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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended January 2, 2005

Commission File No. 0-21625


FAMOUS DAVE’S of AMERICA, INC.
(Exact name of registrant as specified in its charter)
     
Minnesota
(State or other jurisdiction of
incorporation or organization)
  41-1782300
(I.R.S. Employer
Identification No.)

8091 Wallace Road
Eden Prairie, Minnesota 55344

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code (952) 294-1300

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act (the Act) of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12-b-2 of the Act). Yes þ No o

The aggregate market value of the Registrant’s Common Stock held by non-affiliates on June 25, 2004 (the last business day of the Registrant’s most recently completed second quarter), based upon the last sale price of the Common Stock as reported on the NASDAQ National Market SM on June 25, 2004, was $78,768,109. As of March 3, 2005, 11,340,354 shares of the Registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of our definitive Proxy Statement for our Annual Meeting of Shareholders to be held on May 12, 2005 (the “2005 Proxy Statement”) are incorporated by reference into Part III of this Form 10-K, to the extent described in Part III. The 2005 Proxy Statement will be filed within 120 days after the end of the fiscal year ended January 2, 2005.

 
 

 


TABLE OF CONTENTS


             
        Page
           
 
           
  Business     3  
      12  
  Properties     14  
  Legal Proceedings     16  
  Submission of Matters to a Vote of Security Holders     16  
 
           
           
 
           
      16  
  Selected Financial Data     17  
      19  
  Quantitative and Qualitative Disclosures About Market Risk     30  
  Financial Statements and Supplementary Data     31  
      31  
  Controls and Procedures     31  
  Other Information     32  
 
           
           
 
           
  Directors and Executive Officers of the Registrant     32  
  Executive Compensation     32  
      32  
  Certain Relationships and Related Transactions     32  
  Principal Accountant Fees and Services     32  
 
           
           
 
           
  Exhibits and Financial Statement Schedules     32  
 
           
           
 Credit Agreement
 Subsidiaries
 Consent of Grant Thornton LLP
 Certification of CEO Pursuant to Section 302
 Certification of CFO Pursuant to Section 302
 Certification of CEO Pursuant to Section 906
 Certification of CFO Pursuant to Section 906

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PART I

ITEM 1. BUSINESS

General Development of Business

     Famous Dave’s of America, Inc. (“Famous Dave’s” or the “Company”) was incorporated as a Minnesota corporation in March 1994 and opened its first restaurant in Minneapolis in June 1995. As of January 2, 2005, there were 104 Famous Dave’s restaurants operating in 24 states, including 38 company-owned restaurants and 66 franchise-operated restaurants, and there were an additional 159 franchise restaurants in various stages of development.

     Until February 26, 2003, Famous Dave’s was a 40% participant in a joint venture to operate themed restaurant concepts based on the entertainment artist Isaac Hayes. Pursuant to an agreement governing the joint venture, the participants formed a Delaware limited liability company named FUMUME, LLC. FUMUME, LLC opened its first location in Chicago, Illinois in June 2001 and opened its second location in Memphis, Tennessee in October 2001. On February 26, 2003, we disposed of our 40% interest in FUMUME, LLC, and as a result, no longer participate in any revenues or expenses of the joint venture, nor do we have any further obligations with regard to the joint venture.

Financial Information about Segments

     Since our inception, our revenues, operating income (losses) and assets have been attributable to the single industry segment of casual dining. Our revenues and operating income (losses) for each of the last three fiscal years, and our assets for each of the last two fiscal years, are set forth elsewhere in this Form 10-K under Item 8, Financial Statements and Supplementary Data.

Narrative Description of Business

     Famous Dave’s restaurants, a majority of which offer full table service, feature hickory smoked off-the-grill meat entrée favorites, served in one of our three casual decor styles: a “Northwoods” style lodge, a nostalgic roadhouse “Shack,” or a “Blues Club” featuring nightly musical entertainment. We seek to differentiate ourselves by providing high-quality food in these distinctive and comfortable environments. As of January 2, 2005, 31 of our company-owned restaurants were full-service and 7 were counter- service. In 2005, we plan to open our first company-owned “smokehouse” prototype restaurant, which is our ‘restaurant of the future’ concept. We pride ourselves on the following:

     High Quality Food - Each restaurant features a distinctive selection of authentic hickory-smoked off-the-grill favorites such as flame-grilled St. Louis-style ribs, Texas beef brisket, Georgia chopped pork, country-roasted chicken, and generous signature sandwiches and salads. Enticing side items such as honey-buttered corn bread, potato salad, coleslaw, Shack Fries™ and Wilbur Beans™ accompany the broad entrée selection. Homemade desserts, including Famous Dave’s Bread Pudding and Hot Fudge Kahlua™ Brownies, are a specialty. To complement our smoked meat entrée and appetizer items and to suit different customer tastes, our barbeque sauces come in five variations: Rich & Sassy™, Texas Pit™, Georgia Mustard™, Devil’s Spit™ and Sweet and Zesty™. These sauces, in addition to a variety of seasonings, are also distributed in retail grocery stores throughout the country under licensing agreements. We believe that our high quality food is a principal point of differentiation between us and other casual dining competitors and is a significant contributing factor to our level of repeat business.

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     Distinctive Environment - Décor and Music - Our original décor theme, a nostalgic roadhouse shack (“Shack”), is defined by the abundant use of rustic antiques and items of Americana. The Shack promotes a very casual experience with emphasis on value and speed of delivery. In late 1997, we introduced the “Lodge” format which features décor reminiscent of a comfortable “Northwoods” hunting lodge with a full-service dining room and bar. In addition, we have developed a larger “Blues Club” format that features authentic Chicago Blues Club décor and live music seven nights a week. Of our 38 restaurants as of January 2, 2005, 30 were full-service restaurants with 25 having the “Lodge” format and 5 having the “Shack” format, 7 offering counter service were “Shack” format and one restaurant, located in the Minneapolis market, was a “Blues Club” format. During 2005, we will be evaluating converting some of our counter-service restaurants to full-service restaurants where there is determined to be sufficient return on our investment.

     During 2004, we finished the design on our “smokehouse” prototype, which includes a designated bar, a signature exterior smokestack, a separate entrance for our category-leading “TO-GO” business and a patio. This concept has approximately 6,300 square feet, or 7,200 square feet with the overhang, and has 220 seats with 50 more seats on the patio. This design will enable us to capitalize on a consistent and readily identifiable look and feel for our future locations. During the third quarter of 2004, we opened a franchise-operated restaurant in Chandler, Arizona which contained approximately 70% of the prototype elements, and in February 2005, opened a franchise-operated restaurant in Manhattan, Kansas as a full prototype. We plan on utilizing the “smokehouse” concept for our future restaurants and will be opening our first company-owned “smokehouse” restaurant in late 2005.

     Broad-Based Appeal - We believe that our concept has broad appeal because it attracts customers of all ages, the menu offers a variety of items, and our distinctive sauces allow our guests to customize their experience, appealing to many tastes. We believe that our distinctive concept, combined with our high-quality food, make Famous Dave’s appealing to children, teenagers and adults of all ages and socio-economic backgrounds.

Operating Strategy

     Our journey to achieving sustainable profitable growth requires us to deliver high quality experiences, in terms of both food and hospitality, to every guest, every day, and to enhance brand awareness, in our markets. Key elements of our strategy include the following:

     Operational Excellence - In 2004, we focused on improving our overall operational integrity and creating a consistently great guest experience, both in terms of food and hospitality across our system. During fiscal 2005, we intend to continue our focus on operational excellence and operational integrity. We define operational excellence as an uncompromising attention to the details of our recipes, preparation and cooking procedures, handling procedures, rotation, sanitation, cleanliness and safety. It also means an unyielding commitment to our guest to provide a “famous” experience with every visit through the execution of precision service. In our restaurants, we strive to emphasize value and speed of service by employing a streamlined operating system based on a focused menu and simplified food preparation techniques.

     During 2004, we completed our first major menu design change in ten years. The menu focuses on a number of popular smoked, barbeque, meat, entrée items and delicious side dishes which are prepared using easy-to-operate kitchen equipment and processes that use prepared proprietary seasonings, sauces and mixes. This streamlined food preparation system helps lower the cost of operation by requiring fewer staff, lower training costs and eliminates the need for highly compensated chefs. In order to enhance our appeal, expand our audience, and promote our cravable products without the hook of discounting, during 2004 we introduced limited time offerings of full margin promotional products.

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     During 2004, these limited time menu offerings consisted of sweet and sassy grilled salmon, barbeque salads, distinctive sandwich offerings and a smoked pot roast entrée. We believe that constant and exciting new product introductions, offered for a limited period of time, encourage trial visits and build repeat traffic. In order to increase customer frequency, we have assembled a research and development pipeline designed to generate four to six product introductions annually. During the first quarter of 2005, in support of the Lenten period, we introduced a limited time offering seafood promotion consisting of a shrimp Po’Boy sandwich, a blackened catfish Po’Boy sandwich and a blackened catfish dinner entrée. As the menu broadens and food preparation techniques become more focused on meals prepared to order, increased training may be necessary in order to prepare our staff for increased levels of guest service.

     Human Resources and Training - We believe that a key component of the success of our concept rests with the ability to hire, train and motivate qualified restaurant employees and managers. We validate our performance through an industry subscription service, the People Report, which helps us track our “People P&L”. This report is completed every quarter and benchmarks Famous Dave’s with industry leaders in areas such as employee satisfaction and retention. In training and development, we successfully held two area director training classes, which focused on the position’s core competencies and the challenges that our multi-unit managers face both in the corporate and the franchise communities. Our FD101 manager training class was held four times throughout the year and focused on compliance issues such as food safety and alcohol awareness, along with basic management duties including food execution, human resources and restaurant supervision. We are currently offering these classes to all existing corporate managers, and are opening our classes to our franchise partners.

     We are a performance-based organization, and are committed to recognizing and rewarding performance. In addition to our training initiatives, our managers are incentivized with a bonus plan that rewards for profitable growth. Our President’s Club rewards general managers for accomplishments in many areas directly related to great restaurant operations, such as sales growth, operating results, safety programs, turnover reduction, and increased guest satisfaction scores. During 2004, over a third of our general managers and two area directors were successful in attaining the top designation of President’s Club status. All of these initiatives, along with a strong operational focus, resulted in a decrease in management turnover from 38% in 2003 to 26% in 2004. The Support Center bonus plan has been developed to reward all of our employees that are not directly serving our guests. It combines Company performance with individual goal achievement. We believe that by providing training, competitive compensation and opportunities for employee involvement and advancement, we encourage a sense of personal commitment from all of our employees. Looking forward to 2005, our focus will be on selection, succession, safety, organization training and development, streamlining processes, restaurant opening procedures, and retaining top talent.

Restaurant Operations

     Our Company’s ability to manage multiple, geographically diverse units is central to our overall success. At the unit level, we place specific emphasis on the positions of area director and general manager, and seek employees with significant restaurant and management expertise. We strive to maintain quality and consistency in each of our units through the careful training and supervision of personnel and the establishment of, and adherence to, high standards relating to personnel performance, food and beverage preparation, and maintenance of facilities. We seek to attract high quality, experienced restaurant management and personnel with competitive compensation, bonus programs and a defined career path.

     All general managers must complete a seven-week training program, during which they are instructed in areas such as food quality and preparation, customer service, and employee relations. We have prepared operations manuals relating to food and beverage quality and service standards. New staff

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members participate in training under the close supervision of our management. Each general manager reports up through an area director, who manages from four to nine restaurants, depending on the region. Our area directors have all been successful general managers, either for Famous Dave’s or for other casual dining concepts. Our area directors are responsible for ensuring that operational standards are consistently applied in our restaurants and for the communication of company focus and priorities. In addition to the training that the general managers are required to complete, as noted above, our area directors receive additional management training through area director workshops that focus specifically on managing multiple locations, planning and time management.

     Our compliance specialists visited every restaurant in the system four times in 2004 and are closely aligned with the training department. They complete a comprehensive audit form called our Restaurant Operating Review (“ROR”). We use compliance specialists to ensure operational integrity in all areas of the restaurant, such as sanitation, cleanliness, food, beverage, smallwares, training, administration, security, service, repair and maintenance, and are trained to audit each restaurant using our standard operating procedures. Most of the visits are unannounced, but we also send our compliance specialists into markets and restaurants that need help in elevating their ROR scores. We follow up on all RORs to ensure lasting compliance to our “famous” standards.

     We strive to instill enthusiasm and dedication in our employees and regularly solicit employee suggestions concerning our operations and endeavors in order to be responsive to employees’ concerns. In addition, we have numerous programs designed to recognize and reward employees for superior performance. Staffing levels at each restaurant vary according to the time of day and size of the restaurant. However, in general, each restaurant has approximately 40 to 60 employees.

     Take-out and Catering - Focus on Convenience - In addition to our lively and entertaining sit-down experience, we provide our guests with maximum convenience by offering expedient take-out service and catering. We believe that Famous Dave’s entrees and side dishes are viewed by guests as traditional American “picnic foods” that maintain their quality and travel particularly well, making them an attractive choice to replace a home-cooked meal, and the high quality, reasonable cost and avoidance of preparation time make take-out of our product particularly attractive. During fiscal 2004, approximately 30% of our restaurant sales were derived from catering and take-out, and we continue to seek ways to leverage these segments of our business. Our restaurants have been designed specifically to accommodate a significant level of take-out sales, including a separate take-out counter.

     The off-premise portion of our business continues to grow as more consumers and local business people become aware of the portability of our product. The demand for Famous Dave’s catering, which accounted for approximately 7% of our sales for fiscal 2004, continues to increase, as consumers learn just how distinctive, flavorful and easy an event can be when they let Famous Dave’s bring the food. We see catering as an opportunity for new consumers to sample our product who would not otherwise have had the opportunity to visit our restaurants. During the fourth quarter of 2004, we purchased 15 additional catering vehicles to ensure that each restaurant had a dedicated vehicle to fully support our catering initiative going forward.

     “TO-GO,” which accounted for approximately 23% of our restaurant sales for fiscal 2004, also continues to grow as an integral part of our overall business plan, and our new “smokehouse” format restaurants have a separate entrance for “TO-GO” customers’ convenience. This program enables Famous Dave’s to capture a greater portion of the growing convenience and flexibility of the “take-out” market. The Company’s efforts are featured in all company-owned and franchise-operated units and feature signage and merchandising tools both inside and outside the restaurants. From the time a guest drives into the parking lot to the time they leave the restaurant, they will be reminded of Famous Dave’s excellence in delivering the best barbeque “TO-GO”.

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     Customer Satisfaction - We believe that we achieve a significant level of repeat business by providing high-quality food and efficient friendly service, in an entertaining environment at moderate prices. We strive to maintain quality and consistency in each of our restaurants through the training and supervision of personnel and the establishment of, and adherence to, high standards of personnel performance, food preparation and facility maintenance. We have also built family-friendly strategies into each restaurant’s food, service and design by providing children’s menus, smaller-sized entrees at reduced prices and changing tables in restrooms. We diligently monitor the guest experience through the use of mystery shopper programs and an interactive voice response (IVR) system to ensure that our training and incentive investments are producing desired results. During 2004, we saw a steady improvement in guest satisfaction scores through these monitoring programs.

     Value Proposition and Guest frequency - We offer high quality food and a distinctive atmosphere at competitive prices to encourage frequent patronage. Lunch and dinner entrees range from $5 to $19 resulting in an average check of approximately $13.07 during fiscal 2004. Lunch checks averaged $11.00 during 2004 and dinner checks averaged $14.49 during 2004. We believe that constant and exciting new product introductions, offered for a limited period of time, will help drive new, as well as our infrequent and lapsed guests into our restaurants for additional meal occasions. In order to increase customer frequency during 2004, we increased our research and development efforts and have established a research and development pipeline designed to generate many product introductions annually.

Marketing and Promotion

     Famous Dave’s is on its way to becoming the category-defining brand in barbecue. Specializing in a unique and distinctive brand of grilled, smoked, and southern style food, our menu specialty helps to set the brand apart from the rest of the crowded field in casual dining. During fiscal 2005, we will continue to leverage the brand building position established earlier in the year. We expect to spend approximately 3.2% of restaurant sales on marketing and advertising, with 1% of restaurant sales dedicated to the development of advertising and promotional materials and programs designed to create brand awareness in the markets within which we operate. Early in 2004, we hired BBDO – Minneapolis as our first advertising agency of record to help carry the concept forward and create a distinctive positioning and consistent creative voice for the brand. In coordination with our marketing department, BBDO is responsible for the advertising, promotion, creative development, branding and media buying for Famous Dave’s. In addition to the traditional marketing and publicity methods embraced in the past, Famous Dave’s will begin to use more aggressive outreach marketing efforts as appropriate in 2005. This will include television and radio advertising in those markets where there is sufficient penetration of the brand to allow for media efficiencies.

     We are also creating awareness for the Famous Dave’s brand through partnerships that extend our barbeque sauces, seasonings and rubs in retail outlets across the United States. This retail distribution allows consumers to enrich their at-home barbecue experiences with Famous Dave’s bold and zesty flavors.

     Early in 2004, we established a system-wide public relations and marketing fund. All company-owned and franchise-operated restaurants with agreements signed after January 1, 2004, are required to contribute 1% of sales to this fund. We also use payments received from certain vendors in the form of rebates as additional funding.

     Advertising isn’t the only vehicle we use to build awareness of the Famous Dave’s brand. Once again in 2005, our “Rib Team” will be competing in scores of events and festivals nationwide. This team travels the country, participating in contests and festivals to introduce people to our brand of barbeque and build brand awareness in a segment largely defined by independents.

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Growth Strategy

     We believe that the barbecue segment of the casual dining niche of the restaurant industry offers strong growth opportunities, and we see no impediments to our growth on a geographical basis. Our geographical concentration currently consists of 63% Midwest, 23% South, 9% West and 5% Northeast. During fiscal 2005, we plan to open up to 2 Company-owned restaurants and 25 to 30 franchise-operated restaurants. The key elements of our long-term growth strategy include the following:

     Company-Owned Restaurant Expansion - We intend to build in our existing markets in high profile, heavy traffic retail locations in order to continue to build brand awareness. Our plan is focused on sustainable, controlled growth, primarily in markets where multiple restaurants can be opened, thereby expanding consumer awareness and creating opportunities for operating, distribution and marketing efficiencies. As previously mentioned, we have created a prototype design, called our “smokehouse” concept. We will be using this design with all future restaurants to streamline the development and expansion process. We intend to finance development through the use of cash on hand, cash flow generated from operations, and through availability on our recently acquired $10 million, 5-year revolving line of credit.

     Franchise-Operated Restaurant Expansion - As of January 2, 2005, we had 159 signed franchise area development commitments. We continue to expand our franchisee network throughout the United States. Generally, we attempt to find franchise candidates with prior franchise restaurant experience in the markets they will be granted. The area development agreements generally range from a minimum of 5 to a maximum of 15 restaurants and are scheduled to be developed within 5 to 7 years.

Purchasing

     We strive to obtain consistent quality items at competitive prices from reliable sources. In order to maximize operating efficiencies and to provide the freshest ingredients for our food products, each restaurant’s management team determines the daily quantities of food items needed and orders such quantities to be delivered to their restaurant. The products, produced by major manufacturers designated by us, are shipped directly to the restaurants through foodservice distributors.

     Contract pricing accounts for approximately 85% of all of our total purchases. Contracts for various items are negotiated throughout the year and typically fix prices for twelve months. Of our total purchases, pork is approximately 30%, poultry is approximately 11%, and beef, including hamburger and brisket, is approximately 8.5%. Given the unstable commodity markets in 2004, in addition to 2005 futures, our recent contract negotiations resulted in less favorable pricing than the previous year. Our pork contract renewal resulted in an 11% price increase over the prior year. In addition, the renewal of our poultry and brisket contracts, resulted in an 8% price increase for poultry and a 7% increase for brisket. Our brisket contract expires July 31, 2005, and we will watch the market closely for the 2005 contract pricing. We anticipate that food costs, as a percent of net restaurant sales, will remain relatively flat for fiscal 2005 over the prior year, as increases in contract pricing are expected to be offset by margin opportunities.

     We believe we have opportunities to partially offset the increases in commodity pricing through menu engineering such as through the use of our limited time offerings, which carry more margin than many of our core product offerings. Additionally, we believe we have the opportunity to leverage adult beverage sales, which are currently approximately 11% of dine-in sales, and we will continue to evaluate taking price increases at least annually.

     Our food manufacturers produce our products and our distributors warehouse and ship our products. Our primary broad line distributor accounts for approximately 85% of our total purchases. We believe that our relationships with our food manufacturers and distributors are excellent, and anticipate no interruption in the supply of product delivered by any of these companies. In case of a potential supply

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disruption, however, we believe we have identified alternative methods to ensure that there is no disruption of product flow. We could obtain competitive products and prices on short notice from a number of alternative suppliers. In an effort to protect us from product disruption, we have identified a secondary supplier for ribs and are pursuing secondary suppliers for other proprietary product offerings as needed.

Management Information Systems

     We believe that a strong information systems infrastructure is essential to our current operations and is critical towards enhancing our competitive position in our industry. We have invested significantly in building this infrastructure. We have developed restaurant-level management information systems that include a computerized point-of-sale (“POS”) system which facilitates the movement of customer orders between the customer areas and kitchen operations, processes credit card transactions, and provides management with revenue and other key operating and financial information. We also use a time management system which tracks the time worked by each employee, allowing management to more effectively manage labor costs through better scheduling of employee work hours. We utilize enterprise management software, which has provided us with centralized control over restaurant database items such as menu changes, tax structure and price changes. We developed reporting that allows us to track the average guest check daily, by restaurant, by server, and by day part. This reporting is utilized by the general managers to determine restaurant-level staffing needs in addition to supporting sales initiatives, intended to increase the average guest check.

     Our unit-level POS, time management and inventory management systems provide data for posting to our general ledger and to other accounting subsystems. Such reporting includes: (i) daily reports of revenue, (ii) daily labor reports, (iii) weekly reports of selected controllable unit expenses and (iv) detailed monthly reports of revenues and expenses. We continue to develop and implement new enhancements to our systems. During fiscal 2004, we focused on a number of new developments including gift card acceptance through the POS system, food cost and labor cost management and unit level labor efficiency. In 2005, we will focus on continuing to improve our network infrastructure, upgrading our restaurant POS systems, implementing a new budget and forecasting tool and implementing a back-of-the house restaurant solution.

Trademarks

     Our Company has received various trademarks and intends to vigorously defend these marks. There can be no assurance, however, that we will be granted trademark registration for any new applications or for any or all of the proposed uses in our applications. In the event we are granted registration for additional marks, there can be no assurance that we can protect such marks and designs against prior users in areas where we conduct operations. There is also no assurance that we will be able to prevent competitors from using the same or similar marks, concepts or appearance.

Franchise Program

     We have offered franchises of our concept since June 1995 and currently file our franchise circular in all 50 states. Our growth and success depends in part upon our ability to attract, contract with and retain qualified franchisees. It also depends upon the ability of those franchisees to successfully operate their restaurants with our standards of quality and promote and develop Famous Dave’s brand awareness.

     Although we have established criteria to evaluate prospective franchisees, and our franchise agreements include certain operating standards, each franchisee operates his/her restaurants independently. Various laws limit our ability to influence the day-to-day operation of our franchise

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restaurants. We cannot assure you that franchisees will be able to successfully operate Famous Dave’s restaurants in a manner consistent with our standards for operational excellence and food quality.

     At January 2, 2005, we had 30 franchise partners operating 66 Famous Dave’s franchise units. Signed area development agreements, representing commitments to build an additional 159 franchise restaurants, were in place as of January 2, 2005. There can be no assurance, however, that these franchisees will fulfill their commitments or fulfill them within the anticipated timeframe. We continue to pursue an aggressive franchise program for our restaurants and anticipate that 25 to 30 additional franchise restaurants will open during fiscal 2005.

     As of January 2, 2005, we had franchise-operated restaurants in the following locations:

     
    Number of Franchise-Operated
State   Restaurants
Alabama
  1
Arizona
  2
Georgia
  4
Illinois
  5
Indiana
  1
Iowa
  2
Kansas
  2
Kentucky
  3
Michigan
  5
Minnesota
  8
Montana
  1
Nebraska
  4
Nevada
  1
New Jersey
  5
North Dakota
  2
Ohio
  3
South Dakota
  1
Tennessee
  4
Utah
  4
Wisconsin
  8
 
 
Total
  66

     During 2005, we plan to open restaurants in approximately eight additional states including, but not limited to, California, Colorado, Massachusetts, New Hampshire, New York, Pennsylvania, Texas, and Washington.

     We assist franchisees in the site selection and the opening of a Famous Dave’s restaurant. During the pre-opening phase our support includes site evaluation, store build-out assistance, opening advertising and marketing materials and operations training provided by our franchise consultants.

     We make periodic inspections of our franchise stores to ensure that the franchisee is complying with the same quality of service, operational excellence and food specifications that is found at our company-owned restaurants. We generally provide company support as it relates to all aspects of the franchise operations including, store openings, operating performance, and human resource strategic planning.

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     Our franchise revenues are comprised of area development fees, initial franchise fees, and continuing royalty payments. Our area development fee consists of a non-refundable payment equal to $10,000 per unit upon the signing of the area development agreement. Since the fee is non-refundable to secure the territory, we recognize this fee upon receipt. Our initial franchise fee is typically $40,000 per restaurant, of which $5,000 is recognized immediately when a franchise agreement is signed, reflecting the commission earned and expenses incurred, as related to the sale of the franchise. When the franchise agreement is signed, since our primary obligation relates to site selection, the remaining $35,000 is carried in deferred franchise fees and is recognized as revenue when the lease has been signed or the purchase closing document has been executed, and at which time we have substantially performed all of our services. Franchisees are also required to pay us a continuing royalty equal to a percentage of their weekly net sales, which has historically varied from 4% to 5%. Currently, new franchises pay us a continuing royalty of 5% of their net sales.

     The franchisee’s investment depends primarily upon restaurant size. This investment includes the area development fee, initial franchise fee, real estate and leasehold improvements, fixtures and equipment, POS systems, business licenses, deposits, initial food inventory, smallwares, and working capital. Beginning in 2004, all new franchisees were required to contribute 1% of sales for new restaurants to a national public relations and marketing fund dedicated to building system-wide brand awareness.

Seasonality

     Our restaurants typically generate higher revenue in the second and third quarters of our fiscal year as a result of seasonal traffic increases experienced during the summer months, and lower revenue in the first and fourth quarters of our fiscal year, due to possible adverse weather which can disrupt customer and employee transportation to our restaurants.

Government Regulation

     Our Company is subject to extensive state and local government regulation by various governmental agencies, including state and local licensing, zoning, land use, construction and environmental regulations and various regulations relating to the sale of food and alcoholic beverages, sanitation, disposal of refuse and waste products, public health, safety and fire standards. Our restaurants are subject to periodic inspections by governmental agencies to ensure conformity with such regulations. Any difficulty or failure to obtain required licensing or other regulatory approvals could delay or prevent the opening of a new restaurant, and the suspension of, or inability to renew a license could interrupt operations at an existing restaurant, any of which would adversely affect our operations. Restaurant operating costs are also affected by other government actions that are beyond our control, including increases in the minimum hourly wage requirements, workers compensation insurance rates, health care insurance costs, property and casualty insurance, and unemployment and other taxes. We are also subject to “dram shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

     As a franchisor, we are subject to federal regulation and certain state laws that govern the offer and sale of franchises. Many state franchise laws impose substantive requirements on franchise agreements, including limitations on non-competition provisions and the termination or non-renewal of a franchise. Bills have been introduced in Congress from time to time that would provide for federal regulation of substantive aspects of the franchisor-franchisee relationship. As proposed, such legislation would limit, among other things, the duration and scope of non-competition provisions, the ability of a franchisor to terminate or refuse to renew a franchise, and the ability of a franchisor to designate sources of supply.

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     The Federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. We could be required to incur costs to modify our restaurants in order to provide service to, or make reasonable accommodations for, disabled persons. Our restaurants are currently designed to be accessible to the disabled, and we believe we are in substantial compliance with all current applicable regulations relating to this Act.

Employees

     As of January 2, 2005, we employed approximately 2,100 employees, of which approximately 225 were full-time. None of our employees are covered by a collective bargaining agreement. We consider our relationships with our employees to be satisfactory.

ITEM 1A.  CAUTIONARY STATEMENT REGARDING FUTURE RESULTS, FORWARD-LOOKING INFORMATION AND CERTAIN IMPORTANT FACTORS

     Famous Dave’s makes written and oral statements from time to time, including statements contained in this Annual Report on Form 10-K regarding its business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends and other matters that are forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Statements containing the words or phrases “will likely result”, “anticipates”, “are expected to”, “will continue”, “is anticipated”, “estimates”, “projects”, “believes”, “expects”, “intends”, “target”, “goal”, “plans”, “objective”, “should” or similar expressions identify forward-looking statements which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by our officers or other representatives to analysts, shareholders, investors, news organizations, and others, and discussions with our management and other Company representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

     Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statements made by us or on our behalf speak only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. We do not undertake any obligation to update or keep current either (i) any forward-looking statements to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement which may be made by us or on our behalf.

     In addition to other matters identified or described by us from time to time in filings with the SEC, there are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement that may be made by us or on our behalf.

     Our Future Revenue and Profits Are Dependent on Our Ability to Successfully Execute Our Plan

     Our Company’s future revenue and profits will depend upon various factors, including continued and additional market acceptance of the Famous Dave’s concept, the quality of our restaurant operations, our ability to grow our brand, our ability to successfully expand into new and existing markets, our ability to successfully execute our franchise program, our ability to raise additional financing as needed and

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general economic conditions. It is our plan to resume opening company-owned restaurants in 2005. There is no guarantee that any of our company-owned or franchise-operated restaurants will open when planned, or at all, due to the risks associated with the development of new units, such as governmental approvals, the availability of sites, and the availability of capital, many of which are beyond our control. There can be no assurance that we will successfully implement our growth plan for our company-owned and franchise-operated restaurants. In addition, we also face all of the risks, expenses and difficulties frequently encountered in the development of an expanding business.

     In the Recent Past We Have Experienced Losses and May Not be Profitable

     We incurred a net loss of approximately $2.9 million for fiscal 2003, or $0.25 per diluted share, and a net loss of $928,000, or $0.08 per diluted share for fiscal 2002. Our 2003 net loss reflects pre-tax charges of approximately $4.2 million, or $0.22 per diluted share, related to impairment and restructuring charges on five restaurant locations, two of which were subsequently sold and two of which were subsequently closed. In addition, fiscal 2003 results include pre-tax charges of approximately $2.2 million, or $0.11 per diluted share, which reflects losses and divestiture costs related to the Isaac Hayes Blues Clubs. The net loss for fiscal 2002 included losses of approximately $6.0 million, or $0.23 per diluted share, related to the Isaac Hayes clubs. Famous Dave’s has no further obligations relating to the Isaac Hayes clubs.

     Although we reported net income of approximately $3.5 million for fiscal 2004, or $0.29 per diluted share, we cannot assure you that we will generate sufficient revenue or margins, or control operating expenses, to achieve or sustain profitability in future years. In addition, we cannot assure you that we will not take future impairment or restructuring charges on our restaurants.

     Competition May Reduce Our Revenue and Operating Income

     Competition in the restaurant industry is intense. Increased competition by existing or future competitors may reduce our sales. Our restaurants compete with moderately priced casual dining restaurants primarily on the basis of quality of food and service, atmosphere, location and value. In addition to existing themed and barbecue restaurants, we expect to face competition from steakhouses and other restaurants featuring protein-rich foods. We also compete with other restaurants and retail establishments for quality sites. Competition in the restaurant industry is affected by changes in consumer taste, economic and real estate conditions, demographic trends, traffic patterns, the cost and availability of qualified labor, product availability and local competitive factors.

     Many of our competitors have substantially greater financial, marketing and other resources than we do. Regional and national restaurant companies continue to expand their operations into our current and anticipated market areas. We believe our ability to compete effectively depends on our ongoing ability to promote our brand and offer high quality, food and hospitality in a distinctive and comfortable environment.

     Our Failure to Execute Our Franchise Program May Negatively Impact Our Revenue

     Our growth and success depends in part upon our ability to attract, contract with and retain quality franchisees. It also depends upon the ability of those franchisees to successfully operate their restaurants to our standards and promote the Famous Dave’s brand. Although we have established criteria to evaluate prospective franchisees, and our franchise agreements include certain operating standards, each franchisee operates his/her restaurant independently. Various laws limit our ability to influence the day-to-day operation of our franchise restaurants. We cannot assure you that our franchisees will be able to successfully operate Famous Dave’s restaurants in a manner consistent with our concepts and standards,

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which could reduce their gross sales and correspondingly, our franchise royalties, and could adversely affect our operating income and our ability to leverage the Famous Dave’s brand.

ITEM 2. PROPERTIES

     The development cost of our restaurants varies depending primarily on the size and style of the restaurant, whether the property is purchased or leased, and whether it is a conversion of an existing building or a newly constructed unit. Since fiscal 2000, most of our restaurants have been converted from existing restaurant properties. Average approximate size and costs of a converted leased property and a converted purchased property have been approximately 5,900 and 5,100 square feet and $1.1 million and $2.1 million, respectively. We opened no company-owned restaurants in 2004. Two of the restaurants opened in 2003 were ground-up construction and one restaurant was a conversion of a previous restaurant concept. Such development costs included land, building construction, fixtures, furniture and equipment, and pre-opening costs. We have developed a prototype, which is the first-ever standard format for us. The prototype is approximately 6,300 square feet in size and will represent a consistent brand image across all markets while still allowing for new construction and the renovations of pre-existing restaurants.

     Famous Dave’s leased restaurant facilities are occupied under agreements with terms ranging from 10 to 36 years, including renewal options. Such leases generally provide for fixed rental payments plus operating expenses associated with the properties. Our executive offices are currently located in approximately 18,000 square feet in Eden Prairie, Minnesota, under a lease expiring in July 2005.

     On December 30, 2004 we signed a lease agreement with Liberty Property Limited Partnership for a new corporate office in Minnetonka, Minnesota. The lease commences in August 2005, is for approximately 26,000 rentable square feet, and is for a term of 97 months, with two 5 year renewal options. The minimum annual rent commitment over the lease term is approximately $4.6 million. We believe that our current restaurant, and new corporate office leased space, will be suitable for our needs and adequate for operations for the foreseeable future.

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     The following table sets forth certain information about our existing company-owned restaurant locations, sorted by opening date, as of January 2, 2005:

                         
        Square   Interior   Owned      
    Location   Footage   Seats   or Leased   Date Opened  
1
  Roseville, MN   4,800   105   Leased   June 1996
2
  Calhoun Square (Minneapolis, MN)   10,500      380   Leased   September 1996
3
  Maple Grove, MN   5,200   125   Owned (1)   April 1997
4
  Highland Park (St. Paul, MN)   5,200   125   Leased   June 1997
5
  Stillwater, MN   5,200   130   Owned (1)   July 1997
6
  Apple Valley, MN   3,800     90   Owned (1)   July 1997
7
  Forest Lake, MN   4,500   100   Leased   October 1997
8
  Minnetonka, MN   5,500   140   Owned (2)   December 1997
9
  Plymouth, MN   2,100     20   Leased   December 1997
10
  West St. Paul, MN   6,800   140   Leased   January 1998
11
  West Des Moines, IA   5,500   150   Leased   April 1998
12
  Des Moines, IA   5,800   150   Leased   April 1998
13
  Naperville, IL   5,500   170   Leased   April 1998
14
  Cedar Falls, IA   5,400   130   Leased   September 1998
15
  Bloomington, MN   5,400   140   Leased   October 1998
16
  Woodbury, MN   5,900   180   Owned (2)   October 1998
17
  Lincoln, NE   6,300   190   Owned (2)   December 1999
18
  Columbia, MD   7,200   270   Leased   January 2000
19
  Annapolis, MD   7,000   210   Leased   January 2000
20
  Frederick, MD   5,600   180   Leased   January 2000
21
  Woodbridge, VA   5,600   190   Leased   January 2000
22
  Vernon Hills, IL   6,600   230   Leased   February 2000
23
  Addison, IL   4,600   140   Owned (2)   March 2000
24
  Lombard, IL   7,200   250   Leased   July 2000
25
  North Riverside, IL   5,000   160   Leased   August 2000
26
  Sterling, VA   5,200   200   Leased   December 2000
27
  Carpentersville, IL   6,000   227   Leased   February 2001
28
  Streamwood, IL   7,200   260   Leased   March 2001
29
  Oakton, VA   4,300   150   Leased   May 2001
30
  Laurel, MD   5,200   170   Leased   August 2001
31
  Palatine, IL   7,200   260   Leased   August 2001
32
  Richmond I (Richmond, VA)   5,200   165   Owned (2)   December 2001
33
  Gaithersburg, MD   4,800   170   Leased   May 2002
34
  Richmond II (Richmond, VA)   5,100   165   Owned (2)   June 2002
35
  Orland Park, IL   5,000   165   Leased   June 2002
36
  Tulsa, OK   4,900   180   Owned (2)   September 2002
37
  Virginia Commons, VA   5,300   190   Owned (2)   June 2003
38
  Rogers, AR   5,300   190   Owned   June 2003


All seat count and square footage amounts are approximate
 
(1)   Restaurant is collateral in a sale-leaseback financing
 
(2)   Restaurant is subject to a mortgage

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ITEM 3. LEGAL PROCEEDINGS

     During the fourth quarter of 2004, a subsidiary of the Company was named as a defendant in a lawsuit filed in the Court of Common Pleas, Warren County, Ohio. The lawsuit related to, among other things, various alleged defaults by a franchisee of the Company under its Middletown, Ohio lease and defaults by the Company’s subsidiary under a guaranty agreement pursuant to which the subsidiary guaranteed the franchisee’s performance under the lease.

     On January 25, 2005, we entered into a settlement agreement in which the plaintiffs released all claims asserted against us and our subsidiaries in exchange for a payment of $325,000. In addition, the plaintiffs released and terminated the subject guaranty and all rights thereunder. We intend to seek reimbursement for all amounts paid through the pursuit of available remedies.

     From time-to-time, we are involved in various legal actions arising in the ordinary course of business. In the opinion of our management, the ultimate dispositions of these matters will not have a material adverse effect on our consolidated financial position and results of operations. Currently, there are no significant legal matters pending.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted to a vote of our security holders during the fourth quarter of the fiscal year ended January 2, 2005.

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     Market Information

     Our Company’s common stock has traded on the NASDAQ National Market SM under the symbol DAVE since July 24, 1997. Our common stock traded on the NASDAQ Small Cap Market SM prior to July 24, 1997 and since November 1996 under the same symbol.

     The following table summarizes the high and low closing sale prices per share of our common stock for the periods indicated, as reported on the NASDAQ National Market SM:

                                 
    2004     2003  
Period   High     Low     High     Low  
1st Quarter
    $ 8.10       $ 4.51       $ 4.94       $ 2.88  
2nd Quarter
  $ 8.22     $ 6.50     $ 4.38     $ 3.60  
3rd Quarter
  $ 7.79     $ 6.67     $ 6.37     $ 4.30  
4th Quarter
  $ 13.28     $ 6.90     $ 5.63     $ 4.75  

     Holders

     As of March 18, 2005, we had approximately 425 shareholders of record and an estimated 5,800 beneficial shareholders.

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Dividends

     Our Board of Directors has not declared any dividends on our common stock since our inception, and does not intend to pay out any cash dividends on our common stock in the foreseeable future. We presently intend to retain all earnings, if any, to provide for our growth. The payment of cash dividends in the future, if any, will be at the discretion of the Board of Directors and will depend upon such factors as earnings levels, capital requirements, loan agreement restrictions, our financial condition and other factors deemed relevant by our Board of Directors.

Purchases of Equity Securities

     On November 2, 2004, our Board of Directors authorized a program to repurchase up to an additional 1.0 million shares of our common stock. The shares may be repurchased from time-to-time in both the open market or through privately negotiated transactions and are intended to be funded from the Company’s available working capital. As of January 2, 2005, we had repurchased 45,100 shares at an average market price of $9.70, excluding commissions, under this plan.

     Except as otherwise noted below, all share repurchases were made pursuant to open-market transactions under the publicly announced repurchase program approved by our Board of Directors. The following table includes information about our share repurchases for the fourth quarter of our fiscal year ended January 2, 2005.

                                             
 
                            Total Number of       Maximum Number    
        Total                 Shares (or Units)       (or Approximate Dollar    
        Number of       Average       Purchased as Part       Value) of Shares    
        Shares       Price Paid       of Publicly       (or Units) that May Yet    
        (or Units)       per Share       Announced Plans       be Purchased Under the    
  Period     Purchased       (or Unit)       or Programs       Plans or Programs(1)    
 
Month #10
(September 27, 2004 – October 24, 2004)
            $                    
 
Month #11
(October 25, 2004 – November 21, 2004)
      15,600       $ 9.62         15,600         984,400    
 
Month #12
(November 22, 2004 – January 2, 2005)
      29,500       $ 9.75         45,100         954,900    
 


(1)   On November 2, 2004, the Company announced the approval of a repurchase program under which we may repurchase up to 1,000,000 shares of our common stock.

ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data presented below should be read in conjunction with the consolidated financial statements and notes included elsewhere in this Form 10-K, and in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

     The selected financial data as of and for the fiscal years ended January 2, 2005 (fiscal year 2004), December 28, 2003 (fiscal year 2003) and December 29, 2002 (fiscal year 2002) have been derived from our consolidated financial statements as audited by Grant Thornton LLP, independent registered certified public accounting firm. The selected financial data for the fiscal years ended December 30, 2001 (fiscal year 2001), and December 31, 2000 (fiscal year 2000) have been derived from our consolidated financial statements as audited by Virchow, Krause & Company, LLP, independent registered public accounting firm.

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FINANCIAL HIGHLIGHTS

                                         
FISCAL YEAR   2004 (1)     2003     2002     2001     2000  
($’s in 000’s, except per share data, and average weekly sales )                                        
 
STATEMENT OF OPERATIONS DATA
                                       
Revenue
  $ 99,325     $ 97,740     $ 90,820     $ 87,673     $ 70,160  
Asset impairment and restructuring charges (2)
  $     $ (4,238 )   $     $     $  
Income (loss) from operations
  $ 7,365     $ (193 )   $ 4,470     $ 6,209     $ 2,581  
Equity in loss of unconsolidated affiliate (3)
  $     $ (2,155 )   $ (5,994 )   $ (1,029 )   $  
Income tax (provision) benefit
  $ (1,900 )   $ 1,778     $ 1,211     $ 4,010     $  
Net income (loss)
  $ 3,498     $ (2,898 )   $ (928 )   $ 8,118     $ 2,112  
Basic net income (loss) per common share
  $ 0.29     $ (0.25 )   $ (0.08 )   $ 0.81     $ 0.23  
Diluted net income (loss) per common share
  $ 0.29     $ (0.25 )   $ (0.08 )   $ 0.75     $ 0.22  
 
BALANCE SHEET DATA (at year end)
                                       
Cash and cash equivalents
  $ 11,170     $ 9,964     $ 9,473     $ 7,398     $ 1,895  
Total assets
  $ 71,913     $ 73,767     $ 74,817     $ 70,440     $ 52,963  
Working capital
  $ 10,757     $ 9,041     $ 5,769     $ 4,706     $ (3,416 )
Long-term debt less current maturities (4)
  $ 16,453     $ 16,954     $ 17,354     $ 14,579     $ 13,147  
Total shareholders’ equity
  $ 43,343     $ 46,872     $ 47,292     $ 46,689     $ 30,061  
 
OTHER DATA
                                       
Number of restaurants open at year end:
                                       
Company-owned restaurants
    38       38       40       37       33  
Franchise-operated restaurants
    66       54       33       19       9  
 
                             
Total restaurants
    104       92       73       56       42  
 
Comparable store sales increase (decrease) (5)
    1.1 %(6)     (3.0 )%     (0.3 )%     2.9 %     5.3 %
Average weekly sales:
                                       
Company-owned restaurants
  $ 44,164     $ 42,491     $ 45,783     $ 46,429     $ 44,698  
Franchise-operated restaurants
  $ 51,538     $ 47,400     $ 46,642     $ 45,190     $   (7)
 


(1)   Fiscal 2004 consisted of 53 weeks. Fiscal 2003, 2002, 2001, and 2000 all consisted of 52 weeks.
 
(2)   Fiscal 2003 charges reflect impairment and restructuring costs associated with five stores: two of which were subsequently sold, two of which were subsequently closed, and one that was fully impaired, but still operating.
 
(3)   Represents our 40% unconsolidated interest in FUMUME, LLC. Fiscal 2003 expenses represent operating losses and transaction costs related to our divestiture. We have no further obligation regarding this joint venture.
 
(4)   Long-term debt consists of total debt, including capital lease obligations and financing leases, less current maturities.
 
(5)   Our comparable store sales base includes company-owned restaurants that are open year round and have been open more than 18 months.
 
(6)   For purposes of computing comparable store sales, this computation assumes fiscal 2004 was a 52-week year.
 
(7)   This information was not available for this fiscal year.

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Certain statements contained in this Annual Report on Form 10-K include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements in this Annual Report on Form 10-K are based on information currently available to us as of the date of this Annual Report on Form 10-K, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors may include, among others, those factors listed in Item 1A of this Annual Report on Form 10-K, and elsewhere in this Annual Report on Form 10-K, and our other filings with the Securities and Exchange Commission. The following discussion should be read in conjunction with “Selected Financial Data” above (Item 6 of this Annual Report on Form 10-K) and our financial statements and related footnotes appearing elsewhere in this Annual Report on Form 10-K.

Overview

     Famous Dave’s of America, Inc. was incorporated as a Minnesota corporation in March 1994 and opened its first restaurant in Minneapolis in June 1995. As of January 2, 2005, there were 104 Famous Dave’s restaurants operating in 24 states, including 38 company-owned restaurants and 66 franchise-operated restaurants. An additional 159 franchise restaurants were in various stages of development as of January 2, 2005.

     Fiscal Year - Our fiscal year ends on the Sunday closest to December 31st. Our fiscal year is generally 52 weeks; however it periodically consists of 53 weeks. Fiscal 2004, which ended on January 2, 2005, consisted of 53 weeks. Our fiscal years ended December 28, 2003 (fiscal year 2003) and December 29, 2002 (fiscal year 2002) both consisted of 52 weeks. Fiscal 2005, which ends on January 1, 2006, will consist of 52 weeks.

     Basis of Presentation - The financial results presented and discussed herein reflect our results and the results of our wholly owned and majority owned consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Until February 26, 2003, we were a 40% participant in a joint venture to operate themed restaurant concepts based on the entertainment artist Isaac Hayes. On February 26, 2003, we disposed of our 40% interest, and as a result, we are no longer participating in any revenue or expenses of the joint venture and we do not have any further obligations with regard to the joint venture. Our financial results for fiscal 2003 reflect our equity in the losses of this unconsolidated affiliate up until February 26, 2003, in addition to the transaction costs related to the divestiture. Our financial results for fiscal 2002 reflect our equity in the losses of this unconsolidated affiliate.

Application of Critical Accounting Policies and Estimates - The following discussion and analysis of the Company’s financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities and expenses, and related disclosures. On an on-going basis, management evaluates its estimates and judgments. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. Management bases its estimates and judgments on historical experience, observance of trends in the industry, information provided by customers and other outside sources and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities

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that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements. Our Company’s significant accounting policies are described in Note One to the consolidated financial statements included in our annual report for the year ended January 2, 2005.

     We have discussed the development and selection of the following critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our disclosures relating to such estimates in this Management’s Discussion and Analysis.

     Recognition of Franchise-Related Revenue - Initial franchise revenue is recognized when we have performed substantially all of our obligations as franchisor. Franchise royalties are recognized when earned as promulgated by Statement of Financial Accounting Standards (SFAS) No. 45, “Accounting for Franchise Fee Revenue”. Franchise-related revenue consists of royalty revenue and franchise fees, which include initial franchise fees and area development fees.

     Our franchise revenues are comprised of area development fees, initial franchise fees, and continuing royalty payments. Our area development fee consists of a non-refundable payment equal to $10,000 per unit upon the signing of the area development agreement. Since the fee is non-refundable to secure the territory, we recognize this fee upon receipt. Our initial franchise fee is typically $40,000 per restaurant, of which $5,000 is recognized immediately when a franchise agreement is signed, reflecting the commission earned and expenses incurred, as related to the sale of the franchise. When the franchise agreement is signed, since our primary obligation relates to site selection, the remaining $35,000 is carried in deferred franchise fees and is recognized as revenue when the lease has been signed or the purchasing closing document has been obtained and, at which time we have substantially performed all of our services. Franchisees are also required to pay us a continuing royalty equal to a percentage of their weekly net sales, which has historically varied from 4% to 5%. Currently, new franchises pay us a continuing royalty of 5% of their net sales.

     Franchise-related revenue for fiscal 2004 was approximately $9.3 million, a 63.5% increase compared to franchise-related revenue of approximately $5.7 million for the same period in 2003, primarily reflecting increased royalties. Royalties, which are based on a percent of franchise-operated restaurant net sales, increased 61.0%, reflecting the annualization of franchise restaurants that opened in fiscal 2003 in addition to the franchise-operated restaurants that opened during fiscal 2004. During 2004, 13 franchised-operated restaurants opened, and 1 closed. There were 66 franchise-operated restaurants open at January 2, 2005, compared to 54 at December 28, 2003. Additionally, during fiscal 2004, we realized higher royalties from three company-owned restaurants sold to a franchise partner in the fourth quarter of fiscal 2003. An additional 25-30 franchise restaurants are anticipated to open throughout fiscal 2005.

     Asset Impairment and Restructuring Charges - In accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”, we evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of the carrying amount of the restaurant site to its fair value, as determined by the undiscounted future cash flows expected to be generated on a restaurant-by-restaurant basis. Any impairment recognized is the amount by which the carrying amount of the restaurant site exceeds its fair value using a discounted cash flow method. Restaurant sites that are operating but have been previously impaired, are reported at the lower of their carrying amount or fair value less estimated costs to sell. Our January 2, 2005 consolidated balance sheet reflects approximately $1.3 million of assets held for sale,

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which includes the land and building for our Mesquite, TX location that was closed in December 2003. We had several offers for this location during 2004, and believe the land and building are properly valued. During fiscal 2004, there were no impairment or restructuring charges recorded. In fiscal 2003, we recorded impairment and restructuring charges of approximately $4.2 million related to five units, two of which were subsequently closed, two of which were subsequently sold to franchisees, and one that was fully impaired, but still operating.

     Deferred Tax Asset - Deferred taxes recognize the impact of temporary differences between the amounts of assets and liabilities recorded for financial statement purposes and such amounts measured in accordance with tax laws. Realization of net operating loss carry forwards and other deferred tax temporary differences are contingent on future taxable earnings. During fiscal 2004, our deferred tax asset was reviewed for expected utilization using a “more likely than not” approach as required by SFAS No. 109, “Accounting for Income Taxes”, by assessing the available positive and negative evidence surrounding its recoverability. We believe that the realization of the deferred tax asset is more likely than not based on the fact that the Company generated taxable income in fiscal 2004 and based on the expectation that our Company will generate the necessary taxable income in future years.

     Lease Accounting - In accordance with SFAS No. 13 “Accounting for Leases”, we recognize lease expense for our operating leases over the entire lease term including lease renewal options and build-out periods where the renewal is certain and the build-out period takes place prior to the restaurant opening or lease commencement date. We account for construction allowances by recording a receivable when its collectibility is considered certain, depreciating the leasehold improvements over the lesser of their useful lives or the full term of the lease, including renewal options and build-out periods, amortizing the construction allowance as a credit to rent expense over the full term of the lease, including renewal options and build-out periods, and relieving the receivable once the cash is obtained from the landlord for the construction allowance.

Results of Operations

     Revenue - Our revenue consists of restaurant sales, franchise-related revenue, and licensing and other revenue. Our franchise-related revenue is comprised of area development fees, initial franchise fees, and continuing royalty payments. Our area development fee consists of a non-refundable payment equal to $10,000 per unit upon the signing of the area development agreement. Since the fee to secure the territory is non-refundable, we recognize this fee upon receipt. Our initial franchise fee is typically $40,000 per restaurant, of which $5,000 is recognized immediately when a franchise agreement is signed, reflecting the commission earned and the expenses incurred, as related to the sale. The remaining $35,000 is recognized upon either the signing of a lease or upon receipt of a builder’s permit, and at which time we have substantially performed all of our services. Franchise royalties are equal to a percentage of weekly net franchise-operated restaurant sales, currently at 4% to 5%. Licensing revenue includes royalties from a retail line of business, including sauces and seasonings. Other revenue includes opening assistance and training we provide to our franchise partners. Costs and expenses associated with the franchise program are contained in general and administrative expense. Comparable sales represent net sales for restaurants open year-round for 18 months or more.

     Costs and Expenses - Restaurant costs and expenses include food and beverage costs, operating payroll and employee benefits, occupancy costs, repair and maintenance costs, supplies, advertising and promotion, and restaurant depreciation and amortization. Certain of these costs and expenses are variable and will increase or decrease with sales volume. The primary fixed costs are corporate and restaurant management salaries and occupancy costs. Our experience is that when a new restaurant opens, it incurs higher than normal levels of labor and food costs until operations stabilize, usually during the first three months of operation. As restaurant management and staff gain experience following a restaurant’s

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opening, labor scheduling, food cost management and operating expense control are improved to levels similar to those at our more established restaurants.

     General and Administrative Expenses General and administrative expenses include all corporate and administrative functions that provide an infrastructure to support existing operations and support future growth. Salaries, employee benefits, legal fees, consulting fees, travel, rent and general insurance are major items in this category. We also provide franchise services, the revenue of which are included in other revenue and the expenses of which are included in general and administrative costs.

     The following table presents items in our Consolidated Statements of Operations as a percentage of total revenue or restaurant sales, as indicated, for the following fiscal years (1):

                         
       
    2004     2003     2002  
Restaurant sales, net
    89.8 %     93.6 %     95.1 %
Other revenue
    10.2       6.4       4.9  
 
                 
Total revenue
    100.0       100.0       100.0  
Restaurant costs and expenses:
                       
Food and beverage costs (2)
    31.4       30.6       31.7  
Labor and benefits (2)
    29.7       30.1       29.2  
Operating expenses (2)
    24.7       25.6       23.2  
Depreciation and amortization (restaurant level) (2)
    4.7       5.1       5.0  
Asset impairment and restructuring charges (2)
          4.6        
Pre-opening expenses (2)
          0.6       1.2  
 
                 
Total costs and expenses (2)
    90.5       96.6       90.3  
Income from restaurant operations (2)
    9.5       3.4       9.7  
General and administrative (3)
    11.0       9.6       8.9  
Depreciation and amortization (corporate) (3)
    0.4       0.2       0.3  
 
                 
Income (loss) from operations (3)
    7.4 %     (0.2 )%     4.9 %
 
                 


(1)   Data regarding our restaurant operations as presented in the table above, includes sales, costs and expenses associated with our Rib Team, which netted to a loss of $147,000 and $16,000 respectively, in fiscal 2004 and 2003. We did not own the Rib Team during fiscal 2002. Our Rib Team travels the country introducing people to our brand of barbeque and builds brand awareness.
 
(2)   As a percentage of restaurant sales, net.
 
(3)   As a percentage of total revenue.

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Fiscal Year 2004 Compared to Fiscal Year 2003

     Total Revenue - Total revenue of approximately $99.3 million for fiscal 2004 increased approximately $1.6 million or 1.6% over revenue of approximately $97.7 million for fiscal 2003. Fiscal 2004 consisted of 53 weeks as compared to 52 weeks for fiscal 2003. Revenue for the 53rd week in fiscal 2004 was approximately $1.9 million, including restaurant sales and franchise royalties.

     Restaurant Sales - Restaurant sales decreased by approximately $2.3 million or 2.5% to approximately $89.2 million for fiscal year 2004 from approximately $91.5 million for fiscal year 2003. The decrease in sales was due primarily to the sale of three Georgia restaurants to a franchisee and the closure of two Texas restaurants that generated approximately $6.6 million in restaurant sales in fiscal 2003. Without these restaurants in the 2003 base, sales would have been 7.4% higher in 2004 compared to 2003. The decrease in sales for 2004, related to these five restaurants, was partially offset by approximately $1.7 million in sales attributed to the 53rd week.

     Franchise-Related Revenue – Franchise-related revenue consists of royalty revenue and franchise fees, which include initial franchise fees and area development fees. Franchise-related revenue for fiscal 2004 was approximately $9.3 million, a 63.5% increase when compared to franchise-related revenue of approximately $5.7 million for the same period in 2003, primarily reflecting increased royalties. Royalties, which are based on a percent of franchise-operated restaurants net sales, increased 61.0% reflecting the annualization of franchise restaurants that opened in fiscal 2003 in addition to the net 12 new franchise restaurants during fiscal 2004. There were 66 franchise-operated restaurants open at January 2, 2005, compared to 54 at December 28, 2003.

     Licensing and Other Revenue - Licensing revenue includes royalties from a retail line of business, including sauces, and seasonings. Other revenue includes opening assistance and training we provide to our franchise partners. For fiscal year 2004, the licensing royalty income was approximately $248,000 compared to approximately $209,000 for fiscal year 2003. During fiscal 2005, we expect to see licensing revenue remain relatively flat. The amount of other revenue is expected to grow based on the level of opening assistance we may be required to provide during the 25-30 franchise openings planned for 2005.

     Same Store Net Sales - It is our policy to include in our same store net sales base, restaurants that are open year round and have been open for at least 18 months. At the end of fiscal 2004, there were 36 restaurants included in this base. Same store net sales for fiscal 2004 increased approximately 1.1%, compared to fiscal 2003’s decrease of approximately 3.0% and were calculated assuming fiscal 2004 was a 52-week year. We believe that the increase in same store net sales reflects the combination of our advertising initiatives, the success of our limited time offerings, a price increase of approximately 2% and a focus on operational excellence and execution in our restaurant.

     Average Weekly Net Sales - Weighted average weekly net sales for our company-owned and franchise-operated restaurants during fiscal 2004 were $44,164 and $51,538 respectively. During fiscal 2003, weighted average weekly net sales for our company-owned and franchise-operated restaurants were $42,491 and $47,400, respectively. The favorable trend in average weekly sales for both company-owned and franchise-operated restaurants reflects the success of our total brand building effort.

     Food and Beverage Costs - Food and beverage costs for fiscal 2004 were approximately $28.0 million or 31.4% of net restaurant sales compared to approximately $28.0 million or 30.6% of net restaurant sales for fiscal 2003. The increase is primarily the result of higher commodity costs, partially offset by the menu price increase implemented at the beginning of the third quarter. Approximately 85% of our purchases are on contract and overall, contracts negotiated for 2005 have resulted in less favorable pricing. Our pork contract renewal resulted in an 11% contracted price increase, our poultry contract,

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resulted in an 8% price increase and our brisket contract resulted in a 7% increase. Our brisket contract renews in July 2005 and we are watching the beef market closely. We anticipate that food costs, as a percent of net restaurant sales, will remain relatively flat as increases due to contract pricing increases are offset with margin opportunities. We believe that we have an opportunity to mitigate the impact that the recently renewed food contracts have on our margin through menu engineering such as with the use of our limited time offerings, which typically have higher margin, and leveraging adult beverage sales, which are currently at approximately 11% of our dine-in sales. Additionally, we will evaluate taking a price increase as appropriate.

     Labor and Benefits - Labor and benefits at the restaurant level were approximately $26.5 million or 29.7% of net restaurant sales in fiscal 2004 compared to approximately $27.6 million or 30.1% of net restaurant sales in fiscal 2003. The decrease in labor and benefits reflects favorable workers compensation claims experience and labor productivity, partially off-set by a higher level of bonus payout at the restaurant level. Full-service restaurants that operate in states without a “tip credit” (such as Minnesota) experience a higher wage rate for dining room labor than do restaurants located in states where a tip credit is available to reduce wages paid to food servers. The migration toward full-service dining in the majority of our restaurants is part of our strategy for increasing unit-level revenue, but may result in higher labor costs. During fiscal 2005, we are expecting labor and benefits as a percentage of net restaurant sales to remain relatively flat to fiscal 2004.

     Operating Expenses - Operating expenses for fiscal 2004 were approximately $22.0 million or 24.7% of net restaurant sales, compared to approximately $23.4 million or 25.6% of net restaurant sales for fiscal 2003. The decrease in operating expenses reflects the reduction in company-owned restaurants compared to 2003. In addition, repair and maintenance costs for fiscal year 2004 were $1.9 million compared to $2.2 million for fiscal 2003, reflecting a significant investment in the prior year toward neglected restaurants. During fiscal 2005, operating expenses as a percentage of net restaurant sales are expected to decrease from the percentage in fiscal 2004, primarily due to lower levels of repairs and maintenance costs and further leveraging of fixed costs.

     Depreciation and Amortization - Depreciation and amortization for fiscal 2004 was approximately $4.5 million, or 4.6% of total revenue, compared to approximately $4.8 million, or 5.0% of total revenue for fiscal 2003. The decrease in depreciation and amortization primarily reflects fewer company-owned restaurants in 2004. During fiscal 2005, depreciation and amortization is expected to remain relatively flat to fiscal 2004 levels as depreciation from asset additions are offset by assets that will be fully depreciated during fiscal 2005.

     Asset Impairment and Restructuring Charges - During fiscal 2004, we recorded no asset impairment and restructuring charges compared to the recording of approximately $4.2 million of charges on five locations in 2003. As of January 2, 2005, we had approximately $1.3 million of assets held for sale on our consolidated balance sheet representing the land and building on one of the restaurants in Texas for which an impairment was recorded and the restaurant was subsequently closed.

     Pre-opening Expenses We had no pre-opening expenses for fiscal 2004, compared to approximately $543,000 or 0.6% of net restaurant sales for fiscal 2003. We plan to open up to two company-owned restaurants during fiscal 2005 with pre-opening costs estimated at approximately $300,000.

     General and Administrative Expenses - General and administrative expenses totaled approximately $11.0 million or 11.0% of total revenue in fiscal 2004 compared to approximately $9.3 million or 9.6% of total revenue in fiscal 2003. The increase in general and administrative expenses reflects increased legal, consulting and audit fees related to Sarbanes-Oxley 404 compliance, and higher corporate bonus and expenses related to our compensation programs. It also includes increased payroll as

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we continue to build our infrastructure. During 2005, we expect general and administrative expenses to increase approximately 150-200 basis points as a percentage of total revenue, as a result of the increased cost of the performance share program, adoption of SFAS No. 123r in the third quarter of fiscal 2005 and also as a result of the services we expect to provide to the 25-30 expected 2005 franchise-operated openings.

     Interest (Expense) Income - Interest expense, net, totaled approximately $1.6 million or 1.6% of total revenue for fiscal 2004 compared to approximately $1.7 million or 1.7% of total revenue for fiscal 2003. This line item represents interest expense from capital lease obligations, notes payable and financing lease obligations partially offset by interest income received on short-term cash and cash equivalents balances. The decrease in interest expense from fiscal 2003 to fiscal 2004 is primarily the result of no capitalization of construction costs, due to no restaurant openings. We are expecting interest expense to increase moderately from fiscal 2004 levels due to the newly available $10.0 million line of credit obtained in early 2005, which carries a variable rate as well as a non-use fee, and the increased amortization of deferred financing costs related to this line.

     Other (Expense) Income, Net - Other expense, net of approximately $392,000 primarily reflects the write-off of a restaurant’s remaining assets subsequent to the sale to a franchise. This compares to $667,000 in 2003 for losses related to expenses on an unopened site and early extinguishments of debt associated with the early payoff of a note, partially offset by gains attributable to the sale of three units in Georgia to a franchisee.

     Equity in Loss from Unconsolidated Affiliate - Until February 26, 2003, we were a 40% participant in a joint venture to operate themed restaurant concepts based on the entertainment artist Isaac Hayes. Pursuant to an agreement governing the joint venture, the participants in the joint venture formed a Delaware limited liability company named FUMUME, LLC. On February 26, 2003, we disposed of our 40% interest in FUMUME, LLC. The equity in loss from unconsolidated affiliate was $2.2 million for fiscal 2003, reflecting losses in the Isaac Hayes Blues Clubs, in addition to transaction costs associated with our divestiture of those clubs. We are no longer participating in any revenue or expenses of the joint venture and we do not have any further obligations with regard to the joint venture.

     (Provision) Benefit from Income Taxes - Our Company recorded a provision for income taxes during fiscal 2004 of approximately $1.9 million which compares to a benefit of approximately $1.8 million in 2003. At January 2, 2005, we had a remaining deferred tax asset of approximately $7.8 million. Realization of the net operating loss carry forwards and other deferred tax timing differences is contingent on future taxable earnings. Our deferred tax asset was reviewed for expected utilization using a “more likely than not” approach as required by SFAS No. 109, “Accounting for Income Taxes”, by assessing the available positive and negative evidence surrounding the recoverability of the deferred tax asset. We believe that the realization of the deferred tax asset is more likely than not based on the fact that we generated taxable income in fiscal 2004 and based on the expectation that our Company will generate the necessary taxable income in future years.

     Net Income (Loss) / Diluted Net Income (Loss) per Common Share - As a result of the factors above, we realized net income for fiscal 2004 of approximately $3.5 million, or $0.29 per diluted share, on 12,222,000 weighted average shares outstanding, compared to a net loss of approximately $2.9 million, or $0.25 loss per diluted share, on 11,772,000 weighted average shares outstanding for fiscal 2003.

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Fiscal Year 2003 Compared to Fiscal Year 2002

     Total Revenue - Total revenue of approximately $97.7 million for fiscal 2003 increased $6.9 million or 7.6% over revenues of approximately $90.8 million for fiscal 2002.

     Restaurant Sales - Restaurant sales increased by approximately $5.1 million or 5.9% to approximately $91.5 million for fiscal year 2003 from approximately $86.4 million for fiscal year 2002. The increase in sales was due primarily to the annualization of sales on restaurants that opened late in 2002 as well as our 2003 openings.

     Franchise-Related Revenue - Franchise-related revenue consisted of royalty revenue and franchise fees, which included initial franchise fees and area development fees. Franchise-related revenue for fiscal 2003 was approximately $5.7 million, a 34.8% increase when compared to approximately $4.2 million for the same period in 2002, primarily reflecting increased royalties. Royalties, which are based on a percent of net sales, increased 50.9%, reflecting the annualization of franchise restaurants that opened in fiscal 2002 in addition to the 18 franchise restaurants opened during fiscal 2003. There were 54 franchise-operated restaurants open at December 28, 2003, compared to 33 at December 29, 2002.

     Licensing and Other Revenue - Licensing revenue included royalties from a retail line of business, including sauces, seasonings and prepared meats. Other revenue included opening assistance and training we provide to our franchise partners. For fiscal year 2003, the licensing royalty income was $209,000, flat to fiscal 2002.

     Same Store Net Sales - It is our policy to include in our same store net sales base, restaurants that are open year round and have been open for at least 18 months. At the end of fiscal 2003, there were 33 restaurants included in this base. Same store net sales for fiscal 2003 decreased approximately 3.0%, compared to fiscal 2002’s decrease of approximately 0.3%. We believe that the decrease in same store net sales reflected in part, our decision, during the third quarter of fiscal 2003, to eliminate routine discounting throughout our company-owned restaurants. Although discounting during fiscal 2002 had increased restaurant traffic, the majority of the incremental sales derived had substantially lower margins.

     Average Weekly Net Sales - Weighted average weekly net sales for our company-owned and franchise-operated restaurants during fiscal 2003 were $42,491 and $47,400, respectively. During fiscal 2002, weighted average weekly net sales for our company-owned and franchise-operated restaurants were $45,783 and $46,642, respectively.

     Food and Beverage Costs - Food and beverage costs for fiscal 2003 were approximately $28.0 million or 30.6% of net restaurant sales compared to approximately $27.4 million or 31.7% of net restaurant sales for fiscal 2002. The improvement primarily reflected a favorable pork contract and the improved pricing we received.

     Labor and Benefits - Labor and benefits at the restaurant level were approximately $27.3 million or 30.1% of net restaurant sales in fiscal 2003 compared to approximately $25.3 million or 29.2% of net restaurant sales in fiscal 2002. The increase in labor and benefits as a percentage of net restaurant sales reflected a 25% increase in benefits costs, partially offset by a lower level of bonus payout at the restaurant level.

     Operating Expenses - Operating expenses for fiscal 2003 were approximately $23.3 million or 25.6% of net restaurant sales, compared to approximately $20.0 million or 23.2% of net restaurant sales for fiscal 2002. The increase in operating expenses reflected significant investments made at the restaurant level to upgrade and repair stores that had been neglected, in addition to higher utilities related

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to increased gas pricing. Repair and maintenance costs for fiscal year 2003 were approximately $2.2 million compared to approximately $1.3 million for fiscal 2002. The increase in operating expenses as a percentage of restaurant sales for fiscal 2003, compared to fiscal 2002, was primarily due to lower average restaurant sales against slightly higher fixed costs.

     Depreciation and Amortization - Depreciation and amortization for fiscal 2003 was approximately $4.8 million, or 5.0% of total revenue, compared to approximately $4.6 million, or 5.1% of total revenue for fiscal 2002. The increase in depreciation and amortization reflected investments in store openings, restaurant level enhancements, and continuing investments in information systems.

     Asset Impairment and Restructuring Charges - During fiscal 2003 we recorded asset impairment and restructuring charges equal to approximately $4.2 million on five restaurant locations, two of which were subsequently sold and two of which were subsequently closed. As of December 28, 2003, we had approximately $1.3 million of assets held for sale on our consolidated balance sheet related to one of the restaurants in Texas that was closed.

     Pre-opening Expenses - Pre-opening expenses were $543,000 or 0.6% of net restaurant sales for fiscal 2003 compared to approximately $1.0 million or 1.2% of net restaurant sales for fiscal 2002. These expenses reflected the opening of three restaurants during fiscal 2003 as compared with eight in fiscal 2002.

     General and Administrative Expenses - General and administrative expenses totaled approximately $9.3 million or 9.6% of total revenue in fiscal 2003 compared to approximately $8.1 million or 8.9% of total revenue in fiscal 2002. The increase in general and administrative expenses reflected severance and recruiting costs related to changes in management and additions at the board level, consulting expenses associated with the development of our media plan and our new “smokehouse” prototype and increases in the corporate infrastructure to support system-wide restaurant growth.

     Interest (Expense) Income - Interest expense, net, totaled approximately $1.7 million or 1.7% of total revenue for fiscal 2003 compared to approximately $1.0 million or 1.1% of total revenue for fiscal 2002. This line item represented interest expense from capital lease obligations, notes payable and financing lease obligations. The increase in expense from fiscal 2002 to fiscal 2003 was the result of lower capitalization of construction period interest on fewer openings in 2003 than in 2002.

     Other (Expense) Income, Net - Other expense, net of approximately $667,000 reflected losses related to expenses of an unopened site and early extinguishments of debt associated with the early payoff of a note, partially offset by gains attributable to the sale of three units in Georgia to a franchisee. In comparison, during fiscal 2002 we realized other income of approximately $423,000 related to the gains attributable to the sale of three units in Wisconsin to a franchisee.

     Equity in Loss from Unconsolidated Affiliate - Until February 26, 2003, we were a 40% participant in a joint venture to operate themed restaurant concepts based on the entertainment artist Isaac Hayes. Pursuant to an agreement governing the joint venture, the participants in the joint venture formed a Delaware limited liability company named FUMUME, LLC. On February 26, 2003, we disposed of our 40% interest in FUMUME, LLC. The equity in loss from unconsolidated affiliate was approximately $2.2 million for fiscal 2003, reflecting losses in the Isaac Hayes Blues Clubs, in addition to transaction costs associated with our divestiture of those clubs. We are no longer participating in any revenue or expenses of the joint venture and we do not have any further obligations with regard to the joint venture. The equity in loss for 2002 was approximately $6.0 million.

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     Benefit from Income Taxes - Our Company realized a benefit from income taxes during fiscal 2003 of approximately $1.8 million, which included the recognition of the net operating loss carry forwards created in the year ended December 28, 2003 that can be used to reduce future tax liabilities. Realization of the net operating loss carry forwards and other deferred tax timing differences is contingent on future taxable earnings. Our deferred tax asset was reviewed for expected utilization using a “more likely than not” approach as required by SFAS No. 109, “Accounting for Income Taxes”, by assessing the available positive and negative evidence surrounding the recoverability of the deferred tax asset. We believed that the realization of the deferred tax asset was more likely than not based on the expectation that our Company would generate the necessary taxable income through fiscal 2011, beginning in fiscal 2004.

     Net Loss / Diluted Net Loss per Common Share - As a result of the factors above, we realized a net loss for fiscal 2003 of approximately $2.9 million, or $0.25 per diluted share, on 11,771,584 weighted average shares outstanding, compared to a net loss of approximately $928,000, or $0.08 per diluted share, on 11,335,000 weighted average shares outstanding for fiscal 2002.

Recently Issued Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board (FASB) issued its final statement SFAS No. 123r, “Share-Based Payment, an Amendment of FASB Statements No. 123 and 95”. This statement requires companies to recognize compensation cost for share-based awards, including options, granted to employees and would eliminate the use of accounting for employee options under APB Opinion No. 25, “Accounting for Stock Issued to Employees”. We will be required to adopt this pronouncement effective with the beginning of our third fiscal quarter of 2005. We are currently determining the impact this pronouncement will have on our consolidated financial position and results of operations.

Financial Condition, Liquidity and Capital Resources

     As of January 2, 2005, our Company held cash and cash equivalents of approximately $11.2 million compared to approximately $10.0 million as of December 28, 2003. This $1.2 million increase reflects cash generated from operations of approximately $11.4 million, partially offset by the buyback of common stock and warrants of approximately $8.0 million and capital expenditures of approximately $2.4 million.

     Our working capital was approximately $10.8 million for the year ended January 2, 2005 as compared to approximately $9.0 million at December 28, 2003. Our quick ratio, defined as the sum of cash and cash equivalents and receivables, divided by current liabilities, and measures our immediate short-term liquidity, was 1.49 at January 2, 2005 compared to 1.59 at December 28, 2003. The year over year change in our working capital was primarily due to cash generated from operations and partially offset by an increase in accounts payable. The decline in our quick ratio was primarily due to an increase in current liabilities.

     Net cash provided by operations for each of the last three fiscal years was approximately $11.4 million in fiscal 2004, $6.4 million in fiscal 2003 and $9.5 million in fiscal 2002. Cash generated in fiscal 2004 was primarily from net income of $3.5 million, the utilization of our deferred tax asset of $1.9 million and an increase of $2.1 million in accounts payable, due to a 53-week fiscal year. This was partially offset by an increase of approximately $600,000 in accounts receivable, reflecting the $325,000 legal settlement due from a franchise partner and higher franchise receivables related to the creation of the national public relations and marketing fund in 2004. Additionally, there was an increase of approximately $600,000 in prepaid expenses and other current assets due to prepayment of January 2005 rent, and also a decrease in other current liabilities of approximately $500,000 due to lower marketing

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accruals and deferred franchise fees. During fiscal 2003, we took advantage of cash discounts offered by our vendors and decreased accounts payable by approximately $1.6 million. For fiscal 2002, sources of cash generation were primarily from increased accounts payable and decreases in accounts receivable.

     Net cash used for investing activities for each of the last three fiscal years was approximately $2.2 million in fiscal 2004, $5.6 million in fiscal 2003 and $5.7 million in fiscal 2002. In fiscal 2004, we used approximately $2.4 million for capital expenditures related to new catering vehicles, kitchen equipment, development of our site-model tool, and POS and other computer equipment for use in the restaurants and at our corporate office. This was partially offset by payments received on notes receivable. In fiscal 2003, we used cash of approximately $2.1 million to fund losses and exit from our 40% FUMUME, LLC, joint-venture partnership, and $4.3 million for capital expenditures on the construction of three new company-owned restaurants and to upgrade existing facilities. The use of cash was partially offset by cash proceeds from the sale of assets and payments on notes receivable. During fiscal 2002, we used approximately $1.3 million to fund the losses in FUMUME, LLC, approximately $9.5 million on capital expenditures for eight company-owned restaurants and approximately $900,000 on advances of notes receivables. These uses of cash were partially offset by approximately $3.1 million cash proceeds from the sale of assets and approximately $2.9 million in payments on notes receivable.

     Net cash used for financing activities was approximately $7.9 million in fiscal 2004, $323,000 in fiscal 2003 and approximately $1.7 million in fiscal 2002. During fiscal 2004, we bought back approximately 1.0 million shares of our common stock and paid approximately $8.0 million, including commissions. Other uses of cash for fiscal 2004 included payment of long-term debt and capital leases, partially offset by proceeds received from the exercise of stock options and warrants. During fiscal 2003 and 2002, payments on long-term debt and capital lease obligations were the primary uses of cash partially offset by proceeds from stock option exercises.

     Subsequent to year-end, on January 28, 2005 we entered into a five-year credit agreement with Wells Fargo Bank, National Association, as administrative agent and lender, which provides us with a revolving credit facility of $10.0 million. Principal amounts outstanding under the facility will bear interest either at an adjusted Eurodollar rate plus 3.50% or Wells Fargo’s prime rate plus 2.00%. Unused portions of the facility will be subject to an unused facility fee equal to 0.5% of the unused portion.

     The credit agreement is available for general working capital purposes and for the repurchase of shares under our share repurchase program. Under the credit agreement, we granted Wells Fargo a security interest in all of our current and future personal property.

     The credit agreement contains customary affirmative and negative covenants including limitations with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates of the Company among others. The credit agreement also includes various financial covenants.

     We anticipate that future development and expansion will be funded primarily through currently held cash and cash equivalents, cash flow generated from operations, and from sources such as our recently acquired credit facility.

     In addition to commitments we have related to our lease obligations, we also have required payments on our outstanding debt. The following table provides aggregate information about our contractual payment obligations and the periods in which payments are due:

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Payments Due by Period
(in thousands)

                                                         
Contractual Obligations   Total     2005     2006     2007     2008     2009     Thereafter  
Long Term Debt
  $ 12,361     $ 424     $ 426     $ 465     $ 505     $ 548     $ 9,993  
Financing Leases
    4,500                                     4,500  
Capital Leases
    113       97       16                          
Operating Leases
    57,076       3,338       3,408       3,417       3,338       3,341       40,234  
 
                                         
Less: Sublease rental income
    (9,512 )     (502 )     (502 )     (502 )     (440 )     (441 )     (7,125 )
 
                                         
Total
  $ 64,538     $ 3,357     $ 3,348     $ 3,380     $ 3,403     $ 3,448     $ 47,602  
 
                                         

     See Notes 6, 7 and 8 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for details of our contractual obligations.

     Under the agreements governing our long-term debt obligations, we are subject to two main financial covenants. We must maintain a 1.5 to 1.0 fixed charge coverage ratio and a 3.5 to 1.0 leverage ratio during each fiscal year. As of January 2, 2005, December 28, 2003 and December 29, 2002, the Company was in compliance or had obtained waivers for all of its covenants.

Off-Balance Sheet Arrangements

     Our Company does not have any off-balance sheet arrangements.

Income Taxes

     At January 2, 2005, we had federal and state net operating loss carry forwards (“NOL’s”) for tax reporting purposes of approximately $12.2 million and $9.7 million, respectively, which if not used will begin to expire in 2011. These will be adjusted when we file our 2004 income taxes in 2005. In addition, we had tax credit carry forwards of approximately $ 1.8 million, which if not used, will begin to expire in 2011. Future changes in ownership, if any, may place limitations on the use of these NOL’s.

Inflation

     The primary inflationary factors affecting our operations include food, beverage, and labor costs. In addition, our leases require us to pay taxes, maintenance, repairs and utilities and these costs are subject to inflationary increases. We are also subject to interest rate changes based on market conditions.

     We believe that relatively low inflation rates have contributed to relatively stable costs. There is no assurance, however, that low inflation rates will continue.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our Company’s financial instruments include cash and cash equivalents and long-term debt. Our Company includes as cash and cash equivalents investments with original maturities of three months or less when purchased and which are readily convertible into known amounts of cash. Our Company’s cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. We have no derivative financial instruments or derivative commodity instruments in our cash and cash equivalents. The total outstanding long-term debt of our Company as of January 2, 2005 was approximately $16.5 million, including financing lease obligations. Of the outstanding long-term debt, approximately $1.3 million consists of a variable interest rate while the remainder was subject to a fixed interest rate. Subsequent to year-end, on January 28, 2005 we entered into a five-year credit agreement

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with Wells Fargo Bank, National Association, as administrative agent and lender, which provides us with a revolving credit facility of $10.0 million. Principal amounts outstanding under the facility will bear interest either at an adjusted Eurodollar rate plus 3.50% or Wells Fargo’s prime rate plus 2.00%. Unused portions of the facility will be subject to an unused facility fee equal to 0.5% of the unused portion. We do not see the variable interest rate long-term debt as a significant interest rate risk. Some of the food products purchased by us are affected by commodity pricing and are, therefore, subject to price volatility caused by weather, production problems, delivery difficulties and other factors that are outside our control. To control this risk in part, we have fixed-priced purchase commitments for food from vendors. In addition, we believe that substantially all of our food is available from several sources, which helps to control food commodity risks. We believe we have the ability to increase menu prices, or vary the menu options offered, if needed, in response to a food product price increase.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of Famous Dave’s of America, Inc. are included herein, beginning at page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

ITEM 9A. CONTROLS AND PROCEDURES

     Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(c) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Management’s Report on Internal Control over Financial Reporting

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of January 2, 2005. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of January 2, 2005, our internal control over financial reporting is effective based on these criteria. Our independent registered certified public accounting firm, Grant Thornton LLP, has issued an audit report on our assessment of our internal control over financial reporting, which is included herein.

     There were no changes in our internal controls over financial reporting during our most recently-completed fiscal quarter, and year ended January 2, 2005 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

     Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control

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system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Famous Dave’s of America have been detected.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K. The Company has adopted a Code of Ethics applicable to its CEO, CFO and Controller. The Code of Ethics is available on our website at www.famousdaves.com and a copy is available free of charge to anyone requesting it.

ITEM 11. EXECUTIVE COMPENSATION

     Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by this Item appears in our definitive proxy statement for our 2005 annual meeting of shareholders under the caption “Fees Billed to Company by Its Independent Registered Certified Public Accounting Firm,” which information is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 
Documents filed as part of this Form 10-K:
 
 

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Exhibits:
 
See “exhibit index” on the page following the consolidated financial statements and related footnotes

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Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Shareholders
Famous Dave’s of America, Inc.:

We have audited the accompanying consolidated balance sheets of Famous Dave’s of America, Inc. and subsidiaries (the Company) as of January 2, 2005 and December 28, 2003, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended January 2, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Famous Dave’s of America, Inc. and subsidiaries as of January 2, 2005 and December 28, 2003 and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended January 2, 2005 in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying Schedule II is presented for purposes of additional analysis and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the internal control over financial reporting of Famous Dave’s of America, Inc. as of January 2, 2005, based on the criteria established in Internal Control – Integrated Framework issue by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 9, 2005 expressed an unqualified opinion on management’s assessment of internal control over financial reporting and an unqualified opinion on the effectiveness of Famous Dave’s of America, Inc.’s, the effectiveness of Famous Dave’s of America, Inc. and the effective operation, of internal control over financial reporting.

/s/ Grant Thornton LLP

Minneapolis, Minnesota
March 9, 2005

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Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Shareholders
Famous Dave’s of America, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that Famous Dave’s of America, Inc. maintained effective internal control over financial reporting as of January 2, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management of Famous Dave’s of America, Inc. is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the internal control over financial reporting of Famous Dave’s of America, Inc. based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Famous Dave’s of America, Inc. maintained effective internal control over financial reporting as of January 2, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the COSO. Also, in our opinion, Famous Dave’s of America, Inc. maintained, in all material respects, effective internal control over financial reporting as of January 2, 2005, based on the criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Famous Dave’s of America, Inc. and subsidiaries as of January 2, 2005 and December 28, 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended January 2, 2005 and our report dated February 4, 2005 expressed an unqualified opinion on those consolidated financial statements.

/s/ Grant Thornton LLP

Minneapolis, Minnesota
March 9, 2005

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JANUARY 2, 2005 AND DECEMBER 28, 2003

(in thousands, except share data)
                 
    January 2,     December 28,  
    2005     2003  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 11,170     $ 9,964  
Restricted cash
    39        
Accounts receivable, net
    2,289       1,661  
Inventories
    1,523       1,599  
Prepaid expenses and other current assets
    4,747       3,126  
 
           
Total current assets
    19,768       16,350  
 
               
Property, equipment and leasehold improvements, net
    44,664       47,147  
 
               
Other assets:
               
Notes receivable, less current portion
    2,156       2,395  
Deferred tax asset, less current portion
    4,458       6,938  
Other assets
    867       937  
 
           
 
  $ 71,913     $ 73,767  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current liabilities:
               
Current portion of long-term debt
  $ 424     $ 358  
Current portion of capital leases
    97       388  
Accounts payable
    4,138       2,035  
Other current liabilities
    4,352       4,528  
 
           
Total current liabilities
    9,011       7,309  
 
               
Long-term liabilities:
               
Long-term debt, less current portion
    11,937       12,349  
Capital leases, less current portion
    16       105  
Financing leases
    4,500       4,500  
Other liabilities, net
    3,106       2,632  
 
           
Total liabilities
    28,570       26,895  
 
           
 
               
Shareholders’ equity:
               
Common stock, $.01 par value, 100,000,000 shares authorized, 11,340,000 and 12,158,000 shares issued and outstanding at January 2, 2005 and December 28, 2003, respectively
    113       122  
Additional paid-in capital
    49,674       56,692  
Accumulated deficit
    (6,444 )     (9,942 )
 
           
Total shareholders’ equity
    43,343       46,872  
 
           
 
  $ 71,913     $ 73,767  
 
           

See accompanying notes to consolidated financial statements.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(in thousands, except share and per share data)
                         
    January 2,     December 28,     December 29,  
    2005     2003     2002  
    (53 weeks)     (52 weeks)     (52 weeks)  
Revenue:
                       
Restaurant sales, net
  $ 89,176     $ 91,500     $ 86,378  
Franchise royalty revenue
    7,353       4,567       3,027  
Franchise fee revenue
    1,977       1,139       1,205  
Licensing and other revenue
    819       534       210  
 
                 
Total revenue
    99,325       97,740       90,820  
 
                 
 
                       
Costs and expenses:
                       
Food and beverage costs
    27,995       28,014       27,355  
Labor and benefits
    26,472       27,586       25,252  
Operating expenses
    22,005       23,376       20,009  
Depreciation and amortization
    4,549       4,840       4,630  
Asset impairment and restructuring charges
          4,238        
Pre-opening expenses
          543       1,040  
General and administrative
    10,939       9,336       8,064  
 
                 
Total costs and expenses
    91,960       97,933       86,350  
 
                 
 
                       
Income (loss) from operations
    7,365       (193 )     4,470  
 
                 
 
                       
Other income (expense):
                       
Interest (expense)
    (1,901 )     (1,876 )     (1,400 )
Interest income
    326       215       362  
Other (expense) income, net
    (392 )     (667 )     423  
Equity in loss of unconsolidated affiliate
          (2,155 )     (5,994 )
 
                 
Total other expense
    (1,967 )     (4,483 )     (6,609 )
 
                 
 
                       
Income (loss) before income taxes
    5,398       (4,676 )     (2,139 )
 
                       
Income tax (provision) benefit
    (1,900 )     1,778       1,211  
 
                 
 
                       
Net income (loss)
  $ 3,498     $ (2,898 )   $ (928 )
 
                 
 
                       
Basic net income (loss) per common share
  $ 0.29     $ (0.25 )   $ (0.08 )
 
                 
 
                       
Diluted net income (loss) per common share
  $ 0.29     $ (0.25 )   $ (0.08 )
 
                 
 
                       
Weighted average common shares outstanding-basic
    11,858,000       11,772,000       11,335,000  
 
                 
Weighted average common shares outstanding-diluted
    12,222,000       11,772,000       11,335,000  
 
                 

See accompanying notes to consolidated financial statements.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(in thousands)
                                         
                    Additional              
    Common Stock     Paid-In     Accumulated        
    Shares     Amount     Capital     Deficit     Total  
Balance – December 30, 2001
    11,180     $ 112     $ 52,693     $ (6,116 )   $ 46,689  
 
                                       
Issuance of common stock
    26             206             206  
Exercise of stock options
    137       1       305             306  
Exercise of warrants
    45       1       270             271  
Tax benefit for stock options exercised
                707             707  
Options issued below market price
                41             41  
Net loss
                      (928 )     (928 )
 
                             
 
                                       
Balance – December 29, 2002
    11,388       114       54,222       (7,044 )     47,292  
 
                                       
Exercise of stock options
    770       8       2,027             2,035  
Tax benefit for stock options exercised
                443               443  
Net loss
                      (2,898 )     (2,898 )
 
                             
 
                                       
Balance – December 28, 2003
    12,158       122       56,692       (9,942 )     46,872  
 
                                       
Exercise of stock options
    217       2       708             710  
Tax benefit for stock options exercised
                303             303  
Exercise of warrants
    10             60             60  
Purchased rights to exercisable warrants
                (197 )           (197 )
Repurchase of common stock and common stock warrants
    (1,045 )     (11 )     (7,892 )           (7,903 )
Net income
                      3,498       3,498  
 
                             
 
                                       
Balance – January 2, 2005
    11,340     $ 113     $ 49,674     $ (6,444 )   $ 43,343  
 
                             

See accompanying notes to consolidated financial statements.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(in thousands)
                         
    Fiscal Year  
    2004     2003     2002  
Cash flows from operating activities:
                       
Net income (loss)
  $ 3,498     $ (2,898 )   $ (928 )
Adjustments to reconcile net income (loss) to cash flows provided by operations:
                       
Depreciation and amortization
    4,549       4,840       4,630  
Amortization of deferred financing costs
    38       67        
Loss (gain) on disposal of property
    383       (112 )     (549 )
Asset impairment charges
          3,687        
Deferred tax asset
    1,900       (1,778 )     (1,211 )
Deferred rent
    474       568       630  
Equity in loss of unconsolidated affiliate
          2,155       5,994  
Deferred compensation
    142              
Changes in operating assets and liabilities:
                       
Restricted cash
    (39 )            
Accounts receivable, net
    (628 )     (648 )     440  
Inventories
    76       (42 )     (506 )
Prepaid expenses and other current assets
    (566 )     547       (70 )
Deposits
    63       60       36  
Other assets
    (138 )     0       0  
Accounts payable
    2,103       (1,635 )     1,010  
Other current liabilities
    (498 )     1,625       (6 )
 
                 
Cash flows provided by operations
    11,357       6,436       9,470  
 
                 
 
                       
Cash flows from investing activities:
                       
Purchases of property, equipment and leasehold improvements
    (2,449 )     (4,321 )     (9,490 )
Proceeds from sale of property, equipment, and leasehold improvements
          685       3,083  
Investment and repayments of advances in unconsolidated affiliate
          (2,125 )     (1,255 )
Advances on notes receivable
                (941 )
Payments received on notes receivable
    218       139       2,891  
 
                 
Cash flows used for investing activities
    (2,231 )     (5,622 )     (5,712 )
 
                 
 
                       
Cash flows from financing activities:
                       
Payments for debt issuance costs
    (8 )     (9 )     (44 )
Net payments on line of credit
                (100 )
Payments on long-term debt
    (346 )     (1,703 )     (1,153 )
Payments on capital lease obligations
    (380 )     (646 )     (963 )
Proceeds from exercise of stock options and warrants
    770       2,035       577  
Repurchase of common stock and common stock warrants
    (7,956 )            
 
                 
Cash flows used for financing activities
    (7,920 )     (323 )     (1,683 )
 
                 
 
                       
Increase in cash and cash equivalents
    1,206       491       2,075  
 
                       
Cash and cash equivalents, beginning of year
    9,964       9,473       7,398  
 
                 
 
                       
Cash and cash equivalents, end of year
  $ 11,170     $ 9,964     $ 9,473  
 
                 

See accompanying notes to consolidated financial statements.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

     Nature of business – We, Famous Dave’s of America, Inc. (“Famous Dave’s” or the “Company”), were incorporated in Minnesota on March 14, 1994. We develop, own, operate and franchise restaurants under the name “Famous Dave’s”. At January 2, 2005, we had 38 company-owned restaurants and 66 franchise-operated restaurants in 24 states, and an additional 159 signed franchise-operated development agreements.

     Principles of consolidation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. Any inter-company transactions and balances have been eliminated in consolidation.

     Management’s use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

     Financial instruments – Due to their short-term nature, the carrying value of our current financial assets and liabilities approximates their fair value. The fair value of long-term debt approximates the carrying amount based upon our expected borrowing rate for debt with similar remaining maturities and comparable risk.

     Segment reporting – We have company-owned and franchise-operated restaurants in the United States, and operate within the single industry segment of casual dining. Because we manage both types of restaurants in a similar manner and allocate resources to each based upon their relative size to the company we have aggregated our operating segments into a single reporting segment.

     Fiscal year – Our fiscal year ends on the Sunday nearest December 31st of each year. Our fiscal year is generally 52 weeks; however it periodically consists of 53 weeks. The fiscal year ended January 2, 2005 (fiscal 2004) was 53 weeks. Fiscal years ending December 28, 2003 (fiscal 2003) and December 29, 2002 (fiscal 2002) were 52 weeks.

     Cash and cash equivalents – Cash equivalents include all investments with original maturities of three months or less or which are readily convertible into known amounts of cash. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000, while the remaining balances are uninsured at January 2, 2005. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

     Accounts receivable – We provide an allowance for uncollectible accounts on accounts receivable. The allowance for uncollectible accounts was approximately $10,000 and $98,000 at January 2, 2005 and December 28, 2003, respectively. We believe all accounts receivable in excess of the allowance are fully collectible. If accounts receivable in excess of the provided allowance are determined uncollectible, they are charged to expense in the year that determination is made. Accounts receivable are written off when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Account receivable balances written off do not exceed allowances provided.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

     Inventories - Inventories consist principally of food, beverages, retail goods and smallwares, and are recorded at the lower of cost (first-in, first-out) or market.

     Property, equipment and leasehold improvements - Property, equipment and leasehold improvements are recorded at cost. Improvements are capitalized while repair and maintenance costs are charged to operations when incurred. Furniture, fixtures, equipment and antiques are depreciated or amortized using the straight-line method over estimated useful lives ranging from 3-7 years, while buildings are depreciated over 30 years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term, including renewal options, or the estimated useful life of the assets.

     Debt issuance costs - Debt issuance costs are amortized to interest expense over the term of the related financing on a straight-line basis, which approximates the interest method.

     Capitalized interest – There was no capitalized interest in 2004. Interest costs capitalized during the construction period of restaurants were approximately $122,000 and $441,000 for fiscal 2003 and 2002, respectively.

     Advertising costs - Advertising costs are charged to expense as incurred. Advertising costs were approximately $2.7 million, $2.4 million, and $1.9 million for fiscal 2004, 2003 and 2002, respectively, and are included in operating expenses in the consolidated statements of operations.

     Pre-opening expenses - All start-up and pre-opening costs are expensed as incurred.

     Lease Accounting – In accordance with SFAS No. 13 “Accounting for Leases”, we recognize lease expense for our operating leases over the entire lease term including lease renewal options and build-out periods where the renewal is certain and the build-out period takes place prior to the restaurant opening or lease commencement date. We account for construction allowances by recording a receivable when its collectibility is considered certain, depreciating the leasehold improvements over the lesser of their useful lives or the full term of the lease, including renewal options and build-out periods, amortizing the construction allowance as a credit to rent expense over the full term of the lease, including renewal options and build-out periods, and relieving the receivable once the cash is obtained from the landlord for the construction allowance.

     Recoverability of property, equipment and leasehold improvements – In accordance with Statement of Financial Accounting Standards (SFAS) No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” we evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired the loss is measured as the amount by which the carrying amount of the restaurant exceeds its fair value. Fair value as determined by the discounted future net cash flows, is estimated based on the best information available including estimated future cash flows, expected growth rates in comparable restaurant sales, remaining lease terms and other factors. If these assumptions change in the future, we may be required to take additional impairment charges for the related assets. Considerable management judgment is necessary to estimate future cash flows. Accordingly, actual results could vary significantly from such estimates. Our January

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

2, 2005 consolidated balance sheet reflects approximately $1.3 million of assets held for sale, which includes the land and building for our Mesquite, TX location that was closed during 2003. During fiscal 2003, we recorded impairment charges of approximately $3.7 million on five under-performing restaurants, two of which were subsequently closed, two of which were subsequently sold, and one that was fully impaired, but still operating. There were no impairment charges recorded during fiscal 2004 or 2002.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

     Public Relations and Marketing Development Fund - Beginning in fiscal 2004, we established a system-wide public relations and marketing fund. Company-owned restaurants, in addition to franchise-operated restaurants whose franchise agreements were signed after January 1, 2004, are required to contribute a percentage of sales, currently 1.0%, to the fund that will be used for public relations and marketing development efforts throughout the system. Additionally, certain payments received from various vendors are deposited into the public relations and marketing fund. The assets held by this fund are considered restricted. Accordingly, we reflected the cash related to this fund in restricted cash and the liability is included in accounts payable on our consolidated balance sheet as of January 2, 2005.

     Net income (loss) per common share - Basic net income (loss) per common share (“EPS”) is computed by dividing the net income (loss) by the weighted average number of common shares outstanding for the reporting period. Diluted EPS equals net income (loss) divided by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents relating to stock options and warrants when dilutive.

     Following is a reconciliation of basic and diluted net income (loss) per common share:

                         
(in thousands, except per share data)   Fiscal Year  
    2004     2003     2002  
Net income (loss) per common share — basic:
                       
Net income (loss)
  $ 3,498     $ (2,898 )   $ (928 )
Weighted average shares outstanding
    11,858       11,772       11,335  
Net income (loss) per common share – basic
  $ 0.29     $ (0.25 )   $ (0.08 )
 
                       
Net income (loss) per common share — diluted:
                       
Net income (loss)
  $ 3,498     $ (2,898 )   $ (928 )
Weighted average shares outstanding
    11,858       11,772       11,335  
Dilutive impact of common stock equivalents outstanding
    364              
 
                 
Adjusted weighted average shares outstanding
    12,222       11,772       11,335  
Net income (loss) per common share — diluted
  $ 0.29     $ (0.25 )   $ (0.08 )

     Options to purchase approximately 40,000 shares of common stock with a weighted average exercise price of $8.02 were excluded from the fiscal 2004 diluted EPS computation because the exercise price exceeded the average market price of the common shares during the period.

     Options to purchase approximately 1.2 million shares of common stock with a weighted average exercise price of $3.94 were excluded from the fiscal 2003 diluted EPS computation because they were anti-dilutive due to a net loss.

     Options to purchase approximately 1.9 million shares of common stock with a weighted average exercise price of $3.56, and warrants to purchase approximately 95,000 shares of common stock with a weighted average exercise price of $6.63 were excluded from the fiscal 2002 diluted EPS computation because they were anti-dilutive due to a net loss.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

     Stock-based compensation — In accordance with Accounting Principles Board (APB) Opinion No. 25, we use the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of Famous Dave’s common stock at the date of grant over the amount the employee must pay for the stock. Our policy is to grant stock options at the quoted market price at the date of grant. No compensation expense has been recognized for options issued to employees in fiscal years 2004, 2003 or 2002. The following table illustrates the effect on net income (loss) and net income (loss) per common share if we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation.

                         
(in thousands, except per share data)   Fiscal Year  
    2004     2003     2002  
Net income (loss) as reported
  $ 3,498     $ (2,898 )   $ (928 )
Less: Compensation expense determined under the fair value method, net of tax
    (816 )     (1,057 )     (880 )
 
                 
Pro forma net income (loss)
  $ 2,682     $ (3,955 )   $ (1,808 )
 
                 
Net income (loss) per common share:
                       
Basic EPS — as reported
  $ 0.29     $ (0.25 )   $ (0.08 )
Basic EPS — pro forma
    0.23       (0.34 )     (0.16 )
Diluted EPS — as reported
    0.29       (0.25 )     (0.08 )
Diluted EPS — pro forma
    0.22       (0.34 )     (0.16 )

     In determining the compensation cost of the options granted during fiscal 2004, 2003 and 2002, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

                         
    Fiscal Year  
    2004     2003     2002  
Risk free interest rate
    4.4 %     4.2 %     4.7 %
Expected life of options
  10 years   10 years   10 years
Expected volatility
    56.7 %     102.3 %     92.9 %
Dividend yield
    0.0 %     0.0 %     0.0 %

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

     Revenue Recognition – We record restaurant sales at the time food and liquor is served. We record retail sales at the time items are delivered to the customer. We have detailed below our revenue recognition policies for franchise and licensing agreements.

Franchise arrangements - Individual franchise arrangements generally include initial fees, as well as royalty fees based upon a percentage of sales. Our franchisees are granted the right to operate a restaurant using our system for a range of 10 to 20 years. Operating results at franchise-operated restaurants, including restaurant revenue and related expenses, are the responsibility of the franchise owner. Franchisees pay a non-refundable initial fee for each franchised location, and franchise fee which is recognized when we, the franchisor, have performed substantially all of our obligations. The amount of non-refundable initial franchise fee and franchise fee income was approximately $2.0 million, $1.1 million and $1.2 million for fiscal years 2004, 2003 and 2002 respectively. Franchising royalty fee income was approximately $7.4 million, $4.6 million, and $3.0 million for fiscal 2004, 2003 and 2002, respectively.

Licensing agreements and other income We have licensing agreements for our retail products, one which expires in April 2010 with a renewal option of five years, and the other which is indefinite. Licensing revenue for fiscal years 2004, 2003 and 2002 was approximately $248,000, $209,000 and $210,000, respectively.

     Periodically, we provide additional services, beyond the general franchise agreement, to our franchised operations. The cost of these services are invoiced to the respective franchisee and are generally payable on net 30-day terms. Other income related to these services for fiscal years 2004 and 2003 was approximately $571,000 and $325,000, respectively.

     Recently Issued Accounting Pronouncements — In December 2004, the Financial Accounting Standards Board (FASB) issued its final statement SFAS No. 123r, “Share-Based Payment, an Amendment of FASB Statements No. 123 and 95”. This statement requires companies to recognize compensation cost for share-based awards, including options, granted to employees and would eliminate the use of accounting for employee options under APB Opinion No. 25, “Accounting for Stock Issued to Employees”. We will be required to adopt this announcement effective with the beginning of our third fiscal quarter in 2005. We are currently determining the impact this pronouncement will have on our consolidated financial position and results of operations.

(2) INVENTORIES

     Inventories consisted approximately of the following at:

                 
(In thousands)   January 2,     December 28,  
    2005     2003  
Food and beverage
  $ 531     $ 540  
Retail goods
    63       121  
Smallwares and supplies
    929       938  
 
           
 
  $ 1,523     $ 1,599  
 
           

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(3) NOTES RECEIVABLE

     Notes receivable consisted approximately of the following at:

                 
(in thousands)   January 2,     December 28,  
    2005     2003  
Famous Ribs of Georgia, LLC Famous Ribs of Snellville, LLC, Famous Ribs of Marietta, LLC, Famous Ribs of Alpharetta, LLC, — $1,300 amortized over 9 years at 3.27% interest, due November 2012, secured by property and equipment and guaranteed by the franchise owner.
  $ 1,300     $ 1,300  
 
               
Old School BBQ, Inc. – monthly installments of approximately $5.7 including interest at 9.0%, due November 2012, secured by property and equipment and guaranteed by the franchise owners.
    384       422  
 
               
Michael’s First, LLC – monthly installments of approximately $5 including interest at 9.6%, and due May 2010, secured by property and equipment and guaranteed by the franchise owner.
    259       287  
 
               
Utah BBQ, Inc. – monthly installments of approximately $0.9 and $8.6 including interest at 9.5%, due July 2007, secured by property and equipment and guaranteed by the franchise owners.
    253       345  
 
               
River Valley BBQ, Inc. – quarterly interest and principal installments of approximately $22 including interest at prime plus 1.50% (6.75% at January 2, 2005 and 5.50% at December 28, 2003), due December 2006, unsecured.
    169       225  
 
               
Line of credit for up to $50 – Rivervalley BBQ, Inc. – monthly interest only though December 2007 with total outstanding balance due December 2007 including interest at prime plus 1.50% (6.75% at January 2, 2005 and 5.50% at December 28, 2003), unsecured.
    50       50  
 
Competition BBQ, Inc. – monthly installments of approximately $0.4 including interest at 7.0% due January 2008, unsecured.
    14       18  
 
           
 
               
Total notes receivable
    2,429       2,647  
 
               
Current maturities
    (273 )     (252 )
 
           
 
               
Long-term portion of notes receivable
  $ 2,156     $ 2,395  
 
           

     Future principal payments to be received on notes receivable are approximately as follows:

         
(in thousands)          
 
Fiscal Year          
2005
  $ 273  
2006
    274  
2007
    342  
2008
    240  
2009
    250  
Thereafter
    1,050  
 
     
Total
  $ 2,429  
 
     

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(4) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Property, equipment and leasehold improvements consisted approximately of the following at:

                 
(in thousands)   January 2,     December 28,  
    2005     2003  
Land, buildings and improvements
  $ 46,187     $ 46,167  
Furniture, fixtures and equipment
    20,599       20,093  
Antiques
    2,228       2,083  
Land and building held for sale
    1,281       1,281  
Accumulated depreciation and amortization
    (23,606 )     (20,499 )
Restaurant impairment reserve (1)
    (2,025 )     (1,978 )
 
           
Property, equipment and leasehold improvements, net
  $ 44,664     $ 47,147  
 
           


(1)   An adjustment was booked in 2004 related to a 2003 impairment.

     Depreciation and amortization expense on property, equipment and leasehold improvements was approximately $4.5 million, $4.8 million and $4.6 million for fiscal years 2004, 2003, and 2002, respectively.

(5) INVESTMENT IN UNCONSOLIDATED AFFILIATE

     Through February 26, 2003, we held an investment in an unconsolidated affiliate which related to our Company’s 40% investment in FUMUME, LLC (FUMUME), accounted for on the equity method of accounting. FUMUME operated two Isaac Hayes themed restaurants, one each in Chicago, Illinois and Memphis, Tennessee. In May 2001 our Company contributed (i) $825,507 in working capital, (ii) the assets comprising Famous Dave’s Ribs and Blues Club in Chicago and (iii) certain rights to use Famous Dave’s various licensed marks. Although FUMUME was responsible for the payment of the rent for the Chicago club, our Company remained contingently liable under the lease with the landowner. Our Company had an agreement with FUMUME to manage and operate the Chicago club. In addition, FUMUME opened a second club in Memphis in October 2001. Our Company recorded equity in loss of unconsolidated affiliate based on the greater of 40% of the net loss for the years ended December 29, 2002 and December 30, 2001 or 100% of the cash loss our Company was obligated to fund pursuant to the FUMUME operating agreement.

     For the year ended December 29, 2002, we recorded 100% of the cash losses, or approximately $1.1 million. We also recorded an impairment reserve of approximately $4.8 million, of which approximately $4.6 million was included in Equity in Losses and Impairment Reserve in Unconsolidated Affiliate. The impairment charge reflected our conclusion that we would not be able to recover the carrying value of the investment in the unconsolidated subsidiary.

     On February 26, 2003, we disposed of our 40% investment in FUMUME, thereby terminating our obligations to fund cash operating losses. On March 21, 2003, we completed a transaction with the landlord at the Chicago location that terminated our obligations under the lease. Losses of approximately $2.2 million relating to this equity investment were recorded during the first quarter of fiscal year 2003 and included lease termination fees, rent, property tax and legal fees through April 30, 2003, of approximately $1.6 million.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(6) LONG-TERM DEBT

     Long-term debt consisted approximately of the following at:

                 
(in thousands)   January 2,     December 28,  
    2005     2003  
Notes payable – GE Capital Franchise Finance Corporation – monthly installments from approximately $13 to $20 including interest between 8.75% and 10.53% due between February 2020 and October 2023, secured by property and equipment.
  $ 11,064     $ 11,318  
 
               
Notes payable – GE Capital Franchise Finance Corporation – monthly installments from approximately $4 to $10 including interest between 3.80% and 3.89% plus the monthly LIBOR rate (effective rate between 6.39% and 6.48% at January 2, 2005, and between 4.92% and 5.01% at December 2, 2003) due between October 2009 and May 2017, secured by property and equipment.
    1,297       1,389  
 
           
 
Total long – term debt
    12,361       12,707  
Capital lease obligations
    113       493  
Less current maturities
    (521 )     (746 )
 
           
Long – term debt net of current maturities
  $ 11,953     $ 12,454  
 
           

     Required principal payments on long-term debt over the next five years, excluding capital lease obligations are as follows:

         
(in thousands)        
 
Fiscal Year        
2005
  $ 424  
2006
    426  
2007
    465  
2008
    505  
2009
    548  
Thereafter
    9,993  
 
     
Total
  $ 12,361  
 
     

     The notes payable and financing lease obligations contain two main financial covenants. There is a 1.5 to 1.0 fixed charge coverage ratio and a 3.5 to 1.0 leverage ratio that must be maintained during each fiscal year. As of January 2, 2005 and December 28, 2003, the Company was in compliance or had obtained waivers for all of its covenants.

(7) FINANCING LEASE OBLIGATION

     We have a $4.5 million financing obligation involving three existing restaurants as a result of a sale/leaseback transaction. Under this financing, we are obligated to make monthly interest payments of $42,917 (which increases 4.04% every two years) for a minimum of 20 years. We have the option to purchase the leased restaurants for the greater of $4.5 million or fair market value of the properties at the date of purchase at any time or renew the lease for two additional five-year terms. Based upon our continued involvement in the leased property and its purchase option, the transaction has been accounted for as a financing arrangement. Accordingly, the three existing restaurants are included in property, equipment and leasehold improvements and are being depreciated, and a portion of the monthly payments are accounted for as interest expense in the consolidated statements of operations. The principal financing lease obligation payment of $4.5 million is due in March 2019.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(8) CAPITAL AND OPERATING LEASE OBLIGATIONS

     Our assets under capital leases consist of agreements for furniture, equipment and leasehold improvements. Capital leases outstanding under this agreement bear interest at an average rate of 8.1% and expire through February 2006. The obligations are secured by the property under lease. Total cost and accumulated amortization of the capital-leased assets were approximately $4.3 million and $4.1 million at January 2, 2005 and approximately $4.3 million and $3.7 million at December 28, 2003, respectively. We are depreciating the capital lease amounts over their useful life as defined by our capital asset policy.

     We have various operating leases for existing and future restaurants and corporate office space with lease terms ranging from 1 to 36 years, including lease options. Eight of the leases require percentage rent of between 3% and 7% of annual gross sales, typically above a natural breakeven point, in addition to the base rent. All of these leases contain provisions for payments of real estate taxes, insurance and common area maintenance costs. Total occupancy lease cost for fiscal years 2004, 2003 and 2002 including rent, common area maintenance costs, real estate taxes and percentage rent, was approximately $4.8 million, $5.6 million and $4.6 million, respectively. Rent expense only (excluding percentage rent) was approximately $3.0 million, $3.4 million, and $2.0 million for fiscal years 2004, 2003, and 2002, respectively. Percentage rent was approximately $138,000, $128,000 and $145,000 for fiscal years 2004, 2003 and 2002, respectively.

     On December 30, 2004 we signed a lease agreement with Liberty Property Limited Partnership for a new corporate office in Minnetonka, Minnesota. The lease commences in August 2005, is for approximately 26,000 rentable square feet, and is for a term of 97 months, with two-five year renewal options. Minimum annual rent commitment over the lease term is approximately $4.6 million.

     Future minimum lease payments existing at January 2, 2005 including renewal options are:

                 
(in thousands)            
    Operating     Capital  
Fiscal Year   Leases     Leases  
2005
  $ 3,338     $ 105  
2006
    3,408       17  
2007
    3,417        
2008
    3,338        
2009
    3,341        
Thereafter
    40,234        
 
           
Total future minimum lease commitments
  $ 57,076     $ 122  
Less: sublease income
    (9,512 )      
Less: interest at 4.9% - 15.4%
          (9 )
 
           
Total operating and capital lease obligations
  $ 47,564     $ 113  
 
           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(9) RELATED PARTY TRANSACTIONS

     Stock Repurchase - In fiscal 2004, we purchased 200,000 shares of stock from our founder and former CEO, Dave Anderson for approximately $1.6 million.

     Famous Ribs of Georgia, Snellville, Marietta and Alpharetta, LLC – In fiscal 2004, we sublet three restaurants to our former President and CEO, Martin O’Dowd, for a total of $403,000 in lease payments for which he reimbursed us an equal amount to offset our rent expense for these three locations. In November 2003, we executed a signed purchase agreement with Mr. O’Dowd to purchase our three Atlanta area restaurants and operate them under franchise agreements. As part of the purchase price, we executed a signed note receivable in the amount of $1.3 million, with Mr. O’Dowd expected to submit periodic principal and interest payments, to us, over 9 years. In addition, Mr. O’Dowd entered into an area development agreement to develop additional Famous Dave’s franchise restaurants in defined areas of Georgia, and transferred his rights to the North Carolina market back to us.

     S&D Land Holdings, Inc. - S&D Land Holdings, Inc. (S&D) is a company wholly-owned by our founder and former CEO. Through May 29, 2003, we subleased three real estate units from S&D. On May 30, 2003, we acquired all of S&D’s leasehold interest in one of these properties and negotiated a new operating lease directly with the landlord. We paid S&D approximately $244,000 as full consideration for the assignment of the lease and termination of the sublease. This amount represented the unamortized balance of S&D’s original purchase price of the leasehold interest utilizing the 10% interest factor that was assumed by S&D and us on January 1, 1996 at the time the sublease was executed.

     On October 28, 2003, S&D assigned its leasehold interest in another one of the properties to one of our franchisees who had previously been subleasing the property from us. As a result of this transaction and pursuant to the terms of the existing agreements, our sub-lease with S&D at that location was also terminated. The third and final real estate lease agreement with S&D terminated on November 5, 2003 when an unrelated party purchased S&D’s leasehold interest in the property.

(10) STOCK OPTIONS, WARRANTS AND PERFORMANCE SHARES AND SHARE REPURCHASES

     As part of our acquisition of four restaurants during fiscal year 1999, we issued 200,000 warrants which were set to expire in December 2004. All stock warrants had been exercised or redeemed prior to their expiration. During 2004, 10,000 of the warrants were exercised at a price of $6.00 per share and we redeemed the remainder of the warrants for approximately $197,000 which represents the difference between the original exercise price of the warrants and the closing market price of the Company’s stock on the date of the transactions. At December 28, 2003, there were approximately 95,000 of these stock warrants outstanding and exercisable at an average exercise price of $6.63 per share.

     We have adopted a 1995 Stock Option and Compensation Plan, a 1997 Employee Stock Option Plan and a 1998 Director Stock Option Plan (the Plans), pursuant to which we may grant stock options, stock appreciation rights, restricted stock, performance shares, and other stock and cash awards to eligible participants. We have also granted stock options outside of the Plans in limited situations. Under the plans, an aggregate of approximately 306,500 shares of our Company’s common stock remained available for issuance at January 2, 2005. In general, the stock options we have issued under the Plans vest over a period of 5 years and expire 10 years from the date of grant.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(10) STOCK OPTIONS, WARRANTS, PERFORMANCE SHARES, AND SHARE REPURCHASES (continued)

     Information regarding our Company’s stock options is summarized below:

                 
(number of options in thousands)   Number of     Weighted Average  
    Options     Exercise Price  
Options outstanding – December 30, 2001
    1,747     $ 2.82  
Granted
    415       6.82  
Canceled or expired
    (147 )     5.10  
Exercised
    (138 )     2.22  
 
           
Options outstanding – December 29, 2002
    1,877       3.56  
Granted
    450       4.34  
Canceled or expired
    (357 )     5.65  
Exercised
    (770 )     2.64  
 
           
Options outstanding – December 28, 2003
    1,200       3.94  
Granted
    247       6.32  
Canceled or expired
    (135 )     3.43  
Exercised
    (217 )     3.26  
 
           
Options outstanding – January 2, 2005
    1,095     $ 4.67  
 
           
 
               
Options exercisable – December 29, 2002
    1,017     $ 2.59  
 
           
Options exercisable – December 28, 2003
    630     $ 3.28  
 
           
Options exercisable – January 2, 2005
    500     $ 3.80  
 
           
 
               
Weighted average fair value of options granted during the year ended December 29, 2002
          $ 5.80  
 
             
Weighted average fair value of options granted during the year ended December 28, 2003
          $ 1.94  
 
             
Weighted average fair value of options granted during the year ended January 2, 2005
          $ 4.44  
 
             

     The following table summarizes information about stock options outstanding at January 2, 2005:

                                         
(number outstanding and exercisable in thousands)                   Options        
    Total outstanding     Exercisable  
            Weighted-average                      
Exercise   Number     remaining     Weighted-average     Number     Weighted-average  
prices   outstanding     contractual life     exercise price     exercisable     exercise price  
$2.00 - $2.63
    172     3.52 years   $ 2.16       170     $ 2.16  
 
                                       
$3.09 - $4.18
    421     7.41 years   $ 3.85       239     $ 3.84  
 
                                       
$4.82 - $6.72
    457     8.81 years   $ 6.05       56     $ 5.94  
 
                                       
$7.64 - $8.07
    45     5.16 years   $ 7.98       35     $ 8.06  
 
                             
 
                                       
$2.00 - $8.07
    1,095     7.28 years   $ 4.67       500     $ 3.80  
 
                                   

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Table of Contents

FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(10) STOCK OPTIONS, WARRANTS, PERFORMANCE SHARES, AND SHARE REPURCHASES (continued)

     On February 18, 2004, our Board of Directors approved an Executive Elective Deferred Stock Unit Plan (Deferred Stock Unit Plan), in which executives can elect to defer all or part of their bonus compensation for a specified period of time. The amount of compensation that is deferred is converted into a number of stock units, as determined by the share price of our common stock on the date the bonuses are approved by the Board of Directors. Accordingly, we recognize compensation expense throughout the deferral period to the extent that the share price of our common stock increases, and reduce compensation expense throughout the deferral period to the extent that the share price of our common stock decreases.

     We granted our President and CEO, David Goronkin, a bonus of $93,750 in 2004 for his performance during fiscal 2003 that was subject to forfeiture based on certain fiscal 2004 performance criteria. Mr. Goronkin elected to defer this bonus, for a one-year timeframe in accordance with the Deferred Stock Unit Plan discussed above. As a result of Mr. Goronkin’s deferral and the increase in the share price of our common stock during the deferred period, we recognized approximately $68,000 of compensation expense in our consolidated statement of operations in fiscal 2004 as related to the Deferred Stock Unit Plan.

     On February 18, 2004, the Compensation Committee of our Board of Directors established a program under which management and certain director-level employees may be granted performance shares, under the Plans, subject to certain contingencies. Issuance of the shares underlying the performance share grants are contingent upon the company achieving a specified minimum percentage of the cumulative earnings per share goals (as determined by the Compensation Committee) for each of the three fiscal years following the grant. Upon achieving the minimum percentage, and provided that the recipient remains an employee during the entire three-year performance period, the Company will issue the recipient a percentage of the performance shares that is equal to the percentage of the cumulative earnings per share goals achieved. No portion of the shares will be issued if the specified percentage of earnings per share goals is achieved in any one or more fiscal years but not for the cumulative three-year period.

     No recipient will have any rights as a shareholder based on the performance share grants unless and until the conditions have been satisfied and the shares have been issued to the recipient. In accordance with this program, we recognize as compensation expense, the value of these stock grants as they are earned in our consolidated statement of operations throughout the performance period.

     On February 18, 2004, our Board of Directors awarded 33,500 performance share grants to eligible employees for the fiscal 2004 - fiscal 2006 timeframe. Accordingly, we have recognized approximately $142,000 of compensation expense in our consolidated statement of operations for fiscal 2004 related to this program.

     On May 12, 2004, our Board of Directors authorized a stock repurchase plan that authorized the repurchase of up to 1.0 million shares of our common stock. Under the repurchase plan, we repurchased 1.0 million shares from time-to-time in both the open market and through privately negotiated transactions, at an average market price of $7.44, excluding commissions. The repurchases were funded entirely from the Company’s working capital and cash flow. On September 22, 2004, we announced the completion of our stock repurchase plan.

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Table of Contents

FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(10) STOCK OPTIONS, WARRANTS AND PERFORMANCE SHARES (continued)

     On November 2, 2004, our Board of Directors authorized the repurchase of up to an additional 1.0 million shares of our common stock. The shares may be repurchased from time-to-time in both the open market or through privately negotiated transactions and are expected to be funded from the Company’s available working capital. As of January 2, 2005, we had purchased 45,100 outstanding shares under this program at an average market price of $9.70, excluding commissions.

(11) INCOME TAXES

     At January 2, 2005, we had cumulative net operating loss carry-forwards of approximately $12.2 million for federal and approximately $9.7 million for state, which will begin to expire in 2011 if not used. We also had cumulative tax credit carry-forwards of approximately $1.8 million which, if not used, will begin to expire in 2011.

     The (provision for) benefit from income taxes consisted of the following:

                         
(in thousands)   Fiscal Year  
    2004     2003     2002  
Current income tax provision
  $ (1,900 )   $     $  
Deferred income tax benefit
          1,778       1,211  
 
                 
Total (provision for) benefit from income taxes
  $ (1,900 )   $ 1,778     $ 1,211  
 
                 

     Deferred taxes, detailed below, recognize the impact of temporary differences between the amounts of assets and liabilities recorded for financial statement purposes and such amounts measured in accordance with tax laws. Realization of the net operating loss carry forwards and other deferred tax temporary differences are contingent on future taxable earnings. During fiscal 2004, our deferred tax asset was reviewed for expected utilization using a “more likely than not” approach as required by SFAS No. 109, “Accounting for Income Taxes” by assessing the available positive and negative evidence surrounding its recoverability. We believe that the realization of the deferred tax asset is more likely than not based on our taxable income for fiscal 2004 and based on the expectation that our Company will generate the necessary taxable income in future years.

     Our Company’s deferred tax assets were as follows at:

                 
(in thousands)   January 2,     December 28,  
    2005     2003  
Net operating loss carry-forwards
  $ 4,658     $ 7,151  
Property and equipment basis difference
    1,221       1,043  
Tax credit carryovers
    1,772       1,290  
Other
    149       (261 )
 
           
Total deferred tax asset
    7,800       9,223  
Less: current portion
    3,342       2,285  
 
           
Deferred tax asset, long term
  $ 4,458     $ 6,938  
 
           

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(11) INCOME TAXES (continued)

     Reconciliation between the statutory rate and the effective tax rate for the fiscal years is as follows:

                         
    Fiscal Year  
    2004     2003     2002  
Federal statutory tax rate
    34.0 %     (34.0 )%     (34.0 )%
State taxes, net of federal benefit
    4.0       (5.0 )     (5.0 )
Tax effect of permanent differences
    3.4       3.6       5.9  
Tax effect of tip credit
    (6.2 )     (6.1 )     (13.1 )
Other
          3.5       (10.5 )
 
                 
Effective tax rate
    35.2 %     (38.0 )%     (56.7 )%
 
                 

(12) SUPPLEMENTAL CASH FLOWS INFORMATION:

                         
(in thousands)   Fiscal Year  
    2004     2003     2002  
Cash paid for interest
  $ 1,727     $ 1,786     $ 1,402  
 
                 
Cash paid for taxes
  $ 14     $ 6     $ 141  
 
                 
 
                       
Non-cash investing and financing activities:
                       
Property, equipment and leasehold improvements purchased with notes payable
  $     $ 1,600     $ 4,377  
 
                 
 
                       
Deferred tax asset related to tax benefit of stock options exercised
  $ 303     $ 443     $ 707  
 
                 
 
                       
Common stock issued in connection with restaurants acquired
  $     $     $ 206  
 
                 
 
                       
Notes receivable in connection with sale of restaurants, net of deferred gain recorded
  $     $ 1,300     $ 2,187  
 
                 
 
                       
Equipment purchased under capital lease obligation
  $     $     $ 45  
 
                 

(13) RETIREMENT SAVINGS PLAN

     We have a pre-tax salary reduction/profit-sharing plan under the provisions of Section 401(k) of the Internal Revenue Code, which covers employees meeting certain eligibility requirements. During 2004, we matched 30% of the employee’s contribution up to 9% of their earnings. Employer matching contributions were approximately $118,000, $96,000 and $61,000 for fiscal years 2004, 2003 and 2002, respectively.

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(14) COMMITMENTS AND CONTINGENCIES

     Litgation - During the fourth quarter of 2004, a subsidiary of the Company was named as a defendant in a lawsuit filed in the Court of Common Pleas, Warren County, Ohio. The lawsuit related to, among other things, various alleged defaults by a franchisee of the Company under its Middletown, Ohio lease and defaults by the Company’s subsidiary under a guaranty agreement pursuant to which the subsidiary guaranteed the franchisee’s performance under the lease.

     On January 25, 2005, we entered into a settlement agreement in which the plaintiffs released all claims asserted against us and our subsidiaries in exchange for a payment of $325,000. In addition, the plaintiffs released and terminated the subject guaranty and all rights thereunder. We intend to seek reimbursement for all amounts paid through the pursuit of available remedies.

     From time-to-time, we are involved in various legal actions arising in the ordinary course of business. In the opinion of our management, the ultimate dispositions of these matters will not have a material adverse effect on our consolidated financial position and results of operations. Currently, there are no significant legal matters pending.

     Employment agreement - On July 25, 2003, we entered into an employment agreement with our Chief Executive Officer. The agreement required minimum annual compensation of $450,000 and had a term of two years from August 11, 2003. On February 25, 2005, the Company entered into a new employment agreement with David Goronkin, its Chief Executive Officer, which replaces the previous employment agreement that was scheduled to expire in August 2005. The new agreement is effective January 1, 2005, has a one-year term, and will automatically renew for successive one-year terms. See Note 16, Subsequent Events for an expanded discussion of the terms of the agreement.

(15) SELECTED QUARTERLY DATA-UNAUDITED

     The following represents unaudited selected quarterly financial information for fiscal years 2004 and 2003:

                                                                 
(in thousands, except per share data)   First Quarter     Second Quarter     Third Quarter     Fourth Quarter  
    2004     2003     2004     2003     2004     2003     2004     2003  
Revenue
  $ 22,647     $ 23,007     $ 25,404     $ 25,941     $ 25,967     $ 25,970     $ 25,307     $ 22,822  
Income (loss) from operations
    1,284       776       2,112       (1,505 )     2,582       1,247       1,387       (711 )
Net income (loss)
    527       (1,095 )     996       (1,503 )     1,270       478       705       (778 )
Basic Net income (loss) per common share
    0.04       (0.10 )     0.08       (0.13 )     0.11       0.04       0.06       (0.06 )
Diluted net income (loss) per common share
    0.04       (0.10 )     0.08       (0.13 )     0.11       0.04       0.06       (0.06 )

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FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(16) SUBSEQUENT EVENTS – UNAUDITED

     On October 29, 2004, the Company and one of its franchisees were named as defendants in a lawsuit filed in the Court of Common Pleas, Warren County, Ohio. The lawsuit relates to, among other things, various alleged defaults by the franchisee under its Middletown, Ohio lease, for which the landlord is seeking damages. The lawsuit also alleges the failure of the franchisee to pay for electrical work done on the leased premises, for which the electrical contractor has filed a mechanics lien and is seeking damages. On January 25, 2005, we entered into a settlement agreement in which the plaintiffs released all claims asserted against us and our subsidiaries in exchange for a payment of $325,000. In addition, the plaintiffs released and terminated the subject guaranty and all rights thereunder. We intend to seek reimbursement for all amounts paid through the pursuit of available remedies.

     On January 28, 2005 we entered into a five-year credit agreement with Wells Fargo Bank, National Association, as administrative agent and lender, which establishes a revolving credit facility of $10.0 million. Principal amounts outstanding under the facility will bear interest either at an adjusted Eurodollar rate plus 3.50% or Wells Fargo’s prime rate plus 2.00%. Unused portions of the facility will be subject to an unused facility fee equal to 0.5% of the unused portion.

     We expect to use any borrowings under the credit agreement for general working capital purposes and for the repurchase of shares under our share repurchase program. Under the credit agreement, we granted Wells Fargo a security interest in all of our current and future personal property.

     The credit agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates of the Company, among others. The credit agreement also includes financial covenants.

     On February 25, 2005, the Company entered into a new employment agreement with David Goronkin, its Chief Executive Officer. It replaces the previous employment agreement that was scheduled to expire in August 2005. The new agreement is effective January 1, 2005, has a one-year term, and will automatically renew for successive one-year terms. Pursuant to the new agreement, Mr. Goronkin receives an annualized base salary of $472,500 (subject to increase at the discretion of the Board) and is eligible for a bonus of up to 75% of his base salary, as determined by the Compensation Committee of the Board of Directors, based on Mr. Goronkin’s satisfaction of certain performance-based criteria. The Company has filed an 8-K dated March 2, 2005 containing this agreement as Exhibit 10.1.

F-23


Table of Contents

Financial Statement Schedule

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS

                                         
            Additions     Deductions        
                            Credits to Costs        
                            and Expenses        
(in thousands)   Balance at     Charged to Costs     Charged to Other     and other     Balance at  
    Beginning of Period     and Expenses     Accounts(1)     accounts     End of Period  
Year ended December 29, 2002:
                                       
Allowance for doubtful accounts
  $ 45.3     $ 217.5     $     $ (137.8 )   $ 125.0  
Reserve for long-lived assets
  $ 819.0     $     $ 37.1     $ (52.1 )   $ 804.0  
 
                                       
Year ended December 28, 2003:
                                       
Allowance for doubtful accounts
  $ 125.0     $ 90.0     $     $ (116.50 )   $ 98.5  
Reserve for long-lived assets
  $ 804.0     $ 4,725.4     $ 3,519.3     $ (7,071.0 )   $ 1,977.7  
Assets held for Sale
  $     $     $ 1,281.1     $     $ 1,281.1  
 
                                       
Year ended January 2, 2005:
                                       
Allowance for doubtful accounts
  $ 98.5     $     $     $ (88.9 )   $ 9.6  
Reserve for long-lived assets
  $ 1,977.7     $ 58.6     $ 38.1     $ (49.2 )   $ 2,025.2  
Assets held for sale
  $ 1,281.1     $     $     $     $ 1,281.1  


(1)   Additions due to a balance sheet reclassification

F-24


Table of Contents

EXHIBITS

     
Exhibit No.   Description
 
3.1
  Articles of Incorporation, incorporated by reference from Exhibit 3.1 to our Registration Statement on Form SB-2 (File No. 333-10675) filed with the Securities and Exchange Commission on August 23, 1996
 
   
3.2
  Bylaws, incorporated by reference from Exhibit 3.2 to the Registration Statement on Form SB-2 (File No. 333-10675) filed on August 23, 1996
 
   
10.1
  Trademark License Agreement between Famous Dave’s of America, Inc. and Grand Pines Resorts, Inc., incorporated by reference from Exhibit 10.11 to the Registration Statement on Form SB-2 (File No. 333-10675) filed on August 23, 1996
 
   
10.2
  Agreement, dated as of January 21, 2000, by and between S&D Land Holdings, Inc., Grand Pines Resorts, Inc. and Famous Dave’s of America, Inc., incorporated by reference from Exhibit 10.19 to Form 10-Q filed May 16, 2000
 
   
10.3
  Promissory Note, dated January 21, 2000, by Famous Dave’s of America, Inc. and payable to S&D Land Holdings, Inc., in the initial principal amount of $750,000, incorporated by reference from Exhibit 10.20 to Form 10-Q filed May 16, 2000
 
   
10.4
  Loan Agreement, dated as of January 21, 2000, by and between FFCA Acquisition Corporation and MinWood Partners, Inc., incorporated by reference from Exhibit 10.21 to Form 10-Q filed May 16, 2000
 
   
10.5
  Master Lease, dated as of January 21, 2000, by and between MinWood Partners, Inc. and Famous Dave’s of America, Inc., incorporated by reference from Exhibit 10.22 to Form 10-Q filed May 16, 2000
 
   
10.6
  Loan Agreement, dated as of August 4, 2000, by and between FFCA Funding Corporation and FDA Properties, Inc., incorporated by reference from Exhibit 10.13 to Form 10-K filed March 29, 2001
 
   
10.7
  Master Lease, dated as of August 4, 2000, by and between FDA Properties, Inc. and Famous Dave’s of America, Inc., incorporated by reference from Exhibit 10.5 to Form 10-K filed March 29, 2001
 
   
10.8
  Amendment No. 1 to Employment Agreement dated September 1, 2001 between Famous Dave’s of America, Inc. and Martin J. O’Dowd, incorporated by reference from Exhibit 10.1 to Form 10-Q filed November 14, 2001
 
   
10.9
  Agreement and Assignment of Lease Rights dated May 30, 2003 by and between S&D Land Holdings, Inc. and the Company, incorporated by reference from Exhibit 10.1 to Form 10-Q filed August 12, 2003

 


Table of Contents

EXHIBITS (continued)

     
Exhibit No.   Description
 
10.10
  1997 Employee Stock Option Plan (as amended through May 22, 2002), incorporated by reference from Exhibit 10.11 to Form 10-Q filed August 14, 2002
 
   
10.11
  1995 Stock Option and Compensation Plan (as amended through May 22, 2002), incorporated by reference from Exhibit 10.2 to Form 10-Q filed August 14, 2002
 
   
10.12
  1998 Director Stock Option Plan (as amended through May 22, 2002), incorporated by reference from Exhibit 10.3 to Form 10-Q filed August 14, 2002
 
   
10.13
  Employment Agreement dated July 25, 2003 by and between Famous Dave’s of America, Inc. and David Goronkin, incorporated by reference to Exhibit 10.1 to Form 10-Q filed November 10, 2003
 
   
10.14
  Executive Elective Deferred Stock Unit Plan, incorporated by reference to Exhibit 10.1 to Form 10-Q filed May 11, 2004
 
   
10.15
  Credit Agreement by and between Wells Fargo Bank, National Association and Famous Dave’s of America, Inc., dated January 28, 2005
 
   
10.16
  Employment Agreement dated February 25, 2005 by and between David Goronkin, incorporated by reference to Exhibit 10.1 to Form 8-K filed March 2, 2005
 
   
10.17
  Form of 2005-2007 Performance Share Agreement, incorporated by reference to Exhibit 10.2 to Form 8-K filed March 2, 2005
 
   
10.18
  Schedule of grants made under the Form of 2005-2007 Performance Share Agreement, incorporated by reference to Exhibit 10.3 to Form 8-K filed March 2, 2005
 
   
10.19
  Famous Dave’s of America, Inc. Non-Qualified Deferred Compensation Plan, incorporated by reference to Exhibit 10.4 to Form 8-K filed March 2, 2005
 
   
21.0
  Subsidiaries of Famous Dave’s of America, Inc.
 
   
23.1
  Consent of Grant Thornton LLP
 
   
31.1
  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
31.2
  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
32.1
  Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.2
  Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 


Table of Contents

SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
  FAMOUS DAVE’S OF AMERICA, INC.
(“Registrant”)
 
 
Dated: March 18, 2005  By:   /s/ David Goronkin    
   
 
    David Goronkin   
    President and Chief Executive Officer   
 

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 18, 2005 by the following persons on behalf of the Registrant, in the capacities indicated.

     
Signature   Title
 
/s/ David Goronkin
  President, Chief Executive Officer, and Director

  (principal executive officer)
David Goronkin
   
 
   
/s/ Diana Garvis Purcel
  Vice President, Chief Financial Officer, and Secretary

  (principal financial and accounting officer)
Diana Garvis Purcel
   
 
   
/s/ K. Jeffrey Dahlberg
  Director

   
K. Jeffrey Dahlberg
   
 
   
/s/ F. Lane Cardwell, Jr.
  Director

   
F. Lane Cardwell, Jr.
   
 
   
/s/ Mary L. Jeffries
  Director

   
Mary L. Jeffries
   
 
   
/s/ Richard L. Monfort
  Director

   
Richard L. Monfort
   
 
   
/s/ Dean A. Riesen
  Director

   
Dean A. Riesen
   

 

exv10w15
 

Exhibit 10.15
 
 

CREDIT AGREEMENT

Dated as of January 28, 2005

among

FAMOUS DAVE’S OF AMERICA, INC., a Minnesota corporation,
D&D OF MINNESOTA, INC., a Minnesota corporation,
LAKE & HENNEPIN BBQ AND BLUES, INC., a Minnesota corporation,
FAMOUS DAVE’S RIBS, INC., a Minnesota corporation,
FAMOUS DAVE’S RIBS-U, INC., a Minnesota corporation, and
FAMOUS DAVE’S RIBS OF MARYLAND, INC., a Minnesota corporation

collectively, as the Borrowers
and each individually, as a Borrower

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent and as a Lender

and

The Other Lenders Party Hereto

Loan No.: 04 2508 01

 
 

 


 

TABLE OF CONTENTS

             
      Section         Page  
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS     1  
1.01
  Defined Terms.     1  
1.02
  Other Interpretive Provisions.     21  
1.03
  Accounting Terms.     22  
1.04
  Rounding.     22  
1.05
  References to Agreements and Laws.     22  
1.06
  Times of Day.     23  
 
           
ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS     23  
2.01
  Commitment to Make Revolving Credit Loans.     23  
2.02
  Borrowings, Conversions and Continuations of Revolving Credit Loans.     23  
2.03
  Prepayments.     24  
2.04
  Repayment of Revolving Credit Loans.     25  
2.05
  Interest.     25  
2.06
  Fees.     26  
2.07
  Evidence of Debt.     27  
2.08
  Payments Generally.     27  
2.09
  Sharing of Payments.     29  
 
           
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY     29  
3.01
  Taxes.     29  
3.02
  Illegality.     30  
3.03
  Inability to Determine Rates.     31  
3.04
  Increased Cost and Reduced Return; Capital Adequacy.     31  
3.05
  Funding Losses.     32  
3.06
  Matters Applicable to all Requests for Compensation.     32  
3.07
  Survival.     32  
 
           
ARTICLE IV. CONDITIONS PRECEDENT TO REVOLVING CREDIT LOAN BORROWINGS     32  
4.01
  Conditions of Initial Revolving Credit Loan Borrowing.     32  
4.02
  Conditions to all Revolving Credit Loan Borrowings.     34  
 
           
ARTICLE V. REPRESENTATIONS AND WARRANTIES     35  
5.01
  Existence, Qualification and Power.     35  
5.02
  Authorization; No Contravention.     35  
5.03
  No Consent or Other Action.     35  
5.04
  Binding Effect.     36  
5.05
  Financial Statements; No Material Adverse Effect.     36  
5.06
  Litigation.     36  
5.07
  No Default.     36  
5.08
  Ownership of Property; Liens.     37  

i


 

             
      Section         Page  
5.09
  Environmental Compliance.     37  
5.10
  Insurance.     37  
5.11
  Taxes.     37  
5.12
  ERISA Compliance.     38  
5.13
  Borrower Information; Subsidiaries, Etc.     38  
5.14
  Purpose of Revolving Credit Loan Borrowings; Margin Regulations; Investment Company Act; Public Utility Holding Company Act.     38  
5.15
  Disclosure.     39  
5.16
  Compliance with Laws.     39  
5.17
  Business and Location.     39  
5.18
  Transactions with Affiliates.     40  
5.19
  Financing Statements; Perfected Security Interest.     40  
5.20
  Title; Sufficiency; No Liens.     40  
5.21
  No Further Disposition.     41  
5.22
  Principal Agreements.     41  
5.23
  Capitalization; Solvency.     41  
5.24
  Intellectual Property; Licenses, Etc.     42  
5.25
  Brokers and Financial Advisors.     42  
5.26
  Compliance with OFAC Rules and Regulations.     42  
5.27
  Foreign Assets Control Regulations, Etc.     42  
5.28
  FDA Properties, Minwood, FDA Properties of Texas, LP, Famous Dave’s Properties of Texas, Inc., Famous Dave’s Ribs of Texas, L.P. and FD Ribs of Texas, Inc.     43  
 
           
ARTICLE VI. AFFIRMATIVE COVENANTS     43  
6.01
  Financial Statements.     43  
6.02
  Certificates; Other Information.     45  
6.03
  Notices.     46  
6.04
  Payment of Obligations.     46  
6.05
  Preservation of Existence, Etc.     47  
6.06
  Maintenance of Properties.     47  
6.07
  Maintenance of Insurance.     47  
6.08
  Compliance with Laws.     47  
6.09
  Books and Records.     47  
6.10
  Inspection Rights.     48  
6.11
  Conduct of Business.     48  
6.12
  Capitalization; Solvency.     48  
6.13
  Casualty and Condemnation.     48  
6.14
  Banks and Payments.     50  
6.15
  Equipment.     50  
6.16
  Escrows.     51  
6.17
  Taxes.     51  
6.18
  FDA Properties, Minwood, FDA Properties of Texas, LP, Famous Dave’s Properties of Texas, Inc., Famous Dave’s Ribs of Texas, L.P. and FD Ribs of Texas, Inc.     51  
6.19
  Further Assurances.     51  

ii


 

             
      Section         Page  
ARTICLE VII. NEGATIVE COVENANTS     52  
7.01
  Liens.     52  
7.02
  Investments.     53  
7.03
  Indebtedness.     54  
7.04
  Fundamental Changes; Subsidiaries.     54  
7.05
  Dispositions.     54  
7.06
  Restricted Payments.     55  
7.07
  Change in Nature of Business.     55  
7.08
  Transactions with Affiliates.     55  
7.09
  Burdensome Agreements.     55  
7.10
  Use of Proceeds.     56  
 
           
ARTICLE VIII. SECURITY FOR OBLIGATIONS     56  
8.01
  Grant of Security in the Collateral.     56  
 
           
ARTICLE IX. SPECIAL PROVISIONS CONCERNING RIGHTS AND DUTIES WHILE IN POSSESSION OF COLLATERAL     57  
9.01
  Borrowers’ Possession.     57  
9.02
  Administrative Agent’s Possession.     57  
 
           
ARTICLE X. EVENTS OF DEFAULT AND REMEDIES     58  
10.01
  Events of Default.     58  
10.02
  Remedies Upon Event of Default.     60  
10.03
  Application of Funds.     62  
10.04
  Required Notice of Sale.     63  
 
           
ARTICLE XI. RIGHT TO CURE; POST-DEFAULT POWER OF ATTORNEY     63  
11.01
  Right to Cure.     63  
11.02
  Power of Attorney.     63  
 
           
ARTICLE XII. ADMINISTRATIVE AGENT     64  
12.01
  Appointment and Authorization of Administrative Agent.     64  
12.02
  Delegation of Duties.     64  
12.03
  Liability of Administrative Agent.     64  
12.04
  Reliance by Administrative Agent.     65  
12.05
  Notice of Default.     65  
12.06
  Credit Decision; Disclosure of Information by Administrative Agent.     66  
12.07
  Indemnification of Administrative Agent.     66  
12.08
  Administrative Agent in its Individual Capacity.     67  
12.09
  Successor Administrative Agent.     67  
12.10
  Administrative Agent May File Proofs of Claim.     68  
12.11
  Collateral Matters.     68  
12.12
  Duties in the Case of Enforcement.     69  
12.13
  Other Agents; Co-Lead Arrangers and Syndication Agent.     69  
12.14
  Advertising, Promotion and Marketing     69  

iii


 

             
      Section         Page  
ARTICLE XIII. CONTRIBUTION AMONG THE BORROWERS     69  
13.01
  Contribution.     69  
13.02
  Calculation of Contributions.     70  
13.03
  Rights to Contribution Subordinated.     70  
 
           
ARTICLE XIV. FINANCIAL COVENANTS     70  
14.01
  Adjusted Leverage Ratio.     70  
14.02
  Consolidated Cash Flow Ratio.     71  
14.03
  Capital Expenditures.     71  
 
           
ARTICLE XV. MISCELLANEOUS     72  
15.01
  Amendments, Etc.     72  
15.02
  Notices and Other Communications; Facsimile Copies.     73  
15.03
  No Waiver; Cumulative Remedies.     74  
15.04
  Attorney Costs, Expenses and Taxes.     74  
15.05
  Indemnification by the Borrowers.     74  
15.06
  Payments Set Aside.     75  
15.07
  Successors and Assigns.     75  
15.08
  Confidentiality.     79  
15.09
  Set-off.     80  
15.10
  Interest Rate Limitation.     80  
15.11
  Counterparts.     81  
15.12
  Integration.     81  
15.13
  Survival of Representations and Warranties.     81  
15.14
  Severability.     81  
15.15
  Tax Forms.     82  
15.16
  Estoppel Certificates.     83  
15.17
  Recourse.     84  
15.18
  Governing Law; Consent to Jurisdiction.     84  
15.19
  Waiver of Right to Trial by Jury and Other Rights.     85  
15.20
  Time of the Essence.     85  
15.21
  Joint and Several Liability of Borrowers.     85  
15.22
  Patriot Act Notice.     86  
 
           
SIGNATURES     S-1  

iv


 

             
SCHEDULES        
 
           
2.01
  Commitments and Pro Rata Shares        
5.05
  Indebtedness as of the Closing Date        
5.06
  Litigation        
5.11
  Tax Liens and Waivers        
5.13
  Mergers, etc., Subsidiaries and Other Equity Investments        
5.17
  Other Businesses        
5.18
  Transactions with Affiliates        
5.22
  Principal Agreements        
5.24
  IP Rights        
5.25
  Brokers and Financial Advisors        
6.07
  Insurance Requirements        
6.14
  Banks        
7.01
  Existing Liens        
7.03
  Permitted Indebtedness        
15.02
  Administrative Agent’s Office, Certain Addresses for Notices        
 
           
EXHIBITS        
 
           
A
  Form of Revolving Credit Loan Notice        
B
  List of Company-Owned Properties        
C
  List of Franchised Properties        
D
  Form of Note        
E
  Form of Compliance Certificate        
F
  Form of Assignment and Assumption        
H
  Opinion Matters        
I
  Filing Offices        
J
  Ownership Chart        
K
  Permitted Encumbrances        

v


 

CREDIT AGREEMENT

     This CREDIT AGREEMENT (“Agreement”) is entered into as of January 28, 2005, among FAMOUS DAVE’S OF AMERICA, INC., a Minnesota corporation D&D OF MINNESOTA, INC., a Minnesota corporation (“D&D”), LAKE & HENNEPIN BBQ AND BLUES, INC., a Minnesota corporation (“Lake BBQ”), FAMOUS DAVE’S RIBS, INC., a Minnesota corporation (“Ribs”), FAMOUS DAVE’S RIBS-U, INC. (“Ribs-U”), a Minnesota corporation and FAMOUS DAVE’S RIBS OF MARYLAND, INC. (“Ribs of Maryland”), a Minnesota corporation (individually and collectively, as the context requires, with such determination to be made by Administrative Agent (as hereinafter defined) in its sole discretion, “Borrower”), each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent.

     The Borrowers have requested that the Lenders provide a revolving credit facility, and the Lenders are willing to do so on the terms and conditions set forth herein.

     In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS

     1.01 Defined Terms.

     As used in this Agreement, the following terms shall have the meanings set forth below:

     “Accessions” shall have the meaning accorded to such term in the UCC.

     “Account” or “Accounts” shall have the meaning accorded to such term in the UCC.

     “Accounting Changes” means: (a) changes in accounting principles required by GAAP consistently applied and implemented by the Borrowers and (b) changes in accounting principles recommended by the Borrowers certified public accountants.

     “Actual/360 Basis” means on the basis of a 360-day year and charged on the basis of actual days elapsed for any whole or partial month in which interest is being calculated.

     “Adjusted Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Rental Expense for the Reference Period ending on such date (multiplied by eight (8)) plus the aggregate undrawn amount of all letters of credit outstanding plus (without duplication) Consolidated Funded Indebtedness outstanding on such date to (b) Consolidated EBITDAR for the Reference Period ending on such date.

     “Adjusted Eurodollar Rate” means the rate of interest per annum, rounded upward to the nearest whole multiple of one-hundredth of one percent (0.01%), obtained by dividing (a) the Eurodollar Rate, by (b) a percentage equal to 100% minus the Reserve Percentage.

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     “Administrative Agent” means Wells Fargo in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

     “Administrative Agent Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 15.02, or such other address or account as the Administrative Agent may from time to time notify the Borrowers and the Lenders.

     “Affiliate” means, with respect to any Person, (i) any Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, (ii) any Person who is a manager, director or officer of, partner in, trustee of, or blood or legal relative, guardian or representative of the specified Person, or any Person who acts or serves in a similar capacity with respect to the specified Person, (iii) any Person of which or whom the specified Person is a manager, director or officer, partner, trustee, or blood or legal relative, guardian or representative, or with respect to which or whom, the specified Person acts or serves in a similar capacity; (iv) any Person, who, directly or indirectly, is the legal or beneficial owner of or Controls 10% or more of any class of equity securities of the specified Person, and (v) any Person who is an Affiliate as defined in clauses (i), (ii), (iii) or (iv) of an Affiliate of the specified Person.

     “Agent-Related Persons” means the Administrative Agent, together with its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

     “Aggregate Commitments” means the sum of the Commitments of all the Lenders.

     “Agreement” means this Credit Agreement, as the same may be amended, restated, modified or otherwise supplemented from time to time in accordance with the terms hereof.

     “Anti-Terrorism Order” means the Executive Order 13224 issued on September 24, 2001.

     “Applicable Rate” means, (i) with respect to Eurodollar Rate Loans, an interest rate per annum equal to 3.50% and (ii) with respect to Base Rate Loans, an interest rate per annum equal to 2.00%.

     “Approved Providers” means providers of insurance rated not less than A/X by A.M. Best Company Inc., or otherwise approved by Administrative Agent.

     “Assignment and Assumption” means an Assignment and Assumption substantially in the form of Exhibit F.

     “Attorney Costs” means and includes all reasonable fees, expenses and disbursements of any law firm or other external counsel and, without duplication, the allocated cost of internal legal services and all expenses and disbursements of internal counsel.

     “Audited Financial Statements” means the audited consolidated balance sheet of the Borrowers and their Subsidiaries for the fiscal year ended December 28, 2003, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrowers and their Subsidiaries, including the notes thereto.

2


 

     “Availability Period” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, and (b) the date of termination of the commitment of each Lender to make Revolving Credit Loans pursuant to Section 10.02.

     “Balance Sheet Date” means December 28, 2003.

     “Base Rate” means for any day a rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the per annum rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its “prime rate.” The “prime rate” is a rate set by the Administrative Agent based upon various factors including the Administrative Agent’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change.

     “Base Rate Loan” means a Revolving Credit Loan that bears interest at the Base Rate.

     “Borrower” has the meaning specified in the introductory paragraph hereto.

     “Brand” means Famous Dave’s.

     “Business” means (a) the business of operating a Famous Dave’s restaurant business at each Company-Owned Property, (b) the business of acting as franchisor under franchise agreements with certain Persons that are not Affiliates of any Borrower, as franchisees, pursuant to which such Persons operate Famous Dave’s restaurant businesses at the Franchised Properties, (c) the business of owning and licensing the trademarks and service marks used in connection with the operation of the Famous Dave’s restaurant business, and (d) any other business activity incidental or related to any of the foregoing.

     “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, Delaware, New York or California[, and if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market].

     “Capital Assets” means fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks and good will); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with GAAP consistently applied.

     “Capital Expenditures” means amounts paid or Indebtedness incurred by the Borrowers or any of their Subsidiaries (net of any tenant improvement allowances related to a Restaurant) in connection with (i) the purchase or lease by a Borrower or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with GAAP consistently applied, including without limitation or duplication, maintenance capital, build-out and new store expenditures, and (ii) the lease of any assets by a

3


 

Borrower or any of its Subsidiaries as lessee under any Synthetic Lease to the extent that such assets would have been Capital Assets had the Synthetic Lease been treated for accounting purposes as a Capitalized Lease.

     “Capitalized Leases” mean leases under which a Borrower or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP consistently applied.

     “Capital Stock” means any common stock, partnership interest, membership interest or other equity interest.

     “Cash Equivalents” means (a) securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States or any agency or instrumentality thereof (provided, that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such Person; (b) securities issued, or directly, unconditionally and fully guaranteed or insured, by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Ratings Group or Moody’s Investors Services, Inc.; (c) time deposits and certificates of deposit or bankers’ acceptance of any Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any state thereof or the District of Columbia having, capital and surplus aggregating in excess of $500,000,000 and a rating of “A” (or such other similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) with maturities of not more than one year from the date of acquisition by such Person; (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above, which repurchase obligations are secured by a valid perfected security interest in the underlying securities; (d) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by Standard & Poor’s Rating Service or at least P-1 or the equivalent thereof by Moody’s Investors Service, Inc., and in each case maturing not more than ninety (90) days after the date of acquisition by such Person; (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above; and (f) demand deposit accounts maintained in the ordinary course of business.

     “Certificated and Uncertificated Securities” shall have the meaning accorded to such term in the UCC.

     “Certificate of Title” shall mean any certificate or document evidencing title.

     “Change in Control” means, any act or event (including any assignment, sale, disposition or issuance) which results in (or with the passage of time will result in) (i) any Person owning, directly or indirectly, 50% or more of the Capital Stock of Famous Dave’s or (ii) Famous Dave’s

4


 

owning, directly or indirectly, less than (i) 100% of the Capital Stock of D&D, Lake BBQ, Ribs, Ribs-U, Minwood, or FDA Properties or (ii) 97% of Ribs of Maryland.

     “Change in Law” means (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any appropriate Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     “Chattel Paper” shall have the meaning accorded to such term in the UCC.

     “Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01 (or, in the case of Section 4.01(b), waived by the Person entitled to receive the applicable payment).

     “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time.

     “Collateral” means all personal property, including Equipment, Inventory, Fixtures, Accessions, General Intangibles (including Principal Agreements), Accounts, Certificates of Title, Money, Instruments, Investment Property, Documents, Chattel Paper, Deposit Accounts, Letters of Credit (as defined in the UCC), Commodity Accounts, Commodity Contracts, Health-Care Insurance Receivables, Commercial Tort Claims, Promissory Notes, Certificated and Uncertificated Securities, Financial Assets, Securities Accounts, Securities Entitlements, Payment Intangibles and Software, credit balances, deposits, bankers’ acceptances, guaranties, supporting obligations, letter-of-credit-rights, credits, claims, choses in action, demands, liens, security interests, rights, insurance, awards, compensation, remedies, title and interest in, to and in respect of other Collateral, and all Collateral Revenues and all other personal property of any kind, wherever located, whether now owned or hereafter acquired, including any of the same now or hereafter existing, arising, held, sold, used or consumed in connection with the Business or any Property and any other property, rights, and interests which at any time relate to, arise out of or in connection with the foregoing or which come into the possession, custody or control of Administrative Agent, on behalf of the Lenders, or any of its agents, representatives, associates or correspondents, for any purpose, and all products and Proceeds of the foregoing.

     “Collateral Revenues” means with respect to any Collateral all interest, income, dividends, distributions, rents, revenues, profits and earnings thereon or other monies or revenues derived therefrom, including any such property received in connection with any disposition of any Principal Agreement and all moneys which may become payable or received under any policy insuring the Collateral or otherwise required to be maintained under the Loan Documents (including return of unearned premium.)

     “Commercial Tort Claims” shall have the meaning accorded to such term in the UCC.

     “Commitment” means, as to each Lender, its Revolving Credit Loan Commitment, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to

5


 

which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

     “Commodity Account” shall have the meaning accorded to such term in the UCC.

     “Commodity Contract” shall have the meaning accorded to such term in the UCC.

     “Company-Owned Property” means each real property in which any Borrower or any of its Subsidiaries owns a fee simple or leasehold interest and upon which any Borrower (or any tenant of any Borrower) operates all or any portion of the Business, each such Company-Owned Property being listed on Exhibit B (as said Exhibit B shall be amended from time to time in accordance with this Agreement)..

     “Compliance Certificate” means a certificate substantially in the form of Exhibit E.

     “Condemnation” means any taking of the property of any Borrower by any Governmental Authority or other Person.

     “Conflict” or “Conflicting” means, with respect to any Contractual Obligation, Organizational Document, Requirement of Law, Consent or Other Action or any other item, any conflict with, breach of, default under, any triggering of rights, benefits, or obligations under or in connection with such item.

     “Consent(s) and/or Other Action” shall mean any consent, authorization, Judgment, directive, approval, license, certificate, registration, permit, exception, exemption, filing, notice, declaration or other action by, with or to any Person.

     “Consolidated” or “consolidated” with reference to any term defined herein, shall mean that term as applied to the accounts of the Borrowers and their Subsidiaries, consolidated in accordance with GAAP consistently applied.

     “Consolidated Cash Flow” means, for any Reference Period, (a) Consolidated EBITDAR for such period, minus (b) cash income taxes paid during such period by the Borrowers and their Subsidiaries, minus (c) Maintenance Capital Expenditures during such period.

     “Consolidated Cash Flow Ratio” means, as of the end of any Reference Period, the ratio of (a) Consolidated Cash Flow for such Reference Period to (b) the sum of Consolidated Financial Obligations and Consolidated Rental Expense, in each case, for such Reference Period.

     “Consolidated EBITDA” means, with respect to any Reference Period, an amount equal to the sum of (a) Consolidated Pre-Tax Income of the Borrowers and their Subsidiaries for such period, plus (b) in each case to the extent deducted in the calculation of such Person’s Consolidated Pre-Tax Income and without duplication, (i) depreciation and amortization for such period, plus (ii) non-cash charges pertaining to the Borrowers’ compensation programs and performance shares as required by Financial Accounting Statement No. 148 and Financial Accounting Statement 123r, plus (iii) Consolidated Total Interest Expense paid or accrued during such period, plus (iv) net losses from sales of assets, whether or not extraordinary (excluding sales in the ordinary course of business but including the sale of the real property owned by FDA

6


 

Properties of Texas, LP in Mesquite, Texas), plus (v) amounts required to be deducted under GAAP for closed or abandoned operations (including pursuant to FASB 121), up to a maximum amount of $1,000,000 in the aggregate for any four consecutive fiscal quarters of the Borrowers, minus (c) net gains on sales of assets, whether or not extraordinary (excluding sales in the ordinary course of business), and other extraordinary gains.

     “Consolidated EBITDAR” means, for any Reference Period, the sum of (a) the Consolidated EBITDA for such period, plus (b) Consolidated Rental Expense for such period.

     “Consolidated Financial Obligations” means, for any period, the sum of (a) all scheduled payments of principal or mandatory redemption amounts and fees on Indebtedness of the Borrowers and their Subsidiaries, including Capitalized Leases and including Synthetic Leases, due and payable during such period or within six Business Days following the last day of such period, plus (b) Consolidated Total Interest Expense for such period. Demand obligations shall be deemed to be due and payable during any period during which such obligations are outstanding.

     “Consolidated Funded Indebtedness” means, with respect to the Borrowers and their Subsidiaries on a consolidated basis, the sum, without duplication, of (a) the aggregate amount of Indebtedness of the Borrowers and their Subsidiaries, on a consolidated basis, to the extent relating to (i) the borrowing of money or the obtaining of credit, including the issuance of notes or bonds or Indebtedness issued in connection with the conversion of any Capital Stock, (ii) the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business), and (iii) Synthetic Leases and Capitalized Leases, plus (b) Indebtedness of the type referred to in clause (a) of another Person guaranteed by the Borrowers and any of their Subsidiaries; provided that, for the avoidance of doubt, subclause (i) shall not include any Derivative Contracts.

     “Consolidated Net Income (or Deficit)” means, for any Reference Period, the consolidated net income (or deficit) of the Borrowers and their Subsidiaries, after deduction of all expenses, taxes, and other proper charges, determined in accordance with GAAP consistently applied, after eliminating therefrom all extraordinary non-recurring items of income.

     “Consolidated Pre-Tax Income” means, for any Reference Period, Consolidated Net Income (or Deficit) for such period plus, to the extent deducted from the calculation of Consolidated Net Income (or Deficit), income tax paid or payable for such period, determined in accordance with GAAP consistently applied.

     “Consolidated Rental Expense” means, for any Reference Period, the sum of all rental expense of the Borrowers and their Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP consistently applied, incurred under any Leases or other rental agreements or leases of real or personal property, including space leases and ground leases, other than obligations in respect of any Capitalized Leases or any Synthetic Leases.

     “Consolidated Total Interest Expense” means, for any Reference Period, the aggregate amount of cash interest accrued by the Borrowers and their Subsidiaries during such period on all Indebtedness of the Borrowers and their Subsidiaries outstanding during all or any part of

7


 

such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including (a) payments consisting of interest in respect of any Capitalized Lease or any Synthetic Lease, (b) commitment fees and letter of credit fees incurred in connection with the borrowing of money (including amounts due under Section 2.06) and (c) facility fees, balance deficiency fees and similar fees or expenses in connection with the borrowing of money other than the financing provided under this Agreement and the other Loan Documents.

     “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound and shall include, without limitation, any obligation under or in connection with any Instrument, Document or General Intangible.

     “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling,” and “Controlled by” and “under common Control with” have meanings correlative thereto.

     “Current Filings” shall have the meaning specified in Section 5.20.

     “D&D” shall have the meaning specified in the introductory paragraph hereto.

     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

     “Default” means any event or condition that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

     “Default Rate” means an interest rate equal to (a) the Base Rate plus (b) the Applicable Rate, if any, applicable to Base Rate Loans plus (c) 4% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 4% per annum, in each case to the fullest extent permitted by applicable Laws.

     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Revolving Credit Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

     “Deposit Account” or “Deposit Accounts” shall have the meaning accorded to such term in the UCC.

     “Derivative Contracts” means, with respect to any Person, every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement

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or arrangement (including caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices.

     “Disposition” or “Dispose” means, with respect to any property, assets, obligations or other items, the sale, assignment, conveyance, pledge, Grant, encumbrance, transfer, license, lease, gift, abandonment or other disposition (including any sale and leaseback transaction) of thereof by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

     “Document” shall have the meaning accorded to such term in the UCC.

     “Dollar” and the sign “$” mean lawful money of the United States.

     “Environmental Laws” means all present and future Laws, Requirements of Law, or Consents or Other Action, relating to the protection of human health and safety or the environment, including (a) all Laws, Requirements of Law, or Consents or Other Action, pertaining to reporting, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of hazardous materials, chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials or wastes whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the presence, generation, discharge, release, removal, manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, emissions, contaminants, or hazardous, radioactive or toxic substances, materials, or wastes, whether solid, liquid, or gaseous in nature; and (b) all Laws, Requirements of Law, Consents or Other Action, pertaining to the protection of the health and safety of employees of the public.

     “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     “Equipment” shall have the meaning accorded to such term in the UCC.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with any Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section

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4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower or any ERISA Affiliate.

     “Eurodollar Rate” means for any Interest Period the rate of interest, rounded upward to the nearest whole multiple of one-sixteenth of one percent (0.0625%), quoted by Administrative Agent as the London Inter-Bank Offered Rate for deposits in U.S. Dollars with a term equivalent to such Interest Period, determined at approximately 9:00 a.m. California time.

     “Eurodollar Rate Loan” means a Revolving Credit Loan bearing interest at the Adjusted Eurodollar Rate.

     “Event of Default” has the meaning specified in Section 10.01.

     “Famous Dave’s” means Famous Dave’s of America, Inc., a Minnesota corporation.

     “FDA Properties” means FDA Properties, Inc., a Delaware corporation.

     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent.

     “Filing Collateral” means all Collateral and all other property with respect to which a security interest may be perfected by the filing of financing statements under the UCC.

     “Filing Offices” means the filing offices listed on Exhibit I.

     “Financial Assets” shall have the meaning accorded to such term in the UCC.

     “Financing Statements” shall mean financing statements on form UCC-1 naming the Borrowers, as debtors and Administrative Agent, for the benefit of Lenders, as secured party and describing the Collateral, as the collateral.

     “Fixtures” shall have the meaning accorded to such term in the UCC.

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     “Foreign Lender” has the meaning specified in Section 15.15(a)(i).

     “Franchised Properties” means those real properties listed on Exhibit C upon which Persons that are not Affiliates of any Borrower (other than Dave Anderson) operate Famous Dave’s restaurant businesses pursuant to franchise agreements between a Borrower or its Affiliates, as franchisor, and such other Persons, as franchisees

     “FRB” means the Board of Governors of the Federal Reserve System of the United States, or any Governmental Authority that succeeds to any of its principal functions.

     “GAAP” or “generally accepted accounting principles” means generally accepted accounting principles in effect in the United States of America from time to time and subject to Section 1.03.

     “General Intangible” or “General Intangibles” shall have the meaning accorded to such term in the UCC.

     “Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank, public office, court, arbitration or mediation panel, or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

     “Grant” or “Grants” or “Granting” shall include to grant, assign, pledge, transfer, convey, set over and dispose.

     “Growth Capital Expenditures” means Capital Expenditures related to the construction, acquisition or opening of new Restaurants during any fiscal year.

     “Guarantee” means, as to any Person, any (a) obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such primary obligor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as

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determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

     “Hazardous Material” means any material or substance that, whether by its nature or use, is now or hereafter defined as a hazardous waste, hazardous substance, pollutant or contaminant under any Environmental Laws, or which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and which is now and hereafter regulated under any Environmental Laws, or which is or contains petroleum, gasoline, diesel fuel or another petroleum hydrocarbon product.

     “Health-Care Insurance Receivables” shall have the meaning accorded to such term in the UCC.

     “Incurrence Ratio” means, as of any date of determination, the maximum Adjusted Leverage Ratio permitted under Section 14.01 as of the end of the most recently ended Reference Period for which the Borrowers have delivered a Compliance Certificate, less 0.15.

     “Indebtedness” means, as to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication:

     (a) every obligation of such Person for money borrowed,

     (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses,

     (c) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person,

     (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith and for which the Borrowers maintain sufficient reserves in accordance with GAAP consistently applied),

     (e) every obligation of such Person under any Capitalized Lease,

     (f) every obligation of such Person under any Synthetic Lease,

     (g) all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively “receivables”), whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith,

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     (h) every obligation of such Person (an “equity related purchase obligation”) to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person or any rights measured by the value of such Capital Stock,

     (i) every obligation of such Person under any Derivative Contract,

     (j) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law,

     (k) every Guarantee.

     The “amount” or “principal amount” of any Indebtedness at any time of determination represented by (i) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP consistently applied, (ii) any Capitalized Lease shall be the principal component of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (iii) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than any of the Borrowers or any of their wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (iv) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount, (v) any Derivative Contract shall be the maximum amount of any termination or loss payment required to be paid by such Person if such Derivative Contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred, (vi) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price and (vii) any Guarantee shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

     “Indemnified Liabilities” has the meaning set forth in Section 15.05.

     “Indemnitees” has the meaning set forth in Section 15.05.

     “Instrument” or “Instruments” shall have the meaning accorded to such term in the UCC.

     “Insurance Proceeds” means, at any time, all insurance proceeds or payments to which any Borrower may be or become entitled by reason of any casualty with respect to a Company-Owned Property under the insurance policies required to be maintained pursuant to the Loan Documents plus (i) the amounts of any deductibles under such insurance policies; (ii) if any Borrower fails to maintain any of the insurance policies required under the Loan Documents, the amounts which would have been available with respect to such casualty had such Borrower maintained such insurance policies; and (iii) all insurance proceeds and payments to which any

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Borrower may be or become entitled, including pursuant to title insurance or by reason of any casualty with respect to any Company-Owned Property under any other insurance policies coverage maintained by any Borrower.

     “Insurance Requirements” means the insurance requirements set forth in Section 6.07 and Schedule 6.07.

     “Interest Payment Date” means, as to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the first Business Day of each month and the Maturity Date.

     “Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed, or converted to, or continued as, a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Revolving Credit Loan Notice; provided that:

     (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

     (ii) any Interest Period pertaining to a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

     (iii) no Interest Period shall extend beyond the Maturity Date.

     “Inventory” shall have the meaning accorded to such term in the UCC.

     “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

     “Investment Property” shall have the meaning accorded to such term in the UCC.

     “IP Rights” has the meaning set forth in Section 5.24.

     “IRS” means the United States Internal Revenue Service.

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     “Judgment” means any order, decision, decree, award or injunction of any Governmental Authority.

     “Lake BBQ” shall have the meaning specified in the introductory paragraph hereto.

     “Late Payment Charge” shall have the meaning accorded to such term in Section 2.05(b).

     “Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

     “Lease” or “Leases” means any lease covering all or a portion of any Company-Owned Property and any other leases to which any Borrower is a party or in which any Borrower owns an interest other than a Personal Property Lease.

     “Lease Obligations” means obligations under or in connection with any Lease.

     “Lender” has the meaning specified in the introductory paragraph hereto.

     “Lending Office” means, as to any Lender, the office or offices of such Lender designated by such Lender in writing to Borrowers and Administrative Agent from time to time.

     “License” or “Licenses” means any license, permit, directive, authorization, approval or stipulation required to operate the Business at any location.

     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing) and including any right of set off or offset, rights of others, benefits, claims or other liens (including federal or state tax liens).

     “Litigation” means any action, proceeding, litigation, investigation, arbitration, mediation, claim or Judgment.

     “Loan Documents” means this Agreement, each Note and any other note, security agreement, pledge agreement, mortgage, deed of trust, deed to secure debt, any guarantee of Borrowers’ Obligations, collateral assignments, and other contractual Obligations, filings (including financing statements) and recordings executed, delivered or filed, including any amendments, supplements, renewals, extensions or replacements thereof, executed between any Borrowers or their Affiliates and Lenders or by any Borrowers or their Affiliates for the benefit of Lenders.

     “Loss” means any casualty or Condemnation.

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     “Loss Proceeds” means all insurance proceeds or awards with respect to any Loss.

     “Maintenance Capital Expenditures” means Capital Expenditures that are not Growth Capital Expenditures. For the avoidance of doubt, Maintenance Capital Expenditures shall include investments in new point of sale systems or accounting systems.

     “Margin Stock” shall have the meaning accorded to such term in Regulation U, T or X of the Board of Governors of the Federal Reserve System, as amended.

     “Material Adverse Effect” means, a material adverse change in, or a material adverse effect on, (a) the business, results of operations, condition (financial or otherwise), assets or liabilities (actual or contingent) of any Borrower, (b) the ability of the Borrowers to perform any of their respective obligations under the Loan Documents, (c) the rights and remedies of the Administrative Agent and the Lenders under any of the Loan Documents, or (d) the legality, validity, binding effect or enforceability of any of the Loan Documents.

     “Maturity Date” means January 28, 2010.

     “Maximum Revolving Credit Loan Commitment” means TEN MILLION AND NO/100ths Dollars ($10,000,000.00).

     “Minwood” means Minwood Partners, a Delaware corporation.

     “Money” shall have the meaning accorded to such term in the UCC.

     “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

     “Note” means a promissory note made by the Borrowers in favor of a Lender evidencing Revolving Credit Loans made by such Lender, substantially in the form of Exhibit D.

     “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Borrower arising under any Loan Document or otherwise with respect to any Revolving Credit Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising, and any future advances thereon, renewals, extensions, modifications, amendments, substitutions and consolidations thereof, including Borrowers’ obligations to pay (or reimburse Administrative Agent and Lenders for) all costs and expenses (including Attorney Costs) incurred by Administrative Agent or Lenders in obtaining, maintaining, protecting and preserving their interest in the Collateral or its security interest therein, foreclosing, retaking, holding, preparing for sale or lease, selling or otherwise disposing or realizing on the Collateral or in exercising their rights hereunder or as secured party under the UCC, any other applicable Law or Loan Document, and including interest and fees and that accrue after the commencement by or against any Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

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     “OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

     “Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed, if necessary, in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

     “Outstanding Amount” means, on any date, the aggregate outstanding principal amount of the Revolving Credit Loans after giving effect to any borrowings and prepayments or repayments occurring on such date.

     “Participant” has the meaning specified in Section 15.07(e).

     “Payment Intangibles” shall have the meaning accorded to such term in the UCC.

     “Permitted Encumbrances” means those matters set forth in Section 7.01 and listed on Exhibit K and which individually and in the aggregate will not materially and adversely affect the ability of any Borrower to pay in full the Obligations, the use of any Company-Owned Property for the use currently being made thereof, or the operation or value of any Company-Owned Property.

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Borrower or any ERISA Affiliate or to which any Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

     “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     “Personal Property Lease” shall mean any lease of Equipment or other personal property deemed an operating lease under GAAP consistently applied.

     “Personalty Charges” means, with respect to any period, payments on any Personal Property Lease.

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     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by any Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

     “Principal Agreement” or “Principal Agreements” shall mean (a) any written agreement calling for the annual expenditure or receipt by any Borrower or any Subsidiary individually (or any two or more of the Borrowers or Subsidiaries in the aggregate) of more than $1,000,000 and (b) any other contract, agreement, permit or license, written or oral, of the Borrowers or any of their Subsidiaries as to which the breach, nonperformance, cancellation of failure to renew by any party thereto, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     “Proceeds” shall include Insurance Proceeds, Loss Proceeds, “proceeds”, “products”, and “comingled goods” within the meaning accorded to such term in the UCC.

     “Promissory Notes” shall have the meaning accorded to such term in the UCC.

     “Property” means each Company-Owned Property.

     “Pro Rata Share” means, with respect to each Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitment of such Lender at such time and the denominator of which is the amount of the Aggregate Commitments at such time; provided that if the commitment of each Lender to make Revolving Credit Loans have been terminated pursuant to Section 10.02, then the Pro Rata Share of each Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof. The initial Pro Rata Share of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

     “Reference Period” means, as of any date of determination, the period of four (4) consecutive fiscal quarters of the Borrowers and their Subsidiaries ending on such date, or if such date is not a fiscal quarter end date, the period of four (4) consecutive fiscal quarters most recently ended (in each case treated as a single accounting period).

     “Register” has the meaning set forth in Section 15.07(c).

     “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

     “Required Lenders” means, as of any date of determination, (a) if there are less than three (3) Lenders on such date, all Lenders (other than any Defaulting Lender) and (b) if there are three (3) or more Lenders on such date, Lenders having in the aggregate at least sixty-six and two-thirds percent (66 2/3%) of the Aggregate Commitments or, if the commitment of each Lender to make Revolving Credit Loans have been terminated pursuant to Section 10.02,

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Lenders holding in the aggregate at least sixty-six and two-thirds percent (66 2/3%) of the Total Outstandings; provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

     “Requirement of Law” or “Requirements of Law” means any requirement, direction, policy or procedure of any Law or License, Judgment, or Consent or Other Action.

     “Reserve Percentage” means at any time the percentage announced within Administrative Agent as the reserve percentage under Regulation D for loans and obligations making reference to an Adjusted Eurodollar Rate. The Reserve Percentage shall be based on Regulation D or other regulations from time to time in effect concerning reserves for Eurocurrency Liabilities as defined in Regulation D from related institutions as though Administrative Agent were in a net borrowing position, as promulgated by the Board of Governors of the Federal Reserve System, or its successor.

     “Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or vice president of a Borrower. Any document delivered hereunder that is signed by a Responsible Officer of a Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Borrower.

     “Restaurant” means a particular restaurant at a particular location that is owned or operated by a Borrower or a Subsidiary of a Borrower.

     “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Capital Stock or other equity interest of any Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other equity interest or of any option, warrant or other right to acquire any such capital stock or other equity interest.

     “Revolving Credit Loan” has the meaning specified in Section 2.01.

     “Revolving Credit Loan Borrowing” means a borrowing of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

     “Revolving Credit Loan Commitment” means, for each Lender, its obligation to make Revolving Credit Loans to the Borrowers pursuant to Section 2.01, in an aggregate principal amount at any one time outstanding not to exceed the product of (a) such Lender’s Pro Rata Share, times (b) the Maximum Revolving Credit Loan Commitment.

     “Revolving Credit Loan Notice” means a notice of (i) a Revolving Credit Loan Borrowing, (ii) a conversion of Revolving Credit Loans from one Type to the other, or (iii) a

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continuation of Eurodollar Rate Loans pursuant to Section 2.02, which, if in writing, shall be substantially in the form of Exhibit A.

     “Ribs” shall have the meaning specified in the introductory paragraph hereto.

     “Ribs-U” shall have the meaning specified in the introductory paragraph hereto.

     “Ribs of Maryland” shall have the meaning specified in the introductory paragraph hereto.

     “Sanctioned Country” shall mean a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/eotffc/ofac/sanctions/ index.html, or as otherwise published from time to time.

     “Sanctioned Person” shall mean (i) a Person named on the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC available at http://www.treas.gov/offices/ eotffc/ofac/sdn/index.html, or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.

     “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

     “Securities Accounts” shall have the meaning accorded to such term in the UCC.

     “Securities Entitlements” shall have the meaning accorded to such term in the UCC.

     “Software” shall have the meaning accorded to such term in the UCC.

     “Sole Discretion” means with respect to any decision or action (including granting of any consent or approval) the discretion to make or take or fail to take or make any decision or action with or without any reason, taking into account such factors, if any, as the decision maker or action taker determines (including self interest), and any decision or action may be subject to any such conditions or no conditions as the decision maker or action taker determines and shall be final and conclusive.

     “Stock Repurchase” means the common stock share repurchases pursuant to the stock repurchase authorization approved by the Board of Directors of Famous Dave’s on November 2, 2004 for a total aggregate repurchase of no more than 1,000,000 shares..

     “Subsidiary” of a Person (the “parent”) means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise Controlled, by the parent. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of a Borrower.

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     “Synthetic Lease” means any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP consistently applied and as a loan or financing for U.S. income tax purposes.

     “Taxes and Other Charges” means all taxes, assessments and other governmental charges, ground rents, or other rents, rates and charges, excises, levies, fees and other charges (public or private) which may be assessed, levied, confirmed or imposed on, or in respect of or be a lien upon the Collateral, a Company-Owned Property or the Business or any part thereof or any interest therein.

     “30/360 Basis” means on the basis of a 360-day year consisting of 12 months of 30 days each.

     “Total Outstandings” means the aggregate Outstanding Amount of all Revolving Credit Loans.

     “UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect from time to time as adopted in the State of New York.

     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     “United States” and “U.S.” mean the United States of America.

     “Wells Fargo” means Wells Fargo Bank, National Association and its successors.

     1.02 Other Interpretive Provisions.

     With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

     (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

     (b)  (i) The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.

     (ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.

     (iii) The term “including” is by way of example and not limitation and shall be deemed to be followed by the phrase “without limitation.”

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     (iv) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.

     (c) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

     (d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

     1.03 Accounting Terms.

     (a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

     (b) In the event any Accounting Changes shall occur and such changes affect financing covenants, standards or terms in this Agreement, then the Borrowers and the Lenders agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of the Borrowers shall be the same as if such Accounting Changes had not been made, and until such time as such an amendment shall have been executed and delivered by the Borrowers and the Required Lenders, (a) all financial covenants, standards and terms in this Credit Agreement shall be calculated and/or construed as if such Accounting Changes had not been made, and (b) the Borrowers shall prepare footnotes to the financial statements required to be delivered hereunder that shows the differences between the financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes).

     1.04 Rounding.

     Any financial ratios required to be maintained by the Borrowers pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

     1.05 References to Agreements and Laws.

     Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions,

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supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

     1.06 Times of Day.

     Unless otherwise specified, all references herein to times of day shall be references to Pacific time (daylight or standard, as applicable).

ARTICLE II.
THE COMMITMENTS AND CREDIT EXTENSIONS

     2.01 Commitment to Make Revolving Credit Loans.

     Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a “Revolving Credit Loan”) to the Borrowers from time to time, on any Business Day during the Availability Period (but in no event more frequently than five (5) times in any calendar month), in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Revolving Credit Loan Commitment; provided, however, that after giving effect to any Revolving Credit Loans, (i) the Total Outstandings shall not exceed the Aggregate Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, shall not exceed such Lender’s Revolving Credit Loan Commitment. Within the limits of each Lender’s Revolving Credit Loan Commitment, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.01, prepay under Section 2.03, and reborrow under this Section 2.01. Revolving Credit Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

     2.02 Borrowings, Conversions and Continuations of Revolving Credit Loans.

     (a) Each Revolving Credit Loan, each conversion of Revolving Credit Loans from one Type to the other and each continuation of Eurodollar Rate Loans shall be made upon the Borrowers’ irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 8:00 a.m. (i) three Business Days prior to the requested date of any Revolving Credit Loan Borrowing or, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans and (ii) the requested date of any Revolving Credit Loan Borrowing of Base Rate Loans. Each telephonic notice by the Borrowers pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Revolving Credit Loan Notice, appropriately completed and signed by a Responsible Officer of Famous Dave’s (it being hereby acknowledged by each Borrower that execution of the same by such Responsible Officer of Famous Dave’s shall be deemed to constitute execution of the same by a Responsible Officer of each Borrower). Each Revolving Credit Loan Borrowing shall be in a principal amount of $50,000 or a whole multiple of $50,000 in excess thereof. Each Revolving Credit Loan Notice (whether telephonic or written) shall specify (i) whether the Borrowers are requesting a conversion of Revolving Credit Loans from one Type to the other or a continuation of Eurodollar Rate Loans, (ii) the requested borrowing, conversion or continuation, as the case may be, date of the Revolving Credit Loans (which shall be a Business Day), (iii) the principal

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amount of the Revolving Credit Loans to be borrowed, converted or continued, (iv) the Type of Revolving Credit Loans to be borrowed or to which existing Revolving Credit Loans are to be converted and (iv) if applicable, the duration of the Interest Period with respect thereto. If the Borrowers fail to specify a Type of Revolving Credit Loan in a Revolving Credit Loan Notice or if the Borrowers fail to give a timely notice requesting a conversion or continuation, then the applicable Revolving Credit Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrowers request a Revolving Credit Loan Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Revolving Credit Loan Notice, but fail to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

     (b) Following receipt of a Revolving Credit Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the applicable Revolving Credit Loans, and if no timely notice of a conversion or continuation is provided by the Borrowers, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. Each Lender shall make the amount of its Revolving Credit Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 10:00 a.m. on the Business Day specified in the applicable Revolving Credit Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Revolving Credit Loan Borrowing is the initial Revolving Credit Loan Borrowing, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrowers in like funds as received by the Administrative Agent either by (i) crediting the account of any Borrower on the books of Wells Fargo with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by any Borrower.

     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default or Event of Default, no Revolving Credit Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

     (d) The Administrative Agent shall promptly notify Famous Dave’s and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. The determination of the Adjusted Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify Famous Dave’s and the Lenders of any change in Wells Fargo’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

     (e) After giving effect to all Revolving Credit Loan Borrowings, all conversions of Revolving Credit Loans from one Type to the other, and all continuations of Revolving Credit Loans as the same Type, there shall not be more than five Interest Periods in effect with respect to Revolving Credit Loans.

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     2.03 Prepayments.

     (a) The Borrowers may, upon notice to the Administrative Agent, from time to time, voluntarily prepay any Revolving Credit Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 8:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $50,000 or a whole multiple of $50,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $50,000 or a whole multiple of $50,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date of prepayment and amount of such prepayment and the Types of Revolving Credit Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Pro Rata Share of such prepayment. If such notice is given by the Borrowers, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the prepayment date specified therein. Any prepayment of a Revolving Credit Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Revolving Credit Loans of the Lenders in accordance with their respective Pro Rata Shares.

     (b) If for any reason the Total Outstandings at any time exceed the Aggregate Commitments then in effect, the Borrowers shall immediately prepay Revolving Credit Loans in an aggregate amount equal to such excess, any such prepayment to be applied to the applicable Commitments which have been exceeded (in accordance with each Lender’s Pro Rata Share thereof) in such order as Administrative Agent may determine in its Sole Discretion.

     (c) If for any reason the Adjusted Leverage Ratio for any Reference Period exceeds the applicable ratio set forth in Section 14.01, the Borrowers shall prepay, on or before the date which is thirty (30) days after the date such excess is determined, Revolving Credit Loans in an aggregate amount equal to an amount which would bring the Adjusted Leverage Ratio in compliance with Section 14.01, any such prepayment to be applied to the Revolving Credit Loans (in accordance with each Lender’s Pro Rata Share thereof) in such order as Administrative Agent may determine in its Sole Discretion

     2.04 Repayment of Revolving Credit Loans.

     In addition to any other payments due under this Agreement, the Borrowers shall repay to the Lenders on the Maturity Date the aggregate Outstanding Amount of all Revolving Credit Loans on such date.

     2.05 Interest.

     (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Adjusted Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate;

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     (b) If Administrative Agent has not received on any date on which any payment is due (whether by acceleration or otherwise) the full amount due on such date, in addition to any other amounts payable hereunder, Borrowers shall pay to the Administrative Agent, promptly on demand, a late payment charge (“Late Payment Charge”) in an amount equal to the product of (x) the difference between (1) the amount due on any such due date and (2) the amount actually received on such due date, multiplied by (y) .05. In addition, if any amount payable by the Borrowers under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Furthermore, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

     (c) Interest on each Revolving Credit Loans shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

     (d) Interest shall accrue on each Revolving Credit Loan for the day on which the Revolving Credit Loan is made, and shall not accrue on a Revolving Credit Loan, or any portion thereof, for the day on which the Revolving Credit Loan or such portion is paid, provided that any Revolving Credit Loan that is repaid on the same day on which it is made shall, subject to Section 2.08(a), bear interest for one day.

     (e) All computations of interest with respect to Base Rate Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of interest shall be made on an Actual/360 Basis (which results in more interest being paid than if computed on a 30/360 Basis). Interest shall accrue on each Revolving Credit Loan for the day on which the Revolving Credit Loan is made, and shall not accrue on a Revolving Credit Loan, or any portion thereof, for the day on which the Revolving Credit Loan or such portion is paid, provided that any Revolving Credit Loan that is repaid on the same day on which it is made shall, subject to Section 2.08(a), bear interest for one day.

     2.06 Fees.

     (a) Revolving Credit Commitment Fee. The Borrowers shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share, a revolving credit commitment fee computed on a daily basis equal to the product of (A) 0.50 percent (0.50%) per annum times (B) the positive difference, if any, of (i) the Maximum Revolving Credit Loan Commitment on each day, minus (ii) the average daily Outstanding Amount of all Revolving Credit Loans on each day, in each case, during the period from the then most recent prior Interest Payment Date (or, in the case of the amount being determined on the first Interest Payment Date, from the Closing Date) until the day immediately preceding the applicable Interest Payment Date. The revolving credit commitment fee shall accrue at all times

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during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable monthly in arrears on the first Business Day of each month, commencing with the first such date to occur after the Closing Date, and on the Maturity Date.

     (b) Other Fees. The Borrowers shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

     (c) Actual/360. All computations of fees shall be made on an Actual/360 Basis (which results in more fees being paid than if computed on a 30/360 Basis).

     2.07 Evidence of Debt.

     The Revolving Credit Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Revolving Credit Loans made by the Lenders to the Borrowers and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrowers shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Revolving Credit Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Revolving Credit Loans and payments with respect thereto.

     2.08 Payments Generally.

     (a) All payments to be made by any Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by any Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, via bank account debit in Dollars and in immediately available funds not later than 11:00 a.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 11:00 a.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

     (b) If any payment to be made by any Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected, without duplication, in computing interest or fees, as the case may be.

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     (c) Unless the Borrowers or any Lender have notified the Administrative Agent, prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrowers or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrowers or such Lender, as the case may be, have timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in immediately available funds, then:

     (i) if the Borrowers failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in immediately available funds at the Federal Funds Rate from time to time in effect; and

     (ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in immediately available funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrowers to the date such amount is recovered by the Administrative Agent (the “Compensation Period”) at a rate per annum equal to the Federal Funds Rate from time to time in effect. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Revolving Credit Loan, included in the applicable Revolving Credit Loan Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent may make a demand therefor upon the Borrowers, and the Borrowers shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Revolving Credit Loan Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrowers may have against any Lender as a result of any default by such Lender hereunder.

      A notice of the Administrative Agent to any Lender or any Borrower with respect to any amount owing under this subsection (c) shall be conclusive, absent manifest error.

     (d) If any Lender makes available to the Administrative Agent funds for any Revolving Credit Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrowers by the Administrative Agent because the conditions to the applicable Revolving Credit Loan Borrowing set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

     (e) The obligations of the Lenders hereunder to make Revolving Credit Loans are several and not joint. The failure of any Lender to make any Revolving Credit Loan on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on

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such date, and no Lender shall be responsible for the failure of any other Lender to so make its Revolving Credit Loan.

     (f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Revolving Credit Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Revolving Credit Loan in any particular place or manner.

     2.09 Sharing of Payments.

     If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Revolving Credit Loans made by it, any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Revolving Credit Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Revolving Credit Loans or such participations, as the case may be, pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 15.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. Each Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 15.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.

ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY

     3.01 Taxes.

     (a) Any and all payments by any Borrower to or for the account of the Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the

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case of the Administrative Agent and each Lender, taxes imposed on or measured by its overall net income, and franchise taxes imposed on it (in lieu of net income taxes) by the jurisdiction (or any subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as “Taxes”). If Borrowers shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), each of the Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions, (iii) the Borrowers shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, the Borrowers shall furnish to the Administrative Agent (which shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof.

     (b) In addition, the Borrowers agree to pay any and all present or future stamp, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “Other Taxes”).

     (c) If the Borrowers shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, the Borrowers shall also pay to the Administrative Agent or to such Lender, as the case may be, at the time interest is paid, such additional amount that the Administrative Agent or such Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) that the Administrative Agent or such Lender would have received if such Taxes or Other Taxes had not been imposed.

     (d) Each Borrower agrees to indemnify the Administrative Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by the Administrative Agent and such Lender, (ii) amounts payable under Section 3.01(c) and (iii) any liability (including additions to tax, penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Payment under this subsection (d) shall be made within 30 days after the date the Lender or the Administrative Agent makes a demand therefor.

     3.02 Illegality.

     If any Lender determines that any Change in Law has made it unlawful for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Adjusted Eurodollar Rate, then, on notice thereof by such Lender to the Borrowers through the Administrative Agent, any obligation of such Lender to

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make or continue Eurodollar Rate Loans or convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender into Base Rate Loans, either on the last day of the Interest Period therefore, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such date, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Loans. Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.

     3.03 Inability to Determine Rates.

     If the Administrative Agent determines that for any reason adequate and reasonable means do not exist for determining the Interest Rate based upon the Adjusted Eurodollar Rate for any Interest Period for any Eurodollar Rate Loans, or that the Adjusted Eurodollar Rate with respect to any requested Interest Period for any Eurodollar Rate Loans does not adequately and fairly reflect the cost to Lenders of funding such Eurodollar Rate Loans, the Administrative Agent will promptly so notify the Borrowers and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrowers may revoke any pending request for a Revolving Credit Loan Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, such request will be deemed to be a request for a Revolving Credit Loan Borrowing of Base Rate Loans in the amount so specified.

     3.04 Increased Cost and Reduced Return; Capital Adequacy.

     (a) If any Lender determines that as a result of any Change in Law, or such Lender’s compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this subsection (a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or has its Lending Office, and (iii) reserve requirements utilized in the determination of the Adjusted Eurodollar Rate), then from time to time upon demand of such Lender (with a copy of such demand to the Administrative Agent), the Borrowers shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction.

     (b) If any Lender determines that any Change in Law regarding capital adequacy or any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender’s obligations

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hereunder (taking into consideration its policies with respect to capital adequacy and such Lender’s desired return on capital), then from time to time upon demand of such Lender (with a copy of such demand to the Administrative Agent), the Borrowers shall pay to such Lender such additional amounts as will compensate such Lender for such reduction.

     3.05 Funding Losses.

     Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrowers shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

     (a) any continuation, conversion, payment or prepayment of any Eurodollar Rate Loan on a day other than the last day of the Interest Period for such Eurodollar Rate Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or

     (b) any failure by the Borrowers (for a reason other than the failure of such Lender to make a Revolving Credit Loan) to continue, convert, prepay or borrow any Eurodollar Rate Loan on the date or in the amount notified by the Borrowers;

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Revolving Credit Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrowers shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrowers to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Adjusted Eurodollar Rate for such Revolving Credit Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

     3.06 Matters Applicable to all Requests for Compensation.

     A certificate of the Administrative Agent or any Lender claiming compensation under this Article III and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, the Administrative Agent or such Lender may use any reasonable averaging and attribution methods.

     3.07 Survival.

     All of the Borrowers obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

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ARTICLE IV.
CONDITIONS PRECEDENT TO REVOLVING CREDIT LOAN BORROWINGS

     4.01 Conditions of Initial Revolving Credit Loan Borrowing.

     The obligation of the Lenders to make the initial Revolving Credit Loan Borrowing hereunder is subject to satisfaction of the following conditions precedent:

     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Borrower, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and its legal counsel:

     (i) executed counterparts of this Agreement and the other Loan Documents, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrowers;

     (ii) a Note executed by the Borrowers in favor of each Lender that requests a Note;

     (iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Borrower as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Borrower is a party;

     (iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Borrower is duly organized or formed, and that each Borrower and each other Borrower executing any of the Loan Documents is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification;

     (v) a favorable opinion or opinions of counsel to the Borrowers, addressed to the Administrative Agent and each Lender, as to the matters set forth in Exhibit H and such other matters concerning the Borrowers and the Loan Documents as the Required Lenders may reasonably request;

     (vi) a certificate of each Borrower signed by a Responsible Officer either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by, and the validity against, such Borrower of the Loan Documents to which it is a party, which consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

     (vii) a certificate of each Borrower signed by a Responsible Officer certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect; and (C) a calculation of EBITDA and Adjusted Leverage Ratio as of November 21, 2004 (except that the Indebtedness used for purposes

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of such calculations shall be the Indebtedness as of the Closing Date and which is set forth on part (a) of Schedule 5.05);

     (viii) evidence that all Insurance Requirements have been met and that all insurance required to be maintained pursuant thereto is in effect; and

     (ix) such other assurances, certificates, documents, consents or opinions as the Administrative Agent or the Required Lenders reasonably may require.

     (b) Any fees required to be paid on or before the Closing Date shall have been paid.

     (c) Unless waived by the Administrative Agent, the Borrowers shall have paid all Attorney Costs of the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Administrative Agent).

     (d) Patriot Act Certificate. The Administrative Agent shall have received a certificate satisfactory thereto, for benefit of itself and the Lenders, provided by the Borrowers that sets forth information required by the Patriot Act (as defined in Section 15.22) including the identity of the Borrowers, the name and address of the Borrowers and other information that will allow the Administrative Agent or any Lender, as applicable, to identify the Borrowers in accordance with the Patriot Act.

     4.02 Conditions to all Revolving Credit Loan Borrowings.

     The obligation of each Lender to honor any Revolving Credit Loan Notice (other than a Revolving Credit Loan Notice requesting only a conversion of Revolving Credit Loans to the other Type, or a continuation of Eurodollar Rate Loans), is subject to the following conditions precedent:

     (a) The representations and warranties of the Borrowers contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Revolving Credit Loan Borrowing, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.

     (b) No Default or Event of Default shall exist, or would result from such proposed Revolving Credit Loan Borrowing.

     (c) The Administrative Agent shall have received a Revolving Credit Loan Notice in accordance with the requirements hereof.

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     Each Revolving Credit Loan Notice (other than a Revolving Credit Loan Notice requesting only a conversion of Revolving Credit Loans to the other Type, or a continuation of Eurodollar Rate Loans) submitted by the Borrowers (and each other request, or deemed request, for any Revolving Credit Loans pursuant to the terms of this Agreement) shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Revolving Credit Loan Borrowing.

ARTICLE V.
REPRESENTATIONS AND WARRANTIES

     Each Borrower represents and warrants to the Administrative Agent and the Lenders that:

     5.01 Existence, Qualification and Power.

     Each Borrower (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its Business requires such qualification, and (d) has all licenses reasonably necessary for the operation of each individual Restaurant at each Company-Owned Property and for the conduct of the Business as a whole, except for licenses which the failure to have would not materially and adversely affect any Company-Owned Property.

     5.02 Authorization; No Contravention.

     The execution, delivery and performance by each Borrower of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (with the passage of time, giving of notice or otherwise) (a) contravene or Conflict with the terms of any of such Person’s Organization Documents; (b) Conflict with or result in any breach or contravention of, or the creation of any Lien (except Liens in favor of the Administrative Agent created by the Loan Documents) under, (i) any Contractual Obligation to which such Person is a party or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.

     5.03 No Consent or Other Action.

     No Consent or Other Action by, from, with or to any other Person is required prior to or otherwise in connection with (a) any Borrower’s ownership of the Collateral and conduct of its Business, (b) any Borrower’s execution and delivery of, and performance of its obligations under, the Loan Documents, (c) the Grant of any Lien granted hereby or by any other Loan Document, or (d) the validity, perfection and maintenance of any Lien created hereby or by any other Loan Document, except (in the case of the foregoing clauses (c) and (d)) for the filing of the Financing Statements with the Filing Offices.

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     5.04 Binding Effect.

     This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Borrower that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of each such Borrower, enforceable against each Borrower that is party thereto in accordance with its terms.

     5.05 Financial Statements; No Material Adverse Effect.

     (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrowers and their Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show, in accordance with GAAP consistently applied, all material indebtedness and other liabilities, direct or contingent, of the Borrowers and their Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

     (b) The unaudited consolidated financial statements of the Borrower and their Subsidiaries dated November 21, 2004, including the consolidated balance sheet, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the periods then ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrowers and their Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments. Schedule 5.05 sets forth all Indebtedness of the Borrowers and their consolidated Subsidiaries as of the Closing Date.

     (c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

     5.06 Litigation.

     Except as set forth on Schedule 5.06, there is no Litigation pending or, to the knowledge of any Borrower after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Borrower, any of their Subsidiaries or against any of their respective properties, assets (including any Collateral or Principal Agreement), Business or any Property, or revenues, or affecting or pertaining to this Agreement or any other Loan Document, or any of the transactions contemplated hereby which, if adversely determined, would, individually, result in liability to any Borrower in excess of $25,000 or, in the aggregate, result in liability to any Borrower in excess of $150,000. None of the Litigation identified on Schedule 5.06 would, either individually, or in the aggregate, if determined adversely, have a Material Adverse Effect.

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     5.07 No Default.

     No Borrower or any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

     5.08 Ownership of Property; Liens.

     Each Borrower and each Subsidiary has good record and marketable title in fee simple to, or valid leasehold interests in, the all real property necessary or used in the ordinary conduct of the Business. The property of the Borrowers and their Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.

     5.09 Environmental Compliance.

     The Borrowers and their Subsidiaries have conducted a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrowers have reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     5.10 Insurance.

     The Borrowers and their Subsidiaries are in compliance with the Insurance Requirements.

     5.11 Taxes.

     Each Borrower, each Subsidiary and each Person which might have tax liabilities for which Borrower, any Subsidiary of any Borrower is or may be liable (each, a “Tax Party”) have filed, or caused to be filed, in a timely manner all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable. All information in any such tax returns, reports and declarations is complete and accurate in all material respects. Each Tax Party has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, and has collected, deposited and remitted in accordance with all Requirements of Law, all sales and/or use taxes applicable to the conduct of its business, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to the Tax Party and with respect to which adequate reserves have been set aside on its books. There are no Liens on any properties or assets of any Borrower or any of its Subsidiaries imposed or arising as a result of the delinquent payment or the nonpayment of any tax, assessment, fee or other governmental charge. The income tax returns of each Tax Party have been examined and reported upon by the relevant tax authorities, or closed by applicable statutes of limitations, for all fiscal years and no Tax Party has given or consented to any waiver of the statute of limitations with respect to its tax liabilities for any such year. Except as reflected in the financial statements provided to Administrative Agent, no Borrower knows of any transaction or matter which might or could result in additional tax assessments to any Tax Party.

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There are no applicable Taxes and Other Charges payable by any Tax Party, Administrative Agent or any Lender in connection with the execution and delivery of any Loan Documents by the Borrowers which have not been paid by the Tax Party.

     5.12 ERISA Compliance.

     (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of each Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Each Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

     (b) There are no pending or, to the best knowledge of any Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could be reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

     (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither any Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither any Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither any Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

     5.13 Borrower Information; Subsidiaries, Etc.

     (a) The legal names, federal taxpayer identification numbers, states of formation and mailing addresses, as applicable, for each of the Borrowers are accurately set forth in the Loan Documents.

     (b) Except as disclosed in part (a) of Schedule 5.13, no Borrower has merged, consolidated, acquired all or substantially all of the assets of any Person or used any other name (whether in connection with the Business or the Collateral or for other business, obtaining credit or financing or otherwise) in the last six years. No Borrower has any Subsidiaries other than those specifically disclosed in Part (b) of Schedule 5.13 and no Borrower has any equity investments in any other Person other than those specifically disclosed in part(c) of Schedule 5.13.

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     5.14 Purpose of Revolving Credit Loan Borrowings; Margin Regulations; Investment Company Act; Public Utility Holding Company Act.

     (a) Except in connection with the Stock Repurchase, the Borrowers do not intend to use all or any portion of any Revolving Credit Loan Borrowing to purchase or carry any securities, including Margin Stock. None of the proceeds of any Revolving Credit Loan Borrowing will be used, directly or indirectly, for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any Margin Stock or other security or for any other purpose which might cause any Revolving Credit Loan Borrowing to be considered a “purpose credit” within the meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System, as amended. Each Borrower intends to and agrees to use the proceeds of each Revolving Credit Loan Borrowing solely for the lawful, proper business or commercial purposes set forth in its application for the Revolving Credit Loan Borrowings and any disbursement direction letter furnished by Borrowers to Administrative Agent in connection with any Revolving Credit Loan Borrowing.

     (b) The Borrowers are not engaged, principally or as one of their important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock.

     (c) No Borrower, no Person Controlling any Borrower, or any Subsidiary (i) is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

     5.15 Disclosure.

     Each Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Borrower to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, each Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

     5.16 Compliance with Laws.

     Each Borrower and each Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted

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     5.17 Business and Location.

     Each Borrower, under its legal name, is engaged in the Business under the Brand at the Company-Owned Properties with the addresses set forth on Exhibit B (in the case of the Business described in clause (a) of the definition thereof) or at such Borrower’s address set forth in Schedule 15.02 (in the case of the Business described in clauses (b) through (e) of the definition thereof). Schedule 5.17 contains a complete and accurate list of businesses, if any, conducted by any Borrower other than its Business. All Collateral, including all writings relating thereto and records thereof, books of record or account, employees, business, offices and operations are located at, and all operation with respect there to are conducted out of, the related Company-Owned Properties or Borrowers chief executive office. Each Borrower’s chief executive office address is 8091 Wallace Road, Eden Prairie, Minnesota 55344 and shall be, as of July 1, 2005, 12601 Whitewater Drive, Minnetonka, Minnesota 55343.

     5.18 Transactions with Affiliates.

     Except as set forth on Schedule 5.18, no Borrower is currently a party to any transaction of any kind with any Affiliate of any Borrower. Each of the transactions listed on Schedule 5.18 was entered into in the ordinary course of each applicable Borrower’s business, pursuant to written agreements and on fair and reasonable terms substantially as favorable to such Borrower as were obtainable by such Borrower at the time in a comparable arm’s length transaction with a Person other than an Affiliate.

     5.19 Financing Statements; Perfected Security Interest.

     The execution and delivery of this Agreement and the Grant hereunder creates a valid Lien in the Collateral and the Proceeds thereof which has attached and is enforceable. The Filing Offices are the only offices where financing statements are required to be filed in order to perfect such security interest in all Filing Collateral, except to the extent that Filing Collateral includes Fixtures which require the recording of the deed of trust or mortgage (whether one or more) or separate financing statement(s) in the county in which such Fixtures are located in order to perfect a security interest therein. The Lien of the Administrative Agent, on behalf of the Lenders, in all Filing Collateral is a first priority perfected security interest. Upon delivery into Administrative Agent’s (or any Lender’s) possession of Collateral other than Filing Collateral, the Lien therein of the Administrative Agent, on behalf of the Lenders, will be a first priority perfected security interest.

     5.20 Title; Sufficiency; No Liens.

     Borrowers have good and marketable title to the Collateral free of all Liens (other than the Lien granted to Administrative Agent, on behalf of the Lenders, hereunder and Liens permitted under Section 7.01) and such Collateral is sufficient to enable Borrowers to operate the Business at each Company-Owned Property (in the case of the Business described in clause (a) of the definition thereof) and at Borrower’s address set forth in Schedule 15.02 (in the case of the Business described in clauses (b) through (e) of the definition thereof), in each case in accordance with the applicable Principal Agreements. Except for the filings reflected on the UCC searches delivered to Administrative Agent together with this Agreement (“Current Filings”), there is no financing statement (or similar statement, agreement, pledge, deed of trust, mortgage, notice or registration), Lien, or Judgment filed with, registered, indexed or recorded in

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any Governmental Authority (or intended so to be), directly or indirectly, identifying or encumbering or covering or involving the Collateral or any Principal Agreement or which could have a Material Adverse Effect. Borrowers shall take all actions necessary to terminate all Current Filings prior to or concurrently with the funding of the Revolving Credit Loan.

     5.21 No Further Disposition.

     Other than with respect to the Lien granted herein to Administrative Agent, on behalf of the Lenders and, to the extent of the Permitted Encumbrances and Liens permitted under Section 7.01, no Borrower has entered into any agreement or understanding or taken, permitted or suffered to exist any action (including the filing of a financing statement, agreement, pledge, deed of trust or mortgage, notice or registration) or event (whether by operation of law or otherwise) for the purpose of, or that may have the effect of, directly or indirectly, Granting or permitting any Lien on or Disposing of any Collateral (including the Principal Agreements), any interest therein or rights pertaining thereto.

     5.22 Principal Agreements.

     Every Principal Agreement currently in effect is listed on Schedule 5.22 and Borrowers have provided Administrative Agent with a true, correct and complete copy of each of the same. Each Borrower is in good standing under, and in compliance with, the Principal Agreements. No Borrower has been, and no Borrower is, in Conflict with or under, any of the Principal Agreements. No Borrower has any knowledge of any claim of (or basis for any claim of) any such Conflict or of any termination or nonrenewal of any Principal Agreement. Each of the Principal Agreements listed on Schedule 5.22 was entered into in the ordinary course of each applicable Borrower’s business, pursuant to written agreements and on fair and reasonable terms and, to the extent the same is with an Affiliate, on terms substantially as favorable to such Borrower as were obtainable by such Borrower at the time in a comparable arm’s length transaction with a Person other than an Affiliate.

     5.23 Capitalization; Solvency.

     All of the issued and outstanding Capital Stock of Borrowers (and the other Persons listed on Exhibit J), except as noted thereon, is directly and beneficially owned and held by the entity listed for each such Borrower or other Person listed on Exhibit J, and all of such Capital Stock has been duly authorized and are fully paid and non-assessable, free and clear of all Liens other than Permitted Encumbrances and Liens permitted under Section 7.01. Each Borrower (a) is solvent after giving effect to the Obligations, the security interests of Administrative Agent, on behalf of the Lenders, and the other transactions contemplated hereunder, and (b) is able to pay its debts as they mature and has (and has reason to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business and all businesses in which it is about to engage. The assets and properties of each Borrower at a fair valuation and at their present fair salable value are greater than the Indebtedness of each such Borrower, and including any subordinated and contingent liabilities computed at the amount which, to the best of each Borrower’s knowledge, represents an amount which can reasonably be expected to become an actual or matured liability.

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     5.24 Intellectual Property; Licenses, Etc.

     The Borrowers and their Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of the Business (including those trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights listed on Schedule 5.24), without conflict with the rights of any other Person. To the best knowledge of the Borrowers, no trademark, service mark, slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Borrower or any Subsidiary infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrowers, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     5.25 Brokers and Financial Advisors.

     Except as set forth on Schedule 5.25, no brokers or finders were used in connection with the financing contemplated hereby and each Borrower hereby agrees to indemnify and hold Administrative Agent and the Lenders harmless from and against any and all liabilities, costs and expenses (including attorney’s fees and court costs) suffered or incurred by Administrative Agent or any such Lenders as a result of or arising out of any of the transactions contemplated hereby. The provisions of this Section shall survive the expiration and termination of this Agreement and the payment of the Obligations.

     5.26 Compliance with OFAC Rules and Regulations.

     None of the Borrowers, any Subsidiary of any Borrower or, to any Borrower’s knowledge, any Affiliate of any Borrower (i) is a Sanctioned Person, (ii) has more than 15% of its assets in Sanctioned Countries, or (iii) derives more than 15% of its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Countries. No part of the proceeds of any Revolving Credit Loan Borrowing hereunder will be used directly or indirectly to fund any operations in, finance any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned Country.

     5.27 Foreign Assets Control Regulations, Etc.

     Neither any Borrower nor any of its Subsidiaries is an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United States of America (50 U.S.C. App. §§ 1 et seq.), as amended. Neither any Borrower nor any or its Subsidiaries is in violation of (a) the Trading with the Enemy Act, as amended, (b) any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or (c) the Patriot Act (as defined in Section 15.22). None of the Borrowers (i) is a blocked person described in Section 1 of the Anti-Terrorism Order or (ii) to the best of its knowledge, engages in any dealings or transactions, or is otherwise associated, with any such blocked person.

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     5.28 FDA Properties, Minwood, FDA Properties of Texas, LP, Famous Dave’s Properties of Texas, Inc., Famous Dave’s Ribs of Texas, L.P. and FD Ribs of Texas, Inc.

     None of FDA Properties, Minwood, FDA Properties of Texas, LP, a Texas limited partnership, Famous Dave’s Properties of Texas, Inc., a Texas corporation, Famous Dave’s Ribs of Texas, L.P., a Texas limited partnership, or FD Ribs of Texas, Inc., a Texas corporation, has engaged in any business other than the owning (and initial acquisition) of the assets which it owns on the date hereof.

ARTICLE VI.
AFFIRMATIVE COVENANTS

     So long as any Revolving Credit Loans or other Obligations are outstanding or any Lender has any obligation to make any Revolving Credit Loan or the Borrowers shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each Subsidiary to:

     6.01 Financial Statements.

     Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and Required Lenders:

     (a) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrowers, the consolidated balance sheet of the Borrowers and their Subsidiaries as of the end of such year, and the related consolidated statement of income and consolidated statement of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated statements to be in reasonable detail, prepared in accordance with GAAP consistently applied, and certified, without qualification and without an expression of uncertainty as to the ability of any of the Borrowers or any of their Subsidiaries to continue as going concerns, by Grant Thorton LLP or by other independent certified public accountants reasonably satisfactory to the Required Lenders, together with a written statement from such accountants to the effect that they have read a copy of this Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default, provided that such accountants shall not be liable to the Lenders for failure to obtain knowledge of any Default or Event of Default;

     (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each fiscal quarter of each fiscal year of the Borrowers, (i) copies of the unaudited consolidated balance sheet of the Borrowers and their Subsidiaries as of the end of such quarter, and the related consolidated statement of income and consolidated statement of cash flow for such fiscal quarter and the portion of the Borrowers fiscal year then elapsed, setting forth in each case in comparative form the figures for the corresponding period or periods of the previous fiscal year and the comparisons to projections for such period, all in reasonable detail and prepared in accordance with GAAP consistently applied (subject to year-end adjustments and footnote information required by GAAP consistently applied), together with a certification by the

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principal financial or accounting officer of the Borrowers that the information contained in such financial statements fairly presents in all material respects the financial position of the Borrowers and their Subsidiaries on the date thereof (subject to year-end adjustments and footnote information required by GAAP consistently applied); and (ii) a list (such list to specify whether any addition is an addition of a Company-Owned Property or a Franchised Property) of any new Restaurants acquired or opened (or any Restaurants closed or sold) within such fiscal quarter by Borrowers and any of their Subsidiaries and any new Restaurants scheduled to be acquired or opened (or any Restaurants scheduled to be closed or sold) within the next year after such fiscal quarter and, if applicable, amended Exhibits B and/or C reflecting the addition of any new Company-Owned Properties or Franchised Properties (or the deletion of any Company-Owned Properties or Franchised Properties), as applicable, which amended Exhibit B and/or Exhibit C shall be substituted as a replacement Exhibit B and/or Exhibit C to this Agreement, as applicable;

     (c) as soon as practicable, but in any event within thirty (30) days after the end of each fiscal month in each fiscal year of the Borrowers, unaudited consolidated financial statements of the Borrowers and their Subsidiaries for such fiscal period and the portion of the Borrowers’ fiscal year then ending, setting forth in each case in comparative form the figures for the corresponding period or periods of the previous fiscal year and the comparisons to projections for such period, prepared in accordance with GAAP consistently applied (subject to year-end adjustments and footnote information required by GAAP consistently applied) (except that the projections used for such comparison purposes must only have been prepared in good faith based upon assumptions believed by Borrowers to have been reasonable at the time), together with a certification by the principal financial or accounting officer of the Borrowers that the information contained in such financial statements fairly presents in all material respects the financial condition of the Borrowers and their Subsidiaries on the date thereof (subject to year-end adjustments and footnote information required by GAAP consistently applied);

     (d) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a Compliance Certificate certified by the principal financial or accounting officer of the Borrowers and setting forth in reasonable detail computations evidencing compliance with the covenants contained in Article XIV and (if applicable) reconciliations to reflect changes in GAAP since the Balance Sheet Date;

     (e) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature furnished to the holders of direct or indirect equity interests in Borrowers or filed with the Securities and Exchange Commission;

     (f) within forty-five (45) days after the beginning of each fiscal year of the Borrowers and, if a Default or Event of Default shall have occurred and be continuing, from time to time upon the request of the Administrative Agent, projections and budgets of the Borrowers and their Subsidiaries organized for the next fiscal year on a period-by-period and quarter-by-quarter basis updating those projections delivered to the Lenders prior to the date hereof and or, if applicable, updating any later such projections delivered in response to a request pursuant to this Section 6.01(f); and

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     (g) from time to time such other financial data and information (including accountants, management letters) as the Administrative Agent or any Lender may reasonably request.

     6.02 Certificates; Other Information.

     Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

     (a) concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent certified public accountants certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default or, if any such Default or Event of Default shall exist, stating the nature and status of such event;

     (b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate of Famous Dave’s signed by a Responsible Officer of Famous Dave’s (it being hereby acknowledged by each Borrower that execution of the same by Famous Dave’s in such manner shall be deemed to constitute execution of the same by each Borrower);

     (c) promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Borrower by independent accountants in connection with the accounts or books of any Borrower or any Subsidiary, or any audit of any of them;

     (d) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the members or other direct or indirect equityholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which any Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

     (e) promptly after any Borrower has notified the Administrative Agent of any intention by any Borrower to treat the Revolving Credit Loans and related transactions as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4), a duly completed copy of IRS Form 8886 or any successor form; and

     (f) promptly, such additional information regarding the business, financial or corporate affairs of any Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

     In addition, Borrowers shall furnish or cause to be furnished to Administrative Agent and Lenders such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrowers, as Administrative Agent or Lenders may, from time to time, reasonably request. Administrative Agent and each Lender is hereby authorized to deliver, from

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time to time, a copy of any financial statement or any other information relating to the business of Borrowers to any Person. Borrowers hereby irrevocably authorizes and directs all accountants or auditors to deliver to Administrative Agent and Lenders, at Borrowers’ expense, copies of the financial statements of Borrowers and any reports or management letters prepared by such accountants or auditors on behalf of the Borrowers and to disclose to Administrative Agent and Lenders such information as they may have regarding the business of Borrowers. Any documents, schedules, invoices or other papers delivered to Administrative Agent or any Lender may (but shall not be required to) be destroyed or otherwise disposed of by Administrative Agent or Lenders at any time after the same are delivered to Administrative Agent or Lenders, except as otherwise designated by Borrowers to Administrative Agent in writing.

     Except for Compliance Certificates required under Section 6.02, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrowers with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

     6.03 Notices.

     Promptly notify the Administrative Agent and each Lender:

     (a) of the occurrence of any Default or Event of Default;

     (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of any Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between any Borrower or any Subsidiary and any Governmental Authority; (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws; or (iv) any material loss, damage, or Litigation relating to the Business, the Collateral or any other property which is security for the Obligations;

     (c) of the occurrence of any ERISA Event; and

     (d) of any material change in accounting policies or financial reporting practices by any Borrower or any Subsidiary.

     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of each Borrower setting forth details of the occurrence referred to therein and stating what action the Borrowers have taken and propose to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

     6.04 Payment of Obligations.

     Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate

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proceedings diligently conducted and adequate reserves in accordance with GAAP consistently applied are being maintained by any Borrower or any Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon any Borrower’s or any Subsidiary’s property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.

     6.05 Preservation of Existence, Etc.

     (a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except as otherwise permitted by Section 7.04 or 7.05; (b) preserve, renew and maintain in full force and effect its good standing status under the Laws of the jurisdiction of its organization except as otherwise permitted by Section 7.04 or 7.05; (c) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or deemed desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (d) preserve or renew all of its registered IP Rights, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

     6.06 Maintenance of Properties.

     (a) Maintain, preserve and protect the Company-Owned Properties, the Collateral and all of its other material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.

     6.07 Maintenance of Insurance.

     At Borrowers’ sole cost and expense, (a) maintain with Approved Providers insurance policies satisfying the Insurance Requirements set forth on Schedule 6.07, (b) timely pay all premiums, fees and charges required in connection with all of its insurance policies and otherwise continue to maintain such policies in full force and effect; (c) promptly deliver the insurance policies, certificates (and renewals) thereof or other evidence of compliance herewith to Administrative Agent; and (d) promptly notify Administrative Agent of any loss covered by or claim under or notice made in connection with any such insurance policies.

     6.08 Compliance with Laws.

     Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted.

     6.09 Books and Records.

     (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and

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matters involving the assets and business of such Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over such Borrower or such Subsidiary, as the case may be.

     6.10 Inspection Rights.

     Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrowers and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrowers; provided, however, that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrowers at any time during normal business hours and without advance notice.

     6.11 Conduct of Business.

     Continue to engage only in the Business engaged in by the Borrower on the Closing Date, and in businesses and activities reasonably related thereto.

     6.12 Capitalization; Solvency.

     (a) Continue to be solvent after giving effect to the Obligations, the security interests of Administrative Agent, on behalf of the Lenders, and the other transactions contemplated hereunder.

     (b) Continue to pay its debts as they mature and continue to have sufficient capital (and not unreasonably small capital) to carry on its business and all businesses in which it is about to engage.

     6.13 Casualty and Condemnation.

          Comply with the following requirements:

     (a) The Loss Proceeds in respect of any Loss of any of the Collateral shall, subject to the rights, if any, of other parties with a prior interest in the property covered thereby, (i) so long as no Event of Default has occurred and is continuing and to the extent that the amount of such Loss Proceeds is less than $250,000, be disbursed to the applicable Borrower for reinvestment in such Borrower’s Business and (ii) in all other circumstances, be held by the Administrative Agent as cash collateral for the Obligations. The Administrative Agent may, so long as no Event of Default has occurred and is continuing and the Borrowers are not required to apply such Loss Proceeds to prepay the Obligations pursuant to Section 6.13(b) below or have not elected to reinvest such Loss Proceeds pursuant to Section 6.13(b) below, disburse from time to time all or any part of such proceeds so held as cash collateral, upon such terms and conditions as the Administrative Agent may reasonably prescribe, for direct application by such Borrower solely to the repair or replacement of such Borrower’s property so damaged, destroyed or taken or other

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reinvestment in the Borrowers’ Business; provided that, so long as no Event of Default has occurred and is continuing, the Borrowers shall at all times and in any event have the rights set forth in the last sentence of Section 6.13(d) below. In the event that such proceeds have not been reinvested in the Borrowers’ business within two hundred seventy (270) days after the earlier to occur of receipt thereof by the Borrowers or receipt thereof by the Administrative Agent, the Administrative Agent shall apply all or any part of such proceeds to the Obligations as provided in Sections 6.13(c) and (d); provided that, if (A) within such 270-day period after the earlier to occur of receipt of such proceeds by the Borrowers or receipt of such proceeds by the Administrative Agent, the Borrowers enter into an agreement (which may be a purchase order) pursuant to which such reinvestment shall be made, a copy of which shall be provided to the Administrative Agent, and (B) within four hundred five (405) days following receipt of such proceeds by the Borrowers or the Administrative Agent, the Borrowers shall have completed, or shall have made significant progress toward completion of, such reinvestment with such Loss Proceeds, then the Borrowers shall not be required to prepay the Revolving Credit Loans pursuant to Sections 6.13(b) and (c) but shall in any event comply with Section 6.13(d).

     (b) Concurrently with the receipt by any of the Borrowers or any of their Subsidiaries of Loss Proceeds relating to any Loss with respect to any Collateral or Company-Owned Property, less reasonable expenses relating to such Loss, which have not been reinvested in the Borrowers’ Business within two hundred and seventy (270) days of receipt of such proceeds subject to Section 6.13(a) above, provided that, if (A) within such 270-day period after the earlier to occur of receipt of such Loss Proceeds by the Borrowers or receipt of such Loss Proceeds by the Administrative Agent, the Borrowers enter into an agreement (which may be a purchase order) pursuant to which such reinvestment shall be made, a copy of which shall be provided to the Administrative Agent, and (B) within four hundred five (405) days following receipt of such proceeds by the Borrowers or the Administrative Agent, the Borrowers shall have completed, or shall have made significant progress toward completion of, such reinvestment of such Loss Proceeds, then the Borrowers shall not be required to prepay the Revolving Credit Loans in accordance with Sections 6.13(b) and (c) but shall in any event comply with Section 6.13(d) (provided, however, if a Default or Event of Default has occurred and is continuing, such proceeds shall be immediately paid to the Administrative Agent); then the Borrowers shall pay to the Administrative Agent for the respective accounts of the Lenders an amount equal to one hundred percent (100%) of such Loss Proceeds, to be applied in the manner set forth in Sections 6.13(b) and (c) or, if applicable, Section 6.13(d).

     (c) All mandatory prepayments pursuant to Section 6.13(b) above shall be applied first, as a principal reduction of any Revolving Credit Loans in such order and such manner as Administrative Agent shall determined in its Sole Discretion, and second, to any other Obligations in such order and such manner as Administrative Agent shall determine in its Sole Discretion. Any prepayment of principal of any Revolving Credit Loans shall include all interest accrued thereon to the date of such prepayment.

     (d) The Borrowers shall deliver to the Administrative Agent, promptly upon receipt thereof, all Loss Proceeds that may have to be applied to prepay any Revolving Credit Loans or other Obligations pursuant to Section 6.13(c) above if not reinvested as permitted in Section 6.13(a), to be held as Collateral pending reinvestment in accordance with such Section 6.13(a). Upon the Borrowers’ request, any cash amounts delivered to the Administrative Agent to be held

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as Collateral under this Section 6.13(d) may be applied to repay the Revolving Credit Loans or other Obligations in the order provided above.

     6.14 Banks and Payments.

     (a) Cause all Collateral Revenues and Proceeds to be deposited in the account(s) with the bank(s) listed on Schedule 6.14 and Borrowers shall pay, and hereby authorize Administrative Agent to cause to be paid, all Obligations as and when due from all amounts in any bank required to be listed on Schedule 6.14. Borrowers shall enter into such control agreements or other similar agreements between each such bank, Borrowers and Administrative Agent, as Administrative Agent shall deem necessary in its Sole Discretion, in form and substance reasonably acceptable to the Administrative Agent, providing for such bank’s agreement to disburse any such amounts in accordance with the instruction of Administrative Agent without the further consent of, or notice to, Borrowers. Borrowers hereby appoint Administrative Agent as their attorney-in-fact for the purpose of executing such agreement(s) on behalf of the Borrowers as set forth in Section 6.14 hereof.

     (b) Direct (and each Borrower does hereby direct) any and all transferors, distributors or payors (including insurance companies with whom any Borrower maintains insurance), upon receipt of notice from Administrative Agent, on behalf of the Lenders, to make payment of all Collateral Revenues and Proceeds directly to Administrative Agent, on behalf of the Lenders, and authorizes Administrative Agent, on behalf of the Lenders, in its Sole Discretion, to hold the same in its possession as Collateral, to apply the same to repayment of the Obligations, to deposit the same into any of the accounts with the banks listed on Schedule 6.14, or, to apply the same toward replacement of the Collateral. Administrative Agent shall deliver such a notice only upon or after the occurrence of an Event of Default (whether or not the same shall be continuing). All Collateral Revenues and Proceeds whether received by Administrative Agent, on behalf of the Lenders, or by any Borrower, or by any other Person will be included in the Collateral subject to the security interest granted to Administrative Agent, on behalf of the Lenders, hereunder. Each Borrower shall (i) identify, earmark, segregate and keep separate all Collateral Revenues and Proceeds received by it, (ii) upon Administrative Agent’s request, on behalf of the Lenders, promptly account to Administrative Agent, on behalf of the Lenders, for all Collateral Revenues and Proceeds, (iii) hold all Collateral Revenues and Proceeds received by any Borrower in trust for the benefit of Administrative Agent, on behalf of the Lenders, and shall promptly (and in any event not later than the fifth day after receipt) deliver (or cause to be delivered) the same to Administrative Agent, on behalf of the Lenders, and into its possession in the form received by such Borrower and at a time and in a manner satisfactory to Administrative Agent, on behalf of the Lenders.

     6.15 Equipment.

     (a) Keep the Equipment in good condition and repair (ordinary wear and tear excepted);

     (b) Use the Equipment with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all Contractual Obligations, Requirements of Law and Consents and Other Action;

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     (c) Use the Equipment only in the Business and not for personal, family, household or farming use; and

     (d) Assume (and Borrowers do hereby assume) all responsibility and liability arising from the Borrowers’ use of the Equipment.

     6.16 Escrows.

     Upon or after the occurrence of an Event of Default hereunder or under the other Loan Documents (whether or not the same shall be continuing), Borrowers shall upon written notice from Administrative Agent, on behalf of the Lenders, escrow with Administrative Agent from time to time, amounts sufficient, in Administrative Agent’s Sole Discretion, to pay as the same come due, all taxes, insurance, rentals, and any capital expenditures required to be expended in connection with the Company-Owned Properties by any Borrower during the term of any Revolving Credit Loan.

     6.17 Taxes.

     Continue (and cause each Tax Party to continue) to file in a timely manner all Federal, state and other material tax returns and reports required to be filed, and to continue (and cause each Tax Party to continue) to pay, all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable. All information in such tax returns, reports and declarations will be complete and accurate in all material respects.

     6.18 FDA Properties, Minwood, FDA Properties of Texas, LP, Famous Dave’s Properties of Texas, Inc., Famous Dave’s Ribs of Texas, L.P. and FD Ribs of Texas, Inc.

               Not allow any of FDA Properties, Minwood, FDA Properties of Texas, LP, a Texas limited partnership, Famous Daves Properties of Texas, Inc., a Texas corporation, Famous Daves Ribs of Texas, L.P., a Texas limited partnership, or FD Ribs of Texas, Inc., a Texas corporation,, to engage in any business other than the owning of the assets which it owns on the date hereof or to acquire any new property or assets. In addition, cause FDA Properties of Texas, LP and FDA Properties of Texas, Inc. to dissolve its legal existence within ninety (90) days after the property in Mesquite, Texas, currently owned by FDA Properties of Texas, LP, is sold.

     6.19 Further Assurances.

               Deliver or cause to be delivered to Administrative Agent from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to Administrative Agent as Administrative Agent shall reasonably deem necessary or desirable to perfect, maintain or protect the Liens on the Collateral

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ARTICLE VII.
NEGATIVE COVENANTS

     So long as any Revolving Credit Loans or other Obligations are outstanding or any Lender has any obligation to make any Revolving Credit Loan, no Borrower shall, nor shall any Borrower permit any Subsidiary to, directly or indirectly:

     7.01 Liens.

     Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

     (a) Liens pursuant to any Loan Document;

     (b) Liens existing on the date hereof and listed on Schedule 7.01, provided that the property covered thereby is not increased;

     (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP consistently applied;

     (d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlords’ or other like Liens arising in the ordinary course of business which are for sums not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

     (e) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

     (f) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business;

     (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

     (h) purchase money Liens upon or in equipment acquired by any Borrower to secure the purchase price of such equipment or to secure debt incurred solely for the purpose of financing the acquisition of any such equipment, or Liens existing on any such equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price); provided that the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition; and

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     (i) Liens in connection with Capitalized Leases permitted pursuant to Section 7.03.

     7.02 Investments.

     Make any Investments, except:

     (a) Investments held by such Borrower or such Subsidiary in the form of cash and Cash Equivalents;

     (b) Investments of any Borrower in any wholly-owned Subsidiary as of the date hereof;

     (c) Investments of a Borrower consisting of the formation of a wholly-owned Subsidiary (each, a “Proposed Subsidiary”), provided, however, that no Borrower shall make such an Investment without the prior written consent of Administrative Agent, such consent not to be unreasonably withheld in the event that Borrowers satisfy the following conditions: (i) Administrative Agent receives at least sixty (60) days prior written notice of the proposed formation; (ii) no Event of Default shall have occurred and be continuing at the time of such notice or at the time of the proposed formation of such Proposed Subsidiary; (iii) the Proposed Subsidiary, at the time of formation and at the time such Proposed Subsidiary is added as a Borrower hereunder (as provided below), satisfies Administrative Agent’s then applicable credit review and underwriting standards, as determined by Administrative Agent in its Sole Discretion after review of such financial statements, reports and other documentation, if any, as Administrative Agent may require in order to make such determination, all of which shall, at Administrative Agent’s request, be delivered by Borrowers at their sole cost and expense; (iv) the Proposed Subsidiary, at the time of formation and at the time such Proposed Subsidiary is added as a Borrower hereunder (as provided below), satisfies Administrative Agent’s underwriting standards regarding its organizational structure, as determined by Administrative Agent in its Sole Discretion; (v) Borrowers and such Proposed Subsidiary execute and deliver to Administrative Agent and Lenders such documents and instruments as Administrative Agent shall reasonably require, in form and content reasonably satisfactory to Administrative Agent, to cause such Proposed Subsidiary to be added as an additional Borrower under this Agreement, the Notes and the other Loan Documents, jointly and severally liable with all other Borrowers for all obligations and liabilities of Borrowers hereunder and thereunder, including, without limitation, a joinder agreement and legal opinions; (vi) Borrowers pay to Administrative Agent an amendment fee determined by the Administrative Agent and all reasonable costs and expenses incurred by Administrative Agent in connection with such transaction, including, without limitation, Attorney Costs; and (vii) satisfaction of such other terms and conditions as Administrative Agent shall reasonably require; and

     (d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

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provided, however, that the foregoing Investments shall not be permitted if and to the extent that they are otherwise prohibited pursuant to any other provision of this Agreement or any other Loan Document.

     7.03 Indebtedness.

     Create, incur, assume, increase, become liable on or suffer to exist any Indebtedness other than Indebtedness listed on Schedule 7.03; provided, however, that notwithstanding the foregoing, nothing contained in this Section 7.03 shall permit any Borrower or any Subsidiary to create, incur, assume, increase, become liable on or suffer to exist any Indebtedness (whether or not listed on Schedule 7.03) to the extent that such Borrower’s or such Subsidiary’s ability to do so is otherwise prohibited by any other provision of this Agreement or any other Loan Document.

     7.04 Fundamental Changes; Subsidiaries.

     (a) Change its name, federal taxpayer identification number or state of formation, nor assume a different name, nor conduct its business or affairs under any other name without providing Administrative Agent with 60 days prior written notice thereof.

     (b) Merge, dissolve, liquidate, consolidate with or into another Person, change its structure (whether by equity sale, issuance, purchase or otherwise), change its use of any item of Collateral during the term hereof, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that (i) any Subsidiary of any Borrower may merge into or consolidate with any other Subsidiary of any Borrower provided that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a wholly-owned Subsidiary of a Borrower, and (ii) any of a Borrower’s Subsidiaries may merge into a Borrower. Borrowers shall provide prior written notice to Administrative Agent of any merger or consolidation permitted under this Section 7.04(b), together with an amended Exhibit J to this Agreement including any changes necessary to accurately reflect such merger or consolidation, which amended Exhibit J shall, upon approval by Administrative Agent and consummation of the applicable merger or consolidation, be substituted as a replacement Exhibit J to this Agreement.

     (c) Have any Subsidiaries other than those specifically disclosed in Part (b) of Schedule 5.13 or have any equity investments in any other Person other than those specifically disclosed in part(c) of Schedule 5.13, except, in each case, as expressly permitted otherwise under Section 7.02(b).

     7.05 Dispositions.

     Make any Disposition of any Collateral, any Company-Owned Property, or any other property or assets of any Borrower or any Subsidiary or enter into any agreement to make any Disposition of any of the same, except:

     (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

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     (b) Dispositions of inventory in the ordinary course of business;

     (c) Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property;

     (d) Disposition of assets from one Borrower to another Borrower

     (e) the Disposition of the real property located in Mesquite, Texas currently owned by FDA Properties of Texas, LP;

provided, however, that any Disposition pursuant to clauses (a) through (d) shall be for fair market value.

     7.06 Restricted Payments.

     Except for (i) Restricted Payments from any Borrower to another Borrower (only to the extent that the same may lawfully be made by such Borrower in accordance with applicable Laws) and (ii) the Stock Repurchase, directly or indirectly, declare, or pay or make any Restricted Payment, or set aside or otherwise deposit or invest any sums for such purpose, or agree to do any of the foregoing.

     7.07 Change in Nature of Business.

     Engage in any material line of business substantially different from those lines of business conducted by the Borrowers and their Subsidiaries on the date hereof or any business substantially related or incidental thereto.

     7.08 Transactions with Affiliates.

     Enter into any transaction of any kind with any Affiliate of any Borrower, except in the ordinary course of business, pursuant to written agreements and on fair and reasonable terms substantially as favorable to such Borrower or such Subsidiary as would be obtainable by such Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate.

     7.09 Burdensome Agreements.

     Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability (a) of any Subsidiary to make Restricted Payments to any Borrower or to otherwise transfer property to any Borrower, (b) of any Subsidiary to Guarantee the Indebtedness of any Borrower or (c) of any Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person.

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     7.10 Use of Proceeds.

     (a) Except in the case of the Stock Repurchase, use the proceeds of any Revolving Credit Loan Borrowing, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry any securities, including Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose.

     (b) Use the proceeds of any Revolving Credit Loan Borrowing, directly or indirectly, for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any Margin Stock or other security or for any other purpose which might cause any Revolving Credit Loan Borrowing to be considered a “purpose credit” within the meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System, as amended.

     (c) Use the proceeds of any Revolving Credit Loan Borrowing for any purpose other than for the lawful, proper business or commercial purposes related to the Business or for the Stock Repurchase.

     (d) Engage, principally or as one of their important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock.

ARTICLE VIII.
SECURITY FOR OBLIGATIONS

     8.01 Grant of Security in the Collateral.

     To secure the payment and performance in full of all of the Obligations, each Borrower hereby Grants to Administrative Agent for the benefit of Lenders a continuing security interest and Lien on and with respect to any and all right, title and interest of each such Borrower in and to the Collateral (including the Principal Agreements but only as provided in the next sentence below), whether now owned and existing or hereafter acquired or arising; all additions and accessions thereto, substitutions therefor and replacements and improvements of or to any or all of the foregoing; and all products and Proceeds of the foregoing. In the event and to the extent that any Borrower now or hereafter may Grant a security interest in or other Lien on its rights under any Principal Agreement without Conflicting with such Principal Agreement, either because the terms of such Principal Agreement do not restrict such Grant, or each of the other parties thereto has consented to such Grant or applicable Law permits such Grant, or for any other reason, then such Borrower hereby Grants to Administrative Agent for the benefit of Lenders such Lien in such Principal Agreements, whether now owned or hereafter acquired, and all Proceeds thereof. Each Borrower hereby authorizes Administrative Agent, on behalf of the Lenders, to file the Financing Statements in the Filing Offices or in such other locations as Administrative Agent, on behalf of the Lenders, may now or hereafter deem appropriate in its Sole Discretion.

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ARTICLE IX.
SPECIAL PROVISIONS CONCERNING RIGHTS AND DUTIES WHILE IN
POSSESSION OF COLLATERAL

     9.01 Borrowers’ Possession.

     Upon and during the continuation of an Event of Default, to the extent the same shall, from time to time, be in any Borrower’s possession, such Borrower will hold the Collateral and all writings evidencing or relating to the Collateral in trust for Administrative Agent, on behalf of the Lenders, and, upon request or as otherwise provided herein, promptly deliver the same to Administrative Agent, in the form received and at a time and in a manner satisfactory to Administrative Agent. With respect to the Collateral in any Borrower’s possession Borrowers shall at Administrative Agent’s request take such action as Administrative Agent in its Sole Discretion deems necessary or desirable to create, perfect and protect the security interest of Administrative Agent, on behalf of the Lenders, in any of the Collateral and to preserve or enhance the value thereof.

     9.02 Administrative Agent’s Possession.

     With respect to all of the Collateral (and all other security for the Revolving Credit Loans) delivered or transferred to, or otherwise in the custody or control of (including any items in transit to or set apart for) Administrative Agent or any of its agents, associates or correspondents, in accordance with this Agreement, the Borrowers agree that (a) such Collateral (and other security) will be and be deemed to be in the sole possession of the Administrative Agent, for the benefit of Lenders; (b) Borrowers have no right to withdraw or substitute any such Collateral (or other security); (c) Borrowers shall not take or permit any action, or exercise any voting and other rights, powers and privileges in respect of the Collateral (or other security) inconsistent with Administrative Agent’s and Lenders’ interest therein and sole possession thereof; and (d) Administrative Agent, for the benefit of Lenders, may in it its Sole Discretion and without notice, without obligation or liability except to account for property actually received by it, and without affecting or discharging the Obligations, (1) further transfer and segregate the Collateral (or other security) in its possession; (2) receive Collateral Revenues or Proceeds and hold the same as a part of the Collateral (or other security) and/or apply the same as hereinafter provided; and (3) exchange any of the Collateral (or other security) for other property upon reorganization, recapitalization or other readjustment. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent, for the benefit of Lenders, is authorized (i) to exercise or cause its nominee to exercise all or any rights, powers and privileges (including to vote) on or with respect to the Collateral (or other security) with the same force and effect as an absolute owner thereof; (ii) whether any of the Obligations be due, in its (or Lenders’) name(s) or in Borrowers’ names or otherwise, to demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement Administrative Agent, on behalf of the Lenders, deems desirable with respect to, any of the Collateral (or other security); and (iii) to extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release, any of the Collateral (or other security). Notwithstanding the rights accorded Administrative Agent or the Lenders with respect to the Collateral (or other security) and except to the extent provided below or required by the UCC or other applicable Law (which

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requirement cannot be modified, waived or excused), Administrative Agent’s (and any Lender’s) sole duty with respect to any Collateral (or other security) in its possession (with respect to custody, preservation, safekeeping or otherwise and whether under Section 9-207 of the UCC or otherwise) will be to deal with it in the same manner that such party deals with similar property owned and possessed by it. Without limiting the foregoing, Administrative Agent (and Lenders), and any of its (and their) officers, directors, members, partners, trustees, owners, debt holders, employees, representatives, agents and designees, except as otherwise required by applicable Law (I) will have no duty with respect to the Collateral (or other security) or the rights granted hereunder; (II) will not be required to sell, invest, substitute, replace or otherwise dispose of the Collateral (or other security); (III) will not be required to take any steps necessary to preserve any rights against prior parties to any of the Collateral (or other security); (IV) will not be liable for (or deemed to have made an election of or exercised any right or remedy on account of) any delay or failure to demand, collect or realize upon any of the Collateral (or other security); and (V) will have no obligation or liability in connection with the Collateral (or other security) or arising under this Agreement. Borrowers agree that such standard of care is reasonable and appropriate under the circumstances.

ARTICLE X.
EVENTS OF DEFAULT AND REMEDIES

     10.01 Events of Default.

     Any of the following shall constitute an Event of Default:

     (a) Non-Payment. Any Borrower fails to pay (i) when and as required to be paid herein, any amount of principal or interest of any Revolving Credit Loan, or (ii) within three Business Days after the same becomes due, any fee or other amount due hereunder or under any other Loan Document; or

     (b) Disclaimer. Any Borrower disclaims liability under, or enforceability of, any Loan Document; or

     (c) Specific Covenants. Any Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05(a), 6.05(c), 6.10, 6.14, or Article VII, or Section 14.02 or 14.03; or

     (d) Other Defaults. Any Borrower fails to perform or observe any other covenant or agreement (not specified in subsection (a), (b) or (c) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or

     (e) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Borrower herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading when made or deemed made; or

     (f) Insolvency Proceedings, Etc. Any Borrower or any Subsidiary of any Borrower institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any

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receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 90 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 90 calendar days, or an order for relief is entered in any such proceeding; or

     (g) Inability to Pay Debts; Attachment. (i) Any Borrower or any Subsidiary of any Borrower becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or

     (h) Judgments. There is entered against any Borrower or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding $750,000.00 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of ten (10) consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $250,000.00, or (ii) any Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $250,000.00; or

     (j) Invalidity of Loan Documents. Any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Borrower or any other Person contests in any manner the validity or enforceability of any Loan Document; or any Borrower denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document;

     (k) Change of Control. There occurs any Change of Control;

     (l) Dissolution, Etc. of Borrowers. Any Borrower or any partnership or limited liability company in which any Borrower or any Subsidiary is a partner or member (each hereinafter called an “other liable party”) shall dissolve, merge or consolidate, suspend the transaction of business, attempt to terminate, revoke or disclaim any obligation to Administrative Agent or any Lender (except strictly in accordance with its terms), or incur any material adverse change in its financial condition or prospects; or if any Borrower or any other liable party shall be expelled from or suspended by any stock or securities exchange or other exchange; or if any

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Borrower or any other liable party shall take any action to effect, or which indicates its acquiescence in, any of the foregoing, except as expressly permitted in or required by this Agreement; or

     (m) The Capital Stock of Famous Dave’s shall cease to be traded on a nationally recognized stock or securities exchange.

     10.02 Remedies Upon Event of Default.

     If any Event of Default occurs and is continuing, the Administrative Agent shall, subject to Section 12.12, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

     (a) declare the commitment of each Lender to make Revolving Credit Loans to be terminated, whereupon such commitments and obligation shall be terminated;

     (b) declare the unpaid principal amount of all outstanding Revolving Credit Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each Borrower;

     (c) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law, which shall include, without limitation, the rights, powers and remedies (i) granted to secured parties under the UCC or other applicable Uniform Commercial Code; (ii) granted to Administrative Agent or Lenders under any other applicable Law; and (iii) granted to Administrative Agent or Lenders under this Agreement, the Notes or any other Loan Document or any other agreement between Borrowers and Administrative Agent or Lenders;

     (d) without Borrowers’ assent, without advertisements or notices of any kind (except for the notice specified in Section 10.04 below regarding notice required in connection with a public or private sale), or demand of performance or other demand, or obligation or liability (except to account for amounts actually received) to or upon Borrowers or any other person (all such advertisements, notices and demands, obligation and liabilities, if any, hereby being expressly waived and discharged to the extent permitted by law), forthwith, directly or through its agents or representatives, (i) disclose such default and other matters (including the names of Borrowers) in connection therewith to any Person in Administrative Agent’s and Lenders’ reasonable discretion; (ii) to the extent permitted by applicable Law enter any Company-Owned Property, with or without the assistance of other persons or legal process; (iii) require Borrowers to account for (including accounting for any products and proceeds of any Collateral), segregate, assemble, make available and deliver to Administrative Agent, its agents or representatives, for the benefit of Lenders, the Collateral, at any place and time designated by Administrative Agent or Lenders; (iv) take possession of, operate, render unusable, remove from any location, collect, transfer and receive, recover, appropriate, foreclose, extend payment of, adjust, compromise, settle, release any claims included in, and do all other acts or things necessary or, that Administrative Agent or Lenders in their Sole Discretion deem appropriate, to protect, maintain, preserve and realize upon, the Collateral and any products and proceeds thereof, in whole or in

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part; (v) exercise all rights, powers and interests with respect to any and all Collateral, and sell, assign, lease, license, pledge, transfer, negotiate (including endorse checks, drafts, orders, or instruments), deliver or otherwise dispose (by contract, option(s) or otherwise) of the Collateral or any part thereof; and (vi) without regard to the sufficiency of the security for repayment of the Obligations and without notice to Borrowers, or any showing of insolvency, fraud or mismanagement on the part of Borrowers and without the necessity of filing any judicial or other proceeding other than the proceeding for appointment of a receiver, and without regard to the then value of the Collateral, Administrative Agent and Lenders shall be entitled to the ex parte appointment of a receiver or receivers for the protection, control and management of the Collateral. Any such disposition may be in one or more public or private sales, at or upon an exchange, board or system or in the State where any Collateral or any Company-Owned Property is located or elsewhere, at such price, for cash or credit (or for future delivery without credit risk) and upon such other terms and conditions as it deems appropriate, with the right of Lenders to the extent permitted by Law upon any such sale or sales, public or private, to purchase the whole or any part of said Collateral, free of any right, claim or equity of redemption of or in any Borrower (such rights, claims and equity of redemption, if any, hereby being expressly waived). If any of the Collateral is sold or leased by Administrative Agent, on behalf of the Lenders, upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefore is finally collected by Administrative Agent, for the benefit of Lenders. In the event Administrative Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower waives the posting of any bond which might otherwise be required. Notwithstanding that Administrative Agent or any Lender, whether in its own behalf and/or on behalf of another or others, may continue to hold the Collateral and regardless of the value thereof, or any delay or failure to dispose thereof, unless and then only to the extent that Administrative Agent or any such Lender proposes to retain the Collateral in satisfaction of the Obligations by written notice in accordance with the UCC, Borrowers shall be and remain liable for the payment in full of any balance of the Obligations and expenses at any time unpaid. Without limiting the foregoing, upon Borrowers’ failure to abide by and comply with its obligations under Article VI hereof, in addition to its other rights and remedies, Administrative Agent, on behalf of the Lenders, may (but is not required to), in its Sole Discretion and to the extent it deems necessary, advisable or appropriate, take or cause to be taken such actions or things to be done (including the payment or advancement of funds, or requiring advancement of funds to be held by Administrative Agent, for the benefit of Lenders, to fund such obligations, including taxes or insurance) as may be required hereby (or necessary or desirable in connection herewith) to correct such failure (including causing the Collateral to be maintained or insurance protection required hereby to be procured and maintained) and any and all costs and expenses incurred (including reasonable attorneys fees and disbursements) in connection therewith shall be included in Borrowers’ Obligations and shall be immediately due and payable and bear interest at the Default Rate;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Revolving Credit Loans shall automatically terminate, the unpaid principal amount of all outstanding Revolving Credit Loans and all interest and other amounts as aforesaid shall automatically become due and payable, without further act of the Administrative Agent or any Lender.

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All such rights, powers and remedies shall be cumulative and not alternative and enforceable, in Required Lenders’ Sole Discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Borrower of this Agreement or any of the other Loan Documents. Any single or partial exercise of, or forbearance, failure or delay in exercising any right, power or remedy shall not be, nor shall any such single or partial exercise of, or forbearance, failure or delay be deemed to be a limitation, modification or waiver of any right, power or remedy and shall not preclude the further exercise thereof; and every right, power and remedy of Administrative Agent or Lenders shall continue in full force and effect until such right, power and remedy is specifically waived by an instrument in writing executed and delivered with respect to each such waiver by such parties.

     10.03 Application of Funds.

     After the exercise of remedies provided for in Section 10.02 (or after the Revolving Credit Loans have automatically become immediately due and payable any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

     First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including Attorney Costs and amounts payable under Article III) payable to the Administrative Agent in its capacity as such and including all costs and expenses (including Attorney Costs, trustee fees and court costs) incurred in connection with any collection, receipt, recovery, appropriation, foreclosure or realization, or from any use, operation, sale, assignment, lease, pledge, transfer, delivery or disposition of all or any of the Collateral, or with respect to the care, safekeeping, custody, maintenance, protection, administration or otherwise of any and all of said Collateral or in any way relating to the rights of Administrative Agent and Lenders under this Agreement;

     Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

     Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Revolving Credit Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

     Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Revolving Credit Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them;

     Fifth, to the payment, satisfaction or discharge of any other Indebtedness or Obligations (including any reimbursement, subrogation, contribution or other obligation to any Person), or otherwise as may be permitted or as required by any law, rule or regulation (including Section 9-615(a)(3) of the UCC); and

     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrowers or as otherwise required by Law.

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     10.04 Required Notice of Sale.

     In exercising its rights, powers and remedies as secured party, Administrative Agent, on behalf of the Lenders, agrees to give Borrowers 10 days’ notice of the time and place of any public sale of Collateral or of the time after which any private sale of Collateral may take place, unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. Borrowers agree that such period and notice is commercially reasonable under the circumstances.

ARTICLE XI.
RIGHT TO CURE; POST-DEFAULT POWER OF ATTORNEY

     11.01 Right to Cure.

     Administrative Agent, on behalf of the Lenders, may, at its option but without any obligation, after an Event of Default that is continuing cure any default by Borrowers under any Contractual Obligation including the Principal Agreements and Leases or pay or bond on appeal any judgment entered against Borrowers; discharge taxes or other Liens at any time levied on or existing with respect to the Collateral; and pay any amount, incur any expense or perform any act which, in Administrative Agent’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Administrative Agent or Lenders with respect thereto. Administrative Agent may add any amounts so expended to the Obligations, such amounts to be repayable by Borrowers on demand. Administrative Agent shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of Borrowers. Any payment made or other action taken by Administrative Agent under this Section shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly.

     11.02 Power of Attorney.

     Each Borrower hereby irrevocably constitutes and appoints, effective on and after the occurrence of an Event of Default, Administrative Agent acting through any officer or Agent thereof, with full power of substitution, as such Borrower’s true and lawful attorney-in-fact with full irrevocable power and authority in such Borrower’s place and stead and in such Borrower’s name or in its own name, from time to time in Administrative Agent’s Discretion, to receive, open and dispose of mail addressed to such Borrower, to take any and all action, to do all things, to execute, endorse, deliver and file any and all writings, documents, instruments, notices, statements (including financing statements, and writings to correct any error or ambiguity in any Loan Document), applications and registrations (including registrations and licenses for securities, copyrights, patents, and trademarks), checks, drafts, acceptances, money orders, or other evidence of payment or proceeds, which may be or become necessary or desirable in the Sole Discretion of Administrative Agent to accomplish the terms, purposes and intent of, or to fulfill Borrowers’ obligations under this Agreement and the other Loan Documents, including the right to enter into any control agreements on behalf of each such Borrower as described in Section 6.14, to appear in and defend any action or proceeding brought with respect to the Collateral or any Company-Owned Property, and to bring any action or proceeding, in the name and on behalf of any Borrower, which Administrative Agent, in its Sole Discretion, deems

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necessary or desirable to protect its interest in the Collateral or any Property. This power is coupled with an interest and is irrevocable. THIS POWER DOES NOT AND SHALL NOT BE CONSTRUED TO AUTHORIZE ANY CONFESSION OF JUDGMENT. Each Borrower hereby releases Administrative Agent, Lenders and their respective officers, directors, members, partners, trustees, debt holders, employees, representatives, agents and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except and only to the extent the same results from the applicable released party’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

ARTICLE XII.
ADMINISTRATIVE AGENT

     12.01 Appointment and Authorization of Administrative Agent.

     (a) Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

     12.02 Delegation of Duties.

     The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

     12.03 Liability of Administrative Agent.

     No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any

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Lender or participant for any recital, statement, representation or warranty made by any Borrower or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Borrower or any Affiliate thereof.

     12.04 Reliance by Administrative Agent.

     (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

     (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

     12.05 Notice of Default.

     The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or any Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default.” The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with

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respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Article X; provided, however, that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

     12.06 Credit Decision; Disclosure of Information by Administrative Agent.

     Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Borrower or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrowers and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrowers and the other Borrowers hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrowers and the other Borrowers. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Borrowers or any of their respective Affiliates which may come into the possession of any Agent-Related Person.

     12.07 Indemnification of Administrative Agent.

     Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Borrower and without limiting the obligation of any Borrower to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Agent-Related Person’s own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred

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by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of the Administrative Agent.

     12.08 Administrative Agent in its Individual Capacity.

     Wells Fargo and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Borrowers and their respective Affiliates as though Wells Fargo were not the Administrative Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Wells Fargo or its Affiliates may receive information regarding any Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Borrower or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Revolving Credit Loans, Wells Fargo shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” include Wells Fargo in its individual capacity.

     12.09 Successor Administrative Agent.

     The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders and Famous Dave’s. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall be consented to by the Borrowers at all times other than during the existence of an Event of Default (which consent of the Borrowers shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrowers, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor administrative agent and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article XII and Sections 15.04 and 15.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

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     12.10 Administrative Agent May File Proofs of Claim.

     In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Borrower, the Administrative Agent (irrespective of whether the principal of any Revolving Credit Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise

     (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Revolving Credit Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.06 and 10.04) allowed in such judicial proceeding; and

     (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.06 and 15.04.

     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

     12.11 Collateral Matters.

     The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than contingent indemnification obligations), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, (iii) in accordance with any provision for the release thereof provided for in this Agreement or the other Loan Documents, or (iv) subject to Section 15.01, if approved, authorized or ratified in writing by the Required Lenders.

     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property pursuant to this Section 12.11.

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     12.12 Duties in the Case of Enforcement.

     In case one of more Events of Default have occurred and shall be continuing, the Administrative Agent shall, if (a) so requested (or consented to) by the Required Lenders and (b) the Lenders have provided to the Administrative Agent such additional indemnities and assurances against expenses and liabilities as the Administrative Agent may reasonably request, proceed to enforce the provisions of any Loan Documents authorizing the sale or other disposition of all or any part of the Collateral (or any other property which is security for the Obligations) and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral (or such other property). The Required Lenders may direct the Administrative Agent in writing as to the method and the extent of any such sale or other disposition, the Lenders hereby agreeing to indemnify and hold the Administrative Agent, harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Administrative Agent need not comply with any such direction to the extent that the Administrative Agent reasonably believes the Administrative Agent’s compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction.

     12.13 Other Agents; Co-Lead Arrangers and Syndication Agent.

     None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” or “co-lead arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

     12.14 Advertising, Promotion and Marketing

     The Administrative Agent and each Lender may, and each Borrower hereby authorizes the Administrative Agent and each Lender to, include references to such Borrower and its Subsidiaries, and utilize any logo or other distinctive symbol associated with such Borrower or any of its Subsidiaries, in connection with any advertising, promotion or marketing undertaken by the Administrative Agent or such Lender.

ARTICLE XIII.
CONTRIBUTION AMONG THE BORROWERS

     13.01 Contribution.

     To provide for just and equitable contribution among the Borrowers, if any payment is made by one Borrower (a “Funding Borrower”) hereunder or under any other Loan Document in respect of the Obligations, such Funding Borrower shall be entitled to a contribution from the other Borrower for all payments, damages and expenses incurred by such Funding Borrower under or in connection with such Obligations, such contributions to be made in the manner and

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to the extent set forth below. Any amount payable as a contribution under this Agreement shall be determined as of the date on which the related payment is made by a Funding Borrower.

     13.02 Calculation of Contributions.

     Each Borrower shall be liable for contribution to each Funding Borrower in respect of all payments, damages and expenses incurred by such Funding Borrower hereunder or under any other Loan Document in an aggregate amount, subject to Section 13.03, equal to (i) the ratio of (x) the Property Worth of all Collateral and other security for the Obligations owned by such Borrower, to (y) the Property Worth of the entire Collateral and other security for the Obligations owned by all of the Borrowers collectively, multiplied by (ii) the aggregate amount of such payments, damages and expenses incurred by such Funding Borrower under or in connection with the Secured Obligations. As used herein, the term “Property Worth” shall mean, with respect to each Borrower, the fair market value such Borrower’s right, title and interest in and to the Collateral and other security for the Obligations as of the Disbursement Date.

     13.03 Rights to Contribution Subordinated.

     Each Borrower agrees that all of its rights to receive contributions under this Article XIII (whether for payments, damages, expenses or otherwise) and all of its rights, if any, to be subrogated to any of the rights of Administrative Agent or Lenders shall be subordinated in right of payment (in liquidation or otherwise) to the prior payment in full in cash of all of the Obligations (whether for principal, interest, premium or otherwise). If any amount shall at any time be paid to a Borrower on account of such rights of contribution or subrogation, or in contravention of the provisions of this Article XIII at any time, such amount shall be held in trust, segregated from the other assets of such Borrower, for the benefit of the Administrative Agent and Lenders and shall promptly be paid to the Administrative Agent. The foregoing shall constitute a continuing offer to, and agreement with, all persons that from time to time may become holders of, or continue to hold, Obligations under this Agreement, and the provisions of the foregoing sentence are made for the benefit of such holders and such holders, as third party beneficiaries hereunder, are entitled to enforce such provisions.

ARTICLE XIV.
FINANCIAL COVENANTS

     The Borrowers covenant and agree that, so long as any Revolving Credit Loans or other Obligations are outstanding or any Lender has any obligation to make any Revolving Credit Loan:

     14.01 Adjusted Leverage Ratio.

     As of the end of any fiscal quarter in any fiscal year referenced in the table below, the Adjusted Leverage Ratio for the Reference Period then ended shall not exceed the ratio set forth opposite such fiscal year in such table:

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Fiscal Year     Ratio
       
 
     
 
     
       
FY 2005
    4.10:1.00
FY 2006
    4.00:1.00
FY 2007
    3.90:1.00
FY 2008
    3.80:1.00
FY 2009
    3.70:1.00

     14.02 Consolidated Cash Flow Ratio.

     As of the end of any fiscal quarter referenced in the table below, the Consolidated Cash Flow Ratio for the Reference Period then ended shall not be less than the ratio set forth opposite such fiscal quarter in such table:

           
Fiscal Quarter     Ratio  
       
From Closing Date through 2nd fiscal quarter ending June 29, 2008

      1.75:1.00

 
       
From 3rd fiscal quarter beginning June 30, 2008 through 4th quarter ending January 3, 2010
      2.00:1,00  
 
         

     14.03 Capital Expenditures.

     No Borrower shall, nor shall any Borrower permit any Subsidiary to, directly or indirectly make or become legally obligated to make any Growth Capital Expenditures costing in excess of the following amounts in the aggregate for the Borrowers and their Subsidiaries during each applicable fiscal year:

       
Fiscal Year     Ratio
       
FY 2005
    $  8,000,000
 
     
       
FY 2006
    $15,000,000
 
     
       
FY 2007
    $22,250,000
 
     
       
FY 2008
    $22,250,000
 
     
       
FY 2009
    $25,000,000
 
     

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     In additional and without limited the foregoing, no Borrower shall, nor shall any Borrower permit any Subsidiary to, at any time, directly or indirectly (a) become legally obligated to make any Growth Capital Expenditures, or (b) make any Growth Capital Expenditures which any Borrower or any such Subsidiary was not previously legally obligated to make, if, in either case, after giving effect thereto, the Adjusted Leverage Ratio is, or would be, greater than the Incurrence Ratio.

ARTICLE XV.
MISCELLANEOUS

     15.01 Amendments, Etc.

     No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Borrower or any other Borrower therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrowers or the applicable Borrower, as the case may be, and acknowledged by the Administrative Agent and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

     (a) waive any condition set forth in Section 4.01(a) without the written consent of each Lender;

     (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 10.02) without the written consent of such Lender;

     (c) postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) or any scheduled or mandatory reduction of the Aggregate Commitments hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

     (d) reduce the principal of, or the rate of interest specified herein on, any Revolving Credit Loan, or (subject to clause (iv) below in this Section 15.01) any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrowers to pay interest at the Default Rate;

     (e) change Section 2.09 or Section 10.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;

     (f) change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lender required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; or

     (g) release all or substantially all of the Collateral or other collateral securing the Revolving Credit Loans without the written consent of each Lender;

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and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

     15.02 Notices and Other Communications; Facsimile Copies.

     (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

          (i) if to the Borrowers or the Administrative Agent, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 15.02 or to such other address, facsimile number or telephone number as shall be designated by such party in a notice to the other parties; and

          (ii) if to any other Lender, to the address, facsimile number or telephone number specified for such Lender on Schedule 15.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrowers and the Administrative Agent.

All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone, and (D) if delivered by electronic mail, when delivered; provided, however, that notices and other communications to the Administrative Agent pursuant to Article II shall not be effective until actually received by such Person. In no event shall a voicemail message be effective as a notice, communication or confirmation hereunder.

     (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents and/or executed signature pages thereto may be transmitted by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and shall be binding on all Borrowers, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.

     (c) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Revolving

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Credit Loan Notices) purportedly given by or on behalf of any Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrowers shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of any Borrower. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

     15.03 No Waiver; Cumulative Remedies.

     No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

     15.04 Attorney Costs, Expenses and Taxes.

     Each Borrower agrees (a) to pay or reimburse the Administrative Agent for all costs and expenses incurred in connection with the development, preparation, negotiation and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs, and (b) to pay or reimburse the Administrative Agent and each Lender for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any “workout” or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative Agent and the cost of independent public accountants and other outside experts retained by the Administrative Agent or any Lender. All amounts due under this Section 15.04 shall be payable within ten Business Days after demand therefor. The agreements in this Section shall survive the termination of the Aggregate Commitments and repayment of all other Obligations.

     15.05 Indemnification by the Borrowers.

     Whether or not the transactions contemplated hereby are consummated, each Borrower shall indemnify and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on,

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incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment or Loan or the use or proposed use of the proceeds therefrom, or (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by any Borrower or any Subsidiary, or any Environmental Liability related in any way to any Borrower or any Subsidiary, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks, any website or other similar information transmission systems in connection with this Agreement, nor shall any Indemnitee have any liability for any indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). All amounts due under this Section 15.05 shall be payable within ten Business Days after demand therefor. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

     15.06 Payments Set Aside.

     To the extent that any payment by or on behalf of any Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.

     15.07 Successors and Assigns.

     (a) Conditions to Assignment by Lenders. Except as provided herein, each Lender may assign to one or more commercial banks, other financial institutions or other Persons, all or

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a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Revolving Credit Loans at the time owing to it; provided that (1) the Administrative Agent shall have given its prior written consent to such assignment, which consent will not be unreasonably withheld, conditioned or delayed; except that the consent of the Administrative Agent shall not be required in connection with any assignment by a Lender to (i) an existing Lender or (ii) an Affiliate of such Lender, provided that if such Lender or Affiliate is (or would, if it were a Lender, be) a Foreign Lender, such Person has complied with the requirements set forth in Section 15.15 (as though it were a Lender) prior to such assignment, (2) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender’s rights and obligations in respect of its Commitment and the Revolving Credit Loans at the time owing to it, (3) each assignment, shall be in a minimum amount of $2,000,000 (or, if less, such Lender’s entire Commitment and Revolving Credit Loans) or such lesser amount consented to by the Administrative Agent, and (4) the parties to such assignment shall execute and deliver to the Administrative Agent, for recording in the Register (as hereinafter defined), an Assignment and Assumption, together with any Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Assumption, which effective date shall (unless otherwise consented to by Administrative Agent) be at least five (5) Business Days after the execution thereof, (aa) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Assumption, have the rights and obligations of a Lender hereunder, and (bb) the assigning Lender shall, to the extent provided in such assignment and upon payment to the Administrative Agent of the registration fee referred to in Section 15.07(c), be released from its obligations under this Agreement.

     (b) Certain Representations and Warranties; Limitations; Covenants. By executing and delivering an Assignment and Assumption, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows:

     (1) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage,

     (2) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto;

     (3) such assignee confirms that it has received a copy of this Agreement (together with any amendments thereto), together with copies of the most recent financial statements referred to in Section 5.05 and Section 6.01 and such other documents and information as it has

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deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption;

     (4) such assignee will, independently and without reliance upon the assigning Lender, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement;

     (5) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto;

     (6) such assignee agrees that it will perform in accordance with this Agreement and the other Loan Documents all of the obligations that by the terms thereof are required to be performed by it as a Lender;

     (7) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Assumption; and

     (8) such assignee acknowledges that it has complied with the provisions of Section 15.15 to the extent applicable.

     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Revolving Credit Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice. The Register shall be available for inspection by the Borrowers and the Lenders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Lender agrees to pay to the Administrative Agent a registration fee in the sum of $3,500.

     (d) New Notes. Upon its receipt of an Assignment and Assumption executed by the parties to such assignment, the Administrative Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrowers and the Lenders (other than the assigning Lender). Within five (5) Business Days after receipt of such notice, each Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.

     (e) Participations. Any Lender may at any time, without the consent of, or notice to, any Borrower or the Administrative Agent, sell participations to any Person (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Revolving Credit Loans owing to it); provided that (1) each of the Administrative Agent and, unless an Event of Default shall have

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occurred and be continuing, the Borrowers shall have given their prior written consent to such sale of a participation, which consents will not be unreasonably withheld, conditioned or delayed, except that the consent of the Borrowers or the Administrative Agent shall not be required in connection with any sale of a participation by a Lender to (i) an existing Lender or (ii) an Affiliate of such Lender, (2) each such participation shall be in an amount of not less than $3,000,000, (3) such Lender’s obligations under this Agreement shall remain unchanged, and (4) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 15.01 that directly affects such Participant.

     (f) Assignee or Participant Affiliated with the Borrowers. If any assignee Lender is an Affiliate of any Borrower, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Article X, and the determination of the Required Lenders shall for all purposes of this Agreement and the other Loan Documents be made without regard to such assignee Lender’s interest in any of the Commitments or Revolving Credit Loans. If any Lender sells a participating interest in any of the Revolving Commitments or Revolving Credit Loans to a participant, and such participant is a Borrower or an Affiliate of a Borrower, then such transferor Lender shall promptly notify the Administrative Agent of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Article X to the extent that such participation is beneficially owned by a Borrower or any Affiliate of a Borrower, and the determination of the Required Lenders shall for all purposes of this Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Revolving Credit Loans or Commitments to the extent of such participation.

     (g) Miscellaneous Assignment Provisions. Any assigning Lender shall retain its rights to be indemnified pursuant to Section 15.05 with respect to any claims or actions arising prior to the date of such assignment. Anything contained in this Section 15.07 to the contrary notwithstanding, any Lender may at any time pledge or assign a security interest in all or any portion of its interest and rights under this Agreement (including all or any portion of its Notes) to secure obligations of such Lender, including any pledge or assignment to secure obligations to (a) any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341 and (b) with respect to any Lender that is a fund that invests in bank loans, to any lender or any trustee for, or any other representative of, holders of obligations owed or securities issued by such fund as security for such obligations or securities or any institutional custodian for such fund or for such lender. Any foreclosure or similar action by any Person in respect of such pledge or assignment shall be subject to the other provisions of this Section 15.07. No such

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pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents, provide any voting rights hereunder to the pledgee thereof, or affect any rights or obligations of the Borrowers or Administrative Agent hereunder.

     (h) Assignment by Borrowers. The Borrowers shall not assign or transfer any of their rights or obligations under this Agreement or any of the Loan Documents without (i) the prior written consent of each of the Lenders and (ii) the payment to the Administrative Agent, on behalf of the Lenders, of an assignment fee in an amount equal to 1.0% of the amount to be assigned and all costs and expenses associated with any such assignment. For purposes of this Agreement, a Change in Control (whether by equity sale, issuance or otherwise) shall constitute an assignment hereof.

     (i) Syndication. The Borrowers hereby agree, at the request of the Administrative Agent, to use commercially reasonable efforts to assist and cooperate with the Administrative Agent in efforts to complete any syndication of the Commitments and the Revolving Credit Loans hereunder, including, but not limited to, promptly preparing and providing materials and information reasonably deemed necessary by the Administrative Agent to successfully complete and otherwise facilitate such syndication, including all projections required to be delivered pursuant to Section 5.05 and Section 6.01. The Borrowers and each of their directors, officers, employees and agents shall, at the reasonable request of the Administrative Agent, use commercially reasonable efforts to meet with any potential lender and provide such additional information as such Persons may reasonably request.

     15.08 Confidentiality.

     Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to any Borrower and its obligations, (g) with the consent of the Borrowers or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrowers. For purposes of this Section, “Information” means all information received from any Borrower relating to any Borrower or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Borrower, provided that, in the case of information received from a Borrower after the date

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hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything herein to the contrary, “Information” shall not include, and the Administrative Agent and each Lender may disclose without limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Administrative Agent or such Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Revolving Credit Loans and transactions contemplated hereby. In addition, the Administrative Agent may disclose to any agency or organization that assigns standard identification numbers to loan facilities such basic information describing the facilities provided hereunder as is necessary to assign unique identifiers (and, if requested, supply a copy of this Agreement), it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to make available to the public only such Information as such person normally makes available in the course of its business of assigning identification numbers

     15.09 Set-off.

     In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender is authorized at any time and from time to time, without prior notice to any Borrower or any other Borrower, any such notice being waived by each Borrower (on its own behalf and on behalf of each Borrower) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the respective Borrowers against any and all Obligations owing to such Lender hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or indebtedness. Each Lender agrees promptly to notify the Borrowers and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.

     15.10 Interest Rate Limitation.

     Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents, together with all fees, charges and other amounts that may be treated as interest under applicable law (collectively, the “Charges”) shall not exceed the maximum lawful rate of interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive Charges in an amount that

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exceeds the Maximum Rate, the excess Charges shall be applied to the principal of the Revolving Credit Loans or, if it exceeds such unpaid principal, refunded to the Borrowers. In determining whether the Charges contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

     15.11 Counterparts.

     This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     15.12 Integration.

     This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

     15.13 Survival of Representations and Warranties.

     All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or Event of Default at the time of any Revolving Credit Loan Borrowing, and shall continue in full force and effect as long as any Revolving Credit Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

     15.14 Severability.

     If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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     15.15 Tax Forms.

     (a) (i) Each Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code (a “Foreign Lender”) shall deliver to the Administrative Agent, prior to receipt of any payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Foreign Lender and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Foreign Lender by the any Borrower pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Foreign Lender by any Borrower pursuant to this Agreement) or such other evidence satisfactory to the Borrowers and the Administrative Agent that such Foreign Lender is entitled to an exemption from, or reduction of, U.S. withholding tax, including any exemption pursuant to Section 881(c) of the Code. Thereafter and from time to time, each such Foreign Lender shall (A) promptly submit to the Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Borrowers and the Administrative Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Foreign Lender by any Borrower pursuant to this Agreement, (B) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (C) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that the Borrowers make any deduction or withholding for taxes from amounts payable to such Foreign Lender.

          (ii) Each Foreign Lender, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums paid or payable to such Lender under any of the Loan Documents (for example, in the case of a typical participation by such Lender), shall deliver to the Administrative Agent on the date when such Foreign Lender ceases to act for its own account with respect to any portion of any such sums paid or payable, and at such other times as may be necessary in the determination of the Administrative Agent (in the reasonable exercise of its discretion), (A) two duly signed completed copies of the forms or statements required to be provided by such Lender as set forth above, to establish the portion of any such sums paid or payable with respect to which such Lender acts for its own account that is not subject to U.S. withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or any successor thereto), together with any information such Lender chooses to transmit with such form, and any other certificate or statement of exemption required under the Code, to establish that such Lender is not acting for its own account with respect to a portion of any such sums payable to such Lender.

          (iii) The Borrowers shall not be required to pay any additional amount to any Foreign Lender under Section 3.01 (A) with respect to any Taxes required to be deducted or withheld on the basis of the information, certificates or statements of exemption such Lender transmits with an IRS Form W-8IMY pursuant to this Section 15.15(a) or (B) if

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such Lender shall have failed to satisfy the foregoing provisions of this Section 15.15(a); provided that if such Lender shall have satisfied the requirement of this Section 15.15(a) on the date such Lender became a Lender or ceased to act for its own account with respect to any payment under any of the Loan Documents, nothing in this Section 15.15(a) shall relieve any Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender or other Person for the account of which such Lender receives any sums payable under any of the Loan Documents is not subject to withholding or is subject to withholding at a reduced rate.

          (iii) The Administrative Agent may, without reduction, withhold any Taxes required to be deducted and withheld from any payment under any of the Loan Documents with respect to which the Borrowers are not required to pay additional amounts under this Section 15.15(a).

     (b) Upon the request of the Administrative Agent, each Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Code shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. If such Lender fails to deliver such forms, then the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction.

     (c) If any Governmental Authority asserts that the Administrative Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Lender, such Lender shall indemnify the Administrative Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including Attorney Costs) of the Administrative Agent. The obligation of the Lenders under this Section shall survive the termination of the Aggregate Commitments, repayment of all other Obligations hereunder and the resignation of the Administrative Agent. The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its Sole Discretion, to release any Collateral or other security for the Obligations from the Liens imposed by the Loan Documents: (i) upon termination of all Commitments and payment in full of all Revolving Credit Loans and all other Obligations payable under this Agreement and under any other Loan Document any obligation to make any Revolving Credit Loan; (ii) in connection with the sale of such Collateral or other security pursuant to any Disposition permitted under the terms of this Agreement; or (iii) if approved, authorized or ratified in writing by the Required Lenders. Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral or other security pursuant to this Section 15.15(b).

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     15.16 Estoppel Certificates.

     Borrowers, within ten (10) days after request by Administrative Agent and at Borrowers’ expense, will furnish Administrative Agent and Lenders with a statement, duly acknowledged and certified, setting forth the amount of all Revolving Credit Loans and other Obligations and the offsets or defenses thereto, if any, all in form and substance reasonably acceptable to Administrative Agent.

     15.17 Recourse.

     Notwithstanding anything to the contrary contained in this Agreement or in any other Loan Document, the liability for payment of the Revolving Credit Loans and other Obligations and for the payment and performance of all other agreements, covenants and obligations contained herein or in any of the other Loan Documents, shall be the full recourse obligations of the Borrowers.

     15.18 Governing Law; Consent to Jurisdiction.

     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

     (b) EACH PARTY HERETO HEREBY CONSENTS, UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF NEW YORK AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE OTHER THAN PURSUIT OF A JUDGMENT ON A NOTE WHERE SUIT IS ALSO BROUGHT IN THE STATE WHERE ANY COMPANY-OWNED PROPERTY IS LOCATED TO TAKE JURISDICTION OF SUCH COMPANY-OWNED PROPERTY. EACH BORROWER FURTHER CONSENTS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF EACH STATE WHERE ANY COMPANY-OWNED PROPERTY IS LOCATED IN RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH RESPECT TO SUCH COMPANY-OWNED PROPERTY INCLUDING BUT NOT LIMITED TO FORECLOSURES, AND EACH BORROWER AGREES THAT ADMINISTRATIVE AGENT AND LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH ADMINISTRATIVE AGENT OR LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS OR TO OTHERWISE ENFORCE ITS RIGHTS AGAINST ANY BORROWER, ANY OTHER BORROWER OR THEIR RESPECTIVE PROPERTY. EACH BORROWER FURTHER IRREVOCABLY WAIVES PERSONAL SERVICE OF ANY AND

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ALL PROCESS UPON IT AND CONSENTS TO THE SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET FORTH HEREIN IN CONNECTION WITH ANY OF THE AFORESAID PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ADMINISTRATIVE AGENT AND LENDERS TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWER IN ANY JURISDICTION. TO THE EXTENT THAT ANY BORROWER HAS OR MAY HEREAFTER ACQUIRE ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGEMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ANY BORROWER OR ANY BORROWER’S PROPERTY, EACH BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.

     15.19 Waiver of Right to Trial by Jury and Other Rights.

     TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO TRIAL BY JURY AND ANY RIGHT OR CLAIM TO ANY CONSEQUENTIAL DAMAGES, EXEMPLARY DAMAGES, EXPECTANCY DAMAGES, SPECIAL DAMAGES AND GENERAL DAMAGES IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS HEREUNDER OR IN ANY WAY RELATING TO ANY LOAN OR ANY PROPERTY (INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR ADMINISTRATIVE AGENT AND LENDERS TO ENTER INTO THIS AGREEMENT AND TO MAKE THE REVOLVING CREDIT LOAN BORROWINGS.

     15.20 Time of the Essence.

     For all payments to be made and all obligations to be performed under the Loan Documents, time is of the essence.

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     15.21 Joint and Several Liability of Borrowers.

     The liability of all Borrowers hereunder, under the Notes and under each other Loan Document shall be joint and several. Each Borrower shall be primarily and directly liable hereunder, under the Notes and under each other Loan Document.

     15.22 Patriot Act Notice.

     Each Lender and the Administrative Agent (for itself and not on behalf of any other party) hereby notifies the Borrowers that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law on October 26, 2001 (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrowers and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrowers in accordance with the Patriot Act.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

     
  FAMOUS DAVE’S OF AMERICA, INC.,
  a Minnesota corporation
 
   
  By: /s/ Diana Purcel
  Name: Diana Purcel
  Title: Vice President and Chief Financial Officer
 
   
  D&D OF MINNESOTA, INC.,
  a Minnesota corporation
 
   
  By: /s/Diana Purcel
  Name: Diana Purcel
  Title: Vice President and Chief Financial Officer
 
   
  LAKE & HENNEPIN BBQ AND BLUES, INC.,
  a Minnesota corporation
 
   
  By: /s/ Diana Purcel
  Name: Diana Purcel
  Title: Vice President and Chief Financial Officer
 
   
  FAMOUS DAVE’S RIBS, INC.,
  a Minnesota corporation
 
   
  By: /s/ Diana Purcel
  Name: Diana Purcel
  Title: Vice President and Chief Financial Officer
 
   
  FAMOUS DAVE’S RIBS-U, INC.,
  a Minnesota corporation
 
   
  By: /s/ Diana Purcel
  Name: Diana Purcel
  Title: Vice President and Chief Financial Officer

S - 1


 

     
  FAMOUS DAVE’S RIBS OF MARYLAND,
  INC., a Minnesota corporation
 
   
  By: /s/ Christopher O’Donnell
  Name: Christopher O’Donnell
  Title: President
 
   
  WELLS FARGO BANK, NATIONAL
  ASSOCIATION, as Administrative Agent and as a Lender
 
   
  By: /s/ Brian J. Roach
  Name: Brian J. Roach
  Title: Managing Director
 
   
  By: /s/ James Kendrick Noble III
  Name: James Kendrick Noble III
  Title: Managing Director

S - 2


 

SCHEDULE 2.01

COMMITMENTS
AND PRO RATA SHARES

                 
Lender   Commitment   Pro Rata Share
 
Wells Fargo Bank, National Association
  $ 10,000,000.00       100 %
 
               
Total
  $ 10,000,000.00       100 %

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SCHEDULE 5.05

INDEBTEDNESS AS OF THE CLOSING DATE

         
Notes Payable to GE Capital Franchise Finance Corp.
  $ 12,360,856.24  
 
       
Capital Equipment Leases with various lessors
  $ 112,775.79  
 
       
Finance Leases with GE Capital Franchise Finance Corp.
  $ 4,500,000.00  

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SCHEDULE 506

LITIGATION

Famous Dave’s of America was served with a third party complaint in connection with a lease dispute with a FDA franchisee, Best Que, LLC, in which the Landlord of the franchisee site is attempting to enforce a guaranty for the franchisee’s obligations under the lease. There has been severe casualty damage at the site which has not been repaired. Famous Dave’s recently settled the lawsuit for $325,000.00, and obtained a full release from the Landlord. Famous Dave’s has recourse against the franchisee for all amounts which were paid by Famous Dave’s under this settlement, which Famous Dave’s will be pursuing by separate action.

1


 

SCHEDULE 5.11

TAX LIENS AND WAIVERS

     
Tax Liens
  NONE
 
   
Tax Waivers
  NONE

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SCHEDULE 5.13

MERGERS, ETC., SUBSIDIARIES AND
OTHER EQUITY INVESTMENTS

Part (a).   Mergers, Consolidations, Acquisitions, Other Names.

Famous Dave’s and Ribs acquired substantially all of the assets of the Red River restaurant group relating to four (4) restaurants located in Maryland and Virginia during 2000.

Part (b).   Subsidiaries

     The following Borrowers are subsidiaries of Famous Dave’s of America, Inc.:

            D&D of Minnesota, Inc.

            Lake & Hennepin BBQ and Blues, Inc.

            Famous Dave’s Ribs, Inc.

            Famous Dave’s Ribs-U, Inc.

     Famous Dave’s ribs of Maryland, Inc. is a subsidiary of Famous Dave’s Ribs, Inc.

The Borrowers have the following additional subsidiaries that are not Borrowers:

Minwood Partners, Inc., a Delaware corporation is wholly owned by Famous Dave’s of America, Inc.

FDA Properties, Inc., a Delaware corporation, is wholly owned by Famous Dave’s of American, Inc.

Famous Dave’s Properties of Texas, Inc., a Texas corporation is wholly owned by FDA Properties, Inc.

FD Ribs of Texas, Inc. , a Texas corporation is wholly owned by Famous Dave’s RIBS, Inc.

FDA Properties of Texas, LP, a Texas limited partnership

    Famous Dave’s of America, Inc. is the limited partner
Famous Dave’s Properties of Texas, Inc., a Texas corporation, is the General partner

Famous Dave’s Ribs of Texas, LP, a Texas limited partnership

    Famous Dave’s RIBS, Inc., is the limited partner
FD Ribs of Texas, Inc is the General partner

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Part (c). Other Equity Investments.

     None

2


 

SCHEDULE 5.17

OTHER BUSINESSES

NONE

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SCHEDULE 5.18

TRANSACTIONS WITH AFFILIATES

David Anderson operates a restaurant in Haywood, Wisconsin as a franchisee of Famous Dave’s of America, Inc.

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SCHEDULE 5.21

EXISTING AGREEMENTS REGARDING DISPOSITIONS

NONE

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SCHEDULE 5.22

PRINCIPAL AGREEMENTS

Letter Agreement dated October 29, 2004 between Famous Dave’s of America, Inc. and Hormel Foods Corporation relating to pork supplies.

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SCHEDULE 5.24

IP RIGHTS

                           
 
              Serial No./Registration        
  Owner     Mark     No.     Registration Date  
 
Famous Dave’s of America, Inc.
    TEXAS MANHANDLER
(Stylized)
      78385398       Pending  
 
Famous Dave’s of America, Inc.
    REAL HONEST
BARBEQUE (Stylized)
      78385186       Pending  
 
Famous Dave’s of America, Inc.
    THE ABSOLUTE BEST BAR-B-QUE EVER! (Stylized)       76559431       Pending  
 
Famous Dave’s of America, Inc.
    BAR-B-Q TO GO (&
Design)
      76503073       Pending  
 
Famous Dave’s of America, Inc.
    GRAB A LOAD & HIT
THE ROAD
      2810368       Registered  
 
Famous Dave’s of America, Inc.
    IF YOU’RE LICKIN’ YOUR LIPS, YOU’RE LICKIN’ THE BLUES.       2501844       Registered  
 
Famous Dave’s of America, Inc.
    PLEASE LIMIT FINGER-LICKIN’ TO YOUR OWN HANDS       2762186       Registered  
 
Famous Dave’s of America, Inc.
    WEAR LOSE PANTS       2453214       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S       2461570       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S       2457218       Registered  
 
Famous Dave’s of America, Inc.
    DEVIL’S SPIT       2283165       Registered  
 
Famous Dave’s of America, Inc.
    HOME OF THE BIG SLAB       2417905       Registered  
 
Famous Dave’s of America, Inc.
    SWEET HOME CHICAGO       2336602       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S (Stylized)       2360550       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S (Stylized)       2364913       Registered  
 
Famous Dave’s of America, Inc.
    LEGENDARY PIT
BAR-B-QUE
      75333105       Pending  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S (& Design)       2187168       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S (& Design)       2170880       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S BAR B QUE (& Design)       2170879       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S BBQ SHACK (& Design)       2163463       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S BAR B QUE (& Design)       2161520       Registered  
 

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              Serial No./Registration        
  Owner     Mark     No.     Registration Date  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S BBQ SHACK (& Design)       2170878       Registered  
 
Famous Dave’s of America, Inc.
    DESIGN ONLY       2233234       Registered  
 
Famous Dave’s of America, Inc.
    BUTT-ROCKIN’ BLUES       2265793       Registered  
 
Famous Dave’s of America, Inc.
    I’M NOT FAMOUS, IT’S THE RIBS       2160936       Registered  
 
Famous Dave’s of America, Inc.
    MAY YOU ALWAYS BE
SURROUNDED BY GOOD
FRIENDS AND GREAT
BARBEQUE
      2196326       Registered  
 
Famous Dave’s of America, Inc.
    FAMOUS DAVE’S BBQ SAUCE       2073251       Registered