**Exhibit 99.5**

# ** **

**FORBEARANCE AGREEMENT**

 

This FORBEARANCE AGREEMENT (as amended, modified or extended inaccordance with the terms hereof, the “Forbearance Agreement”), datedand effective as of June 1, 2004 (the “Effective Date”), is enteredinto by and among (i) American Restaurant Group, Inc., a Delawarecorporation (the “Company”), (ii) the Guarantors (as defined in theIndenture referred to herein), and (iii) the beneficial holders of the111⁄2% Series D Senior Secured Notes due 2006 (the “Notes”) signatory hereto(each, a “Signing Holder” and, collectively, the “Signing Holders”).

 

WITNESSETH:

 

WHEREAS, theCompany, the Guarantors and BNY Western Trust Company, a California statebanking corporation formerly known as U.S. Trust Company, National Association,as successor to U.S. Trust Company of California, N.A. (“BNY”), astrustee under the Indenture referred to herein (the “Trustee”) areparties to that certain Second Supplemental Indenture dated as of October 31, 2001 toIndenture dated as of February 25, 1998 (as amended and supplemented to date,the “Indenture”), providing for the issuance of an aggregate principalamount of up to $166,000,000 of the Notes;

 

WHEREAS, theCompany and the Guarantors are borrowers and Wells Fargo Foothill, Inc., a Californiacorporation formerly known as Foothill Capital Corporation (the “Agent”),is both agent and a lender under that certain Loan Agreement dated December 17,2001 (as amended, restated, supplemented, or otherwise modified from time totime, the “Credit Facility”);

 

WHEREAS, theCompany and the Guarantors are credit parties and TCW Shared Opportunity FundIII, L.P. (the “ECF Party”) is lender under that certain Loan Agreementdated October 31, 2003 (as amended, restated, supplemented, or otherwise modifiedfrom time to time, the “Eligible Credit Facility”);

 

WHEREAS, theCompany, the Guarantors, the Agent, the ECF Party, and the Trustee are partiesto the Second Amended and Restated Intercreditor and Collateral AgencyAgreement dated December 17, 2001 (the “Intercreditor Agreement”), inwhich BNY is separately designated Collateral Agent (as that term is definedtherein, the “Collateral Agent”);

 

WHEREAS, theobligations of the Company and the Guarantors under the Indenture, the Notes,the Credit Facility and the Eligible Credit Facility are secured by liens andsecurity interests in favor of the Collateral Agent on certain assets of theCompany and the Guarantors (the “Collateral”);

 

WHEREAS, theCompany and Guarantors are not in compliance with certain provisions of theIndenture, resulting in the occurrence of certain Defaults (as defined in theIndenture) and Events of Default (as defined in the Indenture) (i) underSections 4.1 and 6.1(1) of the Indenture in respect of an interest payment onthe Notes due on or about May 1, 2004 and (ii) any cross-default underSection 6.1(5) of the Indenture that may exist as a result of an overadvancecondition under the Credit Facility (but excluding any cross-default resultingfrom the issuance of a notice of default issued by the Agent or the CollateralAgent) (collectively, the “Specified Defaults”); and

 

WHEREAS, the Company has requested that the Signing Holders forbear ininstructing the Trustee to exercise, or in the exercise of, any default-relatedremedies with respect to the Specified Defaults, and the Signing Holders arewilling to grant such forbearance with respect to the Specified Defaults on theterms and conditions provided herein;

 

NOW, THEREFORE, in consideration of the premises and covenants herein contained,and for other good and valuable consideration, the receipt and sufficiency ofwhich is hereby acknowledged, the parties hereto mutually agree and covenant asfollows:

 

Section 1. CapitalizedTerms.  Capitalized terms used hereinwithout definition shall have the meanings assigned to them in the Indenture.

 

Section 2.  Forbearance.  The Signing Holders hereby agree, on theterms and subject to the conditions hereof, to forbear solely during the periodfrom and after the Effective Date until (but excluding) the ForbearanceTermination Date (as defined below) (the “Forbearance Period”) ininstructing the Trustee to exercise, or in the exercise of, all default-relatedrights and remedies available under the Indenture Documents (as defined

 

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below) with respect to the Specified Defaults.  Notwithstanding the forbearance set forth inthe immediately preceding sentence, it is understood and agreed by the Companyand Guarantors that none of the Signing Holders have waived any existing oranticipated Default or Event of Default (including, without limitation, theSpecified Defaults), and reserve all of their rights or remedies in respectthereof, under the Indenture, the Notes, the Security Documents (as definedbelow), and any other agreements, instruments, or documents executed anddelivered in connection therewith or the transactions contemplated thereby(collectively, the “Indenture Documents”) and applicable law.  During the Forbearance Period (andthereafter), the Signing Holders shall be permitted to exercise any and all oftheir rights and remedies under the Indenture Documents, except as may belimited or provided otherwise during the Forbearance Period pursuant to thefirst sentence of this Section 2.

 

Section 3. Termination.The Forbearance Period shall immediately terminate and be of no further forceor effect whatsoever at 10:00 a.m. Pacific Time on the date of theearliest to occur (the “Forbearance Termination Date”) of the followingevents (each, a “Forbearance Termination Event”):

 

(a)           thirty(30) days after the Effective Date (the “Initial Period”); providedhowever, such Initial Period shall, provided the conditions precedentset forth in Section 4 hereof are satisfied or waived, renew for a successiveperiod of thirty (30) days (such renewal period, the “Subsequent Period”)unless and until either of the Committee Advisors (as defined below) providesthe Company with written notice of termination of the Initial Period no laterthan seven (7) days in advance of the date upon which the Initial Periodotherwise would terminate unless renewed (it being understood that any suchtermination will occur at the end of the Initial Period); and providedfurther,that either of the Committee Advisors, on behalf of the Signing Holders, mayterminate this Forbearance Agreement at any time during the Subsequent Periodupon ten (10) days’ prior written notice;

 

(b)           commencementof any liquidation, bankruptcy, receivership, assignment for the benefit ofcreditors, or similar case or proceeding by or against the Company or any ofthe Guarantors (excluding ARG Terra, Inc.) in a court of competentjurisdiction, and, in the case of an involuntary proceeding, the passage ofthirty (30) days from the date of such filing without such filing beingdismissed or stayed, by or with respect to the Company or one or more of theGuarantors;

 

(c)           thedate on which the Collateral Agent commences, or delivers any notice to theCompany or one or more of the Guarantors evidencing its intention to commence,enforcement of its security interests in any of the Collateral by taking actionto collect, take possession of, or dispose of such Collateral for the benefitof, on behalf of, or at the direction of the Agent or the ECF Party;

 

(d)           thedate on which the Agent, the ECF Party, or the Collateral Agent, as the casemay be, delivers a notice to the Company or one or more of the Guarantorsdeclaring any default or event of default under or in respect of the CreditFacility or the Eligible Credit Facility, as applicable; providedhowever,that such notice was not declared at the instruction of the Signing Holders;

 

(e)           thedate on which any Default or Event of Default (other than (i) theSpecified Defaults or (ii) any Default or Event of Default declared by 25%of the holders the Notes, or the Trustee at such holders’ instruction) occursunder the Indenture or the Indenture Documents; and

 

(f)            thedate that is three (3) business days after the date that counsel to theCommittee, at the direction of one or more of the Signing Holders, delivers tothe Company and the Guarantors notice that this Forbearance Agreement isterminated on account of any failure to comply with, or breach of, Section 24hereof by the Company.

 

Upon the occurrence of any Forbearance Termination Event, the agreementof the Signing Holders to forbear with respect to the exercise of anydefault-related remedy provided for under or in respect the Indenture Documentsshall immediately terminate without the requirement of any demand, presentment,protest or notice of any kind, all of which the Company and the Guarantorsexpressly waive.  The Company and each ofthe Guarantors hereby agree that the Signing Holders may at any time after theoccurrence of any Forbearance Termination Event proceed to exercise any and allrights and remedies that the Signing Holders now or may in the future haveunder the Indenture Documents and applicable law in connection with any or allof the Defaults and Events of Default (including, without limitation, theSpecified Defaults) that have occurred and are continuing.

 

Section 4.  Conditions Precedent to Subsequent Period.  The Initial Period shall be extended inaccordance with the terms of clause (a) of Section 3 hereof provided that thefollowing conditions precedent have been satisfied or waived on or prior to thelast date of the Initial Period: (a) the representations and warranties set forth in Section 12hereof shall be true and correct in all material respects on and as of the lastday of the Initial Period, as though made on and as of such date; (b) noDefault or Event of Default shall have occurred and be continuing (other thanthe Specified Defaults); and (c) the Company and the Guarantors reaffirmthe agreements and

 

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acknowledgments set forth in Section 8 and Section 9 hereof as of suchdate.

 

Section 5.  Information.  The Company and the Guarantors agree todeliver promptly to the Committee Advisors financial information and otherdocumentation regarding the Company and the Guarantors reasonably requested bythe Committee Advisors, subject to their execution of confidentiality agreementsin form and substance reasonably acceptable to the Company and the Guarantors.

 

Section 6. Instruction to Trustee. The Signing Holders hold in the aggregate not less than $92,284,000 inprincipal amount of outstanding Notes. Immediately upon the Effective Date, the Signing Holders shall instructthe Trustee, and shall deliver to the Company evidence of the Trustee’sacknowledgement of receipt of such instruction, to honor the provisions of thisForbearance Agreement, and not to issue any notice of default or DebentureAcceleration Notice (as defined in the Intercreditor Agreement), or undertakeany action that is contrary to the terms of this Forbearance Agreement.  The Signing Holders shall have a continuingobligation to direct the Trustee during the term of the Forbearance Agreementin accordance with this Section 6, including but not limited to the obligationto, in accordance with Section 6.6 of the Indenture, promptly give the Trusteea direction that is inconsistent with any instruction given by holders of atleast 25% in principal amount of the outstanding Notes to pursue a remedy withrespect to the Indenture. 

 

Section 7.  Continuing Effect.  Except as expressly provided herein or ashereafter may be modified, the Indenture and the other Indenture Documentsshall continue unchanged and in full force and effect, and all rights, powers,and remedies of the Signing Holders, the Trustee, the Company, and theGuarantors thereunder are hereby expressly reserved.  Except to the extent expressly set forthherein, the Company and each of the Guarantors remains obligated by therepresentations, warranties, covenants, and other provisions set forth in theIndenture and the other Indenture Documents to which it is a party.

 

Section 8.  Acknowledgments and Agreements.  The Company and each of the Guarantors herebyunconditionally acknowledges, affirms, and agrees that, as of the EffectiveDate:

 

(a)           theoutstanding amount of the principal owing by the Company and Guarantors underthe Indenture Documents is $161,774,000, plus accrued and unpaid interestthereon, as provided in the Indenture Documents;

 

(b)           theCompany and the Guarantors are obligated to repay all of the indebtednessreferred to in clause (a) of this Section 8, and all other obligations underand in respect of the Indenture Documents, in each case without defense,offset, deduction or credit of any kind or nature whatsoever, whether matured orcontingent, related or unrelated;

 

(c)           neitherthe Company nor any of the Guarantors has any Claims (as defined below) againstthe Trustee or any of the holders of the Notes in respect of any matterrelating to or arising under this Forbearance Agreement or any of the IndentureDocuments or any of the transactions contemplated hereby or thereby;

 

(d)           nothingin this Forbearance Agreement shall create a contractual restriction on theSigning Holders, or any of them, that would restrict them from trading in anyNotes that each Signing Holder would otherwise be entitled to trade in accordance with applicable law;

 

(e)           exceptas specifically set forth in this Forbearance Agreement, neither the SigningHolders nor the Trustee has waived, forborne, modified, or otherwise agreed notto exercise any rights or remedies available to it under the IndentureDocuments or this Forbearance Agreement;

 

(f)            onand as of the Effective Date, the Specified Defaults have occurred and exist,and, as a result thereof, the Trustee and the requisite holders of the Notesunder the Indenture Documents may be entitled to declare all outstandingobligations of the Company and the Guarantors under or in respect of theIndenture Documents to be due and payable and are entitled to exercise all ofthe rights and remedies available under the Indenture Documents and applicablelaw, subject to the terms of this Forbearance Agreement, and none of theSpecified Defaults have been cured by the Company or the Guarantors or havebeen waived by the Trustee or any of the holders of the Notes;

 

(g)           theIndenture and each of the other Indenture Documents are and shall continue tobe in full force and effect and are hereby in all respects ratified andconfirmed;

 

(h)           itshall not contest or challenge, at any time, or cause or encourage, directly orindirectly, any person, at any time, to contest or challenge, the validity,priority, enforceability, or perfection of any lien or security interestgranted in connection with the Credit Facility, the Eligible Credit Facility,and the Indenture Documents;

 

(i)            ithas thoroughly read and reviewed, clearly understands, and fully andunconditionally consents to the terms and provisions of this ForbearanceAgreement, that it has had the full

 

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benefit and advice of counsel of its own selection, or the opportunityto obtain the benefit and advice of counsel of its own selection, in regard tothe negotiation, drafting, execution, and effectiveness of this Forbearance Agreement,and that it has relied on no other representations, either written or oral,express or implied, made to it by any other party hereto;

 

(j)            theforbearance set forth herein is strictly limited to the Specified Defaults andsuch forbearance shall not apply to any other past, present, or futureviolation or violations (whether known or unknown) of any provision of theIndenture or any of the other Indenture Documents;

 

(k)           itshall not, at any time, cause any assets of any nature whatsoever to be transferredto or for the benefit of ARG Terra, Inc.; and

 

(l)            the failure of anySigning Holder (or any other holder of the Notes) to exercise any right,privilege, or remedy as a result of any violations referred to in clause (j) ofthis Section 8 shall not by reason of this Forbearance Agreement, directly orindirectly, in any way whatsoever (i) impair, prejudice, or otherwise adverselyaffect such Signing Holder’s or holder’s right at any time to exercise anyright, privilege, or remedy in connection with the Indenture or any of theother Indenture Documents or any other contract, agreement, or instrument,(ii) amend or alter any provision of the Indenture or any of the otherIndenture Documents or any other agreement, contract, or instrument, or (iii) constituteany course of dealing or other basis for altering any of the obligations of theCompany or the Guarantors under or in respect of the Indenture Documents or anyrights, privileges, or remedies of the Trustee or the holders of the Notesunder the Indenture and the other Indenture Documents or such other agreement,contract, or instrument.

 

Section 9. No Defenses; Release.

(a) By its execution hereof and in consideration of the mutualcovenants contained herein and other accommodations granted to the Company andthe Guarantors hereunder, the Company and each of the Guarantors, on behalf ofitself and each of its subsidiaries and its or their successors, assigns, andagents, hereby expressly forever waives, releases, and discharges any and allclaims (including, without limitation, cross-claims, counterclaims, and rightsof setoff and recoupment), causes of action (whether direct or derivative innature), demands, suits, costs, expenses, and damages (collectively, the “Claims”)any of them may have or allege to have (and all defenses that may arise out ofany of the foregoing) of any nature, description, or kind whatsoever, based inwhole or in part on facts, whether actual, contingent, or otherwise, now known,unknown, or subsequently discovered, from the beginning of the world to theEffective Date and, if the Initial Period is extended in accordance withSection 4 hereof, to the last day of the Initial Period, whether arisingin law, at equity, or otherwise, against any or all of the holders of theNotes, the Trustee, each of the Committee Advisors and their respectiveaffiliates, and their respective successors and assigns, and each and all ofthe current and former general and/or limited partners, principals, managers,managing members, members, stockholders, “controlling persons” (within themeaning of the United States federal securities laws), directors, officers,employees, attorneys, consultants, advisors, agents, trusts, trustors,trustees, beneficiaries, heirs, executors and administrators of each of theforegoing (collectively, the “Released Parties”) involving or otherwiserelating to this Forbearance Agreement or any of the other agreements enteredinto in connection herewith, the Indenture, or any of the other IndentureDocuments, or any or all of the actions and transactions contemplated hereby orthereby, including, without limitation, any actual or alleged performance ornonperformance by any of the Released Parties hereunder or thereunder.  The extension of the Initial Period shall, asof the last day thereof, constitute a ratification, adoption, and confirmationby the Company and each of the other Guarantors of the foregoing generalrelease of all Claims against any and all of the Released Parties that arebased in whole or in part on the facts, whether or not now known or unknown,existing on or prior to such date.  TheCompany and each of the other Guarantors hereby acknowledge that the agreementsin this Section 9 are intended to be in full satisfaction of all or any allegedinjuries or damages arising in connection with the Claims.  In entering into this Agreement, the Companyand each of the Guarantors (i) expressly disclaims any reliance on anyrepresentations, acts, or omissions by any of the Released Parties and herebyagrees and acknowledges that the validity and effectiveness of the releases setforth above does not depend in any way on any such representation, acts and/oromissions or the accuracy, completeness, or validity thereof and(ii) following consultation with legal counsel, KNOWINGLY ANDVOLUNTARILY WAIVE THEIR JURY TRIAL RIGHTS WITH REGARD TO DISPUTES IN ANY WAYDIRECTLY OR INDIRECTLY ARISING OUT OF OR IN ANY WAY CONNECTED WITH THISFORBEARANCE AGREEMENT.  Theprovisions of this Section 9 shall survive the termination of theIndenture and the other Indenture

 

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Documents andpayment in full of all obligations of the Company and each of the Guarantorsunder or in respect of the Indenture Documents and all other amounts owing thereunder.

 

(b)           The Company and eachof the Guarantors represents and warrants that it has not assigned to anyPerson any Claim.  In the event that theforegoing representation and warranty is, or is purported to be, untrue, theCompany and each of the Guarantors agrees to indemnify and hold harmless theReleased Parties against, and to pay, any and all actions, demands,obligations, causes of action, decrees, awards, claims, liabilities, losses,and costs (including, but not limited to, reasonable expenses of investigationand fees and expenses of counsel) that any of the Released Parties may sustainor incur as a result of the breach or purported breach of the foregoingrepresentation and warranty.

 

Section 10. GOVERNING LAW; JURISDICTION; WAIVER.  THIS STANDSTILL AGREEMENT SHALL BE GOVERNEDBY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THEREOF.  THE COMPANY AND EACH GUARANTOR HEREBYIRREVOCABLY SUBMITS TO AND ACCEPTS THE JURISDICTION OF ANY NEW YORK STATE COURTSITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY UNITEDSTATES FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEWYORK IN RESPECT OF ANY ACTION, SUIT, OR PROCEEDING FOR BREACH OF THISFORBEARANCE AGREEMENT AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITSPROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.  THE COMPANY AND EACH GUARANTOR IRREVOCABLYWAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,TRIAL BY JURY AND ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OFTHE VENUE OF ANY SUCH ACTION, SUIT, OR PROCEEDING BROUGHT IN ANY SUCH COURT ANDANY CLAIM THAT ANY SUCH SUIT, ACTION, OR PROCEEDING BROUGHT IN ANY SUCH COURTHAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE SIGNING HOLDERS OR THETRUSTEE TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGALPROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR ANY GUARANTOR IN ANYOTHER JURISDICTION.

 

Section 11.  No Commitment or Waiver.  Neither this Forbearance Agreement nor anyaction or inaction on the part of the Signing Holders shall be construed toconstitute or represent (a) a commitment by the Signing Holders, either intheir capacities under the Indenture Documents or in any other capacity, torestructure any indebtedness of the Company or the Guarantors or (b) anintention by the Signing Holders, either in their capacities under theIndenture Documents or in any other capacity, except as expressly provided inthis Agreement, to waive, modify, or forbear from exercising any of theirrights, powers, privileges, or remedies under the Indenture Documents or underany other document or agreement, at law, in equity, or otherwise.  Each of the Company and each of theGuarantors acknowledges, agrees, and confirms, except as expressly provided inthis Agreement, that no such commitment, waiver, modification, or forbearancehas been offered, granted, extended, or agreed to by the Signing Holders,either in their capacities under the Indenture Documents or in any othercapacity.  Nothing set forth in this ForbearanceAgreement shall be construed so as to require the Signing Holders, either intheir capacities under the Indenture Documents or in any other capacity, toagree to the terms of any modification proposed by the Company and theGuarantors to the Indenture Documents or any other document or agreement towhich the Signing Holders are a party.

 

Section 12. Representationsand Warranties.  In addition to anyother representations and warranties made or deemed made hereunder, the Companyand each of the Guarantors hereto represents and warrants that:

 

(a)           ithas the full authority and legal right and power to execute and deliver thisForbearance Agreement, and to perform the terms hereof and the transactionscontemplated hereby;

 

(b)           ithas taken all necessary corporate or other action required to be taken inconnection with the execution, delivery, and performance of this ForbearanceAgreement and the performance of the obligations arising hereunder;

 

(c)           thisForbearance Agreement (i) has been duly executed and delivered by it, and(ii) constitutes a legal, valid, and binding obligation, enforceableagainst it in accordance with the terms hereof, except as enforceability may belimited by applicable bankruptcy, insolvency, fraudulent conveyance,reorganization, moratorium, and other similar laws affecting creditors’ rightsgenerally, general equitable principles (whether considered in a proceeding inequity or at law), and an implied

 

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covenant of good faith and fair dealing;

 

(d)           theexecution, delivery, and performance of this Forbearance Agreement does not andshall not (i) violate or result in a breach of any provision of law, rule,or regulation applicable to it, or any judgment, order, writ, or decree of anycourt, arbitrator, or other governmental authority, (ii) violate any ofits organizational documents, or (iii) violate, conflict with, or resultin a breach of or constitute (with due notice, lapse of time, or both) adefault under any agreement, instrument, or other document to which it or anyof its subsidiaries is a party or by which any of their property or assets arebound;

 

(e)           therepresentations and warranties by it contained in this Forbearance Agreementand each of the Indenture Documents are true and correct in all materialrespects on and as of the Effective Date, before and after giving effect tothis Forbearance Agreement, as though made on and as of such date; and

 

(f)            ARGTerra, Inc. does not own any assets, as determined in accordance with generallyaccepted accounting principles; and

 

(g)           NoDefault or Event of Default has occurred and exists on and as of the EffectiveDate, before and after giving effect to this Forbearance Agreement (other thanthe Specified Defaults).

 

Section 13.  Benefit of Agreement.  This Forbearance Agreement is solely for thebenefit of the signatories hereto and, to the extent it is not a SigningHolder, a Person (including, without limitation, any other creditor of orclaimant against the Company or a Guarantor, or any shareholder of any thereof)shall not have any rights under, or because of the existence of, thisForbearance Agreement.

 

Section 14.  Entire Agreement.  This Forbearance Agreement constitutes theentire and final agreement among the parties hereto with respect to the subjectmatter hereof and there are no other agreements, understandings, undertakings,representations, or warranties among the parties hereto with respect to thesubject matter hereof except as set forth herein.

 

Section 15.  Amendments; Extensions.  The terms of this Forbearance Agreement maybe modified, amended, or waived only in writing, executed by the SigningHolders, the Company, and theGuarantors; providedhowever, no amendment, modification, orwaiver of this Forbearance Agreement shall take any of the actions set forth inSection 9.2 of the Indenture that would otherwise require the consent of eachaffected holder of the Notes without the consent of each such holder of theNotes.  Each of the Signing Holders are not andshall not be under any obligation, express or implied, to consent to anymodification or amendment hereof, or to any extension of the ForbearancePeriod.

 

Section 16.  Remedies.

 

(a)           Nofailure on the part of a Signing Holder to exercise, and no course of dealingwith respect to, and no delay in exercising, any right, power, or remedyhereunder or under the Indenture Documents shall operate as a waiverthereof.  Any single or partial exerciseby or any Signing Holder of any right, power, or remedy hereunder or under theIndenture Documents shall not preclude any other or further exercise thereof orthe exercise of any other right, power, or remedy.

 

(b)           Eachparty to this Forbearance Agreement is hereby authorized, to demand specificperformance of any other party hereto at any time any such other party hasfailed to comply with the terms of this Forbearance Agreement.  Each party hereto waives any defense based onthe adequacy of a remedy at law which may be asserted as a bar to such remedyof specific performance.

 

Section 17. Headings, Etc.  “Section”or other headings contained in this Forbearance Agreement are for referencepurposes only and shall not in any way affect the meaning or interpretation ofthis Forbearance Agreement.

 

Section 18. Notices.  All notices andconsents hereunder shall be in writing and shall be deemed to have been dulygiven upon receipt if personally delivered by courier service, messenger,telecopy, or by certified or registered mail, postage prepaid return receiptrequested, to the following addresses, or such other addresses as may befurnished hereafter by notice in writing, to the following parties:

 

If to theCompany, to:

American Restaurant Group, Inc.

4410 El Camino Real, Suite 201

Los Altos,California  94022

Attn:  Patrick J. Kelvie

Facsimile No.:  (650) 949-6420

 

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with a required copy to:

Milbank, Tweed, Hadley & McCloy LLP601 S. Figueroa Street, 30th FloorLos Angeles, California  90017

Attn: Robert Jay Moore and DavidB. ZolkinFacsimile No.:  (213) 629-5063

 

If to theSigning Holders:

To the address listed along with each SigningHolder’s signature block below

with arequired copy to:

Cadwalader, Wickersham & Taft LLP100 Maiden LaneNew York, NY 10038

Attn:  Gregory M. Petrick andMatthew M. Weber

Facsimile No.:  (212) 504-6666

 

If to the Trustee:

At the address identified in the Indenture.

 

Section 19.  Further Assurances.  The Company and each of the Guarantors shall,at their sole expense, execute at any time from time to time all additionaldocuments and do all acts not specifically referred to herein that (a) arereasonably necessary to effect fully the intent of this Forbearance Agreement,or (b) the Trustee or the Committee Advisors, acting on behalf of theSigning Holders, may reasonably deem advisable and may request to protect anyright or interest, or enforce any rights or remedies, under the Indenture andthe other Indenture Documents in respect of the provisions this ForbearanceAgreement.

 

Section 20.  Successors and Assigns.  This Forbearance Agreement, including,without limitation, the representations, warranties, covenants, and obligationscontained herein (a) shall inure to the benefit of and be enforceable bythe parties hereto and their respective successors and permitted assigns, and (b) shallbe legally valid, binding upon, and enforceable against the respectivesuccessors and assigns of the parties hereto. Without limiting the foregoing, any Notes beneficially owned by aSigning Holder and sold, transferred, pledged, assigned, or otherwise disposedof shall remain subject to the terms of this Forbearance Agreement during theForbearance Period.  EachSigning Holder acknowledges that it will (i) notify any party to whom itintends to transfer any interest in the Notes that such interest is subject tothe obligations attendant to this Forbearance Agreement and (ii) promptlyfollowing the transfer of such interest, notify Cadwalader, Wickersham &Taft LLP (“CWT”), counsel to the Signing Holders, of the identity of thetransferee. Each Signing Holder further acknowledges that CWT is authorized toand has agreed to promptly notify the Company of the identity of any suchtransferee upon being notified of same by a Signing Holder.

 

Section 21.  Severability.  Any provision of this Forbearance Agreementthat is determined to be invalid or unenforceable in any jurisdiction shall, asto such jurisdiction, be ineffective to the extent of such invalidity orunenforceability without rendering invalid or unenforceable the remainingprovisions of this Forbearance Agreement or affecting the validity orenforceability of any provisions of this Forbearance Agreement in any otherjurisdiction.

 

Section 22.  Counterparts.  This Forbearance Agreement may be executed inany number of counterparts, all of which taken together shall constitute oneand the same instrument, and any of the parties hereto may execute thisForbearance Agreement by signing any such counterpart.  Delivery of an executed counterpart hereof byfacsimile transmission shall be effective as delivery of a manually executedcounterpart hereof.

 

Section 23.  Survival.  Sections 7, 8, 9, 10, 12, 13, 16, 19 (to theextent such section relates to Section 8 and Section 9 hereof) and 23****shall survive any termination orexpiration of this Forbearance Agreement.

 

Section 24.  Fees and Expenses.  The Company and theGuarantors shall promptly (and in no event later than ten (10) days after theEffective Date) execute engagement and/or feeletters with Cadwalader, Wickersham & Taft LLP****and Imperial Capital LLC, the respectivelegal counsel and financial advisor (together, the “Committee Advisors”)to the adhoc committee of holders of the Notes of which theSigning Holders are members**.**

 

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Except to the extent there is a good faithdispute by the Company and the Guarantors, the Company and the Guarantors shallpromptly pay all reasonable fees and expenses incurred by the CommitteeAdvisors in accordance with the terms and conditions of each CommitteeAdvisor’s engagement and/or fee letter.

 

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IN WITNESS WHEREOF, the undersigned have caused this ForbearanceAgreement to be duly executed as of the day and year first above written.

 
|   | COMPANY                              |
|--------|--------------------------------------|
|   |                                 |
|   | AMERICAN  RESTAURANT GROUP, INC.     |
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ Patrick  J. Kelvie |   |
|   |                                 |
|   | Name:  Patrick J. Kelvie        |
|   | Title:  Vice President          |
|   |                                 |
|   | GUARANTORS                           |
|   |                                 |
|   | ARG  ENTERPRISES, INC.               |
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ Patrick  J. Kelvie |   |
|   |                                 |
|   | Name:  Patrick J. Kelvie        |
|   | Title:  Vice President          |
|   |                                 |
|   |                                 |
|   | ARG PROPERTY  MANAGEMENT CORPORATION |
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ Patrick  J. Kelvie |   |
|   |                                 |
|   | Name:  Patrick J. Kelvie        |
|   | Title:  Vice President          |
|   |                                 |
|   |                                 |
|   | ARG TERRA,  INC.                     |
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ Patrick  J. Kelvie |   |
|   |                                 |
|   | Name:  Patrick J. Kelvie        |
|   | Title:  Vice President          |

 

9

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|   | SIGNING  HOLDERS                                     |
|--------|------------------------------------------------------|
|   |                                                 |
|   |                                                 |   |
|   |                                                 |
|   |                                                 |
|   | By:                                                  |   |   |
|   |                                                 |
|   | Name:                                                |
|   | Title:                                               |
|   |                                                 |
|   | $                                                    |
|   | Principal  Amount of 111⁄2%  Series D Senior |
|   | Secured  Notes due 2006                              |
|   |                                                 |
|   | Address for  Notices to Signing Noteholder:          |
|   |                                                 |
|   |   Attn:                                    |
|   |                                                 |
|   |                                                 |
|   |                                                 |
|   | Facsimile  Number:                                   |
|        |                                                      |  |  |  |

 

10

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|   | SIGNING  HOLDERS                                     |
|--------|------------------------------------------------------|
|   |                                                 |
|   |                                                 |   |
|   |                                                 |
|   |                                                 |
|   | By:                                                  |   |   |
|   |                                                 |
|   | Name:                                                |
|   | Title:                                               |
|   |                                                 |
|   |                                                 |
|   | $                                                    |
|   | Principal  Amount of 111⁄2%  Series D Senior |
|   | Secured  Notes due 2006                              |
|   |                                                 |
|   |                                                 |
|   | Address for  Notices to Signing Noteholder:          |
|   |                                                 |
|   |                                                 |
|   |   Attn:                                    |
|   |                                                 |
|   |                                                 |
|   |                                                 |
|   | Facsimile  Number:                                   |
|        |                                                      |  |  |  |

 

11

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|   | SIGNING HOLDERS                                      |
|--------|------------------------------------------------------|
|   |                                                 |
|   |                                                 |   |
|   |                                                 |
|   |                                                 |
|   | By:                                                  |   |   |
|   |                                                 |
|   | Name:                                                |
|   | Title:                                               |
|   |                                                 |
|   |                                                 |
|   | $                                                    |
|   | Principal  Amount of 111⁄2%  Series D Senior |
|   | Secured  Notes due 2006                              |
|   |                                                 |
|   |                                                 |
|   | Address for  Notices to Signing Noteholder:          |
|   |                                                 |
|   |                                                 |
|   |   Attn:                                    |
|   |                                                 |
|   |                                                 |
|   |                                                 |
|   | Facsimile  Number:                                   |
|        |                                                      |  |  |  |

 

12

----

 
|   | SIGNING HOLDERS                                      |
|--------|------------------------------------------------------|
|   |                                                 |
|   |                                                 |   |
|   |                                                 |
|   |                                                 |
|   | By:                                                  |   |   |
|   |                                                 |
|   | Name:                                                |
|   | Title:                                               |
|   |                                                 |
|   |                                                 |
|   | $                                                    |
|   | Principal  Amount of 111⁄2%  Series D Senior |
|   | Secured  Notes due 2006                              |
|   |                                                 |
|   |                                                 |
|   | Address for  Notices to Signing Noteholder:          |
|   |                                                 |
|   |                                                 |
|   |   Attn:                                    |
|   |                                                 |
|   |                                                 |
|   |                                                 |
|   | Facsimile  Number:                                   |
|        |                                                      |  |  |  |

 

13

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|   | SIGNING  HOLDERS                                     |
|--------|------------------------------------------------------|
|   |                                                 |
|   |                                                 |   |
|   |                                                 |
|   | By:                                                  |   |   |
|   |                                                 |
|   | Name:                                                |
|   | Title:                                               |
|   |                                                 |
|   |                                                 |
|   | $                                                    |
|   | Principal  Amount of 111⁄2%  Series D Senior |
|   | Secured  Notes due 2006                              |
|   |                                                 |
|   |                                                 |
|   | Address for  Notices to Signing Noteholder:          |
|   |                                                 |
|   |                                                 |
|   |   Attn:                                    |
|   |                                                 |
|   |                                                 |
|   |                                                 |
|   | Facsimile  Number:                                   |
|        |                                                      |  |  |  |

 

14

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