Document:

SECOND AMENDMENT TO CREDIT
AGREEMENT

    

    THIS
SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made
and entered into as of July 26, 2010 by and among LUBY’S, INC., a Delaware
corporation (the “Company”); each of
the Lenders which is or may from time to time become a party to the Credit
Agreement (as defined below) (individually, a “Lender” and,
collectively, the “Lenders”), and WELLS
FARGO BANK, NATIONAL ASSOCIATION, acting as administrative agent for the Lenders
(in such capacity, together with its successors in such capacity, the “Administrative
Agent”).

    

    RECITALS

    

    A.    
      The Company, the Lenders and the
Administrative Agent executed and delivered that certain Credit Agreement dated
as of November 9, 2009, as amended by instrument dated as of January 31,
2010.  Said Credit Agreement, as amended, supplemented and restated,
is herein called the “Credit
Agreement”.  Any capitalized term used in this Amendment and
not otherwise defined shall have the meaning ascribed to it in the Credit
Agreement.

    

    B.           The
Company, the Lenders and the Administrative Agent desire to amend the Credit
Agreement in certain respects.

    

    NOW,
THEREFORE, in consideration of the premises and the mutual agreements,
representations and warranties herein set forth, and further good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company, the Lenders and the Administrative Agent do hereby agree as
follows:

    

    SECTION
1. Amendments to
Credit Agreement.

    

    (a)          The
definition of “Applicable Rate” set
forth in Section
1.01 of the Credit Agreement is hereby to read in its entirety as
follows:

    

    “Applicable Rate”
means, for any day with respect to any ABR Loan or Eurodollar Loan or with
respect to the commitment fees payable hereunder, as the case may be, the
applicable rate per annum set forth below under the caption “ABR Spread”,
“Eurodollar Spread” or “Commitment Fee Rate”, as the case may be, based upon the
Total Leverage Ratio as of the most recent determination date:

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	
                                                Total

                                                Leverage Ratio

                                              	 	
                                                ABR Spread

                                              	 	
                                                Eurodollar Spread

                                              	 	
                                                Commitment Fee

                                                Rate

                                              	 
	
                                                Category 1:  greater

                                                than
      2.50

                                              	 	
                                                2.75

                                              	 	
                                                4.50

                                              	 	
                                                0.45

                                              	 
	
                                                Category 2:  greater

                                                than
      1.25 but less than 

                                                or
      equal to 2.50

                                              	 	
                                                2.00

                                              	 	
                                                3.75

                                              	 	
                                                0.40

                                              	 
	
                                                Category 3: greater 

                                                than
      0.50 but less than 

                                                or
      equal to 1.25

                                              	 	
                                                1.50

                                              	 	
                                                3.25

                                              	 	
                                                0.35

                                              	 
	
                                                Category 4: less than 

                                                or
      equal to 0.50

                                              	 	
                                                1.00

                                              	 	
                                                2.75

                                              	 	
                                                0.30

                                              	 

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    For
purposes of the foregoing, (i) the Total Leverage Ratio shall be determined as
of the end of each fiscal quarter of the Borrower’s fiscal year based upon the
Borrower’s consolidated financial statements delivered pursuant to Sections 5.01(a) or
(b) and (ii)
each change in the Applicable Rate resulting from a change in the Total Leverage
Ratio shall be effective during the period commencing on and including the date
of delivery to the Administrative Agent of such consolidated financial
statements indicating such change and ending on the date immediately preceding
the effective date of the next such change; but the Total Leverage Ratio shall
be deemed to be in Category 1 at the request of the Required Lenders if the
Borrower fails to timely deliver the consolidated financial statements required
to be delivered by it pursuant to Sections 5.01(a) or
(b), during the
period from the deadline for delivery thereof until such consolidated financial
statements are received.

    

    (b)          The
definition of “Commitment” set forth
in Section 1.01
of the Credit Agreement is hereby to read in its entirety as
follows:

    

    “Commitment” means,
with respect to each Lender, the commitment, if any, of such Lender to make
Loans and to acquire participations in Letters of Credit hereunder, expressed as
an amount representing the maximum aggregate amount of such Lender’s Revolving
Exposure hereunder, as such commitment may be (a) reduced or increased from time
to time pursuant to Section 2.07 and (b)
reduced from time to time pursuant to assignments by or to such Lender pursuant
to Section
9.04.  The amount of each Lender’s Commitment as of July 26,
2010 is set forth on Schedule
2.01.  The aggregate amount of the Lenders’ Commitments as of
July 26, 2010 is $53,000,000.

    

    (c)          The
definition of “EBITDA” set forth in
Section 1.01 of
the Credit Agreement is hereby to read in its entirety as
follows:

    
      
         

      

      
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    “EBITDA” means,
without duplication, for any period, consolidated income from continuing
operations of the Borrower, consistent with the Borrower’s Forms 10-K and 10-Q,
plus depreciation, amortization, other non-cash expenses, interest expense,
taxes, and minus in the case of income or plus in the case of losses, non-cash
income and extraordinary gains or losses and other non-recurring items of income
or expense as approved by the Administrative Agent; provided that, if the
Borrower or any of its Subsidiaries acquires the Equity Interests or assets of
any Person during such period under circumstances permitted under Section 6.14 hereof,
EBITDA shall be adjusted to give pro forma effect to such acquisition assuming
that such transaction had occurred on the first day of such
period.    In calculating EBITDA for purposes of the Total
Leverage Ratio and the Interest Coverage Ratio, (i) no EBITDA for any period on
or prior to the last day of the third fiscal quarter of the Borrower’s 2010
fiscal year which is allocable to the assets acquired by Borrower or a
Subsidiary of Borrower from Fuddruckers, Inc. (“Fuddrucker Assets”)
shall be included, (ii) as of any date during the fourth fiscal quarter of the
Borrower’s 2010 fiscal year, $8,000,000 shall be added to EBITDA, (iii) as of
any date during the first fiscal quarter of the Borrower’s 2011 fiscal year,
$6,154,000 shall be added to EBITDA, (iv) as of any date during the second
fiscal quarter of the Borrower’s 2011 fiscal year, $4,308,000 shall be added to
EBITDA and (v) as of any date during the third fiscal quarter of the Borrower’s
2011 fiscal year, $2,462,000 shall be added to EBITDA.  EBITDA which
is allocable to the Fuddrucker Assets from and after the first day of the
Borrower’s 2011 fiscal year shall be included in calculating EBITDA for purposes
of the Total Leverage Ratio and the Interest Coverage Ratio.   In
calculating EBITDA for purposes of the Minimum EBITDA covenant, for the first
three periods of the fiscal quarter ending August 25, 2010 $1,846,000 shall be
added to EBITDA and for the fourth period of the fiscal quarter ending August
25, 2010 the actual EBITDA allocable to Fuddruckers Assets for such period shall
be added to EBITDA

    

    (d)          A
new definition of “Fuddruckers Purchase
Agreement” is hereby added to Section 1.01 of the
Credit Agreement, such new definition to read in its entirety as
follows:

    

    “Fuddruckers Purchase
Agreement” means that certain Asset Purchase Agreement dated as of June
23, 2010 between the Borrower and Fuddruckers, Inc., a Texas corporation, and of
certain Affiliates of Fuddruckers, Inc.

    

    (e)          The
definition of “Guarantors” set forth
in Section 1.01
of the Credit Agreement is hereby to read in its entirety as
follows:

    

    “Guarantors” means (i)
Christopher J. Pappas, (ii) Harris J. Pappas and (iii) each of the present or
future Subsidiaries of the Borrower.

    

    (f)          The
definition of “Guaranty” set forth
in Section 1.01
of the Credit Agreement is hereby to read in its entirety as
follows:

    

    “Guaranty” means (i)
that certain Guaranty dated as of November 9, 2009 executed by all of the then
current Subsidiaries of the Borrower in favor of the Administrative Agent, (ii)
that certain Guaranty dated as of July 26, 2010 executed by Christopher J.
Pappas and Harris J. Pappas in favor of the Administrative Agent, and (iii) any
and all other guaranties now or hereafter executed in favor of the
Administrative Agent relating to the Obligations hereunder and the other Loan
Documents, as any of them may from time to time be amended, modified, restated
or supplemented.

    

    (g)          The
definition of “Maturity Date” set
forth in Section
1.01 of the Credit Agreement is hereby to read in its entirety as
follows:

    

    “Maturity Date” means
September 1, 2011.

    

    (h)          The
definition of “Phantom
Amortization” set forth in Section 1.01 of the
Credit Agreement is hereby to read in its entirety as follows:

    
      
         

      

      
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    “Phantom Amortization”
means, (i) for the fiscal quarter ended August 25, 2010, an amount equal to the
outstanding principal balance of the Loans as of the close of business on August
25, 2010 divided by twenty-eight (28) and (ii) for any subsequent fiscal
quarter, an amount equal to the outstanding principal balance of the Loans as of
the close of business on the last day of such fiscal quarter divided by seven
(7).

    

    (i)           Section 2.07(a) of
the Credit Agreement is hereby amended to read in its entirety as
follows:

    

    (a)           The
aggregate amount of the Commitments shall be reduced to (i) $50,400,000 on
November 30, 2010, (ii) $48,800,000 on February 28, 2011, (iii) $43,900,000 on
May 31, 2011 and (iv) $40,000,000 on August 31, 2011.  Each such
reduction shall be allocated among the Lenders pro rata in accordance with their
respective Commitments.  Concurrently with any such reduction,
Borrower shall make any prepayment required under Section 2.09(b) as a
result of such reduction.  Unless previously terminated, the
Commitments shall terminate on the Maturity Date.

    

    (j)           Section 2.07(d) of
the Credit Agreement is hereby amended to read in its entirety as
follows:

    

    (d)           [Intentionally
Left Blank]

    

    (k)          Section 2.08(a) of
the Credit Agreement is hereby amended to read in its entirety as
follows:

    

    (a)           The
Borrower shall make payments of the unpaid principal balance of the Loans during
each fiscal quarter in an aggregate amount equal to or exceeding $2,000,000
(inclusive of amounts paid pursuant to Section
2.09(c)).  In the event that Borrower makes a payment in any
fiscal quarter in an aggregate amount (inclusive of amounts paid pursuant to
Section
2.09(c)) of more than $2,000,000, the amount paid by the Borrower in
excess of $2,000,000 shall be credited to Borrower's obligation to make such
payment in the subsequent fiscal quarters in direct order.  Without
limiting the foregoing, the Borrower hereby unconditionally promises to pay to
the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Loan of such Lender on the Maturity Date.

    

    (l)           Section 2.09(c) of
the Credit Agreement is hereby amended to read in its entirety as
follows:

    

    (c)           In
the event and on each occasion that any Net Proceeds are received by or on
behalf of the Borrower or any of its Subsidiaries in respect of any Prepayment
Event, the Borrower shall, within three Business Days after such Net Proceeds
are received, prepay Borrowings in an aggregate amount equal to 100% of such Net
Proceeds in the case of a Prepayment Event with respect to any real property
that is listed on Schedule 6.05
attached hereto.  To the extent such prepayment would result in the
payment of breakage costs hereunder, at the election of the Required Lenders,
either (i) such prepayment shall be deferred until the last day of the
applicable Interest Period or (ii) such breakage costs shall be
waived.

    
      
         

      

      
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    (m)         Section 5.13 of the
Credit Agreement is hereby amended to read in its entirety as
follows:

    SECTION
5.13  Financial
Covenants.  The Borrower will have and maintain:

    

    (a)           Total Leverage Ratio
– a Total Leverage Ratio of not greater than (i) at any time from and after the
date hereof through and including August 25, 2010, 3.00  to 1.00 and
(ii) at all times thereafter, 2.75 to 1.00.

    

    (b)           Interest Coverage
Ratio – an Interest Coverage Ratio of not less than  2.00 to
1.00 as of the end of each fiscal quarter.

    

    (c)           Minimum EBITDA –
EBITDA of not less than (i) $4,500,000 for the fiscal quarter ended August 25,
2010, (ii) $2,500,000 for the fiscal quarter ended November 17, 2010, (iii)
$3,500,000 for the fiscal quarter ended February 9, 2011, (iv) $7,000,000 for
the fiscal quarter ended May 4, 2011 and (iv) $6,500,000 for the fiscal quarter
ended August 31, 2011.

    

    (n)          Section 5.03(c) of
the Credit Agreement is hereby amended to read in its entirety as
follows:

    

    (c)           In
the event that (i) either (x) an Appraisal has been provided pursuant to Section 5.14 of this
Agreement (other than to the extent already addressed in Section 5.16 hereof)
or (y) any Mortgaged Property is sold pursuant to Section 6.05 of this
Agreement,  and (ii) the Loan to Value Ratio exceeds 1.00 to 2.00
(such event being herein called an "Additional Real Collateral
Event"), as soon as practicable and in any event within forty-five (45)
days after an Additional Real Collateral Event, Borrower shall (1) execute and
deliver or cause to be executed and delivered a Mortgage or Mortgages, in form
and substance reasonably satisfactory to Administrative Agent, in favor of
Administrative Agent and duly executed by Borrower or the applicable Subsidiary,
covering and affecting and granting a first-priority Lien upon real property
with an Appraisal value that is in an amount sufficient to cause the Loan to
Value Ratio to not exceed 1.00 to 2.00 (the real property covered by the
Mortgage or Mortgages created pursuant to this Section 5.03(c) being
herein called the "Additional Real
Collateral"), and such other documents (including, without limitation,
surveys, environmental assessments, certificates and legal opinions, all in form
and substance reasonably satisfactory to Administrative Agent) as may be
required by Administrative Agent in connection with the execution and delivery
of such Mortgage or Mortgages, (2) deliver or cause to be delivered by
Subsidiaries of Borrower such other documents or certificates consistent with
the terms of this Agreement and relating to the transactions contemplated hereby
as Administrative Agent may reasonably request, (3) to the extent required by
Administrative Agent, cause a title insurance underwriter satisfactory to
Administrative Agent to issue to Administrative Agent a mortgage policy of title
insurance, in form and substance satisfactory to Administrative Agent, insuring
the first-priority Lien of the applicable Mortgage in such amount as is
satisfactory to Administrative Agent and (4) deliver or cause to be delivered by
Subsidiaries of Borrower evidence reasonably satisfactory to the Administrative
Agent that such Additional Real Property lies in an area requiring special
notices of flood hazard issues or the purchase of flood hazard
insurance.  The Additional Real Collateral shall become Mortgaged
Property and Scheduled Real Property for purposes of this
Agreement.  The real property that constitutes Additional Real
Collateral shall be selected at the  Borrower's discretion and shall
be satisfactory to the Required Lenders.

    
      
         

      

      
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    (o)          Section 5.11 of the
Credit Agreement is hereby amended to read in its entirety as
follows:

    

    SECTION
5.11  Use of
Proceeds and Letters of Credit.  The Letters of Credit and the
proceeds of the Loans will be used only for general corporate purposes and for
general working capital purposes, which may include refinancing existing
Indebtedness and costs associated with the acquisition of Fuddruckers, Inc. and
other acquisitions permitted hereunder.  No part of the proceeds of
any Loan will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Regulations of the Board, including
Regulations U and X.

    

    (p)          Section 5.14 of the
Credit Agreement is hereby amended to read in its entirety as
follows:

    

    SECTION
5.14  Appraisals.  On
or before September 30, 2010, Borrower shall provide  to the
Administrative Agent Appraisals of real property owned by the Loan Parties which
is not currently covered by a Mortgage reflecting appraised values which, when
added to the appraised values of the real property currently covered by a
Mortgage, would cause the Loan to Value Ratio to be equal to or less than 1.00
to 2.00 upon satisfaction of the requirements of Section 5.16 with
respect to such real property.  Thereafter, Borrower shall provide
Appraisals of the Mortgaged Property to the Administrative Agent upon request by
the Administrative Agent (but not more frequently than once in any period of
twelve months unless an Event of Default has occurred and is
continuing).  The Borrower shall pay all costs and expenses incurred
in obtaining any Appraisals required hereunder.

    

    (q)          Section 5.16 of the
Credit Agreement is hereby amended to read in its entirety as
follows:

    

    SECTION
5.16  Mortgages.  On
or before September 30, 2010, Borrower shall provide (a) counterparts of
additional Mortgages signed on behalf of Borrower or its Subsidiary (as
applicable) covering additional Mortgaged Property having an appraised value (as
demonstrated by Appraisals delivered to the Administrative Agent pursuant to the
first sentence of Section 5.14)
sufficient to result in the Loan to Value Ratio being equal to or less than 1.00
to 2.00, and (b) evidence reasonably satisfactory to the Administrative Agent
that none of such additional Mortgaged Property lies in an area requiring
special notices of flood hazard issues or the purchase of flood hazard insurance
and, to the extent reasonably required by Administrative Agent with respect to
the applicable Mortgaged Property, a policy or policies of title insurance
issued by a nationally recognized title insurance company, insuring the Lien of
each such additional Mortgage as a valid first Lien on the Mortgaged Property
described therein, free of any other Liens except as permitted by Section 6.02,
together with such endorsements, coinsurance and reinsurance as the
Administrative Agent may reasonably request, and such surveys, abstracts and
appraisals as may be required pursuant to such additional Mortgages or as the
Administrative Agent may reasonably request.

    
      
         

      

      
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    (r)          Section 6.02(v) of
the Credit Agreement is hereby amended to read in its entirety as
follows:

    

    (v)           in
addition to and cumulative of the Liens permitted under the other provisions of
this Section, Liens securing Indebtedness not exceeding, in the aggregate at any
one time outstanding, $10,000,000; and

    

    (s)    
     Section 6.08 of the
Credit Agreement is hereby amended to read in its entirety as
follows:

    

    SECTION
6.08  Restricted
Payments.  The Borrower will not, nor will it permit any other
Loan Party to, declare or make, or agree to pay or make, directly or indirectly,
any Restricted Payment, or incur any obligation (contingent or otherwise) to do
so.  Notwithstanding the foregoing, at any time (i) the Borrower may
declare and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock, (ii) Subsidiaries of the Borrower may
declare and pay dividends ratably with respect to their Equity Interests, (iii)
the Borrower may declare and pay such payments or prepayments of Subordinated
Debt as may be permitted under the terms and provisions of any applicable
Subordination Agreement and (iv) management fees paid to advisors and
consultants in an aggregate amount not to exceed $1,000,000 in any fiscal
year.

    

    (t)          Section 6.13 of the
Credit Agreement is hereby amended to read in its entirety as
follows:

    

    SECTION
6.13  Capital
Expenditures.  The Borrower will not, and will not permit any
other Loan Party to, make a Capital Expenditure if, after giving effect to such
Capital Expenditure, (a) any Event of Default is then existing or would arise as
a result of the applicable Capital Expenditure or (b) there are Loans
outstanding and such Capital Expenditure, when added with all other Capital
Expenditures in such fiscal year, would exceed (i) for the fiscal year ended
August 25, 2010, $10,000,000 and (ii) for any subsequent fiscal year,
$15,000,000.  Acquisitions permitted under the terms and provisions of
Section 6.14
hereof shall not be treated as Capital Expenditures for purposes of this
Section.

    

    (u)         Section 6.14 of the
Credit Agreement is hereby amended to read in its entirety as
follows:

    

    SECTION
6.14  Acquisitions.  The
Borrower will not, and will not permit any other Loan Party to, enter into any
transaction or series of transactions for the purposes of acquiring all or a
substantial portion of the assets, property and/or Equity Interests in and to
any Person other than  the acquisition by the Borrower or any Loan
Party of Equity Interests in and to (which may be way of a merger with and into
the Borrower or another Loan Party so long as the Borrower or the applicable
Loan Party is the surviving entity), or all or a substantial portion of the
assets, property and/or operations of, any Person provided that

    
      
         

      

      
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    (a)           Aggregate
consideration paid by the Loan Parties in connection with any such acquisition
occurring on or after July 26, 2010 (exclusive of the acquisition contemplated
under the Fuddruckers Purchase Agreement) shall not exceed
$5,000,000;

    

    (b)          the
Company may acquire less than 100% of the Equity Interests of a Person, but in
no event less than 80% except as permitted under Section 6.04;

    

    (c)          no
Default or Event of Default shall have occurred and be continuing or, on a pro
forma basis, would reasonably be expected to result from such
acquisition;

    

    (d)          such
acquisition is of a Person in the restaurant business or a reasonably-related
business (or of assets used in the restaurant business or a reasonably-related
business);

    

    (e)         
the Borrower can demonstrate, on a pro forma basis, after giving effect to such
acquisition that the Total Leverage Ratio does not exceed 2.75 to 1.00;
and

    

    (f)           the
Borrower shall have delivered (or caused to be delivered) to the Administrative
Agent such other documents as may be reasonably requested by the Administrative
Agent in connection with such acquisition.

    

    (v)        
 Schedule
2.01 to the Credit Agreement is hereby amended to be identical to Schedule 2.01
attached hereto.

    

    (w)         Section 3(d) of the
Security Agreement executed by the Subsidiaries is hereby amended to read in its
entirety as follows:

    

    (d)          As
of the date hereof, no Debtor has changed its name, whether by amendment of its
organizational documents or otherwise, or the jurisdiction under whose laws such
Debtor is organized within the last five (5) years.

    

    SECTION
2. Conditions
Precedent.  The effectiveness of this Amendment shall be
conditioned upon delivery to the Administrative Agent of each of the
following:

    

    (a)          the
Administrative Agent shall have received from the Loan Parties and all of the
Lenders either (1) a counterpart of this Amendment signed on behalf of such
party or (2) written evidence satisfactory to the Administrative Agent (which
may include telecopy or e-mail transmission of a signed signature page of this
Amendment) that such party has signed counterparts of this
Amendment.
 

    
      
         

      

      
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    (b)           the
Administrative Agent shall have received fully executed counterparts of (i) new
Notes payable to the order of the Lenders evidencing the Revolving Loans and
(ii) a Guaranty executed by Christopher J. Pappas and Harris J. Pappas in form
and substance satisfactory to the Lenders and (iii) Security Documents executed
by Christopher J. Pappas and Harris J. Pappas in form and substance satisfactory
to the Lenders, creating and perfecting security interests in and to cash held
in deposit accounts maintained at the respective Lenders (pro rata in accordance
with their respective Commitments) in an aggregate amount equal to the principal
amount guaranteed pursuant to the Guaranty referred to above;

    

    (c)           the
Administrative Agent shall have received such documents, certificates and
opinions as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Company and the
authorization of the execution and delivery of this Amendment, the new Notes
referred to above, the Guaranties referred to above and the Security Documents
referred to above, all in form and substance reasonably satisfactory to the
Administrative Agent and its counsel (provided that delivery of an opinion
regarding the documentation executed by Christopher J. Pappas and Harris J.
Pappas shall not be required until August 9, 2010).

    

    (d)          Christopher
J. Pappas and Harris J. Pappas shall have delivered cash collateral to the
Lenders (and shall execute all applicable related Loan Documents) in order to
comply with the provisions of Section 5.15 of the Guaranty dated as of July 26,
2010 executed by Christopher J. Pappas and Harris J. Pappas in favor of the
Administrative Agent.

    

    (e)           the
acquisition contemplated by the Fuddruckers Purchase Agreement shall have been,
or substantially simultaneously with the closing of the transactions
contemplated herein shall be, consummated in accordance with the Fuddruckers
Purchase Agreement and applicable law, without any amendment to or waiver of any
terms or conditions of the Fuddruckers Purchase Agreement not approved by the
Administrative Agent (such approval not to be unreasonably withheld or delayed),
and the Administrative Agent shall have received copies of the material
documents evidencing the closing of the transactions contemplated by the
Fuddruckers Purchase Agreement and all material due diligence materials relating
to such transactions, which documents shall be in form and substance
satisfactory to the Administrative Agent.

    

    (f)           the
Administrative Agent shall have received, for the pro rata benefit of the
Lenders, the balance of the amendment fee in an amount equal to the product of
0.50% times the aggregate of the Commitments of such Lenders executing this
Amendment (after giving effect to the increase of the Commitments set forth
herein) (one-half of such amendment fee having been previously
paid).

    

    SECTION
3. Ratification.  Except
as expressly amended by this Amendment, the Credit Agreement and the other Loan
Documents shall remain in full force and effect.  None of the rights,
title and interests existing and to exist under the Credit Agreement are hereby
released, diminished or impaired, and the Company hereby reaffirms all
covenants, representations and warranties in the Credit Agreement.

    

    SECTION
4. Expenses.  The
Company shall pay to the Administrative Agent all reasonable fees and expenses
of its legal counsel incurred in connection with the execution of this
Amendment.

    
      
         

      

      
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    SECTION
5. Certifications.  The
Company hereby certifies that (a) no material adverse change in the assets,
liabilities, financial condition, business or affairs of the Company has
occurred and (b) subject to the waiver set forth herein, no Default or Event of
Default has occurred and is continuing or will occur as a result of this
Amendment.

    

    SECTION
6. Miscellaneous.  This
Amendment (a) shall be binding upon and inure to the benefit of the Company, the
Lenders and the Administrative Agent and their respective successors, assigns,
receivers and trustees; (b) may be modified or amended only by a writing signed
by the required parties; (c) shall be governed by and construed in accordance
with the laws of the State of Texas and the United States of America; (d) may be
executed in several counterparts by the parties hereto on separate counterparts,
and each counterpart, when so executed and delivered, shall constitute an
original agreement, and all such separate counterparts shall constitute but one
and the same agreement and (e) together with the other Loan Documents, embodies
the entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter.  The headings herein
shall be accorded no significance in interpreting this Amendment.

    

    NOTICE
PURSUANT TO TEX. BUS. & COMM. CODE §26.02

    

    THE
CREDIT AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN DOCUMENTS
EXECUTED BY ANY OF THE PARTIES PRIOR HERETO OR SUBSTANTIALLY CONCURRENTLY
HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

    

    [Signature
Pages Follow]

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company, the Lenders and the Administrative Agent have
caused this Amendment to be signed by their respective duly authorized officers,
effective as of the date first above written.

    

    
      
        	
                LUBY’S,
      INC.,

              
	
                a
      Delaware corporation

              
	 
      	 
      
	
                By: 

              	
                /s/ Christopher J.
Pappas

              
	 
      	
                 
      Christopher J. Pappas,

              
	 
      	
                  President
      and Chief Executive Officer

              

      

    

     

    The
undersigned Subsidiaries of the Borrower hereby join in this Amendment to
evidence their consent to execution by Borrower of this Amendment, to confirm
that each Loan Document now or previously executed by the undersigned applies
and shall continue to apply to this Amendment, and to acknowledge that without
such consent and confirmation, Lenders would not execute this
Amendment.

     

    
      
        	
                LUBY’S HOLDINGS,
      INC.,

              
	
                a
      Delaware corporation,

              
	
                LUBY’S LIMITED PARTNER,
      INC.,

              
	
                a
      Delaware corporation,

              
	
                LUBCO,
    INC.,

              
	
                a
      Delaware corporation,

              
	
                LUBY’S MANAGEMENT,
      INC.,

              
	
                a
      Delaware corporation,

              
	
                LUBY’S BEVCO,
      INC.,

              
	
                a
      Texas corporation, and

              
	
                LUBY’S
      FUDDRUCKERS RESTAURANTS,

                LLC, a Texas limited
      liability company

              
	 
      	 
      
	
                By: 

              	
                  /s/ Christopher J.
      Pappas

              
	 
      	
                Christopher
      J. Pappas,

              
	 
      	
                President
      and Chief Executive Officer

              

      

    

    

    [signature
page to Second Amendment to Credit Agreement]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        	
                WELLS
      FARGO BANK, NATIONAL

              
	
                ASSOCIATION,
      individually and as

              
	
                Administrative
      Agent

              
	 
      	 
      
	
                By: 

              	
                  /s/ Ben McCaslin

              
	
                Name:
      Ben McCaslin

              
	
                Title:
      Vice President

              

      

    

    

    [signature
page to Second Amendment to Credit Agreement]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        	
                AMEGY
      BANK, NATIONAL ASSOCIATION

              
	 
      	 
      
	
                By: 

              	
                  /s/ Melinda N.
    Jackson

              
	
                Name:
      Melinda N. Jackson

              
	
                Title:
      Senior Vice President

              

      

    

    

    [signature
page to Second Amendment to Credit Agreement]
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
2.01

    

    
      
        
          
            	
                    Lender

                  	 	
                    Commitments

                  	 
	 
      	 	 	 
	
                    Wells
      Fargo Bank, National Association

                  	 	$	26,500,000	 
	
                    Amegy
      Bank National Association

                  	 	$	26,500,000Unassociated Document

    Exhibit
10.1

    

    THE
4% CONVERTIBLE DEBENTURE DUE 2013 REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES INTO WHICH IT MAY BE CONVERTED HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND NEITHER
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE SECURITIES LAWS OR
(2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDERS OF SUCH
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

    

    

    GlenRose
Instruments Inc.

    

    4%
Convertible Debenture Due 2013

    As
amended on July 23, 2010

    

    
      	
              No.
      __

            	
              $____,000

            

    

    

    This Debenture (the “Debenture”)
is one of a duly authorized issue of Debentures of GlenRose Instruments Inc., a
corporation duly incorporated under the laws of the State of Delaware, and
having its principal address at 45 First Avenue, Waltham, Massachusetts 02451
(the “Company”),
designated as its 4% Convertible Debentures due 2013, in an aggregate principal
amount of up to $22,875,000, which amount may be increased at the discretion of
the Company (the “Debentures”).

    

    FOR VALUE RECEIVED, the Company
promises to pay to the order of ___________________ or its registered assigns
(the “Holder”),
the principal sum of _______________United States Dollars (U.S. $______________)
(the “Principal
Amount”) on _______________, 2013, subject to earlier payment as
otherwise provided herein (the “Maturity
Date”), and to pay interest on the Principal Amount outstanding under
this Debenture (the “Outstanding
Principal Amount”), at the rate of 4% per annum, due and payable
quarterly in arrears on the 15th day of October, January, April and July of each
year, commencing on October 15, 2008 (each an “Interest Payment
Date”) and on the Maturity Date. Interest shall be calculated based on a
360-day year. Interest shall accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance and shall continue until the following Interest Payment Date. Except as
otherwise provided herein, the interest so payable will be paid to the person in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of the Debentures (the “Debenture
Register”) at the close of business on the record date for interest
payable on such Interest Payment Date. The record date for any interest payment
is the close of business on the date fifteen days prior to the Interest Payment
Date, unless such date shall not be a business day, in which case on the next
preceding business day. The Company shall be entitled to withhold from all
payments of interest on this Debenture any amounts required to be withheld under
the applicable provisions of the United States income tax laws as evidenced by
an opinion of counsel of the Company.  The Company agrees to pay
additional interest on overdue principal, and, to the extent lawful, overdue
installments of interest at the rate per annum of 2%. Payments in respect of the
Debenture shall be made by the Company by wire transfer of immediately available
funds to the account specified by the Holder.

    

    The
Company will pay, in cash, the Outstanding Principal Amount and all accrued and
unpaid interest (the “Outstanding
Amount”) due upon this Debenture on the Maturity Date.

    

    This Debenture is subject to the
following additional provisions:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.           Exchange.  The
Debentures are exchangeable for an equal aggregate principal amount of
Debentures of different denominations as requested by the Holder surrendering
the same. No fees will be charged for such exchange. Notwithstanding the
foregoing, the Company shall have no obligation to issue new Debentures unless
and until requested by the Holders thereof.

    

    2.           Transfers.  This
Debenture has been issued subject to investment representations of the original
purchaser hereof and may be transferred or exchanged only (a) in compliance with
the Securities Act of 1933, as amended (the “Act”), and
applicable state securities laws, and (b) in accordance with applicable
provisions hereof.  Prior to due presentment for transfer of this
Debenture, the Company may treat the person in whose name this Debenture is duly
registered on the Company’s Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and all other purposes, whether
or not this Debenture is then overdue, and the Company shall not be affected by
notice to the contrary.

    

    3.           Definitions.  For
purposes hereof the following definitions shall apply:

    

    “2008 Private
Placement” The Company’s private placement of up to $22,875,000 of
Debentures.

    

    “Common
Stock” shall mean the Common Stock, $0.01 par value per share, of the
Company.

    

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

    

    “Conversion
Notice” shall have the meaning set forth in Paragraph 5(c).

    

    “Conversion
Price” shall mean $7.00, subject to adjustment from time to time as set
forth in Paragraph 7 hereof.

    

    “Debenture”
shall have the meaning set forth in the first introductory
paragraph.

    

    “Debenture
Register” shall have the meaning set forth in the second introductory
paragraph.

    

    “Debentures”
shall have the meaning set forth in the first introductory
paragraph.

    

    “Events of
Default” shall have the meaning set forth in Paragraph 14.

    

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

    

    “Final Closing
Date” shall mean the final closing date of the 2008 Private Placement
(such date being ____________, 2008).

    

    “Fundamental
Change” shall have the meaning set forth in Paragraph 6(b).

    

    “Fundamental
Change Purchase Date” shall have the meaning set forth in Paragraph
6(b).

    

    “Holder”
shall have the meaning set forth in the second introductory
paragraph.

    

    “Holder
Conversion Date” shall have the meaning set forth in Paragraph
5(c).

    

    “Interest Payment
Date” shall have the meaning set forth in the second introductory
paragraph.

    

    “Investor Rights
Agreement” shall have the meaning set forth in the Subscription
Agreement.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Maturity Date”
shall have the meaning set forth in the second introductory
paragraph.

    

    “Outstanding
Amount” shall have the meaning set forth in the third introductory
paragraph.

    

    “Outstanding
Principal Amount” shall have the meaning set forth in the second
introductory paragraph.

    

    “Principal
Amount” shall have the meaning set forth in the second introductory
paragraph.

    

    “Qualified
Offering” shall mean the Company’s first firm commitment underwritten
public offering of its Common Stock registered under the Securities
Act

    

    “Qualified
Registration” shall mean the registration of the Company’s securities on
Form 10 pursuant to Section 12(b) or 12(g) of the Exchange Act.

    

    “Redemption
Date” shall have the meaning set forth in Paragraph
6(a)(iii).

    

    “Redemption
Debentures” shall have the meaning set forth in Paragraph
6(d).

    

    “Redemption
Price” shall have the meaning set forth in Paragraph 6(c).

    

    “Redemption
Notice” shall have the meaning set forth in Paragraph 6(a).

    

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

    

    “Subscription
Agreement” shall mean the agreement entered into by and between the
Company and the Holder for the purchase of the Debenture.

    

    “Underlying
Shares” shall mean the shares of Common Stock into which this Debenture
is convertible.

    

    In addition, other terms defined in the
Subscription Agreement and not otherwise defined herein shall have the same
meanings herein as are set forth for such terms in the Subscription
Agreement.

    

    4.           Maturity.  On
the Maturity Date, the Outstanding Amount of this Debenture shall be payable in
cash.

    

    5.           Conversion.  This
Debenture is subject to conversion as follows:

    

    (a)           Holder’s Right to
Convert.  The Outstanding Amount of this Debenture shall be
convertible at any time, in whole or in part, at the option of the Holder
hereof, into fully paid, validly issued and nonassessable shares of Common
Stock.

    

    (b)           Conversion Price for Converted
Shares. Subject to Paragraph 5(a), the Outstanding Amount of this
Debenture that is converted into shares of Common Stock shall be convertible
into the number of shares of Common Stock calculated by dividing the Outstanding
Amount of this Debenture submitted for conversion by the Conversion
Price.

    

    (c)           (i)           Mechanics of
Conversion.  In order to convert this Debenture (in whole or in
part) into shares of Common Stock, the Holder shall surrender this Debenture, by
either overnight courier or two-day courier, to the Company, and shall give
written notice in the form of Exhibit 2 hereto (the
“Conversion
Notice”) by facsimile (with the original of such notice forwarded with
the foregoing courier) to the Company that the Holder elects to convert all or
the portion of the Outstanding Amount of this Debenture specified therein, which
such notice and election shall be irrevocable by the Holder; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless this Debenture with evidence
of the principal amount hereof to be converted is delivered to the Company as
provided above, or the Holder notifies the Company that this Debenture has been
lost, stolen or destroyed and promptly executes an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss which may be
incurred by it in connection with this Debenture. The date on which a Conversion
Notice is given (the “Holder
Conversion Date”) shall be deemed to be the date the Company received by
facsimile the Conversion Notice, as evidenced by a printed confirmation of
receipt received by the Holder or confirmed by telephone conference between the
Holder and the Company.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (ii)           Issuance of
Certificates.  In the case of any Conversion Notice given by
the Holder to the Company, the Company shall issue and deliver as promptly as
practicable and in no event later than five (5) business days after delivery to
the Company of the Debenture, or after receipt of such agreement and
indemnification, to such Holder or to its designee, a certificate or
certificates for the number of shares of Common Stock to which the Holder shall
be entitled, together with a Debenture for the Outstanding Amount not submitted
for conversion, if any. The person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Holder Conversion
Date.

    

    6.           Redemption.

    

    (a)           Company Option to
Redeem.  Any portion of this Debenture may be redeemed at the
Company’s option expressed by written notice (a “Redemption
Notice”) to the Holder; provided that the
Redemption Notice delivered by the Company shall be received by the Holder at
least ten (10) trading days (but not more than thirty (30) trading days prior to
the date of the redemption (the “Redemption
Date”).”

     

     (b)           Holder Option to Redeem. If
there shall occur a Fundamental Change (the “Fundamental Change”), the Holder
shall have the right, at such Holder’s option, to require the Company to
purchase for cash all or any portion of such Holder’s Debenture on a date
selected by the Company (the “Fundamental Change Purchase Date”), which
Fundamental Change Purchase Date shall be no later then thirty (30) calendar
days after the occurrence of such Fundamental Change, at the redemption price
specified below in Section 6(c). A Fundamental Change shall be deemed to have
occurred at such time as any of the following events shall occur:

     

    (i)           any
person or group (as defined under Section 13(d) of the Exchange Act), other than
the Company, its subsidiaries or any employee benefits plan of the Company or
its subsidiaries, files a Schedule 13D or Schedule TO or any successor schedule,
form or report pursuant to the Exchange Act, disclosing that such person has
become the beneficial owner of shares with a majority of the total voting power
of the Company’s outstanding voting securities; unless such beneficial ownership
arises solely as a result of a revocable proxy delivered in response to a proxy
or consent solicitation made pursuant to the applicable rules and regulations
under the Exchange Act;

     

    (ii)           the
Company consolidates with or merges with or into another person (other than a
subsidiary of the Company), or sells, conveys, transfers, leases or otherwise
disposes of all or substantially all of its properties and assets to any person
(other than a subsidiary of the Company) or any person (other than a subsidiary
of the Company) consolidates with or merges with or into the Company, and the
outstanding voting securities of the Company are reclassified into, converted
for or converted into the right to receive any other property or security,
provided that none of these circumstances will be a Fundamental Change if
persons that beneficially own the voting securities of the Company immediately
prior to the transaction own, directly or indirectly, shares with a majority of
the total voting power of all outstanding voting securities of the surviving or
transferee person immediately after the transaction in substantially the same
proportion as their ownership of the Company’s voting securities immediately
prior to the transaction; or

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (iii)           the
Company’s stockholders or Board of Directors adopts a plan for the liquidation
or dissolution of the Company.

     

    (c)           Redemption
Price.  The redemption price for the portion of this Debenture
being redeemed shall equal one hundred percent (100%) of the Outstanding
Principal Amount of this Debenture being so redeemed (the “Redemption
Price”), along with any accrued but unpaid interest. The Redemption Price
shall be payable in cash in United States Dollars.

     

    (d)           Mechanics of
Redemption—Company Option in Redeem. In the case of redemption pursuant
to Section 6(a), if less than all of the Outstanding Amount of Debentures are to
be redeemed at any time, the selection of Debentures for redemption will be made
by the Company on a pro rata basis.  In the event the Company shall be
required or elects to redeem any part or all of the Outstanding Amount of the
Debentures, the Company shall send by either overnight courier or two-day
courier (with a copy sent by facsimile) confirmation of such determination or
obligation to the record Holders of the Debentures being redeemed (the
“Redemption Debentures”), which confirmation shall be included in the Redemption
Notice.  Such confirmation shall specify the Redemption Date, which
shall be at least ten (10) business days (but not more than thirty (30) business
days) after receipt by the Holder of the Redemption Notice. On the Redemption
Date, the Redemption Debentures shall be redeemed automatically without any
further action by the Holders of such Debentures and whether or not the
Debentures are surrendered to the Company; provided, that the
Company shall be obligated to pay the cash consideration due to a Holder of such
Debentures upon redemption only when such Debentures are either delivered to the
principal office of the Company or the Holder notifies the Company that such
Debentures have been lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Company to indemnify the Company from any loss
which may be incurred by it in connection with such Debenture. Thereupon, there
shall be promptly issued and delivered to such Holder, within seven (7) business
days after the Redemption Date and delivery to the Company of such Debentures,
or after receipt of such agreement and indemnification, at the address of such
Holder on the books of the Company, payment in immediately available funds to
the name as shown on the books of the Company in the amount of the Redemption
Price as calculated as set forth in Paragraph 6(b).

    

    Notwithstanding
anything to the contrary contained herein, the Holders’ rights of conversion
pursuant to Paragraph 5 hereof shall not be limited in any manner by the
Company’s rights of redemption pursuant to this Paragraph 6.

     

     (e)           Mechanics
of Redemption—Holder Right to Redeem.  In the case of redemption
pursuant to Section 6(b), as promptly as practicable following the date the
Company publicly announces the Fundamental Change transaction, but in no event
less than 10 business days prior to the anticipated effective date of a
Fundamental Change in the case of a Fundamental Change within the control of the
Company or of which the Company has at least 10 business days prior notice, the
Company shall mail a written notice of Fundamental Change by first-class mail to
the Holder.  If the Holder so elects, the Company shall purchase from
the Holder the Debenture at the redemption price specified in Section 6(c) on
the Fundamental Change Purchase Date.

     

           
7.        Adjustments to the
Conversion Price.

     

    (a)           Adjustment for Subdivisions,
Combinations, etc.  If the Company shall subdivide its
outstanding Common Stock by split-up, spin-off, or otherwise, or combine its
outstanding Common Stock, then the number of shares issuable upon conversion of
this Debenture and the Conversion Price in effect as of the date of such
subdivision, split-up, spin-off, or combination shall be proportionally adjusted
to give effect thereto.

     

    (b)           Adjustment for Dividends and
Distributions.  In the event the Company at any time or from
time to time after the Final Closing Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in Common Stock (or rights to acquire Common Stock),
then and in each such event, provision shall be made so that the Holders of
Debentures shall receive upon conversion thereof pursuant to Paragraph 5 hereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of such other securities of the Company to which a Holder on the relevant
record or payment date, as applicable, of the number of shares of Common Stock
so receivable upon conversion would have been entitled, plus any dividends or
other distributions which would have been received with respect to such
securities, had such Holder thereafter, during the period from the date of such
event to and including the Holder Conversion Date retained such securities,
subject to all other adjustments called for during such period under this
Paragraph 7 with respect to the rights of the Holders of the Debentures. For
purposes of this Paragraph 7(b), the number of shares of Common Stock so
receivable upon conversion shall be deemed to be that number which the Holder
would have received upon conversion of the entire Outstanding Amount hereof if
the Holder Conversion Date had been the day the Company set as the record date
for such dividend or distribution.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (c)           Adjustment for Merger,
Reorganization, etc.  In the event that at any time or from
time to time after the Final Closing Date, the Common Stock issuable upon
conversion of the Debentures is changed into the same or a different number of
shares of any class or classes of stock, whether in connection with a merger or
consolidation, by recapitalization, reclassification, reorganization or
otherwise (other than a subdivision, combination of shares or stock dividend
provided for elsewhere in this Paragraph 7), then and in each such event each
Holder of Debentures shall have the right, for a period of thirty (30) days
following receipt of the Company’s notice of such adjustment, to convert such
Debentures into the kind of securities receivable by a holder of Common Stock
upon such merger, recapitalization, reclassification or other change, all
subject to further adjustment as provided herein.

     

    (d)           Certificate as to
Adjustments.  Upon each occurrence of an adjustment pursuant to
this Paragraph 7, the Company at its expense shall furnish to each Holder a
certificate setting forth (i) in reasonable detail the facts upon which such
adjustment is based, and (ii) the number of shares of Common Stock and the
amount of other property or securities that after giving effect thereto would be
received by the Holder upon conversion of this Debenture.

     

    (e)           Minimum Adjustments. No
adjustment of the Conversion Price shall be made unless such adjustment would
require an increase or decrease of at least $.10 in such price; provided that
any adjustments which by reason of this Paragraph 7(f) are not required to be
made shall be carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment(s) so carried
forward, shall require an increase or decrease of at least $.10 in the
Conversion Price then in effect hereunder.

     

    (f)           Board Discretion. Any
determination as to whether an adjustment in the Conversion Price in effect
hereunder is required pursuant to Paragraph 7, or as to the amount of any such
adjustment, if required, shall be binding upon the holders of this Debenture and
the Company if made in good faith by the Board of Directors of the Company,
absent manifest error.

     

    8.           Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional shares of
Common Stock shall be issuable hereunder. The number of shares of Common Stock
that are issuable upon any conversion shall be rounded down to the nearest whole
share, and the Company shall pay the Holder in cash with respect to any
fractional shares.

     

    9.           Reservation of Stock
Issuable Upon Conversion.

     

    Reservation
Requirement.  The Company has reserved and the Company shall
continue to reserve and keep available at all times, free of preemptive rights,
shares of Common Stock for the purpose of enabling the Company to satisfy any
obligation to issue shares of its Common Stock upon conversion of the
Debentures.

     

    10.           Other Covenants of the
Company.

     

    (a)           The
Company shall not intentionally take any action, which would be reasonably
likely to impair the contractual rights and privileges of the Debentures set
forth herein or of the Holders thereof.

     

    (b)           The
Company shall not redeem (other than pursuant to Paragraph 6), retire, purchase
or otherwise acquire, directly or indirectly, Debentures held by any Holder
unless the Company shall have offered to redeem, retire, purchase or otherwise
acquire, as the case may be, the same proportion of the aggregate principal
amount of Debentures held by each other Holder of Debentures at the time
outstanding upon the same terms and conditions and such offer shall remain open
for a period of at least thirty (30) business days.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (c)           The
Company shall not, without the consent of a majority in interest of the Holders
of any outstanding Debentures, (i) consolidate with or merger with or into any
person or (ii) sell, convey, transfer, or otherwise dispose of or lease all or
substantially all of its assets in one transaction or a series of related
transactions to any person; provided, however, that this Section 10(c) shall not
be applicable in the event of a consolidation or merger of a wholly-owned
subsidiary of the Company with and into the Company.

     

    11.           Obligations
Absolute.  No provision of this Debenture, other than
conversion as provided herein, shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place and rate, and in the manner,
herein prescribed.

     

    12.           Waivers of Demand,
Etc. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of intent to accelerate, prior notice of bringing of suit and diligence
in taking any action to collect amounts called for hereunder and will be
directly and primarily liable for the payments of all sums owing and to be owing
hereon, regardless of and without any notice (except as required by law),
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.

     

    13.           Replacement
Debentures.  In the event that the Holder notifies the Company
that its Debenture has been lost, stolen or destroyed, a replacement Debenture
identical in all respects to the original Debenture (except for registration
number and Outstanding Amount, if different than that shown on the original
Debenture) shall be issued to the Holder, provided that the Holder executes and
delivers to the Company an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with the
Debenture and provided that the Company is provided a form of Debenture for such
replacement purposes.

     

    14.           Defaults.  If
one or more of the following described “Events of
Default” shall occur:

     

    
      	
               
      

            	
              (a)

            	
              Any
      of the representations or warranties made by the Company in this
      Debenture, the Subscription Agreement or the Investor Rights Agreement, or
      in any certificate or financial statements of the Company furnished by or
      on behalf of the Company in connection with the execution and delivery of
      this Debenture, the Subscription Agreement or the Investor Rights
      Agreement shall be false or (when taken together with other information
      furnished by or on behalf of the Company) misleading at the time made;
      or

            

    

    

    
      	
               
      

            	
              (b)

            	
              The
      Company shall fail to perform or observe any covenant or agreement in this
      Debenture, the Subscription Agreement or the Investor Rights Agreement, or
      any other covenant, term, provision, condition, agreement or obligation of
      the Company under this Debenture, and such failure shall continue uncured
      for a period of fifteen (15) business days after notice from the Holder of
      such failure; or

            

    

    

    
      	
               
      

            	
              (c)

            	
              The
      Company shall fail to make payments of principal or interest when due,
      including upon a Fundamental Change Purchase Date, and any such failure
      shall continue uncured for a period of five (5) days after the due date;
      or

            

    

    

    
      	
               
      

            	
              (d)

            	
              The
      Company shall (1) admit in writing its inability to pay its debts
      generally as they mature; (2) make a general assignment for the benefit of
      creditors or commence proceedings for its dissolution; or (3) apply for or
      consent to the appointment of a trustee, liquidator or receiver for it or
      for a substantial part of its property or business;
  or

            

    

    

    
      	
               
      

            	
              (e)

            	
              A
      trustee, liquidator or receiver shall be appointed for the Company or for
      a substantial part of its property or business without its consent and
      shall not be discharged within sixty (60) days after such appointment;
      or

            

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (f)

            	
              Any
      governmental agency or any court of competent jurisdiction shall assume
      custody or control of the whole or any substantial portion of the
      properties or assets of the Company or any of its subsidiaries and shall
      not be dismissed within sixty (60) days thereafter;
  or

            

    

     

    
      	
               
      

            	
              (g)

            	
              Bankruptcy,
      reorganization, insolvency or liquidation proceedings or other
      proceedings, or relief under any bankruptcy law or any law for the relief
      of debt, shall be instituted by or against the Company and, if instituted
      against the Company or any of its subsidiaries, shall not be dismissed
      within sixty (60) days after such institution, or the Company or any of
      its subsidiaries shall by any action or answer approve of, consent to, or
      acquiesce in any such proceedings or admit to any material allegations of,
      or default in answering a petition filed in, any such proceeding;
      or

            

    

     

    
      	
               
      

            	
              (h)

            	
              the
      failure by the Company or any of its subsidiaries to make any payment by
      the end of any applicable grace period after maturity of any principal
      and/or accrued interest with respect to debt, where the amount of such
      unpaid and due principal and/or accrued interest is in an aggregate amount
      in excess of $325,000 or (ii) there is an acceleration of any principal
      and/or accrued interest is in an amount in excess of $325,000 because of a
      default with respect to such debt;
or

            

    

     

    
      	
               
      

            	
              (i)

            	
              the
      failure by the Company to provide the notice specified in Section 6(e) on
      a timely basis; or

            

    

     

    
      	
               
      

            	
              (j)

            	
              the
      failure by the Company to deliver all cash and any shares of Common Stock
      when such cash and Common Stock, if any, are required to be delivered upon
      conversion of the Debenture, and the Company does not remedy such default
      within ten (10) days;

            

    

    

    then, or
at any time thereafter prior to the date on which all continuing Events of
Default have been cured, and in each and every such case, unless such Event of
Default shall have been waived in writing by the Holder (which waiver shall not
be deemed to be a waiver of any subsequent default), at the option of the Holder
and in the Holder’s sole discretion, the Holder may, by notice to the Company
declare this Debenture immediately due and payable, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder’s rights and remedies provided herein or any other rights or
remedies afforded by law.  In such event, the Debenture shall be
redeemed at a redemption price per Debenture equal to the Redemption Price
provided in Paragraph 6(c).

    

    15.          Savings
Clause.  In case any provision of this Debenture is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.

     

    16.          Entire
Agreement.  This Debenture and the agreements referred to in
this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject
hereof.  Neither this Debenture nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the Company and a majority of the Outstanding Principal Amount of the
Debentures.

     

    17.          Assignment,
Etc.  Subject to any applicable law and the requirements set
forth in the legend set forth hereon, any Holder may, without notice, transfer
or assign this Debenture.  The Company agrees that, subject to
compliance with the applicable law, after receipt by the Company of written
notice of assignment from the Holder or from the Holder’s assignee, all
principal, interest, and other amounts which are then due and thereafter become
due under this Debenture shall be paid to such assignee at the place of payment
designated in such notice.  This Debenture shall be binding upon the
Company and its successors and shall inure to the benefit of the Holder and its
successors and assigns.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    18.          No
Waiver.  No failure on the part of the Holder to exercise, and
no delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power.  Each and every right, remedy or power
hereby granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.

     

    19.          Miscellaneous.  Unless
otherwise provided herein, any notice or other communication to a party
hereunder shall be deemed to have been duly given if personally delivered or
sent by registered or certified mail, return receipt requested, postage prepaid
with a copy in each case sent on the same day to the party by facsimile, Federal
Express or other overnight delivery service to said party at its address set
forth herein or such other address as either may designate for itself in such
notice to the other and communications shall be deemed to have been received
when delivered personally or, if sent by mail, when actually received by the
party to whom it is addressed.  Copies of all notices to the Company
shall be sent to GlenRose Instruments Inc., 45 First Avenue, Waltham,
Massachusetts 02451, attention: President, and to William O. Flannery, Esq.,
Corporate Counsel, 945 Lenox Road, Richmond, Massachusetts, 01254, Facsimile No.
(413) 698-3506. Whenever the sense of this Debenture requires, words in the
singular shall be deemed to include the plural and words in the plural shall be
deemed to include the singular.  Paragraph headings are for
convenience only and shall not affect the meaning of this document.

     

    20.          Choice of Law and Venue:
Waiver of Jury Trial. THIS DEBENTURE SHALL BE CONSTRUED UNDER THE LAWS OF
THE COMMONMWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW OR CHOICE OF LAW THEREOF.  Each of the Company and the Holder
hereby (i) irrevocably submits to the exclusive jurisdiction of the federal or
state courts located in the Commonwealth of Massachusetts for the purposes of
any suit, action or proceeding arising out of or relating to this Debenture and
(ii) waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper.  Each of the
Company and the Holder consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to the Company or to the Holder, as the
case may be, at the address in effect for notices to it under this Debenture and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by law.

    

     

    [SIGNATURE
PAGE FOLLOWS]

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Company has caused this instrument to be duly executed by an officer thereunto
duly authorized.

    

    

    
      	 
      	
              Dated:  __________,
      2008

            
	 
      	 
      
	 
      	
              GlenRose
      Instruments Inc.

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
              _________________________

            
	 
      	
              Name:
      Anthony S. Loumidis

            
	 
      	
              Title:
      Chief Financial Officer

            

    

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    EXHIBIT
1

    

    CONVERSION
NOTICE

    FOR

    4%
CONVERTIBLE DEBENTURE DUE 2013

    

    

    The
undersigned, as Holder of the 4% Convertible Debenture due 2013 of GlenRose
Instruments Inc. (“Company”), No. 1, in
the Outstanding Principal Amount of U.S. $12,000,000 (the “Debenture”), hereby
irrevocably elects to convert U.S. $__________ of the Outstanding Principal
Amount of the Debenture and U.S.$__________ of interest accrued but unpaid under
the Debenture, into shares of Common Stock, par value $0.01 per share (the
“Common Stock”), of Company according to the conditions of the Debenture, as of
the date written below. The undersigned hereby requests that share certificates
for the Common Stock to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any.

    

    

    
      	
              Conversion
      Information:

            	
              Name
      of Holder:

            	
               

            
	 
      	 
      	 
      
	 
      	
              Signature:

            	
               

            
	 
      	 
      	 
      
	 
      	
              Name:

            	
               

            
	 
      	 
      	 
      
	 
      	
              Address:

            	
               

            
	 
      	 
      	 
      
	 
      	
               

            
	 
      	 
      	 
      
	 
      	
               

            
	 
      	 
      	 
      
	 
      	
              Issue
      Common Stock to:

            	
               

            
	 
      	 
      	 
      
	 
      	
              Address:

            	
               

            
	 
      	 
      	 
      
	 
      	
               

            
	 
      	 
      	 
      
	 
      	
               

            
	 
      	 
      	 
      
	 
      	
              Date
      of Conversion:

            	
               

            

    

    
      
         

      

      
        11

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