Document:

Exhibit
10.1

 

AMENDED
AND RESTATED

REVOLVING CREDIT AGREEMENT

 

Dated as of October 28,
2003

 

among

 

MCCORMICK & SCHMICK ACQUISITION CORP.,

MCCORMICK
& SCHMICK RESTAURANT CORP.,

MCCORMICK
& SCHMICK MARYLAND LIQUOR, INC.,

MCCORMICK
& SCHMICK ACQUISITION I TEXAS, INC.,

MCCORMICK & SCHMICK ACQUISITION II TEXAS, INC.,

MCCORMICK
& SCHMICK ACQUISITION TEXAS LP,

MCCORMICK
& SCHMICK ACQUISITION III TEXAS, INC.,

MCCORMICK
& SCHMICK’S ATLANTA II, LLC,

MCCORMICK & SCHMICK’S HACKENSACK, LLC,

MCCORMICK
& SCHMICK ORLANDO, LLC,

MCCORMICK
& SCHMICK DALLAS, LP,

MCCORMICK
& SCHMICK DALLAS LIQUOR, INC.,

MCCORMICK & SCHMICK AUSTIN, LP,

MCCORMICK
& SCHMICK AUSTIN LIQUOR, INC.,

 

(collectively, the “Borrowers”)

 

THE LENDERS LISTED ON SCHEDULE 1 HERETO,

 

FLEET NATIONAL BANK, as Administrative Agent,

 

BANK OF AMERICA, N.A., as Documentation Agent

 

WELLS FARGO BANK N.A, as Documentation Agent

 

and

 

COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,

“RABOBANK INTERNATIONAL” NEW YORK BRANCH,

as
Syndication Agent

 

with

 

Fleet Securities, Inc., as Arranger

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
  1.

  	
  DEFINITIONS
  AND RULES OF INTERPRETATION

  	
  3

  
	
   

  	
  1.1.

  	
  Definitions

  	
  3

  
	
   

  	
  1.2.

  	
  Rules of Interpretation

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  THE
  REVOLVING CREDIT FACILITY

  	
  30

  
	
   

  	
  2.1.

  	
  Commitment
  to Lend Revolving Credit Loans

  	
  30

  
	
   

  	
  2.2.

  	
  Commitment Fee

  	
  31

  
	
   

  	
  2.3.

  	
  Reduction
  of Total Revolving Credit Commitment

  	
  32

  
	
   

  	
  2.4.

  	
  The
  Notes

  	
  32

  
	
   

  	
  2.5.

  	
  Interest on
  Revolving Credit Loans

  	
  32

  
	
   

  	
  2.6.

  	
  Requests for
  Revolving Credit Loans

  	
  33

  
	
   

  	
  2.7.

  	
  Conversion Options

  	
  33

  
	
   

  	
   

  	
  2.7.1.

  	
  Conversion
  to Different Type of Revolving Credit Loan

  	
  33

  
	
   

  	
   

  	
  2.7.2.

  	
  Continuation
  of Type of Revolving Credit Loan

  	
  34

  
	
   

  	
   

  	
  2.7.3.

  	
  Eurodollar Rate Loans

  	
  34

  
	
   

  	
  2.8.

  	
  Funds for Revolving
  Credit Loan

  	
  34

  
	
   

  	
   

  	
  2.8.1.

  	
  Funding Procedures

  	
  34

  
	
   

  	
   

  	
  2.8.2.

  	
  Advances by
  Administrative Agent

  	
  34

  
	
   

  	
  2.9.

  	
  Repayment of
  Revolving Credit Loans

  	
  35

  
	
   

  	
   

  	
  2.9.1.

  	
  Maturity

  	
  35

  
	
   

  	
   

  	
  2.9.2.

  	
  Mandatory
  Repayments of the Revolving Credit Loans

  	
  35

  
	
   

  	
   

  	
  2.9.3.

  	
  Optional
  Repayments of the Revolving Credit Loans

  	
  36

  
	
   

  	
   

  	
  2.9.4.

  	
  Application
  of Payments Prior to an Event of Default

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  [INTENTIONALLY OMITTED]

  	
  36

  
	
   

  	
   

  	
   

  
	
  4.

  	
  MANDATORY REPAYMENT OF REVOLVING
  CREDIT LOANS

  	
  37

  
	
   

  	
  4.1.

  	
  Excess Operating Cash Flow Recapture

  	
  37

  
	
   

  	
  4.2.

  	
  Proceeds of Certain Events

  	
  37

  
	
   

  	
  4.3.

  	
  Application of Payments

  	
  38

  
	
   

  	
  4.4.

  	
  Delivery of Proceeds

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  LETTERS OF CREDIT

  	
  38

  
	
   

  	
  5.1.

  	
  Letter of Credit
  Commitments

  	
  38

  
	
   

  	
   

  	
  5.1.1.

  	
  Commitment to
  Issue Letters of Credit

  	
  38

  
	
   

  	
   

  	
  5.1.2.

  	
  Letter of Credit
  Applications

  	
  39

  
	
   

  	
   

  	
  5.1.3.

  	
  Terms of Letters of Credit

  	
  39

  
	
   

  	
   

  	
  5.1.4.

  	
  Reimbursement
  Obligations of Lenders

  	
  40

  
	
   

  	
   

  	
  5.1.5.

  	
  Participations of Lenders

  	
  40

  
	
   

  	
  5.2.

  	
  Reimbursement
  Obligation of the Borrowers

  	
  40

  
	
   

  	
  5.3.

  	
  Letter of Credit Payments

  	
  41

  
	
   

  	
  5.4.

  	
  Obligations Absolute

  	
  41

  
	
   

  	
  5.5.

  	
  Reliance by Issuer

  	
  42

  
	
   

  	
  5.6.

  	
  Letter of Credit Fee

  	
  42

  
	
   

  	
  5.7.

  	
  Existing Letters of Credit

  	
  43

  

 

i

 

	
  6.

  	
  CERTAIN GENERAL PROVISIONS

  	
  43

  
	
   

  	
  6.1.

  	
  Fees

  	
  43

  
	
   

  	
  6.2.

  	
  Funds for Payments

  	
  43

  
	
   

  	
   

  	
  6.2.1.

  	
  Payments to
  Administrative Agent

  	
  43

  
	
   

  	
   

  	
  6.2.2.

  	
  No
  Offset, etc.

  	
  43

  
	
   

  	
   

  	
  6.2.3.

  	
  Non-U.S. Lenders

  	
  44

  
	
   

  	
   

  	
  6.2.4.

  	
  Exclusion

  	
  45

  
	
   

  	
  6.3.

  	
  Computations

  	
  45

  
	
   

  	
  6.4.

  	
  Inability to
  Determine Eurodollar Rate

  	
  45

  
	
   

  	
  6.5.

  	
  Illegality

  	
  46

  
	
   

  	
  6.6.

  	
  Additional Costs, etc.

  	
  46

  
	
   

  	
  6.7.

  	
  Capital Adequacy

  	
  48

  
	
   

  	
  6.8.

  	
  Certificate;
  Replacement of Lenders

  	
  48

  
	
   

  	
  6.9.

  	
  Indemnity

  	
  49

  
	
   

  	
  6.10.

  	
  Interest After Default

  	
  49

  
	
   

  	
   

  	
  6.10.1.

  	
  Overdue Amounts

  	
  49

  
	
   

  	
   

  	
  6.10.2.

  	
  Amounts Not Overdue

  	
  50

  
	
   

  	
   

  	
  6.10.3.

  	
  Letters
  of Credit

  	
  50

  
	
   

  	
  6.11.

  	
  Transitional Arrangements

  	
  50

  
	
   

  	
  6.12.

  	
  Concerning
  Joint and Several Liability of the Borrowers

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  COLLATERAL
  SECURITY AND PARENT GUARANTY

  	
  54

  
	
   

  	
  7.1.

  	
  Security of Borrowers

  	
  54

  
	
   

  	
  7.2.

  	
  Parent
  Guaranty and Parent Pledge Agreement

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  54

  
	
   

  	
  8.1.

  	
  Corporate Authority

  	
  54

  
	
   

  	
   

  	
  8.1.1.

  	
  Incorporation; Good
  Standing

  	
  54

  
	
   

  	
   

  	
  8.1.2.

  	
  Authorization

  	
  54

  
	
   

  	
   

  	
  8.1.3.

  	
  Enforceability

  	
  55

  
	
   

  	
  8.2.

  	
  Governmental Approvals

  	
  55

  
	
   

  	
  8.3.

  	
  Title to Properties; Leases

  	
  55

  
	
   

  	
  8.4.

  	
  Financial
  Statements and Projections

  	
  55

  
	
   

  	
   

  	
  8.4.1.

  	
  Fiscal Year; Fiscal
  Quarters

  	
  55

  
	
   

  	
   

  	
  8.4.2.

  	
  Financial Statements

  	
  55

  
	
   

  	
   

  	
  8.4.3.

  	
  Pro Forma Balance Sheet and
  Projections

  	
  55

  
	
   

  	
  8.5.

  	
  No Material Adverse Changes, etc.

  	
  56

  
	
   

  	
  8.6.

  	
  Franchises, Patents, Copyrights, Liquor
  Management Agreements, etc.

  	
  56

  
	
   

  	
  8.7.

  	
  Litigation

  	
  56

  
	
   

  	
  8.8.

  	
  Material Contracts; No Materially
  Adverse Contracts, etc.

  	
  56

  
	
   

  	
  8.9.

  	
  Compliance with Other
  Instruments, Laws, etc.

  	
  57

  
	
   

  	
  8.10.

  	
  Tax
  Status

  	
  57

  
	
   

  	
  8.11.

  	
  No Event of Default

  	
  57

  
	
   

  	
  8.12.

  	
  Holding Company and
  Investment Company Acts

  	
  57

  
	
   

  	
  8.13.

  	
  Absence of Financing Statements,
  etc.

  	
  57

  
	
   

  	
  8.14.

  	
  Perfection of Security
  Interest

  	
  57

  
	
   

  	
  8.15.

  	
  Certain Transactions

  	
  58

  
	
   

  	
  8.16.

  	
  Employee Benefit Plans

  	
  58

  

 

ii

 

	
   

  	
   

  	
  8.16.1.

  	
  In
  General

  	
  58

  
	
   

  	
   

  	
  8.16.2.

  	
  Terminability of Welfare
  Plans

  	
  58

  
	
   

  	
   

  	
  8.16.3.

  	
  Guaranteed Pension Plans

  	
  58

  
	
   

  	
   

  	
  8.16.4.

  	
  Multiemployer Plans

  	
  59

  
	
   

  	
  8.17.

  	
  Use of Proceeds

  	
  59

  
	
   

  	
   

  	
  8.17.1.

  	
  General

  	
  59

  
	
   

  	
   

  	
  8.17.2.

  	
  Regulations U and X

  	
  59

  
	
   

  	
   

  	
  8.17.3.

  	
  Ineligible Securities

  	
  60

  
	
   

  	
  8.18.

  	
  Environmental Compliance

  	
  60

  
	
   

  	
  8.19.

  	
  Subsidiaries, etc.

  	
  61

  
	
   

  	
  8.20.

  	
  Bank Accounts

  	
  61

  
	
   

  	
  8.21.

  	
  Subordinated Debt
  Documents; Equity Documents; Convertible Preferred Stock Documents

  	
  62

  
	
   

  	
  8.22.

  	
  Solvency

  	
  62

  
	
   

  	
  8.23.

  	
  Restaurants

  	
  62

  
	
   

  	
  8.24.

  	
  Franchise Agreements

  	
  62

  
	
   

  	
  8.25.

  	
  Leases

  	
  63

  
	
   

  	
  8.26.

  	
  Disclosure

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  AFFIRMATIVE COVENANTS

  	
  63

  
	
   

  	
  9.1.

  	
  Punctual Payment

  	
  63

  
	
   

  	
  9.2.

  	
  Maintenance of Office

  	
  63

  
	
   

  	
  9.3.

  	
  Records and Accounts

  	
  63

  
	
   

  	
  9.4.

  	
  Financial
  Statements, Certificates and Information

  	
  64

  
	
   

  	
  9.5.

  	
  Notices

  	
  66

  
	
   

  	
   

  	
  9.5.1.

  	
  Defaults

  	
  66

  
	
   

  	
   

  	
  9.5.2.

  	
  Environmental Events

  	
  66

  
	
   

  	
   

  	
  9.5.3.

  	
  Notification
  of Claim against Collateral

  	
  66

  
	
   

  	
   

  	
  9.5.4.

  	
  Notice of Litigation
  and Judgments

  	
  67

  
	
   

  	
   

  	
  9.5.5.

  	
  Notice of Bank Accounts

  	
  67

  
	
   

  	
   

  	
  9.5.6.

  	
  Notice of Real Estate

  	
  67

  
	
   

  	
  9.6.

  	
  Legal
  Existence; Maintenance of Properties

  	
  67

  
	
   

  	
  9.7.

  	
  Insurance

  	
  68

  
	
   

  	
   

  	
  9.7.1.

  	
  Required Insurance

  	
  68

  
	
   

  	
   

  	
  9.7.2.

  	
  Insurance Proceeds

  	
  69

  
	
   

  	
   

  	
  9.7.3.

  	
  Notice of Cancellation

  	
  69

  
	
   

  	
  9.8.

  	
  Taxes

  	
  70

  
	
   

  	
  9.9.

  	
  Inspection of
  Properties and Books, etc.

  	
  70

  
	
   

  	
   

  	
  9.9.1.

  	
  General

  	
  70

  
	
   

  	
   

  	
  9.9.2.

  	
  Environmental Assessments

  	
  70

  
	
   

  	
   

  	
  9.9.3.

  	
  Communications with
  Accountants

  	
  71

  
	
   

  	
  9.10.

  	
  Compliance
  with Laws, Contracts, Licenses, and Permits

  	
  71

  
	
   

  	
  9.11.

  	
  Employee Benefit Plans

  	
  71

  
	
   

  	
  9.12.

  	
  Use of Proceeds

  	
  72

  
	
   

  	
  9.13.

  	
  Additional
  Mortgaged Property; Notice of Leases

  	
  72

  
	
   

  	
  9.14.

  	
  Conduct of Business;
  Restaurants

  	
  73

  
	
   

  	
  9.15.

  	
  Interest Rate Protection

  	
  73

  
	
   

  	
  9.16.

  	
  Bank Accounts

  	
  73

  

 

iii

 

	
   

  	
  9.17.

  	
  Additional Subsidiaries

  	
  74

  
	
   

  	
  9.18.

  	
  Amendments to Documents

  	
  74

  
	
   

  	
  9.19.

  	
  Further Assurances

  	
  74

  
	
   

  	
  9.20.

  	
  Post-Closing
  Delivery Requirements

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  CERTAIN NEGATIVE COVENANTS

  	
  75

  
	
   

  	
  10.1.

  	
  Restrictions on
  Indebtedness

  	
  75

  
	
   

  	
  10.2.

  	
  Restrictions on Liens

  	
  77

  
	
   

  	
  10.3.

  	
  Restrictions on Investments

  	
  79

  
	
   

  	
  10.4.

  	
  Restricted Payments

  	
  80

  
	
   

  	
  10.5.

  	
  Mergers;
  Disposition of Assets; Acquisitions

  	
  82

  
	
   

  	
   

  	
  10.5.1.

  	
  Mergers

  	
  82

  
	
   

  	
   

  	
  10.5.2.

  	
  Disposition of Assets

  	
  82

  
	
   

  	
   

  	
  10.5.3.

  	
  Acquisitions

  	
  83

  
	
   

  	
  10.6.

  	
  Sale and Leaseback

  	
  84

  
	
   

  	
  10.7.

  	
  Compliance with
  Environmental Laws

  	
  84

  
	
   

  	
  10.8.

  	
  Employee Benefit Plans

  	
  85

  
	
   

  	
  10.9.

  	
  Business Activities

  	
  85

  
	
   

  	
  10.10.

  	
  Fiscal Year; Fiscal
  Quarters

  	
  86

  
	
   

  	
  10.11.

  	
  Transactions with
  Affiliates

  	
  86

  
	
   

  	
  10.12.

  	
  Bank Accounts

  	
  86

  
	
   

  	
  10.13.

  	
  Franchises

  	
  86

  
	
   

  	
  10.14.

  	
  Restrictions on
  Amendments to Documents

  	
  86

  
	
   

  	
   

  	
  10.14.1.

  	
  Convertible
  Preferred Stock Documents; Equity Documents; Management Agreements

  	
  87

  
	
   

  	
   

  	
  10.14.2.

  	
  Acquisition Documents

  	
  87

  
	
   

  	
   

  	
  10.14.3.

  	
  Subordinated Debt

  	
  87

  
	
   

  	
   

  	
  10.14.4.

  	
  Certain Amendments

  	
  87

  
	
   

  	
  10.15.

  	
  Capitalization

  	
  88

  
	
   

  	
  10.16.

  	
  Maximum
  Number of Unprofitable Restaurants

  	
  88

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  FINANCIAL COVENANTS

  	
  88

  
	
   

  	
  11.1.

  	
  Leverage Ratio

  	
  89

  
	
   

  	
  11.2.

  	
  Adjusted Leverage Ratio

  	
  89

  
	
   

  	
  11.3.

  	
  Consolidated Cash Flow
  Ratio

  	
  89

  
	
   

  	
  11.4.

  	
  Growth Capital Expenditures

  	
  89

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  CLOSING CONDITIONS

  	
  90

  
	
   

  	
  12.1.

  	
  Loan Documents

  	
  91

  
	
   

  	
  12.2.

  	
  Certified
  Copies of Governing Documents

  	
  91

  
	
   

  	
  12.3.

  	
  Corporate or Other Action

  	
  91

  
	
   

  	
  12.4.

  	
  Incumbency Certificate

  	
  91

  
	
   

  	
  12.5.

  	
  Validity of Liens

  	
  91

  
	
   

  	
  12.6.

  	
  Perfection
  Certificates and Uniform Commercial Code Search Results

  	
  91

  
	
   

  	
  12.7.

  	
  Landlord Consents

  	
  91

  
	
   

  	
  12.8.

  	
  Certificates of Insurance

  	
  92

  
	
   

  	
  12.9.

  	
  Solvency Certificate

  	
  92

  
	
   

  	
  12.10.

  	
  Opinion of Counsel

  	
  92

  

 

iv

 

	
   

  	
  12.11.

  	
  Capital Structure

  	
  92

  
	
   

  	
  12.12.

  	
  Minimum Consolidated EBITDA

  	
  92

  
	
   

  	
  12.13.

  	
  No Material Adverse Change

  	
  93

  
	
   

  	
  12.14.

  	
  Financial
  Statements and Projections

  	
  93

  
	
   

  	
  12.15.

  	
  No Litigation

  	
  93

  
	
   

  	
  12.16.

  	
  Consents and Approvals

  	
  93

  
	
   

  	
  12.17.

  	
  Management
  Agreements; Employment Agreements; Employee Incentive Plans

  	
  93

  
	
   

  	
  12.18.

  	
  Other Documentation

  	
  94

  
	
   

  	
  12.19.

  	
  Payment of Fees and
  Expenses

  	
  94

  
	
   

  	
  12.20.

  	
  Disbursement Instructions

  	
  94

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  CONDITIONS TO ALL
  BORROWINGS

  	
  94

  
	
   

  	
  13.1.

  	
  Representations
  True; No Event of Default

  	
  94

  
	
   

  	
  13.2.

  	
  No Legal Impediment

  	
  95

  
	
   

  	
  13.3.

  	
  Proceedings and Documents

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  EVENTS OF DEFAULT;
  ACCELERATION; ETC.

  	
  95

  
	
   

  	
  14.1.

  	
  Events of Default
  and Acceleration

  	
  95

  
	
   

  	
  14.2.

  	
  Termination of Commitments

  	
  99

  
	
   

  	
  14.3.

  	
  Remedies

  	
  100

  
	
   

  	
  14.4.

  	
  Distribution of
  Collateral Proceeds

  	
  100

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  THE
  AGENTS

  	
  101

  
	
   

  	
  15.1.

  	
  Authorization

  	
  101

  
	
   

  	
  15.2.

  	
  Employees and Agents

  	
  102

  
	
   

  	
  15.3.

  	
  No Liability

  	
  102

  
	
   

  	
  15.4.

  	
  No Representations

  	
  102

  
	
   

  	
   

  	
  15.4.1.

  	
  General

  	
  102

  
	
   

  	
   

  	
  15.4.2.

  	
  Closing Documentation, etc.

  	
  103

  
	
   

  	
  15.5.

  	
  Payments

  	
  103

  
	
   

  	
   

  	
  15.5.1.

  	
  Payments to
  Administrative Agent

  	
  103

  
	
   

  	
   

  	
  15.5.2.

  	
  Distribution by
  Administrative Agent

  	
  103

  
	
   

  	
   

  	
  15.5.3.

  	
  Delinquent Lenders

  	
  103

  
	
   

  	
  15.6.

  	
  Holders of Notes

  	
  104

  
	
   

  	
  15.7.

  	
  Indemnity

  	
  104

  
	
   

  	
  15.8.

  	
  Administrative Agent as
  Lender

  	
  104

  
	
   

  	
  15.9.

  	
  Resignation

  	
  105

  
	
   

  	
  15.10.

  	
  Notification
  of Defaults and Events of Default

  	
  105

  
	
   

  	
  15.11.

  	
  Forwarding of Loan
  Requests, etc.

  	
  105

  
	
   

  	
  15.12.

  	
  Duties in the Case of
  Enforcement

  	
  105

  
	
   

  	
  15.13.

  	
  Duties
  of Syndication Agent and Documentation Agent

  	
  106

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  ASSIGNMENT AND
  PARTICIPATION

  	
  106

  
	
   

  	
  16.1.

  	
  Conditions to
  Assignment by Lenders

  	
  106

  
	
   

  	
  16.2.

  	
  Certain
  Representations and Warranties; Limitations; Covenants

  	
  107

  
	
   

  	
  16.3.

  	
  Register

  	
  108

  
	
   

  	
  16.4.

  	
  New
  Notes

  	
  108

  
	
   

  	
  16.5.

  	
  Participations

  	
  108

  

 

v

 

	
   

  	
  16.6.

  	
  Assignee
  or Participant Affiliated with the Borrowers

  	
  109

  
	
   

  	
  16.7.

  	
  Miscellaneous
  Assignment Provisions

  	
  109

  
	
   

  	
  16.8.

  	
  Assignment by Borrowers

  	
  110

  
	
   

  	
  16.9.

  	
  Syndication

  	
  110

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  PROVISIONS OF
  GENERAL APPLICATIONS

  	
  110

  
	
   

  	
  17.1.

  	
  Setoff

  	
  110

  
	
   

  	
  17.2.

  	
  Expenses

  	
  111

  
	
   

  	
  17.3.

  	
  Indemnification

  	
  112

  
	
   

  	
  17.4.

  	
  Treatment
  of Certain Confidential Information

  	
  113

  
	
   

  	
   

  	
  17.4.1.

  	
  Confidentiality

  	
  113

  
	
   

  	
   

  	
  17.4.2.

  	
  Prior Notification

  	
  114

  
	
   

  	
   

  	
  17.4.3.

  	
  Other

  	
  114

  
	
   

  	
  17.5.

  	
  Survival of Covenants, Etc.

  	
  115

  
	
   

  	
  17.6.

  	
  Notices

  	
  115

  
	
   

  	
  17.7.

  	
  Governing Law

  	
  116

  
	
   

  	
  17.8.

  	
  Headings

  	
  117

  
	
   

  	
  17.9.

  	
  Counterparts

  	
  117

  
	
   

  	
  17.10.

  	
  Entire Agreement, Etc.

  	
  117

  
	
   

  	
  17.11.

  	
  Waiver of Jury Trial

  	
  117

  
	
   

  	
  17.12.

  	
  Consents, Amendments, Waivers,
  Etc.

  	
  117

  
	
   

  	
  17.13.

  	
  Borrowers’ Representative

  	
  119

  
	
   

  	
  17.14.

  	
  Severability

  	
  119

  

 

vi

 

Exhibits

 

	
  Exhibit A

  	
  Form of Note

  
	
  Exhibit B

  	
  Form of Loan Request

  
	
  Exhibit C

  	
  Form of Compliance Certificate

  
	
  Exhibit D

  	
  Form of Agency Account Agreement

  
	
  Exhibit E

  	
  Form of Assignment and Acceptance

  
	
  Exhibit F

  	
  Form of Landlord Waiver

  
	
   

  	
   

  
	
  Schedules

  
	
   

  	
   

  
	
  Schedule 1

  	
  Lenders and Commitments

  
	
  Schedule 1.1

  	
  MS Division Restaurants

  
	
  Schedule 8.3

  	
  Title to Properties; Leases

  
	
  Schedule 8.4.2

  	
  Financial Statement Exceptions

  
	
  Schedule 8.6(a)

  	
  Franchises, Patents, Copyrights, etc.

  
	
  Schedule 8.6(b)

  	
  Liquor Management Agreements

  
	
  Schedule 8.7

  	
  Litigation

  
	
  Schedule 8.8

  	
  Material Contracts

  
	
  Schedule 8.15

  	
  Certain Transactions

  
	
  Schedule 8.16

  	
  Employee Benefit Plans

  
	
  Schedule 8.18

  	
  Environmental Compliance

  
	
  Schedule 8.19

  	
  Subsidiaries, Etc.

  
	
  Schedule 8.20

  	
  Bank Accounts

  
	
  Schedule 8.23

  	
  Restaurants

  
	
  Schedule 8.25

  	
  Leases

  
	
  Schedule 10.1

  	
  Existing Indebtedness

  
	
  Schedule 10.2

  	
  Existing Liens

  
	
  Schedule 10.3

  	
  Existing Investments

  
	
  Schedule 12.7

  	
  Leasehold Mortgages Delivered on the Closing Date

  

 

vii

 

 

AMENDED
AND RESTATED REVOLVING CREDIT AGREEMENT

 

This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
is made as of October 28, 2003, by and among MCCORMICK & SCHMICK ACQUISITION
CORP., a Delaware corporation (“MSAC”), MCCORMICK & SCHMICK
RESTAURANT CORP., a Delaware corporation (“MSRC”), MCCORMICK
& SCHMICK MARYLAND LIQUOR, INC., a Maryland corporation, MCCORMICK
& SCHMICK ACQUISITION I TEXAS, INC., a Texas corporation (“MS
Acquisition I”), MCCORMICK & SCHMICK ACQUISITION II TEXAS, INC.,
a Delaware corporation (“MS Acquisition II”), MCCORMICK & SCHMICK ACQUISITION
TEXAS LP, a Texas limited partnership, MCCORMICK & SCHMICK ACQUISITION III
TEXAS, INC., a Texas corporation, MCCORMICK & SCHMICK’S ATLANTA II,
LLC, a Delaware limited liability company, MCCORMICK & SCHMICK’S HACKENSACK,
LLC, a Delaware limited liability company, MCCORMICK & SCHMICK ORLANDO, LLC, a
Delaware limited liability company, MCCORMICK & SCHMICK DALLAS, L.P., a
Texas limited partnership, MCCORMICK & SCHMICK DALLAS LIQUOR, INC.,
a Texas corporation, MCCORMICK & SCHMICK AUSTIN, LP, a Texas
limited partnership, MCCORMICK & SCHMICK AUSTIN LIQUOR, INC., a
Texas corporation, and each of the other Subsidiaries of MSAC which shall from
time to time hereafter become a party hereto pursuant to §9.17 (collectively,
the “Borrowers”), the lending institutions listed on Schedule 1
as Lenders, and FLEET NATIONAL BANK, as administrative agent for itself and
such other Lenders, COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
“RABOBANK INTERNATIONAL” NEW YORK BRANCH, as syndication agent, BANK OF
AMERICA, N.A., as documentation agent and WELLS FARGO BANK N.A, as
documentation agent

 

RECITALS

 

WHEREAS, the Borrowers, Fleet National Bank and
certain other lending institutions  (the
“Existing Lenders”), and the Administrative Agent are party to a
Revolving Credit and Term Loan Agreement, dated as of August 22, 2001 (as
amended and supplemented, through the date hereof, the “Existing Credit
Agreement”), pursuant to which the Existing Lenders made the Existing Loans
(as defined below) to and issued the Existing Letters of Credit for the account
of the Borrowers;

 

WHEREAS, the Borrowers have requested that the
Existing Lenders and the Administrative Agent amend and restate the Existing
Credit Agreement in its entirety to, among other things,

 

(a)                                  increase
the Total Revolving Loan Commitment to $70,000,000;

 

 

(b)                                 continue
the Existing Revolving Credit Loans as Revolving Credit Loans hereunder;

 

(c)                                  convert
the Existing Term Loans A into a Revolving Credit Loan hereunder;

 

(d)                                 convert
the Existing Term Loans B (the Existing Term Loans B, together with the
Existing Revolving Credit Loans, and Existing Term Loans A, collectively, the “Existing
Loans”) into a Revolving Credit Loan hereunder; and

 

(e)                                  make
certain other changes to the terms and provisions of the Existing Credit
Agreement;

 

WHEREAS, the Existing Lenders and the Administrative
Agent are willing, on the terms set forth in this Credit Agreement and subject
to the conditions and in reliance on the representations set forth herein, to
amend and restate in its entirety the Existing Credit Agreement so as to
accomplish the foregoing;

 

WHEREAS, it is the intent of the parties hereto that
this Credit Agreement not constitute a novation of the obligations and
liabilities under the Existing Credit Agreement or evidence payment and
reborrowing of all or any of such obligations and liabilities, that this Credit
Agreement amend and restate in its entirety the Existing Credit Agreement and
that from and after the date hereof, the Existing Credit Agreement be of no
further force and effect except to evidence the incurrence of the Obligations
as defined and incurred thereunder, the representations and warranties made
thereunder and the obligations, covenants and liabilities of the parties
thereto prior to the Closing Date; and

 

WHEREAS, each of the Borrowers, the Lenders and the
Administrative Agent acknowledges and agrees that (a) all Existing Loans made
and Existing Letters of Credit shall continue as Revolving Credit Loans and
Letters of Credit under this Credit Agreement, as provided in §§2.1 and 5.7,
and shall be governed by this Credit Agreement and secured by all the
Collateral, (b) all other outstanding Obligations (as defined in the Existing
Credit Agreement) under the Existing Credit Agreement shall continue as
Obligations of the same type under this Credit Agreement and shall be governed
by this Credit Agreement and secured by all the Collateral, (c) the security
interests granted to the Administrative Agent, on behalf of itself and the
Lenders pursuant to the Loan Documents (as defined in the Existing Credit
Agreement), shall remain outstanding and in full force and effect and shall
continue to secure the Obligations (as defined herein), and (d) all Liens (as
defined under the Existing Credit Agreement) evidenced by the Loan Documents
(as defined in the Existing Credit Agreement) are hereby ratified, confirmed
and continued.

 

NOW THEREFORE, in consideration of the premises and
the mutual agreements herein contained, the parties hereto hereby agree that,
from and after the Closing Date, the Existing Credit Agreement (including all
the Schedules and Exhibits thereto) is amended and restated in
its entirety to read as set forth above and as follows (and, in the case of the
Schedules and

 

2

 

Exhibits, in the forms attached
hereto).

 

1.  DEFINITIONS AND RULES OF
INTERPRETATION.

 

1.1.  Definitions.  The following terms shall have the meanings
set forth in this §1 or elsewhere in the provisions of this Credit Agreement
referred to below:

 

A&M Acquisition.  The acquisition by the Borrowers of three
full-service Angelo and Maxie’s restaurants in New York, Washington, D.C. and
Virginia from Angelo and Maxie’s Inc., a Delaware corporation.

 

Acknowledgment and Consent.
The Acknowledgment and Consent, dated as of the Original Closing Date, as
amended by the First Amendment to Security Documents Agreement, and  as the same may be further amended from time
to time hereafter, among MS Acquisition I, MS Acquisition II and the
Administrative Agent and in form and substance satisfactory to the
Administrative Agent.

 

Acquired Assets.  See §10.5.

 

Acquisition.  The acquisition by the Borrowers from the
Sellers of substantially all of the assets of the MS Division of the Sellers.

 

Acquisition Agreement.  Collectively, the (a) Asset Purchase
Agreement, dated as of June 7, 2001, among Sellers and MSAC, as
amended by the First Amendment of Asset Purchase Agreement, dated as of the
Original Closing Date, and (b) Bill of Sale and Assignment and Assumption
Agreement, dated December 10, 2001, among MSRC and Sellers, each  as in effect without giving effect to any
additional amendments, modifications or waivers of the terms thereof other than
amendments, modifications and waivers permitted by §10.14.2, certified copies
of which have been delivered to the Administrative Agent.

 

Acquisition Documents.  The Acquisition Agreement, including all
exhibits and schedules thereto, and all other agreements, side letters and
documents executed in connection therewith, each in the form delivered to the
Administrative Agent prior to the Closing Date, together with amendments or
modifications thereto permitted pursuant to §10.14.2.

 

Additional Security
Documents.  All
mortgages, pledge agreements, security agreements and other security documents
and all guarantees of the Obligations entered into after the date hereof
pursuant to §§9.17 and/or 9.19.

 

Adjusted Leverage Ratio.  As at any date of determination, the ratio
of (a) Consolidated Rental Expense for the Reference Period ending on such date
(multiplied by eight (8)) plus Consolidated Funded Indebtedness
outstanding on such date to (b) Consolidated EBITDAR for the Reference Period
ending on such date.

 

3

 

Adjustment Date.  The first day of the month immediately
following the month in which a Compliance Certificate is to be delivered by the
Borrowers pursuant to §9.4(d).

 

Administrative Agent.  Fleet National Bank, acting as agent for the
Lenders and each other Person appointed as the successor Administrative Agent
in accordance with §15.9.

 

Administrative Agent’s
Office.  The
Administrative Agent’s office located at 100 Federal Street, Boston,
Massachusetts 02110, or at such other location as the Administrative Agent may
designate in writing from time to time.

 

Administrative Agent’s
Special Counsel. 
Bingham McCutchen LLP or such other counsel as may be approved by the
Administrative Agent.

 

Affected Lenders.  See §6.8(c).

 

Affiliate.  Any Person that would be considered to be an
affiliate of any Borrower or a Lender (as the context requires) under Rule
144(a) of the Rules and Regulations of the Securities and Exchange Commission,
as in effect on the date hereof, if such Borrower or such Lender were issuing
securities.

 

Agency Accounts.  See §9.16.

 

Agency Account Agreements.  See §9.16.

 

Agents.  Collectively, the Administrative Agent, the
Syndication Agent and the Documentation Agents.

 

Applicable Margin.  For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a “Rate
Adjustment Period”), the Applicable Margin with respect to Revolving Credit
Loans, (in each case, for Base Rate Loans and Eurodollar Rate Loans) and for
the Letters of Credit shall be the applicable percentage set forth below with
respect to each such Revolving Credit Loan or Letter of Credit, as the case may
be, corresponding to the Leverage Ratio, as determined for the most recent
Reference Period ending immediately prior to the applicable Rate Adjustment
Period:

 

	
   

  	
   

  	
   

  	
   

  	
  Revolving
  Credit Loans

  	
   

  
	
  Level

  	
   

  	
  Leverage
  Ratio

  	
   

  	
  Base Rate
  Loans

  	
   

  	
  Eurodollar
  Rate

  Loans and Letters

  of Credit

  	
   

  
	
  I

  	
   

  	
  < 1.75:1

  	
   

  	
  1.75

  	
  %

  	
  3.25

  	
  %

  
	
  II

  	
   

  	
  3 1.75:1 and 
  < 2.25:1

  	
   

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  
	
  III

  	
   

  	
  3 2.25:1

  	
   

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  

 

4

 

Notwithstanding the foregoing, (a) for the period
commencing on the Closing Date through the Adjustment Date immediately
following the date of delivery by the Borrowers to the Agent of a Compliance Certificate
for the fiscal period ending June 26, 2004, the Applicable Margin shall at no
time during such period be permitted to be adjusted to less than the
percentages set forth in Level II in the table above; and (b) if the Borrowers
fail to deliver any Compliance Certificate pursuant to §9.4(d) hereof, then for
the period commencing on the date after the day on which such Compliance
Certificate was due through the date which is five (5) Business Days after such
Compliance Certificate is delivered, the Applicable Margin shall be that
percentage corresponding to Level III in the table above.

 

Applicable Pension
Legislation.  At any
time, any pension or retirement benefits legislation (be it national, federal,
provincial, territorial or otherwise) then applicable to any Borrower.

 

Applicable Percentage.  With respect to any mandatory prepayment
required to be made by the Borrowers pursuant to §4.1, if the Leverage Ratio:
(a) as of the last day of the fiscal year with respect to which such prepayment
is to be calculated is greater than 1.75 to 1.00, seventy-five percent (75%);
(b) as of the last day of the fiscal year with respect to which such prepayment
is to be calculated is less than or equal to 1.75 to 1.00 but greater than 1.50
to 1.00, fifty percent (50%); and (c) as of the last day of the fiscal year
with respect to which such prepayment is to be calculated and as of the last
day of the next succeeding fiscal quarter is less than or equal to 1.50 to
1.00, zero percent (0%).

 

Arranger.
Fleet Securities, Inc.

 

Asset Sale.  Any one or series of related transactions in
which a Borrower or any Subsidiary of a Borrower conveys, sells, leases,
licenses or otherwise disposes of, directly or indirectly, any of its
properties, businesses or assets (including in connection with a sale and
leaseback transaction and the sale or issuance of Equity Interests of any
Subsidiary other than to a Borrower or any wholly-owned Subsidiary of a
Borrower but excluding any dispositions included in the definition of “Casualty
Event”) whether owned on the Closing Date or thereafter acquired.

 

Assignment and Acceptance.  See §16.1.

 

Audited Financials.  Collectively, the audited consolidated
balance sheets of the Borrowers and their Subsidiaries dated December 28, 2002
and the audited consolidated statement of income and cash flow of the Borrowers
and their Subsidiaries for the fiscal year ended December 28, 2002 (in each
case with related footnote disclosures).

 

Austin Acknowledgment and
Consent. The Acknowledgment and Consent, dated as of the
Closing Date, and  as the same may be
amended from time to time hereafter, among MS Acquisition I, MS Acquisition II
and the Administrative Agent and in form and substance satisfactory to the
Administrative Agent.

 

5

 

Austin Collateral
Assignment of Partnership Interests.  The Collateral Assignment of Partnership
Interests, dated as of the Closing Date, as the same may be amended from time
to time hereafter, among MS Acquisition I, MS Acquisition II, and the
Administrative Agent and in form and substance satisfactory to the
Administrative Agent.

 

Avado.  Avado Brands, Inc., a Georgia corporation.

 

Balance Sheet Date.  December 28, 2002.

 

Bank of America.
Bank of America, N.A.

 

Base Rate.  The higher of (a) the variable annual rate
of interest so announced from time to time by Fleet as its “prime rate”,
such rate being a reference rate and not necessarily representing the lowest or
best rate being charged to any customer, and (b) one-half of one percent (0.5%)
above the Federal Funds Effective Rate. 
For the purposes of this definition, “Federal  Funds  Effective
Rate” shall mean for any day, the rate per annum equal to the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average of the quotations
for such day on such transactions received by the Administrative Agent from
three funds brokers of recognized standing selected by the Administrative
Agent.  Changes in the Base Rate
resulting from any changes in Fleet’s “prime rate” shall take place
immediately without notice or demand of any kind.

 

Base Rate
Loans.  Revolving Credit Loans
bearing interest calculated by reference to the Base Rate.

 

Borrower(s). 
As defined in the preamble hereto.

 

BRS.  Bruckmann, Rosser, Sherrill & Co. II,
L.P., a limited partnership organized under the laws of Delaware.

 

BRS Affiliate.
(i) Any Person or account which is
controlled by or under common control with or managed by or under common
management with, directly or indirectly, BRS or any director, officer or
employee of BRS, (ii) any director, officer or employee of BRS or any family
member of such director, officer or employee, or (iii) any trust or other
Person established by or for the benefit of any director, officer or employee
of BRS or family member thereof and controlled by such director, officer,
employee or family member.

 

Business Day.  Any day on which banking institutions in
Boston, Massachusetts and  New York, New York, are open for the
transaction of banking business and, in the case of Eurodollar Rate Loans, also
a day which is a Eurodollar Business Day.

 

6

 

California Proposition 65.  The California Safe Drinking Water and Toxic
Enforcement Act of 1986, as amended.

 

Capital Assets.  Fixed assets, both tangible (such as land,
buildings, fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises 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.

 

Capital Expenditures.  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, including without limitation or duplication, maintenance
capital, build-out and new store expenditures, (ii) without duplication,
Consolidated Restaurant Pre-Opening Costs, and (iii) the lease of any assets by
a 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.  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.

 

Cash Equivalents.  Any of the following: (a) marketable direct
or guaranteed obligations of the United States of America that mature within
one (1) year from the date of purchase by such Borrower; (b) demand deposits,
certificates of deposit, bank acceptances and time deposits of United States
banks having total assets in excess of $1,000,000,000; and (c) securities
commonly known as “commercial paper” issued by a corporation organized
and existing under the laws of the United States of America or any state
thereof that at the time of purchase have been rated and the ratings for which
are not less than “P 1” if rated by Moody’s, and not less than “A 1”
if rated by S&P.

 

Casualty Event.  With respect to any property (including any
interest in property) of a Borrower or any of its Subsidiaries, any loss of,
damage to, or condemnation or other taking of, such property for which such
Person receives insurance proceeds, proceeds of a condemnation award or other
compensation.

 

CERCLA.  See §8.18(a).

 

Change of Control.
At any time, the occurrence of one or more of the following events:  (a) (i) prior to an Initial Public Offering,
the Sponsors shall collectively cease to own directly or indirectly at least
fifty-one percent (51%) or higher of the Voting Stock of the Parent or the
Sponsors shall collectively cease to have the power, directly or indirectly
(including under any stockholders’ agreement) to elect a

 

7

 

majority of the directors of the Parent and any of the Borrowers, and
(ii) after an Initial Public Offering, the Sponsors shall collectively cease to
own directly or indirectly at least forty percent (40%) or higher of the Voting
Stock of the Parent; (b) the replacement of a majority of the board of
directors of the Parent or any of the Borrowers over a two-year period from the
directors who constituted the board of directors of such Person at the
beginning of such period, and such replacement shall not (i) have been approved
by a vote of at least a majority of the board of directors of such Person then
still in office who either were members of such board of directors at the
beginning of such period or whose election as a member of such board of
directors was previously so approved, or (ii) have been elected or nominated
for election by a Sponsor which owns Voting Stock of such Person; or (c) the
Parent shall cease to own directly or through a Borrower one hundred percent
(100%) of the issued and outstanding Equity Interests of the Borrowers.

 

CH.  Castle Harlan, Inc., a Delaware corporation.

 

CH Affiliate.
(i) Any Person or account which is
controlled by or under common control with or managed by or under common
management with, directly or indirectly, CH or any director, officer or
employee of CH, (ii) any director, officer or employee of CH or any family member
of such director, officer or employee, or (iii) any trust or other Person
established by or for the benefit of any director, officer or employee of CH or
family member thereof and controlled by such director, officer, employee or
family member.

 

Closing Date.  The first date on which the conditions set
forth in §12 have been satisfied and any Revolving Credit Loans are to be made
or continued or any Letter of Credit is to be issued or continued hereunder.

 

Code.  The Internal Revenue Code of 1986, as amended.

 

Collateral.  All of the property, rights and interests of
the Parent, the Borrowers and their Subsidiaries that are or are intended to be
subject to the Liens created by the Security Documents.

 

Collateral Assignment of
Acquisition Documents. 
The Collateral Assignment of Acquisition Documents, dated as of the
Original Closing Date, as amended by the First Amendment to Security Documents
Agreement, and as the same may be further amended from time to time hereafter,
among MSAC and the Administrative Agent and in form and substance satisfactory
to the Administrative Agent.

 

Collateral Assignment of
Partnership Interests. 
The Collateral Assignment of Partnership Interests, dated as of the July
26, 2002, as amended by the First Amendment to Security Documents Agreement,
and as the same may be further amended from time to time hereafter, among MS
Acquisition I, MS Acquisition II, and the Administrative Agent and in form and
substance satisfactory to the Administrative Agent.

 

Commitment Fee.  See §2.2.

 

8

 

Compliance Certificate.  See §9.4(d).

 

Concentration Account.  Account number 3752149724 with Bank of
America, N.A.

 

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.

 

Consolidated Cash Flow.  For any period, (a) Consolidated EBITDAR of
the Borrowers and their Subsidiaries for such period, minus (b) cash
income taxes paid during such period by the Borrowers and their Subsidiaries, minus
(c) Maintenance Capital Expenditures made by the Borrowers and their
Subsidiaries during such period, minus (d) Management Fees paid during
such period, minus (e) Officer Fees paid during such period.

 

Consolidated Cash Flow
Ratio.  As at the end
of any Reference Period, the ratio of (a) Consolidated Cash Flow for such
Reference Period to (b) Consolidated Financial Obligations for such Reference
Period plus Consolidated Rental Expense for such Reference Period; provided
that for purposes of calculating the Consolidated Cash Flow Ratio for any
Reference Period ending prior to December 25, 2004, there shall be excluded
from the determination of “Financial Obligations” for such period all payment
made by the Borrowers in respect of principal, interest or fees pursuant to the
Existing Credit Agreement.

 

Consolidated EBITDA.  With respect to any fiscal period, an amount
equal to the sum of (a) Consolidated Pre-Tax Income of the Borrowers and their
Subsidiaries for such fiscal 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) Consolidated Restaurant Pre-Opening Costs for such period, plus
(iii) Consolidated Total Interest Expense paid or accrued during such period, plus
(iv) Management Fees paid or, without duplication, accrued in such period
(whether or not paid), all as determined in accordance with GAAP, plus
(v) noncash charges for rental expenses for such period, plus (vi)
one-time noncash unamortized financing costs associated with the Existing
Credit Agreement, plus (vii) all one-time upfront fees (including
without limitation bank fees and broker fees and commissions) paid, and all
costs and expenses (including attorneys’ fees and fees of other professionals)
incurred and paid, by the Borrowers in connection with the consummation of the
financing contemplated hereby, plus (viii) all costs and expenses
incurred and paid by the Borrowers and their Subsidiaries which are associated
with compliance with California Proposition 65 and with California employment
wage and hour litigation, in an aggregate amount not to exceed $2,000,000
during the period from the Closing Date through to the Maturity Date, plus
(ix) net losses from sales of assets, whether or not extraordinary (excluding
sales in the ordinary course of business), plus (x) noncash charges
incurred by the Borrowers and their Subsidiaries in connection with the closure
of restaurants, in an aggregate amount not to exceed $3,000,000 during the
period from the Closing Date through to the Maturity Date, plus (xi)
Officer Fees paid or,

 

9

 

without duplication, accrued in such period (whether or not paid), all
as determined in accordance with GAAP, in an aggregate amount not to exceed
$400,000 in any fiscal year, and minus (c) to the extent not deducted in
the calculation of Consolidated Pre-Tax Income, GAAP deferred rent credits for
such period and minus (d) net gains on sales of assets, whether or not
extraordinary (excluding sales in the ordinary course of business), and other
extraordinary gains.

 

Consolidated EBITDAR.  For any period, the sum of (a) the
Consolidated EBITDA of the Borrowers and their Subsidiaries for such period, plus
(b) Consolidated Rental Expense for such period.

 

Consolidated Financial
Obligations.  For any
period, the sum of (a) all scheduled payments of principal or mandatory
redemption amounts and fees on Indebtedness (including any Subordinated Debt)
of the Borrowers and their Subsidiaries, including Capitalized Leases and
including Synthetic Leases, due and payable during such period or within six
(6) 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.  With
respect to the Borrowers and their Subsidiaries, 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 Equity
Interests, (ii) the deferred purchase price of assets (other than trade
payables incurred in the ordinary course of business), (iii) Synthetic Leases
and Capitalized Leases, and  (iv) the maximum drawing amount of all
letters of credit (including Letters of Credit hereunder) outstanding and
bankers acceptances, 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 (as defined below in the definition
of “Indebtedness”).

 

Consolidated Net Income
(or Deficit).  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, after eliminating therefrom all extraordinary
non-recurring items of income.

 

Consolidated Pre-Tax
Income.  For any
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.

 

Consolidated Pro Forma
EBITDA.  For any
period, the sum of (a) the Consolidated EBITDA of the Borrowers and their
Subsidiaries for such period, plus (b) following the consummation of the
A&M Acquisition until twelve (12) calendar months have elapsed since the
consummation thereof, $1,800,000 minus the amount

 

10

 

of the actual contribution of the Restaurants acquired in the A&M
Acquisition to the Consolidated EBITDA of the Borrowers and their Subsidiaries
for any date of determination during such period.

 

Consolidated Rental
Expense.  For any
period, the sum of (a) all minimum rental expense of the Borrowers and their
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP, incurred under any 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, minus (b)
noncash charges for rental expenses for such period, plus (c) any GAAP
deferred rent credits for such period deducted from Consolidated EBITDA
pursuant to clause (c) of the definition of ‘Consolidated EBITDA’.

 

Consolidated Restaurant
Pre-Opening Costs. “Start-up costs” (as such term
is  defined in SOP 98-5 published by the
American Institute of Certified Public Accountants) related to the acquisition,
opening and organizing of new Restaurants, such costs including, without limitation,
the cost of feasibility studies, staff-training and recruiting, and travel
costs for employees engaged in such start-up activities.

 

Consolidated Total
Interest Expense.  For
any period, the aggregate amount of cash interest required to be paid by the
Borrowers and their Subsidiaries during such period on all Indebtedness
(including the Subordinated Debt) of the Borrowers and their Subsidiaries
outstanding during all or any part of 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 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 Credit Agreement and the
other Loan Documents.

 

Conversion Request.  A notice given by the Borrowers to the
Administrative Agent of the Borrowers’ election to convert or continue a
Revolving Credit Loan in accordance with §2.7.

 

Convertible Preferred
Stock.  The Parent’s
13% Senior Exchangeable Preferred Stock, par value $1.00 per share, issued on
or about the Original Closing Date pursuant to the Stock and Warrant Purchase
Agreement.

 

Convertible Preferred
Stock Documents. 
Collectively, (a) the Stock and Warrant Purchase Agreement, (b) the
Convertible Preferred Stock, (c) the Amended and Restated Certificate of
Incorporation of the Parent as in effect on the Original Closing Date, (d) the
13% Subordinated Exchange Debentures due August 22, 2011 of the Parent, (e) the
Class A-2 Common Units Purchase Warrant issued August 22, 2001 by MS LLC to
Mellon Bank, N.A., as Trustee for The Bell Atlantic Master Trust pursuant to
the Stock and Warrant

 

11

 

Purchase Agreement, and (f) the Preferred Units Purchase Warrant issued
August 22, 2001 by MS LLC to Mellon Bank, N.A., as Trustee for The Bell
Atlantic Master Trust pursuant to the Stock and Warrant Purchase Agreement, in
each case together with amendments or modifications thereto permitted pursuant
to §10.14.1.

 

Credit Agreement.  This Amended and Restated Revolving Credit
Agreement, including the Schedules and Exhibits hereto.

 

Default.  See §14.1.

 

Delinquent Lender.  See §15.5.3.

 

Developer.  Vineyard Creek, LLC, a California limited
liability company.

 

Distribution.  The declaration or payment of any dividend
on or in respect of any shares of any class of Equity Interests of a Person,
other than dividends payable solely in Equity Interests of such Person; the
purchase, redemption, defeasance, retirement or other acquisition of any shares
of any class of Equity Interests of a Person, directly or indirectly through a
Subsidiary of such Person or otherwise (including the setting apart of assets
for a sinking or other analogous fund to be used for such purpose); the return
of capital by a Person to its shareholders as such; or any other distribution
on or in respect of any shares of any class of Equity Interests of such Person.

 

Dollars
or $.  Dollars in lawful currency
of the United States of America.

 

Documentation Agents.  Bank of America and Wells Fargo, each acting
as a documentation agent for the Lenders.

 

Domestic Lending Office.  Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such
other office of such Lender, if any, located within the United States that will
be making or maintaining Base Rate Loans.

 

Drawdown Date.  The date on which any Revolving Credit Loan
is made or is to be made, and the date on which any Revolving Credit Loan is
converted or continued in accordance with §2.7.

 

Employee Benefit Plan.  Any employee benefit plan within the meaning
of §3(3) of ERISA maintained or contributed to by the Borrowers, or any ERISA
Affiliate if any Borrower has any liability for such plan, other than a
Guaranteed Pension Plan or a Multiemployer Plan.

 

Environmental Laws.  See §8.18(a).

 

EPA.  See §8.18(b).

 

Equity Documents.  Collectively, (a) the Limited Liability
Company Agreement, dated as of August 8, 2001, of MS LLC by and among the
Members set forth on Schedule 1 thereto, (b) the Members Agreement,
dated as of the Original Closing Date, by and among MS LLC, BRS, Castle Harlan
Partners III, L.P., Julie

 

12

 

Frist, David B. Pittaway, Bell Atlantic Master Trust and the other
Members referenced therein, (c) the Registration Rights Agreement, dated as of
the Original Closing Date, by and among MS LLC, BRS, Castle Harlan Partners
III, L.P., Julie Frist, David B. Pittaway, Bell Atlantic Master Trust and the
other Members referenced therein, and (d) the Subscription Agreement, dated as
of the Original Closing Date, by and among MS LLC, BRS, Castle Harlan Partners
III, L.P., Julie Frist, David B. Pittaway and each of the other Purchasers
party thereto, in each case together with amendments or modifications thereto
permitted pursuant to §10.14.1.

 

Equity Interests.  All equity interests of a Person, including,
without limitation, any (a) common or preferred stock, (b) limited or general
partnership interests, (c) limited liability company membership interests, (d)
options, warrants, or other rights to purchase or acquire any Equity Interest,
or (e) securities convertible into any Equity Interest.

 

Equity Issuance.  The sale or issuance by the Parent, any
Borrower or any of its Subsidiaries of any of its Equity Interests to any
Person other than, in the case of the Borrowers, another Borrower.

 

ERISA.  The Employee Retirement Income Security Act
of 1974, as amended.

 

ERISA Affiliate.  Any Person which is treated as a single
employer with any of the Borrowers under §414 of the Code.

 

ERISA Reportable Event.  A reportable event with respect to a
Guaranteed Pension Plan within the meaning of §4043 of ERISA and the
regulations promulgated thereunder.

 

Eurocurrency Reserve Rate.  For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any bank subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against “Eurocurrency
Liabilities” (as that term is used in Regulation D), if such liabilities
were outstanding.  The Eurocurrency
Reserve Rate shall be adjusted automatically on and as of the effective date of
any change in the Eurocurrency Reserve Rate.

 

Eurodollar Business Day.  Any day on which commercial banks are open
for international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Administrative
Agent in its sole discretion acting in good faith.

 

Eurodollar Lending Office.  Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such
other office of such Lender, if any, that shall be making or maintaining
Eurodollar Rate Loans.

 

Eurodollar Rate.  For any Interest Period with respect to a
Eurodollar Rate Loan, the rate of interest equal to (a) the rate at which
Dollar deposits for such

 

13

 

Interest Period are offered as presented on Telerate Page 3750 as of
10:00 a.m. (Boston time) two (2) Eurodollar Business Days prior to the
beginning of such Interest Period or (b) if such information on such Telerate
Page is not available, the arithmetic average of the rates per annum (rounded
upwards to the nearest 1/16 of one percent) of the rate at which the Reference
Lender’s Eurodollar Lending Office is offered Dollar deposits two Eurodollar
Business Days prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations of such Eurodollar Lending Office are customarily conducted, for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the Eurodollar
Rate Loan of Fleet to which such Interest Period applies; divided by in
the case of a rate determined by either clause (a) or clause (b) above, a
number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable.

 

Eurodollar Rate Loans.  Revolving Credit Loans bearing interest
calculated by reference to the Eurodollar Rate.

 

Event of Default.  See §14.1.

 

Existing Credit Agreement.  As defined in the Recitals.

 

Existing Lenders.  As defined in the Recitals.

 

Existing Letters of Credit.  See §5.7.

 

Existing Lenders.  As defined in the Recitals.

 

Existing Revolving Credit
Loans.  The
outstanding “Revolving Credit Loans” (as defined in the Existing Credit
Agreement) made by the Existing Lenders under the Existing Credit Agreement.

 

Existing Term Loans A.  The outstanding “Term Loans A” (as defined
in the Existing Credit Agreement) made by the Existing Lenders under the
Existing Credit Agreement.

 

Existing Term Loans B.  The outstanding “Term Loans B” (as defined
in the Existing Credit Agreement) made by the Existing Lenders under the
Existing Credit Agreement.

 

Fee Letter.  The fee letter, dated on or prior to the
Closing Date, between the Borrowers, the Arranger and the Administrative Agent.

 

Fees.  Collectively, the Commitment Fee, the Letter
of Credit Fees, the Fronting Fees and the fees payable pursuant to the Fee
Letter.

 

Financial Affiliate.  A Subsidiary of the bank holding company
controlling any Lender, which Subsidiary is engaging in any of the activities
permitted by §4(e) of the Bank Holding Company Act of 1956 (12 U.S.C. §1843).

 

14

 

First Amendment to
Security Documents Agreement. The First Amendment to Security
Documents Agreement, dated as of the Closing Date, among the Borrowers, the
Parent and the Administrative Agent.

 

Fleet.  Fleet National Bank, a national banking
association, in its individual capacity.

 

FQ1, FQ2, FQ3, FQ4.The first, second, third and fourth fiscal quarters, respectively, of a
specified fiscal year.

 

Franchise Agreement.  Each franchise agreement between a Borrower
or any Subsidiary of a Borrower and a third Person which sets forth the terms
and conditions for the operation by such Person, as a franchisee, of a
restaurant.

 

Fronting Fee.
See §5.6.

 

GAAP or generally
accepted accounting principles.  (a) When used in §11, whether directly or indirectly through
reference to a capitalized term used therein, means (i) principles that are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect for the fiscal year
ended on the Balance Sheet Date, and (ii) to the extent consistent with such
principles, the accounting practice of the Borrowers reflected in the Audited
Financials for the year ended on the Balance Sheet Date, and (b) when used in
general, other than as provided above, means principles that are (i) consistent
with the principles promulgated or adopted by the Financial Accounting
Standards Board and its predecessors, as in effect from time to time, and (ii)
consistently applied with past financial statements of the Borrowers adopting
the same principles, provided that in each case referred to in this definition
of “GAAP” a certified public accountant would, insofar as the use of
such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in GAAP) as
to financial statements in which such principles have been properly applied; provided,
that despite FASB 150, redeemable preferred stock of any Borrower shall not,
for purposes of this Credit Agreement, be treated as “Indebtedness”. In the
event any “Accounting Changes” (as defined below) shall occur and such
changes affect financing covenants, standards or terms in this Credit
Agreement, then the Borrowers and the Lenders agree to enter into negotiations
in order to amend such provisions of this Credit 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 show 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) and the basis for calculating
financial covenant compliance (without reflecting such Accounting

 

15

 

Changes).  “Accounting
Changes” means: (x) changes in accounting principles required by GAAP and
implemented by the Company and (y) changes in accounting principles recommended
by the Borrowers’ certified public accountants.

 

Governing Documents.  With respect to any Person, its certificate
or articles of incorporation, partnership agreement, membership agreement or
other similar charter agreement, as applicable, its by-laws and all shareholder
agreements, voting trusts and similar arrangements applicable to any of its
Equity Interests.

 

Governmental Authority.  Any foreign, federal, state, regional,
local, municipal or other government, or any department, commission, board,
bureau, agency, public authority or instrumentality thereof, or any court or
arbitrator.

 

Growth Capital
Expenditures.  Capital
Expenditures related to the construction, acquisition or opening of new
Restaurants during any fiscal year plus to the extent not included in
the calculation of such Capital Expenditures, Consolidated Restaurant
Pre-Opening Costs plus Capital Expenditures relating to the conversion
and/or remodeling of any existing Restaurant; provided, however,
that the purchase price paid by the Borrowers and/or their Subsidiaries for the
A&M Acquisition shall not constitute and shall not be included for purposes
of Growth Capital Expenditures.

 

Guaranteed Pension Plan.  Any employee pension benefit plan within the
meaning of §3(2) of ERISA maintained or contributed to by any Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.

 

Hazardous Substances.  See §8.18(b).

 

Incurrence Ratio.  As at any date of determination, the maximum
Leverage Ratio permitted under §11.1 as at the end of the most recently ended
Reference Period for which the Borrowers have delivered a Compliance
Certificate, less 0.15.

 

Indebtedness.  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

 

16

 

repurchase agreements but excluding deferred
Management Fees and 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),

 

(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,

 

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

 

(i)                                     every
obligation of such Person under any forward contract, futures contract, swap,
option or other financing agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreements), the value of which
is dependent upon interest rates, currency exchange rates, commodities or other
indices (a “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
obligation, contingent or otherwise, of such Person guaranteeing, or having the
economic effect of guarantying or otherwise acting as surety for, any
obligation of a type described in any of clauses (a) through (j) (the “primary
obligation”) of another Person (the “primary  obligor”), in
any manner, whether directly or indirectly, and including, without limitation,
any obligation of such Person (i) to purchase or pay (or advance or supply
funds for the purchase of) any security for the payment of such primary
obligation, (ii) to purchase property, securities or services for the purpose
of assuring the payment of such primary obligation, or (iii) to

 

17

 

maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such primary obligation.

 

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, (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
guaranty or other contingent liability referred to in clause (k) shall be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such guaranty or other contingent obligation 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.

 

Ineligible Securities.  Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. §24, Seventh), as amended.

 

Initial Public Offering.  An underwritten initial public offering by
the Parent of the common stock of the Parent pursuant to an effective S-1
Registration Statement under the Securities Act of 1933, as amended, which
consists of at least twenty-one percent (21%) of issued and outstanding capital
stock of the Parent after giving effect to such offering and the related
issuance if the Net Cash Equity Issuance Proceeds from such offering is applied
to prepay the Revolving Credit Loans pursuant to §4.2(b).

 

Interest Payment Date.  (a) As to any Base Rate Loan, the last day
of the calendar quarter  with respect to interest accrued during
such calendar quarter, including, without limitation, the calendar quarter
which includes the Drawdown Date of such Base Rate Loan; and (b) as to any
Eurodollar Rate Loan in respect of which the Interest Period is (i) three (3)
months or less, the last day of such Interest Period and (ii) more than three
(3) months, the date that is three (3) months from

 

18

 

the first day of such Interest Period and, in addition, the last day of
such Interest Period.

 

Interest Period.  With respect to each Revolving Credit Loan,
(a) initially, the period commencing on the Drawdown Date of such Loan and
ending on the last day of one of the periods set forth below, as selected by
the Borrowers in a Loan Request or as otherwise required by the terms of this
Credit Agreement (i) for any Base Rate Loan, the last day of the calendar quarter;
and (ii) for any Eurodollar Rate Loan, one (1), two (2), three (3), six (6) or
twelve (12) months; and (b) thereafter, each period commencing on the last day
of the next preceding Interest Period applicable to such Revolving Credit Loan
and ending on the last day of one of the periods set forth above, as selected
by the Borrowers in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the following:

 

(A)                              if
any Interest Period with respect to a Eurodollar Rate Loan would otherwise end
on a day that is not a Eurodollar Business Day, that Interest Period shall be
extended to the next succeeding Eurodollar Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Eurodollar Business Day;

 

(B)                                if
any Interest Period with respect to a Base Rate Loan would end on a day that is
not a Business Day, that Interest Period shall end on the next succeeding
Business Day;

 

(C)                                if
the Borrowers shall fail to give notice as provided in §2.7, the Borrowers
shall be deemed to have requested a conversion of the affected Eurodollar Rate
Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base
Rate Loans on the last day of the then current Interest Period with respect
thereto;

 

(D)                               any
Interest Period relating to any Eurodollar Rate Loan that begins on the last
Eurodollar 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 Eurodollar Business Day of a calendar month; and

 

(E)                                 any
Interest Period that would otherwise extend beyond the Maturity Date shall end
on the Maturity Date.

 

Interest Rate Agreement.  Any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate futures
contract, interest rate option agreement or other similar agreement or arrangement
to which any Borrower and any Lender is a party which is entered into pursuant
to §9.15 and is designed to protect the Borrowers against fluctuations in
interest rates.

 

Investments.  All expenditures made and all liabilities
incurred (contingently or otherwise) for the acquisition of stock or
Indebtedness of, or for loans, advances,

 

19

 

capital contributions or transfers of property to, or in respect of any
guaranties (or other commitments as described under Indebtedness), or
obligations of, any Person.  In
determining the aggregate amount of Investments outstanding at any particular
time: (a) the amount of any Investment represented by a guaranty shall be taken
at not less than the principal amount of the obligations guaranteed and still
outstanding; (b) there shall be included as an Investment all interest accrued
with respect to Indebtedness constituting an Investment unless and until such
interest is paid; (c) there shall be deducted in respect of each such
Investment any amount received as a return of capital (but only by repurchase,
redemption, retirement, repayment, liquidating dividend or liquidating
distribution); (d) there shall not be deducted in respect of any Investment any
amounts received as earnings on such Investment, whether as dividends, interest
or otherwise, except that accrued interest included as provided in the
foregoing clause (b) may be deducted when paid; and (e) there shall not be
deducted from the aggregate amount of Investments any decrease in the value
thereof.

 

Lender Affiliate.  (a) With respect to any Lender, (i) an
Affiliate of such Lender or (ii) any entity (whether a corporation,
partnership, limited liability company, trust or legal entity) that is engaged
in making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business and is administered
or managed by such Lender or an Affiliate of such Lender and (b) with respect
to any Lender that is a fund which invests in bank loans and similar extensions
of credit, any other entity (whether a corporation, partnership, limited
liability company, trust or other legal entity) that is a fund that invests in
bank loans and similar extensions of credit and is managed by the same
investment advisor as such Lender or by an Affiliate of such investment
advisor.

 

Lenders.  Fleet, RaboBank, Bank of America, Wells
Fargo, SunTrust Bank, Wachovia Bank, National Association and the other lending
institutions listed on Schedule 1 hereto and any other
Person who becomes an assignee of any rights and obligations of a Lender
pursuant to §16.

 

Letter of Credit.  See §5.1.1.

 

Letter of Credit
Application.  See
§5.1.1.

 

Letter of Credit Fee.  See §5.6.

 

Letter of Credit
Participation.  See
§5.1.4.

 

Leverage Ratio.  As at any date of determination, the ratio
of (a) Consolidated Funded Indebtedness outstanding on such date to (b)
Consolidated Pro Forma EBITDA for the Reference Period ending on such date.

 

Lien.  Any mortgage, deed of trust, security
interest, pledge, hypothecation, assignment, attachment, deposit arrangement,
encumbrance, lien (statutory, judgment or otherwise), or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title

 

20

 

retention agreement, any Capitalized Lease, any Synthetic Lease, any
financing lease involving substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).

 

Liquor Management
Agreement.  Any
agreement or contract between any of the Borrowers and any of the Sellers
pursuant to which such Borrower has obtained the consent of such Seller to use
liquor licenses issued to such Seller in the operation of a particular
Restaurant following the consummation of the Acquisition.

 

Loan Documents.  This Credit Agreement, the Notes, the Letter
of Credit Applications, the Letters of Credit, the Fee Letter and the Security
Documents, and each other document or agreement entered into in connection
herewith and therewith.

 

Loan Request.  See §2.6.

 

Maintenance Capital
Expenditures. 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.

 

Management Agreements.  Collectively, the Management Agreements,
each dated as of August 22, 2001, by and among CH, BRS, MSAC, and MSRC,
pursuant to which MSAC and MSRC agree to pay to CH and BRS, as the case may be,
certain fees and other amounts pursuant to the terms thereof, in each case
together with amendments and modifications thereto permitted pursuant to
§10.14.1.

 

Management Fees.  Collectively, the management fees (including
without limitation the “Quarterly Payment”, “Stub Payment”, “Unpaid
Amount” and the “Additional Amount”, in each case as such terms are
defined in the Management Agreements) payable by the Borrowers to any Sponsor
in accordance with the terms of the Management Agreements which shall contain
terms reasonably satisfactory to the Administrative Agent.

 

Material Adverse Effect.  With respect to any event or occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding):

 

(a)                                  a
material adverse effect on the business, properties,  condition (financial or otherwise), assets, operations or income
of MSRC individually, or the Borrowers and their Subsidiaries taken as a whole;

 

(b)                                 an
adverse effect on the ability of MSRC individually, or the Borrowers and their
Subsidiaries, taken as a whole, to perform any of their respective Obligations
under any of the Loan Documents; or

 

(c)                                  any
impairment of (i) the validity, binding effect or enforceability of this Credit
Agreement or any of the other Loan Documents,

 

21

 

(ii) the rights, remedies or benefits available to the
Administrative Agent or any Lender under any Loan Document, or (iii) the
attachment, perfection or priority of any Lien of the Administrative Agent
under the Security Documents on any material portion of the Collateral.

 

Material Contracts.  Written or oral agreements or commitments of
or relating to the Parent, the Borrowers or their Subsidiaries that involve
monetary obligations of more than $100,000 per year.

 

Maturity Date.
April 27, 2007.

 

Maximum Drawing Amount.  The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.

 

Membership Interest
Pledge Agreements. The (a) Membership Interest Pledge
Agreement, dated as of December 14, 2001, among MSAC and the Administrative
Agent and (b) Membership Interest Pledge Agreement, dated as of July 26, 2002,
among MSAC and the Administrative Agent, each as amended by the First Amendment
to Security Documents Agreement, and as each of the same may be further amended
from time to time hereafter, and in each case in form and substance
satisfactory to the Administrative Agent.

 

Moody’s.  Moody’s Investors Services, Inc.

 

Mortgaged Property.  Any Real Estate which is subject to any
Mortgage.

 

Mortgages.  The several mortgages and deeds of trust,
executed and delivered from time to time from and after the Original Closing
Date, as the  same may have been amended
as of the Closing Date and as each of the same may be amended from time to time
hereafter, from the Borrowers and their Subsidiaries to the Administrative
Agent with respect to the fee and leasehold interests of the Borrowers and
their Subsidiaries in the Real Estate and in form and substance satisfactory to
the Administrative Agent.

 

MSAC.  As defined in the preamble hereto.

 

MS Acquisition I.
McCormick & Schmick Acquisition I Texas, Inc., a Texas corporation.

 

MS Acquisition II.  McCormick & Schmick Acquisition II
Texas, Inc., a Delaware corporation.

 

MS Division.  Avado (but only with respect to the
Restaurants listed on Schedule 1.1 hereto operated by Avado as of March
31, 2001 and immediately prior to the Original Closing Date and the assets and
the liabilities directly related thereto), MSHC and the MSHC Subsidiaries.

 

22

 

MSHC.  McCormick & Schmick Holding Corp., a
Georgia corporation.

 

MSHC Subsidiaries.  Collectively, McCormick & Schmick
Holding Corp., a Delaware corporation, McCormick & Schmick Operating Corp.,
a Georgia corporation, McCormick & Schmick TX General, Inc., a Georgia
corporation, McCormick & Schmick Limited, Inc., a Georgia corporation,
McCormick & Schmick of Texas, LP, a Texas limited partnership, McCormick
& Schmick’s SCP VIII, Inc., an Oregon corporation, McCormick &
Schmick’s RMP III, Inc., an Oregon corporation, McCormick & Schmick of
Montgomery County, Inc., a Georgia corporation, and McCormick and Schmick TX
Liquor, Inc., a Texas corporation.

 

MSRC.  As defined in the preamble hereto.

 

MS LLC.  McCormick & Schmick Holdings, LLC, a
Delaware limited liability company.

 

Multiemployer Plan.  Any multiemployer plan within the meaning of
§3(37) of ERISA maintained or contributed to by any of the Borrowers or any
ERISA Affiliate.

 

Net Cash Equity Issuance
Proceeds.  With
respect to any Equity Issuance, the excess of the gross cash proceeds received
by such Person for such Equity Issuance after deduction of all reasonable and
customary transaction expenses (including, without limitation, underwriting
discounts and commissions) actually incurred in connection with such a sale or
other issuance.

 

Net Cash Sale Proceeds.  The net cash proceeds received by a Person
in respect of any Asset Sale, less the sum of (a) all reasonable out-of-pocket
fees, commissions and other reasonably and customary direct expenses actually
incurred in connection with such Asset Sale, including the amount of any
transfer or documentary taxes required to be paid by such Person in connection
with such Asset Sale, and (b) the aggregate amount of cash so received by such
Person which is required to be used to retire (in whole or in part) any
Indebtedness (other than under the Loan Documents) of such Person permitted by
this Credit Agreement that was secured by a Lien permitted by this Credit
Agreement having priority over the Liens (if any) of the Administrative Agent
(for the benefit of the Administrative Agent and the Lenders) with respect to
such assets transferred and which is required to be repaid in whole or in part
(which repayment, in the case of any other revolving credit arrangement or
multiple advance arrangement, reduces the commitment thereunder) in connection
with such Asset Sale.

 

Net Cash Debt Proceeds.  With respect to any issuance of Subordinated
Debt,  the excess of the net cash
proceeds received by such Person for such issuance after deduction of all
reasonable and customary transaction expenses (including, without limitation,
out-of-pocket expenses, underwriting discounts and commissions) actually
incurred in connection with such an issuance.

 

New Lending Office.
See §6.2.4.

 

23

 

Non-U.S. Lender.
See §6.2.3.

 

Note Pledge Agreement.  The Note Pledge Agreement, dated as of June
7, 2002, as amended by the First Amendment to Security Documents Agreement,
and  as the same may be further amended
from time to time hereafter, among the MSRC and the Administrative Agent, in
form and substance satisfactory to the Administrative Agent.

 

Note Record.  A Record with respect to a Note.

 

Notes.
See §2.4.

 

Obligations.  All indebtedness, obligations and
liabilities of any of the Borrowers and their Subsidiaries to any of the
Lenders and the Administrative Agent, individually or collectively, existing on
the date of this Credit Agreement or arising thereafter, direct or indirect,
joint or several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, arising or incurred under this Credit Agreement or any of the other
Loan Documents or any Interest Rate Agreement or in respect of any of the
Revolving Credit Loans made or Reimbursement Obligations incurred or any of the
Notes, Letter of Credit Applications, Letters of Credit or other instruments at
any time evidencing any thereof.

 

Officer Fees.  Collectively, the fees payable by the
Borrowers to William McCormick and/or Douglas Schmick pursuant to the terms of
each of the Covenant Not to Compete Agreements, each dated as of January 1,
2003 by and between MSAC and William McCormick or Douglas Schmick,
respectively, which terms shall be reasonably satisfactory to the
Administrative Agent.

 

Original Closing Date.  August 22, 2001.

 

outstanding.  With respect to the Revolving Credit Loans,
the aggregate unpaid principal thereof as of any date of determination.

 

Parent.  McCormick & Schmick Acquisition Corp.
II, a Delaware corporation.

 

Parent Guaranty.  The Amended and Restated Parent Guaranty,
dated as of the Closing Date, as the same may be amended from time to time
hereafter, made by Parent in favor of the Lenders and the Administrative Agent
pursuant to which the Parent guaranties to the Lenders and the Administrative
Agent the payment and performance of the Obligations and in form and substance
satisfactory to the Lenders and the Administrative Agent.

 

Parent Pledge Agreement.  The Stock Pledge Agreement, dated as of the
Original Closing Date, as amended by the First Amendment to Security Documents
Agreement, and  as the same may be
further amended from time to time hereafter, between the Parent and the
Administrative Agent and in form and substance satisfactory to the
Administrative Agent.

 

24

 

Partnership Pledge
Agreement.  The
Collateral Assignment of Partnership Interests, dated as of the Original
Closing Date, as amended by the First Amendment to Security Documents
Agreement, and  as the same may be
further amended from time to time hereafter, among MS Acquisition I, MS
Acquisition II and the Administrative Agent and in form and substance
satisfactory to the Administrative Agent.

 

PBGC.  The Pension Benefit Guaranty Corporation
created by §4002 of ERISA and any successor entity or entities having similar
responsibilities.

 

Perfection Certificates.  The Perfection Certificates as defined in
the Security Agreement.

 

Permitted Liens.  Liens permitted by §10.2.

 

Person.  Any individual, corporation, limited
liability company, partnership, limited liability partnership, trust, other
unincorporated association, business, or other legal entity, and any
Governmental Authority.

 

Pledge Agreement.  The Stock Pledge Agreement, dated as of the
Original Closing Date, as amended by the First Amendment to Security Documents
Agreement, and  as the same may be further
amended from time to time hereafter, among the Borrowers and the Administrative
Agent, in form and substance satisfactory to the Administrative Agent.

 

Pro Forma Balance Sheet.  See §8.4.3.

 

RaboBank.  Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., “RaboBank International” New York Branch.

 

RCRA.  See §8.18(a).

 

Real Estate.  All real property at any time owned or
leased (as lessee or sublessee) by any of the Borrowers or any of their
Subsidiaries.

 

Real Estate Documentation.
See §9.13(c).

 

Real Estate Leases.  Leases, including ground leases and space
leases, pursuant to which any of the Borrowers or any of their Subsidiaries
leases Real Estate.

 

Record.  The grid attached to a Note, or the
continuation of such grid, or any other similar record, including computer
records, maintained by any Lender with respect to any Revolving Credit Loan
referred to in such Note.

 

Reference Lender.  Fleet.

 

Reference Period.  As of any date of determination, the period
of four (4) consecutive fiscal quarters of the Borrowers and their Subsidiaries
ending on such

 

25

 

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); provided, however, (a) solely for
purposes of calculating the Adjusted Leverage Ratio and Consolidated Cash Flow
Ratio set forth in §§11.2 and 11.3, until four (4) fiscal quarters of the
Borrowers and their Subsidiaries have elapsed since September 27, 2003, “Reference
Period” shall mean, such shorter period of one (1), two (2) or three (3)
full fiscal quarters elapsed since September 27, 2003 and (b) solely for
purposes of calculating the Consolidated Funded Indebtedness for purposes of
the Adjusted Leverage Ratio in §§11.2, until four (4) fiscal quarters of the
Borrowers and their Subsidiaries have elapsed since September 27, 2003, the
actual amount of Consolidated Funded Indebtedness shall be multiplied by
twenty-five percent (25%) for every fiscal quarter in such shorter Reference
Period.

 

Register.  See §16.3.

 

Reimbursement Obligation.  The Borrowers’ obligation to reimburse the
Administrative Agent and the Lenders on account of any drawing under any Letter
of Credit as provided in §5.2.

 

Required Lenders.  As of any date, any combination of Lenders
the sum of whose aggregate Revolving Credit Commitments constitute at least
sixty-six and two-thirds percent (66 2/3%) of the sum of the Total Revolving
Credit Commitment, or, if the Total Revolving Credit Commitment has been
terminated or if the Maturity Date has occurred, any combination of Lenders
holding at least sixty-six and two-thirds percent (66 2/3%) of the total
outstanding principal amount of the Revolving Credit Loans on such date.

 

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

 

Restricted Payment.  In relation to the Borrowers and their
Subsidiaries, any (a) Distribution, (b) payment or prepayment by any Borrower
or any of its Subsidiaries of any amounts to such Borrower’s or such
Subsidiary’s equity holders or to any Affiliates of such equity holders or of
such Borrower, in each case, other than to a Borrower, (c) payment or prepayment
of any amounts in respect of the Convertible Preferred Stock or any
Subordinated Debt, (d) payments in respect of derivatives or other transactions
with any financial institution, commodities or stock exchange or clearinghouse
(a “Derivatives  Counterparty”) obligating a Borrower or any of
its Subsidiaries to make payments to such Derivatives Counterparty as a result
of any change in market value of any Equity Interests of such Borrower or such
Subsidiary, or (e) Management Fees or any other payments to any Sponsor.

 

Revolving Credit
Commitment.  With
respect to each Lender, the amount set forth on Schedule 1
hereto as the amount of such Lender’s commitment to make Revolving Credit Loans
to, and to participate in the issuance, extension and renewal of Letters of
Credit for the account of, the Borrowers, as the same may be reduced from time
to time; or if such commitment is terminated pursuant to the provisions hereof,
zero.

 

26

 

Revolving Credit
Commitment Percentage. 
With respect to each Lender, the percentage set forth on Schedule 1
hereto as such Lender’s percentage of the Total Revolving Credit Commitments.

 

Revolving Credit Loans.  Revolving credit loans made or to be made by
the Lenders to the Borrowers pursuant to §2.

 

Santa Rosa Pledge
Agreement.  The Pledge
and Security Agreement, dated as of June 7, 2002, by Developer and MSRC,
whereby Developer granted a Lien on certain furniture, fixtures and equipment
located at Developer’s Santa Rosa, California restaurant in favor of MSRC.

 

Santa Rosa Transaction.  Collectively, the (a) management and
consulting services to be provided by MSRC to Developer in connection with
Developer’s Santa Rosa, California restaurant pursuant to a Management
Agreement, dated June 6, 2002, between Developer and MSRC, and (b) $400,000
loan advanced by MSRC to Developer evidenced by a promissory note, dated as of
June 7, 2002, issued by Developer in favor of MSRC, and secured by the Santa
Rosa Pledge Agreement.

 

SARA.  See §8.18(a).

 

Security Agreement.  The Security Agreement, dated as of the
Original Closing Date, as amended by the First Amendment to Security Documents
Agreement, and  as the same may be
further amended from time to time hereafter, among the Borrowers, each of the
Subsidiaries of the Borrowers and the Administrative Agent, in form and
substance satisfactory to the Administrative Agent.

 

Security Documents.  The Parent Guaranty, the Security Agreement,
the Parent Pledge Agreement, the Pledge Agreement, the Partnership Pledge
Agreement, Membership Interest Pledge Agreements, the Collateral Assignment of
Partnership Interests, the Note Pledge Agreement, the Acknowledgment and
Consent, the Mortgages, the Trademark Assignment, Austin Acknowledgment and
Consent, Austin Collateral Assignment of Partnership Interests, the Agency
Account Agreements, the Collateral Assignment of Acquisition Documents, the
First Amendment to Security Documents Agreement, each Additional Security
Document,  and all other instruments and
documents, including without limitation Uniform Commercial Code financing
statements, required to be executed or delivered pursuant to any Security
Document.

 

Sellers.  Collectively, Avado, MSHC, and each of the
Persons listed on Schedule 1.1D of the Acquisition Agreement.

 

S&P.  Standard & Poor’s Ratings Group.

 

Sponsor(s).  Collectively or individually, BRS, the BRS
Affiliates, CH and/or the CH Affiliates, as the context requires.

 

27

 

Stock and Warrant
Purchase Agreement. 
The Stock and Warrant Purchase Agreement, dated as of the Original
Closing Date, between Mellon Bank, N.A., as trustee for The Bell Atlantic
Master Trust, and the Parent, and all exhibits and attachments thereto, as in
effect on the Original Closing Date and as the same may be supplemented,
amended or modified from time to time in accordance with the terms hereof and
thereof, in each case in form and substance reasonably satisfactory to the
Administrative Agent.

 

Subordinated Debt.  Collectively, (a) unsecured Indebtedness of
any Borrower or any of its Subsidiaries permitted by §10.1(c) and evidenced by
the Subordinated Debt Documents and (b) unsecured Indebtedness of the Parent
permitted pursuant to §4.2(b) of the Parent Guaranty.

 

Subordinated Debt
Documents.  Each
document evidencing the Subordinated Debt which has been delivered to the
Administrative Agent in form and substance reasonably satisfactory to the
Required Lenders, together with amendments or modifications thereto permitted
pursuant to §10.14.3.

 

Subsidiary.  Any corporation, partnership, limited
liability company, association, trust, or other business entity of which the
designated parent shall at any time own directly or indirectly through a
Subsidiary or Subsidiaries at least a majority (by number of votes) of the
outstanding Voting Stock.

 

Syndication Agent.  RaboBank, acting as syndication agent for
the Lenders.

 

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

 

Total Revolving Credit
Commitment.  The sum
of the Revolving Credit Commitments of the Lenders, as in effect from time to
time.  On the Closing Date, the Total
Revolving Credit Commitment is equal to $70,000,000.

 

Trademark Assignment.  The Amended and Restated Trademark
Collateral Security and Pledge Agreement, dated as of the Closing Date, as the
same may be further amended from time to time hereafter, made by the Borrowers
in favor of the Administrative Agent and the Assignment of Trademarks executed
in connection therewith, all in form and substance satisfactory to the
Administrative Agent.

 

Type.  As to any Revolving Credit Loan its nature
as a Base Rate Loan or a Eurodollar Rate Loan.

 

Uniform Commercial Code.
The Uniform Commercial Code as in effect in any applicable jurisdiction.

 

Uniform Customs.
See §5.1.3.

 

28

 

Unpaid Reimbursement
Obligation.  Any
Reimbursement Obligation for which the Borrowers do not reimburse the
Administrative Agent and the Lenders on the date specified in, and in
accordance with, §5.2.

 

Unprofitable Restaurant.  At the relevant time of reference thereto,
any Restaurant (a) which has been in operation for at least twelve (12) months
and (b) whose individual “Restaurant EBITDA” (as identified on the
Borrowers’ financial statements applied consistently from and after the Closing
Date) is less than $1 for the twelve (12) most recently ended fiscal months; provided
that, solely for purposes of determining whether any Restaurant is an
Unprofitable Restaurant, it shall be assumed that, for the first six (6) months
after any Restaurant commences operation, the “Restaurant EBITDA” of
such Restaurant shall be the greater of (i) its actual “Restaurant EBITDA”
for such period or (ii) $1.

 

Voting Stock.  Equity Interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, general partner or
partnership, limited liability company, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.

 

Wells Fargo.  Wells Fargo Bank N.A.

 

1.2.  Rules of Interpretation.

 

(a)                                  A
reference to any document or agreement shall include such document or agreement
as amended, modified or supplemented from time to time in accordance with its
terms and the terms of this Credit Agreement unless specifically specified to
the contrary, either in the defined term referring to such document or
agreement or otherwise.

 

(b)                                 The
singular includes the plural and the plural includes the singular.

 

(c)                                  A
reference to any law includes any amendment or modification to such law.

 

(d)                                 A
reference to any Person includes its permitted successors and permitted
assigns.

 

(e)                                  Accounting
terms not otherwise defined herein have the meanings assigned to them by GAAP
applied on a consistent basis by the accounting entity to which they refer.

 

(f)                                    The
words “include”, “includes” and “including” are not
limiting.

 

(g)                                 All
terms not specifically defined herein or by GAAP, which terms are defined in
the Uniform Commercial Code as in effect in the

 

29

 

Commonwealth of Massachusetts, have the meanings
assigned to them therein, with the term “instrument” being that defined
under Article 9 of the Uniform Commercial Code.

 

(h)                                 Reference
to a particular “§” refers to that section of this Credit Agreement unless
otherwise indicated.

 

(i)                                     The
words “herein”, “hereof”, “hereunder” and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.

 

(j)                                     Unless
otherwise expressly indicated, 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.”

 

(k)                                  This
Credit Agreement and the other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar
matters.  All such limitations, tests
and measurements are, however, cumulative and are to be performed in accordance
with the terms thereof.

 

(l)                                     This
Credit Agreement and the other Loan Documents are the result of negotiation
among, and have been reviewed by counsel to, among others, the Administrative
Agent and the Borrowers and are the product of discussions and negotiations
among all parties.  Accordingly, this
Credit Agreement and the other Loan Documents are not intended to be construed
against the Administrative Agent or any of the Lenders merely on account of the
Administrative Agent’s or any Lender’s involvement in the preparation of such
documents.

 

2.  THE REVOLVING CREDIT
FACILITY.

 

2.1.  Commitment to Lend Revolving Credit
Loans.  (a)
Subject to the terms and conditions set forth in this Credit Agreement,
including §2.1(b), each of the Lenders severally agrees to lend to the
Borrowers, and the Borrowers may borrow, repay and reborrow from time to time
from the Closing Date up to but not including the Maturity Date upon notice by
the Borrowers to the Administrative Agent given in accordance with §2.6, such
sums as are requested by the Borrowers up to a maximum aggregate amount
outstanding (after giving effect to all amounts requested) at any one time
equal to such Lender’s Revolving Credit Commitment minus such Lender’s
Revolving Credit Commitment Percentage of the sum of the Maximum Drawing Amount
and all Unpaid Reimbursement Obligations, provided that the sum of the
outstanding amount of the Revolving Credit Loans (after giving effect to all
amounts requested) plus the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not at any time exceed the Total Revolving
Credit Commitment at such time.  The
Revolving Credit Loans shall be made pro  rata in accordance with
each Lender’s Revolving Credit Commitment Percentage.  Each request for a Revolving Credit Loan hereunder shall
constitute a representation and

 

30

 

warranty by the Borrowers that the conditions set forth in §12 and §13,
in the case of the initial Revolving Credit Loans to be made (or converted and
continued in the case of Existing Loans) on the Closing Date, and §13, in the
case of all other Revolving Credit Loans, have been satisfied on the date of
such request.

 

(b)                                 Loans Under Existing Credit Agreement. 
The Borrowers acknowledge and agree that as of the Closing Date (i) the
outstanding principal amount of Existing Revolving Credit Loans equals
$7,000,000.00 and that the entire amount of such Existing Revolving Credit
Loans are continued as Revolving Credit Loans hereunder; (ii) the outstanding
principal amount of the Existing Term Loans A equals $18,500,000.00 and that
the entire amount of such Existing Term Loans A is converted to and continued
as a Revolving Credit Loan  hereunder; (iii) the outstanding principal
amount of the Existing Term Loans B equals $19,750,001.00 and that the entire
amount of such Existing Term Loans B is converted to and continued as a
Revolving Credit Loan  hereunder. 
All Existing Term Loans A, Existing Term Loans B and Existing Revolving
Credit Loans, and Revolving Credit Commitments (as defined in the Existing
Credit Agreement) shall hereinafter be assigned, at par, and re-allocated among
the Lenders holding Revolving Credit Commitments hereunder, and after giving
effect hereto, the percentages of the Revolving Credit Commitments are as set
forth on Schedule 1 hereto and upon the execution of this Credit
Agreement each Lender shall and does hereby purchase from the Administrative
Agent, for cash, at par, such Lender’s Revolving Credit Commitment Percentage
of all Revolving Credit Loans outstanding on the Closing Date as a result of
the conversions and continuations described above.  Notwithstanding anything set forth herein to the contrary, in
order to effect the continuation of the outstanding Existing Loans contemplated
by the preceding sentence, the amount to be funded on the Closing Date by each
Lender hereunder in respect of its Revolving Credit Commitments shall be
reduced by the principal amount of such Lender’s Existing Loans under the
Existing Credit Agreement outstanding on the Closing Date.  All other Eurodollar Rate Loans outstanding
to the Borrowers on the Closing Date under the Existing Credit Agreement will
be converted to Base Rate Loans hereunder.

 

2.2.  Commitment Fee.  The Borrowers jointly and severally agree to
pay to the Administrative Agent for the accounts of the Lenders in accordance
with their respective Revolving Credit Commitment Percentages a commitment fee
(the “Commitment  Fee”) calculated at the rate of  three-quarters
of one percent (0.75%) per annum on the average daily amount during each
calendar quarter or portion thereof from  the Original Closing Date  to the Maturity Date by
which the Total Revolving Credit Commitment minus the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations exceeds the outstanding
amount of Revolving Credit Loans during such calendar quarter.  The Commitment Fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the Original Closing Date, with a final payment on the Maturity Date
or any earlier date on which the Revolving Credit Commitments shall terminate.

 

31

 

2.3.  Reduction of Total Revolving Credit
Commitment. 
The Borrowers shall have the right at any time and from time to time
upon five (5) Business Days prior written notice to the Administrative Agent to
reduce by $1,000,000 or an integral multiple of $500,000 in excess thereof or
to terminate entirely the Total Revolving Credit Commitment, whereupon the
Revolving Credit Commitments of the Lenders shall be reduced pro  rata
in accordance with their respective Revolving Credit Commitment Percentages of
the amount specified in such notice or, as the case may be, terminated.  Promptly after receiving any notice of the
Borrowers delivered pursuant to this §2.3, the Administrative Agent will notify
the Lenders of the substance thereof. 
Upon the effective date of any such reduction or termination, the
Borrowers shall pay to the Administrative Agent for the respective accounts of
the Lenders the full amount of any Commitment Fee then accrued on the amount of
the reduction.  No reduction or
termination of the Revolving Credit Commitments may be reinstated.  In addition, the Total Revolving Credit
Commitment shall be reduced in accordance with §4.3.

 

2.4.  The Notes.  The Revolving Credit Loans shall be evidenced by separate
promissory notes of the Borrowers in substantially the form of Exhibit A
hereto (each a “Note”), dated as of the Closing Date (or such other date
on which a Lender may become a party hereto in accordance with §16 hereof) and
completed with appropriate insertions. 
One Note shall be payable to the order of each Lender in a principal
amount equal to such Lender’s Revolving Credit Commitment or, if less, the
outstanding amount of all Revolving Credit Loans made by such Lender, plus
interest accrued thereon, as set forth below. 
Each of the Borrowers irrevocably authorizes each Lender to make or
cause to be made, at or about the time of the Drawdown Date of any Revolving
Credit Loan or at the time of receipt of any payment of principal on such Lender’s
Note, an appropriate notation on such Lender’s Note Record reflecting the
making of such Revolving Credit Loan or (as the case may be) the receipt of
such payment.  The outstanding amount of
the Revolving Credit Loans set forth on such Lender’s Note Record shall be prima
facie evidence of the principal amount thereof owing and unpaid to such
Lender, but the failure to record, or any error in so recording, any such
amount on such Lender’s Note Record shall not limit or otherwise affect the
obligations of the Borrowers hereunder or under any Note to make payments of
principal of or interest on any Note when due.

 

2.5.  Interest on Revolving Credit Loans.  Except as otherwise provided in §6.10,

 

(a)                                  Each
Base Rate Loan shall bear interest for the period commencing with the Drawdown
Date thereof and ending on the last day of the Interest Period with respect
thereto at the rate per annum equal to the Base Rate plus the Applicable
Margin with respect to Base Rate Loans as in effect from time to time.

 

(b)                                 Each
Eurodollar Rate Loan shall bear interest for the period commencing with the
Drawdown Date thereof and ending on the last day of the Interest Period with
respect thereto at the rate per annum equal to the

 

32

 

Eurodollar Rate determined for such Interest Period plus
the Applicable Margin with respect to Eurodollar Rate Loans as in effect from
time to time.

 

The Borrowers jointly and severally promise to pay
interest on each Revolving Credit Loan in arrears on each Interest Payment Date
with respect thereto.

 

2.6.  Requests for Revolving Credit Loans.  The Borrowers shall give to the
Administrative Agent written notice in the form of Exhibit B
hereto (or telephonic notice confirmed in a writing in the form of Exhibit B
hereto) of each Revolving Credit Loan requested hereunder (a “Loan Request”)
(a) prior to 1:00 p.m. (Boston time) of the proposed Drawdown Date of any Base
Rate Loan and (b) prior to 1:00 p.m. (Boston time) on the third Eurodollar
Business Day prior to the proposed Drawdown Date of any Eurodollar Rate
Loan.  Each such notice shall specify
(i) the principal amount of the Revolving Credit Loan requested, (ii) the
proposed Drawdown Date of such Revolving Credit Loan, (iii) the Interest Period
for such Revolving Credit Loan and (iv) the Type of such Revolving Credit
Loan.  Promptly upon receipt of any such
notice, the Administrative Agent shall notify each of the Lenders thereof.  Each Loan Request shall be irrevocable and
binding on the Borrowers and shall obligate the Borrowers to accept the
Revolving Credit Loan requested from the Lenders on the proposed Drawdown
Date.  Each Loan Request shall be in a
minimum aggregate amount of $500,000 or an integral multiple of $500,000 in
excess thereof.

 

2.7.  Conversion Options.

 

2.7.1.  Conversion to Different Type of
Revolving Credit Loan.  The Borrowers may elect from time to time to convert any
outstanding Revolving Credit Loan to a Revolving Credit Loan of another Type, provided
that (a) with respect to any such conversion of a Base Rate Loan to a
Eurodollar Rate Loan, the Borrowers shall give the Administrative Agent at
least three (3) Eurodollar Business Days prior written notice of such election;
(b) with respect to any such conversion of a Eurodollar Rate Loan into a Base
Rate Loan, such conversion shall only be made on the last day of the Interest
Period with respect thereto and (c) no Revolving Credit Loan may be converted
into a Eurodollar Rate Loan when any Default or Event of Default has occurred and
is continuing.  On the date on which
such conversion is being made each Lender shall take such action as is
necessary to transfer its Revolving Credit Commitment Percentage of such
Revolving Credit Loans to its Domestic Lending Office or its Eurodollar Lending
Office, as the case may be.  All or any
part of outstanding Revolving Credit Loans of any Type may be converted into a
Revolving Credit Loan of another Type as provided herein, provided that
any conversion of a Base Rate Loan into a Eurodollar Rate Loan shall be in an
aggregate principal amount of $500,000 or an integral multiple of $500,000 in
excess thereof.  Each Conversion Request
relating to the conversion of a Revolving Credit Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrowers.

 

33

 

2.7.2.  Continuation of Type of Revolving
Credit Loan. 
Any Revolving Credit Loan of any Type may be continued as a Revolving
Credit Loan of the same Type upon the expiration of an Interest Period with
respect thereto by compliance by the Borrowers with the notice provisions
contained in §2.7.1; provided that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which officers of the
Administrative Agent active upon the Borrowers’ account have actual knowledge.  In the event that the Borrowers fail to
provide any such notice with respect to the continuation of any Eurodollar Rate
Loan as such, then such Eurodollar Rate Loan shall be automatically converted
to a Base Rate Loan on the last day of the first Interest Period relating
thereto.  The Administrative Agent shall
notify the Lenders promptly when any such automatic conversion contemplated by
this §2.7 is scheduled to occur.

 

2.7.3.  Eurodollar
Rate Loans. 
Any conversion to or from Eurodollar Rate Loans shall be in such amounts
and be made pursuant to such elections so that, after giving effect thereto,
the aggregate principal amount of all Eurodollar Rate Loans having the same
Interest Period shall not be less than $500,000 or an integral multiple of $500,000
in excess thereof.  No more than six (6)
Revolving Credit Loans that are Eurodollar Rate Loans having different Interest
Periods may be outstanding at any time.

 

2.8.  Funds for Revolving Credit Loan.

 

2.8.1.  Funding
Procedures. 
Not later than 3:00 p.m. (Boston time) on the proposed Drawdown Date of
any Revolving Credit Loans, each of the Lenders will make available to the
Administrative Agent, at the Administrative Agent’s Office, in immediately
available funds, the amount of such Lender’s Revolving Credit Commitment
Percentage of the amount of the requested Revolving Credit Loans.  Upon receipt from each Lender of such
amount, and upon receipt of the documents required by §§12 and 13 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Administrative Agent will make available to the Borrowers the
aggregate amount of such Revolving Credit Loans made available to the
Administrative Agent by the Lenders. 
The failure or refusal of any Lender to make available to the
Administrative Agent at the aforesaid time and place on any Drawdown Date the
amount of its Revolving Credit Commitment Percentage of the requested Revolving
Credit Loans shall not relieve any other Lender from its several obligation
hereunder to make available to the Administrative Agent the amount of such
other Lender’s Revolving Credit Commitment Percentage of any requested
Revolving Credit Loans.

 

2.8.2.  Advances
by Administrative Agent.  The Administrative Agent may, unless notified to the contrary by
any Lender prior to a Drawdown Date, assume that such Lender has made available
to the

 

34

 

Administrative Agent on such Drawdown Date the amount
of such Lender’s Revolving Credit Commitment Percentage of the Revolving Credit
Loans to be made on such Drawdown Date, and the Administrative Agent may (but
it shall not be required to), in reliance upon such assumption, make available
to the Borrowers a corresponding amount. 
If any Lender makes available to the Administrative Agent such amount on
a date after such Drawdown Date, such Lender shall pay to the Administrative
Agent on demand an amount equal to the product of (a) the average computed for
the period referred to in clause (c) below, of the weighted average interest
rate paid by the Administrative Agent for federal funds acquired by the
Administrative Agent during each day included in such period, times (b)
the amount of such Lender’s Revolving Credit Commitment Percentage of such
Revolving Credit Loans, times (c) a fraction, the numerator of which is
the number of days that elapse from and including such Drawdown Date to the
date on which the amount of such Lender’s Revolving Credit Commitment
Percentage of such Revolving Credit Loans shall become immediately available to
the Administrative Agent, and the denominator of which is 360.  A statement of the Administrative Agent
submitted to such Lender with respect to any amounts owing under this paragraph
shall be prima  facie evidence of the amount due and owing to the
Administrative Agent by such Lender.  If
the amount of such Lender’s Revolving Credit Commitment Percentage of such
Revolving Credit Loans is not made available to the Administrative Agent by
such Lender within three (3) Business Days following such Drawdown Date, the
Administrative Agent shall be entitled to recover such amount from the
Borrowers on demand, with interest thereon at the rate per annum applicable to
the Revolving Credit Loans made on such Drawdown Date.

 

2.9.  Repayment of Revolving Credit Loans.

 

2.9.1.  Maturity.  The Borrowers jointly and severally promise
to pay on the Maturity Date, and there shall become absolutely due and payable
on the Maturity Date, all of the Revolving Credit Loans outstanding on such
date, together with any and all accrued and unpaid interest thereon.

 

2.9.2.  Mandatory Repayments of the
Revolving Credit Loans.  If
at any time the sum of the outstanding amount of the Revolving Credit Loans,
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the
Total Revolving Credit Commitment at such time, then the Borrowers shall
immediately pay the amount of such excess to the Administrative Agent for the
respective accounts of the Lenders for application:  first, to any Unpaid Reimbursement Obligations; second,
to the Revolving Credit Loans; and third, to provide to the
Administrative Agent cash collateral for Reimbursement Obligations as
contemplated by §5.2(b) and (c).  Each
payment of any Unpaid Reimbursement Obligations or prepayment of Revolving
Credit Loans shall be allocated among the Lenders, in proportion, as nearly as
practicable, to such Lender’s funded share of the Reimbursement Obligation or
(as the case may be) the respective unpaid principal amount of each Lender’s
Note, with adjustments to the extent

 

35

 

practicable to equalize any prior payments or
repayments not exactly in proportion.

 

2.9.3.  Optional Repayments of the
Revolving Credit Loans.  The Borrowers shall have the right, at their election, to repay
the outstanding amount of the Revolving Credit Loans, as a whole or in part, at
any time without penalty or premium, provided that any full or partial
prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to
this §2.9.3 may be made only on the last day of the Interest Period relating
thereto.  The Borrowers shall give the
Administrative Agent (a) no later than 1:00 p.m. (Boston time), prior written
notice on the date of any proposed prepayment pursuant to this §2.9.3 of Base
Rate Loans, and (b) no later than 1:00 p.m. (Boston time), two (2) Eurodollar
Business Days prior written notice of any proposed prepayment pursuant to this
§2.9.3 of Eurodollar Rate Loans, in each case specifying the proposed date of
prepayment of Revolving Credit Loans and the principal amount to be
prepaid.  Each such partial prepayment
of the Revolving Credit Loans shall be in an integral multiple of $100,000,
shall be accompanied by the payment of accrued interest on the principal
prepaid to the date of prepayment and shall be applied, in the absence of
instruction by the Borrowers, first to the principal of Base Rate Loans
and then to the principal of Eurodollar Rate Loans.  Each partial prepayment shall be allocated
among the Lenders, in proportion, as nearly as practicable, to the respective
unpaid principal amount of each Lender’s Note, with adjustments to the extent
practicable to equalize any prior repayments not exactly in proportion.

 

2.9.4.  Application
of Payments Prior to an Event of Default.  Prior to the occurrence of an Event of
Default, if, and solely to the extent that, after giving effect to the
prepayment of any Base Rate Loans then outstanding, any prepayment required to
be made pursuant to §§4.1 and 4.2 would require the Borrowers to compensate any
Lender pursuant to §6.9 with respect to any breakage costs associated with
Eurodollar Rate Loans, the Borrowers may at their option deposit in their
Concentration Account on the date of prepayment required under §§4.1 or 4.2, as
applicable, cash in an amount equal to the aggregate amount of the Eurodollar
Rate Loans otherwise required to be prepaid on such date.  On the last day of each Interest Period
applicable to any such Eurodollar Rate Loans, the Borrowers shall withdraw and
pay in immediately available funds to the Administrative Agent amounts then
held in the Concentration Account and deposited therein pursuant to this §2.9.4
sufficient to repay such Eurodollar Rate Loans of each Lender.

 

3.  [INTENTIONALLY
OMITTED].

 

36

 

4.  MANDATORY
REPAYMENT OF REVOLVING CREDIT LOANS.

 

In addition to payments in respect of Revolving Credit
Loans pursuant to §2.9, the Revolving Credit Loans shall be repaid as follows:

 

4.1.  Excess Operating Cash Flow Recapture.  For each fiscal year commencing with the
fiscal year ending on or about December 31, 2003, the Borrowers shall prepay
the Revolving Credit Loans and shall permanently reduce the Total Revolving
Credit Commitment in accordance with §4.3, in an aggregate amount equal to (i)
the Applicable Percentage multiplied by (ii)  the amount (if any)
by which the sum of cash (excluding (A) cash in transit, (B) change funds not
to exceed $10,000 per Restaurant, (C) cash in an amount equal to all checks
written by the Borrowers and outstanding at the end of such fiscal year, and
(D) cash in payroll bank accounts of the Borrowers) and Cash Equivalents on the
audited consolidated balance sheet of the Borrowers and their Subsidiaries for
such fiscal year exceeds $2,000,000. 
Any prepayment of the Revolving Credit Loans required to be made
pursuant to this §4.1 shall be due no later than one hundred and twenty (120)
days after the end of each applicable fiscal year and shall be applied to
prepay the Revolving Credit Loans in the manner set forth in §4.3.

 

4.2.  Proceeds of Certain Events.  Concurrently with the receipt by any of the
Borrowers or any of their Subsidiaries of:

 

(a)                                  subject
to the reinvestment provisions of §10.5.2, Net Cash Sale Proceeds in excess of
$500,000 per annum from Asset Sales (other than proceeds from the sale, lease,
license or other disposition of assets in the ordinary course of business
consistent with past practices);

 

(b)                                 Net
Cash Equity Issuance Proceeds from an Equity Issuance by the Parent, the
Borrowers or any of their Subsidiaries (other than amounts not to exceed
$500,000 in the aggregate after the date hereof arising from (i) any such sale
or issuance to its existing shareholders other than in connection with a public
offering of the equity securities of any Borrower and (ii) the sale or issuance
to any employee or director of such Borrower or such Subsidiary pursuant to any
stock option plan or compensatory arrangement approved by the board of
directors of such Person in the ordinary course of business and consistent with
past practices);

 

(c)                                  proceeds
relating to (i) Casualty Events, less reasonable expenses relating to such
Casualty Events, which have not been reinvested in the Borrowers’ business
within two hundred and seventy (270) days of receipt of such proceeds subject
to §9.7.2, 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

 

37

 

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 proceeds,
then the Borrowers shall not be required to prepay the Revolving Credit Loans
in accordance with §4.3 but shall in any event comply with §4.4 (provided,
however, if a Default or Event of Default has occurred and is
continuing, such proceeds shall be immediately paid to the Administrative
Agent), and (ii) any tax refund with respect to any taxable year; or

 

(d)                                 Net
Cash Debt Proceeds from an issuance by the Parent, the Borrowers or any of
their Subsidiaries of Subordinated Debt;

 

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 proceeds, to be applied in the manner set forth in §4.3 or, if
applicable, §4.4.

 

4.3.  Application of Payments.  All mandatory prepayments pursuant to §4.1
or §4.2 shall be applied to the principal of the outstanding Revolving Credit
Loans for application in accordance with the provisions of §2.9.2 and
concurrently with such prepayment, to reduce permanently the Total Revolving
Credit Commitment in an amount equal to such prepayment.  In the event that at the time of such
mandatory prepayment event, there are no outstanding Revolving Credit Loans,
the Total Revolving Credit Commitment shall be permanently reduced by the
amount that would otherwise have been prepaid pursuant to §§4.1 and 4.2 had
Revolving Credit Loans been outstanding. 
Any prepayment of principal of the Revolving Credit Loans shall include
all interest accrued to the date of such prepayment.

 

4.4.  Delivery of Proceeds.  The Borrowers shall deliver to the
Administrative Agent, promptly upon receipt thereof, all Net Cash Sale Proceeds
or proceeds relating to Casualty Events that may have to be applied to prepay
the Revolving Credit Loans if not reinvested as permitted in §4.2(a) and (b),
to be held as Collateral pending reinvestment in accordance with such §§4.2(a)
and (b).  Upon the Borrowers’ request,
any cash amounts delivered to the Administrative Agent to be held as Collateral
under this §4.4 may be applied to repay Revolving Credit Loans.

 

5.  LETTERS OF CREDIT.

 

5.1.  Letter of Credit Commitments.

 

5.1.1.  Commitment
to Issue Letters of Credit.  Subject to the terms and conditions hereof and the execution and
delivery by the Borrowers of a letter of credit application on the Administrative
Agent’s customary form (a “Letter  of  Credit  Application”),
the Administrative Agent on behalf of the Lenders and in reliance upon the
agreement of the Lenders set forth in §5.1.4 and upon the representations and
warranties of the Borrowers contained herein, agrees, in its individual
capacity, to issue, extend and renew for the account of a Borrower one or more
standby or documentary letters of credit

 

38

 

(individually, a “Letter  of  Credit”),
in such form as may be requested from time to time by such Borrower and agreed
to by the Administrative Agent; provided, however, that, after
giving effect to such request, (a) the sum of the aggregate Maximum Drawing
Amount and all Unpaid Reimbursement Obligations shall not exceed $10,000,000 at
any one time and (b) the sum of (i) the Maximum Drawing Amount on all Letters
of Credit, (ii) all Unpaid Reimbursement Obligations, and (iii) the amount of
all Revolving Credit Loans outstanding shall not exceed the Total Revolving
Credit Commitment at such time. 
Notwithstanding the foregoing, the Administrative Agent shall have no
obligation to issue any Letter of Credit to support or secure any Indebtedness
of a Borrower or any of its Subsidiaries to the extent that such Indebtedness
was incurred prior to the proposed issuance date of such Letter of Credit,
unless in any such case such Borrower demonstrates to the satisfaction of the
Administrative Agent that (x) such prior incurred Indebtedness was then fully
secured by a prior perfected and unavoidable security interest in collateral
provided by such Borrower or such Subsidiary to the proposed beneficiary of
such Letter of Credit or (y) such prior incurred Indebtedness was then secured
or supported by a letter of credit issued for the account of such Borrower or
such Subsidiary and the reimbursement obligation with respect to such letter of
credit was fully secured by a prior perfected and unavoidable security interest
in collateral provided to the issuer of such letter of credit by such Borrower
or such Subsidiary.

 

5.1.2.  Letter
of Credit Applications.  Each Letter of Credit Application shall be completed to the
reasonable satisfaction of the Administrative Agent.  In the event that any provision of any Letter of Credit
Application shall be inconsistent with any provision of this Credit Agreement,
then the provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.

 

5.1.3.  Terms of
Letters of Credit. 
Each Letter of Credit issued, extended or renewed hereunder shall, among
other things, (a) provide for the payment of sight drafts for honor thereunder
when presented in accordance with the terms thereof and when accompanied by the
documents described therein, and (b) have an expiry date no later than the
earlier of (x) one (1) year from the date of issuance, extension or renewal
thereof, or (y) the date which is fourteen (14) days (or, if the Letter of
Credit is confirmed by a confirmer or otherwise provides for one or more
nominated persons, forty-five (45) days) prior to the Maturity Date.  Each Letter of Credit so issued, extended or
renewed shall be subject to either (i) the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500 or any successor version thereto adopted by the
Administrative Agent in the ordinary course of its business as a letter of
credit issuer and in effect at the time of issuance of such Letter of Credit
(the “Uniform  Customs”) or
(ii) the International Standby Practices (ISP98), International Chamber of
Commerce Publication No. 590, or any successor code of standby letter of credit
practices among banks adopted by the Administrative Agent in the ordinary
course of its business as a standby

 

39

 

letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.

 

5.1.4.  Reimbursement
Obligations of Lenders.  Each Lender severally agrees that it shall be absolutely liable,
without regard to the occurrence of any Default or Event of Default or any
other condition precedent whatsoever, to the extent of such Lender’s Revolving
Credit Commitment Percentage, to reimburse the Administrative Agent on demand
for the amount of each draft paid by the Administrative Agent under each Letter
of Credit to the extent that such amount is not reimbursed by the Borrowers
pursuant to §5.2 (such agreement for a Lender being called herein the “Letter
of  Credit  Participation” of such Lender).

 

5.1.5.  Participations
of Lenders. 
Each such payment made by a Lender shall be treated as the purchase by
such Lender of a participating interest in the Borrowers’ Reimbursement
Obligation under §5.2 in an amount equal to such payment.  Each Lender shall share in accordance with
its participating interest in any interest which accrues pursuant to §5.2.

 

5.2.  Reimbursement Obligation of the
Borrowers.  In
order to induce the Administrative Agent to issue, extend and renew each Letter
of Credit and the Lenders to participate therein, the Borrowers hereby jointly
and severally agree to reimburse or pay to the Administrative Agent, for the
account of the Administrative Agent or (as the case may be) the Lenders, with
respect to each Letter of Credit issued, extended or renewed by the
Administrative Agent hereunder,

 

(a)                                  except
as otherwise expressly provided in §5.2(b) and (c), on each date that any draft
presented under such Letter of Credit is honored by the Administrative Agent,
or the Administrative Agent otherwise makes a payment with respect thereto, (i)
the amount paid by the Administrative Agent under or with respect to such
Letter of Credit, and (ii) the amount of any taxes, fees, charges or other
costs and expenses whatsoever incurred by the Administrative Agent or any
Lender in connection with any payment made by the Administrative Agent or any
Lender under, or with respect to, such Letter of Credit,

 

(b)                                 upon
the reduction (but not termination) of the Total Revolving Credit Commitment to
an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Administrative Agent for the
benefit of the Lenders and the Administrative Agent as cash collateral for all
Reimbursement Obligations, and

 

(c)                                  upon
the termination of the Total Revolving Credit Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with §14, an amount equal to the then Maximum Drawing Amount on all
Letters of Credit, which amount shall be held by the Administrative Agent for
the benefit of the Lenders and

 

40

 

the Administrative Agent as cash collateral for all
Reimbursement Obligations.

 

Each such payment shall be made to the Administrative Agent at the
Administrative Agent’s Office in immediately available funds.  Interest on any and all amounts remaining
unpaid by the Borrowers under this §5.2 at any time from the date such amounts
become due and payable (whether as stated in this §5.2, by acceleration or
otherwise) until payment in full (whether before or after judgment) shall be
payable to the Administrative Agent on demand at the rate specified in §6.10
for overdue principal on the Revolving Credit Loans.

 

5.3.  Letter of Credit Payments.  If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Administrative
Agent shall notify the Borrowers within a reasonable amount of time of the date
and amount of the draft presented or demand for payment and of the date and
time when it expects to pay such draft or honor such demand for payment.  If the Borrowers fail to reimburse the
Administrative Agent as provided in §5.2 on or before the date that such draft
is paid or other payment is made by the Administrative Agent, the
Administrative Agent may at any time thereafter notify the Lenders of the
amount of any such Unpaid Reimbursement Obligation.  No later than 3:00 p.m. (Boston time) on the Business Day next following
the receipt of such notice, each Lender shall make available to the
Administrative Agent, at the Administrative Agent’s Office, in immediately
available funds, such Lender’s Revolving Credit Commitment Percentage of such
Unpaid Reimbursement Obligation, together with an amount equal to the product
of (a) the average, computed for the period referred to in clause (c) below, of
the weighted average interest rate paid by the Administrative Agent for federal
funds acquired by the Administrative Agent during each day included in such
period, times (b) the amount equal to such Lender’s Revolving Credit
Commitment Percentage of such Unpaid Reimbursement Obligation, times (c)
a fraction, the numerator of which is the number of days that elapse from and
including the date the Administrative Agent paid the draft presented for honor
or otherwise made payment to the date on which such Lender’s Revolving Credit
Commitment Percentage of such Unpaid Reimbursement Obligation shall become
immediately available to the Administrative Agent, and the denominator of which
is 360.  The responsibility of the
Administrative Agent to the Borrowers and the Lenders shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit.

 

5.4.  Obligations Absolute.  The Borrowers’ obligations under this §5
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to
payment which the Borrowers may have or have had against the Administrative
Agent, any Lender or any beneficiary of a Letter of Credit.  Each of the Borrowers further agrees with
the Administrative Agent and the Lenders that the Administrative Agent and the
Lenders shall not be responsible for, and the Borrowers’ Reimbursement
Obligations

 

41

 

under §5.2 shall not be affected by, among other things, the validity
or genuineness of documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid, fraudulent
or forged, or any dispute between or among any Borrower, the beneficiary of any
Letter of Credit or any financing institution or other party to which any
Letter of Credit may be transferred or any claims or defenses whatsoever of the
Borrowers against the beneficiary of any Letter of Credit or any such transferee.  The Administrative Agent and the Lenders
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit.  Each of the Borrowers agrees that any action taken or omitted by
the Administrative Agent or any Lender under or in connection with each Letter
of Credit and the related drafts and documents, if done in good faith, shall be
binding upon the Borrowers and shall not result in any liability on the part of
the Administrative Agent or any Lender to the Borrowers.

 

5.5.  Reliance by Issuer.  To the extent not inconsistent with §5.4,
the Administrative Agent shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document 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, 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 this Credit Agreement
unless it shall first have received such advice or concurrence of the Required
Lenders as it reasonably deems appropriate or it shall first be indemnified to
its reasonable 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 Credit Agreement in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Lenders and all future holders of the Notes
or of a Letter of Credit Participation.

 

5.6.  Letter of Credit Fee.  With respect to each Letter of Credit issued
hereunder, the Borrowers shall pay to the Administrative Agent a fee (each a “Letter
of Credit Fee”) for each Letter of Credit issued or renewed by the
Administrative Agent at a rate per annum equal to the Applicable Margin in
effect from time to time with respect to Eurodollar Rate Loans, on the Maximum
Drawing Amount of such Letter of Credit for the period such Letter of Credit is
outstanding.  The Administrative Agent
shall, in turn, remit to each Lender such Lender’s Revolving Credit Commitment
Percentage of the Letter of Credit Fee. 
In addition, the Borrowers

 

42

 

shall pay the Administrative Agent, for its own account, a Fronting Fee
(the “Fronting Fee”) equal to one-quarter of one percent (0.250%) per
annum on the Maximum Drawing Amount of such Letter of Credit for the period
such Letter of Credit is outstanding. 
The Letter of Credit Fee and the Fronting Fee shall be payable quarterly
in arrears on the last day of each calendar quarter for the calendar quarter
then ending.  In respect of each Letter
of Credit, the Borrowers shall also pay to the Administrative Agent, for its
own account, at such time or times as such charges are customarily made by the
Administrative Agent, the Administrative Agent’s customary issuance, amendment,
negotiation or document examination and other administrative fees as in effect
from time to time.

 

5.7.  Existing Letters of Credit.  The Borrowers and the Lenders each agree that
(a) any letter of credit which has been previously issued by Fleet under the
Existing Credit Agreement (the “Existing Letters of Credit”) for the
account of a Borrower or any Subsidiary of a Borrower, shall be deemed a Letter
of Credit issued under and governed by this Credit Agreement, (b) this Credit
Agreement supercedes any and all prior agreements between the Borrowers or any
of their Subsidiaries and Fleet with respect to the Existing Letters of Credit,
and (c) all Existing Letters of Credit, from and after the Closing Date, shall
be subject to and governed by the terms of this Credit Agreement.

 

6.  CERTAIN GENERAL PROVISIONS.

 

6.1.  Fees.  The Borrowers jointly and
severally agree to pay all fees described in the Fee Letter in the amounts and
at the times and otherwise in accordance with the terms specified therein.

 

6.2.  Funds for Payments.

 

6.2.1.  Payments
to Administrative Agent.  All payments of principal, interest, Reimbursement Obligations,
the Commitment Fee, the Letter of Credit Fees and the Fronting Fees and any
other amounts due hereunder or under any of the other Loan Documents (except as
otherwise provided in such Loan Documents) shall be made on the due date
thereof to the Administrative Agent in Dollars at the Administrative Agent’s Office
or at such other place that the Administrative Agent may from time to time
designate, in each case at or about 11:00 a.m. (Boston, Massachusetts, time or
other local time at the place of payment) and in immediately available funds.

 

6.2.2.  No Offset,
etc.  All payments
by the Borrowers hereunder and under any of the other Loan Documents shall be
made without recoupment, setoff or counterclaim and free and clear of and
without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein (other than any such
deductions or withholdings which the Borrowers are compelled by law to make on
or with respect to, or measured by, the income of the Administrative Agent, any
Lender, any assignee or any participant, including without limitation,
franchise taxes imposed on or with respect to, or measured by, net income of
such Person, in each case by any jurisdiction, subdivision thereof or taxing or
other Governmental Authority therein in which the Administrative Agent, such
Lender, such assignee or such participant is organized, has its principal

 

43

 

place of business, maintains a lending office or is
otherwise subject to tax) and other deductions, or withholdings which the
Borrowers are compelled by law to make such deduction or withholding.  If any such obligation is imposed upon the
Borrowers with respect to any amount payable by them hereunder or under any of
the other Loan Documents, the Borrowers will pay to the Administrative Agent,
for the account of the Lenders or (as the case may be) the Administrative
Agent, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Lenders or the Administrative Agent to receive the same
net amount which the Lenders or the Administrative Agent would have received on
such due date had no such obligation been imposed upon the Borrowers.  The Borrowers will deliver promptly to the
Administrative Agent certificates or other evidence reasonably acceptable to
the Administrative Agent for all taxes or other charges deducted from or paid
with respect to payments made by the Borrowers hereunder or under such other
Loan Document.

 

6.2.3.  Non-U.S.
Lenders.  If
any Lender, any transferee or the Administrative Agent is not a U.S. Person as
defined in Section 7701(a)(30) of the Code for federal income tax purposes (a “Non-U.S.
Lender”), such Lender, transferee or the Administrative Agent hereby
agrees that, if and to the extent that it is legally able to do so, it shall, prior
to the date of the first payment by the Borrowers hereunder to be made to such
Lender or the Administrative Agent or for such Non-U.S. Lender’s or the
Administrative Agent’s account, deliver to the Borrowers and the Administrative
Agent, as applicable, such certificates, documents or other evidence, as and
when required by the Code or Treasury Regulations issued pursuant thereto,
including (a) in the case of a Non-U.S. Lender that is a “bank” for purposes of
Section 881(c)(3)(A) of the Code, two (2) duly completed copies of Internal
Revenue Service Form W-8BEN or Form W-8ECI and any other certificate or
statement of exemption required by Treasury Regulations, or any subsequent
versions thereof or successors thereto, properly completed and duly executed by
such Lender or the Administrative Agent establishing that with respect to
payments of principal, interest or fees hereunder it is (i) not subject to
United States federal withholding tax under the Code because such payment is
effectively connected with the conduct by such Lender or Administrative Agent
of a trade or business in the United States or (ii) totally exempt or partially
exempt from United States federal withholding tax under a provision of an
applicable tax treaty and (b) in the case of a Non-U.S. Lender that is not a
“bank” for purposes of Section 881(c)(3)(A) of the Code, a certificate in
form and substance reasonably satisfactory to the Administrative Agent and the
Borrowers and to the effect that (i) such Non-U.S. Lender is not a “bank”
for purposes of Section 881(c)(3)(A) of the Code, is not subject to regulatory
or other legal requirements as a bank in any jurisdiction, and has not been
treated as a bank for purposes of any tax, securities law or other filing or
submission made to any governmental authority, any application made to a rating
agency or qualification for any exemption from any tax, securities law or other
legal requirements, (ii) is not

 

44

 

a ten (10) percent shareholder for purposes of Section
881(c)(3)(B) of the Code and (iii) is not a controlled foreign corporation
receiving interest from a related person for purposes of Section 881(c)(3)(C)
of the Code, together with a properly completed Internal Revenue Service Form
W-8 or W-9, as applicable (or successor forms to establish exemption from
withholding of US taxes).  Each Lender
or the  Administrative Agent agrees that
it shall, to the extent any form previously delivered by it pursuant to this
section is no longer effective, and in any case promptly upon the Borrowers’ or
the Administrative Agent’s reasonable request therefor, deliver to the  Borrowers and the Administrative Agent, as
applicable, if and to the extent it is legally able to do so, a properly
completed and executed Form W-8BEN, Form W-8ECI, Form W-8 or W-9, as
applicable (or any successor forms thereto).

 

6.2.4.  Exclusion.  The Borrowers shall not be required to pay
any additional amount to any Non-U.S. Lender pursuant to §6.2.3 or §6.6 hereof
in respect of any United States federal withholding tax if and to the extent
that (i) the obligation to withhold amounts with respect to such United States
federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Credit Agreement or, with respect to a different lending office
designated by such Non-U.S. Lender as its applicable lending office (a “New
Lending Office”), the date such Non-U.S. Lender designated such New Lending
Office as a result of an assignment, transfer or designation made at the
request of the Borrowers, provided, however, this clause (i)
shall not apply to the extent that the indemnity payment or additional amounts
any transferee, or Lender through a New Lending Office, would be entitled to
receive without regard to this clause (i) do not exceed the indemnity payment
or additional amounts that the Person making the assignment or transfer to such
transferee, or Lender making the designation of such New Lending Office, would
have been entitled to receive in the absence of such assignment, transfer or
designation, or (ii)  the obligation to
pay such additional amounts would not have arisen but for a failure by such
Non-U.S. Lender to deliver the forms specified in §6.2.3.

 

6.3.  Computations.  All computations of interest on the Revolving
Credit Loans and of Fees shall be based on a 360-day year and paid for the
actual number of days elapsed.  Except
as otherwise provided in the definition of the term “Interest Period” with
respect to Eurodollar Rate Loans, whenever a payment hereunder or under any of
the other Loan Documents becomes due on a day that is not a Business Day, the
due date for such payment shall be extended to the next succeeding Business
Day, and interest shall accrue during such extension.

 

6.4.  Inability to Determine Eurodollar
Rate.  In the
event, prior to the commencement of any Interest Period relating to any
Eurodollar Rate Loan, the Administrative Agent shall determine  or
be notified by the Required Lenders that (a) adequate and reasonable methods do
not exist for ascertaining the Eurodollar Rate that would otherwise determine
the rate of interest to be applicable to any Eurodollar Rate Loan during any
Interest Period or (b) the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and

 

45

 

fairly reflect the cost to the Lenders of making or maintaining their
Eurodollar Rate Loans during such period, the Administrative Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrowers and the Lenders) to the Borrowers and the
Lenders.  In such event (i) any Loan
Request or Conversion Request with respect to Eurodollar Rate Loans shall be
automatically withdrawn and shall be deemed a request for Base Rate Loans, (ii)
each Eurodollar Rate Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Base Rate Loan, and (iii)
the obligations of the Lenders to make Eurodollar Rate Loans shall be suspended
until the Administrative Agent or the Required Lenders determine that the
circumstances giving rise to such suspension no longer exist, whereupon the
Administrative Agent  or, as the case may be, the
Administrative Agent upon the instruction of the Required Lenders, shall so
notify the Borrowers and the Lenders.

 

6.5.  Illegality.  Notwithstanding any other provisions herein,
if any present or future law, regulation, treaty or directive or the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Rate Loans, such Lender shall forthwith give notice
of such circumstances to the Borrowers and the other Lenders and thereupon (a)
the commitment of such Lender to make Eurodollar Rate Loans or convert Base Rate
Loans to Eurodollar Rate Loans shall forthwith be suspended and (b) such
Lender’s Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if
any, shall be converted automatically to Base Rate Loans on the last day of
each Interest Period applicable to such Eurodollar Rate Loans or within such
earlier period as may be required by law. 
The Borrowers hereby jointly and severally agree promptly to pay the
Administrative Agent for the account of such Lender, upon demand by such
Lender, any additional amounts necessary to compensate such Lender for any
costs incurred by such Lender in making any conversion in accordance with this
§6.5, including any interest or fees payable by such Lender to lenders of funds
obtained by it in order to make or maintain its Eurodollar Rate Loans
hereunder.

 

6.6.  Additional Costs, etc.  If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon
or otherwise issued to any Lender or the Administrative Agent by any central
bank or other fiscal, monetary or other authority (whether or not having the
force of law), shall:

 

(a)                                  subject
any Lender or the Administrative Agent to any tax, levy, impost, duty, charge,
fee, deduction or withholding of any nature with respect to this Credit
Agreement, the other Loan Documents, any Letters of Credit, such Lender’s
Revolving Credit Commitment or the Revolving Credit Loans (other than taxes
based upon or measured by the income or profits of such Lender or the
Administrative Agent), or

 

46

 

(b)                                 materially
change the basis of taxation (except for changes in taxes based on or measured
by net income or profits) of payments to any Lender of the principal of or the
interest on any Revolving Credit Loans or any other amounts payable to any
Lender or the Administrative Agent under this Credit Agreement or any of the
other Loan Documents, or

 

(c)                                  impose
or increase or render applicable (other than to the extent specifically
provided for elsewhere in this Credit Agreement) any special deposit, reserve,
assessment, liquidity, capital adequacy or other similar requirements (whether
or not having the force of law) against assets held by, or deposits in or for
the account of, or loans by, or letters of credit issued by, or commitments of
an office of any Lender, or

 

(d)                                 impose
on any Lender or the Administrative Agent any other conditions or requirements
with respect to this Credit Agreement, the other Loan Documents, any Letters of
Credit, the Revolving Credit Loans, such Lender’s Revolving Credit Commitment,
or any class of loans, letters of credit or commitments of which any of the
Revolving Credit Loans or such Lender’s Revolving Credit Commitment forms a
part,

 

and the result of any of the foregoing is

 

(i)                                     to
increase the cost to any Lender of making, funding, issuing, renewing,
extending or maintaining any of the Revolving Credit Loans or such Lender’s
Revolving Credit Commitment or any Letter of Credit, or

 

(ii)                                  to
reduce the amount of principal, interest, Reimbursement Obligation or other
amount payable to such Lender or the Administrative Agent hereunder on account
of such Lender’s Revolving Credit Commitment, any Letter of Credit or any of
the Revolving Credit Loans, or

 

(iii)                               to
require such Lender or the Administrative Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable hereunder,
the amount of which payment or foregone interest or Reimbursement Obligation or
other sum is calculated by reference to the gross amount of any sum receivable
or deemed received by such Lender or the Administrative Agent from the
Borrowers hereunder,

 

then, and in each such case, the Borrowers will, upon demand made by
such Lender or (as the case may be) the Administrative Agent at any time and
from time to time and as often as the occasion therefor may arise, pay to such
Lender or the Administrative Agent such additional amounts as will be
sufficient to compensate such Lender or the Administrative Agent for such
additional cost, reduction, payment or foregone interest or Reimbursement
Obligation or other sum.

 

47

 

6.7.  Capital Adequacy.  If after the date hereof any Lender or the
Administrative Agent determines that (a) the adoption of or change in any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) regarding capital requirements for Lenders or Lender
holding companies or any change in the interpretation or application thereof by
a Governmental Authority with appropriate jurisdiction, or (b) compliance by
such Lender or the Administrative Agent or any corporation controlling such
Lender or the Administrative Agent with any law, governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law) of any
such entity regarding capital adequacy, has the effect of reducing the return
on such Lender’s or the Administrative Agent’s commitment with respect to any
Revolving Credit Loans to a level below that which such Lender or the
Administrative Agent could have achieved but for such adoption, change or
compliance (taking into consideration such Lender’s or the Administrative
Agent’s then existing policies with respect to capital adequacy and assuming
full utilization of such entity’s capital) by any amount reasonably deemed by
such Lender or (as the case may be) the Administrative Agent to be material,
then such Lender or the Administrative Agent may notify the Borrowers of such
fact.  To the extent that the amount of
such reduction in the return on capital is not reflected in the Base Rate, the
Borrowersjointly and severally agree to pay such Lender or (as the case may
be) the Administrative Agent for the amount of such reduction in the return on
capital as and when such reduction is determined upon presentation by such
Lender or (as the case may be) the Administrative Agent of a certificate in
accordance with §6.8 hereof.  Each
Lender shall allocate such cost increases among its customers in good faith and
on an equitable basis.

 

6.8.  Certificate; Replacement of Lenders.  (a)                                      A
certificate setting forth any additional amounts payable pursuant to §§6.6 or
6.7 and a brief explanation of such amounts which are due, submitted by any
Lender or the Administrative Agent to the Borrowers, shall be conclusive,
absent manifest error, that such amounts are due and owing.

 

(b)                                 Each
Lender agrees that, upon the occurrence of any event giving rise to the
operation of §§6.2.2, 6.6 or 6.7 with respect to such Lender, it will, if
requested in writing by the Borrowers, use commercially reasonable efforts
(subject to overall policy considerations of such Lender) to designate another
lending office for any Revolving Credit Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no material economic, legal or
regulatory disadvantage; provided, further, that nothing in this
§6.8 shall affect or postpone any of the obligations of the Borrowers or the
rights of any Lender or the Administrative Agent pursuant to §§6.2.2, 6.6 or
6.7.

 

(c)                                  Upon
receipt by the Borrowers from any Lender (an “Affected Lender”) of a
claim under §§6.2.2, 6.6 or 6.7, the Borrowers may:

 

48

 

(i)                                     request
one or more of the other Lenders to acquire and assume all or part of such
Affected Lender’s Revolving Credit Loans and Revolving Credit Commitment, as
applicable, provided that no Lender shall be required to accede to any such
request; or

 

(ii)                                  replace
such Affected Lender with another Lender; provided that (A) such other
Lender agrees to be the replacement Lender, (B) such replacement does not
conflict with any requirement of law, (C) no Default or Event of Default shall
have occurred and be continuing at the time of such replacement, (D) the
Borrowers shall repay, or the replacement Lender shall purchase, at the full
principal or face amount of all Revolving Credit Loans, accrued interest, fees
and other amounts owing to such replaced Lender prior to the date of
replacement, (E) the Borrowers shall be liable to such replaced Lender in accordance
with §6.9 with respect to any prepayment or purchase of Eurodollar Rate Loans,
(F) the replacement Lender, if not already a Lender, shall be reasonably
satisfactory to the Administrative Agent, (G) the replaced Lender shall be
obligated to make such replacement in accordance with the provisions of §16 (provided
that the Borrowers or the replacement Lender shall be obligated to pay the
registration and processing fee) and (H) the Borrowers shall pay all additional
amounts (if any) required pursuant to §§6.2.2, 6.6 or 6.7, as the case may be,
to the extent such additional amounts were incurred on or prior to the
consummation of such replacement.

 

6.9.  Indemnity.  The Borrowers jointly and severally agree to
indemnify each Lender and to hold each Lender harmless from and against any
loss, cost or expense (including loss of anticipated profits) that such Lender
may sustain or incur as a consequence of (a) default by the Borrowers in
payment of the principal amount of or any interest on any Eurodollar Rate Loans
as and when due and payable, including any such loss or expense arising from
interest or fees payable by such Lender to banks of funds obtained by it in
order to maintain its Eurodollar Rate Loans, (b) default by the Borrowers in
making a borrowing or conversion after the Borrowers have given (or are deemed
to have given) a Loan Request, or a Conversion Request relating thereto
in accordance with §2.6 or §2.7 or (c) the making of any payment of a
Eurodollar Rate Loan or the making of any conversion of any such Revolving
Credit Loan to a Base Rate Loan on a day that is not the last day of the
applicable Interest Period with respect thereto, including interest or fees
payable by such Lender to lenders of funds obtained by it in order to maintain
any such Revolving Credit Loans.

 

6.10.  Interest After Default.

 

6.10.1.  Overdue Amounts.  Overdue principal and (to the extent
permitted by applicable law) interest on the Revolving Credit Loans and all
other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded monthly and payable on demand at a
rate per annum equal to two percent (2%) above the rate of interest which would
otherwise be applicable thereto (or, if no rate of interest is then applicable
thereto, two percent (2%) above the rate of interest which would be

 

48

 

applicable to any Base Rate Loans) until such amount
shall be paid in full (after as well as before judgment).

 

6.10.2.  Amounts Not
Overdue. 
During the continuance of a Default or an Event of Default the principal
of the Revolving Credit Loans not overdue shall, until such Default or Event of
Default has been cured or remedied or such Default or Event of Default has been
waived by the Required Lenders pursuant to §17.12, bear interest at a rate per
annum equal to the rate of interest applicable to overdue principal pursuant to
§6.10.1.

 

6.10.3.  Letters of
Credit.  The
Unpaid Reimbursement Obligations and (to the extent permitted by law) unpaid
interest thereon (as provided in this sentence) shall bear interest compounded
monthly and payable on demand at a rate per annum equal to the Base Rate plus
the Applicable Margin then in effect for Base Rate Loans then in effect plus
two percent (2%) per annum until such amount shall be paid in full (after as
well as before judgment).

 

6.11.  Transitional Arrangements.  All
interest, Fees (as defined in the Existing Credit Agreement) and expenses, if
any, owing or accruing under or in respect of the Existing Credit Agreement
shall be paid on the date on which interest, Fees and expenses of such type are
to be paid under this Credit Agreement.

 

 

6.12.  Concerning Joint and Several
Liability of the Borrowers.

 

Notwithstanding anything
to the contrary contained in §§10.3, 10.5.2(c), 10.5.3(d) or 16.8:

 

(a)                                  Each
of the Borrowers is accepting joint and several liability hereunder and under
the other Loan Documents in consideration of the financial accommodations to be
provided by the Lenders and the Administrative Agent under this Credit
Agreement, for the mutual benefit, directly and indirectly, of each of the
Borrowers and in consideration of the undertakings of each other Borrower to
accept joint and several liability for the Obligations.

 

(b)                                 Each
of the Borrowers, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including, without limitation, any Obligations
arising under this §6.12), it being the intention of the parties hereto that
all the Obligations shall be the joint and several obligations of each of the
Borrowers without preferences or distinction among them.

 

50

 

(c)                                  If
and to the extent that any of the Borrowers shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Borrowers will make such payment with respect to, or perform, such
Obligation.

 

(d)                                 The
Obligations of each of the Borrowers under the provisions of this §6.12
constitute the full recourse Obligations of each of the Borrowers enforceable
against each such Borrower to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Credit
Agreement or the other Loan Documents or any other circumstance whatsoever as to
any other Borrower.

 

(e)                                  Except
as otherwise expressly provided herein, each Borrower hereby waives promptness,
diligence, presentment, demand, protest, notice of acceptance of its joint and
several liability, notice of any and all advances of the Revolving Credit Loans
made under this Credit Agreement and the Notes, notice of occurrence of any
Default or Event of Default (except to the extent notice is expressly required
to be given pursuant to the terms of this Credit Agreement or any of the other
Loan Documents), or of any demand for any payment under this Credit Agreement,
notice of any action at any time taken or omitted by the Administrative Agent
or the Lenders under or in respect of any of the Obligations hereunder, any
requirement of diligence and, generally, all demands, notices and other
formalities of every kind in connection with this Credit Agreement and the
other Loan Documents.  Each Borrower
hereby waives all defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or hereafter in effect, any right
to require the marshaling of assets of the Borrowers and any other entity or
Person primarily or secondarily liable with respect to any of the Obligations,
and all suretyship defenses generally. 
Each Borrower hereby assents to, and waives notice of, any extension or
postponement of the time for the payment, or place or manner for payment,
compromise, refinancing, consolidation or renewals of any of the Obligations
hereunder, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by the Administrative Agent and the Lenders at
any time or times in respect of any default by any Borrower in the performance
or satisfaction of any term, covenant, condition or provision of this Credit
Agreement and the other Loan Documents, any and all other indulgences
whatsoever by the Administrative Agent and the Lenders in respect of any of the
Obligations hereunder, and the taking, addition, substitution or release, in
whole or in part, at any time or times, of any security for any of such
Obligations or the addition, substitution or release, in whole or in part, of
any Borrower or any other entity or Person primarily or secondarily liable for
any Obligation.  Such Borrower further
agrees that its Obligations shall not be released or discharged, in whole or in
part, or otherwise affected by the adequacy of any rights which the
Administrative Agent or any Lender may have against any collateral security or
other means of obtaining repayment of any of the Obligations, the impairment of
any collateral security securing the

 

51

 

Obligations, including, without limitation, the
failure to protect or preserve any rights which the Administrative Agent or any
Lender may have in such collateral security or the substitution, exchange,
surrender, release, loss or destruction of any such collateral security, any
other act or omission which might in any manner or to any extent vary the risk
of such Borrower, or otherwise operate as a release or discharge of such
Borrower, all of which may be done without notice to such Borrower; provided,
however, that the foregoing shall in no way be deemed to create
commercially unreasonable standards as to the Administrative Agent’s duties as
secured party under the Loan Documents (as such rights and duties are set forth
therein).  If for any reason any of the
other Borrowers has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from any of the other Borrowers by reason of such other
Borrower’s insolvency, bankruptcy or reorganization or by other operation of
law or for any reason, this Credit Agreement and the other Loan Documents to
which it is a party shall nevertheless be binding on such Borrower to the same
extent as if such Borrower at all times had been the sole obligor on such
Obligations.  Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of the Administrative Agent and the
Lenders, including, without limitation, any failure strictly or diligently to
assert any right or to pursue any remedy or to comply fully with applicable laws
or regulations thereunder which might, but for the provisions of this §6.12,
afford grounds for terminating, discharging or relieving such Borrower, in
whole or in part, from any of its obligations under this §6.12, it being the
intention of each Borrower that, so long as any of the Obligations hereunder
remain unsatisfied, the obligations of such Borrower under this §6.12 shall not
be discharged except by performance and then only to the extent of such
performance.  The Obligations of each
Borrower under this §6.12 shall not be diminished or rendered unenforceable by
any winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to any reconstruction or similar proceeding
with respect to any other Borrower, or any of the Lenders.  The joint and several liability of the
Borrowers hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
ownership, membership, constitution or place of formation of any Borrower or
the Lenders.  Each of the Borrowers
acknowledges and confirms that it has itself established its own adequate means
of obtaining from each of the other Borrowers on a continuing basis all
information desired by such Borrower concerning the financial condition of each
of the other Borrowers and that each such Borrower will look to each of the
other Borrowers and not to the Administrative Agent or any Lender in order for
such Borrower to keep adequately informed of changes in each of the other
Borrowers’ respective financial conditions.

 

(f)                                    The
provisions of this §6.12 are made for the benefit of the Lenders and the
Administrative Agent and their respective permitted successors and assigns, and
may be enforced by it or them from time to time

 

52

 

against any or all of the Borrowers as often as
occasion therefor may arise and without requirement on the part of the Lenders
or the Administrative Agent or such successor or assign first to marshall any
of its or their claims or to exercise any of its or their rights against any of
the other Borrowers or to exhaust any remedies available to it or them against
any of the other Borrowers or to resort to any other source or means of obtaining
payment of any of the Obligations hereunder or to elect any other remedy.  The provisions of this §6.12 shall remain in
effect until all of the Obligations shall have been paid in full or otherwise
fully satisfied.  If at any time, any
payment, or any part thereof, made in respect of any of the Obligations, is
rescinded or must otherwise be restored or returned by any Lender or the
Administrative Agent upon the insolvency, bankruptcy or reorganization of any
of the Borrowers, or otherwise, the provisions of this §6.12 will forthwith be
reinstated in effect, as though such payment had not been made.

 

(g)                                 Each
of the Borrowers hereby agrees that it will not enforce any of its rights of
reimbursement, contribution, subrogation or the like against the other
Borrowers with respect to any liability incurred by it hereunder or under any
of the other Loan Documents, any payments made by it to any of the Lenders or
the Administrative Agent with respect to any of the Obligations or any
collateral security therefor until such time as all of the Obligations have
been irrevocably paid in full in cash. 
Any claim which any Borrower may have against any other Borrower with
respect to any payments to the Lenders or the Administrative Agent hereunder or
under any other Loan Documents are hereby expressly made subordinate and junior
in right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full of the
Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full before any
payment or distribution of any character, whether in cash, securities or other
property, shall be made to any other Borrower therefor.

 

(h)                                 Each
of the Borrowers hereby agrees that the payment of any amounts due with respect
to the indebtedness owing by any Borrower to any other Borrower is hereby
subordinated to the prior payment in full in cash of the Obligations.  Each Borrower hereby agrees that after the
occurrence and during the continuance of any Default or Event of Default, such
Borrower will not demand, sue for or otherwise attempt to collect any
indebtedness of any other Borrower owing to such Borrower until the Obligations
shall have been paid in full in cash. 
If, notwithstanding the foregoing sentence, such Borrower shall collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced and received by such Borrower as trustee for the
Administrative Agent and be paid over to the Administrative Agent for the pro rata
accounts of the Lenders to be applied to repay the Obligations.

 

53

 

7.  COLLATERAL
SECURITY AND PARENT GUARANTY.

 

7.1.  Security of Borrowers.  The Obligations shall be secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of the
Borrowers and their Subsidiaries, whether now owned or hereafter acquired,
pursuant to the terms of the Security Documents to which the Borrowers are
party.

 

7.2.  Parent Guaranty and Parent Pledge
Agreement. 
The Obligations shall also be guaranteed pursuant to the terms of the
Parent Guaranty.  The obligations of the
Parent under the Parent Guaranty shall be in turn secured by a perfected first
priority security interest and pledge in all of the Equity Interests of MSAC,
whether now owned or hereafter acquired, pursuant to the terms of the Parent
Pledge Agreement.

 

8.  REPRESENTATIONS
AND WARRANTIES.

 

The Borrowers represent and warrant to the Lenders and
the Administrative Agent as follows:

 

8.1.  Corporate Authority.

 

8.1.1.  Incorporation;
Good Standing. 
Each of the Parent, the Borrowers and their Subsidiaries (a) is a
corporation, limited partnership or limited liability company as shown on Schedule
8.19, duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or formation, (b) has all requisite powers
to own its property and conduct its business as now conducted and as presently
contemplated, and (c) is in good standing as a foreign corporation, limited
partnership or limited liability company, as applicable, and is duly authorized
to do business in each jurisdiction where such qualification is necessary
except where a failure to be so qualified would not have a Material Adverse
Effect.

 

8.1.2.  Authorization.  The execution, delivery and performance of
this Credit Agreement and the other Loan Documents to which any of the Parent,
the Borrowers or any of their Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate, limited
partnership or limited liability company authority, as applicable, of such
Person, (b) have been duly authorized by all necessary entity proceedings, (c)
do not and will not conflict with or result in any breach or contravention of
any provision of law, statute, rule or regulation to which the Parent, any of
the Borrowers or any of their Subsidiaries is subject or any judgment, order,
writ, injunction, license or permit applicable to, or any agreement or other
instrument binding upon, the Parent, any of the Borrowers or any of their
Subsidiaries, except for any such breach or contravention which could not
reasonably be expected to have a Material Adverse Effect and (d) do not conflict
with any provision of the Governing Documents of the Parent, any of the
Borrowers or any of their Subsidiaries.

 

54

 

8.1.3.  Enforceability.  The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Parent, any of the
Borrowers or any of their Subsidiaries is or is to become a party will result
in valid and legally binding obligations of such Person enforceable against it
in accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors’ rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.

 

8.2.  Governmental Approvals.  The execution, delivery and performance by
the Parent, the Borrowers and their Subsidiaries of this Credit Agreement and
the other Loan Documents to which the Parent, the Borrowers or any of their
Subsidiaries is or is to become a party and the transactions contemplated
hereby and thereby do not require the approval or consent of, or filing with,
any Governmental Authority other than those already obtained and other than
those as to which the failure to obtain such approval or consent could not
reasonably be expected to have a Material Adverse Effect.

 

8.3.  Title to Properties; Leases.  Attached as Schedule 8.3
hereto, as such Schedule 8.3 may be updated from time to time in
accordance with the provisions of §9.5.6, is a complete and accurate list of
Real Estate owned or leased by the Borrowers. 
The Borrowers and their Subsidiaries own or lease all of the assets
reflected in the Audited Financials as of the Balance Sheet Date or acquired
since that date, subject to no Liens or other rights of others, except
Permitted Liens.

 

8.4.  Financial Statements and Projections.

 

8.4.1.  Fiscal
Year; Fiscal Quarters.  Each of the Parent, the Borrowers and their Subsidiaries has a
fiscal  year
which ends on the Saturday closest to December 31 of each calendar year.  The fiscal quarters of the Borrowers and
their Subsidiaries end on the Saturday closest to March 31, June 30, September
30 and December 31 of each calendar year.

 

8.4.2.  Financial
Statements. 
There has been furnished to each of the Lenders the Audited
Financials.  To the best of the
Borrowers’ knowledge, except as set forth on Schedule 8.4.2 hereto, the
Audited Financials have been prepared in accordance with GAAP and fairly
present in all material respects the financial condition of the Borrowers and
their Subsidiaries as at the dates thereof and the result of operations for the
fiscal period then ended.

 

8.4.3.  Pro Forma
Balance Sheet and Projections.  The Borrowers have delivered to the
Administrative Agent a consolidated pro  forma balance sheet as of
October 25, 2003 reflecting the borrowings hereunder on the Closing Date (the “Pro
Forma Balance Sheet”), which Pro Forma Balance Sheet has been prepared in
good faith on the basis of the assumptions stated

 

55

 

therein.  The
projections of the annual operating budgets of the Borrowers and their
Subsidiaries on a consolidated basis, balance sheets and cash flow statements
for the 2003 to 2008 fiscal years, copies of which have been delivered to each
Lender, disclose all assumptions made with respect to general economic,
financial and market conditions used in formulating such projections.  To the knowledge of the Borrowers or any of
their Subsidiaries, no facts exist that (individually or in the aggregate)
would result in any material change in any of such projections.  The projections are based upon reasonable
estimates and assumptions, have been prepared on the basis of the assumptions
stated therein and reflect the reasonable estimates of the Borrowers of the
results of operations and other information projected therein.  There are no contingent liabilities of the
Borrowers or their Subsidiaries as of the Closing Date involving material
amounts, known to the officers of the Borrowers, which are not disclosed in the
Pro Forma Balance Sheet.

 

8.5.  No Material Adverse Changes, etc.  Since the Balance Sheet Date, to the
knowledge of the Borrowers, there has been no event or occurrence which has had
a material adverse effect on the Borrowers and their Subsidiaries taken as a
whole.

 

8.6.  Franchises, Patents, Copyrights, Liquor
Management Agreements, etc.  Except as set forth on Schedule 8.6(a) hereto, the
Borrowers and each of their Subsidiaries possess all franchises, patents,
copyrights, trademarks, trade names, licenses (including liquor licenses) and
permits, and rights in respect of the foregoing, adequate for the conduct of
their business substantially as now conducted without known conflict with any
rights of others.  Schedule 8.6(b)
hereto sets forth a list of all Liquor Management Agreements.

 

8.7.  Litigation.  Except as set forth in Schedule 8.7
hereto, there are no actions, suits, proceedings or, to the knowledge of the
Borrowers, investigations of any kind pending or, to the knowledge of the
Borrowers, threatened against any of the Parent, the Borrowers or any of their
Subsidiaries, that (a) if adversely determined, might, either in any case or in
the aggregate, have a Material Adverse Effect, or (b) question the validity of
this Credit Agreement or any of the other Loan Documents, the Convertible
Preferred Stock Documents, the Subordinated Debt Documents (if any), or the
Equity Documents or any action taken or to be taken pursuant hereto or thereto.

 

8.8.  Material Contracts; No Materially Adverse
Contracts, etc. 
Except as set forth on Schedule 8.8 hereto, none of the Parent,
the Borrowers or any of their Subsidiaries are party to, or after giving effect
to the Acquisition are obligated under, any Material Contracts.  None of the Borrowers nor any of their
Subsidiaries is subject to any Governing Document or other legal restriction,
or any judgment, decree, order, law, statute, rule or regulation that has or is
expected in the future to have a Material Adverse Effect.  None of the Borrowers nor any of their
Subsidiaries is a party to any contract or agreement that has or is expected,
in the judgment of the Borrowers’ officers, to have any Material Adverse
Effect.

 

56

 

8.9.  Compliance with Other Instruments, Laws,
etc.  None of the
Borrowers nor any of their Subsidiaries is in violation of any provision of its
Governing Documents, or any agreement or instrument to which it may be subject
or by which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases
in a manner that could have a Material Adverse Effect.  Any and all approvals by any federal, state
or local liquor authority necessary for the continued operation of any
Restaurant with full liquor service have been received and remain in full force
and effect or alternative arrangements (including execution of Liquor
Management Agreements) which are satisfactory to the Administrative Agent have
been made in order to permit such continued operation, except where the failure
thereof would not have a Material Adverse Effect.

 

8.10.  Tax Status.  The Borrowers and their Subsidiaries (a)
have made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which any of
them is subject, (b) have paid all taxes and other governmental assessments and
charges shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and by appropriate
proceedings and (c) have set aside on their books provisions reasonably
adequate in accordance with GAAP for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction
other than claims being contested in good faith by appropriate proceedings for
which no Lien has been imposed (other than Permitted Liens) and for which
adequate reserves have been set aside in accordance with GAAP.

 

8.11.  No Event of Default.  No Default or Event of Default has occurred
and is continuing.

 

8.12.  Holding Company and Investment
Company Acts. 
None of the Parent, the Borrowers or any of their Subsidiaries is a “holding
company”, or a “subsidiary  company” of a “holding  company”,
or an “affiliate” of a “holding  company”, as such terms
are defined in the Public Utility Holding Company Act of 1935; nor is it an “investment
company”, or an “affiliated  company” or a “principal
underwriter” of an “investment  company”, as such terms are
defined in the Investment Company Act of 1940.

 

8.13.  Absence of Financing Statements, etc.  Except with respect to Permitted Liens,
there is no financing statement, security agreement, chattel mortgage, real
estate mortgage or other document filed or recorded with any filing records,
registry or other public office, that purports to cover, affect or give notice
of any present or possible future Lien on any assets or property of any of the
Parent, the Borrowers or any of their Subsidiaries or any rights relating
thereto, including assets acquired as part of the Acquisition and rights
relating to such assets.

 

8.14.  Perfection of Security Interest.  All filings, assignments, pledges and
deposits of documents or instruments have been made or will be made, and all

 

57

 

other actions have been taken or will be taken that are necessary or
advisable, under applicable law, to establish and perfect the Administrative
Agent’s security interest in the Collateral. 
The Collateral and the Administrative Agent’s rights with respect to the
Collateral are not subject to any setoff, claims, withholdings or other
defenses.

 

8.15.  Certain Transactions.  Except for the Management Agreements and the
other transactions listed on Schedule 8.15 and arm’s length transactions
pursuant to which a Borrower or any of its Subsidiaries makes payments in the
ordinary course of business upon terms no less favorable than such Borrower or
such Subsidiary could obtain from third parties, none of the officers,
directors, or employees of any of the Borrowers, any of their Subsidiaries or
any Sponsor or any Affiliate of a Borrower, any Subsidiary of a Borrower or any
Sponsor is presently a party to any transaction with any of the Borrowers or
any of their Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Borrowers, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.

 

8.16.  Employee Benefit Plans.

 

8.16.1.  In General.  Each Employee Benefit Plan and each
Guaranteed Pension Plan has been maintained and operated in compliance in all
material respects with the provisions of ERISA and all Applicable Pension
Legislation and, to the extent applicable, the Code, except where the failure
to comply could not reasonably be expected to have a Material Adverse
Effect.  The Borrowers have heretofore
delivered to the Administrative Agent the most recently completed annual
report, Form 5500, with all required attachments, and actuarial statements
required to be submitted under §103(d) of ERISA, with respect to each
Guaranteed Pension Plan.

 

8.16.2.  Terminability
of Welfare Plans. 
Except as set forth on Schedule 8.16 hereto, no Employee Benefit
Plan, which is an employee welfare benefit plan within the meaning of §3(1) or
§3(2)(B) of ERISA, provides benefit coverage subsequent to termination of
employment, except as required by Title I, Part 6 of ERISA or the applicable
state insurance laws.  The Borrowers may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of the
Borrowers without liability to any Person other than for claims arising prior
to termination.

 

8.16.3.  Guaranteed
Pension Plans. 
Each contribution required to be made to a Guaranteed Pension Plan,
whether required to be made to avoid the incurrence of an accumulated funding deficiency,
the notice or lien

 

58

 

provisions of §302(f) of ERISA, or otherwise, has been
timely made.  No waiver of an
accumulated funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan, and none of the Borrowers
nor any ERISA Affiliate is obligated to or has posted security in connection
with an amendment to a Guaranteed Pension Plan pursuant to §307 of ERISA or
§401(a)(29) of the Code.  No liability
to the PBGC (other than required insurance premiums, all of which have been
paid) has been incurred by the Borrowers or any ERISA Affiliate with respect to
any Guaranteed Pension Plan and there has not been any ERISA Reportable Event
(other than an ERISA Reportable Event as to which the requirement of 30 days
notice has been waived), or any other event or condition which presents a
material risk of termination of any Guaranteed Pension Plan by the PBGC. Based
on the latest valuation of each Guaranteed Pension Plan (which in each case
occurred within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the aggregate
benefit liabilities of all such Guaranteed Pension Plans within the meaning of
§4001 of ERISA did not exceed the aggregate value of the assets of all such
Guaranteed Pension Plans, disregarding for this purpose the benefit liabilities
and assets of any Guaranteed Pension Plan with assets in excess of benefit
liabilities.

 

8.16.4.  Multiemployer
Plans.  None
of the Borrowers nor any ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under §4201 of
ERISA or as a result of a sale of assets described in §4204 of ERISA.  None of the Borrowers nor any ERISA
Affiliate has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of §4241 or §4245 of ERISA or is at risk
of entering reorganization or becoming insolvent, or that any Multiemployer
Plan intends to terminate or has been terminated under §4041A of ERISA.

 

8.17.  Use of Proceeds.

 

8.17.1.  General.  On the Closing Date, proceeds of the Revolving
Credit Loans shall be used to convert and/or continue the Existing Loans and to
pay the fees and expenses associated with such refinancing. After the Closing
Date, all future Revolving Credit Loans shall be used for the acquisition
and/or construction of new Restaurants and to upgrade existing Restaurants, in
each case in accordance with the terms hereof, and for working capital and
general corporate purposes.  The
Borrowers will obtain Letters of Credit solely for working capital and general
corporate purposes.

 

8.17.2.  Regulations U
and X.  No
portion of any Loan is to be used, and no portion of any Letter of Credit is to
be obtained, for the purpose of purchasing or carrying any “margin  security”
or “margin  stock” as such terms are used in Regulations U and X
of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221
and 224.

 

59

 

8.17.3.  Ineligible
Securities. 
No portion of the proceeds of any Revolving Credit Loans is to be used,
and no portion of any Letter of Credit is to be obtained, for the purpose of
knowingly purchasing, or providing credit support for the purchase of, during
the underwriting or placement period or within thirty (30) days thereafter, any
Ineligible Securities underwritten or privately placed by a Financial
Affiliate.

 

8.18.  Environmental Compliance.  Except as set forth on Schedule 8.18
hereto:

 

(a)                                  none
of the Borrowers, their Subsidiaries or any operator of the Real Estate or any
operations thereon is in violation, or alleged violation, of any judgment,
decree, order, law, license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under the Resource
Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended (“CERCLA”),
the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state, local or foreign law, statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter “Environmental  Laws”), which violation would
reasonably be expected to have a material adverse effect on the environment or
a Material Adverse Effect;

 

(b)                                 none
of the Borrowers nor any of their Subsidiaries has received written notice from
any third party including, without limitation, any Governmental Authority, (i)
that any one of them has been identified by the United States Environmental
Protection Agency (“EPA”) as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B, where such circumstances would reasonably be expected to
have a Material Adverse Effect; (ii) that any hazardous waste, as defined by 42
U.S.C. §6903(5), any hazardous substances as defined by 42 U.S.C. §9601(14),
any pollutant or contaminant as defined by 42 U.S.C. §9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws (“Hazardous  Substances”)
which any one of them has generated, transported or disposed of has been found
at any site at which a Governmental Authority has conducted or has ordered that
any Borrower or any of its Subsidiaries conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law, where such
circumstances would reasonably be expected to have a Material Adverse Effect;
or (iii) that it is or shall be a named party to any claim, action, cause of
action, complaint, or legal or administrative proceeding arising out of any
third party’s incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances where such
circumstances would reasonably be expected to have a Material Adverse Effect;

 

60

 

(c)                                  except
as could not reasonably be expected to result in a Material Adverse Effect, (i)
no portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws; and to the best of the Borrowers’ knowledge, no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate; (ii) in the course of
any activities conducted by the Borrowers, their Subsidiaries or operators of
its properties, no Hazardous Substances have been generated or are being used
on the Real Estate except in accordance with applicable Environmental Laws;
(iii) there have been no releases (i.e. any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the properties of any of the Borrowers or
their Subsidiaries, which releases would reasonably be expected to have a
Material Adverse Effect; and (iv) to the best of the Borrowers’ knowledge,
there have been no releases on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through soil or groundwater
contamination, may have come to be located on, and which would reasonably be
expected to have a Material Adverse Effect; and

 

(d)                                 none
of the Borrowers and their Subsidiaries, any Mortgaged Property or any of the
other Real Estate is subject, as a result of the transactions contemplated
hereby, to any applicable Environmental Law requiring the performance of
Hazardous Substances site assessments, or the removal or remediation of
Hazardous Substances, or the giving of notice to any Governmental Authority or
the recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the recording of any Mortgage or to
the effectiveness of any other transactions contemplated hereby.

 

(e)                                  This
§8.18 contains the sole representations and warranties of the Borrowers with
respect to environmental matters.

 

8.19.  Subsidiaries, etc.  Schedule 8.19, as such Schedule
8.19 may be updated from time to time in accordance with the provisions of
§9.17, sets forth the only Subsidiaries of MSAC, together with information on
each of the Borrowers’ jurisdictions of incorporation or organization, the type
of organization of each of the Borrowers and their Subsidiaries, the number and
class of authorized and issued Equity Interests of the Borrowers and each of
their Subsidiaries and the owners of all such issued Equity Interests.  Except as set forth on Schedule 8.19
hereto, none of the Borrowers nor any of their Subsidiaries is engaged in any
joint venture or partnership with any other Person.

 

8.20.  Bank Accounts.  Schedule 8.20,
as such Schedule 8.20 may be updated from time to time in
accordance with the provisions of §9.5.5, sets forth the account numbers and
location of all bank accounts of each Borrower and its Subsidiaries.

 

61

 

8.21.  Subordinated Debt Documents;
Equity Documents; Convertible Preferred Stock Documents.

 

(a)                                  In
the event that the Borrowers incur Subordinated Debt pursuant to §10.1(c), the
Borrowers shall have furnished to the Administrative Agent true, complete and
correct copies of the Subordinated Debt Documents (including schedules,
exhibits and annexes thereto).  Such
Subordinated Debt Documents shall not subsequently be amended, supplemented or
modified except in accordance with §10.14.3, and constitute the complete
understanding among the parties thereto in respect of the matters and
transactions covered thereby.

 

(b)                                 The
Equity Documents previously furnished to the Administrative Agent have not
subsequently been amended, supplemented, or modified and constitute the
complete understanding among the parties thereto in respect of the matters and
transactions covered thereby except for amendments (i) prior to the Closing
Date, delivered to the Administrative Agent in accordance with §9.18 of the Existing
Credit Agreement and (ii) on or following the Closing Date, delivered to the
Administrative Agent in accordance with §9.18 hereof.

 

(c)                                  The
Convertible Preferred Stock Documents previously furnished to the
Administrative Agent have not subsequently been amended, supplemented, or
modified and constitute the complete understanding among the parties thereto in
respect of the matters and transactions covered thereby except for amendments
(i) prior to the Closing Date, delivered to the Administrative Agent in
accordance with §9.18 of the Existing Credit Agreement and (ii) on or following
the Closing Date, delivered to the Administrative Agent in accordance with
§9.18 hereof.

 

8.22.  Solvency.  Both before and after giving effect to the execution, delivery
and performance of this Credit Agreement and the other Loan Documents, the
Borrowers and their Subsidiaries, on a consolidated basis, are Solvent.  As used herein, “Solvent” shall mean
that each of the Borrowers and their Subsidiaries (i) have assets having a fair
value in excess of their liabilities, (ii) have assets having a fair value in
excess of the amount required to pay their liabilities on existing debts as
such debts become absolute and mature, and (iii) have, and expect to continue
to have, access to adequate capital for the conduct of their business and the
ability to pay their debts from time to time incurred in connection with the
operation of their business as such debts mature.

 

8.23.  Restaurants.  Schedule 8.23 sets forth, as of
the Closing Date, the names and addresses of each Restaurant and identifies, as
of the Closing Date, which of those Restaurants are operated and/or managed
under a franchise agreement or restaurant management agreement by any of the
Borrowers or any of their Subsidiaries (whether as franchisor and a franchisee,
in the case of a franchise agreement).

 

8.24.  Franchise Agreements.  The Borrowers have
delivered to the Administrative Agent true and complete copies of any Franchise
Agreements to which any of the Borrowers or any of their Subsidiaries is party.

 

62

 

8.25.  Leases.  Except
as set forth on Schedule 8.25 hereto, neither the execution, delivery
and performance of this Credit Agreement nor the other Loan Documents, nor any
Subordinated Debt Documents (if any), to which any of the Parent, the Borrowers
or any of their Subsidiaries is a party, including the pledge by the Parent and
the Borrowers of all of the issued and outstanding Equity Interests of the
Borrowers and the exercise by the Administrative Agent of its rights to take
possession of, or otherwise control, such Equity Interests, will create a
default under any Real Estate Lease under which any of the Borrowers or any of
their Subsidiaries is presently a lessee or sublessee, which is likely to have
a Material Adverse Effect.

 

8.26.  Disclosure.  None of
this Credit Agreement or any of the other Loan Documents contains any untrue
statement of a material fact or omits to state a material fact (known to the Borrowers
or any of their Subsidiaries in the case of any document or information not
furnished by the Borrower or any of their Subsidiaries) necessary in order to
make the statements herein or therein not misleading.  There is no fact known to the Borrowers or any of their
Subsidiaries which has a Material Adverse Effect, or which is reasonably likely
in the future to have a Material Adverse Effect, exclusive of effects resulting
from changes in general economic conditions, legal standards or regulatory conditions.

 

9.  AFFIRMATIVE
COVENANTS.

 

Each of the Borrowers covenants and agrees that, so
long as any Revolving Credit Loan, Unpaid Reimbursement Obligation, Letter of
Credit or Note is outstanding or any Lender has any obligation to make any
Revolving Credit Loan or the Administrative Agent has any obligation to issue,
extend or renew any Letters of Credit:

 

9.1.  Punctual Payment.  The Borrowers will duly and punctually pay or
cause to be paid the principal and interest on the Revolving Credit Loans, all
Reimbursement Obligations, the Fees and all other amounts provided for in this
Credit Agreement and the other Loan Documents to which any of the Borrowers or
any of their Subsidiaries is a party, all in accordance with the terms of this
Credit Agreement and such other Loan Documents.

 

9.2.  Maintenance of Office.  Each of the Borrowers
will, and will cause each of its Subsidiaries to, maintain its chief executive
office at the location identified in the Perfection Certificate delivered by it
pursuant to the Security Agreement, or at such other place in the United States
of America as such Person shall designate upon written notice to the
Administrative Agent, where notices, presentations and demands to or upon such
Person in respect of the Loan Documents to which such Person is a party may be
given or made.

 

9.3.  Records and Accounts.  Each of the Borrowers will
(a) keep, and cause each of its Subsidiaries to keep, true and accurate records
and books of account in which complete, true and correct entries will be made
in accordance with GAAP, (b) maintain adequate accounts and reserves for all
taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and 

 

63

 

the properties of its Subsidiaries, contingencies, and other reserves,
and (c) at all times engage PricewaterhouseCoopers or other independent
certified public accountants reasonably satisfactory to the Required Lenders as
the independent certified public accountants of the Borrowers and their
Subsidiaries and will not permit more than thirty (30) days to elapse between
the cessation of such firm’s (or any successor firm’s) engagement as the
independent certified public accountants of the Borrowers and their Subsidiaries
and the appointment in such capacity of a successor firm as shall be reasonably
satisfactory to the Administrative Agent.

 

9.4.  Financial Statements, Certificates
and Information.  The
Borrowers will deliver to each of the 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 at 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, 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
PricewaterhouseCoopers 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 Credit 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 of the fiscal quarters of the Borrowers, (i) copies of the
unaudited consolidated balance sheet of the Borrowers and their Subsidiaries as
at 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 (subject to year-end
adjustments and footnote information required by GAAP), 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 position of the Borrowers and their
Subsidiaries on the date thereof (subject to year-end adjustments and footnote
information required by GAAP); and (ii) statements of sales and statements of
net earnings before 

 

64

 

interest, taxes, depreciation and amortization
expense, on a summarized Restaurant-by-Restaurant basis, for each Restaurant
operated by any of the Borrowers or their Subsidiaries, setting forth in each
case in comparative form the statements for the corresponding period or periods
of the prior fiscal year and a comparison to the projections for such period,
such statements to be in a form satisfactory to the Required Lenders;

 

(c)                                  as
soon as practicable, but in any event within thirty (30) days after the end of
each month in each fiscal year of the Borrowers, unaudited monthly consolidated
financial statements of the Borrowers and their Subsidiaries for such month 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 (subject to year-end adjustments and footnote
information required by GAAP), 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),
including a list of any new Restaurant locations as required pursuant to §9.14;

 

(d)                                 simultaneously
with the delivery of the financial statements referred to in subsections (a)
and (b) above, a statement certified by the principal financial or accounting
officer of the Borrowers in substantially the form of Exhibit C
hereto (a “Compliance  Certificate”) and setting forth in
reasonable detail computations evidencing compliance with the covenants
contained in §11 and (if applicable) reconciliations to reflect changes in GAAP
since the Balance Sheet Date;

 

(e)                                  simultaneously
with the delivery of the financial statements referred to in subsection (a)
above, a statement certified by the principal financial or accounting officer
of the Borrowers setting forth in reasonable detail computations of the
Consolidated Excess Operating Cash Flow for the fiscal year then ended;

 

(f)                                    contemporaneously
with the filing or mailing thereof, copies of all material of a financial
nature furnished to the holders of the Convertible Preferred Stock or filed
with the Securities and Exchange Commission or, following an initial public
offering of the Parent or any of the Borrowers, sent to the equity holders of
the Parent or any of the Borrowers;

 

(g)                                 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 month-by-month and quarter-by-quarter basis updating those
projections delivered to the Lenders 

 

65

 

and referred to in §8.4.3 or, if applicable, updating
any later such projections delivered in response to a request pursuant to this
§9.4(g);

 

(h)                                 all
information sent to the directors of the Borrowers regarding the opening of new
Restaurants;

 

(i)                                     all
notices and other information sent to any holder of the Convertible Preferred
Stock in its capacity as such;

 

(j)                                     all
notices and other information sent to any holder of Subordinated Debt in its
capacity as such; and

 

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

 

9.5.  Notices.

 

9.5.1.  Defaults.  The Borrowers will notify
the Administrative Agent and each of the Lenders in writing of the occurrence
of any Default or Event of Default promptly upon becoming aware thereof,
together with a reasonably detailed description thereof, and the actions the
Borrowers propose to take with respect thereto.  If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of Default)
under this Credit Agreement or any other note, evidence of indebtedness,
indenture or other obligation to which or with respect to which any of the
Borrowers or any of their Subsidiaries is a party or obligor in excess of
$500,000, whether as principal, guarantor, surety or otherwise, the Borrowers
shall forthwith give written notice thereof to the Administrative Agent and
each of the Lenders, describing the notice or action and the nature of the
claimed default.

 

9.5.2.  Environmental
Events.  The
Borrowers will promptly give notice to the Administrative Agent (a) of any
violation of any Environmental Law that the Borrowers or any of their
Subsidiaries reports in writing or is reportable by such Person in writing (or
for which any written report supplemental to any oral report is made) to any
Governmental Authority where such violation could reasonably be expected to
have a Material Adverse Effect, and (b) upon becoming aware of any inquiry,
proceeding, investigation, or other action, including a written notice from any
agency of potential environmental liability, of any Governmental Authority that
could reasonably be expected to have a Material Adverse Effect.

 

9.5.3.  Notification of Claim against
Collateral.  The
Borrowers will, immediately upon becoming aware thereof, notify the
Administrative Agent in writing of any setoff, claims (including, with respect
to the Real Estate, environmental claims), withholdings or other defenses to
which any 

 

66

 

material portion of the Collateral, or the
Administrative Agent’s rights with respect to such Collateral, are subject.

 

9.5.4.  Notice
of Litigation and Judgments.  The
Borrowers will, and will cause each of their Subsidiaries to, give notice to
the Administrative Agent in writing within fifteen (15) days of becoming aware of
any litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting any of the Borrowers or any of their Subsidiaries or
to which any of the Borrowers or any of their Subsidiaries is or becomes a
party involving an uninsured claim against any of the Borrowers or any of their
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect and stating the nature and status of such litigation or
proceedings.  The Borrowers will, and
will cause each of their Subsidiaries to, give notice to the Administrative
Agent, in writing, in form and detail satisfactory to the Administrative Agent,
within ten (10) days of any judgment not covered by insurance, final or
otherwise, against any of the Borrowers or any of their Subsidiaries in an
amount in excess of $500,000.

 

9.5.5.  Notice of
Bank Accounts. 
The Borrowers will, and will cause each of their Subsidiaries to, give
notice to the Administrative Agent in writing of any such Person creating or
opening any additional bank accounts simultaneously with the delivery of the
financial statements referred to in §9.4(c) but in any event no later than one
month after the opening of such account. 
In such event, upon receipt by the Administrative Agent of such notice, Schedule
8.20 shall be deemed to have been amended to include each such new bank
account set forth in such notice.

 

9.5.6.  Notice of
Real Estate. 
Without prejudice to §9.13, the Borrowers will, and will cause each of
their Subsidiaries to, give notice to the Administrative Agent in writing of
any such Person acquiring any additional (i) leased Real Estate to the extent
such Real Estate is leased for a term of five (5) years or longer or such
leased Real Estate is for office space where books and records relating to the
Borrowers’ business shall be maintained, or (ii) owned Real Estate,
simultaneously with the delivery of the financial statements referred to in
§9.4(c) but in any event no later than one month after such acquisition. In
such event, upon receipt by the Administrative Agent of such notice, Schedule
8.3 shall be deemed to have been amended to include each such additional
Real Estate set forth in such notice.

 

9.6.  Legal Existence; Maintenance of
Properties.  Each
of the Borrowers will do or cause to be done all things necessary to preserve
and keep in full force and effect its legal existence, rights and franchises
and those of its Subsidiaries.  Each of
the Borrowers (i) will cause all of its properties and those of its
Subsidiaries used or useful in the conduct of its business or the business of
its Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment except where the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect, (ii) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements 

 

67

 

thereof, all as in the judgment of such Borrower may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times, except where the failure to do so could
not reasonably be expected to result in a Material Adverse Effect, and (iii)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided
that nothing in this §9.6 shall prevent any of the Borrowers from discontinuing
the operation and maintenance of any of its properties or any of those of its
Subsidiaries if such discontinuance is, in the judgment of such Borrower,
desirable in the conduct of its or their business and that do not in the
aggregate have a Material Adverse Effect.

 

9.7.  Insurance.

 

9.7.1.  Required Insurance.  Each of the Borrowers will, and will cause
each of their Subsidiaries to, maintain with financially sound and reputable
insurers insurance with respect to its properties and business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such periods
as may be reasonable and prudent.  Without
limiting the foregoing, (a) such insurance shall be in such minimum amounts
that such Person will not be deemed a co-insurer under applicable insurance
laws, regulations and policies and otherwise shall be in such amounts, contain
such terms, be in such forms and be for such periods as may be reasonably
satisfactory to the Administrative Agent, (b) all such insurance shall be
payable (other than liability insurance, which shall name the Administrative
Agent as an additional insured) to the Administrative Agent as loss payee under
a “standard” or “New York” loss payee clause for the benefit of
the Lenders and the Administrative Agent (c) each such Person will (i) keep all
of its physical property insured with casualty or physical hazard insurance on
an “all risks” basis, with flood and earthquake coverages if available
at commercially reasonable rates and to the extent that a given property lies
within either a flood and/or an earthquake zone, as applicable, and electronic
data processing coverage, with a full replacement cost endorsement and an “agreed
amount” clause in an amount equal to one hundred percent (100%) of the full
replacement cost of such property, subject to aggregate sublimits for flood and
earthquake equal to those generally maintained by businesses engaged in similar
activities in similar geographic areas, (ii) maintain all such workers’
compensation or similar insurance as may be required by law and (iii) maintain,
in amountsand with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of such Person; and business
interruption insurance.  Each of the
Borrowers will, and will cause each of its Subsidiaries to, maintain insurance
on the Mortgaged Properties in accordance with the terms of the Mortgages.

 

68

 

9.7.2.  Insurance
Proceeds.  The
proceeds of any casualty insurance in respect of any casualty 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 proceeds is less than $2,500,000, 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 proceeds to prepay the Obligations
pursuant to §4.2 or have not elected to reinvest such proceeds pursuant to
§§4.2 and 4.4, 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 or
destroyed or other 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 §4.4.  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 §§4.2 and 4.3; 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 proceeds, then the Borrowers shall not
be required to prepay the Revolving Credit Loans pursuant to §§4.2 and 4.3 but
shall in any event comply with §4.4.

 

9.7.3.  Notice of
Cancellation.  All
policies of insurance shall provide for at least thirty (30) days prior written
cancellation notice to the Administrative Agent; provided, however,
in the event of cancellation for non-payment of premiums, such policies of
insurance shall provided for at least ten (10) days prior written cancellation
notice to the Administrative Agent.  In
the event of failure by any Borrower to provide and maintain insurance as
herein provided, the Administrative Agent may, at its option, provide such
insurance and charge the amount thereof to such Borrower; provided that
the Administrative Agent shall provide prompt notice to the Borrowers of any
such action taken by the Administrative Agent. 
The Borrowers shall furnish to the Administrative Agent, on an annual
basis within thirty (30) days after the end of each fiscal year, certificates
of insurance and policies evidencing compliance with the foregoing insurance
provisions.

 

69

 

9.8.  Taxes.  The
Borrowers will, and will cause each of their Subsidiaries to, duly pay and
discharge, or cause to be paid and discharged, before the same shall become
overdue, all taxes, assessments and other governmental charges imposed upon it,
its Real Estate, its sales and activities, or any part thereof, or upon the
income or profits therefrom, as well as all claims for labor, materials, or
supplies that if unpaid would by law become a Lien or charge upon any of its
property; provided that any such tax, assessment, charge, levy or claim
need not be paid if the validity or amount thereof shall currently be contested
in good faith by appropriate proceedings and if such Borrower or such
Subsidiary shall have set aside on its books adequate reserves in accordance
with GAAP with respect thereto; and provided, further, that the
Borrowers and each of their Subsidiaries will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any Lien that may have attached as security therefor, unless such
proceedings are stayed at the time of determination.

 

9.9.  Inspection of Properties and Books,
etc.

 

9.9.1.  General.  No more frequently than
once during any fiscal quarter or, if a Default or Event of Default shall have
occurred and be continuing, from time to time upon the request of the
Administrative Agent or any Lender, each of the Borrowers shall permit the
Lenders, through the Administrative Agent or any of the Lenders’ other
designated representatives, to visit and inspect any of the properties of such
Borrower or any of its Subsidiaries, to examine the books of account of such
Borrower and its Subsidiaries (and to make copies thereof and extracts
therefrom unless and to the extent that a confidentiality agreement with an
unaffiliated third party to which such Borrower or such Subsidiary is bound
would otherwise prohibit such disclosure, in which case such Borrower or such
Subsidiary agrees to use commercially reasonable efforts to obtain the consent
of such Person to such disclosure), and to discuss the affairs, finances and
accounts of such Borrower and its Subsidiaries with, and to be advised as to
the same by, its and their officers, all upon reasonable prior notice during
normal business hours at such reasonable times as the Administrative Agent or
any Lender may reasonably request.

 

9.9.2.  Environmental
Assessments.  Upon
the occurrence and during the continuance of an Event of Default, the
Administrative Agent may require the Borrowers to obtain an environmental
assessment or audit reasonable under the circumstances, prepared by a
hydrogeologist, an independent engineer or other qualified consultant or expert
approved by the Administrative Agent to evaluate or confirm, (a) whether any
Hazardous Materials are present in the soil or water at any Mortgaged Property
and (b) whether the use and operation of any Mortgaged Property complies with
all Environmental Laws.  Environmental
assessments may include without limitation detailed visual inspections of any
Mortgaged Property including any and all storage areas, storage tanks, drains,
dry wells and leaching areas, and the taking of soil samples, surface water
samples and ground water samples, as well as such other investigations or
analyses as the

 

70

 

Administrative Agent deems appropriate.  The reasonable costs of such environmental
assessments shall be paid by the Borrowers.

 

9.9.3.  Communications
with Accountants.  The
Borrowers authorize the Administrative Agent and, if accompanied by the
Administrative Agent, the Lenders to communicate directly with the Borrowers’
independent certified public accountants and authorizes such accountants to
disclose to the Administrative Agent and the Lenders any and all financial
statements and other supporting financial documents and schedules including
copies of any management letter with respect to the business, financial
condition and other affairs of the Borrowers or any of their Subsidiaries to
the extent prepared for the Borrowers. 
At the reasonable request of the Administrative Agent, the Borrowers
shall deliver a letter addressed to such accountants instructing them to comply
with the provisions of this §9.9.3.

 

9.10.  Compliance with Laws, Contracts,
Licenses, and Permits.  Each
of the Borrowers will, and will cause each of their Subsidiaries to, comply in
all material respects with (a) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, (b) the provisions of
its Governing Documents, (c) all agreements and instruments by which it or any
of its properties may be bound and (d) all applicable decrees, orders, and
judgments.  If any authorization,
consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that the Borrowers or any of their Subsidiaries may fulfill any of their
obligations hereunder or any of the other Loan Documents to which any Borrower
or such Subsidiary is a party, the Borrowers will, or (as the case may be) will
cause such Subsidiary to, immediately take or cause to be taken all reasonable
steps within the power of the Borrowers or such Subsidiary to obtain such
authorization, consent, approval, permit or license and furnish the
Administrative Agent and the Lenders with evidence thereof.  Without limiting the foregoing, each of the
Borrowers will, and will cause each of its Subsidiaries to, obtain any and all
approvals by any federal, state or local liquor authority necessary for the
continued operation at all times of any Restaurant operated by any of the
Borrowers or their Subsidiaries with full liquor service unless the failure to
obtain such approvals would not have a Material Adverse Effect.

 

9.11.  Employee Benefit Plans.  The Borrowers will (a)
promptly upon filing the same with the Department of Labor or Internal Revenue
Service upon request of the Administrative Agent, furnish to the Administrative
Agent a copy of the most recent actuarial statement required to be submitted
under §103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan, (b) promptly upon
receipt or dispatch, furnish to the Administrative Agent any notice, report or
demand sent or received in respect of a Guaranteed Pension Plan under §§302,
4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under §§4041A, 4202, 4219, 4242, or 4245 of ERISA and (c) promptly
furnish to the Administrative Agent a copy of all 

 

71

 

actuarial statements required to be submitted under all Applicable Pension
Legislation.

 

9.12.  Use of Proceeds.  The Borrowers will use the proceeds of the
Revolving Credit Loans and obtain Letters of Credit solely for the purposes set
forth in §8.17.1.

 

9.13.  Additional Mortgaged Property;
Notice of Leases.

 

(a)                                  If,
after the Closing Date, any of the Borrowers or any of their Subsidiaries
acquires a fee interest in real estate, such Borrower shall, or shall cause
such Subsidiary to, deliver forthwith to the Administrative Agent for the
benefit of the Lenders and the Administrative Agent a fully executed valid and
enforceable first priority mortgage or deed of trust over such acquired real
estate free and clear of all defects and encumbrances except for Permitted
Liens.

 

(b)                                 If,
after the Closing Date, any of the Borrowers or any of their Subsidiaries
intends to lease  real estate for a term in excess of five (5) years, or to
lease office space where they intend to maintain books and records relating to
their businesses, the Borrowers shall use reasonable best efforts to ensure
that such lease permits the Administrative Agent to obtain a first priority
leasehold mortgage over such leased real estate and to obtain from the landlord
a waiver substantially in the form of Exhibit F hereto.  Upon the execution of such lease, the Borrowers
or such Subsidiary shall promptly deliver to the Administrative Agent a copy of
such lease, and, to the extent permitted by the applicable lease and required
by the Administrative Agent, the Borrowers or such Subsidiary shall deliver
forthwith to the Administrative Agent for the benefit of the Lenders and the
Administrative Agent a fully executed, valid and enforceable first priority
leasehold mortgage over such leased real estate, free and clear of all defects
and encumbrances except for Permitted Liens.

 

(c)                                  Each
such mortgage, leasehold mortgage or deed of trust referred to in §9.13(a) and
(b) shall be substantially in the form of the Mortgages delivered on or about
the Closing Date, together with evidences of insurance with the Administrative
Agent named as loss payee and additional insured and other documents and
certificates with respect to such real estate, (such evidence of insurance and
other documents and certificates referred to in this §9.13 as “Real Estate
Documentation”) as was required for Real Estate of the Borrowers or any of
their Subsidiaries as of the Original Closing Date or as otherwise reasonably
required by the Administrative Agent.

 

(d)                                 If,
after the Closing Date, any of the Borrowers or their Subsidiaries leases real
estate or any lease of Real Estate is extended or otherwise modified in any
respect, the Borrowers shall, or shall cause such Subsidiary to, use reasonable
efforts to cause the relevant lessor to execute and deliver a notice of lease
(to the extent that a notice of lease is not already 

 

72

 

recorded in respect of such lease) in form meeting all
statutory and recording requirements of the jurisdiction in which the relevant
real property is located.

 

9.14.  Conduct of Business; Restaurants.  The Borrowers will, and
will cause each of their Subsidiaries to, continue to engage only in the
business of owning, operating and (subject to the consent of the Administrative
Agent, such consent not to be unreasonably withheld) managing full-service
restaurants which (other than the managed restaurants) operate using the
restaurant concepts used by the Borrowers on the Closing Date, and in
businesses and activities reasonably related thereto.  The Borrowers shall inform each of the Lenders of any new
Restaurant locations simultaneously with the delivery of the financial
statements referred to in §9.4(c) but in any event no later than one (1) month
after the opening of a new Restaurant location and the entering into a lease
for, or the acquisition of, the premises for a new Restaurant.  The Parent will continue to engage only in
the business of owning the Equity Interests of the Borrowers and shall not own
any assets other than the Equity Interests of the Borrowers.

 

9.15.  Interest Rate Protection.  Within thirty (30) days
following the Closing Date, the Borrowers will purchase or enter into an
interest cap or swap or such other interest rate protection agreements for
which the terms and conditions (including the term of the agreements, the
amount of Indebtedness for borrowed money which is covered by the interest cap,
and the rates thereunder) are satisfactory to the Administrative Agent.

 

9.16.  Bank Accounts. 
The Borrowers will, and will cause each of their
Subsidiaries to, cause all cash receipts, checks and cash proceeds of accounts
receivable and other Collateral of the Borrowers and their Subsidiaries to be
deposited only into (i) depository accounts with financial institutions that
have entered into agency account agreements in substantially the form of Exhibit
D hereto (such agency account agreements referred to herein as “Agency
Account Agreements” and such depository accounts with financial
institutions that have entered into such Agency Account Agreements referred to
herein as “Agency Accounts”) or (ii) the Concentration Account, in each
case as such accounts are identified on Schedule 8.20 hereto.  The Agency Account Agreements shall provide
that at any time following the occurrence of a Default or an Event of Default,
the Administrative Agent shall be entitled to direct the financial institutions
party thereto to cause all funds of the Borrowers and their Subsidiaries held
in the Agency Accounts at such financial institutions to be transferred
immediately and at any time thereafter to the Agent to be applied to the
Obligations or held as Collateral, as the Administrative Agent deems
appropriate.  The Borrowers shall cause
(A) all cash receipts and checks in excess of $50,000 at each Restaurant to be
deposited into an Agency Account or a Concentration Account, on at least two
(2) separate Business Days during each week (a “week”, for the purposes
of this §9.16, being deemed to begin at the beginning of each Monday and end at
the end of the following Friday) and (B) all funds in each Agency Account or
any other account of the Borrowers or any of their Subsidiaries in excess of
$35,000 (or, to the extent that more than one Restaurant makes deposits to one
Agency Account, the sum of $35,000 multiplied by  

 

73

 

the number of Restaurants making deposits into such Agency Account) to
be deposited in the Concentration Account on a daily basis on each Business
Day.  The Borrowers shall at all times
maintain a Concentration Account with a financial institution that has entered
into an Agency Account Agreement with the Administrative Agent and the
Borrowers that is in all respects satisfactory to the Administrative Agent.

 

9.17.  Additional Subsidiaries.  In the event that, after
the date hereof, any of the Borrowers or any of their Subsidiaries creates any
new Subsidiary or acquires a new Subsidiary in accordance with §10.5.3, (a)
such new Subsidiary shall, concurrently with such event or as soon as
practicable thereafter, execute and deliver to the Administrative Agent an
instrument of joinder and accession, in form and substance satisfactory to the
Administrative Agent, pursuant to which such new Subsidiary shall join the
Credit Agreement as a Borrower and the Security Documents as a grantor of
security thereunder as if such new Subsidiary was an original signatory hereto
and thereto, and (b) the Borrowers and/or such new Subsidiary (as the case may
be) shall deliver such other instruments and documents, including without
limitation allonges to the Notes in form and substance satisfactory to the
Administrative Agent, Perfection Certificates, Uniform Commercial Code
financing statements and stock or other certificates representing all of the
issued and outstanding Equity Interests of such new domestic Subsidiary and
sixty-five percent (65%) of non-U.S. Subsidiaries, with accompanying stock
powers or other instruments of transfer duly executed in blank, in each case
required to be executed or delivered pursuant to such Security Documents in order
to grant to or maintain the Administrative Agent’s first priority perfected
security interest in and to the assets of and the Equity Interests issued by
such new Subsidiaries.  Further,
contemporaneously with the formation or acquisition of such new Subsidiary, the
Borrowers and/or such new Subsidiary shall execute and/or deliver to the
Administrative Agent such other documentation as the Administrative Agent may
reasonably request in furtherance of the intent of this §9.17, including
without limitation an updated Schedule 8.19 hereto and documentation of
the type required to be supplied by the Borrowers and their Subsidiaries as a
condition precedent to the initial Revolving Credit Loans made hereunder
pursuant to §12, as applicable to such new Subsidiary or acquisition permitted
pursuant to §10.5.3.

 

9.18.  Amendments to Documents.  The Borrowers will
promptly furnish to the Administrative Agent any amendment, supplement or
modification to any of the Convertible Preferred Stock Documents, the
Acquisition Documents, the Equity Documents, the Management Agreements or the
Subordinated Debt Documents executed or delivered following the Closing Date,
as such documents may amended or modified pursuant to §10.14.

 

9.19.  Further Assurances.  The Borrowers will, and will cause each of
their Subsidiaries to, cooperate with the Lenders and the Administrative Agent
and execute such further instruments and documents as the Lenders or the
Administrative Agent shall reasonably request to carry out to their
satisfaction the transactions contemplated by this Credit Agreement and the
other Loan Documents.

 

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9.20.  Post-Closing Delivery Requirements.  (a)                                 No later than thirty
(30) days after the Closing Date, the Borrowers shall have delivered to the
Administrative Agent evidence, in form and substance reasonably satisfactory to
the Administrative Agent, of the dissolution of McCormick & Schmick
Acquisition II Texas, Inc., a Texas corporation (“McCormick Texas”).  Prior to such date of dissolution, the
Borrowers shall not permit McCormick Texas to own any assets.

 

(b)                                 The
Borrowers will use their commercially reasonable efforts to execute and deliver
to the Administrative Agent, in form reasonably acceptable to the Administrative
Agent, no later than forty-five (45) days after the Closing Date, leasehold mortgages or leasehold deeds of trust
for the following locations:  (i) 623
Brookwood Village, Birmingham, Alabama; (ii) 170 South Market Street, San Jose,
California and (iii)  The Mall at
Millenia, Space A-146, Orlando, Florida.

 

(c)                                  The
Borrowers will use their commercially reasonable efforts to deliver to the
Administrative Agent, in form reasonably acceptable to the Administrative
Agent, no later than forty-five (45) days after the Closing Date, landlord
consents and/or lien waivers, as applicable, for the following leased locations: 
(i) 623 Brookwood Village, Birmingham, Alabama; (ii) 8100 East Union
Avenue, Suite R101, Denver, CO (iii) 1006 Harborplace, 201 East Pratt Street,
Baltimore, MD, (iv) Riverside Square Mall, 274 Riverside Square, Hackensack,
NJ, (v) 11 Dorrance Street, Providence, RI, (vi) 401 Congress Avenue, Austin,
TX and (vii) 307 North Park Center, Dallas, TX.

 

10.  CERTAIN
NEGATIVE COVENANTS.

 

The Borrowers covenant and agree that, so long as any
Revolving Credit Loan, Unpaid Reimbursement Obligation, Letter of Credit or
Note is outstanding or any Lender has any obligation to make any Revolving
Credit Loan or the Administrative Agent has any obligations to issue, extend or
renew any Letters of Credit:

 

10.1.  Restrictions on Indebtedness.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:

 

(a)                                  Indebtedness
to the Lenders and the Administrative Agent arising under any of the Loan
Documents;

 

(b)                                 endorsements
for collection, deposit or negotiation and warranties of products or services,
in each case incurred in the ordinary course of business;

 

(c)                                  Subordinated
Debt; provided that (i) the aggregate principal amount of such
Subordinated Debt plus the aggregate principal amount of Subordinated
Debt incurred by the Parent shall not exceed $10,000,000 at any time and (ii)
prior to the incurrence of any such Subordinated Debt, the Borrowers shall have
demonstrated pro forma compliance with the covenants 

 

75

 

set forth in §§11.1 and 11.2 (using Consolidated
EBITDA or Consolidated EBITDAR, as the case may be) for the Reference Period
most recently ended and projected compliance with all covenants hereunder for
the four (4) fiscal quarters following the incurrence of such Subordinated
Debt; and provided, further, such Subordinated Debt (i) shall be
expressly subordinated and made junior to the payment and performance in full
of the Obligations on terms which are reasonably satisfactory in all respects
to the Required Lenders, (ii) shall not contain terms requiring the payment of
cash interest more frequently than quarterly, (iii) shall bear cash interest at
a rate per annum not greater than 13%, and any interest which accrues at a per
annum rate in excess of 13% is only required to be paid in kind prior to the
Maturity Date, (iv) shall have a final maturity not earlier than one (1) year
following the Maturity Date, and (v) shall otherwise contain terms and
provisions reasonably satisfactory to the Required Lenders;

 

(d)                                 Indebtedness
incurred in connection with the acquisition after the Original Closing Date of
any real or personal property by such Borrower or such Subsidiary or under any
Capitalized Lease, and any refinancings, renewals and replacements thereof
which contain terms no more onerous to the Borrowers than the Indebtedness so
refinanced, renewed or replaced, provided that the aggregate principal
amount of such Indebtedness (including any such Indebtedness outstanding on the
Original Closing Date) of all of the Borrowers and their Subsidiaries shall not
exceed the aggregate amount of $3,000,000 at any one time;

 

(e)                                  Indebtedness
in respect of interest rate agreements, swaps or similar arrangements entered
into pursuant to §9.15 to protect the Borrowers from changes in interest rates;

 

(f)                                    Indebtedness
not otherwise permitted by this §10.1 existing on the Original Closing Date and
listed and described on Schedule 10.1 hereto and any
refinancings thereof not to exceed such original principal amount and on terms
and conditions substantially similar thereto; and

 

(g)                                 Indebtedness
of a Subsidiary of a Borrower owing to such Borrower and Indebtedness of one
Borrower owing to another Borrower; provided that all such intercompany
Indebtedness permitted by this §10.1(g), and all instruments (if any)
evidencing any thereof, shall be pledged and delivered to the Administrative
Agent, for the benefit of the Lenders and the Administrative Agent, as security
for the Obligations pursuant to the provisions of the applicable Security
Documents, and the Administrative Agent shall have a first priority perfected
lien and security interest therein; and provided  further that all
such intercompany Indebtedness shall be subordinated to the Obligations on
terms satisfactory to the Administrative Agent;

 

(h)                                 guarantees
by a Borrower or a Subsidiary of a Borrower of Indebtedness otherwise permitted
under this §10.1;

 

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(i)                                     Indebtedness
consisting of contingent obligations of any Borrower or any of its Subsidiaries
to repurchase or otherwise redeem Equity Interests of MS LLC from former
employees of MS LLC, a Borrower or any of their Subsidiaries pursuant to the
terms of the Equity Documents or other employee compensation plans of the
Borrowers and their Subsidiaries and matured obligations to repurchase or
otherwise redeem such stock to the extent such repurchase or redemption is
permitted under §10.4(d); and

 

(j)                                   other
unsecured Indebtedness not otherwise permitted hereunder in an aggregate
principal amount of $1,000,000, provided that no Default or Event of
Default has occurred and is continuing at the time of the incurrence of such
unsecured Indebtedness or would result after giving effect thereto.

 

10.2.  Restrictions on Liens.

 

10.2.1.  Permitted Liens.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, (a) create or incur or suffer
to be created or incurred or to exist any Lien upon any of its property or
assets of any character whether now owned, leased or hereafter acquired, or
upon the income or profits therefrom; (b) transfer any of such property or
assets or the income or profits therefrom for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (c) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (d)
suffer to exist any claim or demand against it that if unpaid might by law or
upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever
over its general creditors; or  (e) sell, assign, pledge or otherwise
transfer any “receivables” as defined in clause (g) of the definition of
the term “Indebtedness,” with or without recourse; provided that
the Borrowers or any of their Subsidiaries may create or incur or suffer to be
created or incurred or to exist:

 

(i)                                     Liens
to secure claims in respect of taxes, assessments and other government charges
in respect of obligations not overdue or which are being contested in good
faith or Liens on properties to secure claims for labor, material or supplies
in respect of obligations not overdue or which are being contested in good
faith and for which adequate reserves have been set aside in accordance with
GAAP;

 

(ii)                                  deposits
or pledges made in connection with, or to secure payment of, workmen’s
compensation, unemployment insurance, old age pensions or other social security
obligations, statutory obligations, insurance contracts, performance bonds issued
in the ordinary course of business and other similar obligations;

 

77

 

(iii)                               Liens
on properties in respect of judgments or awards that have been in force for
less than the applicable period for taking an appeal so long as execution is
not levied thereunder or in respect of which such Borrower or such Subsidiary
shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained
pending such appeal or review and for which adequate reserves have been set
aside in accordance with GAAP;

 

(iv)                              Liens
of carriers, warehousemen, mechanics and materialmen, and other like Liens on
properties in existence in respect of obligations not overdue or which are
being contested in good faith and for which adequate reserves have been set
aside in accordance with GAAP;

 

(v)                                 encumbrances
on Real Estate consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and irregularities in the
title thereto, landlord’s or lessor’s liens, liens that would be disclosed by
an accurate survey, and other minor Liens, provided that none of such
Liens (A) interferes materially and adversely with the use of the property
affected in the ordinary conduct of the business of the Borrowers and their
Subsidiaries, and (B) individually or in the aggregate have a Material Adverse
Effect;

 

(vi)                              Liens
existing  on
the Original Closing Date and listed on Schedule 10.2 hereto;

 

(vii)                           purchase
money security interests in or purchase money mortgages on real or personal
property acquired (in the case of purchase money security interests) or leased
(in the case of Capitalized Leases) to secure purchase money Indebtedness or Capitalized
Leases of the type and amount permitted by §10.1(d), incurred in connection
with the acquisition or lease of such property, which security interests or
mortgages cover only the real or personal property so acquired or leased;

 

(viii)                        Liens on
each Mortgaged Property as and to the extent permitted by the Mortgage
applicable thereto;

 

(ix)                                Liens
in favor of the Administrative Agent for the benefit of the Lenders and the
Administrative Agent under the Loan Documents and any Interest Rate Agreements;

 

(x)                                   Liens
which replace Liens otherwise permitted hereunder so long as (i) such
replacement Liens do not secure Indebtedness in an amount in excess of the
amount of the original Indebtedness secured thereby and (ii) such Liens
encumber no more than the assets encumbered by the Liens replaced thereby;

 

(xi)                                claims
and demands of the type specified in clause (d) above to the extent such claims
or demands are not otherwise permitted pursuant to 

 

78

 

this §10.2.1 if and to the extent such claims or
demands (x) are not matured or due and payable or (y) are being actively
contested in good faith and for which adequate reserves have been set aside in
accordance with GAAP and; provided that any such claim or demand outstanding
for more than ninety (90) days after the date on which it became due and
payable does not exceed $2,000,000.

 

10.2.2.  Restrictions on
Negative Pledges and Upstream Limitations. None of
the Borrowers will, nor will permit any of its Subsidiaries to, (a) enter into or permit to exist any
arrangement or agreement (excluding the Credit Agreement and the other Loan
Documents) which directly or indirectly prohibits such Borrower or any of its
Subsidiaries from creating, assuming or incurring any Lien upon its properties,
revenues or assets or those of any of its Subsidiaries whether now owned or
hereafter acquired, or (b) enter into any agreement, contract or
arrangement (excluding the Credit Agreement and the other Loan Documents)
restricting the ability of any Subsidiary of such Borrower to pay or make
dividends or distributions in cash or kind to the Borrowers, to make loans,
advances or other payments of whatsoever nature to the Borrowers, or to make
transfers or distributions of all or any part of its assets to the Borrowers; in each case other than (i) restrictions on
specific assets which assets are the subject of purchase money security
interests to the extent permitted under §10.2.1, and (ii) customary
anti-assignment provisions contained in leases and licensing agreements entered
into by such Borrower or such Subsidiary in the ordinary course of its
business.

 

10.3.  Restrictions on Investments.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, make or permit to exist or to
remain outstanding any Investment except Investments in:

 

(a)                                  Cash
Equivalents;

 

(b)                                 [Intentionally
Omitted];

 

(c)                                  [Intentionally
Omitted];

 

(d)                                 Investments
existing  on
the Original Closing Date and listed on Schedule 10.3
hereto;

 

(e)                                  Investments
with respect to Indebtedness permitted by §10.1(g) or (h)  so long as such entities
remain (i) a Borrower or (ii) a Subsidiary of a Borrower, as the case may be;

 

(f)                                    Investments
consisting of Investments by a Borrower in another Borrower or by a Borrower in
any of its Subsidiaries, including Investments effected as a result of the
transfer of assets between Borrowers permitted pursuant to §10.5.2(c) and
§10.5.3(d);

 

79

 

(g)                                 Investments
consisting of promissory notes received as proceeds of asset dispositions
permitted by §10.5.2; provided that the aggregate value of such
promissory notes received in connection with any such asset disposition shall
not exceed fifty percent (50%) of the aggregate value of the proceeds of such
asset disposition;

 

(h)                                 Investments
consisting of loans and advances to employees for moving, entertainment, travel
and other similar expenses in the ordinary course of business not to exceed
$250,000 in the aggregate at any time outstanding;

 

(i)                                     securities
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business;

 

(j)                                     Investments
consisting of Capitalized Leases permitted hereunder;

 

(k)                                  Investments
consisting of Interest Rate Agreements entered into by any Borrower pursuant to
§9.15;

 

(l)                                     the
Investments related to the Santa Rosa Transaction, so long as such Investments
are secured by the Santa Rosa Pledge Agreement and any other Investment made by
a Borrower in connection with a restaurant management agreement pursuant to
§9.14 provided (i) any such other Investment is consented to by the
Administrative Agent (such consent not to be unreasonably withheld) and (ii) if
requested by the Administrative Agent, the property or assets which are the
subject of such Investment are made part of the Collateral subject to the
Security Documents; and

 

(m)                               Investments
consisting of performance bonds or advance payment bonds, in each case issued
in the ordinary course of business

 

provided, however, that, with
the exception of demand deposits referred to in §10.3(b), promissory notes
referred to in §10.3(g) evidencing Indebtedness in an amount less than or equal
to $50,000, and loans and advances referred to in §10.3(h), such Investments
will be considered Investments permitted by this §10.3 only if all actions have
been taken to the satisfaction of the Administrative Agent to provide to the
Administrative Agent, for the benefit of the Lenders and the Administrative
Agent, a first priority perfected security interest in all of such Investments
free of all Liens other than Permitted Liens.

 

10.4.  Restricted Payments.  None of the Borrowers will,
nor will permit any of its Subsidiaries to, make any Restricted Payments, other
than:

 

(a)                                Distributions
by any Borrower to any other Borrower or by any Subsidiary of a Borrower to
such Borrower;

 

80

 

(b)                                 (i) payments by the Borrowers to the Parent to
enable the Parent to pay costs and expenses incurred in the ordinary course of
business as a holding company, including, without limitation, payment of
administrative costs and expenses and (ii) payments in respect of the
Management Fees and reimbursement obligations and indemnification obligations
arising from activities in the ordinary course of the Borrowers’ business and
payable under the Management Agreements, provided that (A) the aggregate
amount of all such amounts payable in any fiscal year of the Borrowers under
clauses (i) and (ii) of this subparagraph (b) shall not exceed $2,440,000 plus
reasonable board fees payable to members of the board of directors of the
Parent, the Borrowers or MS LLC who are not part of the management of the
Borrowers, the Parent or MS LLC or affiliated with the Sponsors and reasonable
out of pocket expenses incurred by members of the board of directors or
observers of the Parent, the Borrowers or MS LLC; (B) the annual Management
Fees shall be payable in equal quarterly installments, (C) with respect to the
payment of Management Fees, no Default or Event of Default then exists or would
result after the making of such payment, (D) the Administrative Agent shall
have received a Compliance Certificate for the Reference Period most recently
ended, (E) the Borrowers shall not pay any Management Fees prior to the
commencement of the fiscal quarter to which such Management Fees relate, and
(F) notwithstanding clause (A) above, the Borrower may pay Management
Fees which were not paid in respect of any prior fiscal quarter so long as (1)
no Default or Event of Default then exists or would result after the making of
such payment and (2) the Administrative Agent shall have received a Compliance
Certificate for the Reference Period most recently ended at least three (3)
Business Days prior to the payment of such Management Fees;

 

(c)                                  payments
by the Borrowers to the Parent to permit the Parent to pay federal and state
income taxes, franchise taxes and other similar licensing expenses incurred in
the ordinary course of business which are owed or payable by the Parent; and

 

(d)                                 so
long as no Event of Default is then continuing, Distributions in an amount not
to exceed $500,000 per annum and $2,000,000 in the aggregate during the period
from the Closing Date through to the Maturity Date to be used to repurchase or
otherwise redeem Equity Interests of MS LLC from former employees of MS LLC,
the Borrowers or their Subsidiaries pursuant to the terms of the Equity
Documents or other employee compensation plans of MS LLC, the Borrowers and
their Subsidiaries; provided that the portion of such Distributions
equal to cash payments received by MS LLC, any Borrower or any of their
Subsidiaries from the subsequent sale of such repurchased or redeemed capital
stock for cash to any employee of MS LLC, the Borrowers and their Subsidiaries
at the commencement of such Person’s employment shall not be deemed to be a
Distribution for purposes of this §10.4(d); and

 

81

 

(e)                                  Distributions
by any Borrower to the Parent solely for the purpose of paying interest on
Subordinated Debt incurred by the Parent so long as (i) no Default or
Event of Default shall have occurred and be continuing or would result after
giving effect to any such Distribution, (ii) the Borrowers shall have delivered
to the Administrative Agent a pro forma Compliance Certificate
demonstrating compliance with the financial covenants set forth in §11 after
giving effect to such Distribution, (iii) the aggregate amount of such
Distributions, together with any interest paid by the Borrowers on Subordinated
Debt incurred by the Borrowers pursuant to §10.1(c), shall not exceed during
any fiscal year that amount equal to interest which has accrued on outstanding
Subordinated Debt during such year at a per annum rate equal to 13%, and (iv)
such Distributions are applied by the Parent solely to pay such interest
expense not earlier than the regularly scheduled payment date therefor.

 

In furtherance of the foregoing, the Borrowers shall not make any
Restricted Payments, and the Parent shall not accept any Restricted Payments,
if such payments would be used to redeem or prepay any (i) Convertible
Preferred Stock or (ii) the principal amount of any Indebtedness of the Parent.

 

10.5.  Mergers; Disposition of Assets;
Acquisitions.

 

10.5.1.  Mergers.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, become a party to any merger,
amalgamation or consolidation except (a) the merger or consolidation of one (1)
or more Borrowers with and into another Borrower and (b) the merger or
consolidation of one (1) or more Subsidiaries of a Borrower with and into a
Borrower.

 

10.5.2.  Disposition
of Assets.  None
of the Borrowers will, nor will permit any of its Subsidiaries to, become a
party to or agree to or effect any disposition of assets (excluding any
disposition included in the definition of “Casualty Event”), other than
(a) the sale of inventory in the ordinary course of business and the
disposition of obsolete assets, (b) the disposition of property as part of a
sale and leaseback transaction permitted under §10.6 in the ordinary course of
business consistent with past practices, (c) assignments, dispositions or
transfers by one Borrower to one or more of the other Borrowers of any rights,
property, Indebtedness, business or other asset of the transferring Borrower
(whether tangible or intangible and including, without limitation, membership
interests and goodwill), together with any liability associated therewith; provided
that the Borrowers (i) provide at least thirty (30) days prior written notice
to the Administrative Agent (or such lesser period as may be consented to by
the Administrative Agent) and (ii) execute and deliver Security Documents and
such further instruments, if and to the extent requested by the Administrative
Agent, in form and substance satisfactory to the Administrative Agent, and do,
or cause to be done, such further acts as may be necessary or proper in the
opinion of the Administrative Agent to evidence, continue, preserve and perfect
the security 

 

82

 

for the Obligations provided by the Borrowers, and (d)
the sale of up to two (2) Unprofitable Restaurants in any year, provided
that the proceeds of such sales of Unprofitable Restaurants are reinvested in
new or existing Restaurants within two hundred seventy (270) days thereafter or
are used to repay or prepay the Obligations pursuant to §4.2(a); provided,
further, that, if (A) within such 270-day period after receipt of such
proceeds by the Borrowers, the Borrowers enter into an agreement 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, the Borrowers shall have completed,
or shall have made significant progress toward completion of, such reinvestment
with such proceeds, then the Borrowers shall not be required to prepay the
Revolving Credit Loans pursuant to §§4.2 and 4.3 but shall in any event comply
with §4.4.  Nothing in this §10.5.2 is
intended to prohibit any Borrower or any of the their Subsidiaries from
conditionally agreeing to dispose of any assets subject to the prior approval
of the Lenders required by §17.12 if (i) such Borrower or Subsidiary will not
be subject to any penalties in connection with such agreement in the event that
the Lenders required by §17.12 do not consent to such disposition or (ii) such
disposition is contingent upon the prior or simultaneous repayment of all of
the Obligations hereunder.  The
Administrative Agent may release any Collateral disposed of by any Borrower or any
Subsidiary of any Borrower if such disposition is in compliance with this
§10.5.2 and otherwise in accordance with the terms hereof.

 

10.5.3.  Acquisitions.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, agree to or effect any asset
acquisition or stock acquisition except (a) Growth Capital Expenditures
permitted pursuant to §11.4, (b) Maintenance Capital Expenditures incurred in
the ordinary course of business to maintain the assets of such Borrower and its
Subsidiaries or to insure compliance with applicable laws and regulations, (c)
the acquisition of inventory, equipment, furnishings and other similar assets
(not including Restaurants or real property) in the ordinary course of business
consistent with past practices, (d) acquisitions by a Borrower effected as a
result of the transfer of assets or obligations between Borrowers permitted
pursuant to §10.5.2(c) and (e) the A&M Acquisition so long as each the
following conditions are satisfied at the time of, or prior to, the consummation
of the A&M Acquisition:

 

(i)                                     after
giving effect to the A&M Acquisition, the assets comprising such business
(as used in this definition, the “Acquired Assets”) shall be owned or
leased exclusively by such Transaction Party;

 

(ii)                                  the
Borrowers and their Subsidiaries shall have complied with the requirements of
§9.17 hereof;

 

83

 

(iii)                               the
Borrowers shall have demonstrated to the reasonable satisfaction of the
Administrative Agent that, immediately after giving effect to the A&M
Acquisition (including the making of any Revolving Credit Loans required to
finance the A&M Acquisition), all covenants (including covenants contained
in §11 of this Credit Agreement) contained herein would have been satisfied on
a pro forma basis as at the end of and for the most recently ended Reference
Period;

 

(iv)                              no
Default or Event of Default is continuing immediately prior to the A&M
Acquisition, and no Default or Event of Default would result from the A&M
Acquisition;

 

(v)                                 the
Administrative Agent shall have received satisfactory evidence that the
business to be acquired has complied with, and, following the consummation of
the A&M Acquisition, is in compliance with, in all material respects all
applicable laws;

 

(vi)                              prior
to the closing of the A&M Acquisition, the Borrowers have delivered to the
Administrative Agent the definitive acquisition documents between the
applicable Borrower or one of their Subsidiaries and the applicable selling
entities; and

 

(vii)                           the purchase
price (excluding for purposes of this clause (vii), any payments related to (A)
net working capital adjustments not in excess of $500,000 or (B) prorations
related to lease payments or other expenses) for the new Restaurants being
acquired shall not exceed $5,800,000 and conversion and pre-opening costs
relating to such new Restaurants shall not exceed $3,000,000 in the aggregate.

 

10.6.  Sale and Leaseback.  None of the Borrowers will, nor will permit any
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby any Borrower or any of its Subsidiaries shall sell or transfer any
property owned by it in order then or thereafter to lease such property or
lease other property that such Borrower or such Subsidiary intends to use for
substantially the same purpose as the property being sold or transferred; provided
that, so long as no Event of Default has occurred and is continuing, the
Borrowers and their Subsidiaries may enter into sale and leaseback transactions
with respect to property and equipment in an aggregate amount not to exceed
$2,500,000 during the period from the Closing Date through to the Maturity
Date; and provided, further, that (a) the terms of the sale as
such are comparable to terms which could be obtained in an arms length sale
among unaffiliated parties not involving a sale and leaseback transaction, (b)
the terms of the lease as such are comparable to terms which could be obtained
in an arms length commercial operating lease among unaffiliated parties and (c)
the proceeds of such sale and leaseback transaction are applied in accordance
with §4.2.

 

10.7.  Compliance with Environmental Laws.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, other than in compliance with
all 

 

84

 

applicable Environmental Laws except where the failure to do so would
not result in a Material Adverse Effect (a) use any of the Real Estate or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, (b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances, (c) generate any Hazardous Substances on any of the Real Estate,
(d) conduct any activity at any Real Estate or use any Real Estate in any
manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or threatened release of Hazardous Substances on, upon or
into the Real Estate or (e) otherwise conduct any activity at any Real Estate
or use any Real Estate in any manner that would violate any Environmental Law
or bring such Real Estate in violation of any Environmental Law.

 

10.8.  Employee Benefit Plans.  No Borrower nor any ERISA
Affiliate will:

 

(a)                                  engage
in any “prohibited  transaction” within the meaning of §406 of
ERISA or §4975 of the Code which could result in a material liability for any
of the Borrowers or any of their Subsidiaries; or

 

(b)                                 permit
any Guaranteed Pension Plan to incur an “accumulated  funding  deficiency”,
as such term is defined in §302 of ERISA, whether or not such deficiency is or
may be waived; or

 

(c)                                  fail
to contribute to any Guaranteed Pension Plan to an extent which, or terminate
any Guaranteed Pension Plan in a manner which, could result in the imposition
of a lien or encumbrance on the assets of any of the Borrowers or any of their
Subsidiaries pursuant to §302(f) or §4068 of ERISA; or

 

(d)                                 amend
any Guaranteed Pension Plan in circumstances requiring the posting of security
pursuant to §307 of ERISA or §401(a)(29) of the Code;

 

(e)                                  permit
or take any action which would result in the aggregate benefit liabilities
(within the meaning of §4001 of ERISA) of all Guaranteed Pension Plans
exceeding the value of the aggregate assets of such Plans, disregarding for
this purpose the benefit liabilities and assets of any such Plan with assets in
excess of benefit liabilities by more than $500,000; or

 

(f)                                    permit
or take any action which would contravene any Applicable Pension Legislation,
except to the extent that any such action could not reasonably be expected to
have a Material Adverse Effect.

 

10.9.  Business Activities.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, engage directly or indirectly
(whether through Subsidiaries or otherwise) in any type of business other than
the businesses conducted by the Borrowers and their Subsidiaries immediately
prior to the Closing Date and 

 

85

 

operating and (subject to the consent of the Administrative Agent, such
consent not to be unreasonably withheld) managing full-service restaurants
(including, without limitation, MSRC’s performance of services and its
Investment related to the Santa Rosa Transaction) which (other than the managed
restaurants) operate using the restaurant concepts used by the Borrowers on the
Closing Date, and, in each case, in related businesses.

 

10.10.  Fiscal Year; Fiscal Quarters.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, change the date of the end of
its fiscal year or fiscal quarters from those set forth in §8.4.1.

 

10.11.  Transactions with Affiliates.  None of the Borrowers
will, nor will permit any of its Subsidiaries to, engage in any transaction
with any Affiliate or Sponsor or any officer, director or employee of an
Affiliate or a Sponsor, (other than for services as employees, officers and
directors or transactions with other Borrowers or any Subsidiary of the
Borrower), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such Person
or, to the knowledge of such Borrower, any corporation, partnership, trust or
other entity in which any such Person has a substantial interest or is an
officer, director, trustee or partner, on terms more favorable to such Person
than would have been obtainable on an arm’s-length basis in the ordinary course
of business; provided that so long as no Default or Event of Default has
occurred and is continuing, the foregoing restriction shall not apply to the
payment of the Management Fees and other payments to the extent permitted under
§10.4(b) and payments to the Parent permitted under §10.4(c).  The Borrowers shall not pay any fees to
members of the board of directors other than reasonable fees payable to outside
non-affiliated board members of the board of directors who are not part of the
management of the Borrowers or affiliated with the Sponsors.

 

10.12.  Bank Accounts.  None of the Borrowers will, nor will permit any
of its Subsidiaries to, (a) establish any bank accounts after the Closing Date
other than the Agency Accounts and the Concentration Account without the
Administrative Agent’s prior written consent, (b) violate directly or
indirectly any Agency Account Agreement or other bank agency or lock box
agreement in favor of the Administrative Agent for the benefit of the Lenders
and the Administrative Agent with respect to such account; or (c) deposit into
Account No. 3750714986 with Bank of America, N.A., any amounts in excess of
amounts necessary to pay current payroll obligations (including payroll taxes)
with respect to management by $30,000 or more, (d) deposit into Account No.
3750714973 with Bank of America, N.A., any amounts in excess of amounts
necessary to pay current payroll obligations (including payroll taxes) with
respect to non-management employees by $20,000, or (e) establish additional
payroll accounts following the Closing Date.

 

10.13.  Franchises. 
None of the Borrowers will, nor will permit any of its
Subsidiaries to, enter into any Franchise Agreement as a franchisor.

 

10.14.  Restrictions on Amendments to
Documents.

 

86

 

10.14.1.  Convertible Preferred Stock
Documents; Equity Documents; Management Agreements.  None of the Borrowers
will, nor will permit any of its Subsidiaries to amend, supplement or otherwise
modify (pursuant to a waiver or otherwise) the terms of the Convertible
Preferred Stock Documents, the Equity Documents or the Management Agreements in
any manner which would (i) create a mandatory obligation to make any Distribution
or other Restricted Payment thereunder or with respect to any Equity Interests
which the Borrowers are not obligated to make on the Closing Date or (ii)
increase the amount of, or accelerate the timing of, any Borrower’s obligation
to make any Distribution or other Restricted Payment thereunder or with respect
to any Equity Interests.

 

10.14.2.  Acquisition
Documents.  None
of the Borrowers will, nor will permit any of its Subsidiaries to, amend,
supplement or otherwise modify (pursuant to a waiver or otherwise) any material
term or condition of any of the Acquisition Documents in any manner which could
have an adverse effect on the Lenders without the prior written consent of the
Administrative Agent.

 

10.14.3.  Subordinated
Debt.  None of
the Borrowers will, nor will permit any of its Subsidiaries to, amend,
supplement or otherwise modify the terms of any Subordinated Debt Documents
approved by the Required Lenders pursuant to §10.1(c), or prepay, redeem or
repurchase any of the Subordinated Debt. 
Notwithstanding the foregoing, the terms of the Subordinated Debt and
the Subordinated Debt Documents may be amended, supplemented or otherwise
modified (a) solely to conform to amendments made to this Credit Agreement and
the other Loan Documents, (b) to waive defaults thereunder or to amend
covenants in order to make them less restrictive on the Borrowers or (c) solely
to permit the exchange of Subordinated Debt for common stock of the Parent or
other Equity Interests of the Parent with similar attributes; provided
that a certified copy of such amendment, modification or waiver is promptly
delivered to the Administrative Agent and such amendment, modification or
waiver is reasonably satisfactory to the Required Lenders.

 

10.14.4.  Certain
Amendments.  Notwithstanding
the foregoing and for the avoidance of doubt, the Parent and the Borrowers may
(a) amend and restate Parent’s Amended and Restated Certificate of
Incorporation in order to (i) conform the definition of “Change in Control”
contained therein to the definition of “Change of Control” contained in this
Credit Agreement and (ii) update the references to the “Credit Agreement” and
the “Guaranty” referred to in the Parent’s Amended and Restated Certificate of
Incorporation to refer to this Credit Agreement and the Parent Guaranty, and
(b) amend the Convertible Preferred Stock Documents and the Equity Documents to
make conforming changes therein; provided that in each case the Borrowers
comply with the requirements of §9.18 in connection with any such amendments.

 

87

 

10.15.  Capitalization. 
None of the Borrowers will issue any Equity Interests
having debt-like features such as mandatory cash dividends, mandatory
redemption provisions or other provisions which create monetary obligations on
such Borrower that become due and payable in cash during a period when any
Revolving Credit Loans or Letters of Credit are outstanding or any Revolving
Credit Commitments are outstanding.

 

10.16.  Maximum Number of Unprofitable
Restaurants.  None
of the Borrowers will, nor will permit any of its Subsidiaries to, permit the
ratio of (a) the aggregate number of Unprofitable Restaurants to (b) the
aggregate number of Restaurants to be more than ten percent (10%) at any time.

 

11.  FINANCIAL
COVENANTS.

 

The Borrowers covenant and agree that, so long as any
Revolving Credit Loan, Unpaid Reimbursement Obligation, Letter of Credit or
Note is outstanding or any Lender has any obligation to make any Revolving
Credit Loan or the Administrative Agent has any obligation to issue, extend or
renew any Letters of Credit:

 

88

 

11.1.  Leverage Ratio. 
As at the end of any fiscal quarter referenced in the
table below, the Leverage Ratio for the Reference Period then ended shall not
exceed the ratio set forth opposite such fiscal quarter in such table:

 

	
  Fiscal
  Quarter

  	
   

  	
  Ratio

  
	
   

  	
   

  	
   

  
	
  Closing Date through
  FQ3 2004

  	
   

  	
  2.60:1.00

  
	
  FQ4 2004 through FQ3
  2005

  	
   

  	
  2.50:1:00

  
	
  FQ4 2005 through FQ2
  2006

  	
   

  	
  2.40:100

  
	
  Thereafter

  	
   

  	
  2.35:1.00

  

 

11.2.  Adjusted Leverage Ratio.  As at the end of any
fiscal quarter 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 quarter in such table:

 

	
  Fiscal
  Quarter

  	
   

  	
  Ratio

  
	
   

  	
   

  	
   

  
	
  Closing Date through
  FQ4 2004

  	
   

  	
  4.90:1:00

  
	
  Thereafter

  	
   

  	
  4.70:1.00

  

 

11.3.  Consolidated Cash Flow Ratio.  As at 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

  
	
   

  	
   

  	
   

  
	
  Closing Date through
  FQ2 2005

  	
   

  	
  1.40:1.00

  
	
  FQ3 2005 

  	
   

  	
  1.50:1.00

  
	
  FQ4 2005 and Thereafter

  	
   

  	
  1.55:1.00

  

 

11.4.  Growth Capital Expenditures.  The Borrowers will not
make, and will not permit any of their Subsidiaries to make, aggregate Growth
Capital Expenditures or construct, acquire or open new Restaurants during any
fiscal year that exceed the amounts and numbers set forth in the table below
opposite such fiscal year; provided that (i) the maximum amount of
Growth Capital Expenditures permitted in each fiscal year shall be increased by
one hundred (100%) of the unused Growth Capital Expenditures from the
immediately preceding fiscal year (calculated 

 

89

 

without reference to any amounts carried forward to such preceding year
from any earlier year pursuant to this proviso); provided, however,
that to the extent that less than seventy percent (70%) of the permitted Gross
Capital Expenditures for any fiscal year is utilized, the Borrowers shall only
be permitted to carry forward  to the
following fiscal year seventy–five percent (75%) of such unused Growth Capital
Expenditures from such immediately preceding fiscal year (calculated without
reference to any amounts carried forward from prior years pursuant to this
proviso) and (ii) in the event that the Borrowers do not carry forward any of a
prior year’s Growth Capital Expenditures basket, the Borrowers may increase
such current fiscal year’s Growth Capital Expenditure basket by up to
$1,500,000 in order to expedite completion of one or more restaurants in such
fiscal year, so long as the next fiscal year’s Growth Capital Expenditure
basket is reduced by the equivalent amount of such increase:

 

	
  Period

  	
   

  	
  Maximum Growth

  Capital Expenditures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fiscal year 2003

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  Fiscal year 2004

  	
   

  	
  $

  	
  17,000,000

  	
   

  
	
  Fiscal year 2005

  	
   

  	
  $

  	
  19,000,000

  	
   

  
	
  Fiscal year 2006

  	
   

  	
  $

  	
  23,000,000

  	
   

  
	
  Fiscal year 2007

  	
   

  	
  $

  	
  23,000,000

  	
   

  

 

Notwithstanding the foregoing, the Borrowers will not commit to open
any new Restaurants (including without limitation entering into any lease,
purchase agreement, construction contract or other agreement or arrangement
relating to the acquisition, build-out or refurbishment of any property in
connection with the opening or anticipated opened of a new Restaurant), or make
Growth Capital Expenditures a Borrower was not previously committed to make, at
any time during which a Default or Event of Default is continuing or when the
Leverage Ratio as at the end of the most recently ended Reference Period for
which the Borrowers have delivered a Compliance Certificate exceeds the
Incurrence Ratio. For purposes of testing quarterly compliance with this §11.4,
the Borrowers shall aggregate Growth Capital Expenditures incurred year-to-date
for the then current fiscal year and the Growth Capital Expenditures projected
in good faith and based on reasonable assumptions to be made during the balance
of such fiscal year after taking into account the Borrowers’ outstanding
commitments and projections relating to the opening of new Restaurants.

 

12.  CLOSING
CONDITIONS.

 

The obligations of the Lenders to make Revolving
Credit Loans and of the Administrative Agent to issue any initial Letters of
Credit shall be subject to the satisfaction of the following conditions
precedent on or prior to October 28, 2003:

 

90

 

12.1.  Loan  Documents.  Each of Loan Documents
shall have been duly executed and delivered by the respective parties thereto,
and each Loan Document shall be in full force and effect and shall be in form
and substance satisfactory to each of the Lenders.  Each Lender shall have received a fully executed copy of each
such document.

 

12.2.  Certified Copies of Governing
Documents.  Each
of the Lenders shall have received from each of the Borrowers and each of their
Subsidiaries a copy, certified by a duly authorized officer of such Person to
be true and complete on the Closing Date, of each of its Governing Documents as
in effect on such date of certification.

 

12.3.  Corporate or Other Action.  All corporate (or other)
action necessary for the valid execution, delivery and performance by each of the
Borrowers and each of their Subsidiaries of this Credit Agreement and the other
Loan Documents to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Lenders shall have
been provided to each of the Lenders.

 

12.4.  Incumbency Certificate.  Each of the Lenders shall
have received from each of the Borrowers and their Subsidiaries an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of such Person, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf of
such Person, each of the Loan Documents to which such Person is or is to become
a party on or after the Closing Date ; (b) in the case of the Borrowers, to
make Loan Requests and Conversion Requests and to apply for Letters of Credit;
and (c) to give notices and to take other action on its behalf under the Loan
Documents.

 

12.5.  Validity of Liens.  The Security Documents shall be effective to
create, or to have created, in favor of the Administrative Agent a legal, valid
and enforceable first priority (except for Permitted Liens entitled to priority
under applicable law) security interest in and Lien upon the Collateral.  All filings, recordings, deliveries of
instruments and other actions necessary or desirable in the opinion of the
Administrative Agent to protect and preserve such security interests shall have
been duly effected.  The Administrative
Agent shall have received evidence thereof in form and substance satisfactory
to the Administrative Agent.

 

12.6.  Perfection Certificates and
Uniform Commercial Code Search Results.  The Administrative Agent shall have received
from the Parent and each of the Borrowers and their Subsidiaries a completed
and fully executed Perfection Certificate and the results of Uniform Commercial
Code searches (and the equivalent thereof in all applicable foreign
jurisdictions) with respect to the Collateral, indicating no Liens other than Permitted
Liens and otherwise in form and substance satisfactory to the Administrative
Agent.

 

12.7.  Landlord Consents.  The Borrowers and their Subsidiaries shall have
delivered to the Administrative Agent all consents requested by the 

 

91

 

Administrative Agent to receive, as part of the Security Documents, a
collateral assignment of each leasehold of personal property, and a mortgage of
each leasehold of real property identified on Schedule 12.7 hereto, together
in each case with such estoppel certificates as the Administrative Agent may
request.

 

12.8.  Certificates of Insurance.  The Administrative Agent
shall have received (a) a certificate of insurance from an independent
insurance broker dated as of a date preceding the Closing Date by not more than
five (5) Business Days, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing the insurance obtained in
accordance with the provisions of the Security Agreement and (b) certified
copies of all policies evidencing such insurance (or certificates therefore
signed by the insurer or an agent authorized to bind the insurer), which
certificates shall state that the Administrative Agent is an additional insured
and in respect of all insurance (other than liability insurance, which shall
state that the Administrative Agent as an additional insured) a loss payee.

 

12.9.  Solvency Certificate.  Each of the Lenders shall
have received an officer’s certificate of the Borrowers dated as of the Closing
Date as to the solvency of the Borrowers on a consolidated basis following the
consummation of the transactions contemplated herein and in form and substance
satisfactory to the Lenders.

 

12.10.  Opinion of Counsel.  Each of the Lenders and the Administrative
Agent shall have received a favorable legal opinion addressed to the Lenders
and the Administrative Agent, dated as of the Closing Date, in form and
substance satisfactory to the Administrative Agent, from:

 

(a)                                  Kirkland
& Ellis LLP,  counsel to the
Borrowers and their Subsidiaries with respect to the financing contemplated by
this Credit Agreement;

 

(b)                                 Victor
& Bernstein, PC, counsel to the Borrowers with respect to liquor law
compliance;

 

(c)                                  Thompson
& Knight LLP, special counsel to the Borrowers and their Subsidiaries in
Texas; and

 

(d)                                 Ballard
Spahr Andrews & Ingersoll, LLP, special counsel to the Borrowers and their
Subsidiaries in Maryland.

 

12.11.  Capital Structure.  The Administrative Agent shall be satisfied
with the capital structure of the Borrowers and their Subsidiaries.

 

12.12.  Minimum Consolidated EBITDA.  The Administrative Agent
shall have received evidence satisfactory to the Administrative Agent that the
Borrowers’ Consolidated EBITDA for the twelve (12) month period ended September
27, 2003 shall be equal to at least $23,500,000.

 

92

 

12.13.  No Material Adverse Change.  The Administrative Agent
shall be satisfied that there shall have occurred no material adverse change in
the business, operations, assets, management, properties, financial condition,
income or prospects of the Borrowers and their Subsidiaries taken as a whole
since the Balance Sheet Date.

 

12.14.  Financial Statements and
Projections.  The
Administrative Agent shall have received copies of the financial statements and
projections described in §8.4, and the Administrative Agent shall be satisfied
that such financial statements fairly present in all material respects the
financial condition of the Borrowers and their Subsidiaries as at the close of
business on the date thereof and the results of operations for the fiscal
period then ended and compliance with the terms and conditions hereof.  The Administrative Agent shall have received
a certificate demonstrating that on the Closing Date, the ratio of (a)
Consolidated Funded Indebtedness of the Borrowers on such date (after giving
effect to all Revolving Credit Loans to be made on the Closing Date) to (b)
Consolidated EBITDA for the twelve (12) month period ended September 27, 2003
is no more than 2.20:1.  The
Administrative Agent shall have received a statement of the sources and uses of
funds in connection with the financing contemplated by this Credit Agreement
and such statement of sources and uses shall be satisfactory in all material
respects to the Administrative Agent.

 

12.15.  No Litigation. 
No litigation, inquiry, injunction or restraining
order shall be pending, entered or threatened against the Parent, any Borrower
or any Subsidiary of any Borrower that, in the reasonable opinion of the
Administrative Agent, could reasonably be expected to have a material adverse
effect on (i) the transactions contemplated hereby, (ii) the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise) of the Borrowers, taken as a whole, (iii) the ability of the
Borrowers to perform their obligations under the Loan Documents, (iv) the
rights and remedies of the Administrative Agent and the Lenders under the Loan
Documents, or (v) the perfection or priority of any security interests granted
to the Administrative Agent under the Loan Documents.

 

12.16.  Consents and Approvals.  The Administrative Agent
shall have received evidence that all material governmental and third-party
approvals (including liquor licenses, Liquor Management Agreements and other
consents to the extent reasonably obtainable and excluding landlord consents to
the extent required under §12.7) necessary or advisable in connection with and
the credit facilities contemplated hereby and the continuing operations of the
Borrowers shall have been obtained and shall be in full force and effect, and
all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority that would restrain, prevent or
otherwise impose materially adverse conditions on the Borrowers taken as a
whole, or the credit facilities contemplated hereby.

 

12.17.  Management Agreements; Employment
Agreements; Employee Incentive Plans. 
There shall have been made available for review by the
Administrative Agent and the Lenders true and correct copies of (a) any 

 

93

 

amendments to the Management Agreements and any other material
agreement with respect to the management of any Borrower or any of its
Subsidiaries entered into after the Original Closing Date; (b) any material
employment agreements entered into by any Borrower or any of its Subsidiaries
after the Original Closing Date; and (c) any employee incentive plans,
including stock option agreements and other similar arrangements, including any
amendments thereto, established following the Original Closing Date, with each
of the foregoing to be reasonably satisfactory to the Administrative Agent.

 

12.18.  Other Documentation.  All other material
agreements, including any tax sharing agreements or other financing
arrangements of the Borrowers and their Subsidiaries, shall be reasonably
satisfactory in form and substance to the Administrative Agent.

 

12.19.  Payment of Fees and Expenses.  The Borrowers shall have
paid to the Lenders or the Administrative Agent, as appropriate, the Fees
pursuant to §§5.6 and 6.1.  The
Borrowers shall have reimbursed the Administrative Agent for, or paid directly,
all reasonable fees, costs and expenses incurred by the Administrative Agent’s
Special Counsel and local counsel to the Administrative Agent and the Lenders
(including, without limitation, the fees, costs and expenses required to be
paid pursuant to the Fee Letter in all relevant jurisdictions in connection
with the closing of the transactions contemplated hereby.

 

12.20.  Disbursement Instructions.  The Administrative Agent
shall have received disbursement instructions from the Borrowers with respect
to the proceeds of the Revolving Credit Loans to be made on the Closing Date.

 

13.  CONDITIONS
TO ALL BORROWINGS.

 

The obligations of the Lenders to make any Revolving
Credit Loan, and of the Administrative Agent to issue, extend or renew any
Letter of Credit, in each case whether on or after the Closing Date, shall also
be subject to the satisfaction of the following conditions precedent:

 

13.1.  Representations True; No Event of
Default.  Each
of the representations and warranties of any of the Borrowers contained in this
Credit Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Credit Agreement (i) that are
qualified as to materiality shall be true in all respects, and (ii) that are
not qualified as to materiality shall be true in all material respects, as of
the date as of which they were made and shall also be true in all respects, or
true in all material respects, as applicable, 
at and as of the time of the making of such Revolving Credit  Loan or the issuance, extension or renewal
of such Letter of Credit, with the same effect as if made at and as of that
time (except to the extent of changes resulting from transactions contemplated
or permitted by this Credit Agreement and the other Loan Documents and changes
occurring in the ordinary course of business that singly or in the aggregate
are not materially adverse, and to the extent that such 

 

94

 

representations and warranties relate expressly to an earlier date) and
no Default or Event of Default shall have occurred and be continuing.

 

13.2.  No Legal Impediment.  No change shall have
occurred in any law or regulations thereunder or interpretations thereof that
in the reasonable opinion of any Lender would make it illegal for such Lender
to make such Revolving Credit Loan or to participate in the issuance, extension
or renewal of such Letter of Credit or in the reasonable opinion of the
Administrative Agent would make it illegal for the Administrative Agent to
issue, extend or renew such Letter of Credit.

 

13.3.  Proceedings and Documents.  All proceedings in
connection with the transactions contemplated by this Credit Agreement, the
other Loan Documents and all other documents incident thereto shall be
reasonably satisfactory in substance and in form to the Lenders and to the
Administrative Agent and the Administrative Agent’s Special Counsel, and the
Lenders, the Administrative Agent and such counsel shall have received all
information and such counterpart originals or certified or other copies of such
documents as the Administrative Agent may reasonably request.

 

14.  EVENTS
OF DEFAULT; ACCELERATION; ETC.

 

14.1.  Events of Default and Acceleration.  If any of the following
events (each an “Event  of  Default” or, if the giving of
notice or the lapse of time or both is required, then, prior to such notice or
lapse of time, each a “Default”) shall occur:

 

(a)                                  the
Borrowers shall fail to pay any principal of the Revolving Credit Loans or any
Reimbursement Obligation when the same shall become due and payable, whether at
the stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment;

 

(b)                                 the
Borrowers shall fail to pay any interest on the Revolving Credit Loans, any
Fees, or other sums due hereunder or under any of the other Loan Documents,
when the same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed for
payment;

 

(c)                                  any
of the Borrowers (i) shall fail to comply with any of its covenants contained
in §§9.5, the first sentence of 9.6, 9.7, 9.9, 9.12, 9.15, 9.17, 10 or 11 or
any of the covenants contained in any of the Mortgages, or (ii) shall fail to
comply with its covenants contained in §9.4 for a period in excess of five (5)
days;

 

(d)                                 the
Parent, any Borrower or any of its Subsidiaries shall fail to perform any term,
covenant or agreement contained herein or in any of the other Loan Documents
(other than those specified elsewhere in this §14.1) for thirty (30) days after
written notice of such failure has been given to the Parent or such Borrower by
the Administrative Agent;

 

95

 

(e)                                  any
representation or warranty of the Parent, any Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or in
any other document or instrument delivered pursuant to or in connection with
this Credit Agreement shall prove to have been false in any material respect
upon the date when made or deemed to have been made or repeated;

 

(f)                                    (i)
the Parent, any Borrower or any of its Subsidiaries shall (A) fail to pay at
maturity, or within any applicable period of grace, any obligation for borrowed
money or credit received or in respect of any Capitalized Leases in an
aggregate amount in excess of $500,000, or (B) fail to observe or perform any
material term, covenant or agreement contained in any agreement by which it is
bound, evidencing or securing borrowed money or credit received or in respect
of any Capitalized Leases in an aggregate amount in excess of $500,000 for such
period of time as would permit (assuming the giving of appropriate notice if
required) the holder or holders thereof or of any obligations issued thereunder
to accelerate the maturity thereof, or any such holder or holders shall rescind
or shall have a right to rescind the purchase of any such obligations, or (ii)
any Indebtedness in an aggregate amount in excess of $500,000 of the Parent,
any Borrower or any of its Subsidiaries shall be declared due and payable or be
required to be prepaid prior to a regularly scheduled maturity date or
amortization payment date;

 

(g)                                 the
Parent, any Borrower or any of its Subsidiaries shall make an assignment for
the benefit of creditors, or admit in writing its inability to pay or generally
fail to pay its debts as they mature or become due, or shall petition or apply
for the appointment of a trustee or other custodian, liquidator or receiver of
the Parent, such Borrower or any of its Subsidiaries or of any substantial part
of the assets of the Parent, such Borrower or any of its Subsidiaries or shall
commence any case or other proceeding relating to the Parent, such Borrower or
any of its Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall be
commenced against the Parent, such Borrower or any of its Subsidiaries and the
Parent, such Borrower or any of its Subsidiaries shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or
application shall not have been dismissed within forty-five (45) days following
the filing thereof;

 

(h)                                 a
decree or order is entered appointing any such trustee, custodian, liquidator
or receiver or adjudicating the Parent, any Borrower or any of its Subsidiaries
bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of the
Parent, any Borrower or any of its Subsidiaries in an 

 

96

 

involuntary case under federal bankruptcy laws as now
or hereafter constituted;

 

(i)                                     there
shall remain in force, undischarged, unsatisfied and unstayed, for more than
thirty (30) days, any final judgment against the Parent, any Borrower or any of
its Subsidiaries that, with other outstanding final judgments, undischarged,
against the Parent, any Borrower or any of its Subsidiaries exceeds in the
aggregate $500,000;

 

(j)                                     the
holders of all or any part of any Subordinated Debt shall accelerate the
maturity of all or any part of such Subordinated Debt, Subordinated Debt shall
be prepaid, redeemed or repurchased in whole or in part or an offer to prepay,
redeem or repurchase any Subordinated Debt in whole or in part shall have been
made; provided that any Subordinated Debt may be exchanged for common
stock of the Parent or other Equity Interests of the Parent with similar
attributes as common stock;

 

(k)                                  (i)
the Convertible Preferred Stock shall be prepaid, redeemed or repurchased in
whole or in part, (ii) an offer to prepay, redeem or repurchase the Convertible
Preferred Stock in whole or in part shall have been made unless the obligation
to prepay, redeem or repurchase the Convertible Preferred Stock pursuant to
such offer is contingent upon (A) the prior or simultaneous repayment of all of
the Obligations hereunder or (B) receipt of the consent of the Lenders, (iii)
the Convertible Preferred Stock shall be converted into Indebtedness of the
Parent, or (iv) any cash dividend shall be paid in respect of the Convertible
Preferred Stock; provided, however, the Convertible Preferred
Stock may be exchanged by the Parent for other Equity Interests of the Parent
so long as such Equity Interests do not contain terms which are more onerous on
the Parent than the terms of the Convertible Preferred Stock (including terms
relating to the prepayment, redemption or repurchase thereof, or the payment of
dividends thereon);

 

(l)                                     if
any of the Loan Documents shall be cancelled, terminated, revoked or rescinded
or the Administrative Agent’s security interests, mortgages or liens in a
substantial portion of the Collateral shall cease to be perfected, or shall
cease to have the priority contemplated by the Security Documents, in each case
otherwise than in accordance with the terms thereof or with the express prior
written agreement, consent or approval of the Lenders, or any action at law,
suit or in equity or other legal proceeding to cancel, revoke or rescind any of
the Loan Documents shall be commenced by or on behalf of the Parent, the
Borrowers or any of their respective stockholders, or any court or any other
Governmental Authority of competent jurisdiction shall make a determination
that, or issue a judgment, order, decree or ruling to the effect that, any one
or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof;

 

(m)                               the
Parent, any Borrower or any ERISA Affiliate incurs any liability to the PBGC or
a Guaranteed Pension Plan pursuant to Title IV of 

 

97

 

ERISA in an aggregate amount exceeding $500,000, or
the Parent, any Borrower or any ERISA Affiliate is assessed withdrawal
liability pursuant to Title IV of ERISA by a Multiemployer Plan requiring
aggregate annual payments exceeding $500,000, or any of the following occurs
with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a
failure to make a required installment or other payment (within the meaning of
§302(f)(1) of ERISA), provided that the Administrative Agent determines
in its reasonable discretion that such event (A) could be expected to result in
liability of the Parent, any Borrower or any of its Subsidiaries to the PBGC or
such Guaranteed Pension Plan in an aggregate amount exceeding $500,000 and (B)
could reasonably be expected to constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate
United States District Court of a trustee to administer such Guaranteed Pension
Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan;
or (ii) the appointment by a United States District Court of a trustee to
administer such Guaranteed Pension Plan; or (iii) the institution by the PBGC
of proceedings to terminate such Guaranteed Pension Plan;

 

(n)                                 any
Borrower or any of its Subsidiaries shall be enjoined, restrained or in any way
prevented by the order of any Governmental Authority from conducting any
material part of the business of MSRC, individually, or the Borrowers and their
Subsidiaries, taken as a whole, and such order shall continue in effect for
more than thirty (30) consecutive days;

 

(o)                                 there
shall (i) occur any material damage to, or loss, theft or destruction of, any
Collateral or any strike, lockout, labor dispute, embargo, condemnation, act of
God or public enemy, or other casualty, which in any such case causes, for more
than thirty (30) consecutive days, the cessation or substantial curtailment of
revenue producing activities at any facility of any Borrower or any of its
Subsidiariesif such event or circumstance is not covered by insurance and (ii)
such occurrence would have a Material Adverse Effect;

 

(p)                                 [intentionally
omitted];

 

(q)                                 the
Parent, any Borrower or any of its Subsidiaries shall be indicted for a state
or federal crime, or any civil or criminal action shall otherwise have been
brought against such Person, a punishment for which in any such case is
reasonably likely to include the forfeiture of any assets of such Person having
a fair market value in excess of $500,000;

 

(r)                                    a
Change of Control shall occur;

 

(s)                                  the
holders of the Convertible Preferred Stock shall exercise any rights they may
have under any of the Convertible Preferred Stock Documents to require the
Parent to redeem, repurchase or repay the 

 

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Convertible Preferred Stock or the holders of any
subordinated debentures issued upon conversion of the Convertible Preferred
Stock;

 

(t)                                    the
Parent (i) directly or indirectly, beneficially or otherwise, holds or owns
stock or other securities of any Person (other than the Borrowers or
Subsidiaries of the Borrowers and other than Investments permitted under
§10.3), (ii) conducts any activity which is inconsistent with activities which
are normal and customary for a holding company, provided that the Parent
may issue the Convertible Preferred Stock and Subordinated Debt so long as such
issuance is in accordance with §4 of the Guaranty and §10.1(c) of this Credit
Agreement, or (iii) owns any material assets other than the Equity Interests of
MSAC; or

 

(u)                               the
Parent amends, supplements or otherwise modifies the terms of any Subordinated
Debt Documents previously approved by the Required Lenders pursuant to §10.1(c)
other than (i) solely to conform to amendments made to this Credit Agreement
and the other Loan Documents, (ii) to waive defaults thereunder or to amend
covenants in order to make them less restrictive on the Parent or (iii) solely
to permit the exchange of Subordinated Debt for common stock of the Parent or
other Equity Interests of the Parent with similar attributes as common stock; provided
that a certified copy of such amendment, modification or waiver is promptly
delivered to the Administrative Agent and such amendment, modification or
waiver is reasonably satisfactory to the Required Lenders;

 

then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Required Lenders shall,
by notice in writing to the Borrowers declare all amounts owing with respect to
this Credit Agreement, the Notes and the other Loan Documents and all
Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrowers; provided
that in the event of any Event of Default specified in §§14.1(g), 14.1(h),
14.1(j) or 14.1(k), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Administrative
Agent or any Lender.

 

14.2.  Termination of Commitments.  If any one or more of the
Events of Default specified in §§14.1(g), 14.1(h), 14.1(j) or 14.1(k) shall
occur, any unused portion of the credit hereunder shall forthwith terminate and
each of the Lenders shall be relieved of all further obligations to make
Revolving Credit Loans to the Borrowers and the Administrative Agent shall be
relieved of all further obligations to issue, extend or renew Letters of
Credit.  If any other Event of Default
shall have occurred and be continuing, the Administrative Agent may and, upon
the request of the Required Lenders shall, by notice to the Borrowers,
terminate the unused portion of the credit hereunder, and upon such notice
being given such unused portion of the credit hereunder shall terminate
immediately and each of the Lenders shall be relieved of all further
obligations to make Revolving Credit Loans and the Administrative Agent shall
be relieved of all further obligations to issue, extend or 

 

99

 

renew Letters of Credit.  No
termination of the credit hereunder shall relieve the Borrowers or any of their
Subsidiaries of any of the Obligations.

 

14.3.  Remedies.  In
case any one or more of the Events of Default shall have occurred and be
continuing, and whether or not the Lenders shall have accelerated the maturity
of the Revolving Credit Loans pursuant to §14.1, each Lender, if owed any
amount with respect to the Revolving Credit Loans or the Reimbursement
Obligations, may, with the consent of the Required Lenders but not otherwise,
proceed to protect and enforce its rights by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Lender
are evidenced, including as permitted by applicable law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of such Lender. 
No remedy herein conferred upon any Lender or the Administrative Agent
or the holder of any Note or purchaser of any Letter of Credit Participation is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or any other
provision of law.

 

14.4.  Distribution of Collateral Proceeds.  In the event that,
following the occurrence or during the continuance of any Default or Event of
Default, the Administrative Agent or any Lender, as the case may be, receives
any monies in connection with the enforcement of any the Security Documents, or
otherwise with respect to the realization upon any of the Collateral, such
monies shall be distributed for application as follows:

 

(a)                                  First,
to the payment of, or (as the case may be) the reimbursement of the
Administrative Agent for or in respect of all reasonable out-of-pocket costs,
expenses, disbursements and losses which shall have been incurred or sustained
by the Administrative Agent in connection with the collection of such monies by
the Administrative Agent, for the exercise, protection or enforcement by the
Administrative Agent of all or any of the rights, remedies, powers and
privileges of the Administrative Agent or the Lenders under this Credit
Agreement or any of the other Loan Documents or in respect of the Collateral or
in support of any provision of adequate indemnity to the Administrative Agent
against any taxes or liens which by law shall have, or may have, priority over
the rights of the Administrative Agent to such monies;

 

(b)                                 Second,
to all other Obligations in such order or preference as the Required Lenders
may determine; provided, however, that (i) distributions shall be
made (A) pari  passu among Obligations with respect to the
Administrative Agent’s fee and all other Obligations and (B) with respect to
each type of Obligation owing to the Lenders, such as interest, principal, fees
and expenses, among the Lenders pro  rata, and (ii) the
Administrative 

 

100

 

Agent may in its discretion make proper allowance to
take into account any Obligations not then due and payable;

 

(c)                                  Third,
upon payment and satisfaction in full or other provisions for payment in full
satisfactory to the Lenders and the Administrative Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant to
§9-608(a)(1)(c) or §9-615(a)(3) of the Uniform Commercial Code of the
Commonwealth of Massachusetts; and

 

(d)                                 Fourth,
the excess, if any, shall be returned to the Borrowers or to such other Persons
as are entitled thereto.

 

15.  THE AGENTS.

 

15.1.  Authorization.

 

(a)                                  The
Administrative Agent is authorized to take such action on behalf of each of the
Lenders and to exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the Administrative
Agent, together with such powers as are reasonably incident thereto, including
the authority, without the necessity of any notice to or further consent of the
Lenders, from time to time to take any action with respect to any Collateral or
the Security Documents which may be necessary to perfect, maintain perfected or
insure the priority of the security interest in and liens upon the Collateral
granted pursuant to the Security Documents, provided that no duties or
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by the Administrative Agent.

 

(b)                                 The
relationship between the Administrative Agent and each of the Lenders is that
of an independent contractor.  The use
of the term “Administrative Agent” is for convenience only and is used
to describe, as a form of convention, the independent contractual relationship
between the Administrative Agent and each of the Lenders.  Nothing contained in this Credit Agreement
nor the other Loan Documents shall be construed to create an agency, trust or
other fiduciary relationship between the Administrative Agent and any of the
Lenders.

 

(c)                                  As
an independent contractor empowered by the Lenders to exercise certain rights
and perform certain duties and responsibilities hereunder and under the other
Loan Documents, the Administrative Agent is nevertheless a “representative”
of the Lenders, as that term is defined in Article 1 of the Uniform Commercial
Code, for purposes of actions for the benefit of the Lenders and the
Administrative Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. 
Such actions include the designation of the Administrative Agent as “secured
party”, “mortgagee” or the like on all financing statements and
other documents and instruments, whether recorded or otherwise, relating to the

 

101

 

attachment, perfection, priority or enforcement of any security
interests, mortgages or deeds of trust in collateral security intended to
secure the payment or performance of any of the Obligations, all for the
benefit of the Lenders and the Administrative Agent.

 

15.2.  Employees and Agents.  The Administrative Agent
may exercise its powers and execute its duties by or through employees or
agents and shall be entitled to take, and to rely on, advice of counsel
concerning all matters pertaining to its rights and duties under this Credit
Agreement and the other Loan Documents. 
The Administrative Agent may utilize the services of such Persons as the
Administrative Agent in its sole discretion may reasonably determine, and all
reasonable fees and expenses of any such Persons shall be paid by the
Borrowers.

 

15.3.  No Liability. 
None of the Agents nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that such Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.

 

15.4.  No Representations.

 

15.4.1.  General.  None of the Agents shall
be responsible for the execution or validity or enforceability of this Credit
Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes, or for the value of any such collateral security or for
the validity, enforceability or collectability of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Parent, the Borrowers or any of their Subsidiaries, or be bound to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
covenants or agreements herein or in any instrument at any time constituting,
or intended to constitute, collateral security for the Notes or to inspect any
of the properties, books or records of the Borrowers.  The Administrative Agent shall not be bound to ascertain whether
any notice, consent, waiver or request delivered to it by the Borrowers or any
holder of any of the Notes shall have been duly authorized or is true, accurate
and complete.  The Administrative Agent
has not made nor does it now make any representations or warranties, express or
implied, nor does it assume any liability to the Lenders, with respect to the
credit worthiness or financial conditions of the Borrowers.  Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based upon such information and documents as it has 

 

102

 

deemed appropriate, made its own credit analysis and
decision to enter into this Credit Agreement.

 

15.4.2.  Closing
Documentation, etc.  For
purposes of determining compliance with the conditions set forth in §§12 and
13, each Lender that has executed this Credit Agreement shall be deemed to have
consented to, approved or accepted, or to be satisfied with, each document and
matter either sent, or made available, by the Administrative Agent or the
Arranger to such Lender for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
such Lender, unless an officer of the Administrative Agent or the Arranger
active upon the Borrowers’ account shall have received written notice from such
Lender prior to the Closing Date specifying such Lender’s objection thereto and
such objection shall not have been withdrawn by notice to the Administrative
Agent or the Arranger to such effect on or prior to the Closing Date.

 

15.5.  Payments.

 

15.5.1.  Payments
to Administrative Agent.  A
payment by the Borrowers to the Administrative Agent hereunder or under any of
the other Loan Documents for the account of any Lender shall constitute a
payment to such Lender.  The
Administrative Agent agrees promptly to distribute to each Lender such Lender’s
pro  rata share of payments received by the Administrative Agent
for the account of the Lenders except as otherwise expressly provided herein or
in any of the other Loan Documents.

 

15.5.2.  Distribution
by Administrative Agent.  If
in the opinion of the Administrative Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated
by a court of competent jurisdiction. 
If a court of competent jurisdiction shall adjudge that any amount
received and distributed by the Administrative Agent is to be repaid, each
Person to whom any such distribution shall have been made shall either repay to
the Administrative Agent its proportionate share of the amount so adjudged to
be repaid or shall pay over the same in such manner and to such Persons as
shall be determined by such court.

 

15.5.3.  Delinquent
Lenders.  Notwithstanding
anything to the contrary contained in this Credit Agreement or any of the other
Loan Documents, any Lender that fails (a) to make available to the
Administrative Agent its pro  rata share of any Revolving Credit
Loan or to purchase any Letter of Credit Participation or (b) to comply with
the provisions of §17.1 with respect to making dispositions and arrangements
with the other Lenders, where such Lender’s share of any payment received,
whether by setoff or otherwise, is in excess of its pro  rata
share of such payments due and payable to all of the Lenders, in each case as,
when and to the full extent 

 

103

 

required by the provisions of this Credit Agreement,
shall be deemed delinquent (a “Delinquent  Lender”) and shall be
deemed a Delinquent Lender until such time as such delinquency is
satisfied.  A Delinquent Lender shall be
deemed to have assigned any and all payments due to it from the Borrowers,
whether on account of outstanding Revolving Credit Loans, Unpaid Reimbursement
Obligations, interest, fees or otherwise, to the remaining nondelinquent
Lenders for application to, and reduction of, their respective pro  rata
shares of all outstanding Revolving Credit Loans and Unpaid Reimbursement
Obligations.  The Delinquent Lender
hereby authorizes the Administrative Agent to distribute such payments to the
nondelinquent Lenders in proportion to their respective pro  rata
shares of all outstanding Revolving Credit Loans and Unpaid Reimbursement
Obligations.  A Delinquent Lender shall
be deemed to have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Revolving Credit Loans
and Unpaid Reimbursement Obligations of the nondelinquent Lenders, the Lenders’
respective pro  rata shares of all outstanding Revolving Credit
Loans and Unpaid Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to the nonpayment
causing such delinquency.  At any time
before a Delinquent Lender shall have satisfied in full a delinquency as
provided in the foregoing sentence, the Borrowers shall have the same rights
and remedies with respect to such Delinquent Lender as the Borrowers have with
respect to any Affected Lender set forth in §6.8(c) hereof.

 

15.6.  Holders of Notes.  The Administrative Agent may deem and treat the
payee of any Note or the purchaser of any Letter of Credit Participation as the
absolute owner or purchaser thereof for all purposes hereof until it shall have
been furnished in writing with a different name by such payee or by a
subsequent holder, assignee or transferee.

 

15.7.  Indemnity. 
The Lenders ratably agree hereby to indemnify and hold
harmless the Administrative Agent and its affiliates from and against any and
all claims, actions and suits (whether groundless or otherwise), losses,
damages, costs, expenses (including any expenses for which the Administrative
Agent or such affiliate has not been reimbursed by the Borrowers as required by
§17.2), and liabilities of every nature and character arising out of or related
to this Credit Agreement, the Notes, or any of the other Loan Documents or the
transactions contemplated or evidenced hereby or thereby, or the Administrative
Agent’s actions taken hereunder or thereunder, except to the extent that any of
the same shall be caused by the Administrative Agent’s willful misconduct or
gross negligence.

 

15.8.  Administrative Agent as Lender.  In its individual
capacity, Fleet shall have the same obligations and the same rights, powers and
privileges in respect to its Revolving Credit Commitment and the Revolving
Credit Loans made by it, and as the holder of any of the Notes and as the
purchaser of any Letter of Credit Participations, as it would have were it not
also the Administrative Agent.

 

104

 

15.9.  Resignation. 
The Administrative Agent may resign at any time by
giving sixty (60) days prior written notice thereof to the Lenders and the
Borrowers.  Upon any such resignation,
the Required Lenders shall have the right to appoint a successor Administrative
Agent.  Unless a Default or Event of
Default shall have occurred and be continuing, such successor Administrative
Agent shall be reasonably acceptable to the Borrowers.  If no successor Administrative Agent shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent’s
giving of notice of resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent, which shall be
a financial institution having a rating of not less than A or its equivalent by
S&P.  Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder.  After any retiring Administrative Agent’s resignation, the
provisions of this Credit Agreement and the other Loan Documents shall continue
in effect for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as Administrative Agent.

 

15.10.  Notification of Defaults and Events
of Default.  Each
Lender hereby agrees that, upon learning of the existence of a Default or an
Event of Default, it shall promptly notify the Administrative Agent
thereof.  The Administrative Agent
hereby agrees that upon receipt of any notice under this §15.10 it shall
promptly notify the other Lenders of the existence of such Default or Event of
Default.

 

15.11.  Forwarding of Loan Requests, etc.  The Administrative Agent
hereby agrees that upon receipt from the Borrowers of any Loan Request, notice
of conversion or continuation pursuant to §2.7 or §3.5.2 or notice of repayment
pursuant to §2.9.3 or §3.4, it shall promptly forward a copy of such notice to
the other Lenders.  The Administrative
Agent shall not be required to forward notices required to be furnished to the
Lenders by the Borrowers or notices which the Administrative Agent believes to
have been separately forwarded to the Lenders.

 

15.12.  Duties in the Case of Enforcement.  In case one of more Events
of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Administrative Agent
shall, if (a) so requested 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 the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral.  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 

 

105

 

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.

 

15.13.  Duties of Syndication Agent and
Documentation Agent.  Neither
the Syndication Agent nor either of the Documentation Agents shall have any
right, power, obligation, liability, responsibility or duty under this Credit
Agreement or any of the other Loan Documents other than those applicable to it
in its capacity as a Lender.

 

16.  ASSIGNMENT
AND PARTICIPATION.

 

16.1.  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 a portion of its interests, rights and
obligations under this Credit Agreement (including all or a portion of its
Revolving Credit Commitment Percentage and Revolving Credit Commitment and the
same portion of the Revolving Credit Loans at the time owing to it, the Notes
held by it and its participating interest in the risk relating to any Letters
of Credit); provided that (a)  each of the Administrative Agent  and,
unless an Event of Default shall have occurred and be continuing, the Borrowers
shall have given their prior written consent to such assignment, which consents
will not be unreasonably withheld; except that the consent of the Borrowers or
the Administrative Agent shall not be required in connection with any
assignment by a Lender to (i) an existing Lender or (ii) a Lender Affiliate of
such Lender, provided that if such Lender or Lender Affiliate is a Non-U.S.
Lender, such Person has complied with the requirements set forth in §6.2.3
prior to such assignment, (b) 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 Revolving Credit Commitment Percentage and Revolving Credit
Commitment, the Revolving Credit Loans at the time owing to it, and its
participating interest in the risk relating to any Letters of Credit, (c) each
assignment, shall be in a minimum amount of $2,000,000 (or, if less, such
Lender’s entire Revolving Credit Loans and Revolving Credit Commitment) or such
lesser amount consented to by the Administrative Agent, and (d) the parties to
such assignment shall execute and deliver to the Administrative Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit E hereto
(an “Assignment  and  Acceptance”), together with any Notes
subject to such assignment; provided that no Lender may assign its
interests, rights and obligations under this Credit Agreement to a competitor
of the Borrowers or any of their Subsidiaries, or an adverse party in any legal
or arbitration proceeding with the Borrowers or any of their Subsidiaries (as
determined by the Borrowers).  Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least five (5) Business Days after the execution thereof, (y) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder, and (z) the assigning Lender shall, to the extent provided in such
assignment and 

 

106

 

upon payment to the Administrative Agent of the registration fee
referred to in §16.3, be released from its obligations under this Credit Agreement.

 

16.2.  Certain Representations and
Warranties; Limitations; Covenants. 
By executing and delivering an Assignment and
Acceptance, the parties to the assignment thereunder confirm to and agree with
each other and the other parties hereto as follows:

 

(a)                                  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 Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Credit 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,

 

(b)                                 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 Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto;

 

(c)                                  such
assignee confirms that it has received a copy of this Credit Agreement,
together with copies of the most recent financial statements referred to in
§8.4 and §9.4 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance;

 

(d)                                 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 Credit Agreement;

 

(e)                                  such
assignee appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers under this Credit 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;

 

107

 

(f)                                    such
assignee agrees that it will perform in accordance with the Credit 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;

 

(g)                                 such
assignee represents and warrants that it is legally authorized to enter into
such Assignment and Acceptance;

 

(h)                                 such
assignee acknowledges that it has made arrangements with the assigning Lender
satisfactory to such assignee with respect to its pro  rata share
of Letter of Credit Fees in respect of outstanding Letters of Credit; and

 

(i)                                     such
assignee acknowledges that it has complied with the provisions of §6.2.3 to the
extent applicable.

 

16.3.  Register.  The
Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered
to it and a register or similar list (the “Register”) for the
recordation of the names and addresses of the Lenders and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Lenders from time to time.
The entries in the Register shall be conclusive, in the absence of manifest
error, and the Borrowers, the Administrative Agent and the Lenders shall treat
each Person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Credit Agreement. 
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.

 

16.4.  New Notes.  Upon
its receipt of an Assignment and Acceptance executed by the parties to such
assignment, together with each Note subject 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, the Borrowers, at their own expense, shall execute and deliver
to the Administrative Agent, in exchange for each surrendered Note, a new Note
to the order of such Assignee in an amount equal to the amount assumed by such
Assignee pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained some portion of its obligations hereunder, a new Note to
the order of the assigning Lender in an amount equal to the amount retained by
it hereunder.  Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the assigned
Notes. The surrendered Notes shall be cancelled and returned to the Borrowers.

 

16.5.  Participations. 
Each Lender may sell participations to one or more
Lenders or other entities in all or a portion of such Lender’s rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (a) each 

 

108

 

such participation shall be in an amount of not less than $2,000,000,
(b) any such sale or participation shall not affect the rights and duties of
the selling Lender hereunder to the Borrowers and (c) the only rights granted
to the participant pursuant to such participation arrangements with respect to
waivers, amendments or modifications of the Loan Documents shall be the rights
to approve waivers, amendments or modifications that would reduce the principal
of or the interest rate on any Revolving Credit Loans, extend the term or
increase the amount of the Commitment of such Lender as it relates to such
participant, reduce the amount of any Commitment Fee or Letter of Credit Fees
to which such participant is entitled or extend any regularly scheduled payment
date for principal or interest; and provided, further, no Lender
may sell a participation to a competitor of the Borrowers or any of their
Subsidiaries, or an adverse party in any legal or arbitration proceeding with
the Borrowers or any of their Subsidiaries (as determined by the Borrowers).

 

16.6.  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 §14.1 or §14.2, and the determination of the Required Lenders shall
for all purposes of this Credit Agreement and the other Loan Documents be made
without regard to such assignee Lender’s interest in any of the Revolving
Credit Loans or Reimbursement Obligations. 
If any Lender sells a participating interest in any of the Revolving
Credit Loans or Reimbursement Obligations 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 §14.1 or
§14.2 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 Credit Agreement and the other Loan Documents be
made without regard to the interest of such transferor Lender in the Revolving
Credit Loans or Reimbursement Obligations to the extent of such participation.

 

16.7.  Miscellaneous Assignment Provisions.  Any assigning Lender shall
retain its rights to be indemnified pursuant to §17.3 with respect to any
claims or actions arising prior to the date of such assignment. If the
Reference Lender transfers all of its interest, rights and obligations under
this Credit Agreement, the Administrative Agent shall, in consultation with the
Borrowers and with the consent of the Borrowers and the Required Lenders,
appoint another Lender to act as a Reference Lender hereunder.  Anything contained in this §16 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 Credit
Agreement (including all or any portion of its Notes) to secure obligations of
such Lender, including any 

 

109

 

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 §16. 
No such 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.

 

16.8.  Assignment by Borrowers.  The Borrowers shall not
assign or transfer any of their rights or obligations under any of the Loan
Documents without the prior written consent of each of the Lenders; provided,
that notwithstanding the foregoing, each Borrower may, at any time and from
time to time, assign or otherwise transfer to one or more of the other
Borrowers, its obligations, as “primary obligor” for any Obligations under any
Loan Document; provided further that no such assignment or transfer
shall have any impact whatsoever on any Borrower’s joint and several liability
(as set forth in §6.12 and elsewhere in this Credit Agreement) for all
Obligations.

 

16.9.  Syndication. 
The Borrowers hereby agree to use commercially
reasonable efforts to assist and cooperate with the Arranger in efforts to
complete the syndication of the Revolving Credit Commitments and Revolving
Credit Loans hereunder, including, but not limited to, promptly preparing and
providing materials and information reasonably deemed necessary by the Arranger
to successfully complete and otherwise facilitate such syndication, including,
without limitation, all projections required to be delivered pursuant to
§§8.4.3, 9.4(b) and 9.4(g).  The
Borrowers and each of their directors, officers, employees and agents shall, at
the reasonable request of the Arranger, use commercially reasonable efforts to
meet with potential lenders and provide such additional information as such
Persons may reasonably request.  The
terms of the Fee Letter shall survive the Closing Date.

 

17.  PROVISIONS
OF GENERAL APPLICATIONS.

 

17.1.  Setoff.  The
Borrowers hereby grant to the Administrative Agent and each of the Lenders a
continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Administrative Agent and each Lender,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Administrative Agent or such Lender or any Lender
Affiliate and their successors and assigns or in transit to any of them.  Regardless of the adequacy of any
collateral, if any of the Obligations are due and payable and have not been
paid or any Event of Default shall have occurred, any deposits or other sums
credited by or due from any of the Lenders to any of the Borrowers and any
securities or other property of any of the Borrowers in the possession of such
Lender may be applied to 

 

110

 

or set off by such Lender against the payment of Obligations and any
and all other liabilities, direct, or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, of the Borrowers to such
Lender.  ANY AND ALL RIGHTS TO REQUIRE ANY LENDER
TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT
TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 
Each of the Lenders agrees with each other Lender that (a) if
an amount to be set off is to be applied to Indebtedness of any of the
Borrowers to such Lender, other than Indebtedness evidenced by the Notes held
by such Lender or constituting Reimbursement Obligations owed to such Lender,
such amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Notes held by such Lender or constituting
Reimbursement Obligations owed to such Lender, and (b) if such Lender shall
receive from any of the Borrowers, whether by voluntary payment, exercise of
the right of setoff, counterclaim, cross action, enforcement of the claim
evidenced by the Notes held by, or constituting Reimbursement Obligations owed
to, such Lender by proceedings against such Borrower at law or in equity or by
proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment of
the Note or Notes held by, or Reimbursement Obligations owed to, such Lender
any amount in excess of its ratable portion of the payments received by all of
the Lenders with respect to the Notes held by, and Reimbursement Obligations
owed to, all of the Lenders, such Lender will make such disposition and
arrangements with the other Lenders with respect to such excess, either by way
of distribution, pro  tanto assignment of claims, subrogation or
otherwise as shall result in each Lender receiving in respect of the Notes held
by it or Reimbursement Obligations owed it, its proportionate payment as
contemplated by this Credit Agreement; provided that if all or any part
of such excess payment is thereafter recovered from such Lender, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.

 

17.2.  Expenses.  The
Borrowers jointly and severally agree to pay, upon receipt of an invoice
therefor, (a) the reasonable costs of producing and reproducing this Credit
Agreement, the other Loan Documents and the other agreements and instruments
mentioned herein, (b) any stamp, documentary or similar taxes (including any
interest and penalties in respect thereto) payable by the Administrative Agent
or any of the Lenders on or with respect to the transactions contemplated by
this Credit Agreement (the Borrowers hereby jointly and severally agreeing to
indemnify the Administrative Agent and each Lender with respect thereto), (c)
the reasonable fees, expenses and disbursements of the Administrative Agent’s
Special Counsel or any local counsel to the Administrative Agent incurred in
connection with the preparation, syndication, administration or interpretation
of the Loan Documents and other instruments mentioned herein, each closing
hereunder, any amendments, modifications, approvals, consents or waivers hereto
or hereunder, or the cancellation of any Loan Document upon payment in full in
cash of all of the Obligations or pursuant to any terms of such Loan Document
for providing for such 

 

111

 

cancellation, (d) the reasonable fees, expenses and disbursements of
the Administrative Agent or any of its affiliates incurred by the
Administrative Agent or such affiliate in connection with the preparation,
syndication, administration or interpretation of the Loan Documents and other instruments
mentioned herein, including all title insurance premiums and surveyor,
engineering, appraisal and examination charges,  (e) any reasonable fees,
costs, expenses and bank charges, including bank charges for returned checks,
incurred by the Administrative Agent in establishing, maintaining or handling
any agency accounts, lock box accounts and other accounts for the collection of
any of the Collateral, (f) all reasonable out-of-pocket expenses (including
without limitation reasonable attorneys’ fees and costs, which attorneys may be
employees of any Lender or the Administrative Agent, and reasonable consulting,
accounting, appraisal, investment banker and similar professional fees and
charges) incurred by any Lender or the Administrative Agent in connection with
(i) the enforcement of or preservation of rights under any of the Loan
Documents against the Borrowers or any of their Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Lender’s or the Administrative Agent’s
relationship with the Borrowers or any of their Subsidiaries and (g) all
reasonable fees, expenses and disbursements of any Lender or the Administrative
Agent incurred in connection with Uniform Commercial Code searches, Uniform
Commercial Code filings, intellectual property searches, intellectual property
filings or mortgage recordings.  The covenants
contained in this §17.2 shall survive payment or satisfaction in full of all
other Obligations.

 

17.3.  Indemnification.  The Borrowers jointly and severally agree to
indemnify and hold harmless each of the Agents, its affiliates and each of the
Lenders from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of this Credit
Agreement or any of the other Loan Documents or the transactions contemplated
hereby including, without limitation, (a) any actual or proposed use by any of
the Borrowers or any of their Subsidiaries of the proceeds of any of the
Revolving Credit Loans or Letters of Credit, (b) the reversal or withdrawal of
any provisional credits granted by the Administrative Agent to the Borrowers
upon the transfer of funds from lock box, bank agency, concentration accounts
or otherwise under any cash management arrangements with any of the Borrowers
or any of their Subsidiaries or in connection with the provisional honoring of
funds transfers, checks or other items, (c) any actual or alleged infringement
of any patent, copyright, trademark, service mark or similar right of any of
the Borrowers or any of their Subsidiaries comprised in the Collateral, (d) any
of the Borrowers or any of their Subsidiaries entering into or performing this
Credit Agreement or any of the other Loan Documents or (e) with respect to each
of the Borrowers and their Subsidiaries and their respective properties and assets,
the violation of any Environmental Law, the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release or threatened release
of any Hazardous Substances or any action, suit, proceeding or investigation
brought or threatened with respect to any Hazardous Substances (including, but
not limited to, claims with respect to wrongful death, personal injury 

 

112

 

or damage to property), in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs of internal
counsel incurred in connection with any such investigation, litigation or other
proceeding; provided, however, the Borrowers shall not be liable
to any of the Agents, its affiliates or any Lender for any portion of such
liabilities, losses, damages or expenses resulting from the gross negligence or
willful misconduct of any Agent, its affiliates or any Lender.  In litigation, or the preparation therefor,
the Lenders and the Administrative Agent and its affiliates shall be entitled
to select their own counsel provided; that notwithstanding the foregoing
indemnity, the Borrowers shall jointly and severally be liable to pay promptly
the reasonable fees and expenses for only one such counsel for the
Administrative Agent, its affiliates and the Lenders.  If, and to the extent that the obligations of the Borrowers under
this §17.3 are unenforceable for any reason, the Borrowers hereby agree to make
the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. 
The covenants contained in this §17.3 shall survive payment or
satisfaction in full of all other Obligations.

 

17.4.  Treatment of Certain Confidential
Information.

 

17.4.1.  Confidentiality.  Each of the Lenders and
the Administrative Agent agrees, on behalf of itself and each of its
affiliates, directors, officers, employees and representatives, to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by any of the Sponsors, the Borrowers or any of their
Subsidiaries or Affiliates pursuant to this Credit Agreement that is identified
by such Person as being confidential at the time the same is delivered to the
Lenders or the Administrative Agent, provided that nothing herein shall
limit the disclosure of any such information (a) after such information shall
have become public other than through a violation of this §17.4, or becomes
available to any of the Lenders or the Administrative Agent on a
nonconfidential basis from a source other than the Borrowers, (b) to the extent
required by statute, rule, regulation or judicial process, (c) to counsel for
any of the Lenders or the Administrative Agent, (d) to bank examiners or any
other regulatory authority having jurisdiction over any Lender or the
Administrative Agent, or to auditors or accountants, (e) to the Administrative
Agent, any Lender or any Financial Affiliate, (f) in connection with any
litigation to which any one or more of the Lenders, the Administrative Agent or
any Financial Affiliate is a party, or in connection with the enforcement of
rights or remedies hereunder or under any other Loan Document, (g) to a Lender
Affiliate or a Subsidiary or affiliate of the Administrative Agent, (h) to any
actual or prospective assignee or participant or any actual or prospective
counterparty (or its advisors) to any swap or derivative transactions
referenced to credit or other risks or events arising under this Credit
Agreement or any other Loan Document so long as such assignee, participant or
counterparty, as the case may be, agrees to be bound by the provisions of §17.4
or (i) with the prior written consent of the Borrowers.  

 

113

 

Moreover, each of the Administrative Agent, the
Lenders and any Financial Affiliate is hereby expressly permitted by the
Borrowers to refer to any of the Borrowers and their Subsidiaries in connection
with any advertising, promotion or marketing undertaken by the Administrative
Agent, such Lender or such Financial Affiliate and, for such purpose, the
Administrative Agent, such Lender or such Financial Affiliate may utilize any
trade name, trademark, logo or other distinctive symbol associated with the
Borrowers or any of their Subsidiaries or any of their businesses. Notwithstanding anything to the
contrary set forth herein or in any other agreement to which the parties or by
which they are bound, the obligations of confidentiality contained herein and
therein, as they relate to the transactions contemplated by this Credit
Agreement and the other Loan Documents, shall not apply to the federal tax
structure or federal tax treatment of such transactions, and each party hereto
(and any employee, representative, agent of any party hereto) may disclose to
any and all persons, without limitation of any kind the federal tax structure
and federal tax treatment of such transactions.  The exemption in the preceding sentence is not intended to
permit disclosure of any other information including (without limitation) (i)
any portion of any materials to the extent not related to the tax treatment or
tax structure of the transaction, (ii) the identities of the Sponsors, the
Borrowers, their respective Subsidiaries or future Borrowers or Subsidiaries of
the Borrowers, (iii) the existence or status of any negotiations, (iv) any
pricing or financial information (except to the extent such pricing or
financial information is related to the tax treatment or tax structure of the
transaction), or (v) any other term or detail not relevant to the tax treatment
or the tax structure of the transaction. 
The two preceding
sentences are intended to cause the transactions to be treated as not having
been offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the Internal Revenue Code of 1986, as
amended, and shall be construed in a manner consistent with such purpose.  In addition, each party hereto acknowledges
that it has no proprietary or exclusive rights to the federal tax structure of
such transactions, or any federal tax matter or federal tax idea related to
such transactions.

 

17.4.2.  Prior
Notification.  Unless
specifically prohibited by applicable law or court order, each of the Lenders
and the Administrative Agent shall, prior to disclosure thereof, notify the
Borrowers of any request for disclosure of any such non-public information by
any Governmental Authority representative thereof (other than any such request
in connection with an examination of the financial condition of such Lender by
such Governmental Authority) or pursuant to legal process.

 

17.4.3.  Other.  In no event shall any
Lender or the Administrative Agent be obligated or required to return any
materials furnished to it or any Financial Affiliate by the Borrowers or any of
their Subsidiaries.  The obligations of
each Lender under this §17.4 shall supersede and replace the 

 

114

 

obligations of such Lender under any confidentiality
letter in respect of this financing signed and delivered by such Lender to the
Borrowers prior to the date hereof and shall be binding upon any assignee of,
or purchaser of any participation in, any interest in any of the Revolving
Credit Loans or Reimbursement Obligations from any Lender. The covenants
contained in this §17.4 shall survive payment or satisfaction in full of all of
the Obligations.

 

17.5.  Survival of Covenants, Etc.  All covenants, agreements,
representations and warranties made herein, in the Notes, in any of the other
Loan Documents or in any documents or other papers delivered by or on behalf of
the Borrowers or any of their Subsidiaries pursuant hereto shall be deemed to
have been relied upon by the Lenders and the Administrative Agent,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by the Lenders of any of the Revolving Credit
Loans and the issuance, extension or renewal of any Letters of Credit, as
herein contemplated, and shall continue in full force and effect so long as any
Letter of Credit or any amount due under this Credit Agreement or the Notes or
any of the other Loan Documents remains outstanding or any Lender has any
obligation to make any Revolving Credit Loans or the Administrative Agent has
any obligation to issue, extend or renew any Letter of Credit, and for such
further time as may be otherwise expressly specified in this Credit
Agreement.  All statements contained in
any certificate or other paper required to be delivered to any Lender or the
Administrative Agent at any time by or on behalf of any of the Borrowers or any
of their Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by such
Borrower or such Subsidiary hereunder.

 

17.6.  Notices.  Except
as otherwise expressly provided in this Credit Agreement, all notices and other
communications made or required to be given pursuant to this Credit Agreement
or the Notes or any Letter of Credit Applications shall be in writing and shall
be delivered by hand, mailed by United States registered or certified first
class mail, postage prepaid, sent by overnight courier, or sent by telecopy or
facsimile and confirmed by delivery via courier or postal service, addressed as
follows:

 

(a)                                  if
to any Borrower or the Parent, c/o Bruckmann, Rosser, Sherill & Co., Inc.,
126 East 56th Street, New York, New York 10022, Attention: Harold O.
Rosser, J. Rice Edmonds and Jaime C. Wall, fax: (212) 521-3799; with copies to
Castle Harlan Partners, III, L.P., 150 East 58th St., New York, New
York 10155, Attention: David B. Pittaway and Justin Wender, fax: (212)
207-8042; and copies to Kirkland & Ellis LLP, Citigroup Center, 153 East 53rd
St., New York, New York 10022-4675, Attention: Kim Taylor, fax: (212) 446-4900;
and copies to Schulte, Roth & Zabel LLP, 919 Third Ave., New York, New York
10022, Attention: Marc Weingarten, fax: (212) 593-5955, or at such other
address for notice as such Borrower or the Parent, as applicable, shall last have
furnished in writing to the Person giving the notice;

 

115

 

(b)                                 if
to the Administrative Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Thomas P. Tansi, Director, fax: (617) 434-0637, with
copies to Bingham McCutchen LLP, 150 Federal Street, Boston, Massachusetts
02110, Attention: Sula R. Fiszman, Esq., fax: (617) 951-8736, or such other
address for notice as the Administrative Agent shall last have furnished in
writing to the Person giving the notice; and

 

(c)                                  if
to any Lender, at such Lender’s address set forth on Schedule 1
hereto, or such other address for notice as such Lender shall have last
furnished in writing to the Person giving the notice.

 

Any such notice or demand shall be deemed to have been
duly given or made and to have become effective (i) if delivered by hand,
overnight courier or facsimile to a responsible officer of the party to which
it is directed, at the time of the receipt thereof by such officer or the
sending of such facsimile and (ii) if sent by registered or certified
first-class mail, postage prepaid, on the third Business Day following the
mailing thereof.  Any notice or other
communication to be made hereunder or under the Notes or any Letter of Credit
Applications, even if otherwise required to be in writing under other
provisions of this Credit Agreement, the Notes or any Letter of Credit
Applications, may alternatively be made in an electronic record transmitted
electronically under such authentication and other procedures as the parties
hereto may from time to time agree in writing (but not an electronic record),
and such electronic transmission shall be effective at the time set forth in
such procedures.  Unless otherwise
expressly provided in such procedures, such an electronic record shall be
equivalent to a writing under the other provisions of this Credit Agreement,
the Notes or any Letter of Credit Applications, and such authentication, if
made in compliance with the procedures so agreed by the parties hereto in
writing (but not an electronic record), shall be equivalent to a signature
under the other provisions of this Credit Agreement, the Notes or any Letter of
Credit Applications.

 

17.7.  Governing Law. 
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH
OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF
LAW).  EACH PARTY HERETO AGREES THAT ANY
SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR
ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON SUCH
PERSON BY MAIL AT THE ADDRESS SPECIFIED IN §17.6.  EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT IS BROUGHT IN AN INCONVENIENT COURT.

 

116

 

17.8.  Headings.  The
captions in this Credit Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.

 

17.9.  Counterparts. 
This Credit Agreement and any amendment hereof may be
executed in several counterparts and by each party on a separate counterpart,
each of which when executed and delivered shall be an original, and all of
which together shall constitute one instrument.  In proving this Credit Agreement it shall not be necessary to
produce or account for more than one such counterpart signed by the party
against whom enforcement is sought. 
Delivery by facsimile by any of the parties hereto of an executed
counterpart hereof or of any amendment or waiver hereto shall be as effective
as an original executed counterpart hereof or of such amendment or waiver and
shall be considered a representation that an original executed counterpart
hereof or such amendment or waiver, as the case may be, will be delivered.

 

17.10.
 Entire Agreement, Etc.  The Loan Documents and any
other documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Credit Agreement nor any term hereof may be changed,
waived, discharged or terminated, except as provided in §17.12.

 

17.11.  Waiver of Jury Trial.  EACH PARTY HERETO HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY,
INCLUDING ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF
THE ADMINISTRATIVE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE
REVOLVING CREDIT LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT IT
WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  Except as prohibited by law, each party
hereto hereby waives any right it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages.  Each party hereto (a)
certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waivers and (b) acknowledges
that each party has been induced to enter into this Credit Agreement, the other
Loan Documents to which it is a party by, among other things, the waivers and
certifications contained herein.

 

17.12.  Consents, Amendments, Waivers, Etc.  Any consent or approval
required or permitted by this Credit Agreement to be given by the Lenders may
be 

 

117

 

given, and any term of this Credit Agreement, the other Loan Documents
or any other instrument related hereto or mentioned herein may be amended, and
the performance or observance by any of the Borrowers or any of their
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Borrowers and the written consent of the Required Lenders. Notwithstanding the foregoing, no amendment,
modification or waiver shall:

 

(a) without the written consent
of the Borrowers and each Lender:

 

(i)
reduce or forgive the principal amount of any Revolving Credit Loans or
Reimbursement Obligations, or reduce the rate of interest on the Notes or the
amount of the Commitment Fee, the Letter of Credit Fees or any other fees
payable for the account of all of the Lenders (other than (A)  interest
accruing pursuant to §6.10 following the effective date of any waiver by the
Required Lenders of the Default or Event of Default relating thereto or (B) as
a result of a change in the definition of Leverage Ratio or any of the
components thereof or the method of calculation thereof);

 

(ii)
increase the amount of such Lender’s Revolving Credit Commitment or extend the
expiration date of such Lender’s Revolving Credit Commitment;

 

(iii)
postpone or extend the Maturity Date or any other regularly scheduled
dates for payments of principal of, or interest on, the Revolving Credit Loans
or Reimbursement Obligations or any Fees or other amounts payable to such
Lender (it being understood that (A) a waiver of the application of the default
rate of interest pursuant to §6.10 and  (B) any vote to rescind any acceleration made pursuant
to §14.1 of amounts owing with respect to the Revolving Credit Loans and other
Obligationsshall require only the approval of the Required Lenders);

 

(iv) other than pursuant
to a transaction permitted by the terms of this Credit Agreement, release all
or any portion of the Collateral with a book value equal to or greater than 50%
of the aggregate book value of the Collateral prior to such release (excluding,
if any Borrower becomes a debtor under the federal Bankruptcy Code, the release
of “cash collateral”, as defined in Section 363(a) of the federal
Bankruptcy Code pursuant to a cash collateral stipulation with the debtor
approved by the Required Lenders) or the Parent from its obligations under the
Parent Guaranty;

 

(v) amend or waive any
provision of this Credit Agreement which requires pro-rata distributions to
each of the Lenders by the 

 

118

 

Administrative Agent of payments and/or proceeds
received from the Borrowers or the Parent by the Administrative Agent
hereunder; and

 

(vi) amend or waive this
§17.12 or the definition of Required
Lenders;

 

(b)
without the written consent of the Administrative Agent, amend or waive
§15, the amount or time of payment of any Letter of Credit Fees or other fees
payable for the Administrative Agent’s account or any other provision
applicable to the Administrative Agent.

 

No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. 
No course of dealing or delay or omission on the part of the
Administrative Agent or any Lender in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto.  No notice to or demand upon the Borrowers shall entitle the
Borrowers to other or further notice or demand in similar or other
circumstances.

 

17.13.  Borrowers’ Representative.  Each of the Borrowers
hereby irrevocably appoints MSAC as such Borrower’s representative and agent
for all purposes under this Credit Agreement and authorizes MSAC, on behalf of
each such Borrower and in each such Borrower’s name to give and receive all
notices and documents, certificates and instruments to be given or received by
the Borrowers or any of them in connection with this Credit Agreement and the
other Loan Documents, including receipt of service of legal process in
connection with any suit or proceeding arising under, or in connection with the
transactions contemplated by this Credit Agreement, delivery of Loan Requests,
Conversion Requests, Compliance Certificates and requests for waivers and
amendments and to acknowledge or consent to any amendments, waivers or
assignments.

 

17.14.  Severability. 
The provisions of this Credit Agreement are severable
and if any one clause or provision hereof shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Credit Agreement in any jurisdiction.

 

119

 

IN WITNESS WHEREOF, the undersigned have
duly executed this Credit Agreement as a sealed instrument as of the date first
set forth above.

 

	
   

  	
  MCCORMICK
  & SCHMICK 

    ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: President, Treasurer and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK 

    RESTAURANT CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: President, Treasurer and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK 

    MARYLAND LIQUOR, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: President and Treasurer 

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK 

    ACQUISITION I TEXAS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK 

    ACQUISITION II TEXAS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  

 

 

	
   

  	
  MCCORMICK
  & SCHMICK 

    ACQUISITION TEXAS LP

  
	
   

  	
  By:

  	
  McCormick & Schmick Acquisition I 

  Texas, Inc., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK 

    ACQUISITION III TEXAS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK’S 

  ATLANTA II, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: President, Treasurer and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK’S 

  HACKENSACK, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: President, Treasurer and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK 

  ORLANDO, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: President, Treasurer and Secretary

  

 

 

	
   

  	
  MCCORMICK
  & SCHMICK DALLAS, 

  LP

  
	
   

  	
  By:

  	
  McCormick & Schmick Acquisition I 

  Texas, Inc., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK 

  DALLAS LIQUOR, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK AUSTIN, 

  LP

  
	
   

  	
  By:

  	
  McCormick & Schmick Acquisition I 

  Texas, Inc., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  MCCORMICK
  & SCHMICK AUSTIN 

  LIQUOR, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS L. SCHMICK

  
	
   

  	
   

  	
  Name: Douglas L. Schmick

  
	
   

  	
   

  	
  Title: Authorized Signatory

  

 

 

	
   

  	
  FLEET
  NATIONAL BANK, individually 

    and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ THOMAS P. TANSI

  
	
   

  	
   

  	
  Thomas P. Tansi, Director

  

 

 

	
   

  	
  COOPERATIEVE
  CENTRALE 

  RAIFFEISEN-BOERENLEENBANK 

  B.A., “RABOBANK INTERNATIONAL” 

  NEW YORK BRANCH, individually and 

  as Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ M. KRAPELS

  
	
   

  	
   

  	
  Name: M. Krapels

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ REBECCA O. MORROW

  
	
   

  	
   

  	
  Name: Rebecca O. Morrow

  
	
   

  	
   

  	
  Title: Executive Director

  

 

 

	
   

  	
  BANK
  OF AMERICA, N.A., individually 

    and as Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DANIEL J. RILER

  
	
   

  	
   

  	
  Name: Daniel J. Riler

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

	
   

  	
  WELLS
  FARGO BANK N.A., 

  individually and as Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JAMES KENDRICK NOBLE III

  
	
   

  	
   

  	
  Name: James Kendrick Noble III

  
	
   

  	
   

  	
  Title: Managing Director

  

 

 

	
   

  	
  SUNTRUST
  BANK

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ SUSAN M. HALL

  
	
   

  	
   

  	
  Name: Susan M. Hall

  
	
   

  	
   

  	
  Title: Managing Director

  

 

 

	
   

  	
  WACHOVIA
  BANK, NATIONAL 

  ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ANDREA S. CHEN

  
	
   

  	
   

  	
  Name: Andrea S. Chen

  
	
   

  	
   

  	
  Title: AssociateExhibit 10.2

 

STOCK AND WARRANT PURCHASE AGREEMENT

 

by and among

 

MELLON BANK, N.A.,

as Trustee for

The Bell Atlantic Master Trust,

 

MCCORMICK & SCHMICK ACQUISITION CORP. II,

 

and

 

MCCORMICK & SCHMICK HOLDINGS LLC

 

Dated as of August 22, 2001

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
  1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  The
  Closing

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Purchase of Stock and Warrants

  	
  6

  
	
   

  	
  3.1

  	
  Purchase and Sale of Senior Preferred Stock

  	
  6

  
	
   

  	
  3.2

  	
  Amendment to the Charter of the Company

  	
  6

  
	
   

  	
  3.3

  	
  Purchase and Sale of Warrants

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Representations and Warranties of the Company and M&S LLC

  	
  6

  
	
   

  	
  4.1

  	
  Organization; Delivery of Documents

  	
  6

  
	
   

  	
  4.2

  	
  Authorization

  	
  7

  
	
   

  	
  4.3

  	
  Capitalization

  	
  7

  
	
   

  	
  4.4

  	
  Absence of Certain Changes or Events

  	
  7

  
	
   

  	
  4.5

  	
  Plan
  Assets

  	
  7

  
	
   

  	
  4.6

  	
  Consents

  	
  7

  
	
   

  	
  4.7

  	
  Effect of Transactions

  	
  7

  
	
   

  	
  4.8

  	
  Compliance with Laws and Other Instruments

  	
  8

  
	
   

  	
  4.9

  	
  Securities
  Laws

  	
  8

  
	
   

  	
  4.10

  	
  Litigation

  	
  8

  
	
   

  	
  4.11

  	
  Investment Company Act

  	
  8

  
	
   

  	
  4.12

  	
  No Material Contracts; etc

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Representations and Warranties of Bell
  Atlantic

  	
  9

  
	
   

  	
  5.1

  	
  Authorization

  	
  9

  
	
   

  	
  5.2

  	
  Compliance with Laws and Other Instruments

  	
  9

  
	
   

  	
  5.3

  	
  Consents

  	
  9

  
	
   

  	
  5.4

  	
  Status and Investment Intent

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Covenants

  	
  10

  
	
   

  	
  6.1

  	
  Distributions

  	
  10

  
	
   

  	
  6.2

  	
  Maintenance of Property; Insurance

  	
  10

  
	
   

  	
  6.3

  	
  Maintenance of Existence

  	
  10

  
	
   

  	
  6.4

  	
  Ownership of Subsidiaries

  	
  11

  
	
   

  	
  6.5

  	
  Compliance with Laws

  	
  11

  
	
   

  	
  6.6

  	
  Books
  and Records

  	
  11

  
	
   

  	
  6.7

  	
  Legal Prohibitions

  	
  11

  
	
   

  	
  6.8

  	
  Monthly
  Reports

  	
  11

  
	
   

  	
  6.9

  	
  Other Information; etc

  	
  11

  
	
   

  	
  6.10

  	
  Plan
  Assets

  	
  12

  
	
   

  	
  6.11

  	
  Rules 144 and 144A

  	
  12

  
	
   

  	
  6.12

  	
  Transactions with Affiliates

  	
  13

  
	
   

  	
  6.13

  	
  Maximum Leverage Ratio

  	
  13

  

 

i

 

	
  7.

  	
  Put Rights; Related Company Redemption
  Right

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Conditions Precedent

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Miscellaneous

  	
  15

  
	
   

  	
  9.1

  	
  Binding Effect; Legend

  	
  15

  
	
   

  	
  9.2

  	
  Amendment

  	
  16

  
	
   

  	
  9.3

  	
  Notices

  	
  16

  
	
   

  	
  9.4

  	
  Applicable
  Law

  	
  18

  
	
   

  	
  9.5

  	
  Entire
  Agreement

  	
  18

  
	
   

  	
  9.6

  	
  Descriptive Headings

  	
  18

  
	
   

  	
  9.7

  	
  Counterparts

  	
  18

  
	
   

  	
  9.8

  	
  Specific Performance; Holders, Remedies

  	
  18

  
	
   

  	
  9.9

  	
  Survival of Covenants

  	
  18

  
	
   

  	
  9.10

  	
  Expenses

  	
  18

  
	
   

  	
  9.11

  	
  Legend

  	
  19

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  –

  	
  Amended and
  Restated Certificate of Incorporation of the Company

  
	
  Exhibit B

  	
  –

  	
  Form of 13% Subordinated Exchange
  Debentures due August 22, 2011

  
	
  Exhibit C

  	
  –

  	
  Class A-2
  Common Unit Purchase Warrant

  
	
  Exhibit D

  	
  –

  	
  Preferred
  Unit Purchase Warrant

  
					

 

ii

 

STOCK AND WARRANT PURCHASE AGREEMENT

 

STOCK AND WARRANT PURCHASE AGREEMENT dated as of August 22, 2001,
by and among Mellon Bank, N.A., as Trustee for The Bell Atlantic Master Trust
(“Bell Atlantic”), McCormick & Schmick Acquisition Corp.  II, a Delaware corporation (the “Company”)
and McCormick & Schmick Holdings LLC, a Delaware limited liability
corporation (“M&S LLC”).

 

WHEREAS, the parties hereto desire that, pursuant to the terms and
conditions set forth herein, (i) the Company designate a Senior Preferred
Stock, and the Company desires to sell, and Bell Atlantic desires to purchase,
20,000 shares of such Senior Preferred Stock, and (ii) M&S LLC desires
to sell, and Bell Atlantic desires to purchase, (A) warrants to purchase
103,896.10 Class A-2 Units (the “Class A-2 Warrants”) and (B) warrants
to purchase 4,956.52 Preferred Units (the “Preferred Warrants,” and
together with the Class A-2 Warrants, the “Warrants”).

 

NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:

 

1.                                       Definitions.

 

As used in this Agreement, the following terms shall have the meanings
ascribed to them below:

 

“Affiliate” shall, as to the Company or any other Person, mean
(i) any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with the Company or such other Person, and
(ii) any Person, directly or indirectly, beneficially owning at least 10% of
any class of outstanding capital stock or other evidence of beneficial interest
of the Company or such other Person; provided, however, that no holder
of Senior Preferred Stock shall by reason of such holding be an Affiliate of
the Company or any of its Subsidiaries for purposes of this Agreement.

 

“Business Day” shall mean any day other than a Saturday, Sunday
or any other day on which commercial banks are required or authorized by law or
regulation to be closed in New York, New York.

 

“Catch Up Dividends” shall have the meaning assigned to such
term in the Certificate of Incorporation.

 

 

“Certificate of Incorporation” shall mean the Amended and
Restated Certificate of Incorporation of the Company, dated as of
August 22, 2001, attached hereto as Exhibit A and filed with the
Secretary of State.

 

“Change in Control” shall mean any of the following:  (i) a majority of the board of advisors of
M&S LLC, shall be comprised of persons other than designees of Bruckmann,
Rosser, Sherrill & Co. II, L.P., a Delaware limited partnership (“BRS”)
and/or Castle Harlan Partners III, L.P., a Delaware limited partnership (“CHP”),
(ii) BRS, CHP, and their respective controlled Affiliates, affiliated
management companies and employees, in the aggregate, shall cease to own
(directly or indirectly) (a) Common Units of M&S LLC (or its successor)
representing 51% or more (40% or more if an underwritten initial public
offering of the Common Units of M&S LLC or its successor has been
consummated) of the Common Units of M&S LLC (or its successor), or (b)
Common Stock representing 51% or more (40% or more if an underwriters’ initial
public offering of the Common Stock has been consummated) of the Common
Stock.  For purposes of this definition,
BRS shall be deemed to no longer own the equity securities of M&S LLC in
the event that BRSE LLC (or an entity controlling, controlled by or under
common control with BRSE LLC) shall cease to be the sole general partner of
BRS, and CHP shall be deemed to no longer own the equity securities of M&S
LLC in the event that Castle Harlan Partners III GP, Inc.  (or an entity controlling, controlled by or
under common control with Castle Harlan Partners III GP, Inc.)  shall cease to be the sole general partner
of CHP.

 

“Class A-2 Units” shall have the meaning given to such term in
the LLC Agreement.

 

“Class A-2 Warrants” shall have the meaning given to such term
in the preamble above.

 

“Class A-2 Warrant Shares” shall mean, to the extent that any
remaining Class A-2 Warrants are unexercised as of the applicable date of
determination, the number of Class A-2 Units issuable upon exercise of such
Class A-2 Warrants.

 

“Closing” shall have the meaning set forth in Section 2.

 

“Common Stock” means, collectively, the Common Stock of the
Company, par value $0.01 per share, and any capital stock of any class of the
Company hereafter authorized which is not limited to a fixed sum or percentage
of par or stated value with respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Company.

 

“Common Units” shall mean the Class A-1 Common Units, Class A-2
Common Units and Class B Common Units of M&S LLC, but excluding the Class C
Common Units of M&S LLC.

 

2

 

“Company” shall have the meaning set forth in the first
paragraph hereof.

 

“Credit Agreement” shall mean that certain Revolving Credit and
Term Loan Agreement, as the same may be amended, modified or restated and in
effect from time to time or as otherwise specified pursuant to the terms of
this Agreement, among (i) McCormick & Schmick Acquisition Corp., (ii)
McCormick & Schmick Restaurant Corp., (iii) McCormick &
Schmick Maryland Liquor, Inc., (iv) McCormick & Schmick Acquisition I
Texas, Inc., (v) McCormick & Schmick Acquisition II Texas, Inc.,
(vi) McCormick & Schmick Acquisition Texas LP, (vii)
McCormick & Schmick Acquisition III Texas, Inc. (as Borrowers),
(viii) the Lenders listed on Schedule I thereto, (ix) Fleet National Bank,
as Administrative Agent, 

(x) SunTrust Bank, as Syndication Agent, and (xi) IBJ Whitehall Bank &
Trust Company, as Documentation Agent.

 

“Debentures” shall mean the 13% Subordinated Exchange Debentures
due August 22, 2011, that may, at the option of the Company and pursuant
to the terms thereof, be issued in exchange for the Senior Preferred Stock, the
form of which Debenture is attached hereto as Exhibit B.

 

“Distribution” shall mean, with respect to the capital stock of
the Company or any of its Subsidiaries, (i) the declaration or payment of any
dividend on or in respect of any shares of any class of such capital stock;
(ii) the purchase, redemption or other retirement of any shares of any class of
such capital stock, directly or indirectly, through a Subsidiary or otherwise;
or (iii) any other distribution in respect of any shares of any class of such
capital stock on or in respect of stock appreciation or similar rights.

 

“ERISA” shall mean the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and regulations
thereunder, and in the case of any referenced section of any such statute, rule
or regulation, any successor section thereto, collectively, as from time to
time amended and in effect.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934,
as amended.

 

“Governmental Authority” shall mean any federal, state or local
governmental, administrative, or regulatory authority or agency.

 

“Guaranty” shall mean that certain Guaranty, dated as of
August 22, 2001, issued by the Company for the benefit of Fleet National
Bank, as Administrative Agent for the lenders party to the Credit Agreement,
and such lenders, pursuant to which the Company has guaranteed the obligations
of its Subsidiaries (as defined therein) under the Credit Agreements, as such
Guaranty shall be amended, modified or restated and in effect from time to
time.

 

3

 

“Holder” shall mean Bell Atlantic and each subsequent holder of
any of the Senior Preferred Stock, Debentures or Warrants and units issuable
upon exercise of the Warrants.

 

“Leverage Ratio” shall have the meaning set forth in Section 6.13.

 

“LLC Agreement” shall mean the Amended and Restated Limited
Liability Company Agreement of M&S LLC, dated as of the date hereof, by and
among the members of M&S LLC.

 

“Majority Holders” shall mean, with respect to any class(es) or
type(s) of securities issued pursuant to this Agreement, the holder or holders
at the relevant time of a majority of the number of outstanding shares,
outstanding principal amount, or number of outstanding and unexercised
Warrants, as the case may be, of the specified series, class(es) or type(s) of
securities (other than securities subsequently sold in a registered public
offering or in a “brokers transaction” within the meaning of Rule 144), or if
no class or type is specified in the applicable Section of this Agreement,
the holder or holders at the relevant time of each of a majority of the
outstanding shares of Senior Preferred Stock, holders of a majority of the principal
amount of outstanding Debentures, the holders of a majority of the Class A-2
Warrant Shares and the holders of a majority of the Preferred Warrant Shares,
other than those not previously sold in a registered public offering or in a
“brokers transaction” within the meaning of Rule 144.

 

“Members Agreement” shall mean that certain Members Agreement,
dated as of the date hereof, by and among M&S LLC and the Initial Parties
(as defined therein).

 

“M&S LLC” shall have the meaning set forth in the first
paragraph hereof.

 

“Operating Company” means an “operating company” within the
meaning of Department of Labor Regulation § 2510.3-101(c) or successor
rule or regulation, as from time to time amended and in effect.

 

“Person” means any individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated organization or
government or department or agency thereof.

 

“Plan Assets” means “plan assets” within the meaning of
Department of Labor Regulation § 2510.3-101(c) or successor rule or regulation,
as from time to time amended and in effect.

 

“Preferred Units” shall have the meaning given to such term in the LLC
Agreement.

 

“Preferred Warrants” shall have the meaning given to such term
in the preamble above.

 

4

 

“Preferred Warrant Shares” shall mean, to the extent that any
remaining Preferred Warrants are unexercised as of the applicable date of
determination, the number of Preferred Units issuable upon exercise of such
Preferred Warrants.

 

“Public Sale” means a sale pursuant to an effective registration
statement under the Securities Act or a sale to the public pursuant to Rule
144.

 

“Put” shall have the meaning set forth in Section 7(a).

 

“Put Notice” shall have the meaning set forth in Section 7(a).

 

“Put Price” shall have the meaning set forth in Section 7(a).

 

“Secretary of State” shall mean the Secretary of State of the
State of Delaware.

 

“Securities Act” shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.

 

“Senior Preferred Stock” shall mean the Company’s 13% Senior
Exchangeable Preferred Stock, par value $1.00 per share, having all of the
rights and preferences set forth in the Certificate of Incorporation.

 

“Subsidiary” shall mean any Person of which the Company or any
other Person now or hereafter shall, at the applicable date of determination,
own (directly or indirectly) at least a majority of the outstanding capital
stock (or other equity interests) entitled to vote or at least a majority of
the partnership, joint venture or other similar interests, or of which the
Company or such other Person is a general partner or joint venturer without
limited liability.

 

“Transaction Documents” shall mean this Agreement, the
Debentures, the LLC Agreement, the Members Agreement, the Registration Rights
Agreement, dated as of the date hereof, by and among the Initial Parties (as
defined therein), and the Warrants.

 

“Warrants” shall have the meaning given to such term in the
preamble above.

 

2.                                       The
Closing.  The execution and delivery
of this Agreement (the “Closing”) shall take place at the offices of
Schulte, Roth & Zabel LLP in New York, New York on August 22,
2001, or at such other time and/or place as the parties hereto may mutually
agree.  At the Closing, each party to
this Agreement shall deliver to the others such documents, instruments and
writings as may be required to be delivered in accordance with this Agreement
or as may be reasonably requested by such other parties.

 

5

 

3.                                       Purchase
of Stock and Warrants.

 

3.1                                 Purchase
and Sale of Senior Preferred Stock. 
Pursuant to the terms and conditions of this Agreement, (i) the Company
shall authorize the issuance and sale to Bell Atlantic of 20,000 shares of
Senior Preferred Stock and (ii) at the Closing, (A) Bell Atlantic shall
purchase such shares for an aggregate purchase price of $14,945,579.38 in
immediately available funds, and (B) the Company shall issue and deliver to
Bell Atlantic stock certificates representing such sale of shares.

 

3.2                                 Amendment
to the Charter of the Company.  The
Company shall file, or cause to be filed, the Certificate of Incorporation with
the Secretary of State as of the Closing Date.

 

3.3                                 Purchase
and Sale of Warrants.  Pursuant to
the terms and conditions of this Agreement, (i) M&S LLC shall sell to Bell
Atlantic Warrants representing the right to purchase 103,896.10 Class A-2 Units
and 4,956.52 Preferred Units, in the form of the unit purchase warrants
attached hereto as Exhibits C and D, and (ii) at the Closing, (A)
Bell Atlantic shall purchase such Warrants for an aggregate purchase price of
$5,054,420.62 in immediately available funds (such amount to be allocated
$102,857.14 for the Class A-2 Warrants and $4,951,563.48 for the Preferred
Warrants) and (B) M&S LLC shall issue and deliver to Bell Atlantic such
Warrants.  Each party hereby agrees to
the allocation of the purchase price made in this Article 3 and
that such party will take no position inconsistent with such allocation for any
purpose, including, but not limited to, any tax reporting.

 

4.                                       Representations and Warranties
of the Company and M&S LLC. 
Each of the representations and warranties set forth in the Credit
Agreement, as such agreement is in effect on the date hereof, including the
definitions related thereto and set forth therein, are hereby incorporated by
reference as of the date hereof and the Closing as though such representations
and warranties, and such definitions, were set forth in their entirety herein mutatis
mutandis, so that references to the recipient of any such
representations and warranties shall be deemed references to Bell Atlantic and
references hereunder.

 

The Company and M&S
LLC further represent and warrant as of the date hereof and the Closing as
follows:

 

4.1                                 Organization;
Delivery of Documents.  Each of the
Company and M&S LLC is a corporation or a limited liability company duly
organized, existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate or limited liability company power
and authority to own, lease and operate its properties and assets and to carry
on its business as now being conducted. 
The Company has delivered to Bell Atlantic complete and correct copies
of the current Certificate of Incorporation and by-laws of the Company, and
M&S LLC has delivered to Bell Atlantic complete and correct copies of its
Certificate of Formation and the LLC Agreement.

 

6

 

4.2                                 Authorization.  Each of the Company and M&S LLC has full
corporate or limited liability company power and authority to execute and
deliver the Transaction Documents.  Each
of the Transaction Documents has been duly authorized, executed and delivered
by the Company and M&S LLC and is valid, binding and enforceable against
the Company and M&S LLC in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally and subject to the
availability of equitable remedies.

 

4.3                                 Capitalization.  The authorized capital stock of the Company
consists of 51,000 shares, consisting of 1,000 shares of Common Stock and
50,000 shares of Senior Preferred Stock. 
Upon consummation of the transactions contemplated in this Agreement,
the Senior Preferred Stock, when purchased in accordance with the terms of this
Agreement, will be duly and validly issued and will be fully paid and
nonassessable.  Schedule I
attached hereto sets forth the outstanding capital units of the LLC immediately
following the Closing, and each Common Unit and Preferred Unit which may be
issued upon exercise of the Warrants will be duly issued.  At the Closing, the Warrants and the Senior
Preferred Stock will be duly issued, and upon exchange of the Senior Preferred
Stock for the Debentures in accordance with the Certificate of Incorporation,
the issuance of the Debentures in accordance with their terms will constitute
the legal, valid and binding obligations of the Company in accordance with
their terms.  Except as provided in the
Members Agreement, there are no statutory or contractual securityholders’
preemptive rights or rights of refusal to which M&S LLC is a party.

 

4.4                                 Absence
of Certain Changes or Events.  Except
as otherwise disclosed herein or in the Credit Agreement, there has not been
any material adverse change in the business, assets, operations or conditions,
financial or otherwise, of M&S LLC and its Subsidiaries (as defined in the
Credit Agreement) taken as a whole since June 7, 2001.

 

4.5                                 Plan
Assets.  Each of the Company and
M&S LLC is an Operating Company and none of the underlying assets of any of
M&S LLC, the Company or any of its Subsidiaries will be deemed to be Plan
Assets with respect to Bell Atlantic.

 

4.6                                 Consents.  Except for the filing with the Secretary of
State of the State of Delaware of the Certificate of Incorporation, no filing,
consent, approval or authorization of or action with any federal, state or
other governmental authority is required to be made or obtained by or with
respect to the Company or M&S LLC in connection with the execution and
delivery of this Agreement by the Company or M&S LLC or any other document
required to be executed by the Company or M&S LLC in connection with the
transactions contemplated in this Agreement, other than such filings, consents,
approvals, authorizations or actions, the failure of which to make or obtain,
individually or in the aggregate, would not cause a material adverse change in
the business, assets, operations or conditions, financial or otherwise, of
M&S LLC and its Subsidiaries taken as a whole or prevent or materially
delay consummation of the transactions contemplated in this Agreement.

 

4.7                                 Effect
of Transactions.  To the knowledge
of the Company and M&S LLC, the execution and delivery of the Transaction
Documents, and the consummation of the transactions contemplated hereby, will
not involve any prohibited transactions within the meaning of ERISA.

 

7

 

4.8                                 Compliance
with Laws and Other Instruments. 
Assuming the making or receipt of all filings, consents, approvals,
authorizations or actions described in Section 4.6 hereof, the
execution and delivery by M&S LLC of this Agreement and the other Transaction
Documents, the offering, sale and issuance of the Warrants and the Common Units
and Preferred Units issuable upon exercise of the Warrants hereunder and the
fulfillment of and compliance with the respective terms hereof and thereof by
M&S LLC, do not and shall not conflict with or result in a breach of the
terms, conditions or provisions of, constitute a default under, result in the
creation of any lien, security interest, charge or encumbrance upon M&S
LLC’s units, membership interests or assets pursuant to, give any third party
the right to modify, terminate or accelerate any obligation under, result in a
violation of, or require any authorization, consent, approval, exemption or
other action by or notice to any court or administrative or governmental body
pursuant to, (i) the organizational documents of M&S LLC, (ii) any law,
statute, rule or regulation to which M&S LLC is subject, or (iii) any
agreement, instrument, order, judgment or decree to which M&S LLC is
subject, except, in the case of subclauses (ii) and (iii) above, for any
conflict, result, default, right or other requirement that could not reasonably
be expected to have a material adverse effect on the transaction contemplated
hereby.

 

4.9                                 Securities
Laws.  The issuance by the Company
of the Senior Preferred Stock pursuant to this Agreement has not violated, and
the issuance by M&S LLC of the Warrants and the Common Units and Preferred
Units issuable upon exercise of the Warrants pursuant to this Agreement will
not violate, the Securities Act or any state securities or “blue sky” laws.

 

4.10                           Litigation.  There is no action, suit or proceeding
pending against, or to the knowledge of the Company or M&S LLC, threatened
against or affecting, M&S LLC, the Company or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official which
could reasonably be expected to have a material adverse effect on the business,
assets, operations, condition, financial or otherwise, of M&S LLC and its
Subsidiaries taken as a whole or which in any manner draws into the question
the validity of the Transaction Documents.

 

4.11                           Investment
Company Act.  Neither M&S LLC
nor the Company is an “investment company,” an “affiliated company” or a
“principal underwriter” of an “investment company,” as such terms are defined
in the Investment Company Act of 1940, as amended, and the rules and
regulations promulgated thereunder.

 

8

 

4.12                           No
Material Contracts; etc.  Except as
set forth on Schedule 4.12 hereto, neither the Company nor M&S LLC
is party to any material contracts, agreements or commitments.

 

5.                                       Representations and Warranties
of Bell Atlantic.

 

Bell Atlantic represents and warrants as
follows:

 

5.1                                 Authorization.  Bell Atlantic has full power and authority
to execute and deliver this Agreement and to perform its obligations hereunder,
and this Agreement has been duly authorized, executed and delivered by Bell
Atlantic and is valid, binding and enforceable in accordance with its terms,
except that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general application relating to
or affecting the rights and remedies of creditors.

 

5.2                                 Compliance
with Laws and Other Instruments. 
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby will not (a) conflict with (i) any
provision of any governing instrument applicable to Bell Atlantic or (ii) any
permit, franchise, judgment, decree, statute, rule or regulation applicable to
Bell Atlantic or its business or property, or (b) result in any material breach
of any terms or provisions of, or constitute a material default under, any
material contract, agreement or instrument to which Bell Atlantic is a party or
by which Bell Atlantic is bound.

 

5.3                                 Consents.  No consent, approval or authorization of, or
filing or action with, any Governmental Authority or third party is required to
be made or obtained by or with respect to Bell Atlantic in connection with the
execution and delivery of this Agreement, other than such filings, consents,
approvals, authorizations or actions, the failure of which to make or obtain,
individually or in the aggregate, would not prevent or materially delay
consummation of this Agreement.

 

5.4                                 Status
and Investment Intent.

 

(a)                                  Bell
Atlantic is an “accredited investor” as defined in Rule 501(a) under the
Securities Act, and it is acquiring the Senior Preferred Stock hereunder for
its own account for investment purposes only and not with a view to, or with
any present intention of, resale, distribution or other disposition thereof
except as is otherwise provided in this Agreement.  Bell Atlantic understands that it must bear the economic risk of
an investment in the Senior Preferred Stock for an indefinite period of time
because, among other reasons, the offering and sale of the Senior Preferred
Stock, Class A-2 Units and Preferred Units have not been registered under the
Securities Act and, therefore, cannot be sold unless such securities are
subsequently registered under the Securities Act or an exemption from such
registration is available.

 

9

 

(b)                                 Bell
Atlantic has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its
investment in the Senior Preferred Stock, Class A-2 Units and Preferred Units
and is capable of bearing the economic risks of such investment, including a
complete loss of its investment.  Bell
Atlantic has not relied, in connection with this investment, upon any
representations, warranties or agreements other than those set forth in this
Agreement.

 

6.                                       Covenants.

 

The Company covenants and agrees as follows,
with such covenants to be effective so long as, (i) in the case of Sections
6.1 through 6.6 and Section 6.13, any shares of Senior
Preferred Stock or Debentures remain outstanding, and (ii) in the case of Sections
6.7 through 6.12, any shares of Senior Preferred Stock, Debentures,
Warrants, Class A-2 Warrant Shares or Preferred Warrants Shares remain
outstanding:

 

6.1                                 Distributions.  The Company will not declare or pay any
Distributions, with respect to the Common Stock or any other capital stock of
the Company ranking junior to the Senior Preferred Stock, so long as any shares
of Senior Preferred Stock shall remain outstanding; provided, that,
notwithstanding the terms of this Section 6.1, the Company shall be
permitted to declare or pay any Distributions to be used (i) to repurchase or
otherwise redeem, in an amount not to exceed $600,000 per annum and $2,400,000
in the aggregate during the term of this Agreement, equity interests of M&S
LLC from former employees of the Company or any of its Subsidiaries pursuant to
the terms of the LLC Agreement, written agreements between M&S LLC or any
of its Subsidiaries and such employees or other employee compensation plans of
M&S LLC and its Subsidiaries, (ii) to pay, in an amount not to exceed
$2,660,000 in any fiscal year, costs and expenses incurred in the ordinary
course of business as a holding company, including, without limitation, payment
of administrative costs and expenses and reasonable out of pocket expenses
incurred by members of the board of advisors of M&S LLC, or (iii) to make
payments in connection with federal and state income taxes, franchise taxes and
other similar licensing expenses incurred in the ordinary course of business.

 

6.2                                 Maintenance
of Property; Insurance.  The Company
and its Subsidiaries will keep all material tangible property necessary in its
business in good working order and condition, ordinary wear and tear expected,
except where failure to do so could not reasonably be expected to have a
material adverse effect on the business, operations, or condition of the
Company and its Subsidiaries taken as a whole, and will maintain insurance on
all their respective properties in at least such amounts and against at least
such risks (and with such risk retention) as are usually insured against by companies
similarly situated or engaged in the same or a similar business.

 

6.3                                 Maintenance
of Existence.  The Company and its
Subsidiaries will preserve, renew and keep in full force and effect and in good
standing their corporate existence and take all action reasonably necessary to
maintain their rights, privileges, permits, and franchises necessary or
desirable in the normal conduct of business; provided, that nothing in
this Section 6.3 shall prohibit (a) the merger of any Subsidiary
into the Company or the merger or consolidation of any Subsidiary with or into
another Person if the corporation surviving such consolidation or merger is a
Subsidiary of the Company and if, in each case and after giving

 

10

 

effect thereto, no default
under this Agreement shall have occurred and be continuing, (b) the termination
of the corporate existence of any Subsidiary if the Company in good faith
determines that such termination is in its best interest and is not materially
disadvantageous to the Holders or (c) any transaction permitted under Section 6.4.  Nothing in this Section 6.3
shall be deemed to authorize any transaction expressly prohibited by any other
section of this Agreement.

 

6.4                                 Ownership
of Subsidiaries.  The Company shall,
directly or through Subsidiaries, own all of the capital stock or beneficial
interests of its Subsidiaries, except for capital stock or beneficial interests
owned by Persons (other than Subsidiaries) who are not Affiliates of the
Company or Affiliates of such Affiliates.

 

6.5                                 Compliance
with Laws.  The Company and its
Subsidiaries will comply with all applicable laws, rules, regulations and
orders (including, without limitation, environmental laws, rules, regulations
and orders and ERISA), other than such laws, rules, regulations and orders the
failure to comply with which cannot reasonably be expected to have a material
adverse effect on the business, operations or condition, financial or
otherwise, of the Company and its Subsidiaries, taken as a whole.

 

6.6                                 Books
and Records.  The Company and its
Subsidiaries will keep proper books of record and account in which full, true
and correct entries in conformity with generally accepted accounting principles
shall be made of all dealings and transactions in relation to their business
and activities.

 

6.7                                 Legal
Prohibitions.  No Holder shall be
required by any provision of this Agreement to take any action prohibited by
applicable law, including ERISA.  To the
extent that the exercise of any right or the performance of any obligation by
any Holder under this Agreement shall be prohibited by law, such Holder and the
other parties hereto agree to cooperate in good faith in any reasonable and
lawful alternative arrangements designed to provide such Holder or such other
parties, as the case may be, the economic benefit from the exercise of such
right or the performance of such obligation.

 

6.8                                 Monthly
Reports.  The Company will furnish
to each Holder as soon as practicable, and in any event within 30 days after
the end of each month in each fiscal year, unaudited consolidating and
consolidated statements of income and cash flows of the Company and its
consolidated Subsidiaries for each monthly accounting period, and consolidating
and consolidated balance sheets of the Company and its consolidated
Subsidiaries as of the end of such monthly accounting period, setting forth in
each case comparisons to the corresponding period in the preceding fiscal
year.  M&S LLC will furnish to each
holder of Warrants as soon as practicable, and in any event within 30 days
after such financial statements become available, those certain financial
statements of M&S LLC produced by M&S LLC in the ordinary course of
business.

 

6.9                                 Other
Information; etc.  From time to time
upon reasonable request of a Holder (so long as such Person holds any of the
issued and outstanding shares of Senior Preferred Stock or Debentures), the
Company will furnish to such Holder (or its designated representative) such
information regarding the business of the Company and its Subsidiaries as such
Holder or its representative may reasonably request.  Each Holder and its representatives

 

11

 

shall have the right during
normal business hours to visit and inspect (in a manner so as not to
unreasonably disrupt the operations of the Company and its Subsidiaries) any of
the properties of the Company or any of its Subsidiaries, to make an
independent examination of the books and records of the Company or any of its
Subsidiaries, to make copies, notes and abstracts therefrom, and to discuss
their business, affairs and financial condition with the officers, employees
and accountants of the Company or any of its Subsidiaries.

 

6.10                           Plan
Assets.  The Company shall take all
actions necessary to allow it to continue to constitute an Operating Company,
or otherwise not to cause any of the underlying assets of the Company or any of
its Subsidiaries to be deemed “Plan Assets” with respect to Bell Atlantic.

 

6.11                           Rules
144 and 144A.  So long as the
Company shall not have filed a registration statement pursuant to
Section 12 of the Exchange Act or a registration statement pursuant to the
requirements of the Securities Act, the Company shall, at any time and from
time to time, upon the request of a Holder or upon the request of any Person
designated by a Holder as a prospective purchaser of securities of the Company
from such Holder, furnish in writing to such Holder or such prospective
purchaser, as the case may be, a statement as of a date not earlier than
12 months prior to the date of such request of the nature of the business
of the Company and the products and services it offers and copies of the
Company’s most recent balance sheet and profit and loss and retained earnings
statements, together with similar financial statements for such part of the two
preceding fiscal years as the Company shall have been in operation, all such
financial statements to be audited to the extent audited statements are
reasonably available, provided, that, in any event the most recent
financial statements so furnished shall include a balance sheet as of a date
less than 16 months prior to the date of such request, statements of
profit and loss and retained earnings for the 12 months preceding the date
of such balance sheet, and if such balance sheet is not as of a date less than
6 months prior to the date of such request, additional statements of
profit and loss and retained earnings for the period from the date of such
balance sheet to a date less than 6 months prior to the date of such
request.  If the Company shall have
filed a registration statement pursuant to the requirements of Section 12
of the Exchange Act or a registration statement pursuant to the requirements of
the Securities Act, the Company shall file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or if the Company is not required to file
such reports, will, upon the request of any Holder, make publicly available
other information) and will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell securities of the Company without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission.  Upon the request of any Holder, the Company
will deliver to such Holder a written statement as to whether it has complied
with the requirements of this Section 6.11.  The Company, upon written request, will
cooperate with and assist any Holder or any member of the National Association
of Securities Dealers, Inc. system for Private Offering Resales and Trading
through Automated Linkages (“PORTAL”) in applying to designate and thereafter
maintaining the eligibility of the Company’s securities for trading through
PORTAL.

 

12

 

6.12                           Transactions
with Affiliates.  Except as set
forth on Schedule 6.12, neither the Company nor any Subsidiary will
enter into any transaction with any Affiliate of the Company or any Subsidiary
or with any Affiliate of any such Affiliate, except upon fair and reasonable
terms no less favorable to the Company or such Subsidiary than could be
obtained at the time of such transaction in a comparable arm’s-length
transaction with a Person that is not such an Affiliate.  Transactions between the Company and
Subsidiaries or between Subsidiaries or with employees of the Company and
Subsidiaries in the ordinary course of business shall not be subject to this Section 6.12.

 

6.13                           Maximum
Leverage Ratio.  At the end of each
fiscal quarter, the Leverage Ratio for the Reference Period then ended shall
not exceed a ratio of 4.5:1.0.  “Leverage
Ratio” and “Reference Period” shall have the respective meanings
given to such terms in the Credit Agreement, as such agreement is in effect as
of the date hereof.

 

7.                                       Put Rights; Related Company
Redemption Right.

 

(a)                                  In
connection with a Change in Control, each Holder shall have the right to
require the Company to repurchase all or any portion of the shares of Senior
Preferred Stock or of the Debentures, if any, held by such Holder at the Put
Price (the “Put”) by delivering a written notice to the Company
specifying the number of shares of Senior Preferred Stock or principal amount
of Debentures to be purchased by the Company (the “Put Notice”), which
notice when given shall be irrevocable; provided, that, if and to the
extent such repurchase is prohibited by or would result in a default under the
terms of the Guaranty or the Credit Agreement, such Holder may not exercise its
rights to require such repurchase hereunder. 
The Put Price for shares of Senior Preferred Stock shall be $1,000 per
share (or a proportionate fraction thereof for fractional shares, if any) for
the shares to be sold plus an amount equal to dividends (whether or not
declared) accrued and unpaid thereon to the date such shares are so purchased
plus any Catch-Up Dividends applicable to such shares.  The Put Price for each Debenture to be sold
shall be the principal amount plus accrued and unpaid interest thereon to the
date such Debenture is so purchased. 
The Put Notice shall be given within 30 days after the Company has
given written notice to such Holder of the impending Change in Control, which
such notice must be provided no later than 45 days prior to any Change in
Control.  At the Put closing, such
Holder shall deliver to the Company certificates representing the shares and/or
Debentures to be sold and the Company shall deliver the applicable payment by
cashier’s or certified check payable to such Holder or by wire transfer of
immediately available funds to an account designated by such Holder and, if
less than all shares or Debentures held by such Holder are being sold to the
Company, new shares or Debenture certificates representing the unsold portion
of any certificates so surrendered, as applicable.

 

(b)                                 The
Company agrees that it will not effect any Change in Control unless the Put
Price for all shares of Senior Preferred Stock and/or Debentures subject to and
designated in each Put Notice given by a Holder is simultaneously paid to the
Holder against surrender of stock or Debenture certificates therefor as
provided above.  The Company agrees that
notwithstanding any provisions in the Debentures, including the terms of the
subordination thereof, the Company will not effect any Change in Control unless
the exercise by any Holder of its Put rights, including the receipt and
retention of the Put Price by such Holder and the payment by the Company
thereof, are then permitted without conflict with or violation of any agreement

 

13

 

or instrument (including,
without limitation, the Guaranty or the Credit Agreement) applicable to the
Company or any of its Subsidiaries or any term of the Senior Preferred Stock or
the Debentures.

 

(c)                                  The
Company may, at its option, if permitted under the terms of the Guaranty and
the Credit Agreement, redeem any issued and outstanding shares of Senior
Preferred or Debentures (not otherwise redeemed at the option of Bell Atlantic
pursuant to the Put Notice) at the applicable Put Price by giving written
notice of such redemption to the Holders of such Senior Preferred Stock or
Debentures at least 10 days prior to the Change in Control.  Such redemption shall be effected at the Put
closing in accordance with the procedures set forth in Section 7(a).

 

8.                                       Conditions Precedent.

 

The obligation of Bell Atlantic to consummate
the Closing hereunder shall be subject to the satisfaction, prior to or
substantially contemporaneously with the Closing, of the following conditions,
the compliance with which, or the occurrence of which, may be waived in whole
or in part by Bell Atlantic in writing:

 

(a)                                  Legal
Opinions.  Bell Atlantic shall have
received from Kirkland & Ellis an opinion dated the date of the
Closing in form and substance reasonably satisfactory to Bell Atlantic.

 

(b)                                 Representations,
Warranties and Conditions; Officers’ Certificate.  The representations and warranties of each of the Company and
M&S LLC contained herein shall be true and correct in all material respects
on and as of the Closing.  Bell Atlantic
shall have received as of Closing a certificate of each of the Company and
M&S LLC executed on its behalf by its President or chief financial officer
to these effects and to the effect that the conditions specified in this Section 8(b)
have been satisfied and each of the Company and M&S LLC has performed and
complied with all agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing.

 

(c)                                  General.  All instruments and legal and corporate
proceedings in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in form and substance to Bell Atlantic (Bell
Atlantic agrees that the forms of this Agreement and the exhibits thereto
provided to it at the closing are so satisfactory), and Bell Atlantic shall
have received counterpart original, or certified or other copies, of all
documents, including records of corporate proceedings and opinions of counsel,
that it may have requested in connection therewith.

 

(d)                                 McCormick &
Schmick Acquisition.  The Asset
Purchase Agreement, dated as of June 7, 2001, by and among Avado Brands,
Inc., McCormick & Schmick Acquisition Corp. (“Acquisition Corp.”)
and certain other parties thereto (as in effect from time to time, the “Asset
Purchase Agreement”), shall be in full force and effect and all conditions
to the obligations of Acquisition Corp. under the Asset Purchase Agreement
shall have been satisfied or waived pursuant to the terms therein, and the
acquisition contemplated by the Asset Purchase Agreement shall be consummated
concurrently with the Closing.

 

14

 

(e)                                  Bank
Agreement.  BRS and CHP shall have
received oral confirmation from the senior lenders under the Credit Agreement
(together with all other “Loan Documents” (as defined therein), as in effect
from time to time, the “Bank Agreement”), that such lenders are prepared
to enter into the Bank Agreement, and close the transactions contemplated by
the Bank Agreement concurrently with the transactions contemplated hereby, on
terms and conditions satisfactory to BRS and CHP.

 

9.                                       Miscellaneous.

 

9.1                                 Binding
Effect; Legend.  The provisions of
this Agreement shall be binding upon the parties hereto and their respective
successors and assigns.  For all
purposes of this Agreement, the term “Bell Atlantic” shall include any
successor entity acting on behalf of The Bell Atlantic Master Trust.  Neither Bell Atlantic nor any subsequent
Holder shall transfer any Senior Preferred Stock unless the transferee (other
than a transferee in a Public Sale) agrees to be bound by the provisions of
Section 5 of this Agreement, this Section 9.1 and Section 5
of the Debentures (to the extent applicable), and each certificate of Senior
Preferred Stock shall contain a legend to such effect.

 

15

 

9.2                                 Amendment.  This Agreement may be amended or provisions
thereof waived only by a written instrument signed by the Company and the
Majority Holders; provided, that, (i) Sections 6.1 through 6.6
and Section 6.13 may be amended or waived by a written instrument
signed by the Company and the Majority Holders of any outstanding Senior
Preferred Stock and any outstanding Debentures; (ii) Sections 6.7
through 6.12 may be amended or waived by a written instrument signed by
the Company and the Majority Holders of any outstanding Senior Preferred Stock,
any outstanding Debentures, any outstanding Class A-2 Warrant Shares and any
outstanding Preferred Warrant Shares; and (iii) Section 7 may be
amended or waived by a written instrument signed by the Company and the
Majority Holders of any outstanding Senior Preferred Stock and any outstanding
Debentures.

 

9.3                                 Notices.  All notices and other communications
provided for herein shall be dated and in writing and shall be deemed to have
been duly given when delivered, if delivered personally, by telecopier or sent
by registered or certified mail, return receipt requested, postage prepaid and
when received if delivered otherwise, to the party to whom it is directed:

 

(a)                                  If
to the Company, to it at the following address:

 

c/o Castle
Harlan Partners III, L.P.

150 East 58th
Street

New York, New
York 10155

Attention:                                         David
B. Pittaway

Facsimile:                                            (212)
207-8042

 

with copies
to:

 

Schulte
Roth & Zabel LLP

919 Third
Avenue

New York, New
York 10022

Attention:                                         Marc
Weingarten

Michael R. Littenberg

Facsimile:                                            (212)
593-5955

 

Kirkland &
Ellis

153 East 53rd
Street

New York, New
York 10022

Attention:                                         Kimberly
P. Taylor

Facsimile:                                            (212)
446-4900

 

16

 

(b)                                 If
to Bell Atlantic, to it at the following address:

 

c/o Mellon
Bank, N.A.

One Mellon
Bank Center

Room 3346

Pittsburgh,
Pennsylvania 15258-001

Attention:                                         Francis
Walton

Facsimile:                                            (412)
236-4225

 

with copies
to:

 

Ropes &
Gray

One
International Place

Boston,
Massachusetts 02110

Attention:                                         Ann
Milner

Facsimile:                                            (617)
951-7050

 

Verizon
Investment Management Corp.

695 Main
Street

Suite 600

Stamford,
Connecticut 06901

Attention:                                         Conrad
Francis

Facsimile:                                            (203)
965-3300

 

Verizon
Investment Management Corp.

695 Main
Street

Suite 600

Stamford,
Connecticut 06901

Attention:                                         Bruce
Franzese

Facsimile:                                            (203)
965-2243

 

or at such other address
or addresses as the parties hereto shall have specified by notice in writing to
the other parties (provided, that, such notice of change of address
shall be deemed to have been duly given only when actually received).

 

(c)                                  If
to any other holder of record of any Senior Preferred Stock, Debentures or
Warrants, to it at its address set forth in the register therefor to be
maintained by the Company.

 

17

 

9.4                                 Applicable
Law.  The laws of the State of New
York shall govern the interpretation, validity and performance of the terms of
this Agreement, regardless of the law that might be applied under principles of
conflicts of law.

 

9.5                                 Entire
Agreement.  This Agreement contains
the entire understanding of the parties with respect to the subject matter hereof,
and there are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein. 
This Agreement supersedes all prior agreements and understandings
between the parties with respect to this subject matter.

 

9.6                                 Descriptive
Headings.  The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of terms contained herein.

 

9.7                                 Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.

 

9.8                                 Specific
Performance; Holders, Remedies. 
Each of the parties hereto acknowledges and agrees that in the event of
any breach of this Agreement, the non-breaching party would be irreparably
harmed and could not be made whole by monetary damages.  It is accordingly agreed that the parties
hereto shall and do hereby waive the defense in any action for specific
performance that a remedy at law would be adequate and that the parties hereto,
in addition to any other remedy to which they may be entitled at law or in
equity, shall be entitled to compel specific performance of this Agreement in
any action instituted in the United States District Court for the District of
New York, or in the event such Court shall not have jurisdiction of such
action, in any court of the United States or any state thereof having subject
matter jurisdiction of such action.  The
parties hereto consent to personal jurisdiction in any such action brought in
the United States District Court for the Southern District of New York or any
such other court.

 

9.9                                 Survival
of Covenants.  All covenants,
agreements, representations and warranties made herein or in any other document
referred to herein or delivered to a party pursuant hereto or in connection
herewith shall survive the execution and delivery to such party of this
Agreement and of the Closing hereunder.

 

9.10                           Expenses.  The Company agrees to pay, on demand, all
expenses in connection with the transactions contemplated hereunder and
operations hereunder, including without limitation (a) payment by wire transfer
at the closing hereunder of the reasonable fees and expenses of
Ropes & Gray, special counsel to Bell Atlantic, arising in connection
with the preparation, negotiation and execution of this Agreement, the
agreements related hereto, and the consummation of the transactions
contemplated hereby and thereby, (b) the out-of-pocket expenses incurred by
Bell Atlantic in connection with the investigation and consummation of such
transactions, (c) any taxes, including recording or filing fees and transfer
and documentary stamp and similar taxes, payable in respect of execution and
delivery of this Agreement and any of the agreements related hereto, all
expenses (including enforcement, reasonable attorneys, fees

 

18

 

and expenses) incurred in
respect of the exercise or performance, or the preservation or enforcement, of
any right granted to Bell Atlantic, and the consideration of any legal
questions relevant thereto and (d) all expenses (including reasonable
attorneys’ fees and expenses) in connection with any amendments or waivers
(whether or not the same become effective) of this Agreement and any of the
agreements related hereto.

 

9.11                           Legend.  Each certificate for Senior Preferred Stock
shall be imprinted with a legend in substantially the following form:

 

“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON AUGUST 22, 2001,
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THE TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN
STOCK AND WARRANT PURCHASE AGREEMENT, DATED AS OF AUGUST 22, 2001, BY AND
AMONG THE ISSUER (THE “COMPANY”), MCCORMICK & SCHMICK HOLDINGS LLC,
AND A CERTAIN INVESTOR, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER.  A COPY OF
SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST AND WITHOUT CHARGE.”

 

*  *  *  *  *

 

19

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

 

	
   

  	
  MCCORMICK &
  SCHMICK ACQUISITION CORP. II

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS
  L. SCHMICK

  
	
   

  	
   

  	
  Name:

  	
  Douglas L.
  Schmick

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MELLON BANK,
  NA., solely in its capacity as Trustee for The Bell Atlantic Master Trust (as
  directed by Verizon Investment Management Corp.), and not in its individual
  capacity

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ CAROLE
  BRUNO

  
	
   

  	
   

  	
  Name:

  	
  Carole Bruno

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  McCORMICK &
  SCHMICK HOLDINGS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOUGLAS
  L. SCHMICK

  
	
   

  	
   

  	
  Name:

  	
  Douglas L.
  Schmick

  
	
   

  	
   

  	
  Title:

  	
  President

  
							

 

 

Exhibit B

 

THE DEBENTURES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES OR
“BLUE SKY” LAWS AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR QUALIFICATION.  THE DEBENTURES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A STOCK AND WARRANT
PURCHASE AGREEMENT, DATED AS OF AUGUST 22, 2001, BETWEEN THE COMPANY AND
THE ORIGINAL HOLDER OF THESE DEBENTURES. 
A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY
TO THE HOLDER HEREOF UPON REQUEST.

 

McCORMICK & SCHMICK ACQUISITION CORP. II

 

13% SUBORDINATED EXCHANGE DEBENTURE DUE AUGUST 22, 2011

 

	
  No.

  	
   

  	
  [DATE]

  

 

McCORMICK & SCHMICK ACQUISITION CORP. II, a Delaware
corporation (the “Company,” which term includes any successor corporation), for
value received, promises to pay to
                    ,
the principal sum of                     
dollars
($                    )
together with accrued and unpaid interest thereon, on August 22, 2011, in
accordance with the provisions set forth below.  See paragraph 4 herein for certain definitions.

 

1.                                       Interest.  The Company promises to pay (in cash or PIK
Debentures (as more fully described below) at the option of the Company)
interest, at the rate of 13% per annum (increasing to 15% on any overdue
principal and, to the extent legally permitted, overdue interest) semi-annually
on any unpaid principal amount (or PIK Debentures) on August 31 and
February 28 of each year (except that if such interest payment date is not
a Business Day then such interest will be payable on the preceding Business
Day), commencing on [insert date of exchange]
(or with respect to PIK Debentures, the interest payment date upon which such
PIK Debentures were issued), until payment of the applicable principal amount
has been made or duly provided for. 
Interest on the Debentures shall be computed on the basis of a 360-day
year.  For purposes of this Debenture,
interest shall accrue to the extent necessary so that the amount of interest
paid or accrued on the principal amount hereof from the original issue date of
the Debentures to the accrual determination date shall equal the amount of
interest which a holder of this Debenture would have received on this Debenture
and on all PIK Debentures traceable to this Debenture directly or by reason of
PIK Debentures payable as interest on such PIK Debentures, had the Company made
timely payment of all PIK Interest from such issue date (except that no
interest shall accrue with respect to any interest payments made in cash).

 

 

The Company may issue additional Debentures, dated the date of the
applicable interest payment date (the “PIK Debentures”) in an aggregate
principal amount of the amount of interest then due, and the timely issuance of
such PIK Debentures shall constitute full payment of

 

such interest.  In no event shall an election by the Company
either to pay interest in cash on the Debentures or to issue PIK Debentures as
payment of interest, in whole or in part, on any interest payment date preclude
the Company from electing either such alternative in respect of all or any
portion of interest accruing on the Debentures on any subsequent interest
payment date, except that if the Company shall default in the payment of
interest for more than thirty (30) days, it shall be deemed to have made an
irrevocable election to pay in PIK Debentures all interest then payable with
respect to this Debenture and all interest thereafter accruing on such
amount.  Each issuance of PIK Debentures
shall be made pro rata in respect to the outstanding Debentures.  If any payment of interest on the Debentures
to be made, in whole or in part, by the issuance of PIK Debentures would result
in the issuance of PIK Debentures in any denomination of less than $1,000, the
Company may at its option pay cash in lieu of issuing such Debentures.  All PIK Debentures shall be subject to the
same terms as this Debenture (except with respect to the issuance date and
aggregate principal amount).  The term
Debentures shall include PIK Debentures that may be issued hereunder.

 

2.                                       Method of
Payment.  The interest so payable on
any August 31 and February 28 will be paid to the Holder in whose
name this Debenture is registered on the Debenture register at the close of
business on the August 15 or February 15 preceding such
August 31 or February 28, whether or not such August 15 or
February 15 is a Business Day and may, at the option of the Company, be
paid by PIK Debentures and/or check mailed to such registered Holders.  Holders must surrender Debentures to the
Company to collect principal payments. 
The Company will pay principal and any cash interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts.  The Company
may pay principal by check payable in such money.

 

3.                                       Denominations,
Transfer, Exchange.  The Debentures
are issuable only in fully registered form without coupons and as certificated
Debentures in any denominations.  The
transfer of Debentures may be registered, and Debentures may be exchanged.  The Company may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law. 
The Company need not exchange or register the transfer of any Debenture
or portion of a Debenture selected for redemption.  Also, it need not exchange or register the transfer of any
Debentures for a period of 15 days before a selection of Debentures to be
redeemed.

 

4.                                       Definitions.  The following terms shall have the
respective meanings specified below.

 

“Board of Directors” means the board of directors of the Company or any
authorized committee of the Board of Directors.

 

“Business Day” means a day that is not a Legal Holiday.

 

2

 

“Capital Stock” means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock or any and all
equivalent ownership interests in a Person (other than a corporation).

 

“Change in Control” shall mean any of the following:  (i) a majority of the board of advisors of
McCormick & Schmick Holdings LLC (“M&S LLC”) shall be comprised of
persons other than designees of Bruckmann, Rosser, Sherrill & Co. II,
L.P. (“BRS”) and/or Castle Harlan Partners III, L.P. (“CHP”), (ii) BRS, CHP,
and their respective controlled Affiliates, affiliated management companies and
employees, in the aggregate, shall cease to own (directly or indirectly) (a)
Common Units of M&S LLC (or its successor) representing 51% or more (40% or
more if an underwritten initial public offering of the Common Units of M&S
LLC or its successor has been consummated) of the Common Units of M&S LLC
(or its successor), or (b) common stock of the Company representing 51% or more
(40% or more if an underwritten public offering of the common stock of the
Company has been consummated) of the common stock of the Company.  For purposes of this definition, BRS shall
be deemed to no longer own the equity securities of M&S LLC in the event that
BRSE LLC (or an entity controlling, controlled by or under common control with
BRSE LLC) shall cease to be the sole general partner of BRS, and CHP shall be
deemed to no longer own the equity securities of M&S LLC in the event that
Castle Harlan Partners III GP, Inc. (or an entity controlling, controlled by or
under common control with Castle Harlan Partners III GP, Inc.) shall cease to
be the sole general partner of CHP.

 

“Common Units” means the Class A-1 Common Units, Class A-2 Common Units
and Class B Common Units of M&S LLC, and excluding any Class C Common Units
of M&S LLC.

 

“Company” means the party named as such above until a successor
replaces it in accordance with this Debenture and thereafter means the
successor.

 

“Debentures” means the Company’s 13% Subordinated Exchange Debentures
due August 22, 2011 described herein, including any PIK Debentures, in
each case as amended, restated, supplemented or modified and in effect from
time to time.

 

“Default” means any event which is, or after notice or passage of time
would be, an Event of Default.

 

“Designated Senior Indebtedness” means Senior Indebtedness described in
clause (i) of the definition of Senior Indebtedness.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Holder” or “Debentureholder” means a Person in whose name a Debenture
is registered.

 

“Indebtedness” means all principal, interest, fees, costs and expenses
and reimbursements and indemnity obligations arising in respect of (i) any
liability of any Person (A) for borrowed money, or (B) evidenced by a note,
debenture or similar instrument (including a purchase money obligation and a
letter of credit) whether issued in connection with the

 

3

 

acquisition of any property,
assets (other than inventory or similar property acquired in the ordinary
course of business) or securities, or otherwise, (ii) any liability of others
described in the preceding clause (i) which a Person has guaranteed or is
otherwise its legal liability and (iii) any amendment, renewal, extension or
refunding of any liability of the types referred to in clauses (i) and (ii)
above.

 

“Legal Holiday” means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in New York, New York.

 

“Officer” means any of the President, Chief Executive Officer, Vice
President, Controller, Secretary or Assistant Secretary of the Company.

 

“Officers’ Certificate” means a certificate signed by two Officers of
the Company or of any other obligor upon the Debentures, as the case may be.

 

“Person” means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

 

The “principal” of a debt security (including the Debentures) means the
principal of the security plus the premium, if any, on the security.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Senior Agent” means Fleet National Bank in its capacity as
Administrative Agent for itself and the other holders of the Designated Senior
Indebtedness, including its successors and assigns and any other agent
designated by notice to the Company by holders of more than 66 2/3% of the
principal amount of the Designated Senior Indebtedness.

 

“Senior Indebtedness” means (i) Indebtedness and other monetary
obligations (including, without limitation, principal, interest, fees, costs,
enforcement expenses (including legal fees, disbursements and collateral
protection expenses) and other reimbursement or indemnity obligations arising
at any time) under that certain Revolving Credit and Term Loan Agreement, dated
as of August 22, 2001, among McCormick & Schmick Acquisition
Corp., McCormick & Schmick Restaurant Corp., McCormick &
Schmick Maryland Liquor, Inc., McCormick & Schmick Acquisition I
Texas, Inc., McCormick & Schmick Acquisition II Texas, Inc.,
McCormick & Schmick Acquisition Texas LP, McCormick & Schmick
Acquisition III Texas, Inc.  (as
Borrowers), the Lenders listed on Schedule I thereto, Fleet National Bank, as
Administrative Agent, SunTrust Bank, as Syndication Agent, and IBJ Whitehall
Bank & Trust Company, as Documentation Agent, as from time to time
amended, extended, modified, supplemented, refinanced or restated from time to
time, and Indebtedness and other monetary obligations of the Company under the
Guaranty, dated as of August 22, 2001, issued by the Company for the benefit
of such Administrative Agent and such Lenders, pursuant to which the Company
guaranteed the obligations of its Subsidiaries under such Credit Agreement, and
(ii) any other Indebtedness of the Company or its Subsidiaries the terms
of which expressly specify such Indebtedness to be Senior Indebtedness for
purposes of the Debentures.  It is

 

4

 

expressly acknowledged and
agreed that the amount of Senior Indebtedness may be increased, the term
thereof may be extended or shortened, and the provisions thereof may be
amended, modified or restated in any respect. 
Senior Indebtedness shall expressly include any and all interest
accruing or out of pocket costs or expenses incurred after the date of any
filing by or against the Company or any of its Subsidiaries of any petition
under the federal Bankruptcy Code or any other Bankruptcy Law regardless of
whether a claim therefor is allowed or allowable in the case or proceeding
relating thereto.

 

“Subordinated Debt Documents” means the Debentures, the PIK Debentures,
and any and all other documents or instruments evidencing or guarantying or
securing directly or indirectly any of the Subordinated Indebtedness, whether
now existing or hereafter created.

 

“Subordinated Indebtedness” means all principal, interest, fees, costs,
enforcement expenses (including legal fees and disbursements), collateral
protection expenses and other reimbursement and indemnity obligations created
or evidenced by the Debentures or any other Subordinated Debt Documents,
including all interest accruing thereon or out of pocket costs or expenses
incurred with respect thereto after the date of any filing by or against the
Company or any of its Subsidiaries of any petition under the federal Bankruptcy
Code or any other Bankruptcy Law.

 

“Subsidiary” of a Person means (i) a corporation at least a majority of
whose Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned or controlled, directly
or indirectly, by such Person or (ii) any other Person (other than a
corporation) in which such Person, directly or indirectly, at the date of
determination thereof has at least a majority ownership interest.

 

4.1                                 Other
Definitions

 

	
  Terms

  	
   

  	
  Defined in
  Paragraph

  	
   

  
	
  “Bankruptcy Law”

  	
   

  	
  11.1

  	
   

  
	
  “Custodian”

  	
   

  	
  11.1

  	
   

  
	
  “Event of Default”

  	
   

  	
  11.1

  	
   

  
	
  “PIK Debentures”

  	
   

  	
  1

  	
   

  

 

4.2                                 Rules of
Construction.  Unless the context
otherwise requires:

 

(1)                                  a term has the
meaning assigned to it;

 

(2)                                  “or” is not
exclusive;

 

(3)                                  words
in the singular include the plural, and in the plural include the singular; and

 

(4)                                  provisions apply to
successive events and transactions.

 

5

 

5.                                       Subordination.

 

5.1                                 Debentures
Subordinated to Senior Indebtedness. 
The Company covenants and agrees, for itself and its successors and
assigns, and each Holder of any Debenture, by its acceptance thereof, shall be
deemed to have agreed, that the Subordinated Indebtedness and the Subordinated
Debt Documents shall be and hereby are subordinate and subject in right of
payment, to the extent and in the manner hereinafter set forth, to the prior
irrevocable payment in full in cash of all Senior Indebtedness and termination
of all lending commitments (including provision of cash collateral for
contingent obligations in respect of letters of credit, if applicable), and
that each holder of Senior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed or guaranteed shall be deemed to have acquired
Senior Indebtedness in reliance upon the provisions contained in this
Section 5.

 

5.2                                 Debentures
Subordinated to Prior Payment of All Senior Indebtedness on Dissolution,
Liquidation, Reorganization, Etc. 
Upon any payment or distribution of the assets of the Company of any
kind or character, whether in cash, property or securities to creditors of the
Company, by reason of any liquidation, dissolution or other winding up of the
Company or by reason of any sale, receivership, insolvency or bankruptcy proceedings
or assignment for the benefit of creditors or any other proceeding by or
against the Company for any relief under any bankruptcy, reorganization or
insolvency law or laws, federal or state, or any law, federal or state,
relating to the relief of debtors, readjustment of indebtedness,
reorganization, composition or extension, or upon an assignment for the benefit
of creditors of the Company, then in such event:

 

(i)                                     the holders of
Senior Indebtedness shall be entitled to receive irrevocable payment in full in
cash of all amounts due or to become due on or in respect of all Senior
Indebtedness (including provision of cash collateral in respect of letters of
credit, if applicable), before any payments are made on account of or applied
on the Subordinated Indebtedness;

 

(ii)                                  any payment or
distribution of assets of the Company or any of its Subsidiaries of any kind or
character, whether in cash, property or securities (other than securities of
the Company as reorganized or readjusted or securities of the Company or any
other Person provided for by a plan of reorganization, arrangement, adjustment,
composition, recapitalization or readjustment, or other securities (including,
without limitation, equity securities), in each case the payment of which is
subordinate, at least to the extent provided in this Section 5 with
respect to the Subordinated Indebtedness, to the payment of all Senior
Indebtedness and to the payment of all securities issued in exchange therefor
to holders of Senior Indebtedness and which do not mature or become subject to
mandatory redemption prior to the maturity of any Senior Indebtedness, to which
the Holders of the Subordinated Indebtedness would be entitled except for the
provisions of this Section 5, shall be paid or delivered by any debtor,
custodian or other Person making such payment or distribution, directly to the
Senior Agent or other designated agent (and, if there shall be a holder of
Senior Indebtedness for

 

6

 

which no Person is a designated agent,
directly to such holder), for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full after giving effect to any concurrent payment or
distribution, or provision thereof, to the holders of Senior Indebtedness; and

 

(iii)                               in the event that,
notwithstanding the foregoing provisions of this Section 5.2, any payment
or distribution of assets of the Company or any of its Subsidiaries of any kind
or character, whether in cash, property or securities (other than securities
permitted to be received by the Holders of the Subordinated Indebtedness
pursuant to Section 5.2(ii)), shall be received by any Holder of the
Subordinated Indebtedness before all Senior Indebtedness is irrevocably paid in
full in cash (including provision of cash collateral for any contingent
obligations in respect of letters of credit, if any), such payment or
distribution shall be held in trust for the benefit of, and shall be
immediately paid or delivered by such Holder to the Senior Agent or other
designated agents (and, if there shall be a holder of Senior Indebtedness for
which no Person is a designated agent, directly to such holder), for
application to the payment of all Senior Indebtedness remaining unpaid, ratably
according to the aggregate amounts remaining unpaid on the Senior Indebtedness
to the extent necessary to pay all Senior Indebtedness in full in cash and
provide cash collateral for any letters of credit, if any, after giving effect
to any concurrent payment or distribution, or provision thereof, to the holders
of Senior Indebtedness.

 

The Company shall give prompt notice to each Holder of outstanding
Debentures of any dissolution, winding-up, liquidation or reorganization of the
Company.

 

Upon any distribution referred to in this Section 5 of the assets
of the Company, the Holders of the Subordinated Indebtedness shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which such dissolution, winding-up, liquidation or reorganization proceeding is
pending, or a certificate of a designated agent or a liquidating trustee or
other Person making any distribution to such Holders in connection with such
proceeding, for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Section 5.

 

5.3                                 Subordinated
Debt Voting Rights.  At any meeting
of creditors of the Company or in the event of any case or proceeding,
voluntary or involuntary, for the distribution, division or application of all
or part of the assets of the Company or the proceeds thereof, whether such case
or proceeding be for the liquidation, dissolution or winding up of the Company
or its business, a receivership, insolvency or bankruptcy case or proceeding,
an assignment for the benefit of creditors or a proceeding by or against the
Company for relief under the federal Bankruptcy Code or any other Bankruptcy
Law, the Holders of the Subordinated Indebtedness shall retain the right to
vote and otherwise act with respect to the Subordinated Indebtedness
(including, without limitation, the right to vote to accept or reject any plan
of partial or complete liquidation, reorganization, arrangement, composition or
extension), provided that the Holders of the Subordinated Indebtedness shall
not vote with respect to any

 

7

 

such plan or take any other
action in any way so as to contest (i) the validity of any Senior Indebtedness
or any collateral therefor or guaranties thereof, (ii) the relative rights and
duties of any holders of any Senior Indebtedness established in any instruments
or agreements creating or evidencing any of the Senior Indebtedness with
respect to any of such collateral or guaranties or (iii) the obligations and
agreements of the Holders of the Subordinated Indebtedness set forth in this
Debenture.  If the Holders of the
Subordinated Indebtedness fail to file proof of their claims prior to
14 days before the expiration of the time period during which such claims
must be submitted, the Senior Agent or any designated agent for the holders of
the Senior Indebtedness shall be authorized and entitled to file a proof of
claim on behalf of such Holders of Subordinated Indebtedness.

 

5.4                                 No
Payments with Respect to Subordinated Indebtedness in Certain Circumstances.

 

(a)                                  No
payment in respect of the Subordinated Indebtedness (other than the issuance of
PIK Debentures) shall be made by or on behalf of the Company (and no
acceleration of the Subordinated Indebtedness other than pursuant to Sections
11.1(4), 11.1(5) and 11.1(6) hereof or any other exercise of remedies by any
Holder of Subordinated Indebtedness) may be made, if, at the time of such
payment, acceleration or exercise or immediately after giving effect thereto,
(i) a default in the payment when due (whether at the maturity thereof, or upon
acceleration of maturity or otherwise) of any amounts payable with respect to
Senior Indebtedness shall have occurred, and such default shall not have been
cured or waived in accordance with the terms of the relevant agreements and
instruments pursuant to which Senior Indebtedness shall have been created or
incurred; or (ii) subject to the last sentence of this Section 5.4(a), (x)
the Company shall have a received written notice from the Senior Agent of the
occurrence of any other default in respect of Senior Indebtedness which, under
the terms of the agreement and instruments pursuant to which such Senior
Indebtedness shall have been created or incurred, shall permit the holders of
such Senior Indebtedness (immediately or with the giving of notice or the
passage of time or both) to accelerate the maturity thereof and specifying that
a Payment Bar Period (as defined below) is in effect, and (y) such default
shall not have been cured or waived in accordance with the terms of such
agreements and instruments (any period during which no payment or remedies in
respect of the Subordinated Indebtedness or any judgment with respect thereto
may be made or exercised by reason of the application of this clause (ii) being
hereinafter called a “Payment Bar Period”). 
The Company shall forthwith upon receipt of such notice, and in any
event no later than 10 days after receipt thereof, provide a copy of such
notice to each Holder of Subordinated Indebtedness.  Notwithstanding any provision of this Section 5.4(a) to the
contrary, (I) no Payment Bar Period may continue for no more than
180 days, (II) there shall not be more than one Payment Bar Period during
any period of 365 consecutive days and (III) no default existing on the date
any notice is given pursuant to clause (ii)(x) of this Section 5.4(a)
shall, unless the same shall have ceased to exist for a period of at least 30
consecutive days otherwise than by waiver, be used as a basis for any
subsequent such notice.

 

(b)                                 In
the event that, notwithstanding the foregoing, the Company shall make any
payment to any Holder of Subordinated Indebtedness prohibited by the foregoing
provisions of this Section 5.4, then and in such event, such payment shall
be held in trust for the benefit of the holders of Senior Indebtedness and,
upon receipt by such Holder of notice from the Company

 

8

 

or from the Senior Agent or any
other designated agent, shall be immediately paid over and delivered to the
Senior Agent or other designated agent in accordance with and for application
as contemplated by Section 5.2(iii).

 

(c)                                  Following
any acceleration of the maturity of any Senior Indebtedness and as long as such
acceleration shall continue unrescinded and unannulled, such Senior
Indebtedness shall first be irrevocably paid in full in cash (including
provision for cash collateral for contingent obligations in respect of letters
of credit, if any) before any payment is made on account of or applied to the
Subordinated Indebtedness.

 

(d)                                 The
Company shall give prompt written notice to each holder of outstanding
Subordinated Indebtedness of any default in respect of Senior Indebtedness
referred to in subsection (a) of this Section 5.4, but the failure or
delay of the Company to give such notice shall not affect the rights of the
holders of Senior Indebtedness hereunder.

 

5.5                                 Holders
of Subordinated Indebtedness to be Subrogated to Rights of Holders of Senior
Indebtedness.  Subject to the
irrevocable payment in full in cash of all Senior Indebtedness (including
provision of cash collateral for contingent obligations in respect of letters
of credit, if any), the Holders of Subordinated Indebtedness shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness until the principal of, and interest and prepayment charge (if
any) on, and all other amounts payable in respect of, Subordinated Indebtedness
shall be paid in full, and for purposes of such subrogation, no payment or
distribution to the holders of the Senior Indebtedness of assets, whether in
cash, property or securities, distributable to the holders of Senior
Indebtedness under the provisions hereof to which the Holders of Subordinated
Indebtedness would be entitled to but for this Section 5, and no payment
pursuant to the provisions of this Section 5 to the holders of the Senior
Indebtedness by the Holders of the Subordinated Indebtedness shall, as between
the Company, its creditors (other than the holders of the Senior Indebtedness
and the Holders of the Subordinated Indebtedness), be deemed to be a payment by
the Company to or on account of such Senior Indebtedness, it being understood
that the provisions of this Section 5 are, and are intended, solely for
the purpose of defining the relative rights of the Holders of Subordinated
Indebtedness, on the one hand, and the holders of Senior Indebtedness, on the
other hand.

 

5.6                                 Obligations
of the Company Unconditional. 
Nothing contained in this Section 5 is intended to or shall impair,
as among the Company and its creditors (other than the holders of Senior
Indebtedness) and the Holders of Subordinated Indebtedness, the obligations of
the Company to the Holders of Subordinated Indebtedness to pay any Subordinated
Indebtedness as and when such Subordinated Indebtedness shall become due and
payable in accordance with their terms, or to affect the relative rights of the
Holders of Subordinated Indebtedness and creditors of the Company (other than
the holders of Senior Indebtedness), nor shall anything herein or therein
prevent any Holder of Subordinated Indebtedness from exercising all remedies
otherwise permitted by applicable law upon the happening of an Event of Default
under this Debenture, subject to the provisions of Section 5 and subject
to the rights, if any, under this Section 5 of the holders of Senior
Indebtedness in respect to assets, whether in cash, property or securities, of
the Company received upon the exercise of any such remedy.

 

9

 

Nothing contained in this Section 5 or elsewhere in this Agreement
shall, except during the pendency of any dissolution, winding-up, liquidation,
reorganization, adjustment, composition, or adjustment of the Company, affect
the obligation of the Company to make, or prevent the Company from making, at
any time (except under the circumstances described in Section 5.4),
payment of any amounts in respect of Subordinated Indebtedness.

 

5.7                                 Holders
of Subordinated Indebtedness Entitled to Assume Payments Not Prohibited in
Absence of Notice.  No Holder of
Subordinated Indebtedness shall at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to it,
unless and until such Holder shall have received written notice thereof from
the Company, the Senior Agent or any other designated agent (or, if there shall
be a holder of Senior Indebtedness for which no Person is a designated agent,
from such holder); and prior to the receipt of any such written notice each
such Holder of Subordinated Indebtedness shall be entitled to assume
conclusively that no such facts exist, without, however, limiting any rights of
holders of Senior Indebtedness under this Section 5 to recover from the
Holders of Subordinated Indebtedness any payment made to any such Holder which
it is not entitled under this Section 5 to retain.

 

Each Holder of Subordinated Indebtedness shall be entitled to rely on
the delivery to it of a written notice by a Person representing itself to be
the Senior Agent, a designated agent or a holder of Senior Indebtedness to
establish that such notice has been given by the Senior Agent, a designated
agent or a holder of Senior Indebtedness.

 

5.8                                 Effect
of Failure to Pay Debentures.  The
fact that failure to make any payment on account of Debentures is by reason of
the operation of any provision of this Section 5 shall not be construed as
preventing the occurrence of an Event of Default under this Debenture.

 

5.9                                 Company
to Send Copies of Notice.  The
Company will promptly send to the Senior Agent, any other designated agent,
each holder of Senior Indebtedness for which no Person is a designated agent,
and each Holder of Subordinated Indebtedness a copy of each notice given to the
Company under this Section 5.

 

5.10                           Amendments
of Section 5.  The provisions
of this Section 5 and each of the defined terms incorporated herein
(including, without limitation, the definition of “Senior Indebtedness,”
“Subordinated Indebtedness,” “Subordinated Debt Documents,” and “Designated
Senior Indebtedness,” may only be amended or waived by the written consent of
Holders of at least a majority in principal amount of all Subordinated
Indebtedness then outstanding and the holders of at least 66 2/3% of the
principal amount of the Designated Senior Indebtedness, or if no Designated
Senior Indebtedness is outstanding, the holders of at least 50% of the
principal amount of all Senior Indebtedness at the time outstanding.

 

5.11                           Voided
Payments.  To the extent that the
Company or any of its Subsidiaries or any guarantor of or provider of
collateral for the Senior Indebtedness makes any payment on the Senior
Indebtedness that is subsequently invalidated, declared to be fraudulent or
preferential or set aside or is required to be repaid to a trustee, receiver or
any other party under any bankruptcy, insolvency or reorganization act, state
or federal law, common law or equitable

 

10

 

cause (such payment being hereinafter
referred to as a “Voided Payment”), then to the extent of such Voided Payment,
that portion of the Senior Indebtedness that had been previously satisfied by
such Voided Payment shall be revived and continue in full force and effect as
if such Voided Payment had never been made. 
To the extent that any Holder of the Subordinated Indebtedness has
received any payments with respect to the Subordinated Indebtedness subsequent
to the date of initial receipt by the holders of Senior Indebtedness of such
Voided Payment and such payments have not been invalidated, declared to be
fraudulent or preferential or set aside or are required to be repaid to a
trustee, receiver, or any other party under any bankruptcy act, state or
federal law, common law or equitable cause, each Holder of the Subordinated
Indebtedness shall be obligated and hereby agrees that any such payment so made
or received shall be deemed to have been received in trust for the benefit of
the holders of Senior Indebtedness, and each Holder of the Subordinated
Indebtedness shall pay to holders of the Senior Indebtedness upon demand, the
full amount so received by the Holder of the Subordinated Indebtedness during
such period of time to the extent necessary fully to restore to holders of the
Senior Indebtedness the amount of such Voided Payment.

 

5.12                           Holders
of Senior Indebtedness.  The terms
of this Section 5 are for the benefit of, and may be relied upon by, the
holders of Senior Indebtedness.

 

6.                                       Redemption.

 

6.1                                 Redemption.

 

(i)                                     The
Company, at its option and to the extent permitted by the terms of any Senior
Indebtedness, may redeem pro rata, out of funds legally available therefor, in
whole or in part, the Debentures, for cash at a redemption price equal to the
redemption prices set forth below (expressed as percentages of the principal
amount), together with accrued and unpaid interest to the redemption date
(subject to the right of the Holder of Debentures on a record date for the
payment of interest on Debentures to receive the interest due on such
Debentures on the corresponding interest payment date, if such interest payment
date is prior to the date set for redemption), if redeemed during the 12-month
period beginning August 22 of the years indicated below:

 

	
  2001

  	
   

  	
  110

  	
  %

  
	
  2002

  	
   

  	
  109

  	
  %

  
	
  2003

  	
   

  	
  108

  	
  %

  
	
  2004

  	
   

  	
  107

  	
  %

  
	
  2005

  	
   

  	
  106

  	
  %

  
	
  2006

  	
   

  	
  104

  	
  %

  
	
  2007

  	
   

  	
  103

  	
  %

  
	
  2008

  	
   

  	
  102

  	
  %

  
	
  2009

  	
   

  	
  101

  	
  %

  
	
  2010

  	
   

  	
  100

  	
  %

  

 

(ii)                                  The
Company may, at its option and to the extent permitted by the terms of the
Senior Indebtedness, redeem out of funds legally available therefor, in whole
or in part, all Debentures then outstanding at the outstanding principal amount
thereof, together with accrued

 

11

 

and unpaid interest to the
redemption date, simultaneously with the occurrence of any of the following
events:

 

(A) the closing of an underwritten initial
public offering of the common units of M&S LLC, or of the capital stock of
its successor or any of its subsidiaries, pursuant to an effective registration
statement under the Securities Act; provided, that, in the event of an
initial public offering of any of the subsidiaries of M&S LLC, this Clause
(A) shall only take effect if the subsidiary (or subsidiaries) which is (are)
the subject of such initial public offering represents at least 75% of the
consolidated assets of M&S LLC;

 

(B) a sale of the Company to a person and/or
entity or group of persons and/or entities pursuant to which such person or
entity or group of persons or entities directly or indirectly acquires (i) a
number of shares of the Common Stock which represents a majority of the
outstanding shares of the Common Stock (whether pursuant to the sale of shares
of the Common Stock or by merger, consolidation or otherwise) or (ii) all or
substantially all of the property or assets of the Company; or

 

(C) a Change of Control shall have occurred.

 

In case of the redemption of less than all of the then outstanding
Debentures, the Company shall select the Debentures to be redeemed pro rata.

 

6.2                                 Redemption
Procedures.  Not more than 60 nor
less than 30 days prior to the redemption date, notice by first class
mail, postage prepaid, shall be given to each Holder of Debentures to be
redeemed, at such Holder’s address as it shall appear upon the stock transfer
books of the Company.  Each such notice
of redemption shall specify the date fixed for redemption, the redemption
price, the place or places of payment and that payment will be made upon
presentation and surrender of the Debentures to be redeemed.

 

Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder receives such
notice; and failure to give such notice by mail, or any defect in such notice,
to the Holders of any Debentures designated for redemption shall not affect the
validity of the proceedings for the redemption of any other Debenture.  On or after the date fixed for redemption as
stated in such notice, each Holder of the Debentures called for redemption
shall surrender such Debentures to the Company at the place designated in such
notice and shall thereupon be entitled to receive payment of the Redemption
Price.  Upon surrender of a Debenture
that is redeemed in part, a new Debenture equal in principal amount to the
unredeemed portion of the Debenture surrendered shall be issued to the
Holder.  If such notice of redemption
shall have been so mailed and if, on or prior to the redemption date specified
in such notice all funds necessary for such redemption shall have been set
aside by the Company, separate and apart from its other funds, in trust for the
account of the Holders of the Debentures so to be redeemed (so as to be and
continue to be available therefor), then on and after the redemption date,
notwithstanding that any certificate for the Debentures so called for
redemption shall not have been surrendered for cancellation, all Debentures
with respect to which such notice shall have been mailed and such funds which
shall have been set aside shall be deemed to be no longer outstanding and all
rights with respect to such Debentures so called for redemption shall forthwith
cease and terminate, except the right of the Holders

 

12

 

thereof to receive the amount
payable on redemption thereof (including an amount equal to accrued and unpaid
interest to the redemption date) without interest thereon.  However, if such notice of redemption shall
have been so mailed and if, prior to the redemption date specified in such
notice, all said funds necessary for such redemption shall have been
irrevocably deposited in trust, for the account of the Holders of the
Debentures so to be redeemed (so as to be and continue to be available
therefor), with a corporation organized and doing business under the laws of
the United States or any State thereof or of the District of Columbia (or a
corporation or other person permitted to act as a trustee by the Securities and
Exchange Commission) authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $500,000,000 and
subject to supervision or examination by Federal, State or District of Columbia
authority, then, upon the making of such irrevocable deposit and without
awaiting the redemption date, all Debentures with respect to which such notice
shall have been so mailed and such funds which shall have been so irrevocably
deposited shall be deemed to be no longer outstanding, and all rights with
respect to such Debentures so called for redemption shall forthwith cease and
terminate except the right of the Holders thereof on or after the redemption
date to receive out of the funds so irrevocably deposited in trust the amount
payable upon redemption thereof (including an amount equal to accrued and
unpaid interest to the redemption date) without interest thereon.

 

The Holder of any Debenture redeemed upon any exercise of the Company’s
redemption right shall not be entitled to receive payment of the redemption
price for such Debentures until such Holder shall cause to be delivered to the
place specified in the notice given with respect to such redemption (i) the
Debentures to be redeemed and (ii) transfer instrument(s) satisfactory to the
Company and sufficient to transfer such Debentures to the Company free of any
adverse interest.  No interest shall
accrue on any Debentures after its redemption date.

 

7.                                       Persons
Deemed Owners.  The registered
Holder of a Debenture may be treated as its owner for all purposes.

 

8.                                       Amendments
and Waivers.  Except as provided in
Section 5, the Debentures may be amended with the consent of the Holders
of at least a majority in principal amount of the Debentures, and any existing
Default may be waived with the consent of the Holders of a majority in
principal amount of the Debentures, except that, without the consent of each
Holder affected, an amendment or waiver may not (i) reduce the amount of
Debentures whose Holders must consent to an amendment or waiver; (ii) reduce
the rate of or change the time for payment of interest on any Debenture; (iii)
reduce the principal of or time for payment of principal on any Debenture; or
(iv) make any Debenture payable in money other than that stated in the
Debenture.  Without the consent of any
Debentureholder, the Debentures may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of Company obligations to
Debentureholders, or to make any change that does not adversely affect the
rights of any Debentureholder.

 

13

 

9.                                       Covenants.

 

9.1                                 Payment
of Debentures.  The Company shall
pay the principal of and interest on the Debentures on the dates and in the
manner provided herein.  The Company
shall pay interest on overdue principal on overdue installments of interest at
the rate so provided in Section 1 hereof to the extent lawful.

 

9.2                                 Notice
of Default.  The Company will
deliver to the Holders an Officers’ Certificate promptly upon becoming aware of
any Default or Event of Default, which Officers’ Certificate will specify such
Default or Event of Default.

 

10.                                 Successor
Corporations.

 

10.1                           When
Company May Merge, etc.  The Company
shall not consolidate with or merge with or into any other Person or transfer
(by lease, assignment, sale or otherwise) all or substantially all of its
properties and assets, in a single transaction or through a series of related
transactions, as an entirety or substantially as an entirety to another Person
or group of affiliated Persons unless:

 

(1)                                  the Company is the
survivor or the Holders of Debentures have a contractual right thereupon to
sell their Debentures to the Company; or

 

(2)                                  such transaction is
consented to by the Holders of a majority in principal amount of
Debentureholders and the successor Person expressly assumes all of the
obligations of the Company hereunder.

 

Notwithstanding the foregoing, any Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to the Company
or any other Subsidiary or Subsidiaries.

 

10.2                           Successor
Corporation Substituted.  Upon any
consolidation or merger, or any transfer of assets of the Company in accordance
with paragraph 10.1, the successor Person formed by such consolidation or into
which the Company is merged or to which such transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Debenture with the same effect as if such successor Person had been
named as the Company herein.  When a
successor Person expressly assumes all of the obligations of the Company
hereunder, the predecessor shall be released from such obligation.

 

11.                                 Defaults and
Remedies.

 

11.1                           Events
of Default.  An “Event of Default”
occurs if:

 

(1)                                  the Company defaults
in the payment of interest on any Debenture when the same becomes due and
payable and the Default continues for a period of 5 days;

 

14

 

(2)                                  the Company defaults
in the payment of the principal of any Debenture when the same becomes due and
payable at maturity, upon redemption, acceleration or otherwise;

 

(3)                                  the Company shall
default in the performance of any of its obligations hereunder (other than
those referred to in clauses (1) and (2) above) and such default shall continue
for a period of 90 days after written notice thereof shall have been
received by the Company from any Holder;

 

(4)                                  the Company, pursuant
to or within the meaning of any Bankruptcy Law (A) becomes insolvent, (B) fails
generally to pay its debts as they become due, (C) admits in writing its
inability to pay its debts generally as they become due, (D) commences a
voluntary case or proceeding, (E) consents to, or acquiesces in, the
institution of a bankruptcy or an insolvency proceeding against it or the entry
of a judgment, decree or order for relief against it in an involuntary case or proceeding,  (F) applies for, consents to or acquiesces
in the appointment of or taking possession by a Custodian of the Company or of
any part of its property or (G) makes a general assignment for the benefit of
its creditors;

 

(5)                                  a court of competent
jurisdiction enters a judgment, decree or order under any Bankruptcy Law which
(A) is for relief against the Company in an involuntary case, (B) appoints a
Custodian of the Company or for any part of its property or (C) orders the
winding-up or liquidation of its affairs; and such judgment, decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or any
bankruptcy or insolvency petition or application is filed, or any bankruptcy
case or insolvency proceeding is commenced, against the Company and such
petition, application, case or proceeding is not dismissed within 60 days;
or

 

(6)                                  there shall be a
default under any Designated Senior Indebtedness or, if no Designated Senior
Indebtedness is outstanding, there shall be a default under any other Senior
Indebtedness of the Company or any Subsidiary, whether any such Senior
Indebtedness now exists or shall hereafter be created, if (A) as a result of
such default the maturity of such Indebtedness has been accelerated prior to
its expressed maturity and (B) the aggregate principal amount of such
Indebtedness equals $5,000,000 or more or, together with the principal amount
of any other Indebtedness of the Company or any Subsidiary in default for
failure to pay principal at maturity or the maturity of which has been
accelerated aggregates $5,000,000; provided, however, that any acceleration
pursuant to this Section 11.1(6) shall be automatically rescinded upon the
discharge of such Senior Indebtedness or upon acceleration of such Senior Indebtedness
having been rescinded or annulled.

 

The term “Bankruptcy Law”
means title 11, U.S. Code or any similar Federal or state law for the
relief, supervision, conservation, reorganization or liquidation of debtors or
for the benefit of creditors.  The term
“Custodian” means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.

 

15

 

11.2                           Acceleration.  If an Event of Default (other than an Event
of Default specified in paragraph 11.1(4) or (5)) occurs and is continuing, the
Holders of at least a majority in principal amount of the Debentures by notice
to the Company, may declare the unpaid principal of and accrued interest on all
the Debentures to be due and payable. 
Upon 30 days’ notice of such declaration by the Company to the
holders of any Designated Senior Indebtedness, the principal and accrued
interest of such Debentures shall be due and payable immediately.  If an Event of Default specified in
paragraph 11.1(4) or (5) occurs, all unpaid principal of and accrued interest
on the Debentures then outstanding shall automatically become due and payable
without any declaration or other act on the part of any Debentureholder.  Upon payment of such principal amount and
interest, all of the Company’s obligations under the Debentures shall
terminate.  The Holders of a majority in
principal amount of the Debentures may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree and
if all existing Events of Default have been cured or waived except nonpayment
of principal or interest that has become due solely because of the
acceleration.

 

11.3                           Other
Remedies.  Except as provided in
Section 5, if an Event of Default occurs and is continuing, the Holders
may pursue any available remedy to collect the payment of principal of or
interest on the Debentures or to enforce the performance of any provision of
the Debentures.

 

11.4                           Waiver
of Past Defaults.  Subject to
paragraphs 11.2 and 11.6, the Holders of a majority in principal amount of the
Debentures may waive an existing Default and its consequences except a Default
in the payment of the principal of or interest on any Debenture.  When a Default or Event of Default is
waived, it is cured and ceases.

 

11.5                           Limitation
on Suits.  A Debentureholder may
pursue a remedy with respect to the Debentures only if:

 

(1)                                  the Holder gives to
the Company notice of a continuing Event of Default; and

 

(2)                                  the Holders of at
least a majority in principal amount of the Debentures agree to pursue the
remedy.

 

A Debentureholder may not
use this Debenture to prejudice the rights of another Debentureholder or to
obtain a preference or priority over another Debentureholder.

 

11.6                           Rights
of Holders to Receive Payment. 
Notwithstanding any other provision of this Debenture, the right of any
Holder of a Debenture to receive payment of principal of and interest on the
Debenture, on or after the respective due dates expressed in the Debenture, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.

 

12.                                 Reports.  So long as the Debentures remain
outstanding, the Company shall cause its annual reports to stockholders and any
quarterly or other financial reports and information furnished by it to
stockholders pursuant to the requirements of the Exchange Act to be mailed to
the Holders (contemporaneously with the mailing of such materials to the
Company’s stockholders) at their addresses appearing on the books of the
Company.  If the Company is not

 

16

 

required to furnish annual or
quarterly reports to its stockholders pursuant to the Exchange Act, it shall
cause its financial statements, including any notes thereto (and with respect
to annual reports, an auditors’ report by a nationally recognized firm of
independent certified public accountants), a “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and such other
information which the Company would otherwise be required to include in annual
and quarterly reports filed under the Exchange Act, to be mailed to the
Holders, within 120 days after the end of each of the Company’s fiscal years
and within 60 days after the end of each of its first three fiscal
quarters.

 

13.                                 No Recourse Against
Others.  A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Debentures or for any claim based
on, in respect of or by reason of such obligations or their creation.  Each Debentureholder by accepting a
Debenture waives and releases all such liability.  The waiver and release are part of the consideration for the issue
of the Debentures.

 

14.                                 Abbreviations.  Customary abbreviations may be used in the
name of a Debentureholder or an assignee, such as:  TEN COM (= as tenants in common), TEN ENT as tenants by the
entireties), JT TEN (= as joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).

 

15.                                 Notices.  Any notice or communication by the Holder is
duly given if in writing and delivered in person or by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:

 

c/o Castle
Harlan Partners III, L.P.

150 East 58th
Street

New York, New
York 10155

Attention:                                         David
B. Pittaway

Facsimile:                                            212/207-8042

 

with copies
to:

 

Schulte
Roth & Zabel LLP

919 Third
Avenue

New York, New
York 10022

Attention:                                         Marc
Weingarten

Michael R. Littenberg

Facsimile:                                            212/593-5955

 

17

 

and to:

 

Kirkland &
Ellis

153 East 53rd
Street

New York, New
York 10022

Attention:                                         Kimberly
P. Taylor

Facsimile:                                            212/446-4900

 

Any notice or communication by the Company is duly given if in writing
and delivered in person, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to a Debentureholder at his address as it
appears on the register kept by the Company, which address shall initially be:

 

Bell Atlantic

c/o Mellon
Bank, N.A.

One Mellon
Bank Center

Room 3346

Pittsburgh,
Pennsylvania 15258-001

Attention:                                         Francis
Walton

Facsimile:                                            412/236-4225

 

with a copy
to:

 

Ropes &
Gray

One
International Place

Boston,
Massachusetts 02110

Attention:                                         Ann
Milner

Facsimile:                                            617/951-7050

 

Verizon
Investment Management Corp.

695 Main
Street

Suite 600

Stamford,
Connecticut 06901

Attention:                                         Conrad
Francis

Facsimile:                                            203/965-3300

 

Verizon
Investment Management Corp.

695 Main
Street

Suite 600

Stamford,
Connecticut 06901

Attention:                                         Bruce
Franzese

Facsimile:                                            203/965-2243

 

The Company or the Holder
by notice to the other may designate additional or different addresses for subsequent
notices or communications.  Any notice
or communication to the Company or the Holder shall be deemed to have been
given or made as of the date so delivered if personally delivered; when receipt
is acknowledged, if telecopied; and five calendar days after

 

18

 

mailing if sent by
registered or certified mail (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).

 

If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.  All other notices or
communications shall be in writing.

 

16.                                 Governing Law.  This Debenture shall be construed in accordance
with and governed by the laws of the State of New York, without respect to the
conflict of laws principles thereof.

 

17.                                 Separability.  In case any provision in this Debenture
shall be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions thereof shall not in any way be affected or
impaired thereby.

 

18.                                 Loss, Theft,
Destruction or Mutilation of this Debenture.  Upon receipt by the Company of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Debenture,
and of an indemnity agreement or other security reasonably satisfactory to the
Company (which indemnity or security shall not be required of any Holder for
The Bell Atlantic Master Trust), and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Debenture, if mutilated, the Company will make and deliver a new Debenture
of like tenor, in lieu of this Debenture. 
Any Debenture made and delivered in accordance with the provisions of
this Section shall be dated as of the date to which interest has been paid
on this Debenture, or if no interest has therefore been paid on this Debenture,
then dated the date hereof.

 

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed.

 

	
   

  	
  MCCORMICK &
  SCHMICK ACQUISITION CORP. II

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

19

 

ASSIGNMENT FORM

 

For value received 

 

Hereby sells, assigns and transfers
unto

 

Please insert
social security or

other identifying number of assignee

 

Please print
or typewrite name

and address including zip code

of assignee:

 

 

 

 

 

 

 

 

the within Debenture and do
hereby irrevocably constitute and appoint
                          
Attorney to transfer the Debenture on the books of the Company with full power
of substitution in the premises.

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