, if any, shall attend and complete, to Franchisor's satisfaction, an initial training program satisfying the criteria set forth in the MOD Manual; and Franchisee shall pay to Franchisor a training fee at the then- current rate being charged by Franchisor to franchisees for such training. b. If Franchisee operates a Chili's Grill & Bar restaurant other than the Restaurant and the Operating Principal or Operating Designee and at least two (2) managers for such restaurant have satisfied the initial training criteria set forth in the MOD Manual, Franchisee may conduct the initial training program required hereunder for Franchisee's managers. If Franchisee conducts such initial training, Franchisee's managers shall satisfactorily complete such training as set forth in the MOD Manual. (2) Franchisee shall cause its Operating Principal or Operating Designee, managers and other employees to attend and complete, to Franchisor's satisfaction, such courses, seminars, conferences and other training programs as Franchisor may require from time to time. The Operating Principal or Operating Designee, Franchisee's managers and other employees may also attend such optional courses, seminars, conferences and training programs as Franchisor may offer from time to time. Franchisee shall pay to Franchisor the training fee, if any, then being charged by Franchisor to franchisees for such additional required or optional training. (3) Franchisee or its employees shall be responsible for any and all other expenses incurred by them in connection with any training programs hereunder, including, without limitation, the costs of transportation, lodging, meals and wages. G. Franchisee shall use the Restaurant premises solely for the operation of the business franchised hereunder; shall keep the business open and in normal operation for such hours and days as Franchisor may from time to time specify in the MOD Manual or as Franchisor may otherwise approve in writing; and shall refrain from using or permitting the use of the premises for any other purpose or activity at any time without first obtaining the written consent of Franchisor. H. Franchisee agrees to maintain a competent, conscientious, trained staff, including at least three (3) fully trained full-time managers (one or both of whom may be the Operating Principal and/or the Operating Designee), and to take such steps as are necessary to ensure that its employees preserve good customer relations and comply with such dress code as Franchisor may prescribe. I. Franchisee shall meet and maintain the highest health standards and ratings applicable to the operation of the Restaurant. Franchisee shall furnish to Franchisor, within five (5) days after receipt thereof, a copy of any inspection report, warning, citation, certificate and/or rating which indicates Franchisee's failure to meet or maintain the highest applicable health or safety standards in the operation of the Restaurant. J. To ensure that the highest degree of quality and service is maintained, Franchisee shall operate the Restaurant in strict conformity with such methods, standards and specifications as Franchisor may from time to time prescribe in the MOD Manual or otherwise in writing. Franchisee agrees: (1) To maintain in sufficient supply, and to use and/or sell at all times, only such menu items, ingredients, products, materials, supplies and paper goods as conform with Franchisor's standards and specifications, and to refrain from deviating therefrom by the use or offer of non-conforming items, without Franchisor's prior written consent. (2) To sell or offer for sale only such menu items, products and services as have been expressly approved for sale in writing by Franchisor; to sell or offer for sale all types of menu items, products and services specified by Franchisor; to refrain from any deviation from Franchisor's standards and specifications without Franchisor's prior written consent; and to discontinue selling and offering for sale any menu items, products or services which Franchisor may, in its discretion, disapprove in writing at any time. With respect to the offer and sale of all menu items, products and services, Franchisee shall have sole discretion as to the prices to be charged to customers. (3) To permit Franchisor or its agents, at any reasonable time, to remove samples of food or non-food items from Franchisee's inventory, or from the Restaurant, without payment therefor, in amounts reasonably necessary for testing by Franchisor or an independent laboratory to determine whether said samples meet Franchisor's then-current standards and specifications. In addition to any other remedies it may have under this Agreement, Franchisor may require Franchisee to bear the cost of such testing if the supplier of the item has not previously been approved by Franchisor or if the sample fails to conform with Franchisor's specifications. (4) To purchase and install, at Franchisee's expense, all fixtures, furnishings, equipment, decor and signs as Franchisor may reasonably direct from time to time in the MOD Manual or otherwise in writing; and to refrain from installing or permitting to be installed on or about the Restaurant premises, without Franchisor's prior written consent, any fixtures, furnishings, equipment, decor, signs, games, vending machines or other items not previously approved as meeting Franchisor's standards and specifications. (5) To sell or offer for sale products and services only at the Restaurant and to refrain from off-premises sales or catering unless expressly authorized by Franchisor in writing, which authorization shall not be unreasonably withheld or delayed. K. Franchisee shall purchase all food items, ingredients, supplies, materials and other products used or offered for sale at the Restaurant solely from suppliers (including manufacturers, distributors and other sources) who demonstrate, to the continuing reasonable satisfaction of Franchisor, the ability to meet Franchisor's then-current standards and specifications for such items, who possess adequate quality controls and capacity to supply Franchisee's needs promptly and reliably; and who have been approved in writing by Franchisor prior to any purchases by Franchisee from any such supplier; and who have not thereafter been disapproved. If Franchisee desires to purchase any products from an unapproved supplier, Franchisee shall submit to Franchisor a written request for such approval, or shall request the supplier itself to do so. Franchisee shall not purchase from any supplier until and unless such supplier has been approved in writing by Franchisor. Franchisor shall have the right to require that its representatives be permitted to inspect the supplier's facilities, and that samples from the supplier be delivered, either to Franchisor or to an independent laboratory designated by Franchisor for testing. A charge not to exceed the reasonable cost of the inspection and the actual cost of the test shall be paid by Franchisee or the supplier. Franchisor reserves the right, at its option, to re-inspect from time to time the facilities and products of any such approved supplier and to revoke its approval upon the supplier's failure to continue to meet any of Franchisor's then-current criteria. Nothing in the foregoing shall be construed to require Franchisor to approve any particular supplier. L. Franchisee acknowledges and agrees that Franchisor may develop for use in the System certain products which are highly confidential secret recipes and which are trade secrets of Franchisor. Because of the importance of quality and uniformity of production and the significance of such products in the System, it is to the mutual benefit of the parties that Franchisor closely control the production and distribution of such products. Accordingly, Franchisee agrees that, in the event such products become a part of the System, Franchisee shall use only Franchisor's secret recipe products and shall purchase from Franchisor or from a source designated by Franchisor all of Franchisee's requirements of such products. M. Franchisee shall require all advertising and promotional materials, signs, decorations, paper goods (including disposable food containers, napkins, menus and all forms and stationery used in the franchised business), and other items which may be designated by Franchisor to bear the Proprietary Marks in the form, color, location and manner prescribed by Franchisor. N. Franchisee shall maintain the Restaurant in a high degree of sanitation, repair and condition, and in connection therewith shall make such additions, alterations, repairs and replacements thereto (but no others without Franchisor's prior written consent) as may be required for that purpose, including, without limitation, such periodic repainting or replacement of obsolete signs, furnishings, equipment and decor as Franchisor may reasonably direct. O. Upon Franchisor's reasonable request, Franchisee shall make all improvements and alterations that Franchisor may determine to be necessary for the Restaurant to conform with the System image as it may be prescribed by Franchisor at that time. Franchisee shall undertake and complete such improvements and alterations within reasonable times specified by Franchisor. Franchisee acknowledges Franchisor's right to make changes in the System image as it reasonably deems appropriate. Notwithstanding the foregoing, Franchisee shall not be required to make any such improvements or alterations unless at least fifty percent (50%) of the restaurants of the same prototype or style owned and operated by Franchisor have made the same or similar improvements and alterations. P. Franchisee shall grant Franchisor and its agents the right to enter upon the Restaurant premises at any time for the purpose of conducting inspections; shall cooperate with Franchisor's representatives in such inspections by rendering such assistance as they may reasonably request; and, upon notice from Franchisor or its agents and without limiting Franchisor's other rights under this Agreement, shall take such steps as may be necessary to correct immediately any deficiencies detected during any such inspection. Should Franchisee, for any reason, fail to correct such deficiencies within a reasonable time as determined by Franchisor, Franchisor shall have the right and authority (without, however, any obligation to do so), to correct such deficiencies and to charge Franchisee a reasonable fee for Franchisor's expenses in so acting, payable by Franchisee immediately upon demand. Q. Franchisee shall comply with all other requirements set forth in this Agreement. VI. PROPRIETARY MARKS A. Franchisor represents with respect to the Proprietary Marks that: (1) Franchisor is the owner of all right, title and interest in and to the Proprietary Marks. (2) Franchisor has taken and will take all steps reasonably necessary to preserve and protect the ownership in and validity of the Proprietary Marks. (3) Franchisor will permit Franchisee and other franchisees to use the Proprietary Marks only in accordance with the System and the standards and specifications attendant thereto which underlie the goodwill associated with and symbolized by the Proprietary Marks. B. With respect to Franchisee's licensed use of the Proprietary Marks pursuant to this Agreement, Franchisee agrees that: (1) Franchisee shall use only the Proprietary Marks designated by Franchisor, and shall use them only in the manner authorized and permitted by Franchisor. (2) Franchisee shall use the Proprietary Marks only for the operation of the business franchised hereunder and only at the location authorized hereunder, or in advertising for the business conducted at or from that location. (3) Unless otherwise authorized or required by Franchisor, Franchisee shall operate and advertise the franchised business only under the name "Chili's Grill & Bar" without prefix or suffix. (4) During the term of this Agreement and any renewal hereof, Franchisee shall identify itself as the owner of the franchised business in conjunction with any use of the Proprietary Marks, including, but not limited to, uses on invoices, order forms, receipts and contracts, as well as the display of a notice in such content and form and at such conspicuous locations on the premises of the franchised business as Franchisor may designate in writing. (5) Franchisee's right to use the Proprietary Marks is limited to such uses as are authorized under this Agreement, and any unauthorized use thereof shall constitute an infringement of Franchisor's rights. (6) Franchisee shall not use the Proprietary Marks to incur any obligation or indebtedness on behalf of Franchisor. (7) Franchisee shall not use the Proprietary Marks as part of its corporate or other legal name. (8) Franchisee shall comply with Franchisor's instructions in filing and maintaining the requisite trade name or fictitious name registrations, and shall execute any documents deemed necessary by Franchisor or its counsel to obtain protection for the Proprietary Marks or to maintain their continued validity and enforceability. (9) In the event that litigation involving the Proprietary Marks is instituted or threatened against Franchisee, Franchisee shall promptly notify Franchisor and shall cooperate fully in defending or settling such litigation. C. Franchisee expressly understands and acknowledges that: (1) Franchisor is the owner of all right, title and interest in and to the Proprietary Marks and the goodwill associated with and symbolized by them. (2) The Proprietary Marks are valid and serve to identify the System and those who are authorized to operate under the System. (3) Franchisee shall not directly or indirectly contest the validity or Franchisor's ownership of the Proprietary Marks. (4) Franchisee's use of the Proprietary Marks pursuant to this Agreement does not give Franchisee any ownership interest or other interest in or to the Proprietary Marks, except the license granted by this Agreement. (5) Any and all goodwill arising from Franchisee's use of the Proprietary Marks in its franchised operation under the System shall inure solely and exclusively to Franchisor's benefit, and upon expiration or termination of this Agreement and the license herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Franchisee's use of the System or the Proprietary Marks. (6) The right and license of the Proprietary Marks granted hereunder to Franchisee is non-exclusive, and Franchisor thus has and retains the rights, among others: (a) To use the Proprietary Marks itself in connection with selling products and services; (b) To grant other licenses for the Proprietary Marks, in addition to those licenses already granted to existing franchisees; (c) To develop and establish other systems using the same or similar Proprietary Marks, or other proprietary marks, and to grant licenses or franchises thereto without providing any rights therein to Franchisee. (7) Franchisor reserves the right to substitute different Proprietary Marks for use in identifying the System and the business operating thereunder if Franchisor's currently owned Proprietary Marks no longer can be used, or if Franchisor, in its sole discretion, determines that substitution of different Proprietary Marks will be beneficial to the System, including, but not limited to, restaurants owned by Franchisor. VII. CONFIDENTIAL MANUAL OF OPERATING DATA A. In order to protect the reputation and goodwill of Franchisor and to maintain high standards of operation under Franchisor's Proprietary Marks, Franchisee shall conduct its business in accordance with the MOD Manual, at least one copy of which Franchisee acknowledges having received on loan from Franchisor for the term of this Agreement. B. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals shall at all times treat the MOD Manual, any other manuals created for or approved for use in the operation of the franchised business, and the information contained therein, as confidential, and shall use all reasonable efforts to maintain such information as secret and confidential. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals shall not at any time copy, duplicate, record or otherwise reproduce the foregoing materials, in whole or in part, nor otherwise make the same available to any unauthorized person. Notwithstanding anything to the contrary contained in this Agreement, the restrictions on Franchisee's disclosure and use of any confidential information shall not apply to the following: (1) information, processes, or techniques which are or become generally known and used in the food service or restaurant industry, other than through disclosure (whether deliberate or inadvertent) by Franchisee; (2) disclosure of any confidential information in judicial or administrative proceedings to the extent that Franchisee is legally compelled to disclose such information, provided Franchisee shall have used its best efforts, and shall have afforded Franchisor the opportunity to obtain an appropriate protective order, or other assurance satisfactory to Franchisor, of confidential treatment for the information required to be so disclosed; and (3) disclosure to Franchisee's employees to the extent necessary for the proper operation of the Restaurant. C. The MOD Manual shall at all times remain the sole property of Franchisor and shall at all times be kept in a secure place on the Restaurant premises. D. Franchisor may from time to time revise the contents of the MOD Manual, and Franchisee expressly agrees to comply with each new or changed standard. E. Franchisee shall at all times maintain the MOD Manual at the Restaurant and ensure that the MOD Manual is kept current and up to date; and, in the event of any dispute as to the contents of the MOD Manual, the terms of the master copy of the MOD Manual maintained by Franchisor at Franchisor's home office shall be controlling. VIII. CONFIDENTIAL INFORMATION A. Neither Franchisee, the Operating Principal, the Operating Designee, nor Franchisee's Principals shall, during the term of this Agreement or thereafter, communicate, divulge or use for the benefit of any other person, persons, partnership, association or corporation any confidential information, knowledge or know-how concerning the methods of operation of the business franchised hereunder which may be communicated to Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals or of which they may be apprised in connection with the operation of the Restaurant under the terms of this Agreement. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals shall divulge such confidential information only to such of Franchisee's employees as must have access to it in order to operate the franchised business and who are either the Operating Principal, the Operating Designee, a Franchisee's Principal, or who have signed an agreement substantially in the form attached hereto as Attachment B, C, D, or E. Any and all information, knowledge, know-how and techniques provided by Franchisor to Franchisee shall be deemed confidential for purposes of this Agreement. B. Franchisee shall require its restaurant managers, members of Board of Directors (except for Franchisee's Principals), any other person or entity having access to any confidential information of Franchisor, and any corporation directly or indirectly controlling Franchisee, if Franchisee is a corporation (or of any corporate general partner and any individual or corporation directly or indirectly controlling a general partner of Franchisee, if Franchisee is a partnership), to execute covenants that they will maintain the confidentiality of information they receive in connection with their relationship with Franchisee. Such covenants shall be substantially in the form contained in Attachment B for Franchisor's restaurant managers and other persons having access to confidential information of Franchisor. C. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals acknowledge that any failure to comply with the requirements of this Section VIII., or the willful and knowing aiding or abetting of a third party in an action which would be a breach of Section VIII or a breach of the agreement attached hereto as Attachment B if such third party had been a party to either this Agreement, or the agreement attached hereto as Attachment B, respectively, shall constitute a material event of default under Section XIII.C.(7) and will cause Franchisor irreparable injury; and, therefore, Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals agree to pay all court costs and reasonable attorneys' fees incurred by Franchisor in obtaining specific performance of, or an injunction against violation of, the requirements of this Section VIII. IX. ACCOUNTING AND RECORDS A. Franchisee shall maintain during the term of this Agreement, and shall preserve for at least five (5) years from the dates of their preparation, full, complete and accurate books, records and accounts in accordance with generally accepted accounting principles and in the form and manner prescribed by Franchisor from time to time in the MOD Manual or otherwise in writing. B. Franchisee shall submit to Franchisor, at the address provided under Section XIX. hereof, in care of the "Treasurer," no later than the tenth (10th) day of each month during the term of this Agreement after the opening of the franchised business, a remittance report, in the form prescribed by Franchisor, accurately reflecting all gross sales during the preceding calendar month, and such other data or information as Franchisor may require. In particular, and without limiting the foregoing, Franchisee shall submit a quarterly and fiscal-year-to-date profit and loss statement (which may be unaudited) for the franchised business, and shall submit copies of all state sales tax returns for the franchised business. C. Franchisee shall, at Franchisee's expense, submit to Franchisor, in the form prescribed by Franchisor, a quarterly balance sheet (which may be unaudited) within thirty (30) days after the end of each quarter of the fiscal year of the franchised business during the term hereof. Each such statement shall be signed by Franchisee or by Franchisee's treasurer or chief financial officer attesting that it is true, complete and correct. D. Franchisee shall, at its expense, provide to Franchisor a complete audited annual financial statement prepared by an independent certified public accountant satisfactory to Franchisor, within ninety (90) days after the end of each fiscal year of the franchised business during the term hereof, showing the results of operations of the franchised business during said fiscal year. E. Franchisee shall also submit to Franchisor, for review or auditing, such other forms, reports, records, information and data as Franchisor may reasonably designate, in the form and at the times and places reasonably required by Franchisor, upon request and as specified from time to time in the MOD Manual or otherwise in writing. F. Franchisor or its designated agents shall have the right at all reasonable times to examine and copy, at Franchisor's expense, the books, records and sales and liquor tax returns of Franchisee. Franchisor shall also have the right, at any time, to have an independent audit made of the books of Franchisee. If an inspection should reveal that any payments have been understated in any report to Franchisor, then Franchisee shall immediately pay to Franchisor the amount understated upon demand, in addition to interest from the date such amount was due until paid, at the rate of eighteen percent (18%) per annum, or the maximum rate permitted by law, whichever is less. If an inspection discloses an understatement in any report of two percent (2%) or more, Franchisee shall, in addition, reimburse Franchisor for any and all costs and expenses connected with the inspection (including, without limitation, travel, lodging and wage expenses and reasonable accounting and legal costs). The foregoing remedies shall be in addition to any other remedies Franchisor may have. X. ADVERTISING Recognizing the value of advertising, and the importance of the standardization of advertising programs to the furtherance of the goodwill and public image of the System, the parties agree as follows: A. Until Franchisor has established a cooperative for the administration of a regional advertising program, as defined in Section X.B. below, or a national advertising fund, as defined in Section X.C. below, applicable to the Restaurant, the Franchisee shall be obligated to expend or contribute the following sums during the term of this Agreement in the manner provided below: (1) One-half of one percent (1/2%) of the gross sales of the Restaurant for the preceding month shall be paid to Franchisor on the tenth (10th) day of each month in the manner provided in Section IV.C. to be used exclusively for the purpose of maintaining, administering, directing and preparing advertising and promotional activities for the benefit of the System, including, but not limited to, creative costs associated therewith. (2) Two percent (2%) of the gross sales of the Restaurant shall be spent by Franchisee on appropriate local advertising approved by Franchisor for the benefit of the Restaurant. Franchisor shall have the right to require reasonable documentation, on a semi- annual basis, to evidence that expenditures by Franchisee have been made or contracted for. Franchisee shall have the discretion to expend such funds as and when Franchisee reasonably deems appropriate, so long as the Franchisee's expenditure schedule is acceptable to Franchisor in its reasonable discretion. Notwithstanding the above, in the event such funds have not been spent or committed by Franchisee as scheduled, Franchisor may require the Franchisee to remit such funds to Franchisor to be spent on local advertising in the local area of the Restaurant. B. Franchisee agrees that Franchisor shall have the right, in its discretion, to designate any geographical area (e.g., an area of dominant influence or "ADI") as a region for purposes of establishing an advertising cooperative ("Cooperative"). A Cooperative may be composed of one or more Chili's Grill & Bar restaurants operated by Franchisor and/or one or more Chili's Grill & Bar restaurants operated by Franchisee or another franchisee of Franchisor. In the event a Cooperative is established for a geographic area which includes the ADI, if any, in which the Restaurant is located, Franchisor agrees that the Cooperative shall administer an advertising program within such ADI. If a Cooperative has been established for the geographic area in which the Restaurant is located at the time the Franchisee commences business hereunder, Franchisee shall immediately become a member of such Cooperative. If a Cooperative applicable to the Franchisee's Restaurant is established at any later time during the term of this Agreement, Franchisee shall become a member of such Cooperative no later than thirty (30) days after the date on which the Cooperative commences operation as provided below: (1) Each Cooperative shall be organized and governed in a form and manner, and shall commence operation on a date, approved in advance by Franchisor in writing. (a) Each Cooperative shall be organized for the exclusive purposes of administering regional advertising programs and developing, subject to Franchisor's approval, standardized promotional materials for use by the members in local advertising. (b) Each Cooperative shall be Franchisor's designee for maintaining and administering advertising and promotional programs in each region and all contributions to and expenditures of each Cooperative shall be subject to the provisions applicable to the Fund set forth in Section X.C. hereof. (c) No advertising or promotional plans or materials may be used by a Cooperative or furnished to its members without the prior approval of Franchisor. All such plans and materials shall be submitted to Franchisor in accordance with the procedure set forth in Section X.D. hereof. (d) All payments pursuant to Section X.B.(l)(e) and any earnings thereon shall be used exclusively to meet any and all costs of maintaining, advertising, directing and preparing advertising and/or promotional activities (including, among other things, the cost of preparing and conducting television, radio, magazine and newspaper advertising campaigns, direct mail and outdoor billboard advertising; marketing surveys and other public relations activities; employing advertising agencies to assist therein; and providing promotional brochures and other marketing materials to the restaurants operated under the System) in connection with the regional advertising program. (e) Franchisee shall submit to the Cooperative, no later than the tenth (10th) day of each month, for the preceding calendar month, three percent (3%) of the gross sales of the Restaurant, and shall submit to the Cooperative and to Franchisor, by such date, such other statements or reports as may be required by Franchisor or by the Cooperative with Franchisor's prior written approval. Franchisee's obligation to provide such statements or reports shall be subject to Section IX. (2) Franchisor, in its sole discretion, may grant to any franchisee an exemption for any length of time from the requirement of membership in a Cooperative, upon written request of such franchisee stating reasons supporting such exemption. Franchisor may require as a condition of granting such exemption that the franchisee expend on local advertising, in a manner approved in advance by Franchisor, and supported by such proof of expenditures as Franchisor may require, at least the amount that the franchisee would have contributed to a Cooperative. Franchisor's decision concerning such request for exemption shall be final. (3) In addition to the advertising contribution described in Section X.B.(1)(e), the Franchisee shall spend each month, one-half of one percent (1/2%) of gross sales of the Restaurant for the preceding month on appropriate local advertising approved by Franchisor for the benefit of the Restaurant. Franchisor shall have the right to require reasonable documentation, on a semi-annual basis to evidence such expenditures. Franchisee shall have the discretion to expend such funds as and when Franchisee reasonably deems appropriate as long as Franchisee's expenditure schedule is acceptable to the Franchisor in its reasonable discretion. In the event such funds are not expended or committed by Franchisee as scheduled, Franchisor may require the Franchisee to remit such funds to Franchisor to be spent on local advertising in the Restaurant's local area. C. Upon establishment of a national advertising fund as defined in Section X.C.(1) hereof, Franchisee's obligations shall be as follows: (1) On the tenth (10th) day of each month during the term of this Agreement, Franchisee shall contribute an amount equal to three and one-half percent (3-1/2%) of Franchisee's gross sales for the preceding month for advertising and promotional purposes in the manner provided in Section IV.C. Franchisee shall allocate its contributions as Franchisor may designate between the national advertising fund (hereinafter "Fund"), described in Section X.C.(2) hereof, and any Cooperative designated for Franchisee's Restaurant, as defined in Section X.B. hereof, provided, however, that Franchisee shall not be obligated to expend or contribute more than three and one-half percent (3-1/2%) of Franchisee's monthly gross sales for advertising and promotional purposes. Franchisee is encouraged and will be permitted to conduct additional local advertising at its expense, subject to the terms and conditions contained in Section X.D. hereof. (2) Franchisee agrees to make contributions to the Fund as required under Section X.C.(1) hereof, and further agrees that the Fund shall be maintained and administered by Franchisor or its designee, as follows: (a) Franchisor shall oversee all advertising and promotional programs with sole discretion to approve or disapprove the creative concepts, materials and media used in such programs, and the placement and allocation thereof. Franchisee agrees and acknowledges that the Fund is intended to maximize general public recognition and acceptance of the Proprietary Marks for the benefit of the System. (b) The Fund, all contributions thereto, and any earnings thereon shall be used exclusively to meet any and all costs of maintaining, administering, directing and preparing advertising and/or promotional activities (including, among other things, the cost of preparing and conducting television, radio, magazine and newspaper advertising campaigns; direct mail and outdoor billboard advertising; marketing surveys and other public relations activities; employing advertising agencies to assist therein; and providing promotional brochures and other marketing materials to the restaurants operated under the System). (c) Franchisee shall contribute to the Fund by separate check made payable to the Fund. All sums paid by the Franchisee to the Fund shall be maintained in an account separate from the other monies of Franchisor and shall not be used to defray any of Franchisor's expenses, except for such reasonable administrative costs and overhead, if any, as Franchisor may incur in activities reasonably related to the administration or direction of the Fund and advertising programs for franchisees and the System. The Fund and its earnings shall not otherwise inure to the benefit of Franchisor. Franchisor or its designee shall maintain separate bookkeeping accounts for the Fund. (d) It is anticipated that all contributions to and earnings of the Fund shall be expended for advertising and/or promotional purposes during the taxable year within which the contributions and earnings are received. If, however, excess amounts remain in the Fund at the end of such taxable year, all expenditures in the following taxable year(s) shall be made first out of accumulated earnings from previous years, next out of earnings in the current year, and finally from contributions. (e) The Fund shall not be an asset of Franchisor or its designee. A statement of the operations of the Fund as shown on the books of Franchisor or its designee shall be prepared annually by Franchisor and shall be made available to Franchisee upon Franchisee's request. (f) Although the Fund is intended to be of perpetual duration, Franchisor maintains the right to terminate the Fund. The Fund shall not be terminated, however, until all monies in the Fund have been expended for advertising and/or promotional purposes. D. All advertising and promotion by Franchisee in any medium shall be conducted in a dignified manner and shall conform to the standards and requirements of Franchisor as set forth in the MOD Manual or otherwise. Franchisee shall obtain Franchisor's prior approval of all advertising and promotional plans and materials that Franchisee desires to use and that have not been prepared or previously approved by Franchisor within one (1) year. Franchisee shall submit such unapproved plans and materials to Franchisor (by personal delivery or through the mail, return receipt requested), and Franchisor shall approve or disapprove such plans and materials within fourteen (14) days from the date of receipt thereof by Franchisor. Franchisee shall use no such plans or materials until they have been approved by Franchisor and shall promptly discontinue use of any advertising or promotional plans or materials upon notice from Franchisor. E. Franchisee shall have the right to sell its products and offer services at any prices it may determine, and shall in no way be bound by any price which may be recommended or suggested by Franchisor. XI. INSURANCE A. Franchisee shall procure, prior to the commencement of any operations under this Agreement, and shall maintain in full force and effect at all times during the term of this Agreement at Franchisee's expense, an insurance policy or policies protecting Franchisee and Franchisor, and their respective subsidiaries, officers, directors, partners and employees, against any demand or claim with respect to personal injury, death or property damage, or any loss, liability or expense whatsoever arising or occurring in connection with the franchised business. B. Such policy or policies shall be written by a responsible carrier or carriers acceptable to Franchisor and shall include, at a minimum (except as additional coverages and higher policy limits may reasonably be specified by Franchisor from time to time), in accordance with standards and specifications set forth in the MOD Manual or otherwise in writing, the following: (1) Comprehensive General Liability Insurance, including broad form contractual liability, broad form property damage, personal injury, completed operations, products liability, host liquor liability and fire damage coverage, in the amount of One Million Dollars ($1,000,000) per occurrence for bodily injury, and Five Hundred Thousand Dollars ($500,000) per occurrence for property damage. (2) "All Risks" coverage (including or excluding earthquake and flood) for the full cost of replacement of the Restaurant premises and all other property in which Franchisor may have an interest; if such insurance policy is to contain a co-insurance clause, the co- insurance requirement may not be less than ninety percent (90%). (3) Employer's Liability and Workers' Compensation insurance in amounts prescribed by the state or locality in which the franchised business is located and operated; and such other insurance as may be required by the state or locality in which the franchised business is located and operated. (4) Franchisee may, with the prior written consent of Franchisor, elect to have reasonable deductibles in connection with the coverage required under Sections XI.B.(l) and (2) hereof. C. In connection with any construction, renovation, refurbishment or remodeling of the Restaurant, Franchisee shall maintain Builder's Risks insurance in form and amount, and written by a carrier or carriers, reasonably satisfactory to Franchisor. D. Franchisee's obligation to obtain and maintain the foregoing policy or policies in the amounts specified shall not be limited in any way by reason of any insurance which may be maintained by Franchisor, nor shall Franchisee's performance of that obligation relieve it of liability under the indemnity provisions set forth in Section XVII.C. of this Agreement. E. All public liability and property damage policies shall contain a provision that Franchisor, although named as an insured, shall nevertheless be entitled to recover under said policies on any loss occasioned to Franchisor or its servants, agents or employees by reason of the negligence of Franchisee or its servants, agents or employees. F. At least thirty (30) days prior to the time any insurance is first required to be carried by Franchisee, and thereafter at least thirty (30) days prior to the expiration of any such policy, Franchisee shall deliver to Franchisor Certificates of Insurance evidencing the proper coverage with limits not less than those required hereunder. In addition, if requested by Franchisor, Franchisee shall deliver to Franchisor a copy of the insurance policy or policies required hereunder. All insurance policies required hereunder, with the exception of Workers' Compensation, shall name Franchisor, and each of its partners, subsidiaries, affiliates, officers, directors, agents and employees as additional insureds. Further, all insurance policies required hereunder shall expressly provide that no less than thirty (30) days' prior written notice shall be given to Franchisor in the event of a material alteration to or cancellation of the policies. G. Should Franchisee, for any reason, fail to procure or maintain the insurance required by this Agreement, as such requirements may be revised from time to time by Franchisor in the MOD Manual or otherwise in writing, Franchisor shall have the right and authority (without, however, any obligation to do so) immediately to procure such insurance and to charge same to Franchisee, which charges, together with a reasonable fee for Franchisor's expenses in so acting, shall be payable by Franchisee immediately upon notice. The foregoing remedies shall be in addition to any other remedies Franchisor may have. XII. TRANSFER OF INTEREST A. TRANSFER BY FRANCHISOR: Franchisor shall have the right to transfer or assign this Agreement and all or any part of its rights or obligations herein to any person or legal entity. B. TRANSFER BY FRANCHISEE: (1) Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee, and that Franchisor has granted this franchise in reliance on the business skill, financial capacity and personal character of the Franchisee and any guarantor of Franchisee. Accordingly, neither Franchisee nor any initial or subsequent successor or assign to any part of Franchisee's interest in this franchise, nor any individual, partnership, corporation or other entity which directly or indirectly has or owns any interest in this Agreement, in the franchised business or in Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage or otherwise encumber any direct or indirect interest in this Agreement, in the franchised business or in any entity which owns this franchise without the prior written consent of Franchisor; provided, however, that Franchisor's prior written consent shall not be required for a transfer of less than a one percent (1%) interest in a publicly-held corporation, and further, Franchisor's prior written consent for a Minority Interest Transfer (as hereinafter defined) shall be exclusively based upon the requirements enumerated in Section XII.B.(3) hereof. A publicly-held corporation is a corporation having its securities registered pursuant to Section 12 under the Securities Exchange Act of 1934, as amended, or a corporation subject to the requirements of Section 15(d) under the Securities Exchange Act of 1934, as amended. Any purported assignment or transfer, by operation of law or otherwise, not having the written consent of Franchisor required by this Section XII.B.(l) shall be null and void and shall constitute a material breach of this Agreement, for which Franchisor may then terminate this Agreement without opportunity to cure pursuant to Section XIII.C.(5) of this Agreement. (2) Franchisor shall not unreasonably withhold its consent to a transfer of any interest in Franchisee, in the franchised business or in this Agreement. Franchisor may, in its sole discretion, require any or all of the following as conditions of its approval: (a) All of Franchisee's accrued monetary obligations and all other outstanding obligations to Franchisor, its subsidiaries and its affiliates shall have been satisfied; (b) Franchisee is not in material default of any provision of this Agreement, any amendment hereof or successor hereto, or any other agreement between Franchisee and Franchisor, or its subsidiaries and affiliates; (c) The transferor shall have executed a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its officers, directors, shareholders and employees, in their corporate and individual capacities, including, without limitation, claims arising under this Agreement and federal, state and local laws, rules and ordinances; (d) If the transferee is the Operating Principal or the Operating Designee, then the requirements of Section V.D. shall be satisfied by such transferee; (e) If the transferee is a Franchisee's Principal, then the requirements of Section V.B.(8) shall be satisfied by such transferee; (f) The transferee shall enter into a written agreement, in a form satisfactory to Franchisor, assuming full, unconditional, joint and several liability for and agreeing to perform from the date of the transfer, all obligations, covenants and agreements contained in this Agreement which the transferor was obligated to perform. If, however, the transferee is to become an Operating Principal, Operating Designee, or Franchisee's Principal, such transferee shall be required to enter into a written agreement, in a form reasonably satisfactory to Franchisor assuming full, unconditional, joint and several liability for and agreeing to perform from the date of the transfer, all obligations, covenants, and agreements contained in this Agreement; (g) The transferee shall demonstrate to Franchisor's satisfaction that transferee meets the criteria considered by Franchisor when reviewing a prospective franchisee's application for a franchise including but not limited to Franchisor's educational, managerial and business standards; transferee's good moral character, business reputation and credit rating; transferee's aptitude and ability to conduct the business franchised herein (as may be evidenced by prior related business experience or otherwise); transferee's financial resources and capital for operation of the business; and the geographic proximity of other Chili's Grill & Bar restaurants owned or operated by transferee and the territories or areas with respect to which transferee is obligated to develop Chili's Grill & Bar restaurants pursuant to any development agreement between Franchisor and Franchisee, in relation to the Restaurant. (h) At Franchisor's option, the transferee shall execute (and/or, upon Franchisor's request, shall cause all interested parties to execute), for a term ending on the expiration date of this Agreement and with such renewal term as may be provided by this Agreement, the standard form franchise agreement then being offered to new System franchisees and other ancillary agreements as Franchisor may require for the franchised business, which agreements shall supersede this Agreement and its ancillary documents in all respects and the terms of which agreements may differ from the terms of this Agreement, except that the percentage royalty fee and advertising contribution shall remain unchanged; provided, however, that the transferee shall not be required to pay any initial franchise fee; (i) The transferee, at its expense, shall upgrade the Restaurant to conform to the then-current standards and specifications of System restaurants, and shall complete the upgrading and other requirements within the time specified by Franchisor. Notwithstanding the foregoing, Franchisee shall not be required to make any such upgrade unless at least fifty percent (50%) of the restaurants of the same prototype or style owned or operated by Franchisor have made the same or similar upgrade; (j) If a transfer of all of Franchisee's interest in this Agreement, Franchisee and any guarantor of Franchisee shall remain liable for all of the obligations to Franchisor in connection with the franchised business prior to the effective date of the transfer and shall execute any and all instruments reasonably requested by Franchisor to evidence such liability; (k) At the transferee's expense, the transferee, the transferee's manager, the transferee's Operating Principal and the transferee's Operating Designee, if applicable, shall complete any training programs then in effect for franchisees upon such terms and conditions as Franchisor may reasonably require; (l) Franchisee shall pay a transfer fee in an amount sufficient to reimburse Franchisor for its actual and reasonable costs and expenses associated with reviewing the application to transfer, including, without limitation, legal and accounting fees; and (m) If transferee is a corporation or a partnership, transferee shall make and will be bound by any or all of the representations, warranties and covenants set forth at Section V.B. as Franchisor requests. Transferee shall provide to Franchisor evidence satisfactory to Franchisor that the terms of Section V.B. have been satisfied and are true and correct on the date of transfer. (3) Franchisor will apply the transfer requirements set forth in Section XII.B.(2) to all transfers requiring Franchisor's consent except a Minority Interest Transfer (as hereinafter defined). Franchisor shall not unreasonably withhold its consent to a transfer of any interest in Franchisee, in the franchised business or in this Agreement. Minority Interest Transfer shall be defined as a transfer or transfers by an interest holder or holders in Franchisee or in a general partner of Franchisee wherein such interest holder(s) do not include the Operating Principal and the Operating Designee. Notwithstanding the foregoing, the Operating Principal and the Operating Designee shall be permitted to transfer any direct or indirect ownership interest in Developer provided that the voting control and minimum ownership requirements set forth in Section V.D. of this Agreement continue to be satisfied. Minority Interest Transfer shall be defined further to exclude any transfer by an interest holder or holders in Franchisee or in a general partner of Franchisee, which transfer(s) is/are reasonably calculated to be made in conjunction with, as a part of, reasonably contemporaneous with, or in the same transaction with, any transfer by the Operating Principal or Operating Designee. Franchisor may, in its sole discretion, require any or all of the following as conditions of its approval of a Minority Interest Transfer (except for a Minority Interest Transfer or a series of Minority Interest Transfers (i) from Holdings Group, Inc. to an investment partnership controlled by the controlling shareholder of Tiger Management Corporation, (ii) in which, in the aggregate, ten percent (10%) or less of the interest of the transferor is to be transferred to (x) a partnership consisting solely of the transferor and his or her relatives, or (y) a trust established by the transferor for the benefit of his or her spouse or children), or (iii) in which additional limited partnership interests in Franchisee are issued to certain key employees of, or consultants to, Franchisee pursuant to Section 2.2 of Franchisee's Agreement of Limited Partnership in an amount not to exceed twelve percent (12%) of the aggregate limited partnership interests in Franchisee (after taking such issuance into consideration), provided that each such transferee is already a limited partner in Franchisee and will not become the Operating Principal, Operating Designee, or a Franchisee's Principal: (a) All of Franchisee's accrued monetary obligations and all other outstanding obligations to Franchisor, its subsidiaries and its affiliates shall have been satisfied; (b) Franchisee is not in material default of any provision of this Agreement, any amendment hereof or successor hereto, or any other agreement between Franchisee and Franchisor, or its subsidiaries and affiliates; (c) The transferor shall have executed a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its officers, directors, shareholders and employees, in their corporate and individual capacities, including, without limitation, claims arising under this Agreement and federal, state and local laws, rules and ordinances; (d) The transferee, if such person is to become the Operating Principal or the Operating Designee, or if a person or entity described in Section VIII.B. of this Agreement (and upon Franchisor's request, all interested parties), shall enter into a written agreement, in a form satisfactory to Franchisor, assuming full, unconditional, joint and several liability for and agreeing to perform from the date of the transfer, the covenants and agreements contained in Sections VII., VIII., and XV. of this Agreement; (e) The transferee shall demonstrate to Franchisor's satisfaction the following: that transferee meets the criteria considered by Franchisor when reviewing a prospective franchisee's application for a franchise, including but not limited to, Franchisor's educational, managerial and business standards; that transferee (if such transferee is to serve as the Operating Principal, the Operating Designee, or as a Franchisee's Principal) possesses a good moral character, business reputation and credit rating; that transferee (if such transferee is to serve as the Operating Principal, the Operating Designee, or as a Franchisee's Principal) has the aptitude and ability to conduct the business franchised herein (as may be evidenced by prior related business experience or otherwise); and that transferee has reasonably adequate financial resources and capital to operate the business; (f) Franchisee and any guarantor of Franchisee shall remain liable for all of the obligations to Franchisor in connection with the franchised business prior to the effective date of the transfer and shall execute any and all instruments reasonably requested by Franchisor to evidence such liability; (g) The transferor shall pay a transfer fee in an amount sufficient to reimburse Franchisor for its actual and reasonable costs and expenses associated with reviewing the application to transfer, including, without limitation, legal and accounting fees; and (h) If transferee is a corporation or a partnership, transferee shall make and will be bound by any or all of the representations, warranties and covenants set forth at Section V.B. as Franchisor requests. Transferee shall provide to Franchisor evidence satisfactory to Franchisor that the terms of Section V.B. have been satisfied and are true and correct on the date of transfer. (4) Franchisee shall not grant a security interest in the franchised business or in any of its assets, without Franchisor's prior written consent, which shall not be unreasonably withheld. In connection therewith, the secured party will be required by Franchisor to agree that in the event of any default by Franchisee under any documents related to the security interest, Franchisor shall have the right and option to be substituted as obligor to the secured party and to cure any default of Franchisee. (5) Franchisee acknowledges and agrees that each condition which must be met by the transferee is reasonable and necessary to assure such transferee's full performance of the obligations hereunder. C. TRANSFER FOR CONVENIENCE OF OWNERSHIP: In the event the proposed transfer is to a corporation or partnership formed solely for the convenience of ownership, Franchisor's consent may be conditioned upon any of the requirements set forth at Section XII.B.(2), except that the requirements set forth at Sections XII.B.(2)(c), (g), (h), (i), (k) and (1) shall not apply. With respect to a transfer to a corporation or partnership formed for the convenience of ownership, Franchisee shall be the owner of all of the voting stock or interest of the corporation and if Franchisee is more than one individual, each individual shall have the same proportionate ownership interest in the corporation as he had in Franchisee prior to the transfer. D. RIGHT OF FIRST REFUSAL: (1) Any party holding any interest in this Agreement, in Franchisee or in the franchised business who desires to accept any BONA FIDE offer from a third party to purchase such interest shall promptly notify Franchisor in writing of each such offer, and shall provide such information and documentation relating to the offer as Franchisor may require. Franchisor shall have the right and option, exercisable within thirty (30) days after receipt of such written notification, to send written notice to the seller that Franchisor intends to purchase the seller's interest on the same terms and conditions offered by the third party. In the event that Franchisor elects to purchase the seller's interest, closing on such purchase must occur within thirty (30) days from the date of notice to the seller of the election to purchase by Franchisor. Any material change in the terms of any offer prior to closing shall constitute a new offer subject to the same rights of first refusal by Franchisor as in the case of an initial offer. Failure of Franchisor to exercise the option afforded by this Section XII.D. shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Section XII., with respect to a proposed transfer. (2) In the event an offer from a third party provides for payment of consideration other than cash or involves certain intangible benefits, Franchisor may elect to purchase the interest proposed to be sold for the reasonable equivalent in cash. If the parties cannot agree within a reasonable time on the reasonable equivalent in cash of the non-cash part of the offer, then Franchisor shall appoint an independent appraiser and Developer shall appoint an independent appraiser. In the event both parties do not select the same appraiser, the two appraisers shall select a third appraiser which shall, within thirty (30) days of appointment, determine the fair market value of the non-cash part of the offer, and its determination shall be binding. If, however, due to the comparative tax consequences of such transactions, Franchisor's cash offer compares unfavorably to an offer made by a third party including, in whole or in part, non-cash consideration, then Franchisee may elect to rescind its acceptance of such third party offer and Franchisor shall have no right of first refusal with respect to such offer. (3) Notwithstanding anything in this Section XII.D. to the contrary, Franchisor agrees to waive the right of first refusal described herein with respect to Minority Interest Transfers and transfers by the Operating Principal and Operating Designee if the Operating Principal and the Operating Designee will continue to satisfy the voting control and minimum ownership requirements set forth in Section V.D. of this Agreement. E. TRANSFER UPON DEATH OR PERMANENT DISABILITY: (1) Upon the death of any person with an interest in this Agreement, the franchised business or in Franchisee (the "Deceased"), the executor, administrator or other personal representative of the Deceased shall transfer such interest to a third party approved by Franchisor and meeting the requirements set forth in this Agreement within twelve (12) months after the death. If no personal representative is designated or appointed or no probate proceedings are instituted with respect to the estate of the Deceased, then the distributee of such interest must be approved by Franchisor. If the distributee is not approved by Franchisor, then the distributee shall transfer such interest to a third party approved by Franchisor within twelve (12) months after the death of the Deceased. (2) Upon the permanent disability of any person with an interest in this Agreement, the franchised business or in Franchisee, Franchisor may, in its sole discretion, require such interest to be transferred to a third party meeting the requirements set forth in this Agreement in accordance with the conditions described in this Section XII. within twelve (12) months after notice to Franchisee. "Permanent disability" shall mean any physical, emotional or mental injury, illness or incapacity which would prevent a person from performing the obligations set forth in this Agreement or in the Guaranty attached to this Agreement for at least ninety (90) consecutive days and from which condition recovery within ninety (90) days from the date of determination of disability is unlikely. Permanent disability shall be determined by a licensed practicing physician selected by Franchisor upon examination of the person; or if the person refuses to submit to an examination, then such person shall be automatically deemed permanently disabled as of the date of such refusal for the purpose of this Section XII. The costs of any examination required by this Section XII.E.(2) shall be paid by Franchisor. (3) Upon the death or claim of permanent disability of any person with an interest in this Agreement, the franchised business or in Franchisee, Franchisee or a representative of Franchisee must promptly notify Franchisor of such death or claim of permanent disability. Any transfer upon death or permanent disability shall be subject to the same terms and conditions as described in Section XII. for any INTER VIVOS transfer. If an interest is not transferred upon death or permanent disability as required in this Section XII.E., in accordance with the terms and conditions of this Section XII., Franchisor may terminate this Agreement. F. NON-WAIVER OF CLAIMS: Franchisor's consent to a transfer of any interest in the franchise granted herein shall not constitute a waiver of any claims it may have against the transferring party, nor shall it be deemed a waiver of Franchisor's right to demand exact compliance with any of the terms of this Agreement by the transferee. G. OFFERINGS BY FRANCHISEE: Securities or partnership interests in Franchisee may be offered to the public by private offering or otherwise, only with the prior written consent of Franchisor (whether or not Franchisor's consent is required under Section XII.B. hereof), which consent shall not be unreasonably withheld. All materials required for such offering by federal or state law shall be submitted to Franchisor for a limited review as discussed below prior to their being filed with any governmental agency; and any materials to be used in any exempt offering shall be submitted to Franchisor for such review prior to their use. No Franchisee offering shall imply (by use of the Proprietary Marks or otherwise) that Franchisor is participating in an underwriting, issuance or offering of Franchisee or Franchisor securities; and Franchisor's review of any offering shall be limited solely to the subject of the relationship between Franchisee and Franchisor. Franchisor may, at its option, require Franchisee's offering materials to contain a written statement prescribed by Franchisor concerning the limitations described in the preceding sentence. Franchisee and the other participants in the offering must fully indemnify Franchisor in connection with the offering. For each proposed offering, Franchisee shall pay to Franchisor a non-refundable fee of Five Thousand Dollars ($5,000), or such greater amount as is necessary to reimburse Franchisor for its reasonable costs and expenses associated with reviewing the proposed offering, including, without limitation, legal and accounting fees. Franchisee shall give Franchisor written notice at least thirty (30) days prior to the date of commencement of any offering or other transaction covered by this Section XII.G. XIII. DEFAULT AND TERMINATION A. Franchisee acknowledges and agrees that each of the Franchisee's obligations described in this Agreement is a material and essential obligation of Franchisee; that nonperformance of such obligations will adversely and substantially affect the Franchisor and the System; and agrees that the exercise by Franchisor of the rights and remedies set forth herein are appropriate and reasonable. B. Franchisee shall be deemed to be in default under this Agreement, and all rights granted herein shall automatically terminate without notice to Franchisee, if Franchisee shall become insolvent or makes a general assignment for the benefit of creditors; or if Franchisee files a voluntary petition under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state thereof, or admits in writing its inability to pay its debts when due; or if Franchisee is adjudicated a bankrupt or insolvent in proceedings filed against Franchisee under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state thereof, or if a bill in equity or other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee; or if a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; or if proceedings for a composition with creditors under any state or federal law should be instituted by or against Franchisee and are not dismissed within thirty (30) days; or if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless supersedeas bond is filed); or if Franchisee is dissolved; or if execution is levied against Franchisee's business or property and such execution is not lifted, released, or dismissed within thirty (30) days; or if suit to foreclose any lien or mortgage against the Restaurant premises or equipment is instituted against Franchisee and not dismissed within thirty (30) days; or if the real or personal property of Franchisee's Restaurant shall be sold after levy thereupon by any sheriff, marshal or constable; or if any legal entity affiliated with Franchisee (or having the same or substantially similar management and ownership composition to Franchisee including, but not limited to, NE Restaurant (Cambridge) Limited Partnership, a Massachusetts limited partnership, and NE Restaurant (Glastonbury) Limited Partnership, a Connecticut limited partnership) which is the franchisee under a separate Franchise Agreement with Franchisor, or is the developer under any Development Agreement with Franchisor, is in default under any similar provision or provisions of such other Franchise Agreement or Development Agreement. If Franchisee is a limited partnership, all of the events of default described in this Section XIII.B. shall be read to include similar events involving Franchisee's general partner. C. Franchisee shall be deemed to be in default and Franchisor may, at its option, terminate this Agreement and all rights granted hereunder, without affording Franchisee any opportunity to cure the default, effective immediately upon notice to Franchisee, upon the occurrence of any of the following events: (1) If Franchisee at any time forfeits the right to do or transact business in the jurisdiction where the Restaurant is located and such right is not reinstated within ten (10) days thereafter, ceases to operate or otherwise abandons the franchised business, or loses the right to possession of the premises. Notwithstanding the foregoing, if the Restaurant is damaged by fire or other casualty, Franchisee shall, at its sole cost and expense, expeditiously repair such damage as soon as possible after the occurrence thereof. In the event such casualty loss requires the closing of the Restaurant for more than ninety (90) days, then unless repair and reconstruction work has commenced in earnest within such ninety (90) day period, and unless the Restaurant is reopened and in full operation no later than one (1) year after the date of such casualty, then same shall constitute a default hereunder. Provided that the prior written approval of Franchisor is obtained, which approval shall not be unreasonably withheld, but may be conditioned upon the payment of an agreed minimum royalty to Franchisor during the period in which the Restaurant is not in operation due to fire or other casualty, Franchisee may construct and open a different Restaurant within the trade area of such damaged Restaurant within one (1) year after the date of such casualty loss. Such substituted Restaurant shall be exempt from the Restaurant franchise fee requirement provided for in Section IV.A. of this Agreement. (2) If Franchisee, the Operating Principal, the Operating Designee, or any of Franchisee's Principals is convicted of a felony, a crime involving moral turpitude, or any other crime or offense that Franchisor believes is reasonably likely to have an adverse effect on the System, the Proprietary Marks, the goodwill associated therewith, or Franchisor's interest therein; (3) If a threat or danger to public health or safety results from the construction, maintenance, or operation of the Restaurant and same is not cured within thirty (30) days after Franchisee is notified of such threat or danger; (4) If Franchisee fails to propose a qualified Operating Principal, or Operating Designee, or any replacement thereof, within a reasonable time as required under Section V.D. hereof; (5) If Franchisee or any partner or shareholder in Franchisee purports to transfer any rights or obligations under this Agreement or any interest in Franchisee or the franchised business to any third party without Franchisor's prior written consent, contrary to the terms of Section XII. of this Agreement; (6) If Franchisee, the Operating Principal, the Operating Designee, or any of Franchisee's Principals fails to comply with the in-term covenants in Section XV.B. hereof or Franchisee fails to obtain execution of the covenants and related agreements required under Sections VIII.B. or XV.H. hereof, (7) If, contrary to the terms of Sections VII. or VIII. hereof, Franchisee, the Operating Principal, the Operating Designee, or any of Franchisee's Principals discloses or divulges the contents of the MOD Manual or other confidential information provided to Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals by Franchisor; (8) If a transfer upon death or permanent disability is not transferred in accordance with Section XII. within the time periods required by Section XII.E. hereof; (9) If Franchisee knowingly maintains false books or records, or submits any false reports to Franchisor; (10) If Franchisee breaches any of the covenants set forth in Section V.B. or has falsely made any of the representations or warranties set forth in Section V.B.; (11) If Franchisee repeatedly is in default under Section XIII.D. hereof for failure substantially to comply with any of the requirements imposed by this Agreement, whether or not cured after notice; or (12) If any legal entity affiliated with Franchisee (or having the same or substantially similar management and ownership composition to Franchisee) which is the franchisee under a separate Franchise Agreement with Franchisor, is in default of any similar provision or provisions of such other Franchise Agreement. D. Except as provided in Sections XIII.B. and C. of this Agreement, upon any default by Franchisee which is susceptible of being cured, Franchisor may terminate this Agreement only by giving written notice of termination stating the nature of such default to Franchisee at least thirty (30) days prior to the effective date of termination; provided, however, that Franchisee may avoid termination by immediately initiating a remedy to cure such default and curing it to Franchisor's satisfaction within the thirty-day period, and by promptly providing proof thereof to Franchisor. If any such default is not cured within the specified time, or such longer period as applicable law may require or as Franchisor may deem appropriate in its sole and absolute discretion, this Agreement shall terminate without further notice to Franchisee effective immediately upon the expiration of the thirty-day period or such longer period as applicable law may require or as Franchisor may grant in its sole and absolute discretion. Defaults which are susceptible of cure hereunder may include, but are not limited to, the following illustrative events: (1) If Franchisee fails to comply with any of the requirements imposed by this Agreement, as it may from time to time be amended or reasonably be supplemented by the MOD Manual, or fails to carry out the terms of this Agreement in good faith. (2) If Franchisee fails, refuses, or neglects promptly to pay any monies owing to Franchisor or its subsidiaries or affiliates when due, or to submit the financial or other information required by Franchisor under this Agreement. (3) If Franchisee fails to maintain or observe any of the standards or procedures prescribed by Franchisor in this Agreement, the MOD Manual, or otherwise in writing. (4) Except as provided in Section XIII.C.(5) hereof, if Franchisee fails, refuses, or neglects to obtain Franchisor's prior written approval or consent as required by this Agreement. (5) If Franchisee misuses or makes any unauthorized use of the Proprietary Marks or otherwise materially impairs the goodwill associated therewith or Franchisor's rights therein. (6) If Franchisee engages in any business or markets any service or product under a name or mark which, in Franchisor's opinion, is confusingly similar to the Proprietary Marks. XIV. OBLIGATIONS UPON TERMINATION OR EXPIRATION Upon termination or expiration of this Agreement, all rights granted hereunder to Franchisee shall forthwith terminate, and: A. Franchisee shall immediately cease to operate the business franchised under this Agreement, and shall not thereafter, directly or indirectly, represent to the public or hold itself out as a present or former franchisee of Franchisor. B. Franchisee shall immediately and permanently cease to use, in any manner whatsoever, any confidential methods, procedures and techniques associated with the System; the Proprietary Mark "CHILI'S(R)"; and all other Proprietary Marks and distinctive forms, slogans, signs, symbols, and devices associated with the System. In particular, Franchisee shall cease to use, without limitation, all signs, advertising materials, displays, stationery, forms and any other articles which display the Proprietary Marks. C. Franchisee shall take such action as may be necessary to cancel any assumed name or equivalent registration which contains the mark "CHILI'S(R)" or any other service mark or trademark of Franchisor, and Franchisee shall furnish Franchisor with evidence satisfactory to Franchisor of compliance with this obligation within five (5) days after termination or expiration of this Agreement. D. 1. If Franchisee operates the Restaurant under a lease for the Restaurant premises with a third party, Franchisee shall, at Franchisor's option, assign to Franchisor any interest which Franchisee has in any lease or sublease for the premises of the franchised business. Franchisor may exercise such option at or within thirty (30) days after either termination or (subject to any existing right to renew) expiration of this Agreement. In the event Franchisor exercises such option and acquires the lease or sublease for the premises of the franchised business, Franchisee shall indemnify and hold harmless Franchisor for any claim, loss, cost, or damage relating to a period of time prior to the acquisition of such lease or sublease, and Franchisor shall indemnify and hold harmless Franchisee for any claim, loss, cost, or damage relating to a period of time after the acquisition of such lease or sublease. In the event Franchisor does not elect to exercise its option to acquire the lease or sublease for the premises of the franchised business, Franchisee shall make such modifications or alterations to the premises operated hereunder (including, without limitation, the changing of the telephone number) immediately upon termination or expiration of this Agreement as may be necessary to distinguish the appearance of said premises from that of other restaurants under the System, and shall make such specific additional changes thereto as Franchisor may reasonably request for that purpose. In the event Franchisee fails or refuses to comply with the requirements of this Section XIV., Franchisor shall have the right to enter upon the premises where Franchisee's franchised business was conducted, without being guilty of trespass or any other tort, for the purpose of making or causing to be made such changes as may be required, at the expense of Franchisee, which expense Franchisee agrees to pay upon demand. 2. Except as provided in Section XIV.D.3., Franchisor shall have the option, to be exercised within thirty (30) days after termination or expiration of this Agreement, to purchase from Franchisee any or all of the furnishings, equipment, signs, fixtures, supplies, or inventory of Franchisee related to the operation of the franchised business, at Franchisee's cost or fair market value, whichever is less. Franchisor shall be purchasing Franchisee's assets only and shall be assuming no liabilities whatsoever. If the parties cannot agree on a fair market value within thirty (30) days after Franchisor's exercise of its option, then Franchisor shall appoint an independent appraiser and Franchisee shall appoint an independent appraiser. In the event both parties do not select the same appraiser, the two appraisers shall select a third appraiser which shall, within thirty (30) days of appointment, determine the fair market value of the non-cash part of the offer and its determination shall be binding. In the event of such appraisal, each party shall bear its own legal and other costs and shall split the appraisal fees. If Franchisor elects to exercise any option to purchase herein provided, it shall have the right to set off all amounts due from Franchisee hereunder, against any payment therefor. 3. In addition to the options described in Section XIV.D. 1. and 2. and if Franchisee owns the Restaurant premises, Franchisor shall have the option, to be exercised at or within thirty (30) days after termination or expiration of this Agreement, to purchase the Restaurant premises including any building thereon, if applicable, for the fair market value of the land and building, and the furnishings, equipment, signs, fixtures, supplies and inventory therein at Franchisee's cost or fair market value, whichever is less. Fair market value shall be determined using the procedure described in Section XIV.D.2. Franchisor shall be purchasing assets only and shall be assuming no liabilities whatsoever. If Franchisee does not own the land on which the Restaurant is operated and Franchisor exercises its option for an assignment of the lease, Franchisor may exercise this option for the purpose of purchasing the building if owned by Franchisee and related assets as described above. 4. With respect to the options described in Section XIV.D. L, Franchisee shall deliver to Franchisor in a form satisfactory to Franchisor, such warranties, deeds, releases of lien, bills of sale, assignments and such other documents and instruments which Franchisor deems necessary in order to perfect Franchisor's title and possession in and to the properties being purchased or assigned and to meet the requirements of all tax and government authorities. 5. The time for closing of the purchase and sale of the properties described in Section XIV.D.2. and 3. shall be a date not later than thirty (30) days after the purchase price is determined by the parties or the determination of the appraisers, whichever is later, unless the parties mutually agree to designate another date. The time for closing on the assignment of the lease described in Section XIV.D.1. shall be a date no later than ten (10) days after Franchisor's exercise of its option thereunder unless Franchisor is also exercising its options under Section XIV.D.2. or D.3. in which case the date of the closing shall be on the same closing date prescribed for such options, as applicable. Closing shall take place at Franchisor's corporate offices or at such other location as the parties may agree. E. Franchisee agrees, in the event it continues to operate or subsequently begins to operate any other business, not to use any reproduction, counterfeit, copy or colorable imitation of the Proprietary Marks, either in connection with such other business or the promotion thereof, which is likely to cause confusion, mistake, or deception, or which is likely to dilute Franchisor's rights in and to the Proprietary Marks, and further agrees not to utilize any designation of origin or description or representation which falsely suggests or represents an association or connection with Franchisor constituting unfair competition. F. Franchisee shall promptly pay all sums owing to Franchisor and its subsidiaries and affiliates. In the event of termination for any default of Franchisee, such sums shall include all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor as a result of the default, which obligation shall give rise to and remain, until paid in full, a lien in favor of Franchisor against any and all of the personal property, furnishings, equipment, signs, fixtures, and inventory owned by Franchisee and on the premises operated hereunder at the time of default. G. Franchisee shall pay to Franchisor all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor subsequent to the termination or expiration of this Agreement in obtaining injunctive or other relief for the enforcement of any provisions of this Section XIV. H. Franchisee shall immediately deliver to Franchisor all manuals, including the MOD Manual, records, files, instructions, correspondence, all materials related to operating the franchised business, including, without limitation, brochures, agreements, invoices, and any and all other materials relating to the operation of the franchised business in Franchisee's possession, and all copies thereof (all of which are acknowledged to be Franchisor's property), and shall retain no copy or record of any of the foregoing, except Franchisee's copy of this Agreement, Franchisee's business and financial records, and copies of any correspondence between the parties and any other documents which Franchisee reasonably needs for compliance with any provision of law. I. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals shall comply with the restrictions on confidential information contained in Section VIII.A. and the covenants contained in Section XV.B. of this Agreement. Any other person required to execute similar covenants pursuant to Sections VIII.B. or XV.H. shall also comply with such covenants. XV. COVENANTS A. Franchisee and the Operating Principal covenant that during the term of this Agreement except as otherwise approved in writing by Franchisor, Franchisee, and either the Operating Principal or the Operating Designee shall devote full time, energy, and best efforts to the management and operation of the business franchised hereunder. B. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals specifically acknowledge that, pursuant to this Agreement, Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals will receive valuable specialized training, trade secrets and confidential information, including, without limitation, information regarding the operational, sales, promotional and marketing methods and techniques of Franchisor and the System which is beyond the present skills and experience of Franchisee, the Operating Principal, the Operating Designee, Franchisee's Principals and Franchisee's managers and employees. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals acknowledge that such training, trade secrets and confidential information provide a competitive advantage and will be valuable to them in the development of the franchised business, and that gaining access to such training, trade secrets and confidential information is, therefore, a primary reason why they are entering into this Agreement. In consideration for such training, trade secrets and confidential information, Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals covenant that during the term of this Agreement (or, with respect to the Operating Principal, during the term of this Agreement for so long as such person owns any interest in Franchisee or, with respect to the Operating Designee, during the term of this Agreement for so long as such person serves as the Operating Designee on behalf of Franchisee and the Operating Principal or, with respect to each of Franchisee's Principals, during the term of this Agreement for so long as such individual or entity satisfies the definition of "Franchisee's Principals" as described in Section XXI.F. of this Agreement), and for a continuous uninterrupted period commencing upon the expiration or termination of this Agreement, regardless of the cause for termination (or, with respect to the Operating Principal or each of Franchisee's Principals, commencing upon the earlier of: (i) the expiration or termination of this Agreement, or (ii) with respect to the Operating Principal, the termination of all of the Operating Principals' interest in Franchisee; or, with respect to the Operating Designee, during the term of this Agreement for so long as such person serves as the Operating Designee on behalf of Franchisee and the Operating Principal; or, with respect to each of Franchisee's Principals, the time such individual or entity ceases to satisfy the definition of "Franchisee's Principals" as described in Section XXI.F. of this Agreement) and continuing for two (2) years thereafter (except in the case of restaurant managers, to whom such two (2) year period shall not be applicable), and as otherwise approved in writing by the Franchisor, neither Franchisee, the Operating Principal, the Operating Designee, nor Franchisee's Principals shall, directly or indirectly, for themselves, or through, on behalf of or in conjunction with any person, persons, partnership, or corporation: (1) Divert or attempt to divert any business or customer of the business franchised hereunder to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with Franchisor's Proprietary Marks and the System. (2) Employ or seek to employ any person who is at that time employed by Franchisor or by any other franchisee or developer of Franchisor, or otherwise directly or indirectly induce such person to leave his or her employment. (3) Own, maintain, operate, engage in, or have any interest in any business in the United States which is in the full-service casual dining market segment of the restaurant industry having as a primary menu item any of the following: hamburgers or other sandwiches, salads, barbecue ribs, fajitas, and other Southwestern and Mexican-style cuisine. The current seven percent (7%) ownership interest of Dennis Pedra in Uno Concepts, Inc. shall not be deemed to be a violation of this Section XV.B.(3) although no new or additional investments in Uno Concepts, Inc. or in any other restaurant business shall be permitted by Dennis Pedra. C. Section XV.B.(3) shall not apply to ownership of less than ten percent (10%) beneficial interest in the outstanding equity securities of any publicly-held corporation. D. The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Section XV. is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Franchisor is a party, Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals expressly agree to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Section XV. E. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals understand and acknowledge that Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in Section XV.B. in this Agreement, or any portion thereof, without their consent, effective immediately upon notice to Franchisee; and Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals agree that they shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section XX. hereof. F. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals expressly agree that the existence of any claims they may have against Franchisor, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Franchisor of the covenants in this Section XV. If either Franchisor or Franchisee institutes any action or proceeding seeking legal or equitable relief in connection with enforcement of this Section XV, then the non-prevailing party in such action or proceeding shall reimburse the prevailing party for its reasonable expenses, attorneys' fees, investigation costs, and all costs and disbursements incurred herein by the prevailing party, including without limitation, any such reasonable fees, costs, or disbursements incurred on any appeal from such action or proceeding. G. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals acknowledge that a violation of the terms of this Section XV. or the willful and knowing aiding or abetting of a third party in an action which would be a violation of this Section XV. if such third party was a party to this Agreement would result in irreparable injury to Franchisor for which no adequate remedy at law may be available, and Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals accordingly consent to the issuance of an injunction prohibiting any conduct by Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals in violation of the terms of this Section XV. H. At Franchisor's request, Franchisee shall require and obtain execution of covenants similar to those set forth in this Section XV. (including covenants applicable upon the termination of a person's relationship with Franchisee) from its restaurant managers, members of its advisory board, any other person or entity who has received or will receive training or confidential information from Franchisor and any corporation directly or indirectly controlling Franchisee, if Franchisee is a corporation (or of any corporate general partner and any individual or corporation directly or indirectly controlling a general partner of Franchisee, if Franchisee is a partnership). The covenants required by this Section XV.H. shall be substantially in the form contained in Attachment B for Franchisee's restaurant managers and other persons having access to confidential information of Franchisor, Attachment C for Lee Ainslie (and his successors on Franchisee's advisory board), Attachment D for Alan McDowell, and Attachment E for Thomas Devlin. Failure by Franchisee to obtain execution of the covenants required by this Section XV.H. shall constitute a default under Section XIII.C.(6) hereof. XVI. TAXES, PERMITS AND INDEBTEDNESS A. Franchisee shall promptly pay when due all taxes levied or assessed, including, without limitation, unemployment and sales taxes, and all accounts and other indebtedness of every kind incurred by Franchisee in the conduct of the business franchised under this Agreement. Franchisee shall pay to Franchisor an amount equal to any sales tax, gross receipts tax, or similar tax (other than income tax) imposed on Franchisor with respect to any payments to Franchisor required under this Agreement, unless the tax is credited against income tax otherwise payable by Franchisor. B. In the event of any BONA FIDE dispute as to Franchisee's liability for taxes assessed or other indebtedness, Franchisee may contest the validity or the amount of the tax or indebtedness in accordance with procedures of the taxing authority or applicable law; however, in no event shall Franchisee permit a tax sale or seizure by levy of execution or similar writ or warrant, or attachment by a creditor, to occur against the premises of the franchised business, or any improvements thereon. C. Franchisee shall comply with all federal, state and local laws, rules and regulations, and shall timely obtain any and all permits, certificates, or licenses necessary for the full and proper conduct of the business franchised under this Agreement, including, without limitation, licenses to do business, fictitious name registrations, sales tax permits and fire clearances. D. Franchisee shall notify Franchisor in writing within five (5) days of the commencement of any action, suit, or proceeding, and of the issuance of any order, writ, injunction, award, or decree of any court, agency, or other governmental instrumentality, which may adversely affect the operation or financial condition of the franchised business. XVII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION A. It is understood and agreed by the parties hereto that this Agreement does not create a fiduciary relationship between them, that Franchisee shall be an independent contractor, and that nothing in this Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of the other for any purpose whatsoever. B. During the term of this Agreement and any extensions hereof, Franchisee shall hold itself out to the public as an independent contractor operating the business pursuant to a franchise from Franchisor. Franchisee agrees to take such action as may be necessary to do so, including, without limitation, exhibiting a notice of that fact in a conspicuous place in the franchised premises, the content of which Franchisor reserves the right to specify. C. It is understood and agreed that nothing in this Agreement authorizes Franchisee, the Operating Principal, the Operating Designee, or any of Franchisee's Principals to make any contract, agreement, warranty, or representation on Franchisor's behalf, or to incur any debt or other obligation in Franchisor's name; and that Franchisor shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action; nor shall Franchisor be liable by reason of any act or omission of Franchisee in its conduct of the franchised business or for any claim or judgment arising therefrom against Franchisee or Franchisor. Franchisee shall indemnify and hold Franchisor, and Franchisor's officers, directors, and employees harmless against any and all claims arising directly or indirectly from, as a result of, or in connection with Franchisee's operation of the franchised business, as well as the costs, including attorneys' fees, of defending against them, except for claims arising directly or indirectly from the negligence of Franchisor, its officers, directors, or employees. XVIII. APPROVALS AND WAIVERS A. Whenever this Agreement requires the prior approval or consent of Franchisor, Franchisee shall make a timely written request to Franchisor therefor, and such approval or consent shall be obtained in writing. B. Franchisor makes no warranties or guarantees upon which Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals may rely, and assumes no liability or obligation to Franchisee or such persons, by providing any waiver, approval, consent, or suggestion to Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals in connection with this Agreement, or by reason of any neglect, delay, or denial of any request therefor. C. No delay, waiver, omission, or forbearance on the part of Franchisor to exercise any right, option, duty, or power arising out of any breach or default by Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals under any of the terms, provisions, covenants, or conditions hereof, shall constitute a waiver by Franchisor to enforce any such right, option, duty, or power as against Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals, or as to any subsequent breach or default. Subsequent acceptance by Franchisor of any payments due to it hereunder shall not be deemed to be a waiver by Franchisor of any preceding breach by Franchisee, the Operating Principal, the Operating Designee, or Franchisee's Principals of any terms, provisions, covenants, or conditions of this Agreement. XIX. NOTICES Any and all notices required or permitted under this Agreement shall be in writing and shall be personally delivered or mailed by expedited delivery service or certified or registered mail, return receipt requested, or sent by prepaid telex or facsimile (provided the sender confirms the telex or facsimile by sending an original confirmation copy thereof by certified or registered mail or expedited delivery service within three (3) business days after transmission thereof) to the respective parties at the following addresses unless and until a different address has been designated by written notice to the other party: Notices to Franchisor: Brinker International, Inc. 6820 LBJ Freeway Dallas, Texas 75240 Attention: General Counsel Notices to Franchisee, Operating Principal, Operating Designee, and Franchisee's Principals: NE Restaurant Company, Inc. 300 Pond Street Randolph, Massachusetts 02368 Any notice shall be deemed to have been given at the time of personal delivery or, in the case of facsimile or telex, upon receipt (provided confirmation is sent as described above) or, in the case of expedited delivery service or registered or certified mail, three (3) business days after the date and time of mailing. Business day for the purpose of this Section XIX. excludes Saturday, Sunday, and the following national holidays: New Year's Day, Martin Luther King Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving, and Christmas. XX. ENTIRE AGREEMENT This Agreement, the documents referred to herein, and the Attachment hereto constitute the entire, full and complete Agreement between Franchisor and Franchisee concerning the subject matter hereof, and shall supersede all prior agreements, no other representations having induced Franchisee to execute this Agreement. Except for those permitted to be made unilaterally by Franchisor hereunder, no amendment, change, or variance from this Agreement shall be binding on either party unless mutually agreed to by the parties and executed by their authorized officers or agents in writing. XXI. SEVERABILITY AND CONSTRUCTION A. Except as expressly provided to the contrary herein, each portion, section, part, term, and/or provision of this Agreement shall be considered severable; and if, for any reason, any section, part, term, and/or provision herein is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation by a court or agency having valid jurisdiction, such shall not impair the operation of, or have any other effect upon, such other portions, sections, parts, terms, and/or provisions of this Agreement as may remain otherwise intelligible; and the latter shall continue to be given full force and effect and bind the parties hereto; and said invalid portions, sections, parts, terms and/or provisions shall be deemed not to be a part of this Agreement. B. Except as expressly provided to the contrary herein, nothing in this Agreement is intended, nor shall be deemed, to confer upon any person or legal entity other than Franchisee, Franchisor, Franchisor's officers, directors, and employees, and such of Franchisee's and Franchisor's respective successors and assigns as may be contemplated (and, as to Franchisee, permitted) by Section XII. hereof, any rights or remedies under or by reason of this Agreement. C. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals, as applicable, expressly agree to be bound by any promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms of any provision hereof, as though it were separately articulated in and made a part of this Agreement, that may result from striking from any of the provisions hereof any portion or portions which a court may hold to be unreasonable and unenforceable in a final decision to which Franchisor is a party, or from reducing the scope of any promise or covenant to the extent required to comply with such a court order. D. All captions in this Agreement are intended solely for the convenience of all parties, and none shall be deemed to affect the meaning or construction of any provision hereof. E. All references herein to the masculine, neuter, or singular shall be construed to include the masculine, feminine, neuter, or plural, where applicable; and, without limiting the obligations individually undertaken by the Operating Principal and Franchisee's Principals hereunder, all acknowledgments, promises, covenants, agreements and obligations herein made or undertaken by Franchisee shall be deemed jointly and severally undertaken by all those executing this Agreement on behalf of Franchisee. F. The term "Franchisee's Principals" as used in this Agreement shall include, collectively or individually, Franchisee's spouse, if Franchisee is an individual; all officers and directors of, and all other holders of a beneficial interest of twelve percent (12%) or more of the securities of, Franchisee and any corporation directly or indirectly controlling Franchisee, if Franchisee is a corporation; the general partners of Franchisee and the officers and directors of, and all other holders of a beneficial interest of twelve percent (12%) or more of the securities of, a corporate general partner and any individual or corporation which controls, directly or indirectly, any general partner, if Franchisee is a partnership; and members of Franchisee's advisory board. For purposes of this definition, the Operating Principal, the Operating Designee, Thomas R. Devlin, Alan McDowell, and Holdings Group, Inc. shall not be considered to be Franchisee's Principals. G. This Agreement may be executed in triplicate, and each copy so executed shall be deemed an original. H. If at any time during the term of this Agreement either Franchisor or Franchisee shall institute any action or proceeding against the other relating to the provisions of this Agreement or any default hereunder, the non-prevailing party in such action or proceeding shall reimburse the prevailing party for its reasonable expenses, attorneys' fees, investigation costs, and all costs and disbursements incurred herein by the prevailing party, including without limitation any such reasonable fees, costs, or disbursements incurred on any appeal from such action or proceeding. XXII. APPLICABLE LAW A. THIS AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND EXECUTION BY FRANCHISOR IN TEXAS, AND SHALL BE INTERPRETED AND CONSTRUED UNDER THE LAWS THEREOF (EXCEPT FOR TEXAS CHOICE OF LAW RULES). B. THE PARTIES AGREE THAT ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER IN ANY COURT, WHETHER FEDERAL OR STATE, SHALL BE BROUGHT WITHIN THE STATE OF TEXAS IN THE JUDICIAL DISTRICT IN WHICH FRANCHISOR HAS ITS PRINCIPAL PLACE OF BUSINESS; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION WHICH INCLUDES INJUNCTIVE RELIEF, FRANCHISOR MAY BRING SUCH ACTION IN ANY STATE WHICH HAS JURISDICTION. THE PARTIES DO HEREBY WAIVE ALL QUESTIONS OF PERSONAL JURISDICTION OR VENUE FOR THE PURPOSE OF CARRYING OUT THIS PROVISION. C. No right or remedy conferred upon or reserved to Franchisor or Franchisee by this Agreement is intended to be, nor shall be deemed, exclusive of any other right or remedy herein or by law or equity provided or permitted, but each shall be cumulative of every other right or remedy. D. Nothing herein contained shall bar Franchisor's right to obtain injunctive relief against threatened conduct that will cause it loss or damages, under the usual equity rules, including the applicable rules for obtaining restraining orders and preliminary injunctions. XXIII. ACKNOWLEDGMENTS A. Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals acknowledge that they have conducted an independent investigation of the business franchised hereunder, and recognize that the business venture contemplated by this Agreement involves business risks and that Franchisee's success will be largely dependent upon the ability of Franchisee, the Operating Principal, the Operating Designee, and its Franchisee's Principals as independent business people. Franchisor expressly disclaims the making of, and Franchisee, the Operating Principal, the Operating Designee, and Franchisee's Principals acknowledge not having received, any warranty or guarantee, express or implied as to the potential volume, profits, or success of the business venture contemplated by this Agreement. B. Franchisee acknowledges that it received a copy of the complete Chili's Grill & Bar Restaurant Franchise Agreement, the Attachments thereto, and agreements relating thereto, if any, at least five (5) business days prior to the date on which this Agreement was executed. Franchisee further acknowledges that it has received the disclosure document required by the Trade Regulation Rule of the Federal Trade Commission entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" at least ten (10) business days prior to the date on which this Agreement was executed. C. Franchisee acknowledges that it has read and understood this Agreement, the Attachments hereto, and agreements relating hereto, if any, and that Franchisor has accorded Franchisee ample time and opportunity to consult with advisors of Franchisee's own choosing about the potential benefits and risks of entering into this Agreement. IN WITNESS WHEREOF, the parties hereto have duty executed, sealed, and delivered this Agreement in triplicate on the day and year first above written. BRINKER INTERNATIONAL, INC., a Delaware corporation SEAL By: _____________________________ By: _____________________________ Assistant Secretary Roger F. Thomson Executive Vice President, General Counsel and Secretary NE RESTAURANT COMPANY, INC., a Delaware corporation SEAL _____________________________ By: _____________________________ Secretary Paul Hoagland Chief Financial Officer _____________________________ _____________________________ Benjamin Jacobson, Operating Principal _____________________________ _____________________________ Witness Dennis Pedra, Operating Designee Each of the undersigned acknowledges and agrees as follows: (1) Each has read the terms and conditions of this Franchise Agreement; (2) Each is included in the term "Franchisor's Principals" as described in Section XXI.F. of this Franchise Agreement; and (3) Each individually, jointly and severally makes all of the covenants, representations and agreements of Franchisee's Principals set forth in this Franchise Agreement and is obligated to perform thereunder. ATTEST: FRANCHISEE'S PRINCIPALS _____________________________ _____________________________ Witness Paul Hoagland _____________________________ _____________________________ Witness Dennis Pedra NE RESTAURANT COMPANY, INC., a Delaware corporation _____________________________ By: _____________________________ Witness Benjamin R. Jacobson, Chairman of the Board GUARANTY As an inducement to BRINKER INTERNATIONAL, INC. ("Franchisor") to execute the foregoing Franchise Agreement, including the Attachments thereto of even date, the undersigned, jointly and severally, hereby agree to be bound by all the terms and conditions of the above Franchise Agreement including any amendments or modifications thereto whenever made (hereinafter the "Agreement") and unconditionally and irrevocably guarantee to Franchisor and its successors and assigns that all of Franchisee's obligations under the Agreement will be punctually paid and performed. Upon default by Franchisee or notice from Franchisor, the undersigned will immediately make each payment and perform each obligation required of Franchisee under this Agreement. Without affecting the obligations of the undersigned under this Guaranty, Franchisor may, without notice to the undersigned, renew, extend, modify, amend, or release any indebtedness or obligation of Franchisee, or settle, adjust, or compromise any claims against Franchisee. The undersigned waive all demands and notices of every kind with respect to this Guaranty and the Agreement, including, without limitation, notice of: the amendment or modification of this Guaranty or the Agreement, the demand for payment or performance by Franchisee, any default by Franchisee or any guarantor, and any release of any guarantor or other security for the Agreement or the obligations of Franchisee. Franchisor may pursue its rights against the undersigned without first exhausting its remedies against Franchisee and without joining any other guarantor hereto and no delay on the part of Franchisor in the exercise of any right or remedy shall operate as a waiver of such right or remedy, and no single or partial exercise by Franchisor of any right or remedy shall preclude the further exercise of such right or remedy. Upon receipt by Franchisor of notice of the death of an individual guarantor, the estate of such guarantor will be bound by this Guaranty but only for defaults and obligations hereunder existing at the time of death, and the obligations of the other guarantors hereunder will continue in full force and effect. Notwithstanding anything herein to the contrary, this Guaranty shall terminate and have no further force and effect as of one (1) year from the date of execution of this Guaranty and the joint and several liability of the undersigned for payments hereunder is limited to a total of Two Hundred Thousand and No/100 Dollars ($200,000.00) (I.E., the aggregate liability for all of the undersigned for payments hereunder is limited to $200,000.00). IN WITNESS WHEREOF, the undersigned have signed this Guaranty this 22nd day of Sept., 1997. GUARANTORS: ATTEST WITNESS: _______________________ By: _______________________ Benjamin Jacobson ATTEST WITNESS: _______________________ By: _______________________ Dennis Pedra ATTEST WITNESS: _______________________ By: _______________________ Paul Hoagland EX-10.21 16 FINANCIAL ADVISORY SERVICES AGREEMENT Exhibit 10.21 FINANCIAL ADVISORY SERVICES AGREEMENT This Financial Advisory Services Agreement (this "Agreement") is made and entered into as of July 21, 1998, by and between NE Restaurant Company, Inc., a Delaware corporation (including its successors, the "Company"), and Jacobson Partners, a New York general partnership ("Jacobson"). WHEREAS, the Company and Jacobson desire to enter into an agreement providing for an annual management fee in return for certain services to be provided to the Company by Jacobson. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and Jacobson (the "Parties") hereby agree as follows: 1. RETENTION OF FINANCIAL ADVISOR; SCOPE OF SERVICES. (a) Subject to the terms and conditions set forth herein, the Company hereby retains Jacobson to act as a financial advisor to the Company during the Contract Period (as defined in Paragraph 3 below). (b) As financial advisor to the Company, Jacobson will, from time to time provide consultation, assistance and advice with respect to the Company's financial operations, including without limitation the following: (i) assistance in the public equity or debt offering process, including review of documents, road show planning and participation, and general oversight of legal, accounting and underwriting issues; (ii) assistance in loan and credit agreement negotiation, documentation and compliance; (iii) assistance in upgrading and implementing a long-term budgeting and planning process and a long-term strategy; (iv) assistance and advice in connection with public reporting and disclosure issues; (v) assistance in developing and maintaining an investor relations program, which will include preparation of presentations, planning meetings and attending meetings with analysts; and (vi) ongoing advice on financial and business activities, including negotiation strategies, financing alternatives and possible acquisitions. (c) The Parties acknowledge that (i) Jacobson provides financial advisory services to others and that the services to be performed by Jacobson hereunder are provided, in part, as an incident to Jacobson's and/or its affiliates' ownership of capital stock of the Company; (ii) the fees to be paid to Jacobson hereunder were established at an amount which is believed to be reasonable for the services to be performed by Jacobson hereunder; (iii) Jacobson is not an "investment advisor," within the meaning of the Investment Advisors Act of 1940, as amended, or applicable state laws, or a "broker" or "dealer" under the Securities Exchange Act of 1934, as amended, or applicable state securities laws; (iv) the services to be provided by Jacobson under this Agreement do not include those of an "investment advisor" (i.e., providing advice as to the value of securities or the advisability of investing in, purchasing or selling securities), or those of a "broker" or "dealer" (i.e., effecting transactions in securities for the account of the Company or others); and (v) it is specifically intended by the Parties that Jacobson's activities hereunder will not subject Jacobson to any regulation or registration under federal or state laws. (d) The Parties acknowledge and agree that Jacobson will make available any and all of its partners, employees, agents and other resources, which Jacobson, at its sole discretion, determines to be necessary for it to perform its services hereunder. 2. CONTRACT PERIOD AND TERMINATION. Jacobson shall act as the Company's financial advisor under this Agreement for a period commencing July 21, 1998, and continuing through July 20, 2008, and from year to year thereafter (the "Contract Period"). Upon termination, neither party will have any further obligation under this Agreement, except for (a) the Company's obligation to pay to Jacobson the fees and reimbursements then due pursuant to Paragraph 5 hereof, which shall continue after such termination until such amounts are paid in full; and (b) Jacobson's confidentiality obligations under Paragraphs 4(b) and 4(c) hereof, which shall continue in effect for two years after such termination. 3. FURNISHING OF COMPANY INFORMATION; CONFIDENTIALITY. (a) In connection with Jacobson's activities hereunder on the Company's behalf, the Company shall furnish Jacobson with all information concerning the Company and its operations that Jacobson deems necessary or appropriate (the "Company Information") and will provide Jacobson with access to the Company's books, records, officers, directors, employees, accountants and counsel. The Company acknowledges and agrees that, in rendering its services hereunder, Jacobson will be using and relying on the Company Information without independent verification thereof or independent appraisal of any of the Company's assets and may, in its sole discretion, use additional information contained in public reports or other information furnished by the Company or third parties. (b) Jacobson agrees that the Company Information will be used solely for the purpose of performing its services hereunder. Subject to the limitations set forth in Paragraph 4(c) below, Jacobson will keep the Company Information provided to it hereunder confidential and will not disclose such Company Information or any portion thereof, except (i) to a third party contacted by Jacobson on behalf of the Company pursuant hereto who has agreed to be bound by a confidentiality agreement satisfactory in form and substance to the Company, or (ii) to any other person for which the Company's consent to disclose such Company Information has been obtained. (c) Jacobson's confidentiality obligations under this Agreement shall not apply to any portion of the Company Information which (i) at the time of disclosure to Jacobson or thereafter is generally available to and known by the public (other than as a result of a disclosure directly or indirectly by Jacobson); (ii) was available to Jacobson on a nonconfidential basis from a source other than the Company, provided that such source is not and was not bound by a confidentiality agreement with the Company; (iii) has been independently acquired or developed by Jacobson without violating any of its obligations under this Agreement; or (iv) the disclosure of which is legally compelled (whether by deposition, interrogatory, request for documents, subpoena, civil or administrative investigative demand or other similar process). In the event that Jacobson becomes legally compelled to disclose any of the Company Information, Jacobson shall provide the Company with prompt prior written notice of such requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement. 4. FEES AND EXPENSES. (a) During the Contract Period, the Company shall pay to Jacobson an annual management fee of $500,000 in cash, which is due and payable at the rate of $125,000 per quarter on or before March 31, June 30, September 30 and December 31 of each year, commencing September 30, 1998 and upon termination of this Agreement. (b) The Company shall also promptly reimburse Jacobson or its partners, employees and agents for all reasonable out-of-pocket expenses incurred by Jacobson and its partners, employees and agents in connection with the performance of Jacobson's services under this Agreement during the Contract Period. 5. INDEMNIFICATION. The Company agrees to indemnify and hold the Advisor harmless from and against any losses, claims, damages or liabilities (or actions, including securityholder actions, in respect thereof) related to or arising out of the Advisor's engagement hereunder or its role in connection herewith, and will reimburse the Advisor for all reasonable expenses (including reasonable counsel fees) as they are incurred by the Advisor in connection with investigating, preparing for or defending any such action or claim, whether or not in connection with pending or threatened litigation in which the Advisor is a party. The Company will not, however, be responsible for any claims, liabilities, losses damages or expenses which are finally judicially determined to have resulted primarily from the bad faith or gross negligence of the Advisor. The Company also agrees that the Advisor shall not have any liability to the Company for or in connection with such engagement, except for any such liability for losses, claims, damages, liabilities or expenses incurred by the Company that result primarily from the bad faith or gross negligence of the Advisor. In the event that the foregoing indemnity is unavailable (except by reason of the bad faith or gross negligence of the Advisor), then the Company shall contribute to amounts paid or payable by the Advisor in respect of its losses, claims, damages and liabilities in such proportion as appropriately reflects the relative benefits received by, and fault of, the Company and the Advisor in connection with the matters as to which such losses, claims, damages or liabilities relate and other equitable considerations; provided, however, that in no event shall the amount to be contributed by the Advisor exceed the amount of the fee actually received by the Advisor. The foregoing shall be in addition to any rights that the Advisor may have at common law or otherwise and shall extend upon the same terms to and inure to the benefit of any director, officer, employee, agent or controlling person of the Advisor. The Company hereby consents to personal jurisdiction, service and venue in any court in which any claim which is subject to this agreement is brought against the Advisor or any other person entitled to indemnification or contribution hereunder. 5. GOVERNING LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE FULLY PERFORMED THEREIN. 6. SUCCESSORS AND ASSIGNS. The benefits of this Agreement shall inure to the benefit of the Parties, their respective successors, assigns and representatives, and the obligations and liabilities assumed in this Agreement by the Parties shall be binding upon their respective successors and assigns. This Agreement may not be assigned by either Party to an unaffiliated party without the express written consent of the other Party. 7. NOTICES. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered personally or sent by certified mail, return receipt requested, recognized overnight delivery service, or facsimile as follows: If to the Company: If to Jacobson: 80A Turnpike Road 595 Madison Avenue, 31st Floor Westborough, Massachusetts 01581 New York, New York 10022 Facsimile: (508) 870-9201 Facsimile: (212) 758-4567 Attention: President Attention: James F. Wilson Either Party may change its address or facsimile number set forth above by giving the other Party notice of such change in accordance with the provisions of this Paragraph 8. A notice shall be deemed given (a) if by personal delivery, on the date of such delivery, (b) if by certified mail, on the date shown on the applicable return receipt, (c) if by overnight delivery service, on the day after the date delivered to the service, or (d) if by facsimile, on the date of transmission. 8. NATURE OF RELATIONSHIP. The Parties intend that Jacobson's relationship to the Company and the relationship of each partner, employee or agent of Jacobson to the Company shall be that of an independent contractor. Nothing contained in this Agreement shall constitute or be construed to be or create a partnership or joint venture between Jacobson and the Company or their respective successors or assigns. Neither Jacobson nor any partner, employee or agent of Jacobson shall ever be considered to be an employee of the Company. 9. CAPTIONS. The Paragraph titles herein are for reference purposes only and do not control or affect the meaning or interpretation of any term or provision hereof. 10. AMENDMENTS. No alteration, amendment, change or addition hereto shall be binding or effective unless the same is set forth in a writing signed by a duly authorized representative of each Party. 11. PARTIAL INVALIDITY. If it is finally determined that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision shall be replaced by a term or provisions that is valid and enforceable and that comes as close as possible to expressing the intention of the invalid or unenforceable term or provision. 12. SURVIVAL. All representations, warranties and agreements contained herein shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Party, and shall survive the execution and delivery hereof. 13. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding of the Parties and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. 14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be an original, but all of which together shall be considered one and the same agreement. IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above by duly authorized representatives of the Company and Jacobson. JACOBSON PARTNERS NE RESTAURANT COMPANY, INC. By: /S/ JAMES F. WILSON By: /S/ DENNIS PEDRA James F. Wilson Name: General Partner Title: EX-10.22 17 FORM OF LOAN AGREEMENT Exhibit 10.22 LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made as of June 30, 1998, by and between FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA7), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and NERC LIMITED PARTNERSHIP II, a Delaware limited partnership ("Debtor"), whose address is 80-A Turnpike Road, Westboro, Massachusetts 0 15 8 1. PRELIMINARY STATEMENT: Unless otherwise expressly provided herein, all defined terms used in this Agreement shall have the meanings set forth in Section 1. Debtor has requested from FFCA, and applied for, the Loans to provide long-term financing for the Premises, and for no other purpose whatsoever. Each Loan will be evidenced by a Note and secured by a first priority security interest in the corresponding Premises pursuant to a Mortgage. FFCA has committed to make the Loans pursuant to the terms and conditions of the Commitment, this Agreement and the other Loan Documents. AGREEMENT: In consideration of the mutual covenants and provisions of this Agreement, the parties agree as follows: 1. DEFINITIONS. The following terms shall have the following meanings for all purposes of this Agreement: "ACTION" has the meaning set forth in Section 1 O.A(4). "AFFILIATE" means any Person which directly or indirectly controls, is under common control with, or is controlled by any other Person. For purposes of this definition, "controls", "under common control with" and "controlled by" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or otherwise. "ASSIGNMENT OF RENTS AND LEASES" or "ASSIGNMENTS OF RENTS AND LEASES" means, as the context may require, the assignment of rents and leases or assignments of rents and leases to be executed by Debtor in favor of FFCA, as the same may be amended from time to time. An Assignment of Rents and Leases will be executed for each Premises. "CHILI'S RESTAURANTS" means all of the Premises other than the On the Border Restaurant. "CLOSING" shall have the meaning set forth in Section 4. "CLOSING DATE" means the date specified as the closing date in Section 4. "CODE" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 ET SEQ., as amended. "COMMITMENT" means that certain Commitment Letter dated May 21, 1997 between FFCA and Lessee with respect to the Premises in Warwick, Rhode Island and with respect to the other Premises that certain Commitment Letter dated April 30, 1998 between FFCA and Lessee, and any amendments or supplements thereto. "COUNSEL" means legal counsel to Debtor and Lessee, licensed in the state(s) in which (i) the Premises are located, (ii) Lessee is incorporated or formed and (iii) Debtor and/or Lessee maintain principal places of business, as applicable, as selected by Debtor and Lessee, as the case may be, and approved by FFCA. "DE MINIMIS AMOUNTS" shall mean, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form or combination of forms which does not constitute a violation of any Environmental Laws and is customarily employed in, or associated with, similar businesses located in the state in which the Premises is located. "DISCLOSURES" has the meaning set forth in Section 13.P. "ENVIRONMENTAL CONDITION" means any condition with respect to soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air and any environmental medium comprising or surrounding the Premises, whether or not yet discovered, which could or does result in any damage, loss, cost, expense, claim, demand, order or liability to or against Debtor, Lessee or FFCA by any third party (including, without limitation, any Governmental Authority), including, without limitation, any condition resulting from the operation of Debtor's or Lessee's business and/or the operation of the business of any other property owner or operator in the vicinity of the Premises and/or any activity or operation formerly conducted by any person or entity on or off the Premises. "ENVIRONMENTAL INDEMNITY AGREEMENT" or "ENVIRONMENTAL INDEMNITY AGREEMENTS" means, as the context may require, the environmental indemnity agreement or environmental indemnity agreements dated as of the date of this Agreement executed by Debtor for the benefit of FFCA, as the same may be amended from time to time. An Environmental Indemnity Agreement will be executed for each Premises. "ENVIRONMENTAL INSURER" means such environmental insurance company as FFC,4 select in its sole discretion. "ENVIRONMENTAL LAWS" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to Hazardous Materials and/or the protection of human health or the environment by reason of a Release or a Threatened Release of Hazardous Materials or relating to liability for or costs of Remediation or prevention of Releases. "Environmental Laws" includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. "Environmental Laws" also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law: conditioning transfer of property upon a negative declaration or other approval of a Governmental Authority with respect to Hazardous Materials; requiring notification or disclosure of Releases or other environmental condition of the Premises to any Governmental Authority or other person or entity, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements relating to Hazardous Materials in connection with permits or other authorization for lawful activity; relating to nuisance, trespass or other causes of action related to Hazardous Materials; and relating to wrongful death, personal injury, or property or other damage in connection with the physical condition or use of the Premises by reason of the presence of Hazardous Materials in, on, under or above the Premises. "ENVIRONMENTAL POLICY" means those certain environmental insurance policies issued by Environmental Insurer to FFCA with respect to the Premises, which Environmental Policies shall be in form and substance satisfactory to FFCA in its sole discretion. "EVENT OF DEFAULT" has the meaning set forth in Section 10. "EXISTING LEASES" means, collectively, the ground leases which are in existence as of the date hereof relating to the Premises and all modifications, amendments and supplements thereto disclosed in the Lease Estoppel Certificate and Consents delivered with respect thereto, and all modifications, amendments and supplements consented to by FFCA pursuant to the terms of the Mortgages. The term "Existing Leases" does not include the Operating Leases. "EXISTING LESSEES" means the lessees identified in the Existing Leases. "EXISTING LESSORS" means the lessors under the Existing Leases. "FCCR AMOUNT" has the meaning set forth in Section 10.A(7). "FCCR LOANS" MEANS, collectively, the Loans and the mortgage loans and/or equipment loans corresponding to the FCCR Premises. "FCCR NOTES" means the promissory notes evidencing the FCCR Loans. "FCCR PREMISES" means, collectively, the "Premises" and the parcels of real estate (including improvements and appurtenances) corresponding to mortgage loan and/or equipment loan agreements and related instruments hereafter entered into between, among or by (1) any of the Debtor Entities, and, or for the benefit of, (2) any of the FFCA Entities, including, without limitation, promissory notes and guaranties. successors. "FEE" means an underwriting, site assessment, valuation, processing and commitment fee equal to 1% of the sum of the Loan Amounts for all of the Premises, which Fee shall be payable as set forth in Section 3. "FRANCHISOR" means Brinker International, Inc., a Delaware corporation, and its "FRANCHISOR CERTIFICATE" has the meaning set forth in Section 91. "FRANCHISOR RESTAURANT" means (i) with respect to the Chili's Restaurants, a Chili's restaurant, and (ii) with respect to the On the Border Restaurant, an On the Border restaurant. "GOVERNMENTAL AUTHORITY" means any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority of the United States, the states where the Premises are located or any political subdivision thereof. "HAZARDOUS MATERIALS" means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant or contaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contains dielectric fluid containing levels of polychlorinated biphenyls in excess of federal, state or local safety guidelines, whichever are more stringent, or any petroleum product; (c) any substance, gas, material or chemical which is or may be defined as or included in the definition of "hazardous substances," "toxic substances" "hazardous materials," "hazardous wastes" or words of similar import under any Environmental Laws; and (d) any other chemical, material, gas or substance the exposure to or release of which is or may be prohibited, limited or regulated by any Governmental Authority that asserts or may assert jurisdiction over the Premises or the operations or activity at the Premises, or any chemical, material, gas or substance that does or may pose a hazard to the health and/or safety of the occupants of the Premises or the owners and/or occupants of property adjacent to or surrounding the Premises. "INDEMNIFIED PARTIES" has the meaning set forth in Section 12. "LEASE ESTOPPEL CERTIFICATE AND CONSENTS" has the meaning set forth in Section 9.M. "LESSEE" means NE Restaurant Company, Inc., a Delaware corporation, and its successors and permitted assigns. "LOAN" or "LOANS" means, as the context may require, the loan for each Premises, or the loans for all of the Premises, described in Section 2. Each Loan will be evidenced by a Note and secured by a Mortgage. "LOAN AMOUNT" or "LOAN AMOUNTS" means, as the context may require, the aggregate amount set forth in Section 2 or, with respect to each Premises, the individual amount set forth in EXHIBIT A. "LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the Mortgages, the Environmental Indemnity Agreements, the Assignments of Rents and Leases, the UCC-1 Financing Statements and all other documents executed in connection therewith or contemplated thereby. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) a Premises, including, without limitation, its operation as a Franchisor Restaurant and/or its value, (ii) Debtor's ability to perform under any of the Loan Documents, or (iii) Lessee's ability to perform under any of the Operating Leases. "MORTGAGE" OR "MORTGAGES" means, as the context may require, the mortgage or mortgages dated as of the date of this Agreement to be executed by Debtor for the benefit of FFCA, as the same may be amended from time to time. A Mortgage will be executed for each Premises. "NONDISTURBANCE AGREEMENTS" has the meaning set forth in Section 9.M. "NOTE" or "NOTES" means, as the context may require, the promissory note or notes dated as of the date of this Agreement to be executed by Debtor in favor of FFCA, as such Note or Notes may be amended from time to time, including, without limitation, as a result of the payment of the FCCR Amount pursuant to Section 10. A Note in the corresponding Loan Amount will be executed for each Premises. "ON THE BORDER RESTAURANT" means the Premises located in Rocky Hill, Connecticut. "OPERATING LEASE" or "OPERATING LEASES" means, as the context may require, the lease or leases to be executed by Debtor, as lessor, and Lessee, as lessee, for the sublease of the land comprising the Premises and the lease of the buildings, improvements and tangible personal property located on such land. An Operating Lease will be executed for each of the Premises. "OTHER AGREEMENTS" means, collectively, all agreements and instruments between, among or by (1) any of the Debtor Entities, and, or for the benefit of, (2) any of the FFCA Entities, including, without limitation, promissory notes and guaranties; provided, however, the term Other Agreements shall not include the Loan Documents. "PARTICIPATION" has the meaning set forth in Section 13Y. "PERMITTED EXCEPTIONS" means those recorded easements, restrictions, liens and encumbrances set forth as exceptions in the title insurance policies issued by Title Company to FFCA and approved by FFCA in connection with the Loans. "PERSON" shall mean any individual, corporation, partnership, limited liability company, trust, unincorporated organization, Governmental Authority or any other form of entity. "PREMISES" means the parcel or parcels of real estate corresponding to the FFCA File Numbers, NERC PC Numbers and addresses identified on Exhibit A attached hereto, together with all rights, privileges and appurtenances associated therewith and all buildings, fixtures, and tangible personal property (including, without limitation, restaurant equipment) and other improvements now or hereafter located thereon (whether or not affixed to such parcels), including, without limitation, parking areas. As used herein, the term "Premises" shall mean either a singular property or all of the properties collectively, as the context may require. "QUESTIONNAIRE" means the environmental questionnaires completed by Debtor or Lessee with respect to the Premises and submitted to Environmental Insurer in connection with the issuance of the Environmental Policies. "RELEASE" means any presence, release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials. "REMEDIATION" means any response, remedial, removal, or corrective action, any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous Material, any actions to prevent, cure or mitigate any Release, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials. "SECURITIZATION" has the meaning set forth in Section B.P. "SECURITIZED LOAN POOL" means any pool or group of loans which are a part of any Securitization transaction. "THREATENED RELEASE" means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air or any other environmental medium comprising or surrounding the Premises which may result from such Release. "TITLE COMPANY" means the title insurance company described in Section 4. "TRANSFER" has the meaning set forth in Section B.P. "UCC-1 FINANCING STATEMENTS" means such UCC-1 Financing Statements as FFCA shall require to be executed and delivered by Debtor and Lessee with respect to the Premises. 2. TRANSACTION. On the terms and subject to the conditions set forth in the Loan Documents, FFCA shall make the Loans. The Loans will be evidenced by the Notes and secured by the Mortgages. Debtor shall repay the outstanding principal amount of the Loans together with interest thereon in the manner and in accordance with the terms and conditions of the Notes and the other Loan Documents. The aggregate Loan Amount shall be $3,071,260.00 allocated among the Premises as set forth on the attached Exhibit A. The Loans shall be advanced at the Closing in cash or otherwise immediately available funds subject to any prorations and adjustments required by this Agreement. Each Premises will be leased to Lessee pursuant to an Operating Lease and Debtor will assign each Operating Lease to FFCA pursuant to a Mortgage and an Assignment of Rents and Leases. 3. UNDERWRITING, SITE ASSESSMENT, VALUATION, PROCESSING AND COMMITMENT FEE. Lessee paid FFCA one-half of the Fee pursuant to the Commitment, and such portion was deemed fully earned when received. The remainder of the Fee shall be paid at the Closing and shall be deemed nonrefundable and fully earned upon the Closing. The Fee constitutes FFCA's underwriting, site assessment, valuation, processing and commitment fee. 4. Closing. (a) The Loan shall be closed (the "Closing") within 10 days following the satisfaction of all of the terms and conditions contained in this Agreement, but no later than June 30, 1998 (the date on which the Closing is scheduled to occur is referred to herein as the "Closing Date"). (b) Debtor has ordered a title insurance commitment for each Premises from Lawyers Title Insurance Corporation ("Title Company"). On or prior to the Closing Date, the parties hereto shall deposit with Title Company all documents and moneys necessary to comply with their obligations under this Agreement. Title Company shall n6t cause the transaction to close unless and until it has received written instructions from FFCA to do so. All costs of such transaction shall be borne by Debtor, including, without limitation, the cost of title insurance and endorsements, the attorneys' fees of Debtor, attorneys' fees and expenses of FFCA (provided that FFCA shall advise Debtor prior to the commencement of any legal work for which extraordinary fees would be payable (i.e., in excess of $4,000 per Premises) and discuss with Debtor the most cost effective means to proceed), the cost of the surveys, the cost of the environmental reports and the Environmental Policies to be delivered pursuant to Section 9.E, FFCA's in-house site inspection costs and fees, stamp taxes, mortgage taxes, transfer taxes, and escrow, filing and recording fees. All real and personal property and other applicable taxes and assessments and other charges relating to the Premises which are due and payable on or prior to the Closing Date as well as taxes and assessments due and payable subsequent to the Closing Date but which Title Company requires to be paid at Closing as a condition to the issuance of the title insurance policy described in Section 9.C, shall be paid by Debtor at or prior to the Closing. The Closing documents shall be dated as of the Closing Date. Debtor and FFCA hereby employ Title Company to act as escrow agent in connection with this transaction. Debtor and FFCA will deliver to Title Company all documents, pay to Title Company all sums and do or cause to be done all other things necessary or required by this Agreement, in the reasonable judgment of Title Company, to enable Title Company to comply herewith and to enable any title insurance policy provided for herein to be issued. Title Company is authorized to pay, from any funds held by it for FFCA's or Debtor's respective credit all amounts necessary to procure the delivery of such documents and to pay, on behalf of FFCA and Debtor, all charges and obligations payable by them, respectively. Debtor will pay all charges payable by it to Title Company. Title Company is authorized, in the event any conflicting demand is made upon it concerning these instructions or the escrow, at its election, to hold any documents and/or funds deposited hereunder until an action shall be brought in a court of competent jurisdiction to determine the rights of Debtor and FFCA or to interplead such documents and/or funds in an action brought in any such court. Deposit by Title Company of such documents and funds, after deducting therefrom its charges and its expenses and attorneys' fees incurred in connection with any such court action, shall relieve Title Company of all further liability and responsibility for such documents and funds. Title Company's receipt of this Agreement and opening of an escrow pursuant to this Agreement shall be deemed to constitute conclusive evidence of Title Company's agreement to be bound by the terms and conditions of this Agreement pertaining to Title Company. Disbursement of any funds shall be made by check, certified check or wire transfer, as directed by FFCA. Title Company shall be under no obligation to disburse any funds represented by check or draft, and no check or draft shall be payment to Title Company in compliance with any of the requirements hereof, until it is advised by the bank in which such check or draft is deposited that such check or draft has been honored. Title Company is authorized to act upon any statement furnished by the holder or payee, or a collection agent for the holder or payee, of any lien on or charge or assessment in connection with the Premises, concerning the amount of such charge or assessment or the amount secured by such lien, without liability or responsibility for the accuracy of such statement. The employment of Title Company as escrow agent shall not affect any rights of subrogation under the terms of any title insurance policy issued pursuant to the provisions thereof. 5. REPRESENTATIONS AND WARRANTIES OF FFCA. The representations and warranties of FFCA contained in this Section are being made by FFCA as of the date of this Agreement and the Closing Date to induce Debtor to enter into this Agreement and consummate the transactions contemplated herein, and Debtor has relied, and will continue to rely, upon such representations and warranties from and after the execution of this Agreement and the Closing. FFCA represents and warrants to Debtor as follows: A. ORGANIZATION OF FFCA. FFCA has been duly formed, is validly existing and has taken all necessary action to authorize the execution, delivery and performance by FFCA of this Agreement. B. AUTHORITY OF FFCA. The person who has executed this Agreement on behalf of FFCA is duly authorized so to do. C. ENFORCEABILITY. Upon execution by FFCA, this Agreement shall constitute the legal, valid and binding obligation of FFCA, enforceable against FFCA in accordance with its terms. All representations and warranties of FFCA made in this Agreement shall survive the Closing. 6. REPRESENTATIONS AND WARRANTIES OF DEBTOR. The representations and warranties of Debtor contained in this Section are being made by Debtor as of the date of this Agreement and the Closing Date to induce FFCA to enter into this Agreement and consummate the transactions contemplated herein, and FFCA has relied, and will continue to rely, upon such representations and warranties from and after the execution of this Agreement and the Closing. Debtor represents and warrants to FFCA as follows: A. INFORMATION AND FINANCIAL STATEMENTS. Debtor has delivered to FFCA Lessee's financial statements (either audited financial statements or, if Debtor does not have audited financial statements, certified financial statements) and certain other information concerning Lessee, which financial statements and other information are true, correct and complete in all material respects; and no material adverse change has occurred with respect to any such financial statements and other information provided to FFCA since the date such financial statements and other information were prepared or delivered to FFCA. Debtor understands that FFCA is relying upon such financial statements and information and Debtor represents that such reliance is reasonable. All such financial statements were prepared in accordance with generally accepted accounting principles consistently applied and accurately reflect as of the date of this Agreement and the Closing Date, the financial condition of each individual or entity to which they pertain. B. ORGANIZATION AND AUTHORITY OF DEBTOR AND LESSEE. (1) Each of Debtor and Lessee is duly organized or formed, validly existing and in good standing under the laws of its state of organization or formation, and qualified as a foreign corporation or limited partnership, as applicable, to do business in each of the states where the Premises are located. All necessary corporate or limited partnership action has been taken to authorize the execution, delivery and performance of this Agreement and of the other documents, instruments and agreements provided for herein. (2) The person(s) who have executed this Agreement on behalf of the general partner of Debtor are duly authorized so to do. C. ENFORCEABILITY OF DOCUMENTS. Upon execution by Debtor or Lessee, as applicable, this Agreement and the other documents, instruments and agreements to be executed in connection with this Agreement, shall constitute the legal, valid and binding obligations of Debtor and Lessee, respectively, enforceable against Debtor and Lessee in accordance with their respective terms. D. LITIGATION. There are no suits, actions, proceedings or investigations pending or, to the best of Debtor's knowledge, threatened against or involving Debtor, Lessee or the Premises before any court, arbitrator, or Governmental Authority which might reasonably result in any material adverse change in the contemplated business, condition, worth or operations of Debtor, Lessee or the Premises. E. ABSENCE OF BREACHES OR DEFAULTS. Debtor and/or Lessee are not, and the authorization, execution, delivery and performance of this Agreement and the documents, instruments and agreements provided for herein will not result, in any breach or default under any other document, instrument or agreement to which Debtor and/or Lessee are a party or by which Debtor, Lessee, the Premises or any of the property of Debtor or Lessee is subject or bound, except such breach or default which would not have a Material Adverse Effect. The authorization, execution, delivery and performance of this Agreement and the documents, instruments and agreements provided for herein will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order. F. UTILITIES. The Premises are served by ample public utilities to permit full utilization of the Premises for their intended purpose and all utility connection fees and use charges will have been paid in full. G. INTENDED USE AND ZONING; COMPLIANCE WITH LAWS. Debtor intends that Lessee will use the Premises solely for the operation of Franchisor Restaurants, and related ingress, egress and parking, and for no other purposes, other than as may be contemplated by the Mortgages. Each of the Premises are in material compliance with all applicable zoning requirements. Debtor has no actual knowledge that the use of any of the Premises as a Franchisor Restaurant constitutes a nonconforming use under applicable zoning requirements which would prevent a Franchisor Restaurant from being re-built and operated on such Premises in the event that the existing Franchisor Restaurant is subject to a casualty. The Premises comply with all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders and approvals of each Governmental Authority having jurisdiction over the Premises, including, without limitation, all health, building, fire, safety and other codes, ordinances and requirements, all applicable standards of the National Board of Fire Underwriters and the Americans With Disabilities Act of 1990 and all policies or rules of common law, in each case, as amended, and any judicial or administrative interpretation thereof, including any judicial order, consent, decree or judgment applicable to Debtor or Lessee, except to the extent the failure with which to comply would not have a Material Adverse Effect. H. AREA DEVELOPMENT; WETLANDS. NO condemnation or eminent domain proceedings affecting the Premises have been commenced or, to the best of Debtor's knowledge, are contemplated. To the best of Debtor's knowledge, the areas where the Premises are located have not been declared blighted by any Governmental Authority. The Premises and/or the real property bordering the Premises are not designated by any applicable Governmental Authority as a wetlands. 1. LICENSES AND PERMITS; ACCESS. Debtor or Lessee has all required licenses and permits, both governmental and private, to use and operate the Premises in the intended manner. There are adequate rights of access to public roads and ways available to the Premises to permit fall utilization of the Premises for their intended purposes and all such public roads and ways have been completed and dedicated to public use. J. CONDITION OF PREMISES. The Premises, including the equipment located thereon, are of good workmanship and materials, fully equipped and operational, in good condition and repair, free from known structural defects, clean, orderly and sanitary, safe, well-lit, landscaped, decorated, attractive and well-maintained. K. ENVIRONMENTAL Debtor is fully familiar with the present use of the Pre and, to the extent that Debtor or Lessee has previously obtained a Phase I environmental report with respect to any of the Premises, Debtor has become generally familiar with prior uses of such Premises. During the period in which Debtor or Lessee has had a leasehold interest in the Premises, and except as disclosed in the reports Questionnaires delivered pursuant to Section 9.E (collectively, the "Environmental Disclosures"), (i) no Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred or disposed of at or o Premises, except in De Minimis Amounts and in compliance with all applicable Environmental Laws, and (ii) no Release or Threatened Release has occurred at or on the Premises. Furthermore, Debtor has no actual knowledge that, during the period prior Lessee's acquisition of a fee or leasehold interest in the Premises, and except as disclosed the Environmental Disclosures, (i) any Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred or disposed or on the Premises, except in De Minimis Amounts and in compliance with all applicable Environmental Laws, or (ii) any Release or Threatened Release has occurred at or o Premises. The activities, operations and business undertaken on, at or about the Premises during the period in which Debtor or Lessee has had a fee or leasehold interest in the Premises, including, but not limited to, any past or ongoing alterations or improvements at the Premises, are and have been in compliance with all Environmental Laws, except such noncompliance as would not have a Material Adverse Effect and except as disclosed in the Environmental Disclosures, and Debtor has no actual knowledge that any such activities, operations or business undertaken on, at or about the Premises during the period prior to Lessee's acquisition of a fee or leasehold interest in the Premises were not in compliance with all Environmental Laws except such noncompliance as would not have a Material Adverse Effect and except as disclosed in the Environmental Disclosures. No further action is required to remedy any Environmental Condition or violation of, or to be in full compliance with, any Environmental Laws, and no lien has been imposed on the Premises by any Governmental Authority in connection with any Environmental Condition, the violation or threatened violation of any Environmental Laws or the presence of any Hazardous Materials on or off the Premises during the period in which Debtor or Lessee has had a fee or leasehold interest in the Premises or, to Debtor's actual knowledge, during the period prior to Lessee's acquisition of a fee or leasehold interest in the Premises. There is no pending or, to the best of Debtor's knowledge, threatened litigation or proceeding before any court, administrative agency or Governmental Authority in which any person or entity alleges the violation or threatened violation of any Environmental Laws or the presence, Release, Threatened Release or placement on or at the Premises of any Hazardous Materials, or of any facts which would give rise to any such action, nor has Debtor (a) received any notice (and Debtor has no actual knowledge) that any Governmental Authority or any employee or agent thereof has determined, threatens to determine or requires an investigation to determine that there has been a violation of any Environmental Laws at, on or in connection with the Premises or that there exists a presence, Release, Threatened Release or placement of any Hazardous Materials on or at the Premises, or the use, handling, manufacturing, generation, production, storage, treatment, processing, transportation or disposal of any Hazardous Materials at or on the Premises; (b) received any notice under the citizen suit provision of any Environmental Law in connection with the Premises or any facilities, operations or activities conducted thereon, or any business conducted in connection therewith; or (c) received any request for inspection, request for information, notice, demand, administrative inquiry or any formal or informal complaint or claim with respect to or in connection with the violation or threatened violation of any Environmental Laws or existence of Hazardous Materials relating to the Premises or any facilities, operations or activities conducted thereon or any business conducted in connection therewith. The information and disclosures in the Questionnaires is true, correct and complete in all material respects, FFCA and Environmental Insurer may rely on such information and disclosures, and the person or persons executing the Questionnaires were duly authorized to do so. L. PREMISES; FIRST PRIORITY LIEN. Debtor is the holder of a leasehold interest in the land comprising the Premises and the holder of the fee interest in the buildings and improvements relating thereto. Upon Closing, FFCA shall have a first priority lien upon and security interest in Debtor's right, title and interest in and to each of the Premises pursuant to the Mortgages and the UCC-I Financing Statements. M. NO OTHER AGREEMENTS AND OPTIONS. Neither Debtor, Lessee nor the Premises are subject to any commitment, obligation, or agreement, including, without limitation, any right of first refusal, option to purchase or lease granted to a third party, which could or would prevent or hinder FFCA in making the Loans or prevent or hinder Debtor from fulfilling its obligations under this Agreement or the other Loan Documents, other than those agreements with Existing Lessors for which FFCA shall have received a Lease Estoppel Certificate and Consent prior to Closing and the franchise, license and/or area development agreements with Franchisor for which FFCA shall have received a Franchisor Certificate prior to Closing. N. NO MECHANICS' LIENS. There are no outstanding accounts payable, mechanics' liens, or rights to claim a mechanics' lien in favor of any materialman, laborer, or any other person or entity in connection with labor or materials furnished to or performed on any portion of the Premises; no work has been performed or is in progress nor have materials been supplied to the Premises or agreements entered into for work to be performed or materials to be supplied to the Premises prior to the date hereof, which will not have been fully paid for on or before the Closing Date or which might provide the basis for the filing of such liens ' against the Premises or any portion thereof, Debtor shall be responsible for any and all claims for mechanics' liens and accounts payable that have arisen or may subsequently arise due to agreements entered into for and/or any work performed on, or materials supplied to the Premises prior to the Closing Date; Debtor has made no contract or arrangement of any kind the performance of which by the other party thereto would give rise to a lien on the Premises; and Debtor shall and does hereby agree to defend, indemnify and forever hold FFCA and FFCA's designees harmless from and against any and all such mechanics' lien claims, accounts payable or other commitments relating to the Premises. 0. NO RELIANCE. Debtor acknowledges that FFCA is not affiliated with, and has no business relationship with, Franchisor, other than landlord/tenant and/or creditor/debtor relationships unrelated to the transaction set forth in this Agreement, and that FFCA did not prepare or assist in the preparation of any of the projected financial information used by Debtor in analyzing the economic viability and feasibility of the transaction contemplated by .this Agreement. Furthermore, Debtor acknowledges that it has not relied upon, nor may it hereafter rely upon, the analysis undertaken by FFCA in determining the Loan Amounts, and such analysis will not be made available to Debtor. P. FRANCHISOR PROVISIONS. Lessee has entered into franchise, license and/or area development agreements with Franchisor for the conduct of business at the Premises. Such franchise, license and/or area development agreements will be in full force and effect, will permit Lessee to operate the Premises as Franchisor Restaurants, and will have terms which, together with renewal options, will not expire before the scheduled maturity date of the Notes. Q. EXISTING LEASES. Debtor has delivered to FFCA a certified true, correct and complete copy of the Existing Leases. The Existing Leases have not been modified, amended, supplemented or otherwise revised. The Existing Leases are the only leases or agreements between the Existing Lessors and the Existing Lessees with respect to the Premises. The Existing Leases are in full force and effect and constitute the legal, valid and binding obligations of the Existing Lessees, enforceable against the Existing Lessees in accordance with their terms and, at Closing, such Existing Leases shall constitute the legal, valid and binding obligations of Debtor enforceable against Debtor in accordance with their terms. The Existing Lessees have not assigned, transferred, mortgaged or hypothecated any of the Existing Leases or any interest therein, except for liens that will be released at Closing, and the Existing Lessees have not received any notice that any of the Existing Lessors have made any assignment, pledge or hypothecation of all or any part of their interests in any of the Existing Leases. No event has occurred and no condition exists which, with the giving of notice or the lapse of time or both, would constitute a default by any of the Existing Lessors or the Existing Lessees, except such default as would not have a Material Adverse Effect. All representations and warranties of Debtor made in this Agreement shall survive the Closing. Debtor acknowledges and agrees that Environmental Insurer may rely on the environmental representations and warranties set forth in the preceding subsection K, that Environmental Insurer is an intended third-party beneficiary of such representations and warranties and that Environmental Insurer shall have all rights and remedies available at law or in equity as a result of a breach of such representations and warranties, including, to the extent applicable, the right of subrogation. 7. COVENANTS. Debtor covenants to FFCA from and after the Closing Date as A. INSPECTIONS. Debtor shall, and Debtor shall cause Lessee to, at all reasonable times and upon reasonable prior notice from FFCA (except in the event of an emergency), (i) provide FFCA and FFCA's officers, employees, agents, advisors, attorneys, accountants, architects, and engineers with access to the Premises, all drawings, plans, and specifications for the Premises in possession of Debtor and Lessee, all engineering reports relating to the Premises in the possession of Debtor and Lessee, the files and correspondence relating to the Premises, and the financial books and records, including lists of delinquencies, relating to the ownership, operation, and maintenance of the Premises, and (ii) allow such persons to make such inspections, tests, copies and verifications as FFCA considers necessary; provided that such access, inspections, tests, copies and verifications shall not unreasonably interfere with Lessee's business operations at the Premises. B. FIXED CHARGE COVERAGE RATIO. Until such time as all of Debtor's obligations under the Notes and the other Loan Documents are paid, satisfied and discharged in full, Debtor shall cause to be maintained a Fixed Charge Coverage Ratio at each of the Premises of at least 1.25:1, as determined on each December 31. For purposes of this Section, the term "Fixed Charge Coverage Ratio" shall mean with respect to the twelve month period of time immediately preceding the date of determination, the ratio calculated for such period of time of (a) the sum of Net Income, Depreciation and Amortization, Interest Expense and Operating Lease Expense, less a corporate overhead allocation in an amount equal to 5% of Gross Sales, to (b) the sum of the FFCA Payments, the Equipment Payment Amount and the Ground Lease Expense. For purposes of this Section, the following terms shall be defined as set forth below: "CAPITAL LEASE" shall mean any lease of any property (whether real, personal or mixed) by Lessee with respect to the subject Premises which lease would, in conformity with generally accepted accounting principles consistently applied, be required to be accounted for as a capital lease on the balance sheet of Lessee. The term "Capital Lease" shall not include any operating lease, including, without limitation, the Operating Leases. "DEBT" shall mean as directly related to the subject Premises and the period of determination (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, indentures, notes or similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations under leases which should be, in accordance with generally accepted accounting principles consistently applied, recorded as Capital Leases, and (v) obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. "DEPRECIATION AND AMORTIZATION" shall mean with respect to the subject Premises the depreciation and amortization accruing during any period of determination with respect to Debtor as determined in accordance with generally accepted accounting principles consistently applied. "EQUIPMENT PAYMENT AMOUNT" shall mean for any period of determination the sum of all amounts payable during such period of determination under all (i) leases for equipment located at the subject Premises and (ii) all loans secured by equipment located at the subject Premises. "FFCA PAYMENTS" shall mean with respect to the period of determination, the sum of all amounts payable under the Note corresponding to the subject Premises. "GROSS SALES" shall mean the sales (less any discounts) or other income arising from all business conducted at the subject Premises during the period of determination, less sales tax and any amounts received from not-for-profit sales of all non-food items approved for use in connection with promotional campaigns, if any, pursuant to the franchise, license and/or area development agreements with Franchisor for the subject Premises. "GROUND LEASE EXPENSE" shall mean, for any period of determination, the sum of all amounts payable by Debtor under any Existing Lease with respect to the subject Premises. "INTEREST EXPENSE" shall mean for any period of determination, the sum of all interest accrued or which should be accrued in respect of all Debt of Lessee allocable to the subject Premises and all business operations THEREON DURING SUCH period (including interest attributable to Capital Leases), as determined in accordance with generally accepted accounting principles consistently applied. "NET INCOME" shall mean with respect to the period of determination, the net income or net loss of Lessee allocable to the subject Premises. In determining the amount of Net Income, (i) adjustments shall be made for nonrecurring gains and losses allocable to the period of determination, (ii) deductions shall be made for, among other things, Depreciation and Amortization, Interest Expense and Operating Lease Expense allocable to the period of determination, and (iii) no deductions shall be made for (x) income taxes or charges equivalent to income taxes allocable to the period of determination, as determined in accordance with generally accepted accounting principles consistently applied, or (y) corporate overhead expense allocable to the period of determination. "OPERATING LEASE EXPENSE" shall mean the expenses incurred by Lessee under any Operating Lease with respect to the subject Premises and the business operations thereon during the period of determination, as determined in accordance with generally accepted accounting principles consistently applied. Notwithstanding the foregoing, FFCA shall have the option at any time, upon notice to Debtor, to convert the Fixed Charge Coverage Ratio requirement from a 1.25:1 test applicable to each of the Premises to an aggregate 1.25:1 test applicable to all of the FCCR Premises, or to such of the FCCR Premises as selected by FFCA from time to time, which Fixed Charge Coverage Ratio requirement shall apply until such time as all of Debtor's obligations under the agreements and instruments evidencing the FCCR Loans corresponding to the FCCR Premises for which such aggregate Fixed Charge Coverage Ratio is imposed are paid, satisfied and discharged in full. To the extent FFCA elects to convert the Fixed Charge Coverage Ratio requirement to an aggregate requirement, the definitions relating to the Fixed Charge Coverage Ratio shall be deemed to be modified as applicable to provide for the calculation of an aggregate Fixed Charge Coverage Ratio. C. LOST NOTE. Debtor shall, if any Note is mutilated, destroyed, lost or stolen (a "Lost Note"), promptly deliver to FFCA, upon receipt of an affidavit from FFCA stipulating that such Note has been mutilated, destroyed, lost or stolen, in substitution therefor, a new promissory note containing the same terms and conditions as such Lost Note with a notation thereon of the unpaid principal and accrued and unpaid interest. Debtor shall provide fifteen (15) days' prior notice to FFCA before making any payments to third parties in connection with a Lost Note. Except as a result of the gross negligence or intentional misconduct of Debtor, FFCA shall indemnify Debtor for all reasonable costs, expenses, damages, claims and liabilities incurred by Debtor as a result of a Lost Note. D. EXISTING LEASE MODIFICATIONS. The Existing Leases shall not be modified, amended, terminated, cancelled or surrendered without FFCA's prior consent, which consent shall not be unreasonably withheld or delayed with respect to modifications or amendments as long as the proposed modification or amendment does not shorten the term of the Existing Lease or increase the amount of rent to be paid thereunder. 8. TRANSACTION CHARACTERIZATION. This Agreement is a contract to extend a financial accommodation (as such term is used in the Code) for the benefit of Debtor. It is the intent of the parties hereto that the business relationship created by this Agreement, the Notes, the Mortgages and the other Loan Documents is solely that of creditor and debtor and has been entered into by both parties in reliance upon the economic and legal bargains contained in the Loan Documents. None of the agreements contained in the Loan Documents is intended, nor shall the same be deemed or construed, to create a partnership between Debtor and FFCA, to make them joint venturers, to make Debtor an agent, legal representative, partner, subsidiary or employee of FFCA, nor to make FFCA in any way responsible for the debts, obligations or losses of Debtor. 9. CONDITIONS OF CLOSING. The obligation of FFCA to consummate the transaction contemplated by this Agreement is subject to the fulfillment or waiver of each of the following conditions: A. TITLE. Debtor shall be the holder of a leasehold interest in the land comprising the Premises and the holder of a fee interest in the buildings and improvements relating thereto. Upon Closing, FFCA will obtain a valid and perfected first priority lien upon and security interest in Debtor's right, title and interest in and to each of the Premises. B. CONDITION OF PREMISES. FFCA shall have inspected and approved the Premises, the Premises and the equipment located thereon shall be in good condition and repair and of good workmanship and materials, and the Premises shall be fully equipped and operational, clean, orderly, sanitary, safe, well-lit, landscaped, decorated, attractive and with a suitable layout, physical plant, traffic pattern and location, all as determined by FFCA in its sole discretion. C. EVIDENCE OF TITLE. FFCA shall have received for each of the Premises a preliminary title report and irrevocable commitment to insure title by means of a mortgagee's, ALTA extended coverage policy of title insurance (or its equivalent, in the event such form is not issued in the jurisdiction where the Premises is located) issued by Title Company showing good and marketable leasehold title in the land comprising the Premises in Debtor and good and marketable fee title in the buildings and improvements relating thereto in Debtor, committing to insure FFCA's first priority lien upon and security interest in such Premises subject only to liens, encumbrances, restrictions and easements approved by FFCA, and containing such endorsements as FFCA may require. D. SURVEY. FFCA shall have received a current ALTA survey of each of the Premises, the form and substance of which shall be satisfactory to FFCA in its sole discretion. Debtor shall have provided FFCA with evidence satisfactory to FFCA that the location of each of the Premises is not within the 100-year flood plain or identified as a special flood hazard area as defined by the Federal Insurance Administration, or if any Premises is in such a flood plain or special flood hazard area, Debtor shall provide FFCA with evidence of flood insurance maintained on such Premises in amounts and on terms and conditions satisfactory to FFCA. E. ENVIRONMENTAL. FFCA shall have received (i) a Phase I environmental report (and a Phase 11 environmental report, if necessary, as determined by FFCA in its sole discretion) for each of the Premises, the form, substance and conclusions of which shall be satisfactory to FFCA in its sole discretion, or (ii) an Environmental Policy with respect to each of the Premises, as determined by FFCA in its sole discretion. F. ZONING. Debtor shall have provided FFCA with evidence satisfactory to FFCA that each of the Premises is properly zoned for its use as a Franchisor Restaurant, including evidence that the use of any of the Premises as a Franchisor Restaurant would not constitute a nonconforming use under applicable zoning requirements which would prevent a Franchisor Restaurant from being re-built and operated on such Premises in the event that the existing Franchisor Restaurant is subject to a casualty. G. COMPLIANCE WITH REPRESENTATIONS, WARRANTIES AND COVENANTS. All obligations of Debtor under this Agreement shall have been fully performed and complied with, and no event shall have occurred or condition shall exist w1iich would, upon the Closing Date, or, upon the giving of notice and/or passage of time, constitute a breach or default hereunder or under the Loan Documents, the franchise, license and/or area development agreements with Franchisor for the Premises or any other agreement between or among FFCA, Debtor, Lessee or Franchisor pertaining to the subject matter hereof, and no event shall have occurred or condition shall exist or information shall have been disclosed by Debtor or discovered by FFCA which has had or would have a material adverse effect on the Premises, Debtor or Lessee, and accordingly, FFCA's willingness to consummate the transaction contemplated by this Agreement, as determined by FFCA in its sole and absolute discretion. H. PROOF OF INSURANCE. Debtor shall have delivered to FFCA copies of insurance policies showing that all insurance required by the Loan Documents and providing coverage and limits satisfactory to FFCA are in full force and effect. I. OPINION OF COUNSEL TO DEBTOR AND LESSEE. Debtor and Lessee shall have caused Counsel to prepare and deliver an opinion in form and substance satisfactory to FFCA and its counsel. J. ASSIGNMENTS OF RENTS AND LEASES. Debtor shall have executed and delivered an Assignment of Rents and Leases for each Premises. K. AVAILABILITY OF FUNDS. FFCA presently has sufficient funds to discharge its obligations under this Agreement. In the event that the transaction contemplated by this Agreement does not close on or before the date established for Closing under Section 4(a) hereof, FFCA does not warrant that it will thereafter have sufficient funds to consummate the transaction contemplated by this Agreement. L. FRANCHISE AGREEMENT. FFCA shall have received a certificate, consent and agreement from Franchisor in form and substance acceptable to FFCA in its sole discretion with respect to the Premises, the Existing Leases and the franchise, license and/or area development agreements between Lessee and Franchisor relating to the Premises (the "Franchisor Certificate"). M. EXISTING LEASES. Each of the Existing Leases shall be in full force and effect and Debtor shall be entitled to occupy the Premises corresponding thereto. FFCA shall have approved each Existing Lease in its sole discretion and Debtor shall have delivered to FFCA an estoppel certificate and consent from each Existing Lessor, the form and substance of which shall be satisfactory to FFCA in its sole discretion (the "Lease Estoppel Certificate and Consents"). If any mortgages or deeds of trust (or other similar security agreements) encumber fee simple title to any land comprising the Premises, the holders of such instruments shall have delivered nondisturbance agreements to Debtor and FFCA with respect to the Existing Leases in form and substance acceptable to FFCA in its reasonable discretion (the "Nondisturbance Agreements"). N. CLOSING DOCUMENTS. At or prior to the Closing Date, FFCA and/or Debtor and/or Lessee, as may be appropriate, shall execute and deliver or cause to be executed and delivered to Title Company or FFCA, as may be appropriate, all documents required to be delivered by this Agreement, and such other documents, payments, instruments and certificates, as FFCA may require in form acceptable to FFCA, including, without limitation, the following: (1) Notes; (2) Mortgages; (3) Operating Leases; (4) Assignments of Rents and Leases; (5) Franchisor Certificate; (6) Proof of Insurance; (7) Opinion of Counsel to Debtor and Lessee; (8) Evidence of satisfactory zoning; (9) UCC-1 Financing Statements; (10) Environmental Indemnity Agreements; (11) Lease Estoppel Certificate and Consents; and (12) Nondisturbance Agreements, as applicable. 0. DUE DILIGENCE. FFCA shall have completed its due diligence of Debtor and Lessee to FFCA's satisfaction in its sole and absolute discretion. Upon fulfillment or waiver of all of the above conditions, FFCA shall deposit funds necessary to close this transaction with the Title Company and this transaction shall close in accordance with the terms and conditions of this Agreement. 10. DEFAULT AND REMEDIES. A. Each of the following shall be deemed an event of default by Debtor (each, an "Event of Default"): (1) If any representation or warranty of Debtor set forth in any of the Loan Documents is false in any material respect, or if Debtor renders any intentionally false statement or account. (2) If any principal, interest or other monetary sum due under the Notes, the Mortgages or any other Loan Document is not paid within five days after the date when due; provided, however, notwithstanding the occurrence of such an Event of Default, FFCA shall not be entitled to exercise its rights and remedies set forth below unless and until FFCA shall have given Debtor notice thereof and a period of five days from the delivery of such notice shall have elapsed without such Event of Default being cured. (3) If Debtor fails to observe or perform any of the other covenants (except with respect to a breach of the Fixed Charge Coverage Ratio, which breach is addressed in subitem (7) below), conditions, or obligations of this Agreement; provided, however, if any such failure does not involve the payment of any monetary sum to FFCA, is not willful, does not place any rights or property of FFCA in immediate jeopardy, and is within the reasonable power of Debtor to promptly cure after receipt of notice thereof, all as determined by FFCA in its reasonable discretion, then such failure shall not constitute an Event of Default hereunder, unless otherwise expressly provided herein, unless and until FFCA shall have given Debtor notice thereof and a period of 30 days shall have elapsed, during which period Debtor may correct or cure such failure, upon failure of which an Event of Default shall be deemed to have occurred hereunder without further notice or demand of any kind. If such failure cannot reasonably be cured within such 30-day period, as determined by FFCA in its reasonable discretion, and Debtor is diligently pursuing a cure of such failure, then Debtor shall have a reasonable period to cure such failure beyond such 3 0day period, which shall not exceed 90 days after receiving notice of such failure from FFCA. If Debtor shall fail to correct or cure such failure within such 90-day period, an Event of Default shall be deemed to have occurred hereunder without further notice or demand of any kind being required. (4) If Debtor or Lessee becomes insolvent within the meaning of the Code, files or notifies FFCA that it intends to file a petition under the Code, initiates a proceeding under any similar law or statute relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts (collectively, an "Action"), becomes the subject of either an involuntary Action or petition under the Code without such involuntary Action or petition being dismissed within 90 days of filing, or is not generally paying its debts as the same become due. (5) Subject to the provisions of Section 13.P, if there is an "Event of Default" under any Operating Lease or any other Loan Document, or if there is a breach or default, after the passage of all applicable notice and cure or grace periods, under any other agreement or instrument, including, without limitation, promissory notes and guaranties, between, among or by (1) Debtor, Lessee and/or any subsidiary or Affiliate of Debtor or Lessee, and, or for the benefit of, (2) FFCA and/or any subsidiary or Affiliate of FFCA or Franchise Finance Corporation of America, a Delaware corporation. (6) If there is a breach or default, after the passage of any applicable notice and grace period, under any franchise, license and/or area development agreement with Franchisor with respect to any of the Premises which breach or default would have a Material Adverse Effect, or if such franchise, license and/or area development agreement terminates or expires prior to the payment in full of the Note corresponding to such Premises in accordance with its terms and a substitute agreement for the terminated or expired agreement is not entered into prior to such expiration or termination, which substitute agreement shall be in form and substance reasonably satisfactory to FFCA. (7) If there is a breach of the Fixed Charge Coverage Ratio and FFCA shall have given Debtor notice thereof and Debtor shall have failed within a period of 30 days from the delivery of such notice to pay to FFCA (the "Cure Period") the FCCR Amount (without premium or penalty) with respect to each of those Premises for which the Fixed Charge Coverage Ratio is below 1.25:1 (each, a "Subject Premises"). For purposes of this subsection, "FCCR Amount" means that sum of money which, when subtracted from the outstanding principal amount of the Note corresponding to a Subject Premises, and assuming the resulting principal balance is reamortized over the remaining term of such Note, will result in an adjusted Fixed Charge Coverage Ratio for such Subject Premises of at least 1.25:1 based on the prior year's operations. Promptly after Debtor's payment of the FCCR Amount, Debtor and FFCA agree to execute an amendment to each such Note in form and substance reasonably acceptable to FFCA reducing the principal amount payable to FFCA under such Note and reamortizing the principal amount of such Note over the then remaining term of such Note. Notwithstanding the foregoing, if FFCA shall have exercised its option to require that Debtor cause to be maintained an aggregate Fixed Charge Coverage Ratio with respect to some or all of the FCCR Premises, then, in order to prevent an Event of Default occurring by reason of a breach of such Fixed Charge Coverage Ratio, Debtor must FFCA the Aggregate FCCR Amount (without premium or penalty) within the Cure with respect to such of the FCCR Premises (as selected by Debtor) necessary to cure breach of such Fixed Charge Coverage Ratio requirement and for which a Fixed Coverage Ratio of at least 1.25:1 is not being maintained (with the definitions relating Fixed Charge Coverage Ratio being modified as applicable to provide for a calculation the Fixed Charge Coverage Ratio on an individual basis for each such FCCR Pre (each a " Selected Premises"). For purposes of the preceding sentence, "Aggregate Amount" means that sum of money which, when subtracted from the outstanding principal balance of the FCCR Note corresponding to a Selected Premises, and assuming the re principal balance is reamortized over the remaining term of such FCCR Note, will re an adjusted aggregate Fixed Charge Coverage Ratio for the applicable group of Premises of at least 1.25:1 based on the prior year's operations. Promptly after D payment of the Aggregate FCCR Amount, Debtor and FFCA agree to execute an amendment to each such FCCR Note in form and substance reasonably acceptable to FFCA reducing the principal amount payable to FFCA under such FCCR Note and reamortizing the principal amount of such FCCR Note over the then remaining term of such FCCR Note. (8) If an Existing Lease terminates or expires prior to the scheduled maturity date of the Note corresponding to the Premises to which the Existing Lease relates. B. Upon and during the continuance of an Event of Default, subject to the limitations set forth in subsection A, FFCA may declare all or any part of the obligations of Debtor under the Notes, this Agreement and any other Loan Document to be due and payable, and the same shall thereupon become due and payable without any presentment, demand, protest or notice of any kind except as otherwise expressly provided herein, and Debtor hereby waives notice of intent to accelerate the obligations secured by the Mortgages. Thereafter, FFCA may exercise, at its option, concurrently, successively or in any combination, all remedies available at law or in equity, including without limitation any one or more of the remedies available under the Notes, the Mortgages or any other Loan Document. Neither the acceptance of this Agreement nor its enforcement shall prejudice or in any manner affect FFCA's right to realize upon or enforce any other security now or hereafter held by FFCA, it being agreed that FFCA shall be entitled to enforce this Agreement and any other security now or hereafter held by FFCA in such order and manner as it may in its absolute discretion determine. No remedy herein conferred upon or reserved to FFCA is intended to be exclusive of any other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Loan Documents to FFCA, or to which FFCA may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by FFCA. 11. ASSIGNMENTS. A. Subsequent to the funding of the Loans by FFCA, FFCA may assign in whole or in part its rights under this Agreement, including, without limitation, in connection with any Transfer, Participation and/or Securitization. Upon any unconditional assignment of FFCA's entire right and interest hereunder, FFCA shall automatically BE RELIEVED, FROM AND after the date of such assignment, of liability for the performance of any obligation of FFCA contained herein. B. Debtor shall not, without the prior written consent of FFCA, sell, assign, transfer, mortgage, convey, encumber or grant any easements or other rights or interests of any kind in the Premises, any of Debtor's rights under this Agreement or any interest in Debtor, whether voluntarily, involuntarily or by operation of law or otherwise, including, without limitation, by merger, consolidation, dissolution or otherwise, except, subsequent to the Closing, as expressly permitted by the Mortgage. 12. INDEMNITY. Debtor agrees to indemnify, hold harmless and defend FFCA and its directors, officers, shareholders, employees, successors, assigns, agents, contractors, subcontractors, experts, licensees, affiliates, lessees, lenders, mortgagees, trustees and invitees, as applicable (collectively, the "Indemnified Parties"), from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees (collectively, "Losses"), arising as the result of an Environmental CONDITION and/or a breach of any of the representations, warranties, covenants, agreements or obligations of Debtor set forth in this Agreement. Without limiting the generality of the foregoing, such indemnity shall include, without limitation, any engineering, governmental inspection and reasonable attorneys' fees and expenses that the Indemnified Parties may incur by reason of any representation set forth in this Agreement being false, or by reason of any investigation or claim of any Governmental Authority in connection therewith. Notwithstanding the foregoing, Debtor shall not be obligated to indemnify, hold harmless and defend the Indemnified Parties with respect to those Losses caused by an Environmental Condition which directly resulted from affirmative acts taken with respect to a Premises by any Person (other than Debtor, Lessee or an Affiliate of Debtor or Lessee) after the completion of a foreclosure of the Mortgage corresponding to such Premises by FFCA or the acceptance by FFCA of a deed-in-lieu thereof, it being expressly understood and agreed that Debtor shall be obligated to indemnify, hold harmless and defend the Indemnified Parties with respect to any Environmental Condition arising or accruing prior to the completion of the foreclosure of such Mortgage by FFCA or the acceptance by FFCA of a deed-in-lieu thereof even if such Environmental Condition is not discovered until after the completion of such foreclosure or acceptance of a deed-in-lieu thereof. 13. MISCELLANEOUS PROVISIONS. A. NOTICES. All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Agreement shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express overnight delivery service or (iv) certified or registered mail, return receipt requested, and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c) the next business day, if delivered by express overnight delivery service, or (d) the third business day following the day of deposit of such notice with the United States Postal Service, if sent by certified or registered mail, return receipt requested. Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below: If to Debtor: 80-A Turnpike Road Westboro, MA 0 15 81 Attention: Mr. Paul Hoagland Telephone: (508) 870-9200 Telecopy: (508) 870-9201 with a copy to: Brown, Rudnick, Freed and Gesmer One Financial Center Boston, MA 02111 Attention: Carl E. Axelrod, Esq. Telephone: (617) 856-8200 Telecopy: (617) 856-8201 If to FFCA: Dennis L. Ruben, Esq. Executive Vice President and General Counsel FFCA Acquisition Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Telephone: (602) 585-4500 Telecopy: (602) 585-2226 B. REAL ESTATE COMMISSION. FFCA and Debtor represent and warrant to each other that they have dealt with no real estate or mortgage broker, agent, finder or other intermediary in connection with the transactions contemplated by this Agreement. FFCA and Debtor shall indemnify and hold each other harmless from and against any costs, claims or expenses, including attorneys' fees, arising out of the breach of their respective representations and warranties contained within this Section. C. WAIVER AND AMENDMENT. No provisions of this Agreement shall be deemed waived or amended except by a written instrument unambiguously setting forth the matter waived or amended and signed by the party against which enforcement of such waiver or amendment is sought. Waiver of any matter shall not be deemed a waiver of the same or any other matter on any future occasion. D. CAPTIONS. Captions are used throughout this Agreement for convenience of reference only and shall not be considered in any manner in the construction or interpretation hereof. E. FFCA'S LIABILITY. Notwithstanding anything to the contrary provided in this Agreement, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Agreement by FFCA, that (i) there shall be absolutely no personal liability on the part of any shareholder, director, officer or employee of FFCA, with respect to any of the terms, covenants and conditions of this Agreement or the other Loan Documents, (ii) Debtor waives all claims, demands and causes of action against FFCA's officers, directors, employees and agents in the event of any breach by FFCA of any of the terms, covenants and conditions of this Agreement or the other Loan Documents to be performed by FFCA and (iii) Debtor shall look solely to the assets of FFCA for the satisfaction of each and every remedy of Debtor in the event of any breach by FFCA of any of the terms, covenants and conditions of this Agreement or the other Loan Documents to be performed by FFCA, such exculpation of liability to be absolute and without any exception whatsoever. F. SEVERABILITY. The provisions of this Agreement shall be deemed severable. If any part of this Agreement shall be held unenforceable, the remainder shall remain in full force and effect, and such unenforceable provision shall be reformed by such court so as to give maximum legal effect to the intention of the parties as expressed therein. G. CONSTRUCTION GENERALLY. This is an agreement between parties who are experienced in sophisticated and complex matters similar to the transaction contemplated by this Agreement and is entered into by both parties in reliance upon the economic and legal bargains contained herein and shall be interpreted and construed in a fair and impartial manner without regard to such factors as the party which prepared the instrument, the relative bargaining powers of the parties or the domicile of any party. Debtor and FFCA were each represented by legal counsel competent in advising them of their obligations and liabilities hereunder. H. OTHER DOCUMENTS. Each of the parties agrees to sign such other and further documents as may be appropriate to carry out the intentions expressed in this Agreement. I. ATTORNEYS' FEES. In the event of any judicial or other adversarial proceeding between the parties concerning this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and other costs in addition to any other relief to which it may be entitled. References in this Agreement to the attorneys' fees and/or costs of FFCA shall mean both the reasonable fees and costs of independent outside counsel -retained by FFCA with respect to this transaction and the costs (but not the fees) of FFCA's in-house counsel incurred in connection with this transaction. J. ENTIRE AGREEMENT. THIS Agreement and the other Loan Documents, together with any other certificates, instruments or agreements to be delivered in connection therewith, constitute the entire agreement between the parties with respect to the subject matter hereof, and there are no other representations, warranties or agreements, written or oral, between Debtor and FFCA with respect to the subject matter of this Agreement. Notwithstanding anything in this Agreement to the contrary, upon the execution and delivery of this Agreement by Debtor and FFCA, the terms and conditions of this Agreement shall control over the terms and conditions of the Commitment notwithstanding that such terms and conditions may be inconsistent with or vary from those set forth in the Commitment. K. FORUM SELECTION; JURISDICTION; VENUE; CHOICE OF LAW. acknowledges that this Agreement was substantially negotiated in the State of Arizona Agreement was signed by FFCA in the State of Arizona and delivered by Debtor in the State of Arizona, all payments under the Notes will be delivered in the State of Arizona an are substantial contacts between the parties and the transactions contemplated herein State of Arizona. For purposes of any action or proceeding arising out of this Agreement, the parties hereto hereby expressly submit to the jurisdiction of all federal and state located in the State of Arizona and Debtor consents that it may be served with any or paper by registered mail or by personal service within or without the State of Arizona accordance with applicable law. Furthermore, Debtor waives and agrees not to assert such action, suit or proceeding that it is not personally subject to the jurisdiction courts, that the action, suit or proceeding is brought in an inconvenient forum or that of the action, suit or proceeding is improper. It is the intent of the parties hereto provisions of this Agreement shall be governed by and construed under the laws of the of Arizona. To the extent that a court of competent jurisdiction finds Arizona inapplicable with respect to any provisions hereof, then, as to those provisions only, the of the states where the Premises are located shall be deemed to apply. Nothing Section shall limit or restrict the right of FFCA to commence any proceeding in the or state courts located in the states in which the Premises are located to the extent FFCA deems such proceeding necessary or advisable to exercise remedies available under this Agreement or the other Loan Documents. L. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. M. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of Debtor and FFCA and their respective successors and permitted assigns, including, without limitation, any United States trustee, any debtor in possession or any trustee appointed from a private panel. N. SURVIVAL. Except for the conditions of Closing set forth in Sections 2 and 9, which shall be satisfied or waived as of the Closing Date, all representations, warranties, agreements, obligations and indemnities of Debtor and FFCA set forth in this Agreement shall survive the Closing. 0. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES. DEBTOR AND FFCA HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. P. TRANSFERS, PARTICIPATIONS AND SECURITIZATION. A material inducement to FFCA's willingness to complete the transactions contemplated by the Loan Documents is Debtor's agreement that FFCA may, at any time after the funding of each of the Loans, sell, transfer or assign any Note, Mortgage and any of the other Loan Documents, and any or all servicing rights with respect thereto (each, a "Transfer"), or grant participations therein (each, a "Participation"), or complete an asset securitization vehicle selected by FFCA, in accordance with all requirements which may be imposed by the investors or the rating agencies involved in such securitized financing transaction, as selected by FFCA, or which may be imposed by applicable securities, tax or other laws or regulations, including, without limitation, laws relating to FFCA's status as a real estate investment trust (each, a "Securitization"). Debtor agrees to cooperate in good faith with FFCA in connection with any Transfer, Participation and/or Securitization, including, without limitation, (i) providing such documents, financial and other data, and other information and materials (the "Disclosures") which would typically and reasonably be required with respect to Debtor and Lessee by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or the Securitization, as applicable; provided, however, Debtor and Lessee shall not be required to make Disclosures of any confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws; and (ii) amending the terms of the transactions evidenced by the Loan Documents and the Operating Leases to the extent necessary so as to satisfy the requirements of purchasers, transferees, assignees, servicers, participants, investors or selected rating agencies involved in any such Transfers, Participations or Securitization, so long as such amendments would not have a material adverse effect upon Debtor, Lessee or the transactions contemplated hereunder. Debtor consents to FFCA providing the Disclosures, as well as any other information which FFCA may now have or hereafter acquire with respect to the Premises or the financial condition of Debtor and Lessee, to each purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to each Transfer, Participation and/or Securitization, as applicable; provided that, to the extent that any of such Disclosures or other information include confidential information, FFCA shall take reasonable steps to advise all Persons to whom confidential information is disclosed by FFCA that the information being disclosed is confidential. FFCA and Debtor (and their respective Affiliates) shall each pay their own attorneys fees and other out-of-pocket expenses incurred in connection with the performance of their respective obligations under this Section. Notwithstanding anything to the contrary contained herein, Debtor shall not be required to: (i) amend or change any documents evidencing or securing any Loan which would modify (A) the interest rate payable under any Note, (B) the stated maturity of any Note, (C) the amortization of principal or prepayment rights with respect to any Note, (D) the recourse provisions of any Loan, or (E) any other material economic term of any Loan which would have a material adverse effect on Debtor or the transactions contemplated by this Agreement; or (ii) bear any cost or expense (other than nominal costs or expenses) for updated title insurance endorsements, surveys, environmental reports, legal opinions or any other similar cost or expense relating to such Transfers, Participations or Securitizations except for its own attorney's fees in reviewing documents drafted or PROPOSED BY FFCA OR ITS COUNSEL WITH RESPECT THERETO. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, from and after the closing of a Securitization with respect to the I any loan evidenced by any Other Agreement: (a) a breach or default, after the passage of all applicable notice and cure or grace periods, under any Operating Lease, Loan Document or Other Agreement which relates to a loan or sale/leaseback transaction which has not been the subject of a Securitization shall not constitute an Event of Default under any Operating Lease, Loan Document or Other Agreement which relates to a loan which has been the subject of a Securitization; (b) a breach or default, after the passage of all applicable notice and cure or grace periods, under any Operating Lease, Loan Document or Other Agreement which relates to a loan which has been the subject of a Securitization transaction shall not constitute an Event of Default under any Operating Lease, Loan Document or Other Agreement which relates to a loan which has been the subject of a different Securitization transaction; (c) the Loan Documents corresponding to any Loan in any Securitized Loan Pool shall not secure the obligations of any of the Debtor Entities contained in any Loan Document or Other Agreement which does not correspond to a loan in such Securitized Loan Pool; and (d) the Loan Documents and Other Agreements which do not correspond to a loan in any Securitized Loan Pool shall not secure the obligations of any of the Debtor Entities contained in any Loan Document or Other Agreement which does correspond to a loan in such Securitized Loan Pool. Q. State Specific Provisions. DEBTOR ACKNOWLEDGES THAT THE TRANSACTION CONTEMPLATED HEREIN IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF SECTION 52-278a OF THE CONNECTICUT GENERAL STATUTES, AND THAT IN ANY ACTION UPON THIS TRANSACTION, FFCA MAY AVAIL ITSELF OF AND PURSUE ITS RIGHTS TO OBTAIN A PREJUDGMENT REMEDY IN ACCORDANCE WITH SECTION 52-278f OF THE CONNECTICUT GENERAL STATUTES. DEBTOR HAS BEEN ADVISED BY COUNSEL OF ITS RIGHTS WITH RESPECT TO PREJUDGMENT REMEDIES UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED, INCLUDING SECTIONS 52-278a TO 52-278g. DEBTOR HEREBY KNOWINGLY AND WILLING WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ALL RIGHTS OF NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER IN CONNECTION WITH THE OBTAINING BY FFCA OF ANY PREJUDGMENT REMEDY WITH RESPECT TO THIS AGREEMENT, OR PURSUANT TO ANY OTHER DOCUMENT EXECUTED BY DEBTOR IN CONNECTION WITH THIS TRANSACTION, INCLUDING ANY AMENDMENTS OR EXTENSIONS HEREOF OR THEREOF. FURTHER, DEBTOR WAIVES ANY REQUIREMENT OF FFCA TO POST A BOND OR ANY OTHER SECURITY, OR TO SHOW SOME EXIGENCY, IN CONNECTION WITH THE OBTAINING BY FFCA OF ANY SUCH PREJUDGMENT REMEDY. IN WITNESS WHEREOF, Debtor and FFCA have entered into this Agreement as of the date first above written. FFCA: FFCA ACQUISITION CORPORATION, a Delaware corporation By /s/ Mark Wood ------------------------------ Printed Name Mark Wood Its Vice President DEBTOR: NERC LIMITED PARTNERSHIP II, a Delaware limited partnership By NERC SPE II Inc., a Delaware corporation, its general partner By /s/ Paul V. Hoagland ------------------------- Paul V. Hoagland Vice President, Finance and Assistant Treasurer STATE OF ARIZONA ] ] SS. COUNTY OF MARICOPA ] I The foregoing instrument was acknowledged before me on ______________, 1998 by, ______________________ of FFCA Acquisition Corporation, a Delaware corporation, on behalf of the corporation. ____________________________ Notary Public My Commission Expires: _________________________ COMMONWEALTH OF MASSACHUSETTS ] ]SS. COUNTY OF WORCHESTER ] The foregoing instrument was acknowledged before me on, June 26, 1998 by Paul V. Hoagland, Vice President, Finance and Assistant Treasurer of NERC SPE II Inc., a Delaware corporation, the general partner of NERC Limited Partnership II, a Delaware limited partnership, on behalf of the partnership. /s/ Lorraine M. Bates ------------------------- Notary Public My Commission Expires: Lorraine M. Bates - ----------------------- Notary Public My Commission Expires May 13, 2005 EXHIBIT A ALLOCATED LOAN AMOUNT; PREMISES FFCA No. 8000-5791 Waterbury, CT $1,015,260.00 FFCA No. 8000-6563 Rocky Hill, CT $1,256,000.00 FFCA No. 8000-5417 Warwick, RI $ 800,000.00 ------------- Total $3,071,260.00 EX-10.23 18 FORM OF PROMISSORY NOTE Exhibit 10.23 FORM OF PROMISSORY NOTE $800,000.00 Dated as of June _, 1998 Scottsdale, Arizona NERC LIMITED PARTNERSHIP 11, a Delaware limited partnership ("Debtor"), for value received, hereby promises to pay to FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, or order, on or before July 1, 2012, as herein provided, the principal sum of EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS ($800,000.00), and interest on the unpaid principal amount of this Note from the date hereof to maturity at the rate of 8.94% per annum (the "Base Interest Rate") on the basis of a 360-day year of twelve 30-day months, such principal and interest to be paid in immediately available funds and in lawful money of the United States. Initially capitalized terms which are not otherwise defined in this Note shall have the meanings set forth in that certain Loan Agreement dated as of the date of this Note between Debtor and FFCA (the "Loan Agreement"). Interest on the principal amount of this Note for the period commencing with the date set forth above through the last day in the month in which this Note is dated shall be due and payable upon execution of this Note. Thereafter, principal and interest shall be payable in consecutive monthly installments of EIGHT THOUSAND THREE HUNDRED SIXTY-THREE AND 47/100 DOLLARS ($8,363.47) commencing on August 1, 1998, and continuing on the first day of each month thereafter until maturity of this Note on July 1, 2012 at which time, the outstanding principal and unpaid accrued interest shall be due and payable. Prior to the fifth anniversary of this Note, except as expressly permitted below, Debtor may not prepay this Note. From and after the fifth anniversary of this Note, Debtor may prepay this Note in full, but not in part, including all accrued but unpaid interest hereunder and all sums advanced by FFCA pursuant to the Loan Documents, provided that (i) no default is continuing under this Note and no "Event of Default" is continuing under any of the other Loan Documents, (ii) any such prepayment shall only be made on a regularly scheduled payment date upon not less than 30 days prior written notice from Debtor to FFCA, and (iii) any such prepayment shall be made together with payment of a prepayment premium equal to: (a) 5% of the amount prepaid if the prepayment is made on or following the fifth anniversary of this Note but prior to the sixth anniversary of this Note; (b) 4% of the amount prepaid if the prepayment is made on or following the sixth anniversary of this Note but prior to the seventh anniversary of this Note; (c) 3% of the amount prepaid if the prepayment is made on or following the seventh anniversary of this Note but prior to the eighth anniversary of this Note; (d) 2% of the amount prepaid if the prepayment is made on or following the eighth anniversary of this Note but prior to the ninth anniversary of this Note; and (e) 1% of the amount prepaid if the prepayment is made on or following the ninth anniversary of this Note but prior to the tenth anniversary of this Note. If this Note is prepaid on or following the tenth anniversary of this Note there shall be no prepayment premium. The foregoing prepayment premium shall be due and payable if this Note is prepaid prior to the tenth anniversary of this Note regardless of whether such prepayment is the result of a voluntary prepayment by Debtor or as a result of FFCA declaring the unpaid principal balance of this Note, accrued interest and all other sums due under this Note, the Mortgage encumbering the Premises corresponding to this Note, the other Loan Documents and any other document further securing this Note, due and payable as contemplated below (the "Acceleration'-'); provided, however, the prohibition on prepayment and such prepayment premium shall not be applicable with respect to a prepayment of this Note as a result of the application of condemnation or casualty proceeds as contemplated by the Mortgage encumbering the Premises corresponding to this Note or as contemplated by the Loan Agreement as a result of a breach of the Fixed Charge Coverage Ratio. If this Note is prepaid as a result of an Acceleration prior to the fifth anniversary of this Note, except as expressly contemplated in the preceding sentence and in the following paragraph, a prepayment premium of 5% of the principal amount prepaid shall be due and payable to FFCA by Debtor at the time of such prepayment. Notwithstanding the foregoing, if, prior to the fifth anniversary of the date of this Note, Debtor and NE Restaurant Company, Inc., a Delaware corporation ("Company"), complete the sale or transfer of all or substantially all of their assets to an independent third party or complete the sale or transfer of all of the partnership interests of Debtor and the stock of Company to an independent third party, Debtor may prepay this Note in full, but not in part, including all accrued but unpaid interest hereunder and all sums advanced by FFCA pursuant to the Loan Documents, provided that (i) no default is continuing under this Note and no "Event of Default" is continuing under any of the other Loan Documents, (ii) any such prepayment shall only be made on a regularly scheduled payment date upon not less than 30 days prior written notice from Debtor to FFCA, and (iii) any such prepayment shall be made together with payment of a prepayment premium equal to the Yield Maintenance Amount. "Yield Maintenance Amount" means the difference between (a) the present value computed at the Reinvestment Rate (as defined below) of the stream of monthly principal and interest payments calculated at the Base Interest Rate from the date of prepayment through the scheduled maturity date and (b) the unpaid principal amount of this Note; provided, however, if such difference is a negative number, the Yield Maintenance Amount shall be zero. "Reinvestment Rate" means an interest rate equal to 100 basis points above the current yield of United States Treasury Bonds, Notes and Bills having a weighted average life to maturity closest to the regularly scheduled maturity date of this Note. Upon execution of this Note, Debtor shall establish arrangements whereby all payments of principal and interest hereunder are transferred by wire or other means directly from Debtor's bank account to such account as FFCA may designate or as FFCA may otherwise designate. Each payment of principal and interest hereunder shall be applied first toward any past due payments under this Note (including payment of all Costs (as herein defined)), then to accrued interest, and the balance, after the payment of such accrued interest, if any, shall be applied to the unpaid principal balance of this Note; provided, however, each payment hereunder while a default under this Note has occurred and is continuing shall be applied towards any of Debtor's obligations under the Loan Documents or with respect to the Premises in such priority and amounts as FFCA in its sole discretion may determine. This Note is secured by the Mortgages. If any principal, interest or other monetary sum due under this Note is not paid within five days after the date when due and FFCA shall have given Debtor notice thereof and a period of five days from the delivery of such notice shall have elapsed without such past-due sum being paid, or upon the occurrence of an "Event of Default" under any of the Loan Documents, then, in any of such events, time being of the essence hereof, FFCA may declare the entire unpaid principal balance of this Note, accrued interest, if any, and all other sums due under this Note, the Mortgages, the other Loan Documents AND any other document further securing this Note, due and payable at once without written notice to Debtor. All past-due principal and/or interest shall bear interest from the due date to the date of actual payment at the lesser of the highest rate for which the undersigned may legally contract, or the rate of 18% per annum. (the "Default Rate"), and such Default Rate shall continue to apply following a judgment in favor of FFCA under this Note. If Debtor fails to make any payment or installment due under this Note within five days of its due date, Debtor shall pay to FFCA in addition to any other sum due FFCA under this Note or any other Loan Document a late charge equal to 5% of such past-due payment or installment. All payments of principal and interest due hereunder shall be made (i) without deduction of any present and future taxes, levies, imposts, deductions, charges or withholdings, which amounts shall be paid by Debtor, and (ii) without any other right of abatement, reduction, setoff, defense, counterclaim, interruption, deferment or recoupment for any reason whatsoever. Debtor will pay the amounts necessary such that the gross amount of the principal and interest received by FFCA is not less than that required by this Note. No delay or omission on the part of FFCA in exercising any remedy, right or option under this Note shall operate as a waiver of such remedy, right or option. In any event, a waiver on any one occasion shall not be construed as a waiver or bar to any such remedy, right or option on a future occasion. Debtor hereby waives presentment, demand for payment, notice of dishonor, notice of protest, and protest, and all other notices or demands in connection with delivery, acceptance, performance, default or endorsement of this Note. All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Note shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express overnight delivery service or (iv) certified or registered mail, return receipt requested, and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c) the next business day, if delivered by express overnight delivery service, or (d) the third business day following the day of deposit of such notice with the United States Postal Service, if sent by certified or registered mail, return receipt requested. Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below: If to Debtor: 80-A Turnpike Road Westboro, MA 0 15 81 Attention: Mr. Paul Hoagland Telephone: (508) 870-9200 Telecopy: (508) 870-9201 with a copy to: Brown, Rudnick, Freed and Gesmer One Financial Center Boston, MA 02111 Attention: Carl E. Axelrod, Esq. Telephone: (617) 856-8200 Telecopy: (617) 856-8201 If to FFCA: Dennis L. Ruben, Esq. Executive Vice President and General Counsel FFCA Acquisition Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Telephone: (602) 585-4500 Telecopy:(602) 585-2226 or to such other address or such other person as either party may from time to time hereafter specify to the other party in a notice delivered in the manner provided above. Should any indebtedness represented by this Note be collected at law or in equity, or in bankruptcy or other proceedings, or should this Note be placed in the hands of attorneys for collection after default, Debtor shall pay, in addition to the principal and interest due and payable hereon, all costs of collecting or attempting to collect this Note (the "Costs"), including reasonable attorneys' fees and expenses of FFCA (including those fees and expenses incurred in connection with any appeal and those expenses (but not fees) of FFCA's in-house counsel) whether or not a judicial action is commenced by FFCA. This Note may not be amended or modified except by a written agreement duly executed by Debtor and FFCA. In case any one or more of the provisions contained in this Note shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, and this Note shall be construed as if such provision had never been contained herein or therein. Notwithstanding anything to the contrary contained in any of the Loan Documents, the obligations of Debtor to FFCA under this Note and any other Loan Documents are subject to the limitation that payments of interest and late charges to FFCA shall not be required to the extent that receipt of any such payment by FFCA would be contrary to provisions of applicable law limiting the maximum rate of interest that may be charged or collected by FFCA. The portion of any such payment received by FFCA that is in excess of the maximum interest permitted by such provisions of law shall be credited to the principal balance of this Note or if such excess portion exceeds the outstanding principal balance of this Note, then such excess portion shall be refunded to Debtor. All interest paid or agreed to be paid to FFCA shall, to the extent permitted by applicable law, be amortized, prorated, allocated and/or spread throughout the full term of this Note (including, without limitation, the period of any renewal or extension thereof) so that interest for such full term shall not exceed the maximum amount permitted by applicable law. It is the intent of the parties hereto that the business relationship created by this Note and the other Loan Documents is solely that of creditor and debtor and has been entered into by both parties in reliance upon the economic and legal bargains contained in the Loan Documents. None of the agreements contained in the Loan Documents is intended, nor shall the same be deemed or construed, to create a partnership between FFCA and Debtor, to MAKE them joint venturers, to make Debtor an agent, legal representative, partner, subsidiary or employee of FFCA, nor to make FFCA in any way responsible for the debts, obligations or losses of Debtor. Debtor acknowledges that FFCA (or any affiliate of FFCA) and Franchisor are not affiliates, agents, partners or joint venturers, nor do they have any other legal, representative or fiduciary relationship other than debtor/creditor and/or landlord/tenant relationships unrelated to the transactions contemplated by the Loan Documents. FFCA, by accepting this Note, and Debtor acknowledge and warrant to each other that each has been represented by independent counsel and Debtor has executed this Note after being fully advised by said counsel as to its effect and significance. This Note shall be interpreted and construed in a fair and impartial manner without regard to such factors as the party which prepared the instrument, the relative bargaining powers of the parties or the domicile of any party. Debtor acknowledges that this Note was substantially negotiated in the State of Arizona, the executed Note was delivered in the State of Arizona, all payments under this Note will be delivered in the State of Arizona and there are substantial contacts between the parties and the transactions contemplated herein and the State of Arizona. For purposes of any action or proceeding arising out of this Note, the parties hereto expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona. Debtor consents that it may be served with any process or paper by registered mail or by personal service within or without the State of Arizona in accordance with applicable law. Furthermore, Debtor waives and agrees not to assert in any such action, suit or proceeding that it is not personally subject to the jurisdiction of such courts, that the action, suit or proceeding is brought in an inconvenient forum or that venue of the action, suit or proceeding is improper. It is the intent of Debtor and FFCA that all provisions of this Note shall be governed by and construed UNDER the laws of the State of Arizona. Nothing contained in this paragraph shall limit or restrict the right of FFCA to commence any proceeding in the federal or state courts located in the state in which the Premises corresponding to this Note is located to the extent FFCA deems such proceeding necessary or advisable to exercise remedies available under the Loan Documents. FFCA, BY ACCEPTING THIS NOTE, AND DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, THE RELATIONSHIP OF FFCA AND DEBTOR, DEBTOR'S USE OR OCCUPANCY OF THE PREMISES CORRESPONDING TO THIS NOTE, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. This obligation shall bind Debtor and its successors and assigns, and the benefits hereof shall inure to FFCA and its successors and assigns. FFCA may assign its rights under this Note as set forth in the Loan Agreement. IN WITNESS WHEREOF, Debtor has executed and delivered this Note effective as of the date first set forth above. DEBTOR: NERC LIMITED PARTNERSHIP II, a Delaware limited partnership By NERC SPE 11 Inc., a Delaware corporation, its general partner By __________________________ Paul V. Hoagland Vice President Finance and Assistant Treasurer EX-23.1 19 CONSENT OF ARTHUR ANDERSEN EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports included in this registration statement for the years ended December 31, 1997, for NE Restaurant Company, Inc., and December 27, 1997, for Bertucci's Inc., and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Boston, Massachusetts September 18, 1998 EX-25.1 20 FORM T-1 STATEMENT EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 -------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE -------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _______ -------------------------- UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation or (I. R. S. Employer organization if not a U. S. national bank) Identification Number) 114 West 47th Street 10036-1532 New York, New York (Zip Code) (Address of principal executive offices) -------------------------- NE Restaurant Company Inc. (Exact name of obligor as specified in its charter) Delaware 06-1311266 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 80A Turnpike Road 01581 Westborough, MA (Zip code) (Address of principal executive offices) -------------------------- Bertucci's, Inc. (Exact name of obligor as specified in its charter) Massachusetts 04-2947209 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Bertucci's Restaurant Corp. (Exact name of obligor as specified in its charter) Massachusetts 04-2844750 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Bertucci's Securities Corporation (Exact name of obligor as specified in its charter) Massachusetts 04-3132772 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Berestco, Inc. (Exact name of obligor as specified in its charter) Massachusetts 04-3173720 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Sal & Vinnie's Sicilian Steakhouse, Inc. (Exact name of obligor as specified in its charter) Massachusetts 04-3260622 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Bertucci's of Anne Arundel County, Inc. (Exact name of obligor as specified in its charter) Maryland 52-1854761 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Bertucci's of Columbia, Inc. (Exact name of obligor as specified in its charter) Maryland 52-1854758 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Bertucci's of Baltimore County, Inc. (Exact name of obligor as specified in its charter) Maryland 52-1819001 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Bertucci's of Bel Air, Inc. (Exact name of obligor as specified in its charter) Maryland 52-1854759 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- Bertucci's of White Marsh, Inc. (Exact name of obligor as specified in its charter) Maryland 52-1854760 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) -------------------------- 10 3/4% Senior Note due 2008 (Title of the indenture securities) GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System). Federal Deposit Insurance Corporation, Washington, D. C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None. 3,4,5,6,7,8,9,10,11,12,13,14 and 15. The obligor are currently not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. 16. List of Exhibits (continued) T-1.4 -- The By-laws of the United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE As of September 1, 1998, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U. S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility, as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. --------------------- Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 14th day of September, 1998. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: /s/ Patricia Stermer -------------------------------------- Patricia Stermer Assistant Vice President Exhibit T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 September 1, 1995 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: /S/Gerard F. Ganey Senior Vice President EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION JUNE 30, 1998 ($ IN THOUSANDS) ASSETS Cash and Due from Banks $ 99,322 Short-Term Investments 171,315 Securities, Available for Sale 626,426 Loans 1,857,795 Less: Allowance for Credit Losses 16,708 ---------- Net Loans 1,841,087 Premises and Equipment 59,304 Other Assets 122,476 ----------- Total Assets $2,919,930 ----------- LIABILITIES Deposits: Non-Interest Bearing $ 648,072 Interest Bearing 1,646,049 ----------- Total Deposits 2,294,121 Short-Term Credit Facilities 306,807 Accounts Payable and Accrued Liabilities 144,419 ------------ Total Liabilities $2,745,347 ------------ STOCKHOLDER'S EQUITY Common Stock 14,995 Capital Surplus 49,541 Retained Earnings 107,703 Unrealized Gains on Securities Available for Sale (Net of Taxes) 2,344 -------- Total Stockholder's Equity 174,583 --------- Total Liabilities and Stockholder's Equity $2,919,930 ----------- I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkmann, SVP & Controller July 31, 1998 EX-27.1 21 FDS OF NERCO
5 0001061588 NERCO 6-MOS 12-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 JUN-30-1998 DEC-31-1997 0 248 3,435 0 394 297 0 0 570 592 4,852 1,593 40,482 39,787 (11,623) (9,993) 43,126 37,337 9,931 9,998 41,835 37,596 0 0 0 0 20 20 (12,184) (13,127) 43,126 37,337 45,049 81,364 45,049 81,364 12,722 23,384 41,769 76,262 0 0 0 0 1,864 1,918 1,416 3,184 473 1,083 943 2,100 0 0 0 0 0 0 943 2,100 .72 1.22 .72 1.22
EX-27.2 22 FDS OF BERTUCCI'S INC
5 0000874971 BERTUCCI'S INC. 1,000 6-MOS 12-MOS DEC-26-1998 DEC-27-1997 DEC-28-1997 DEC-29-1996 JUL-11-1998 DEC-27-1997 3,670 5,755 0 0 814 1,078 0 0 1,205 1,222 7,997 10,271 134,380 129,615 (42,812) (38,090) 106,059 105,516 12,402 14,010 13,500 13,500 0 0 0 0 0 0 73,287 71,371 106,059 105,516 78,481 136,719 78,481 136,719 19,488 34,101 75,191 130,197 0 0 0 0 474 1,005 2,816 5,517 994 2,010 1,822 3,508 0 0 0 0 0 0 1,822 3,508 .20 .40 .20 .39
EX-99.1 23 FORM OF LOT EXHIBIT 99.1 LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 10 3/4% SENIOR NOTES DUE 2008 OF NE RESTAURANT COMPANY, INC. PURSUANT TO THE PROSPECTUS DATED _____ __, 1998 =============================================================================== THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________, ___________ __, 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE OFFER IS EXTENDED, IN WHICH CASE THE TERM "EXPIRATION DATE" SHALL MEAN THE LATEST DATE AND TIME TO WHICH THE EXCHANGE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. =============================================================================== If you desire to accept the Exchange Offer, this Letter of Transmittal should be completed, signed, and submitted to the Exchange Agent. THE EXCHANGE AGENT IS: UNITED STATES TRUST COMPANY OF NEW YORK BY REGISTERED OR BY OVERNIGHT COURIER BY HAND BEFORE 4:30 P.M.: CERTIFIED MAIL: AND BY HAND AFTER United States Trust United States Trust 4:30 P.M. ON THE Company of New York Company of New York EXPIRATION DATE: 111 Broadway, Lower P.O. Box 844 United States Trust Company Level Attn: Corporate Trust of New York Attn: Corporate Trust Services 770 Broadway, 13th Floor Services Cooper Station New York, New York New York, New York New York, New York 10003 10006 10276-0844 Attn: Corporate Trust Services BY FACSIMILE TRANSMISSION: 212-780-0592 (For Eligible Institutions Only) Confirm by Telephone: 800-548-6565 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned hereby acknowledges receipt of the prospectus dated ________, 1998 (the "Prospectus"), of NE Restaurant Company, Inc., a Delaware corporation (the "Company"), and this letter of transmittal (the "Letter of Transmittal"), which together with the Prospectus constitute the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 10 3/4% Senior Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its 10 3/4% Senior Notes due 2008 (the "Private Notes") of which $100,000,000 aggregate principal amount is outstanding. Recipients of the Prospectus should read the requirements described in such Prospectus with respect to eligibility to participate in the Exchange Offer. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. The undersigned hereby tenders the Private Notes described in the box entitled "Description of Private Notes" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered owner of such the Private Notes and the undersigned represents that it has received from each beneficial owner of Private Notes (the "Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. This Letter of Transmittal is to be used only by a holder of Private Notes (i) if certificates representing Private Notes are to be forwarded herewith or (ii) if delivery of Private Notes is to be made by book- entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in the section of the Prospectus entitled "The Exchange Offer -- Procedures for Tendering." If delivery of the Private Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC, this Letter of Transmittal need not be manually executed; PROVIDED, HOWEVER, that tenders of the Private Notes must be effected in accordance with the procedures mandated by DTC's Automated Tender Offer Program and the procedures set forth in the Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer." Any beneficial owner whose Private Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder of Private Notes promptly and instruct such registered holder of Private Notes to tender on behalf of the beneficial owner. If such beneficial owner wishes to tender on its own behalf, such beneficial owner must, prior to completing and executing this Letter of Transmittal and delivering its Private Notes, either make appropriate arrangements to register ownership of the Private Notes in such beneficial owner's name or obtain a properly completed bond power from the registered holder of Private Notes. The transfer of record ownership may take considerable time. In order to properly complete this Letter of Transmittal, a holder of Private Notes must (i) complete the box entitled "Description of Private Notes," (ii) if appropriate, check and complete the boxes relating to book-entry transfer, guaranteed delivery, Special Issuance Instructions and Special Delivery Instructions, (iii) sign the Letter of Transmittal by completing the box entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder of Private Notes should carefully read the detailed instructions below prior to completing the Letter of Transmittal. Holders of Private Notes who desire to tender their Private Notes for exchange and (i) whose Private Notes are not immediately available, (ii) who cannot deliver their Private Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date or (iii) who are unable to complete the procedure for book-entry transfer on a timely basis, must tender the Private Notes pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2 of the Instructions beginning on page 8 hereof. Holders of Private Notes who wish to tender their Private Notes for exchange must, at a minimum, complete columns (1), (2), if applicable (see footnote 1 below), and (3) in the box below entitled "Description of Private Notes" and sign the box on page 7 under the words "Sign Here." If only those columns are completed, such holder of Private Notes will have tendered for exchange all Private Notes listed in column (3) below. If the holder of Private Notes wishes to tender for exchange less than all of such Private Notes, column (4) must be completed in full. In such case, such holder of Private Notes should refer to Instruction 5 on page 9. =============================================================================== DESCRIPTION OF PRIVATE NOTES - ------------------------------------------------------------------------------- (1) (2) (3) (4) Name(s) and Address(es) Principal Amount of Registered Holder(s) Tendered For Exchange of Private Note(s), (only if different exactly as name(s) amount from column appear(s) on Private Private Note (3)) (must be in Note Certificate(s) Number(s) (1) integral multiples (Please fill in, (Attach signed list Aggregate of $1,000) (2) if blank) if necessary) Principal Amount - ------------------------------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Column (2) need not be completed by holders of Private Notes tendering Private Notes for exchange by book-entry transfer. Please check the appropriate box on the next page and provide the requested information. (2) Column (4) need not be completed by holders of Private Notes who wish to tender for exchange the principal amount of Private Notes listed in column (3). Completion of column (4) will indicate that the holder of Private Notes wishes to tender for exchange only the principal amount of Private Notes indicated in column (4). =============================================================================== |_| CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH. |_| CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER DEFINED) ONLY): Name of Tendering Institution: _______________________________________ Account Number: _______________________________________ Transaction Code Number: _______________________________________ |_| CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name of Registered Holder of Private Note(s): ________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Window Ticket Number (if available): ________________________ Name of Institution with Guaranteed Delivery: Account Number (if delivered by book-entry transfer): |_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ___________________________________________________________ Address: ___________________________________________________________ ================================= ==================================== SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 6, 7 and 8) (See Instructions 1, 6, 7 and 8) To be completed ONLY if (i) To be completed ONLY if the the Exchange Notes issued Exchange Notes issued in in exchange for Private exchange for Private Notes, Notes, certificates for certificates for Private Private Notes in a principal Notes in a principal amount not exchanged for amount not exchanged for Exchange Notes, or Private Exchange Notes, or Private Notes (if any) not tendered Notes (if any) not tendered for exchange, are to be for exchange, are to be issued in the name of mailed or delivered to: someone other than the (i) someone other than the undersigned, or undersigned, or (ii) Private Notes tendered by (ii) the undersigned at an book-entry transfer which address other than the are not exchanged are to be address shown below the returned by credit to an undersigned's signature. account maintained at DTC. Issue to: Mail or deliver to: Name___________________________ Name_____________________________ (Please Print) (Please Print) Address________________________ Address__________________________ _______________________________ _________________________________ _______________________________ _________________________________ (Include Zip Code) (Include Zip Code) _______________________________ _________________________________ (Tax Identification or (Tax Identification or Social Security No.) Social Security No.) |_| Credit Private Notes not exchanged and delivered by book-entry transfer to the DTC account set forth below: _______________________________ (Account Number) ================================= =================================== If delivery of Private Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC, then tenders of Private Notes must be effected in accordance with the procedures mandated by DTC's Automated Tender Offer Program and the procedures set forth in the Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer." SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY LADIES AND GENTLEMEN: Pursuant to the offer by NE Restaurant Company, Inc., a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the prospectus dated ______, 1998 (the "Prospectus") and this letter of transmittal (the "Letter of Transmittal"), which together with the Prospectus constitutes the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 10 3/4% Senior Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its outstanding 10 3/4% Senior Notes due 2008 (the "Private Notes"), the undersigned hereby tenders to the Company for exchange the Private Notes. By executing this Letter of Transmittal and subject to and effective upon acceptance for exchange of the Private Notes tendered for exchange herewith, the undersigned (A) acknowledges and agrees that, except as set forth in the Prospectus under the caption "The Exchange Offer -- Terms of the Exchange Offer," all of the rights of such undersigned pursuant to that certain Exchange and Registration Rights Agreement, dated as of July 20, 1998, as amended on July 21, 1998, between the Company, the Initial Purchasers and the Guarantors (each as defined in the Prospectus), will have been satisfied and extinguished in all respects and (B) will have irrevocably sold, assigned, transferred and exchanged, to the Company, all right, title and interest in, to and under all of the Private Notes tendered for exchange hereby, and hereby appoints the Exchange Agent as the true and lawful agent and attorney-in- fact (with full knowledge that the Exchange Agent also acts as agent of the Company) of such holder of Private Notes with respect to such Private Notes, with full power of substitution to (i) deliver certificates representing such Private Notes, or transfer ownership of such Private Notes on the account books maintained by DTC (together, in any such case, with all accompanying evidences of transfer and authenticity), to the Company, (ii) present and deliver such Private Notes for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights and incidents of beneficial ownership with respect to such Private Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. The undersigned hereby represents and warrants that (i) the undersigned is the owner of the Private Notes tendered hereby; (ii) has a net long position within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4") equal to or greater than the principal amount of Private Notes tendered hereby; (iii) the tender of such Private Notes complies with Rule 14e-4 (to the extent that Rule 14e-4 is applicable to such exchange); (iv) the undersigned has full power and authority to tender, exchange, assign and transfer the Private Notes; and (v) that when such Private Notes are accepted for exchange by the Company, the Company will acquire good and marketable title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned will, upon receipt, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Private Notes tendered for exchange hereby. The undersigned hereby further represents to the Company that (i) the Exchange Notes to be acquired by the undersigned in exchange for the Private Notes tendered hereby and by any beneficial owner(s) of such Private Notes in connection with the Exchange Offer will be acquired by the undersigned and such beneficial owner(s) in the ordinary course of business of the undersigned, (ii) the undersigned (if not a broker-dealer referred to in the last sentence of this paragraph) is not currently participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, (iii) the undersigned and each beneficial owner acknowledge and agree that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") set forth in certain no-action letters (see the section of the Prospectus entitled "The Exchange Offer -- Resale of the Exchange Notes"), (iv) the undersigned and each beneficial owner understand that a secondary resale transaction described in clause (iii) above should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or 508, as applicable, of Regulation S-K of the Commission and (v) neither the undersigned nor any beneficial owner is an "affiliate" of the Company, as defined under Rule 405 under the Securities Act. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes received in respect of such Private Notes pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For purposes of the Exchange Offer, the Company will be deemed to have accepted for exchange, and to have exchanged, validly tendered Private Notes, if, as and when the Company gives oral or written notice thereof to the Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See the section of the Prospectus entitled "The Exchange Offer -- Withdrawal of Tenders." Any Private Notes tendered by the undersigned and not accepted for exchange will be returned to the undersigned at the address set forth above unless otherwise indicated in the box above entitled "Special Delivery Instructions." The undersigned acknowledges that the Company's acceptance of Private Notes validly tendered for exchange pursuant to any one of the procedures described in the section of the Prospectus entitled "The Exchange Offer" and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated in the box entitled "Special Issuance Instructions," please return any Private Notes not tendered for exchange in the name(s) of the undersigned. Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail any certificates for Private Notes not tendered or exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Private Notes accepted for exchange in the name(s) of, and return any Private Notes not tendered for exchange or not exchanged to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Private Notes from the name of the holder of Private Note(s) thereof if the Company does not accept for exchange any of the Private Notes so tendered for exchange or if such transfer would not be in compliance with any transfer restrictions applicable to such Private Note(s). IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL. Except as stated in the Prospectus, all authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as otherwise stated in the Prospectus, this tender for exchange of Private Notes is irrevocable. - ------------------------------------------------------------------------------- SIGN HERE - ------------------------------------------------------------------------------- (Signature(s) of Owner(s)) Date: , 1998 Must be signed by the registered holder(s) of Private Notes exactly as name(s) appear(s) on certificate(s) representing the Private Notes or on a security position listing or by person(s) authorized to become registered Private Note holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. (See Instruction 6) Name(s):______________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ (Please Print) Capacity (full title):________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Address:______________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ (Include Zip Code) Area Code and Telephone No. (____)____________________________________________ Tax Identification or Social Security Nos.:___________________________________ Please complete Substitute Form W-9 GUARANTEE OF SIGNATURE(S) (Signature(s) must be guaranteed if required by Instruction 1) Authorized Signature:_________________________________________________________ Dated:________________________________________________________________________ Name and Title:_______________________________________________________________ (Please Print) Name of Firm:_________________________________________________________________ ============================================================================== INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by an institution which is an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, which is a member of one of the following recognized Signature Guarantee Programs (an "Eligible Institution"): a. The Securities Transfer Agents Medallion Program (STAMP) b. The New York Stock Exchange Medallion Signature Program (MSP) c. The Stock Exchange Medallion Program (SEMP) Signatures on this Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal is signed by the registered holder(s) of the Private Notes tendered herewith and such registered holder(s) have not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (ii) if such Private Notes are tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. 2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED DELIVERY PROCEDURE. This Letter of Transmittal is to be completed by holders of Private Notes (i) if certificates are to be forwarded herewith or (ii) if tenders are to be made pursuant to the procedures for tender by book-entry transfer or guaranteed delivery set forth in the section of the Prospectus entitled "The Exchange Offer." Certificates for all physically tendered Private Notes or any confirmation of a book-entry transfer (a "Book-Entry Confirmation"), as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile hereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m., New York City time, on the Expiration Date. Holders of Private Notes who elect to tender Private Notes and (i) whose Private Notes are not immediately available, (ii) who cannot deliver the Private Notes or other required documents to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date or (iii) who are unable to complete the procedure for book-entry transfer on a timely basis, may have such tender effected if: (a) such tender is made by or through an Eligible Institution; (b) prior to 5:00 p.m., New York time, on the Expiration Date, the Exchange Agent has received from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile hereof) and Notice of Guaranteed Delivery (by telegram, telex, facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of such Private Notes, the certificate number(s) of such Private Notes and the principal amount of Private Notes tendered for exchange, stating that tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the certificates representing such Private Notes (or a Book-Entry Confirmation), in proper form for transfer, and any other documents required by this Letter of Transmittal, will be deposited by such Eligible Institution with the Exchange Agent; and (c) certificates for all tendered Private Notes, or a Book-Entry Confirmation, together with a copy of the previously executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal are received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER OF PRIVATE NOTES. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE NOTES SHOULD BE SENT TO THE COMPANY. No alternative, conditional or contingent tenders will be accepted. All tendering holders of Private Notes, by execution of this Letter of Transmittal (or facsimile hereof, if applicable), waive any right to receive notice of the acceptance of their Private Notes for exchange. 3. INADEQUATE SPACE. If the space provided in the box entitled "Description of Private Notes" above is inadequate, the certificate numbers and principal amounts of the Private Notes being tendered should be listed on a separate signed schedule affixed hereto. 4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date by delivery of written notice of withdrawal to the Exchange Agent at the address set forth on the cover of this Letter of Transmittal. To be effective, a notice of withdrawal of Private Notes must (i) specify the name of the person who tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and aggregate principal amount of such Private Notes), (iii) be signed by the holder of Private Notes in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the applicable transfer agent register the transfer of such Private Notes into the name of the person withdrawing the tender. Withdrawals of tenders of Private Notes may not be rescinded, and any Private Notes withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Private Notes so withdrawn are validly retendered. Properly withdrawn Private Notes may be retendered by following one of the procedures described in the section of the Prospectus entitled "The Exchange Offer -- Procedures for Tendering" at any time prior to 5:00 p.m., New York City time, on the Expiration Date. 5. PARTIAL TENDERS. (Not applicable to holders of Private Notes who tender Private Notes by book-entry transfer.) Tenders of Private Notes will be accepted only in integral multiples of $1,000 principal amount. If a tender for exchange is to be made with respect to less than the entire principal amount of any Private Notes, fill in the principal amount of Private Notes which are tendered for exchange in column (4) of the box entitled "Description of Private Notes" on page 3, as more fully described in the footnotes thereto. In case of a partial tender for exchange, a new certificate, in fully registered form, for the remainder of the principal amount of the Private Notes, will be sent to the holders of Private Notes unless otherwise indicated in the appropriate box on this Letter of Transmittal as promptly as practicable after the expiration or termination of the Exchange Offer. 6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND ENDORSEMENTS. (a) The signature(s) of the holder of Private Notes on this Letter of Transmittal must correspond with the name(s) as written on the face of the Private Notes without alteration, enlargement or any change whatsoever. (b) If tendered Private Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. (c) If any tendered Private Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary or required documents as there are different registrations or certificates. (d) When this Letter of Transmittal is signed by the holder of the Private Notes listed and transmitted hereby, no endorsements of Private Notes or separate powers of attorney are required. If, however, Private Notes not tendered or not accepted are to be issued or returned in the name of a person other than the holder of Private Notes, then the Private Notes transmitted hereby must be endorsed or accompanied by appropriate powers of attorney in a form satisfactory to the Company, in either case signed exactly as the name(s) of the holder of Private Notes appear(s) on the Private Notes. Signatures on such Private Notes or powers of attorney must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). (e) If this Letter of Transmittal or Private Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Company of their authority so to act must be submitted. (f) If this Letter of Transmittal is signed by a person other than the registered holder of Private Notes listed, the Private Notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name(s) of the registered holder of Private Notes appear(s) on the certificates. Signatures on such Private Notes or powers of attorney must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company will pay all transfer taxes, if any, applicable to the transfer and exchange of Private Notes pursuant to the Exchange Offer. If, however, issuance of Exchange Notes is to be made to, or Private Notes not tendered for exchange are to be issued or returned in the name of, any person other than the holder of Private Notes, and satisfactory evidence of payment of such taxes or exemptions from taxes therefrom is not submitted with this Letter of Transmittal, the amount of any transfer taxes payable on account of the transfer to such person will be imposed on and payable by the holder of Private Notes tendering Private Notes for exchange prior to the issuance of the Exchange Notes. 8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to be issued, or if any Private Notes not tendered for exchange are to be issued or sent to, someone other than the holder of Private Notes or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Holders of Private Notes tendering Private Notes by book-entry transfer may request that Private Notes not accepted be credited to such account maintained at DTC as such holder of Private Notes may designate. 9. IRREGULARITIES. All questions as to the form of documents and the validity, eligibility (including time of receipt), acceptance and withdrawal of Private Notes will be determined by the Company, in its sole discretion, whose determination shall be final and binding. The Company reserves the absolute right to reject any or all tenders for exchange of any particular Private Notes that are not in proper form, or the acceptance of which would, in the opinion of the Company or its counsel, be unlawful. The Company reserves the absolute right to waive any defect, irregularity or condition of tender for exchange with regard to any particular Private Notes. The Company's interpretation of the terms of, and conditions to, the Exchange Offer (including the instructions herein) will be final and binding. Unless waived, any defects or irregularities in connection with the Exchange Offer must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notice of any defects or irregularities in Private Notes tendered for exchange, nor shall any of them incur any liability for failure to give such notice. A tender of Private Notes will not be deemed to have been made until all defects and irregularities with respect to such tender have been cured or waived. Any Private Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, amend or modify certain of the specified conditions as described under "The Exchange Offer -- Conditions" in the Prospectus in the case of any Private Notes tendered (except as otherwise provided in the Prospectus). 11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. If a holder of Private Notes desires to tender Private Notes pursuant to the Exchange Offer, but any of such Private Notes has been mutilated, lost, stolen or destroyed, such holder of Private Notes should write to or telephone the Trustee at the address or telephone number listed below, concerning the procedures for obtaining replacement certificates for such Private Notes, arranging for indemnification or any other matter that requires handling by the Trustee: United States Trust Company of New York P.O. Box 844, Attn: Corporate Trust Services Cooper Station New York, NY 10276-0844 Telephone: 800-548-6565 12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information or for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent at the address or telephone number set forth on the cover of this Letter of Transmittal. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under United States federal income tax law, a holder of Private Notes whose tendered Private Notes are accepted for exchange may be subject to backup withholding unless the holder provides the Company (as payor), through the Exchange Agent, with either (i) such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying that (A) the TIN provided on Substitute Form W-9 is correct (or that such holder of Private Notes is awaiting a TIN) and that (B) the holder is not subject to backup withholding because (a) the holder is exempt from backup withholding, (b) the holder of Private Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (c) the Internal Revenue Service has notified the holder of Private Notes that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption from backup withholding. If such holder of Private Notes is an individual, the TIN is generally such holder's social security number. If the Exchange Agent is not provided with the correct taxpayer identification number, the holder of Private Notes may be subject to backup withholding and a $50 penalty imposed by the Internal Revenue Service. Certain holders of Private Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt holders of Private Notes should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9, and sign, date and return the Substitute Form W-9 to the Exchange Agent. A foreign individual may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8 (the terms of which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the holder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for additional instructions. If backup withholding applies, the Company is required to withhold 31% of any reportable payment made to the holder of Private Notes or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The Company reserves the right in its sole discretion to take whatever steps are necessary to comply with the Company's obligation regarding backup withholding. The holder of Private Notes is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Private Notes. If the Private Notes are held in more than one name or are not held in the name of the actual owner, consult the enclosed Guidelines for additional guidance regarding which number to report. - ------------------------------------------------------------------------------ PAYER'S NAME:____________________________________ - ------------------------------------------------------------------------------ SUBSTITUTE Part 1 - PLEASE PROVIDE Form W-9 YOUR TIN IN THE BOX AT ______________________ Department of RIGHT AND CERTIFY BY Social Security the Treasury SIGNING AND DATING BELOW Number Internal Revenue Service OR Payer's Request ______________________ for Taxpayer Employer Identification Identification Number (TIN) Number -------------------------------------------------------- Part 2 - Part 3 - Certification Under Awaiting |_| Penalties of Perjury, I TIN certify that: (1) The number shown on this form is my current taxpayer identification number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) Ihave not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. -------------------------------------------------------- Certification instructions - You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you receive another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). - ------------------------------------------------------------------------------ SIGNATURE___________________________________ DATE_______________ NAME____________________________________________________________ ADDRESS_________________________________________________________ CITY_______________________ STATE___________ ZIP CODE___________ - ------------------------------------------------------------------------------ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 - ------------------------------------------------------------------------------ PAYOR'S NAME: - ------------------------------------------------------------------------------ CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver such an application in the near future. I understand that until I provide a taxpayer identification number, 31% of all reportable payments made to me will be withheld, but that such withheld amount shall be refunded to me if I provide my taxpayer identification number within 60 days. - ------------------------------------------------------------------------------ Signature Date ============================================================================== EX-99.2 24 FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NE RESTAURANT COMPANY, INC. EXCHANGE OFFER TO HOLDERS OF ITS 10 3/4% SENIOR NOTES DUE 2008 NOTICE OF GUARANTEED DELIVERY This Notice of Guaranteed Delivery or a form substantially equivalent hereto must be used to accept the Exchange Offer of NE Restaurant Company, Inc. (the "Company") made pursuant to the prospectus dated _____, 1998 (the "Prospectus") and the accompanying letter of transmittal (the "Letter of Transmittal"), if certificates for the above-referenced 10 3/4% Senior Notes due 2008 (the "Private Notes") are not immediately available or time will not permit all required documents to reach United States Trust Company of New York (the "Exchange Agent") prior to the Expiration Date (as defined in the Prospectus) of the Exchange Offer (as defined below) or if the procedures for book-entry transfer cannot be completed on a timely basis. This form may be delivered by an Eligible Institution (as defined in the Letter of Transmittal) by hand or by telegram, facsimile transmission or mail to the Exchange Agent. UNITED STATES TRUST COMPANY OF NEW YORK BY REGISTERED OR BY OVERNIGHT COURIER AND BY HAND BEFORE 4:30 P.M.: CERTIFIED MAIL: BY HAND AFTER 4:30 P.M. United States Trust Company United States Trust ON THE EXPIRATION DATE: of New York Company of New York United States Trust 111 Broadway, Lower Level P.O. Box 844 Company of New York Attn: Corporate Trust Attn: Corporate Trust 770 Broadway, 13th Floor Services Services New York, New York 10003 New York, New York 10006 Cooper Station Attn: Corporate Trust New York, New York Services 10276-0844 BY FACSIMILE TRANSMISSION: 212-780-0592 (For Eligible Institutions Only) Confirm by Telephone: 800-548-6565 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by a Medallion Signature Guarantor under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to the Company upon the terms and conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the principal amount of Private Notes set forth below, pursuant to the guaranteed delivery procedure described in the Prospectus and the Letter of Transmittal under the section entitled "The Exchange Offer-Guaranteed Delivery Procedures." The undersigned hereby represents and warrants that the undersigned has full power and authority to tender the Private Notes. The undersigned authorizes the Exchange Agent to deliver this Notice of Guaranteed Delivery to the Company and the Trustee as evidence of the undersigned's tender of the Privates Notes. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. Signature(s) ____________________ Address ____________________________ _________________________________ ____________________________________ Name(s)__________________________ Area Code and Tel. No.(s)___________ _________________________________ If Private Notes will be delivered by Please Type or Print book-entry transfer, check box and provide account number. Certificate Nos. |_| The Depository Trust Company (if available)___________________ Account Number:_____________________ Principal Amount of Private Notes Represented by Certificate(s)_______________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise and "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof) with any required signature guarantees, together with the Private Notes tendered hereby in proper form for transfer (or timely confirmation of the book-entry transfer of such Private Notes into the Exchange Agent's account at the Depository Trust Company and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date. The institution that completes this form must communicate the guarantee to the Exchange Agent and must deliver the Letter of Transmittal and Notes to the Exchange Agent within the time period shown herein. Failure to do so could result in a financial loss to the undersigned. - --------------------------------- ------------------------------------ Name of Firm Authorized Signature - --------------------------------- ------------------------------------ Address Title - --------------------------------- Zip Code Please Type or Print Area Code and Tel. No. __________ Dated ______________________________ EX-99.3 25 FORM OF LETTER TO NOMINEES EXHIBIT 99.3 NE RESTAURANT COMPANY, INC. OFFER TO EXCHANGE 10 3/4% SENIOR NOTES DUE 2008 FOR ANY AND ALL OUTSTANDING 10 3/4% SENIOR NOTES DUE 2008 _____________, 1998 TO SECURITIES DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES: NE Restaurant Company, Inc. (the "Company") is offering (the "Exchange Offer"), upon the terms and subject to the conditions of the enclosed prospectus, dated _____, 1998 (as the same may be amended or supplemented from time to time, the "Prospectus"), and the enclosed letter of transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its 10 3/4% Senior Notes due 2008 (the "Exchange Notes"), which exchange has been registered under the Securities Act of 1933, as amended (the "Securities Act"), for each $1,000 principal amount of its outstanding 10 3/4% Senior Notes due 2008 (the "Private Notes"), of which $100,000,000 aggregate principal amount was issued and sold on July 20, 1998 in a transaction exempt from registration under the Securities Act and is outstanding on the date hereof. The Company will accept for exchange any and all Private Notes properly tendered according to the terms of the Prospectus and the Letter of Transmittal. Consummation of the Exchange Offer is subject to certain conditions described in the Prospectus. WE ARE ASKING YOU TO CONTACT YOUR CLIENTS FOR WHOM YOU HOLD PRIVATE NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE OR WHO HOLD PRIVATE NOTES REGISTERED IN THEIR OWN NAMES. The Company will not pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Private Notes pursuant to the Exchange Offer. You will, however, be reimbursed by the Company for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Company will pay all transfer taxes, if any, applicable to the tender of Private Notes to it or its order, except as otherwise provided in the Prospectus and the Letter of Transmittal. Enclosed are copies of the following documents: 1. A form of letter which you may send, as a cover letter to accompany the Prospectus and related materials, to your clients for whose accounts you hold Private Notes registered in your name or the name of your nominee, with space provided for obtaining the clients' instructions with regard to the Exchange Offer. 2. The Prospectus. 3. The Letter of Transmittal for your use in connection with the tender of Private Notes and for the information of your clients. 4. A form of Notice of Guaranteed Delivery. 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Your prompt action is requested. The Exchange Offer will expire at 5:00 P.M., New York City time, on ________, _______ 1998, unless the Exchange Offer is extended by the Company. The time at which the Exchange Offer expires is referred to as the "Expiration Date." Tendered Private Notes may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to 5:00 P.M. on the Expiration Date. To participate in the Exchange Offer, certificates for Private Notes, or a timely confirmation of a book-entry transfer of such Private Notes into the Exchange Agent's (as defined below) account at The Depository Trust Company, together with a duly executed and properly completed Letter of Transmittal or facsimile thereof, with any required signature guarantees, and any other required documents, must be received by the Exchange Agent by the Expiration Date as indicated in the Letter of Transmittal and the Prospectus. If holders of the Private Notes wish to tender, but it is impracticable for them to forward their Private Notes prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures" and the Letter of Transmittal. Additional copies of the enclosed material may be obtained from the Exchange Agent, United States Trust Company of New York, by calling (800) 548-6565 directing your inquiries to Corporate Trust Services. Very truly yours, NE RESTAURANT COMPANY, INC. NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. EX-99.4 26 FORM OF LETTER TO CLIENTS EXHIBIT 99.4 FORM OF LETTER TO CLIENTS NE RESTAURANT COMPANY, INC. OFFER TO EXCHANGE 10 3/4% SENIOR NOTES DUE 2008 FOR ANY AND ALL OUTSTANDING 10 3/4% SENIOR NOTES DUE 2008 _______, 1998 TO OUR CLIENTS: Enclosed for your consideration is a prospectus, dated ______, 1998 (as the same may be amended or supplemented from time to time, the "Prospectus"), and a letter of transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") by NE Restaurant Company, Inc. (the "Company") to exchange $1,000 principal amount of its 10 3/4% Senior Notes due 2008 (the "Exchange Notes"), which exchange has been registered under the Securities Act of 1933, as amended (the "Securities Act"), for each $1,000 principal amount of its outstanding 10 3/4% Senior Notes due 2008 (the "Private Notes"), of which $100,000,000 aggregate principal amount was issued and sold on July 20, 1998 in a transaction exempt from registration under the Securities Act and is outstanding on the date hereof. The Company will accept for exchange any and all Private Notes properly tendered according to the terms of the Prospectus and the Letter of Transmittal. Consummation of the Exchange Offer is subject to certain conditions described in the Prospectus. This material is being forwarded to you as the beneficial owner of Private Notes carried by us for your account or benefit but not registered in your name. A tender of such Private Notes may only be made by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Private Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if such beneficial owners wish to tender Private Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all such Private Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. However, we urge you to read the Prospectus carefully before instructing us as to whether or not to tender your Private Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Private Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M., New York City time, on _______, ________, 1998, unless the Exchange Offer is extended by the Company. The time the Exchange Offer expires is referred to as the "Expiration Date." Tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. IF YOU WISH TO HAVE US TENDER ANY OR ALL OF YOUR PRIVATE NOTES, PLEASE SO INSTRUCT US BY COMPLETING, EXECUTING AND RETURNING TO US THE INSTRUCTION FORM ON THE REVERSE HEREOF. The accompanying Letter of Transmittal is furnished to you for your information only and may not be used by you to tender Private Notes held by us and registered in our name for your account or benefit. If we do not receive written instructions in accordance with the procedures presented in the Prospectus and the Letter of Transmittal, we will not tender any of the Private Notes on your account. Please carefully review the enclosed material as you consider the Exchange Offer. INSTRUCTIONS INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT OF 10 3/4% SENIOR NOTES DUE 2008 OF NE RESTAURANT COMPANY, INC. The undersigned hereby acknowledges receipt of the prospectus dated ______, 1998 (the "Prospectus") of NE Restaurant Company, Inc., a Delaware corporation (the "Company") and the accompanying letter of transmittal (the "Letter of Transmittal"), that together constitute the exchange offer by the Company (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the Exchange Offer with respect to the 10 3/4% Senior Notes due 2008 (the "Private Notes") held by you for the account of the undersigned. The aggregate face amount of the Private Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $_____________________ of the Private Notes. With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): |_| To TENDER the following Private Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF PRIVATE NOTES TO BE TENDERED, IF ANY): $_____________________ of the Private Notes. |_| NOT to TENDER any Private Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Private Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner of the Private Notes, including but not limited to the representations that (i) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (ii) the undersigned is not currently participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of Exchange Notes, (iii) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Securities Act"), in connection with any resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") set forth in certain no-action letters (See the section of the Prospectus entitled "The Exchange Offer--Resale of the Exchange Notes"), (iv) the undersigned understands that a secondary resale transaction described in clause (iii) above should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or 508, as applicable, of Regulation S-K of the Commission, (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, (vi) if the undersigned is not a broker-dealer, that the undersigned is not participating in, does not intend to participate in, and has no arrangement or understanding with any person to participate in, the distribution of Exchange Notes and (vii) if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes received in respect of such Private Notes pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of Private Notes. |_| Check this box if the Beneficial Owner of the Private Notes is a participating Broker-Dealer and such participating Broker-Dealer acquired the Private Notes for its own account as a result of market-making activities. SIGN HERE Name of Beneficial Owner(s):_________________________________________________ Signature(s):________________________________________________________________ Name(s) (PLEASE PRINT):______________________________________________________ Address:_____________________________________________________________________ Telephone Number:____________________________________________________________ Taxpayer Identification or Social Security Number:___________________________ Date:_______________________ EX-99.5 27 FORM OF GUIDELINES FOR W-9 EXHIBIT 99.5 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.-- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ----------------------------------- -----------------------------------
GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------- 1. An individual The individual 2. Two or more individuals The actual owner (joint account) of the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint The actual owner account) of the account or, if joint funds, either person(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if account) the minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, guardian or committee or incompetent for a designated ward, person(3) minor, or incompetent person 7.a The usual revocable The grantor- savings trust account trustee(1) (grantor is also trustee) b So-called trust account The actual that is not a legal or owner(1) valid trust under State law 8. Sole proprietorship The owner(4) account - --------------------------------------------
GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- --- 9. A valid trust, estate, The legal entity or pension trust (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public Department of entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments ---
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a Social Security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your Social Security number or Employer identification number (if you have one). (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number (for business and all other entities), at the local office to the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan, or a custodial account under section 403(b)(7) of the Code, if the account satisfies the requirements of section 401(f)(2) of the Code. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a) of the Code. . An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1) of the Code. . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. . A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441 of the Code. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. . Section 401(k) payments made by an ESOP. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852 of the Code). . Payments described in section 6049(b)(5) of the Code to nonresident aliens. . Payments on tax-free covenant bonds under section 1451 of the Code. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt Payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A of the Code and the Treasury regulations promulgated thereunder. PRIVACY ACT NOTICE.--Section 6109 of the Code requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.-- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to a reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS. -----END PRIVACY-ENHANCED MESSAGE-----