-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HTZlw3w8MLJK61OqNbKU+UvYJndvqFt2tKhvbCmNcfwfdk+Fm8d4VhEOoDtJql+s 6XfPCYpqGb3rF70pIxybFA== 0000897069-04-001448.txt : 20040810 0000897069-04-001448.hdr.sgml : 20040810 20040810165154 ACCESSION NUMBER: 0000897069-04-001448 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20040527 FILED AS OF DATE: 20040810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARCUS CORP CENTRAL INDEX KEY: 0000062234 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 391139844 STATE OF INCORPORATION: WI FISCAL YEAR END: 0527 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12604 FILM NUMBER: 04964948 BUSINESS ADDRESS: STREET 1: 100 EAST WISCONSIN AVENUE STREET 2: SUITE 1900 CITY: MILWAUKEE STATE: WI ZIP: 53202-4125 BUSINESS PHONE: 4142726020 MAIL ADDRESS: STREET 1: 100 EAST WISCONSIN AVENUE STREET 2: SUITE 1900 CITY: MILWAUKEE STATE: WI ZIP: 53202-4125 10-K 1 cmw848.htm ANNUAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual report pursuant to Section 13 of the
Securities Exchange Act of 1934 for the fiscal year ended May 27, 2004

THE MARCUS CORPORATION

100 East Wisconsin Avenue – Suite 1900
Milwaukee, Wisconsin 53202-4125
(414) 905-1000

A Wisconsin corporation
IRS Employer Identification No. 39-1139844
Commission File No. 1-12609

We have one class of securities registered pursuant to Section 12(b) of the Act: our Common Stock, $1 par value, which is registered on the New York Stock Exchange.

We do not have any securities registered pursuant to Section 12(g) of the Act.

We have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and have been subject to such filing requirements for the past 90 days.

Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is contained in our definitive proxy statement incorporated by reference in Part III of this Form 10-K.

We are an accelerated filer (as defined in Rule 12b-2 of the Act).

The aggregate market value of the voting common equity held by non-affiliates as of November 27, 2003 and August 5, 2004 was $296,164,742 and $354,187,933, respectively. This value includes all shares of our voting and non-voting Common Stock, except for shares beneficially owned by our directors and executive officers listed in Part I below.

As of November 27, 2003 and August 5, 2004, there were 20,303,916 and 20,611,920 shares of our Common Stock, $1 par value, and 9,350,185 and 9,323,660 shares of our Class B, Common Stock, $1 par value, outstanding, respectively.

Portions of our definitive Proxy Statement for our 2004 annual meeting of shareholders, which will be filed with the Commission under Regulation 14A within 120 days after the end of our fiscal year and, upon such filing, will be incorporated by reference into Part III to the extent indicated therein.

PART I

Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Annual Report on Form 10-K and the accompanying annual report to shareholders, particularly in the Shareholders’ Letter and Management’s Discussion and Analysis, are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will include words such as we “believe,” “anticipate,” “expect” or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause results to differ materially from those expected, including, but not limited to, the following: (i) our ability to successfully complete the proposed transaction to sell our limited-service lodging division; (ii) the availability, in terms of both quantity and audience appeal, of motion pictures for our theatre division; (iii) the effects of increasing depreciation expenses and preopening and start-up costs due to the capital intensive nature of our businesses; (iv) the effects of adverse economic conditions in our markets, particularly with respect to our limited-service lodging and hotels and resorts divisions; (v) the effects of adverse weather conditions, particularly during the winter in the Midwest and in our other markets; (vi) the effects on our occupancy and room rates from the relative industry supply of available rooms at comparable lodging facilities in our markets; (vii) the effects of competitive conditions in the markets served by us; (viii) our ability to identify properties to acquire, develop and/or manage and continuing availability of funds for such development; and (ix) the adverse impact on business and consumer spending on travel, leisure and entertainment resulting from terrorist attacks in the United States, the United States’ responses thereto and subsequent hostilities. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this Form 10-K and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Item 1. Business.

General

We are engaged primarily in three business segments: movie theatres; limited-service lodging; and hotels and resorts.

As of May 27, 2004, our theatre operations included 46 movie theatres with 492 screens throughout Wisconsin, Ohio, Illinois and Minnesota, including four movie theatres with 40 screens in Illinois and Wisconsin owned by third parties but managed by us. We also operate a family entertainment center, Funset Boulevard, that is adjacent to one of our theatres in Appleton, Wisconsin.

As of May 27, 2004, our limited-service lodging operations included a chain of 178 Baymont Inns & Suites limited-service facilities in 32 states, seven Woodfield Suites all-suite hotels in five states and one Budgetel Inn in Wisconsin. A total of 84 of our Baymont Inns & Suites were owned and operated by us, ten were operated under joint venture agreements or management contracts and 84 were franchised. On July 14, 2004, we entered into an agreement to sell our limited-service lodging operations to La Quinta Corporation, a leading limited-service lodging company based in Dallas, Texas, for approximately $395 million, excluding certain joint ventures and subject to certain adjustments. La Quinta Corporation will purchase the real estate and related assets and assume the operation of our Company-owned and operated properties and the Baymont franchise system. This transaction is expected to close in late summer or early fall, subject to customary closing conditions, consents and approvals.

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As of May 27, 2004, our hotels and resorts operations included six owned and operated hotels and resorts in Wisconsin, California and Missouri. We also manage five hotels for third parties in Wisconsin, Minnesota, Texas and California and a vacation ownership development in Wisconsin.

Each of these business segments is discussed in detail below.

Strategic Plans

Our current strategic plans include the following goals and strategies:

•

Consummating the sale of our limited-service lodging division and evaluating potential uses of the proceeds from the sale. Subject to determination of final closing adjustments, transaction costs, disposition of selected joint ventures and income tax requirements, we currently anticipate receiving net proceeds from this transaction of approximately $310 to $320 million. In addition to actively evaluating potential growth opportunities in Marcus Theatres and Marcus Hotels and Resorts, as noted below, we will consider other potential investments and uses of the funds. At this stage, we have not established an arbitrary deadline for determining the use of the funds, but we would anticipate providing additional direction on this matter during fiscal 2005.

•

Increasing our total number of screens owned or operated to approximately 600 over the next three years while continuing to maximize the return on our significant recent investments in movie theatres through both revenue and cost improvements. We anticipate achieving our growth goals primarily by adding new locations in or near our existing markets and by selectively adding screens to existing locations. We recently began construction on a new 12-screen theatre in Saukville, Wisconsin and announced a new 14-screen location in Green Bay, Wisconsin. We have also identified screen addition projects that may add up to 27 new screens to existing locations over the next two years, along with expansion of our successful large UltraScreens™. Expansion opportunities for the division may also include potential acquisitions and the addition of new management contracts. In order to maintain and enhance the value of our existing theatre assets, we also began work during fiscal 2004 on a program we call Project 2010, a major initiative that will upgrade and remodel 28 of the division’s theatres over the next several years. Each of these updated theatres will feature enhanced art deco facades and luxurious interior design packages that include remodeled lobbies, entries and concession areas equipped with self-serve soft drinks. Our operating plans include a continued emphasis on expanding ancillary revenues, with a particular focus on pre-show advertising revenues which is a rapidly growing source of income for our theatres. As further evidence of our belief in the potential for this revenue source, our theatre division recently purchased a minority interest in Cinema Screen Media, a cinema advertising company that provides pre-show entertainment on our screens and over 3,000 screens nationwide.

•

Maximizing the return on our significant recent investments in hotel projects and doubling the number of rooms either managed or owned by our hotels and resorts division to 6,000 rooms over the next three to five years. Despite a challenging environment for the hotel industry in the last three years, our hotels and resorts division reported its second consecutive year of improvement in operating results during fiscal 2004. Contributing to the improved results has been steady improvement at several of our properties that underwent significant capital improvements just prior to September 11, 2001 (including the Hilton Madison, Hotel Phillips, Timber Ridge Lodge and Hilton Milwaukee). We expect these development projects, plus anticipated improvement at our core properties as business travel improves, to provide continued earnings growth opportunities during fiscal 2005 and beyond. We expect that the majority of our anticipated potential growth in rooms managed will come from management contracts for other owners. In some cases, we may own a partial interest in some of our potentially new managed properties. We continue to pursue a strategy that involves the use of third-party equity funds to invest in existing hotel properties. Under this strategy, we may make limited equity investments and enter into management contracts to manage the properties for the equity funds. Our recent investment in the development of the Platinum Suite Hotel & Spa in Las Vegas, Nevada (described in detail in the hotels and resorts section of this discussion) and our recently announced participation in a joint venture to restore and manage the Skirvin Hotel in Oklahoma City, Oklahoma are consistent with this growth strategy.

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The actual number, mix and timing of potential future new facilities and expansions will depend in large part on industry and economic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and trends and the availability of attractive opportunities. It is likely that our growth goals will continue to evolve and change in response to these and other factors, and there can be no assurance that these current goals will be achieved. The terrorist attacks of September 11, 2001 and the subsequent war on terrorism, combined with the resulting economic downturn that followed the attacks, had an unprecedented impact on the travel and lodging industry. Although we are encouraged by indications that business travel is continuing to improve, we are unable to predict with certainty if or when lodging demand will return to pre-September 11 levels. Any additional domestic terrorist attacks may have a similar or worse effect on the lodging industry than that experienced as a result of the September 11, 2001 attacks.

Theatre Operations

At the end of fiscal 2004, we owned or operated 46 movie theatre locations with a total of 492 screens in Wisconsin, Illinois, Minnesota and Ohio for an average of 10.7 screens per location, compared to an average of 10.6 screens per location at the end of fiscal 2003 and 10.4 at the end of fiscal 2002. Included in the fiscal 2004 totals are four theatres with 40 screens that we manage for other owners. Our facilities include 19 megaplex theatres (12 or more screens), representing 62% of our total screens, 25 multiplex theatres (two to 11 screens) and two single-screen theatres. Our long-term growth strategy for the theatre division is to focus on megaplex theatres having between 12 and 20 screens, which typically vary in seating capacity from 150 to 450 seats per screen. Multi-screen theatres allow us to offer a more diversified selection of films to attract additional customers, exhibit movies in larger or smaller auditoriums within the same theatre depending on the popularity of the movie and benefit from having common box office, concession, projection and lobby facilities.

During fiscal 2004, we opened six new screens, including our fourth UltraScreen™, at existing theatres and closed and sold one theatre with six screens. We also opened one new theatre with six screens that we manage for another owner and we eliminated two screens at two existing theatres in conjunction with a project to convert two small auditoriums into one larger-capacity auditorium at each theatre. We anticipate adding at least 20 additional screens, including one new 12-screen complex in Wisconsin and eight screens at existing theatres, during fiscal 2005. We also plan to convert one of our two IMAX^® theatres to an UltraScreen™ and begin showing only non- IMAX^® films on the other. In connection with these changes, both of these theatres will stop using the IMAX^® name. We have also sold a four-screen theatre during the first quarter of fiscal 2005 and identified approximately five other theatres with up to 16 screens that we may close over the next three years with minimal impact on operating results. At fiscal year-end, we operated 477 first-run screens, 40 of which are operated under management contracts, and 15 budget-oriented screens.

Revenues for the theatre business, and the motion picture industry in general, are heavily dependent on many factors over which we have no control, including the general audience appeal of available films and studio marketing, advertising and support campaigns. Movie production has been stimulated by additional demand from ancillary markets such as home video, pay-per-view and cable television, as well as increased demand from foreign film markets. Fiscal 2004 featured such box office hits as Lord of the Rings: The Return of the King, Finding Nemo, The Passion of the Christ, Pirates of the Caribbean and Elf.

We obtain our films from several national motion picture production and distribution companies and are not dependent on any single motion picture supplier. Our booking, advertising, concession purchases and promotional activities are handled centrally by our administrative staff.

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We strive to provide our movie patrons with high-quality picture and sound presentation in clean, comfortable, attractive and contemporary theatre environments. Substantially all of our movie theatre complexes feature either digital sound, Dolby or other stereo sound systems; acoustical ceilings; side wall insulation; engineered drapery folds to eliminate sound imbalance, reverberation and distortion; tiled floors; loge seats; cup-holder chair-arms; and computer-controlled heating, air conditioning and ventilation. We offer stadium seating, a tiered seating system that permits unobstructed viewing, at over 88% of our first-run screens. Computerized box offices permit all of our movie theatres to sell tickets in advance. Our theatres are accessible to persons with disabilities and provide wireless headphones for hearing-impaired moviegoers. Other amenities at certain theatres include THX auditoriums, which allow customers to hear the softest and loudest sounds, and touch-screen, computerized, self-service ticket kiosks, which simplify advance ticket purchases. We also operate the Marcus Movie Hitline, which is a satellite-based automated telephone ticketing system that allows moviegoers to buy tickets to movies at any of 12 Marcus first-run theatres in the metropolitan Milwaukee area and our two theatres in Columbus, Ohio using a credit card. We own a minority interest in MovieTickets.com, a joint venture of movie and entertainment companies that was created to sell movie tickets over the internet and represents nearly 70% of the top 50 market theatre screens throughout the United States and Canada. As a result of our association with MovieTickets.com, moviegoers can buy tickets to movies at any of our first-run theatres via the internet and print them at home.

We sell food and beverage concessions in all of our movie theatres. We believe that a wide variety of food and beverage items, properly merchandised, increases concession revenue per patron. Although popcorn and soda remain the traditional favorites with moviegoers, we continue to upgrade our available concessions by offering varied choices. For example, some of our theatres offer hot dogs, pizza, ice cream, pretzel bites, frozen yogurt, coffee, mineral water and juices.

We have a variety of ancillary revenue sources in our theatres, with the largest related to the sale of pre-show advertising. During fiscal 2004, our theatre division purchased a minority interest in Cinema Screen Media, a cinema advertising company that provides pre-show entertainment on our screens and on over 3,000 screens nationwide.

We also own a family entertainment center, Funset Boulevard, adjacent to our 14-screen movie theatre in Appleton, Wisconsin. Funset Boulevard features a 40,000 square foot Hollywood-themed indoor amusement facility that includes a restaurant, party room, laser tag center, virtual reality games, arcade, outdoor miniature golf course and batting cages.

Limited-Service Lodging Operations

As discussed above, we entered into an agreement on July 14, 2004 to sell our limited-service lodging business. As of the end of our fiscal 2004, we owned, operated or franchised a total of 178 limited-service facilities, with nearly 17,000 available guest rooms, under the name “Baymont Inns & Suites” in 32 states. A total of 84 of these Baymont Inns & Suites are owned and operated by franchisees, 84 are owned and operated by us and ten are operated by us under joint venture agreements or management contracts. As of the end of our fiscal 2004, we also operated seven mid-priced, all-suite hotels under the name “Woodfield Suites” in five states and one Budgetel Inn.

Hotels and Resorts Operations

The Pfister Hotel

We own and operate the Pfister Hotel, which is located in downtown Milwaukee, Wisconsin. The Pfister Hotel is a full service luxury hotel and has 307 guest rooms (including 82 luxury suites and 176 tower rooms), three restaurants, two cocktail lounges and a 275-car parking ramp. The Pfister also has 24,000 square feet of banquet and convention facilities. The Pfister’s banquet and meeting rooms accommodate up to 3,000 people and the hotel features two large ballrooms, including one of the largest ballrooms in the Milwaukee metropolitan area, with banquet seating for 1,200 people. A portion of the Pfister’s first-floor space is leased for use by retail tenants. In fiscal 2004, the Pfister Hotel earned its 28^th consecutive four-diamond award from the American Automobile Association and was named one of the “World’s Best Places to Stay” by Condé Nast Traveler magazine. The Pfister is also a member of Preferred Hotels and Resorts Worldwide Association, an organization of independent luxury hotels and resorts, and the Association of Historic Hotels of America.

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The Hilton Milwaukee City Center

We own and operate the 729-room Hilton Milwaukee City Center. Several aspects of Hilton’s franchise program have benefited this hotel, including Hilton’s international centralized reservation and marketing system, advertising cooperatives and frequent stay programs. The Hilton Milwaukee City Center also features Paradise Landing, an indoor water park and family fun center that features water slides, swimming pools, a sand beach, lounge and restaurant. The hotel also has two cocktail lounges, two restaurants and an 870-car parking ramp.

Hilton Madison at Monona Terrace

We own and operate the 240-room Hilton Madison at Monona Terrace. The Hilton Madison, which also benefits from the aspects of Hilton’s franchise program noted above, is connected by skywalk to the new Monona Terrace Community and Convention Center, has four meeting rooms totaling 2,400 square feet, an indoor swimming pool, a fitness center, a lounge and a restaurant.

The Grand Geneva Resort & Spa

We own and operate the Grand Geneva Resort & Spa in Lake Geneva, Wisconsin, which is the largest convention resort in Wisconsin. This full-facility destination resort is located on 1,300 acres and includes 355 guest rooms, 50,000 square feet of banquet, meeting and exhibit space, 6,600 square feet of ballroom space, three specialty restaurants, two cocktail lounges, two championship golf courses, several ski-hills, two indoor and five outdoor tennis courts, three swimming pools, a spa and fitness complex, horse stables and an on-site airport.

We manage and sell units of a vacation ownership development that is adjacent to the Grand Geneva Resort & Spa. The development includes 62 timeshare units and a timeshare sales center. Our timeshare owners can participate in exchange programs through Resort Condominiums International.

Miramonte Resort

We own and operate the Miramonte Resort in Indian Wells, California, a boutique luxury resort located on 11 landscaped acres. The resort includes 14 two-story Tuscan style buildings with a total of 222 guest rooms, one restaurant, one lounge and 9,500 square feet of banquet, meeting and exhibit space, including a 5,000 square foot grand ballroom, a fully equipped fitness center, two outdoor swimming pools, each with an adjacent jacuzzi spa and sauna, outdoor meeting facilities and a golf concierge. A luxury destination spa, The Well^TM, was opened at the end of fiscal 2004 to further enhance this property. During fiscal 2004, the Miramonte Resort earned its ^6thconsecutive four-diamond award from the American Automobile Association.

Hotel Phillips

We own and operate the Hotel Phillips, a 217-room hotel in Kansas City, Missouri. After purchasing and completely restoring this landmark hotel, we reopened it in September 2001. The Hotel Phillips has conference rooms totaling 5,600 square feet of meeting space, a 2,300 square foot ballroom, a restaurant and a lounge.

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Operated and Managed Hotels

We operate the Crowne Plaza-Northstar Hotel in Minneapolis, Minnesota. The Crowne Plaza-Northstar Hotel is located in downtown Minneapolis and has 226 guest rooms, 13 meeting rooms, 6,370 square feet of ballroom and convention space, a restaurant, a cocktail lounge and an exercise facility.

We manage the Hotel Mead in Wisconsin Rapids, Wisconsin. The Hotel Mead has 157 guest rooms, ten meeting rooms totaling 14,000 square feet of meeting space, two cocktail lounges, two restaurants and an indoor pool with a sauna and whirlpool.

We operate Beverly Garland’s Holiday Inn in North Hollywood, California. The Beverly Garland has 257 guest rooms, including 12 suites, meeting space for up to 600, including an amphitheater and ballroom, an outdoor swimming pool and lighted tennis courts. The mission-style hotel is located on seven acres near Universal Studios.

We manage the Timber Ridge Lodge, an indoor/outdoor waterpark and condominium complex in Lake Geneva, Wisconsin. The Timber Ridge Lodge is a 225-unit condominium hotel on the same campus as our Grand Geneva Resort & Spa. The Timber Ridge Lodge has meeting rooms totaling 3,640 square feet, a general store, a restaurant-cafe, a snack bar and lounge, a state-of-the-art fitness center and an entertainment arcade.

Finally, we operate the Hilton Garden Inn Houston NW/Chateau in Houston, Texas, which opened in May 2002. The Hilton Garden Inn has 171 guest rooms, a ballroom, a restaurant, a fitness center, a convenience mart and a swimming pool. The hotel is a part of Chateau Court, a 13-acre, European-style mixed-use development that also includes retail space and an office village.

During fiscal 2004, we announced two new hotels that we will manage upon completion of the respective projects. The Platinum Suite Hotel & Spa will be a luxury condominium hotel just off the Las Vegas Strip that will feature 255 condo units, a luxury spa, indoor and outdoor swimming pools, 8,440 square feet of meeting space, restaurants, lounge and an upscale bar. We own 50% of the joint venture developing this hotel, which is expected to open during our fiscal 2006. We also announced our participation in a joint venture to restore and then manage the Skirvin Hotel in Oklahoma City, the oldest hotel in Oklahoma. Renovation of this historic hotel is also expected to be completed during fiscal 2006. When completed, this hotel is expected to have 235 rooms and 25,000 square feet of meeting space and is expected to be operated as a Hilton.

Competition

Each of our businesses experience intense competition from national, regional and local chain and franchise operations, some of which have substantially greater financial and marketing resources than we have. Most of our facilities are located in close proximity to competing facilities.

Our movie theatres compete with large national movie theatre operators, such as AMC Entertainment, Cinemark, Regal Cinemas, Loews Cineplex and Carmike Cinemas, as well as with a wide array of smaller first-run and discount exhibitors. Although movie exhibitors also generally compete with the home video, pay-per-view and cable television markets, we believe that such ancillary markets have assisted the growth of the movie theatre industry by encouraging the production of first-run movies released for initial movie theatre exhibition, which establishes the demand for such movies in these ancillary markets.

Our Baymont Inns & Suites compete with national limited-service lodging chains such as Hampton Inn (which is owned by Hilton Hotels Corporation), Fairfield Inn (which is owned by Marriott Corporation), Holiday Inn Express and Comfort Inn, as well as a large number of regional and local chains. Our Woodfield Suites compete with national chains such as Embassy Suites, Comfort Suites, AmeriSuites and Courtyard by Marriott, as well as other regional and local all-suite facilities.

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Our hotels and resorts compete with the hotels and resorts operated by Hyatt Corporation, Marriott Corporation, Ramada Inns, Holiday Inns, Wyndham Hotels and others, along with other regional and local hotels and resorts.

We believe that the principal factors of competition in each of our businesses, in varying degrees, are the price and quality of the product, quality and location of our facilities and customer service. We believe that we are well positioned to compete on the basis of these factors.

Seasonality

Historically, our first fiscal quarter has produced the strongest operating results because this period coincides with the typical summer seasonality of the movie theatre industry and the summer strength of our lodging businesses. Our third fiscal quarter has historically produced the weakest operating results primarily due to the effects of reduced travel during the winter months on our lodging businesses.

Environmental Regulation

We do not expect federal, state or local environmental legislation to have a material effect on our capital expenditures, earnings or competitive position. However, our activities in acquiring and selling real estate for business development purposes have been complicated by the continued emphasis that our personnel must place on properly analyzing real estate sites for potential environmental problems. This circumstance has resulted in, and is expected to continue to result in, greater time and increased costs involved in acquiring and selling properties associated with our various businesses.

Employees

As of the end of fiscal 2004, we had approximately 7,500 employees, a majority of whom were employed on a part-time basis. A number of our (i) hotel employees in Minneapolis, Minnesota are covered by collective bargaining agreements that expire in April 2005; (ii) operating engineers in the Hilton Milwaukee City Center and Pfister Hotel are covered by collective bargaining agreements that expire on December 31, 2006 and April 30, 2007, respectively; (iii) hotel employees in the Hilton Milwaukee City Center and the Pfister Hotel are covered by a collective bargaining agreement that expires on June 15, 2006; (iv) painters in the Hilton Milwaukee City Center and the Pfister Hotel are covered by a collective bargaining agreement that expires on May 31, 2008; (v) projectionists at the Chicago, Illinois theatres that we manage for a third party are covered by a collective bargaining agreement that expired on June 6, 2004, an extension to which is currently being negotiated; (vi) projectionists at other Chicago locations are covered by a collective bargaining agreement that expires on April 30, 2006; (vii) projectionists in Madison, Wisconsin are covered by a collective bargaining agreement that expires on April 2, 2008; and (viii) projectionists in Milwaukee, Wisconsin are covered by a collective bargaining agreement that expires on May 30, 2007.

Web Site Information and Other Access to Corporate Documents

Our corporate web site is www.marcuscorp.com. All of our Form 10-Ks, Form 10-Qs and Form 8-Ks, and amendments thereto, are available on this web site as soon as practicable after they have been filed with the SEC. In addition, our corporate governance guidelines and the charters for our Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are available on our web site. If you would like us to mail you a copy of our corporate governance guidelines or a committee charter, please contact Thomas F. Kissinger, General Counsel and Secretary, The Marcus Corporation, 100 East Wisconsin Avenue, Suite 1900, Milwaukee, Wisconsin 53202-4125.

Item 2. Properties.

We own the real estate of a substantial portion of our facilities, including, as of May 27, 2004, the Pfister Hotel, the Hilton Milwaukee City Center, the Hilton Madison at Monona Terrace, the Grand Geneva Resort & Spa, the Miramonte Resort and the Hotel Phillips, all of our Company-owned Baymont Inns & Suites, all of the Woodfield Suites and the majority of our theatres. We lease the remainder of our facilities. As of May 27, 2004, we also managed five hotel properties and four theatres that are owned by third parties. Additionally, we own properties acquired for the future construction and operation of new facilities. All of our properties are suitably maintained and adequately utilized to cover the respective business segment served.

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Our owned, leased and franchised properties are summarized, as of May 27, 2004, in the following table:

Business Segment	Total Number of Facilities in Operation⁽¹⁾	Owned⁽¹⁾⁽²⁾	Leased from Unrelated Parties⁽³⁾	Managed for Related Parties⁽¹⁾	Managed for Unrelated Parties⁽¹⁾	Owned By Franchisees⁽¹⁾
Theatres:
Movie Theatres	46	32	10	0	4	0
Family Entertainment Center	1	1	0	0	0	0

Hotels and Resorts:
Hotels	9	4	0	0	5	0
Resorts	2	2	0	0	0	0
Vacation Ownership	1	0	0	0	1	0

Limited-Service Lodging:
Baymont Inns & Suites	178	84	0	9	1	84
Woodfield Suites	7	7	0	0	0	0
Budgetel Inns	1	1	0	0	0	0

Total	245	131	10	9	11	84

(1)	As discussed under Item 1 above, we entered into an agreement to sell our limited-service lodging business on July 14, 2004. Certain properties managed for related parties (joint ventures) are excluded from the agreement.

(2)

Two of the movie theatres and two of the Baymont Inns & Suites are on land leased from unrelated parties under long-term leases. One of the Baymont Inns & Suites and oneof the Woodfield Suites are located on land leased from related parties. Our partnership interests in nine Baymont Inns & Suites that we manage are not included in this column.

(3)	The ten theatres leased from unrelated parties have 62 screens and the four theatres managed for unrelated parties have 40 screens.

Certain of the above individual properties or facilities are subject to purchase money or construction mortgages or commercial lease financing arrangements, but we do not consider these encumbrances, individually or in the aggregate, to be material.

Over 90% of our operating property leases expire on various dates after the end of fiscal 2005 (assuming we exercise all of our renewal and extension options).

Item 3. Legal Proceedings.

We do not believe that any pending legal proceedings involving us are material to our business. No legal proceeding required to be disclosed under this item was terminated during the fourth quarter of fiscal 2004.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of our shareholders during the fourth quarter of fiscal 2004.

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EXECUTIVE OFFICERS OF COMPANY

Each of our executive officers is identified below together with information about each officer’s age, position and employment history for at least the past five years:

Name	Position	Age
Stephen H. Marcus	Chairman of the Board, President and Chief Executive Officer	69
Bruce J. Olson	Group Vice President and President of Marcus Theatres Corporation	54
H. Fred Delmenhorst	Vice President-Human Resources	63
Thomas F. Kissinger	General Counsel and Secretary	44
Douglas A. Neis	Chief Financial Officer and Treasurer	45
William J. Otto	President and Chief Operating Officer of Marcus Hotels, Inc.	48
James R. Abrahamson	President and Chief Operating Officer of Baymont Inns, Inc.	49

Stephen H. Marcus has been our Chairman of the Board since December 1991 and our President and Chief Executive Officer since December 1988. Mr. Marcus has worked at the Company for 42 years.

Bruce J. Olson has been employed in his present position of Group Vice President since July 1991. He was elected to serve on our Board of Directors in April 1996. Mr. Olson previously served as our Vice President-Administration and Planning from September 1987 until July 1991 and as Executive Vice President and Chief Operating Officer of Marcus Theatres Corporation from August 1978 until October 1988, when he was appointed President of that corporation. Mr. Olson joined the Company in 1974.

H. Fred Delmenhorst has been our Vice President-Human Resources since he joined the Company in December 1984.

Thomas F. Kissinger joined the Company in August 1993 as Secretary and Director of Legal Affairs and in August 1995, he was promoted to General Counsel and Secretary. Prior thereto, Mr. Kissinger was associated with the law firm of Foley & Lardner LLP for five years.

Douglas A. Neis joined the Company in February 1986 as Controller of the Marcus Theatres division and in November 1987, he was promoted to Controller of Marcus Restaurants. In July 1991, Mr. Neis was appointed Vice President of Planning and Administration for Marcus Restaurants. In September 1994, Mr. Neis was also named as our Director of Technology and in September 1995 he was elected as our Corporate Controller. In September 1996, Mr. Neis was promoted to our Chief Financial Officer and Treasurer.

William J. Otto joined the Company in 1993 as the Senior Vice President of Operations of Marcus Hotels, Inc. In 1996, Mr. Otto was promoted to Senior Vice President and Chief Operating Officer of Marcus Hotels, Inc. and in April 2001 he was further promoted to President and Chief Operating Officer of Marcus Hotels, Inc.

James R. Abrahamson joined the Company in April 2000 as President and Chief Operating Officer of Baymont Inns, Inc. Mr. Abrahamson previously served as Executive Vice President of the Franchise Hotel Group of Hilton Hotels Corporation from January 1995 until April 2000.

Our executive officers are generally elected annually by the Board of Directors after the annual meeting of shareholders. Each executive officer holds office until his successor has been duly qualified and elected or until his earlier death, resignation or removal.

-9-

PART II

Item 5. Market for the Company’s Common Equity, Related Shareholder Matters and Issuer Repurchases of Equity Securities.

(a)

Market Information

Our Common Stock, $1 par value, is listed and traded on the New York Stock Exchange under the ticker symbol “MCS.” Our Class B Common Stock, $1 par value, is neither listed nor traded on any exchange. During each quarter of fiscal 2003 and 2004, we paid a dividend of $0.055 per share of our Common Stock and $0.05 per share of our Class B Common Stock. On August 5, 2004, there were 2,385 shareholders of record of our Common Stock and 44 shareholders of record of our Class B Common Stock. The following table lists the high and low sale prices of our Common Stock for the periods indicated:

Fiscal 2004	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
High	$15.38	$16.43	$17.50	$18.30
Low	$12.85	$14.09	$14.50	$14.92

Fiscal 2003	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
High	$16.74	$15.13	$15.34	$15.34
Low	$11.90	$11.94	$13.02	$11.91

(b)

Stock Repurchases

Through May 27, 2004, our board of directors has approved the repurchase of up to 4.7 million shares of our outstanding Common Stock. Under these authorizations, we may repurchase shares of our Common Stock from time to time in the open market, pursuant to privately negotiated transactions or otherwise. The repurchased shares are held in our treasury pending potential future issuance in connection with employee benefit, option or stock ownership plans or other general corporate purposes. Under these authorizations, we have repurchased approximately 2.8 million shares of Common Stock. These authorizations do not have an expiration date. We did not repurchase any shares of Common Stock during the fourth quarter.

-10-

Item 6. Selected Financial Data.

Eleven-Year Financial Summary

	2004
Operating Results
(in thousands)
Revenues⁽⁸⁾	$	409,207		396,915		389,833		375,335		348,130		332,179		303,881		273,693		234,325		201,472		169,680
Earnings from continuing
operations⁽⁸⁾	$	24,611		19,307		22,460		12,740		21,238		20,958		26,343		29,254		27,885		--		--
Net earnings	$	24,611		20,556		22,460		21,776		22,622		23,144		28,444		30,881		42,307		24,136		22,829

Common Stock Data⁽¹⁾
Earnings per share -
continuing operations⁽⁸⁾	$	.82		.66		.76		.43		.71		.70		.87		.98		.94		--		--
Net earnings per share	$	.82		.70		.76		.74		.76		.77		.94		1.04		1.42		.82		.77
Cash dividends per share	$	.22		.22		.22		.22		.22		.22		.22		.20		.23	⁽⁷⁾	.15		.13
Weighted average shares
outstanding
(in thousands)		29,850		29,549		29,470		29,345		29,828		30,105		30,293		29,745		29,712		29,537		29,492
Book value per share	$	13.20		12.54		12.07		11.57		11.03		10.48		10.00		9.37		8.51		7.29		6.61

Financial Position
(in thousands)
Total assets	$	744,869		755,457		774,786		758,659		725,149		676,116		608,504		521,957		455,315		407,082		361,606
Long-term debt	$	210,801		203,307		299,761		310,239		286,344		264,270		205,632		168,065		127,135		116,364		107,681
Shareholders' equity	$	393,723		369,900		354,068		337,701		325,247		313,574		302,531		277,293		251,248		214,464		193,918
Capital expenditures and
other	$	50,915		26,004		48,899		96,748		99,492		111,843		115,880		107,514		83,689		77,083		75,825

Financial Ratios
Current ratio		.45		.40		.51		.40		.41		.45		.43		.39		.62		.41		.67
Debt/capitalization ratio		.38		.43		.48		.49		.48		.47		.42		.39		.35		.37		.37
Return on average
shareholders' equity		6.4	%	5.7	%	6.5	%	6.6	%	7.1	%	7.5	%	9.8	%	11.7	%	18.2	%	11.8	%	12.4	%

GRAPH OMITTED.

(1)	All per share and shares outstanding data is on a diluted basis and has been adjusted to reflect stock splits in 1998 and 1996.

(2)	Includes gain of $7.8 million or $0.27 per share on sale of discontinued operations.

(3)	Includes impairment charge of $2.1 million or $0.07 per share.

(4)	Includes charge of $2.3 million or $0.08 per share for costs associated with the Baymont name change.

(5)	Includes gain of $14.8 million or $0.49 per share on sale of certain restaurant locations.

(6)	Includes gain of $1.8 million or $0.06 per share for cumulative effect of change in accounting for income taxes.

(7)	Includes annual dividend of $0.18 per share and one quarterly dividend of $0.05 per share.

(8)	Restated to present restaurant operations as discontinued operations and to reflect early adoption of EITF No. 00-14, “Accounting for Certain Sales Incentives.”

-11-

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

General

We report our consolidated and individual segment results of operations on a 52-or-53-week fiscal year ending on the last Thursday in May. Fiscal 2004, 2003 and 2002 were 52-week years. Our upcoming fiscal 2005 will also be a 52-week year.

We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. Our primary operations are reported in three business segments: theatres, limited-service lodging and hotels and resorts. As a result of the sale of our KFC restaurants during fiscal 2001, the restaurant business segment has been presented as discontinued operations in the accompanying financial statements and in this discussion. As a result of our recent signing of a definitive agreement to sell our limited-service lodging division, this segment will be presented as discontinued operations in future financial statements and discussion.

Revenue and operating income increases in all three of our business segments contributed to an overall increase in earnings during fiscal 2004. Total revenues reached an all-time high and our net earnings were at the highest level in the last six years. Another record year for our movie theatres, an improved operating environment for our two lodging segments, increased investment income and reduced interest expense all contributed to the overall improved results compared to the prior year.

Pending Sale of Limited-Service Lodging Division

On July 14, 2004, we signed a definitive agreement to sell our limited-service lodging division to La Quinta Corporation of Dallas, Texas, for approximately $395 million in cash, excluding certain joint ventures and subject to certain adjustments. La Quinta will purchase our Baymont Inns & Suites, Woodfield Suites and Budgetel Inns brands, real estate and related assets and assume the operation of the Company-owned and operated properties and the Baymont franchise system. Eight joint venture Baymont Inns & Suites were excluded from the original transaction. One or more of these joint ventures could be added to the transaction at a later date and total proceeds would increase accordingly. The transaction is expected to close later this summer or early fall, subject to customary closing conditions, consents and approvals.

The assets to be sold consist primarily of land, buildings and equipment with a net book value of approximately $261 million as of May 27, 2004. As a result, upon consummation of the sale, we would expect to report a significant gain on sale of discontinued operations during fiscal 2005, after applicable income taxes. Our fiscal 2005 operating results will likely include approximately three months of results from our limited-service lodging division and those results will be classified as income or loss on discontinued operations. The impact of the sale on our full year fiscal 2005 operating results and financial condition will be largely dependent upon how we decide to use the expected proceeds.

Over the past five years, we successfully established the Baymont Inns & Suites brand in the mid-price segment of the lodging industry, building the brand and the related infrastructure. We came to the conclusion that in order to continue Baymont’s growth, the brand would benefit by being part of a larger system. La Quinta Corporation owns, operates or franchises more than 370 La Quinta Inns and La Quinta Inn & Suites in 33 states. As a result, we believe that the sale of this division to LaQuinta is in the best long-term interests of our associates, franchisees, guests and shareholders.

-12-

Consolidated Financial Comparisons

The following table sets forth revenues, operating income, earnings from continuing operations, net earnings and earnings per share for the past three fiscal years (in millions, except for per share and percentage change data):

					Change F04 v. F03							Change F03 v. F02
	2004		2003		Amt.		Pct.			2002		Amt.			Pct.
Revenues	$	409.2	$	396.9	$	12.3		3.1	%	$	389.8	$	7.1			1.8	%
Operating income		53.4		49.4		4.0		8.2	%		47.5		1.9			4.1	%
Earnings from
continuing operations		24.6		19.3		5.3		27.5	%		22.5		(3.2	)		-14.0	%
Net earnings		24.6		20.6		4.0		19.7	%		22.5		(1.9	)		-8.5	%
Earnings per share - Diluted:
Continuing operations	$	.82	$	.66	$	.16		24.2	%	$	.76	$	(.10	)		-13.2	%
Net earnings per share		.82		.70		.12		17.1	%		.76		(.06	)		-7.9	%

Fiscal 2004 versus Fiscal 2003

All three operating divisions contributed to our increase in revenues during fiscal 2004. A third consecutive year of record operating performance from our theatre division, significant improvement in operating results from our limited-service lodging division and a second consecutive year of improved operating results from our hotels and resorts division resulted in an increase in overall operating income (earnings before other income/expense and income taxes). Overall operating income was negatively impacted in fiscal 2004 by an increase in our loss from corporate items, due primarily to a one-time charge of over $600,000 related to prior year insurance claims. These claims, the largest of which relates to our former restaurant division, became our responsibility in fiscal 2004 when our former insurance company filed bankruptcy. A significant increase in investment income and decrease in interest expense during fiscal 2004 contributed to our increased earnings from continuing operations and net earnings during fiscal 2004.

We recognized investment income of $1.7 million during fiscal 2004, compared to a net investment loss of approximately $150,000 during the prior year. Investment income has historically included interest earned on cash equivalents and notes receivable, including notes related to the sale of timeshare units in our hotels and resorts division. Investment income on these items was down from the prior year, due primarily to an overall reduction in our notes receivable during fiscal 2004. Comparisons to last year, however, were favorably impacted by a $2.6 million investment loss reported during fiscal 2003 related to loans to and investments in Baymont Inns & Suites joint ventures that experienced significant financial difficulties in the months following September 11, 2001. We have a limited number of joint ventures and our exposure to additional losses related to these joint ventures is not significant. In addition, we also recognized a $494,000 pre-tax investment loss on securities held during fiscal 2003, whose decline in fair value was deemed to be other than temporary. During fiscal 2004 and in years prior to fiscal 2003, gains and losses on these available for sale investments were included in other comprehensive loss in shareholders’ equity, consistent with current accounting pronouncements.

Our interest expense totaled $16.9 million for fiscal 2004, representing a decrease of $2.8 million, or 14.1%, compared to fiscal 2003 interest expense of $19.6 million. The decrease in interest expense was primarily the result of a $39.1 million, or 14.2%, reduction in our total long-term debt including current maturities at the end of fiscal 2004 compared to the end of the prior year.

We recognized gains on disposition of property, equipment and investments in joint ventures of $2.2 million during fiscal 2004, compared to gains from continuing operations of $2.1 million during fiscal 2003. The fiscal 2004 net gain was primarily the result of the sales of six parcels of excess land, the sale of a former theatre in Minnesota and the sale of a joint venture Baymont property. The timing of our periodic sales of property and equipment can result in variations in the gains or losses that we report on disposition of property and equipment each year. We are actively attempting to sell additional parcels of excess land and we believe that additional net gains on disposition of property and equipment may be recognized during the coming year, in addition to the expected gain on the sale of the limited-service lodging division.

-13-

We reported income tax expense on continuing operations for fiscal 2004 of $15.9 million, an increase of $3.5 million over fiscal 2003. Our effective tax rate for fiscal 2004 was 39.2% compared to 39.1% in fiscal 2003. We anticipate that our effective tax rate during fiscal 2005 will likely remain in the 39-40% range.

Net earnings during fiscal 2003 included an after-tax gain on sale of discontinued operations of $1.3 million, or $.04 per share (a detailed discussion of this item is included in the Discontinued Operations section). Weighted average shares outstanding were 29.9 million during fiscal 2004 and 29.5 million during fiscal 2003. All per share data is presented on a diluted basis.

Fiscal 2003 versus Fiscal 2002

All three operating divisions contributed to the increase in revenues during fiscal 2003. Record operating performance from our theatre division and significant improvement in operating results from our hotels and resorts division resulted in an increase in overall operating income, despite decreases in operating income from our limited-service lodging division and a nearly $1.0 million, or 8.9%, increase in our total gas and electric costs for the year. A slight increase in interest expense, investment losses reported during fiscal 2003 and a significantly higher effective income tax rate contributed to our decreased earnings from continuing operations and net earnings during fiscal 2003.

We recognized a net investment loss of approximately $150,000 during fiscal 2003, compared to investment income of $2.4 million during the prior year. As previously noted, the significant decrease in investment income during fiscal 2003 was primarily the result of a $2.6 million investment loss related to loans to and investments in Baymont Inns & Suites joint ventures and a $494,000 pre-tax investment loss on securities held during fiscal 2003, whose decline in fair value was deemed to be other than temporary.

Our interest expense totaled $19.6 million for fiscal 2003, representing an increase of $800,000, or 4.4%, over fiscal 2002 interest expense of $18.8 million. The increase in interest expense was the result of our issuance of fixed rate long-term senior notes during the fourth quarter of fiscal 2002 in lieu of lower cost variable interest rate borrowings in place during the majority of fiscal 2002. The resulting increase in interest expense was partially offset by an overall reduction in our long-term debt during fiscal 2003 compared to the prior year, due primarily to reduced capital expenditures during fiscal 2003.

We recognized gains on disposition of property, equipment and investments in joint ventures from continuing operations of $2.1 million during fiscal 2003, compared to gains on disposition of property and equipment of $2.5 million during fiscal 2002. The fiscal 2003 gains were primarily the result of the sales of a redeveloped former theatre location, two former restaurant locations and several parcels of excess land.

We reported income tax expense on continuing operations for fiscal 2003 of $12.4 million, an increase of $1.3 million over fiscal 2002 despite reduced earnings before income taxes. Our effective tax rate for fiscal 2003 was 39.1% compared to 33.0% in fiscal 2002. The significantly lower effective tax rate during the prior year was the result of the favorable impact of federal and state historic tax credits related to the renovation of the Hotel Phillips in Kansas City, Missouri. Without these historic tax credits, our fiscal 2002 net earnings would have been approximately $2.6 million, or $.09 per share, lower than we reported.

-14-

Current Plans

We incurred approximately $51 million in aggregate capital expenditures during fiscal 2004, an increase over the prior two years but below our average of over $100 million per year during the 5-year period from fiscal 1997 through 2001. We currently anticipate that our capital expenditures during fiscal 2005 may increase to the $65 to $75 million range, but we will continue to monitor our operating results and economic conditions so that we can respond appropriately. We have approximately $45 million of current capital projects already underway or approved, and we believe it is likely that we will approve additional maintenance and growth capital projects during fiscal 2005 to reach our estimated capital expenditures of $65 to $75 million.

Our current strategic plans include the following goals and strategies:

•

-15-

Theatres

Our oldest and largest division is our theatre division. The theatre division contributed 38.1% of our consolidated revenues and 63.0% of our consolidated operating income, excluding corporate items, during fiscal 2004. The theatre division operates motion picture theatres in Wisconsin, Illinois, Ohio and Minnesota, and a family entertainment center in Wisconsin. The following tables set forth revenues, operating income, operating margin, screens and theatre locations for the last three fiscal years:

							Change F04 v. F03								Change F03 v. F02
	2004			2003			Amt.		Pct.			2002			Amt.		Pct.
	(in millions, except percentages)
Revenues	$	155.7		$	150.4		$	5.3		3.6	%	$	147.3		$	3.1		2.1	%
Operating income		38.9			36.2			2.7		7.7	%		34.7			1.5		4.3	%
Operating margin		25.0	%		24.0	%							23.5	%

Number of screens and locations at fiscal year-end ⁽¹⁾
Theatre screens	492	488	490
Theatre locations	46	46	47

Average screens per location	10.7	10.6	10.4

(1)	Includes 40 screens at four locations managed for other owners in 2004 and 34 screens at three locations managed for another owner in 2003 and 2002.

-16-

The following table further breaks down revenues for the theatre division for the last three fiscal years:

					Change F04 v. F03							Change F03 v. F02
	2004		2003		Amt.		Pct.			2002		Amt.		Pct.
	(in millions, except percentages)
Box office receipts	$	101.1	$	98.8	$	2.3		2.4	%	$	96.5	$	2.3		2.4	%
Concession revenues		46.7		45.6		1.1		2.4	%		45.3		0.3		0.6	%
Other revenues		7.9		6.0		1.9		31.9	%		5.5		0.5		9.2	%

Total revenues	$	155.7	$	150.4	$	5.3		3.6	%	$	147.3	$	3.1		2.1	%

Fiscal 2004 versus Fiscal 2003

The increase in theatre division revenues during fiscal 2004 compared to the prior year occurred despite a slight decrease in overall attendance. We opened six new screens at existing theatres during fiscal 2004, including four screens in Menomonee Falls, Wisconsin, one screen in Madison, Wisconsin and our fourth UltraScreen™ at a theatre in Elgin, Illinois. These new screens plus screens added in fiscal 2003 that were not open for a full year last year generated approximately $1.4 million of additional revenues during fiscal 2004. We closed and sold one budget-oriented theatre with six screens during fiscal 2004 and eliminated two screens at two existing theatres in conjunction with a project to convert two small auditoriums into one larger-capacity auditorium at each theatre. Closing those screens and one other theatre during fiscal 2003 negatively impacted comparisons of this year’s theatre division revenues to prior year results by $700,000, although our screen closings had a minimal impact on operating income. As of May 27, 2004, we operated 477 first-run screens and only 15 budget screens. Compared to first-run theatres, budget theatres generally have lower box office revenues and associated film costs, but higher concession sales as a percentage of box office revenue.

Revenues for the theatre business and the motion picture industry in general are heavily dependent on the general audience appeal of available films, together with studio marketing, advertising and support campaigns, factors over which we have no control. This was evident once again during fiscal 2004. Total theatre attendance was down 2.7%, up 0.9%, down 3.0% and up 5.1% during each of the four fiscal 2004 quarters, respectively, compared to the prior year comparable quarters. With no significant change in the number of competitive screens in our markets, we believe the primary factor contributing to these variations in attendance during fiscal 2004 was the quality and quantity of film product released during the respective quarters compared to the films released during the same quarter last year. Total theatre attendance for the full year decreased 0.4% during fiscal 2004 compared to the prior year and attendance at our comparable screens decreased 0.6%. The traditionally strong movie-going Memorial Day weekend, which was included in our fiscal 2003 fourth quarter last year, occurred during the first quarter of fiscal 2005, negatively impacting this year’s fourth quarter and fiscal 2004 comparisons.

Despite the slight decrease in attendance, fiscal 2004 still was a record year at the box office for our theatre division. Contributing to our improved results was a 2.8% increase in our average ticket price during fiscal 2004 compared to the prior year. Modest price increases contributed to the average ticket price increase, with the remainder of the increase due to the fact that this year’s first quarter film product included an unusually high number of R-rated movies. Such strong adult admission motion pictures appeal to a smaller audience but result in a higher average ticket price due to fewer child admissions.

Consistent with prior years in which blockbusters accounted for a significant portion of our total box office, our top 15 performing films accounted for 35% of our fiscal 2004 box office receipts, compared to 36% during fiscal 2003. Four fiscal 2004 films produced box office receipts in excess of $3 million compared to three films during the prior year, but only five films this year produced over $2 million in receipts compared to eight films last year, indicating that we were much more dependent on a few blockbusters during fiscal 2004 compared to the prior year. The following five fiscal 2004 films produced box office receipts in excess of $2 million: Lord of the Rings: Return of the King, Finding Nemo, The Passion of the Christ, Pirates of the Caribbean and Elf. We played 181 films at our theatres during fiscal 2004 compared to 190 during fiscal 2003. Included in the total films played were three and two new IMAX^®-exclusive films during each fiscal year, respectively. During fiscal 2005, we plan to convert one of our two IMAX^® theatres to an UltraScreen™ and begin showing only non-IMAX^® films on the other. In connection with these changes, both of these theatres will stop using the IMAX^® name.

-17-

Our average concession sales per person increased 2.7% during fiscal 2004 compared to the prior year. Average concession sales per person are impacted by changes in concession pricing, types of films played and changes in our geographic mix of theatre locations. On average, films that appeal to families and teenagers generally produce better than average concession sales compared to more adult-orientated film product.

Our theatre division’s operating margin increased to 25.0% during fiscal 2004, compared to 24.0% in fiscal 2003. Contributing to the improved fiscal 2004 operating margin was reduced film rental, concession and advertising costs as a percentage of revenues. Increases in other revenues, which included management fees and pre-show advertising income, also contributed to our improved operating margin. We expect these ancillary revenues to continue to increase during fiscal 2005. If box office and concession revenues continue to improve as they have in recent years, we anticipate that the expected improvements in other revenues and other various cost controls may be enough to offset anticipated increases in labor and health insurance costs, potentially resulting in continued improvement in our theatre division operating margins.

We continue to use technology to further enhance our operating results. During fiscal 2004, the number of tickets sold over the internet increased by 17%. In addition, we introduced a new stored-value entertainment card during fiscal 2003 which contributed to a nearly 31% increase in gift certificate sales during fiscal 2004. Both of these programs are designed to differentiate our theatres from competing theatres and increase customer loyalty.

We began operating a new six-screen theatre in Tomah, Wisconsin during fiscal 2004 which is owned by the Ho-Chunk Nation and represents our second management agreement. As noted earlier in the Current Plans section of this discussion, in addition to pursuing additional management contracts, we expect to make selected investments in new locations and new screens at existing strategic locations during fiscal 2005 and beyond. We have also sold a four-screen theatre during the first quarter of fiscal 2005 and identified approximately five other theatres with up to 16 screens that we may close over the next three years with minimal impact on operating results.

We believe that our long-term competitive position has been strengthened as a result of our significant capital investments over the past few years. Although it is difficult to predict future box office performance, our performance in the first half of this summer was very strong, with seven of the first nine weeks outperforming the comparative week during fiscal 2004. Film product for the remainder of calendar 2004 appears solid. We believe that it is important for this division to have a strong first quarter of fiscal 2005 due to the fact that we will have difficult year-over-year comparisons to films such as Lord of the Rings and The Passion of the Christ later in the year.

Fiscal 2003 versus Fiscal 2002

The increase in theatre division revenues during fiscal 2003 compared to the prior year occurred despite a slight decrease in overall attendance and a reduction in the number of screens in operation throughout the year. We opened three new screens, including our third UltraScreen™, at a theatre in Appleton, Wisconsin during fiscal 2003, generating $500,000 of additional revenues during the year. We closed one theatre with five screens during fiscal 2003. Closing that theatre and five other theatres during fiscal 2002 negatively impacted comparisons of the theatre division revenues during fiscal 2003 to prior year results by $1.0 million, although our screen closings had a minimal impact on operating income.

-18-

Total theatre attendance decreased 1.3% during fiscal 2003 compared to the prior year and attendance at our comparable locations decreased 0.3%. With no significant change in the number of competitive theatre screens in our markets, the primary factor contributing to the slight decrease in attendance during fiscal 2003 was the quality and quantity of film product released during the fourth quarter compared to the films that generated record performance during the fourth quarter of the prior year. We believe attendance during the fourth quarter was further impacted by the fact that Easter (a time period which historically has higher theatre attendance) was three weeks later than the prior year, effectively shortening the spring film release season. In addition, we believe that television coverage of the war in Iraq also had a negative impact on theatre attendance.

Despite the factors noted above, fiscal 2003 still was a record year at the box office for our theatre division. Contributing to our improved results was a 3.8% increase in our average ticket price during fiscal 2003 compared to the prior year. The entire increase in average ticket price occurred at our first-run theatres. As of May 29, 2003, we operated 467 first-run screens and 21 budget screens. Our average concession sales per person increased 1.9% during fiscal 2003 compared to the prior year.

Our top 15 performing films accounted for 36% of our total box office receipts, compared to 37% during fiscal 2002. Three fiscal 2003 films produced box office receipts in excess of $3 million. The following eight fiscal 2003 films produced box office receipts in excess of $2 million: Lord of the Rings: Two Towers, Harry Potter and the Chamber of Secrets, My Big Fat Greek Wedding, Signs, Austin Powers in Goldmember, Matrix Reloaded, Chicago and Catch Me If You Can. We played 190 films at our theatres during fiscal 2003 compared to 183 during fiscal 2002. Included in the total films played were two new IMAX^®-exclusive films during each fiscal year, respectively.

Our theatre division’s operating margin increased to 24.0% during fiscal 2003, compared to 23.5% in fiscal 2002. Contributing to the improved fiscal 2003 operating margin were reduced concession and advertising costs and reduced fixed occupancy costs as a percentage of revenues, partially offset by slightly higher film rental costs. Increases in other revenues also contributed to our improved operating margin.

During the fourth quarter of fiscal 2002, we entered the theatre management contract business by signing an agreement to manage 34 screens at three Chicago locations for another owner. Due to the timing of this transaction, the management contract had minimal impact on fiscal 2002 operating results but fiscal 2003 results were favorably impacted.

Limited-Service Lodging

Our second largest division is the limited-service lodging division, which contributed 31.2% of our consolidated revenues and 22.4% of our consolidated operating income, excluding corporate items, during fiscal 2004. The division’s business consists of owning and franchising Baymont Inns & Suites and Woodfield Suites, which respectively operate in the segments of the lodging industry designated as “limited-service mid-price without food and beverage” and “limited-service all-suites.” We also own and operate one Budgetel Inn. The following tables set forth revenues, operating income, operating margin, number of units and rooms data for the limited-service lodging division for the last three fiscal years:

							Change F04 v. F03								Change F03 v. F02
	2004			2003			Amt.		Pct.			2002			Amt.			Pct.
	(in millions, except percentages)
Revenues	$	127.8		$	126.6		$	1.2		0.9	%	$	125.7		$	0.9			0.7	%
Operating income		13.8			11.5			2.3		19.9	%		13.5			(2.0	)		-14.7	%
Operating margin		10.8	%		9.1	%							10.7	%

-19-

Number of units at fiscal year-end
Baymont Inns & Suites
Company-owned	84	84	85
Managed for joint ventures/others	10	9	9
Franchised	84	87	92

Total Baymont Inns & Suites	178	180	186

Budgetel Inns	1	1	1

Woodfield Suites	7	7	7

Total number of units	186	188	194

Available rooms at fiscal year-end
Baymont Inns & Suites
Company-owned	8,536	8,544	8,681
Managed for joint ventures/others	1,118	1,016	1,012
Franchised	7,060	7,383	7,988

Total Baymont Inns & Suites	16,714	16,943	17,681

Budgetel Inns	83	83	82

Woodfield Suites	889	889	889

Total available rooms	17,686	17,915	18,652

Fiscal 2004 versus Fiscal 2003

The occupancy percentage (number of occupied rooms as a percentage of available rooms) at comparable Baymont Inns & Suites increased 0.7 percentage points during fiscal 2004 compared to the prior year and the average daily room rate (“ADR”) at comparable Baymont Inns & Suites increased 0.3%. Our ADR for fiscal 2004 for all owned and operated Baymonts was nearly $52, which is approximately 9% lower than our specific set of competitors for the same time period, according to data received from outside industry resources, such as Smith Travel Research. The result of the occupancy and ADR increase was a 1.4% increase in Baymont Inns & Suites revenue per available room, or RevPAR, for comparable Inns for fiscal 2004. RevPAR for comparable Woodfield Suites decreased 2.1% during fiscal 2004 compared to the prior fiscal year, with occupancy percentage equal to last year and ADR down 2.2%.

We continued to operate in a very challenging environment for lodging, with business travel improving but still below historic levels. Companies continued to respond cautiously to the improving economic environment, dampening room demand and creating significant pricing pressure on existing hotels. Our overall improvement in revenues in the division was primarily driven by leisure customers, as evidenced by improvements in our occupancy percentage on weekends and holiday periods. Our overall increase in Baymont Inns & Suites RevPAR during fiscal 2004 continues to track fairly consistently with the majority of the properties in the limited-service, mid-price segment of the lodging industry. Data received from Smith Travel Research indicates that the Baymont Inns & Suites system, including franchised locations, realized gains in market share during fiscal 2004. We believe that our continued sales and marketing efforts to increase brand awareness, including more effectively utilizing all channels of distribution, continued to introduce our brand and facilities to many new customers and differentiated it from our competitors. Woodfield Suites, which operates at a higher price point than Baymont Inns & Suites and whose results are very dependent upon the mid-week business traveler, was impacted more by the current environment, consistent with others in its industry segment.

Our limited-service lodging division’s operating income and operating margin increased during fiscal 2004 compared to the prior year due to several factors. Continued cost controls, particularly in our administrative group, and increased income from our franchising operations contributed to the improved performance. Contributing to the increase in franchising income was improved performance by our franchisees, as well as an overall reduction in administrative costs of our franchising operation. Franchising results in each of the last two years also benefited from the inclusion of a termination fee from a former franchisee.

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Although the near-term outlook for the industry and Baymont in particular is uncertain given the current economic climate, our results in the fourth quarter of fiscal 2004 were encouraging. During this final quarter of the year, RevPAR at our Baymont Inns & Suites increased 4.0% and RevPAR at our Woodfield Suites increased 11.2%, an indication that business travel is improving. The significantly reduced supply growth throughout the industry, while slowing our franchising growth, should also favorably impact the operating results of existing hotels as an economic recovery occurs. Our frequent stay program, Guest Ovations™, now has total membership of over 350,000 and contributed approximately 22% of our revenues during fiscal 2004 and over 24% of our revenues during fiscal 2003. Room nights booked through our Baymont web site during fiscal 2004 were nearly 21% ahead of the prior year.

Three franchised Baymont Inns & Suites were opened during fiscal 2004 and six franchised locations left the system. We opened our first Baymont Inn & Suites in California during fiscal 2004, a joint venture property that has outperformed our expectations during its partial year. Fiscal 2004 revenues were negatively impacted by $360,000 compared to fiscal 2003 as a result of the sale of a Company-owned property midway through fiscal 2003.

Construction continues during fiscal 2005 on a Company-owned location in downtown Chicago, Illinois that is expected to open during the third quarter of fiscal 2005. This location, which was expected to be our first urban Baymont Inn & Suites, is not included as part of the La Quinta transaction. We are currently evaluating our options for this location, which include other brands besides Baymont. Our hotels and resorts division will take over this project and operation of this property.

Fiscal 2003 versus Fiscal 2002

The occupancy percentage at comparable Baymont Inns & Suites increased 4.8 percentage points during fiscal 2003 compared to the prior year and the ADR at comparable Baymont Inns & Suites decreased 5.7%. Our ADR for fiscal 2003 was just over $51. The result of the occupancy increase and ADR decline was a 2.6% increase in Baymont Inns & Suites RevPAR for comparable Inns for fiscal 2003. RevPAR for comparable Woodfield Suites decreased 4.5% during fiscal 2003 compared to the prior fiscal year.

In addition to business travel remaining below historic levels, fiscal 2003 results were further impacted by the uncertainty related to the war with Iraq and the uncertain timing of an economic recovery. These factors further dampened room demand and created significant pricing pressure on existing hotels. Our overall increase in Baymont Inns & Suites RevPAR during fiscal 2003 continued to be better than the results of the majority of the properties in the limited-service, mid-price segment of the lodging industry. Data received from Smith Travel Research indicates that our Company-owned or operated Baymont Inns & Suites realized gains in market share for all four quarters of fiscal 2003.

In general, we believe that limited-service lodging properties performed better during fiscal 2003 compared to their full-service counterparts as a result of travelers “trading down” from higher priced hotels. We also believe that Baymont, in particular, benefited from the fact that it derives a significant portion of its occupancy from the over-the-road traveler and the majority of its Inns are not in urban and destination resort locations, which were most severely impacted by the aftermath of September 11 and the subsequent economic downturn. Woodfield Suites, as noted earlier, operates at a higher price point than Baymont Inns & Suites and was impacted more by the downturn in the economy, consistent with others in its industry segment.

Our limited-service lodging division’s operating income and operating margin decreased during fiscal 2003 compared to the prior year due to several factors. Reduced operating income from our Woodfield Suites and our Baymont franchise operations contributed to the decline. In addition, increases to our advertising, utility and insurance costs continued to put pressure on our operating margin. The fact that our revenue increases were the result of increased occupancy rather than our rates also contributed to our lower operating margin, as payroll costs necessary to service the additional occupancy increased. Comparisons of fiscal 2003 results to fiscal 2002 were also negatively impacted by the fact that during fiscal 2003, our property in Salt Lake City, Utah reported incremental operating profits of approximately $300,000 as a result of the Winter Olympics.

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Our frequent stay program, Guest Ovations™, contributed over 24% of our revenues during fiscal 2003 compared to 20% during fiscal 2002. Room nights booked through our reservation center during fiscal 2003 were nearly 26% higher than the prior year. During fiscal 2003, we further enhanced our reservation technology by introducing full two-way connectivity between the reservation center and the individual properties, increasing our ability to offer all available rooms over every available sales channel, including our rapidly growing internet and travel agent sales. In addition, our new Ovations Rooms continued to be well received by our guests and we continued to update the exterior of many of our Company-owned Baymonts with a fresh, new exterior renovation package that has typically resulted in improved operating performance at our older locations.

Three franchised Baymont Inns & Suites were opened during fiscal 2003. One Company-owned Baymont was sold during fiscal 2003 and eight franchised locations left the system. Fiscal 2003 revenues were negatively impacted by $700,000 compared to fiscal 2002 as a result of the sale of the Company-owned property.

Hotels and Resorts

The hotels and resorts division contributed 30.4% of our consolidated revenues and 14.6% of our consolidated operating income, excluding corporate items, during fiscal 2004. The hotels and resorts division owns and operates two full-service hotels in downtown Milwaukee, Wisconsin, a full-facility destination resort in Lake Geneva, Wisconsin, a boutique luxury resort in Indian Wells, California, and full-service hotels in Madison, Wisconsin, and downtown Kansas City, Missouri. In addition, we managed five hotels during fiscal 2004 and 2003 and four hotels during fiscal 2002 for other owners. We also manage a vacation ownership development in Lake Geneva, Wisconsin. The following table sets forth revenues, operating income, operating margin and rooms data for the hotels and resorts division for the last three fiscal years:

							Change F04 v. F03								Change F03 v. F02
	2004			2003			Amt.		Pct.			2002			Amt.		Pct.
	(in millions, except percentages)
Revenues	$	124.5		$	118.5		$	6.0		5.0	%	$	114.9		$	3.6		3.1	%
Operating income		9.0			8.8			0.2		2.1	%		6.3			2.5		40.8	%
Operating margin		7.2	%		7.4	%							5.5	%

Available rooms at fiscal year-end
Company-owned	2,074	2,074	2,074
Management contracts	1,036	1,036	1,036

Total available rooms	3,110	3,110	3,110

Fiscal 2004 versus Fiscal 2003

Division revenues and operating income increased during fiscal 2004 compared to the prior year due to the continued improvement from our newest hotels (the Hotel Phillips, the Hilton Madison at Monona Terrace and our Timber Ridge Lodge management contract) and improved results from our group-oriented hotels and resorts. In addition, fiscal 2004 revenues benefited from increased food and beverage revenues, which is at least partially attributable to the successful introduction of our “chop house” restaurant concept at our Madison and Kansas City hotels. Conversely, reduced revenues at our Miramonte Resort (negatively impacted by construction delays on our new spa) and at our Marcus Vacation Club timeshare development (negatively impacted by reduced tour flow as a result of the new “no-call” laws) negatively impacted the division’s overall operating results. Excluding timeshare revenues, which decreased from $7.4 million during fiscal 2003 to $5.7 million during the current year, total revenues from this division increased 7.0% during fiscal 2004 compared to the prior year. Fiscal 2004 comparisons to the prior year were also unfavorably impacted by approximately $300,000 of preopening expenses related to the new restaurant concepts and by the fact that the division’s fiscal 2003 operating results included approximately $700,000 of favorable real estate tax adjustments, the result of reductions in our tax assessments in the wake of September 11 and the subsequent impact it had on our industry.

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The division’s total RevPAR for Company-owned properties increased 5.9% during fiscal 2004 compared to the prior year. Excluding the Miramonte Resort, which as noted was impacted by construction delays, the division’s total RevPAR increased 7.6%. According to data received from Smith Travel Research, comparable upper upscale hotels experienced an increase in RevPAR of 4.1% during our fiscal 2004. Our hotels and resorts have generally performed at or better than others in our segment of the industry, likely due at least partially to our property and location mix. Our occupancy percentage increased 3.0 percentage points and our ADR also increased 0.7% during fiscal 2004 compared to fiscal 2003.

As noted in our limited-service lodging discussion, although it continues to be a very challenging environment for hotels, currently the near-term outlook for our properties appears promising. The leisure customer segment has continued to perform well for us and business travel appears to be showing some signs of rebounding. We are encouraged by the fact that our hotels that focus on the individual business traveler, a segment of our customer base that has been lagging the market, showed improvement during fiscal 2004. The group business segment, which is very important to several of our other hotels and resorts, continues to be improved but sporadic. Corporate spending is not yet back to pre-September 11 levels, but it is improving. Our advanced bookings pace at all of our hotels is improved and we are also beginning to note some lengthening of the lead times on advanced bookings for some of the larger conventions and groups. We also anticipate that the performance of our newest hotels will continue to improve. As a result, with cost controls remaining a high priority, subject to economic and industry conditions, we expect our overall operating results and margins to improve in this division during fiscal 2005.

During the fiscal 2004 third quarter, we announced that we had entered into a joint venture with the developer of the Timber Ridge Lodge to develop a luxury condominium hotel just off the Las Vegas Strip. The Platinum Suite Hotel & Spa will feature 255 condo units, a luxury spa, indoor and outdoor swimming pools, 8,440 square feet of meeting space, including a 4,500 square-foot rooftop terrace overlooking the Strip, restaurants, lounge and upscale bar. The hotel will be located just over one block east of the Strip near Bellagio, Bally’s and Caesars Palace. The condo units are priced between $300,000 and $1.0 million and the hotel will manage a unit rental program for owners which will generate income for the owners from their units.

We have contributed an initial $3.5 million to this joint venture, representing our 50% share of the land acquisition costs and estimated initial pre-development costs. The initial sales phase of the project began in February with the opening of a sales center and model unit, along with an aggressive marketing program targeting both U.S. and international markets. Our hotels and resorts division operating income was negatively impacted by approximately $400,000 during fiscal 2004, representing our share of the sales and marketing expenses related to this phase of the project. We currently expect our fiscal 2005 operating results to be negatively impacted by approximately the same amount, although the actual timing of these expenditures is subject to change.

The response to the units has been very positive and, in fact, the project recently sold out. As a result, we believe that project construction should begin this fall, with a targeted opening date of December 2005 or shortly thereafter. We may increase our equity contribution slightly by a yet to be determined amount when construction begins. Upon completion of construction and closing of the condo unit sales, our hotels and resorts division will share in what may be a significant development profit on the project. The division would then manage the hotel for a fee and share in any joint venture earnings on the common areas, such as the restaurants, spa and bars.

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During the fourth quarter of fiscal 2004, the division announced its participation in a joint venture to restore and then manage the Skirvin Hotel in Oklahoma City, the oldest existing hotel in Oklahoma. Renovation of this historic hotel is currently expected to be completed during our fiscal 2006. When completed, this hotel is expected to have 235 rooms and 25,000 square feet of meeting space and is expected to be operated as a Hilton.

Construction was completed in May on a new spa at our Miramonte Resort. The Well™ is a luxury destination spa that was designed to further enhance this property in the competitive desert market. Since its opening, the spa has been very well received by our guests, as evidenced by increased RevPAR of approximately 8% during June, a historically slow time for this property.

We continue to maintain our properties consistent with our traditional high standards, making the investments necessary to improve operating results in the future. In addition to normal maintenance projects at all of our properties, plans are currently underway for several significant improvements to our Grand Geneva Resort & Spa during fiscal 2005, including a renovation of its lobby and restaurants. As noted in the Current Plans section of this discussion, we also continue to pursue several new growth opportunities, with a focus on expanding our hotel management business. The number of projects that we are actively exploring continues to increase, which we find encouraging.

Fiscal 2003 versus Fiscal 2002

Division revenues and operating income increased during fiscal 2003 compared to the prior year due to the added revenues from our newest hotels and improved results from our two Milwaukee hotels. In addition, results from fiscal 2002 included the very difficult weeks and months immediately following September 11, 2001, resulting in favorable comparisons benefiting fiscal 2003. Fiscal 2003 comparisons to the prior year were also favorably impacted by the fact that the division’s fiscal 2002 operating results included approximately $1.1 million of preopening expenses related to the Hotel Phillips and Timber Ridge Lodge.

Fiscal 2003 continued to be a very challenging environment for hotels, particularly those operating in the upscale segments of the industry. Excluding the Hotel Phillips, which opened during the second quarter of fiscal 2002, the division’s total RevPAR for comparable Company-owned properties during fiscal 2003 decreased 0.5% compared to the prior year. The slight decrease in RevPAR compared to the same period last year was the result of the net effect of slightly decreased occupancy and an overall 1.3% increase in ADR for these comparable properties. We attempted to retain the integrity of our rate structure during a period when others in the industry were heavily discounting, believing that this strategy was in our best long-term interest.

Major room renovations were completed at two of our premier properties, the Pfister and Grand Geneva, during fiscal 2003. In addition, a new parking structure at the Hilton Milwaukee City Center was opened during the first quarter of fiscal 2003.

During fiscal 2003, we sold out all available ownership units of our first three buildings at our vacation ownership development at the Grand Geneva Resort & Spa and completed construction on a new building that includes 32 new units, doubling the size of the existing development. Timeshare sales totaled $7.4 million during fiscal 2003 compared to $8.0 million during the prior year and operating income from this business was unchanged.

Discontinued Operations

On May 24, 2001, we sold our 30 KFC and KFC/Taco Bell 2-in-1 restaurants. The asset purchase agreement with the buyer provided for a potential additional future purchase price payment if certain performance conditions were met. During the first quarter of fiscal 2003, the buyer elected to terminate this provision of the agreement by paying us an additional $2.1 million. As a result, an additional gain on sale of discontinued operations, net of tax, of approximately $1.2 million, or $.04 per share, is included in our reported results for fiscal 2003.

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Financial Condition

Liquidity and Capital Resources

Our lodging and movie theatre businesses each generate significant and relatively consistent daily amounts of cash because each segment’s revenue is derived predominantly from consumer cash purchases. We believe that these relatively consistent and predictable cash sources, together with the availability of $101 million of unused credit lines at fiscal 2004 year-end, should be adequate to support the ongoing operational liquidity needs of our businesses.

During the fourth quarter of fiscal 2004, we replaced an expiring five-year, $125 million credit facility with a new five-year, $125 million agreement. The terms of the new credit facility are similar to the expiring facility. Borrowings under the new facility bear interest at LIBOR plus a margin which adjusts based on our borrowing levels. The new agreement matures in April 2009 and requires an annual facility fee of 0.20% on the total commitment.

Net cash provided by operating activities increased by $20.3 million, or 28.4%, to $91.9 million during fiscal 2004, compared to $71.6 million during fiscal 2003. The increase was due primarily to improved operating results and a favorable timing difference in collections of accounts and notes receivable, partially offset by an unfavorable timing difference in the payment of accounts payable.

Net cash used in investing activities during fiscal 2004 increased by $26.6 million, or 134.8%, to $46.3 million. The increase in net cash used in investing activities was primarily the result of increased capital expenditures and purchases of interests in joint ventures, in addition to a small reduction in net proceeds from disposals of property, equipment and other assets. Cash proceeds from the disposals of property, equipment and other assets totaled $8.8 million and $11.8 million during fiscal 2004 and 2003, respectively. The cash proceeds received during fiscal 2004 were primarily the result of the sale of a theatre and six excess parcels of land. The cash proceeds received during fiscal 2003 were primarily the result of the sale of a former theatre location, one Company-owned Baymont Inn, several former restaurant locations, excess parcels of land and the additional payment received on the sale of our KFC restaurants.

Total capital expenditures (including normal continuing capital maintenance projects) of $50.9 million and $26.0 million were incurred in fiscal 2004 and 2003, respectively. Capital expenditures during fiscal 2004 included $32.7 million incurred in the limited-service lodging division, including the construction at the downtown Chicago project and a significant number of regularly scheduled maintenance projects. In addition, capital expenditures of $6.8 million were incurred in the hotels and resorts division, including construction of the new spa at the Miramonte Resort. Also, capital expenditures of $11.0 million were incurred by the theatre division to fund the four-screen addition to the Menomonee Falls, Wisconsin theatre, the Elgin, Illinois UltraScreen™, several interior remodeling projects as well as ongoing maintenance capital projects. In addition to capital expenditures, we also incurred $4.5 million during fiscal 2004 on the purchase of interests in joint ventures, including our interest in the Las Vegas project for our hotels and resorts division and our interest in a theatre advertising company for our theatre division. During fiscal 2003, $12.0 million of capital expenditures was incurred for limited-service lodging division projects, $6.7 million for hotels and resorts division projects and $4.2 million for theatre division projects.

Pending a decision regarding the use of the projected proceeds from the proposed Baymont transaction, total capital expenditures in fiscal 2005 are currently expected to be as high as $65 to $75 million and are expected to be funded by cash generated from operations, net proceeds from the disposal of selected assets and project-related borrowings. Of this amount, approximately $45 million of capital projects are already underway or approved, including a new theatre, multiple screen additions at existing theatres, several hotels and resorts projects including a lobby remodeling at the Grand Geneva Resort & Spa, and completion of the downtown Chicago hotel project. The remaining capital is expected to be divided across our theatre and hotels and resorts divisions and will include selected theatre screen additions and potential new locations, potential strategic equity investments in hotel projects, and maintenance and project capital.

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Principally as a result of our increased cash provided by operating activities during fiscal 2004, our total debt decreased to $237.1 million at the close of fiscal 2004, compared to $276.2 million at the end of fiscal 2003. Net cash used in financing activities in fiscal 2004 totaled $42.0 million, compared to $51.4 million in fiscal 2003. During fiscal 2004, we received $10.8 million of net proceeds from the issuance of notes payable and long-term debt, compared to only $551,000 during fiscal 2003. The fiscal 2004 proceeds were from mortgage debt related to the Chicago development. We made total principal payments on notes payable and long-term debt of $49.3 million and $46.9 million during fiscal 2004 and 2003, respectively, representing the payment of current maturities and payment of borrowings on commercial paper and revolving credit facilities with the excess operating cash flow available. Our debt-capitalization ratio was 0.38 at May 27, 2004, compared to 0.43 at the prior fiscal year end. Based upon our current expectations for fiscal 2005 capital expenditure levels and potential asset sales proceeds, including the estimated net proceeds from the Baymont transaction, we anticipate our long-term debt total and debt-capitalization ratio to decrease further during fiscal 2005. It is our current expectation that we will repay any outstanding short-term debt upon receipt of the proceeds from the Baymont sale. As of May 27, 2004, approximately $23.6 million of short-term debt, in the form of commercial paper borrowings, was outstanding. Our actual long-term debt total and debt-capitalization ratio at the end of fiscal 2005 will be dependent upon our decisions regarding the use of the Baymont sale proceeds.

During fiscal 2004, we repurchased 34,000 shares of our Common Stock for approximately $512,000 in conjunction with the exercise of stock options, compared to 26,000 shares of Common Stock repurchased for approximately $386,000 during fiscal 2003. Through May 27, 2004, our Board of Directors has authorized the repurchase of up to 4.7 million shares of our outstanding Common Stock. As of May 27, 2004, approximately 1.9 million shares remained available under these authorizations for repurchase. Any such repurchases are expected to be executed on the open market or in privately negotiated transactions depending upon a number of factors, including prevailing market conditions.

Contractual Obligations

We have obligations and commitments to make future payments under debt, operating leases and construction commitments. The following schedule details these obligations at May 27, 2004 (in thousands):

	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term debt	$	237,122	$	26,321	$	64,629	$	89,572	$	56,600
Operating lease obligations		50,067		2,744		6,151		5,935		35,237
Construction commitments		11,594		11,594		--		--		--

Total contractual obligations	$	298,783	$	40,659	$	70,780	$	95,507	$	91,837

Included in our long-term debt totals are commercial paper borrowings issued through agreements with two banks. We have included these borrowings with long-term debt because we have the ability and intent to replace the borrowings with long-term borrowings under our credit lines. At the end of fiscal 2003, we classified $38.0 million of outstanding commercial paper borrowings and $16.4 million of term note borrowings as due in less than one year because our then-current revolving credit agreement and related term note were due to expire late in fiscal 2004. The term note was paid off during fiscal 2004 and we executed a new credit agreement during fiscal 2004 that effectively extend the maturity dates of the commercial paper borrowings. Additional detail describing our long-term debt is included in Note 4 to our consolidated financial statements.

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As of May 27, 2004, we had no additional material purchase obligations other than those created in the ordinary course of business related to property and equipment, which generally have terms of less than 90 days. We also have long-term obligations related to our employee benefit plans, which are discussed in detail in Note 6 of our consolidated financial statements.

We guarantee debt of our 50% unconsolidated joint ventures and other entities. Our joint venture partners also guarantee all or a portion of this same debt. During fiscal 2004, we paid $930,000 in connection with our guarantee of debt on a joint venture that was liquidated. The following schedule details our guarantee obligations at May 27, 2004 (in thousands):

	Expirations by Period
	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Guarantee obligations	$	15,067	$	604	$	6,574	$	4,184	$	3,705

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and we manage our exposure to this market risk through the monitoring of available financing alternatives.

Variable interest rate debt outstanding as of May 27, 2004 was $35.1 million, carried an average interest rate of 2.60%, and represented 14.8% of our total debt portfolio. Our earnings are affected by changes in short-term interest rates as a result of our borrowings under our revolving credit agreements, floating-rate mortgages, industrial development revenue bonds and unsecured term notes.

Fixed interest rate debt totaled $202.0 million as of May 27, 2004, carried an average interest rate of 7.38% and represented 85.2% of our total debt portfolio. Fixed interest rate debt included the following: senior notes bearing interest monthly at 10.22%, maturing in 2005; senior notes which bear interest semiannually at fixed rates ranging from 6.66% to 7.93%, maturing in 2008 through 2014; and fixed rate mortgages and other debt instruments bearing interest from 6.15% to 7.68%, maturing in 2006 through 2009. The fair value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of our fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The fair value of our $194.2 million of senior notes is approximately $208.6 million. Based upon the respective rates and prepayment provisions of our remaining fixed interest rate senior notes and mortgages at May 27, 2004, the carrying amounts of such debt approximates fair value.

The variable interest rate debt and fixed interest rate debt outstanding as of May 27, 2004 matures as follows (in thousands):

	2005		2006		2007		2008		2009		Thereafter		Total
Variable interest rate	$	415	$	10,958	$	147	$	--	$	23,618	$	--	$	35,138
Fixed interest rate		25,906		25,128		28,396		34,216		31,738		56,600		201,984

Total debt	$	26,321	$	36,086	$	28,543	$	34,216	$	55,356	$	56,600	$	237,122

On May 3, 2002, we terminated a swap agreement that had effectively converted $25 million of our borrowings under revolving credit agreements from floating-rate debt to a fixed-rate basis. The fair value of the swap on the date of the termination was a liability of $2.8 million. The remaining loss in other comprehensive income at May 27, 2004 of $615,000 ($370,000 net of tax) will be reclassified into earnings as interest expense through November 15, 2005, the remaining life of the original hedge, as interest payments affect earnings. We expect to reclassify approximately $432,000 ($259,000 net of tax) of loss into earnings during fiscal 2005. We had no outstanding interest rate swap agreements at May 27, 2004.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate our estimates, including those related to bad debts, insurance reserves, carrying value of investments in long-lived assets, intangible assets, income taxes, pensions, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

•

We review long-lived assets, including fixed assets, goodwill, investments in joint ventures and receivables from joint ventures, for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. In assessing the recoverability of these assets, we must make assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets. The estimate of cash flow is based upon, among other things, certain assumptions about expected future operating performance. Our estimates of undiscounted cash flow may differ from actual cash flow due to factors such as economic conditions, changes to our business model or changes in our operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset. During fiscal 2003, we recorded a before-tax reserve for bad debts on receivables from joint ventures of $2.0 million and a before-tax impairment charge of $600,000 on investments in joint ventures.

•

We sponsor an unfunded nonqualified defined-benefit pension plan covering certain employees who meet eligibility requirements. Several statistical and other factors which attempt to anticipate future events are used in calculating the expense and liability related to the plans. These factors include assumptions about the discount rate and rate of future compensation increases as determined by us, within certain guidelines. In addition, our actuarial consultants also use subjective factors such as withdrawal and mortality rates to estimate these factors. The actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may impact the amount of pension expense recorded by us.

•

We maintain insurance coverage for workers compensation and general liability claims utilizing a retroactive insurance policy. Under this policy, we are responsible for all claims up to our stop loss limitation of $250,000. It is not uncommon for insurance claims of this type to be filed months or even years after the initial incident may have occurred. It also can take many months or years before some claims are settled. As a result, we must estimate our potential self-insurance liability based upon several factors, including historical trends, our knowledge of the individual claims and likelihood of success, and our insurance carrier’s judgment regarding the reserves necessary for individual claims. Actual claim settlements may differ from our estimates.

•

We offer health insurance coverage to our associates under a variety of different fully-insured HMOs and self-insured fee-for-service plans. Under the fee-for-service plans, we are responsible for all claims up to our stop loss limitation of $100,000. Our health insurance plans are set up on a calendar year basis. As a result, we must estimate our potential health self-insurance liability based upon several factors, including historical trends, our knowledge of the potential impact of changes in plan structure and our judgment regarding the portion of the total cost of claims that will be shared with associates. Actual differences in any of these factors may impact the amount of health insurance expense recorded by us.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk” above.

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Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
of The Marcus Corporation

We have audited the accompanying consolidated balance sheets of The Marcus Corporation (the Company) as of May 27, 2004 and May 29, 2003, and the related consolidated statements of earnings, shareholders’ equity and cash flows for each of the three years in the period ended May 27, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at May 27, 2004 and May 29, 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended May 27, 2004, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin
July 20, 2004

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THE MARCUS CORPORATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

	May 27, 2004			May 29, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	9,629		$	6,039
Accounts and notes receivable, net of reserves (Note 3)		12,818			26,059
Receivables from joint ventures, net of reserves (Note 9)		2,939			3,626
Refundable income taxes		--			4,032
Real estate and development costs		6,438			5,338
Other current assets		6,328			5,771

Total current assets		38,152			50,865
PROPERTY AND EQUIPMENT, NET (Note 3)		654,479			655,803
OTHER ASSETS:
Investments in joint ventures (Note 9)		6,483			1,880
Goodwill		11,773			11,773
Other (Note 3)		33,982			35,136

Total other assets		52,238			48,789

Total assets	$	744,869		$	755,457

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 9)	$	2,066		$	1,465
Accounts payable		17,516			20,723
Income taxes		1,172			--
Taxes other than income taxes		13,717			13,682
Accrued compensation		8,614			7,097
Other accrued liabilities (Note 3)		14,809			11,013
Current maturities of long-term debt (Note 4)		26,321			72,906

Total current liabilities		84,215			126,886
LONG-TERM DEBT (Note 4)		210,801			203,307
DEFERRED INCOME TAXES (Note 7)		40,410			38,768
DEFERRED COMPENSATION AND OTHER (Note 6)		15,720			16,596
COMMITMENTS, LICENSE RIGHTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY (Note 5):
Preferred Stock, $1 par; authorized 1,000,000 shares; none		--			--
issued
Common Stock:
Common Stock, $1 par; authorized 50,000,000 shares; issued
21,865,853 shares in 2004 and 21,684,328 shares in 2003		21,866			21,684
Class B Common Stock, $1 par; authorized 33,000,000
shares; issued and outstanding 9,323,660 shares in
2004 and 9,505,185 shares in 2003		9,324			9,506
Capital in excess of par		42,952			41,751
Retained earnings		333,171			314,903
Accumulated other comprehensive loss		(289	)		(2,181	)

		407,024			385,663
Less unearned compensation on Restricted Stock		(630	)		--
Less cost of Common Stock in treasury (1,356,620 shares in
2004 and 1,687,595 shares in 2003)		(12,671	)		(15,763	)

Total shareholders' equity		393,723			369,900

Total liabilities and shareholders' equity	$	744,869		$	755,457

See accompanying notes.

-30-

THE MARCUS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)

	Year ended
	May 27, 2004			May 29, 2003			May 30, 2002
REVENUES:
Rooms and telephone	$	175,112		$	172,002		$	170,332
Theatre admissions		101,144			98,811			96,502
Theatre concessions		46,696			45,590			45,332
Food and beverage		36,602			33,487			31,812
Other revenues		49,653			47,025			45,855

Total revenues		409,207			396,915			389,833
COSTS AND EXPENSES:
Rooms and telephone		81,837			79,816			79,359
Theatre operations		77,944			76,371			73,401
Theatre concessions		10,209			10,198			10,370
Food and beverage		29,058			26,465			25,995
Advertising and marketing		28,484			29,517			27,220
Administrative		41,900			40,781			39,963
Depreciation and amortization		46,036			45,365			44,887
Rent (Note 8)		2,443			2,407			2,958
Property taxes		15,338			15,204			16,339
Preopening expenses		423			60			1,143
Other operating expenses		22,111			21,346			20,740

Total costs and expenses		355,783			347,530			342,375

OPERATING INCOME		53,424			49,385			47,458
OTHER INCOME (EXPENSE):
Investment income (loss)		1,738			(158	)		2,353
Interest expense		(16,874	)		(19,642	)		(18,807	)
Gain on disposition of property and equipment and
investments in joint ventures		2,174			2,111			2,496

		(12,962	)		(17,689	)		(13,958	)

EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		40,462			31,696			33,500
INCOME TAXES (Note 7)		15,851			12,389			11,040

EARNINGS FROM CONTINUING OPERATIONS		24,611			19,307			22,460

See accompanying notes.

-31-

THE MARCUS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS (continued)
(in thousands, except per share data)

	Year ended
	May 27, 2004		May 29, 2003		May 30, 2002
DISCONTINUED OPERATIONS (Note 2):
Gain on sale of discontinued operations, net of
income taxes of $801	$	--	$	1,249	$	--

EARNINGS FROM DISCONTINUED OPERATIONS		--		1,249		--

NET EARNINGS	$	24,611	$	20,556	$	22,460

EARNINGS PER COMMON SHARE - BASIC:
Continuing operations	$	0.83	$	0.66	$	0.77
Discontinued operations		--		0.04		--

Net earnings per share	$	0.83	$	0.70	$	0.77

EARNINGS PER COMMON SHARE - DILUTED:
Continuing operations	$	0.82	$	0.66	$	0.76
Discontinued operations		--		0.04		--

Net earnings per share	$	0.82	$	0.70	$	0.76

See accompanying notes.

-32-

THE MARCUS CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per share data)

	Common Stock		Class B Common Stock			Capital in Excess of Par			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Unearned Compensation on Restricted Stock			Treasury Stock			Total
BALANCES AT MAY 31, 2001	$	19,618	$	11,572		$	41,062		$	284,402		$	(201	)	$	--		$	(18,752	)	$	337,701
Cash dividends:
$.20 per share Class B Common Stock		--		--			--			(1,962	)		--			--			--			(1,962	)
$.22 per share Common Stock		--		--			--			(4,277	)		--			--			--			(4,277	)
Exercise of stock options		--		--			182			--			--			--			1,085			1,267
Purchase of treasury stock		--		--			--			--			--			--			(225	)		(225	)
Savings and profit-sharing contribution		--		--			189			--			--			--			320			509
Reissuance of treasury stock		--		--			90			--			--			--			170			260
Conversions of Class B Common Stock		1,966		(1,966	)		--			--			--			--			--			--
Components of comprehensive income:
Net earnings		--		--			--			22,460			--			--			--			22,460
Change in unrealized loss on available
for sale investments, net of tax		--		--			--			--			22			--			--			22
effect of $15
Cumulative effect of change in
accounting for interest rate swap,
net of tax benefit of $732 (Note 4)		--		--			--			--			(1,098	)		--			--			(1,098	)
Change in fair value of interest rate
swap, net of tax benefit of $384		--		--			--			--			(577	)		--			--			(577	)
(Note 4)
Amortization of loss on swap
agreement, net of tax effect of $131		--		--			--			--			197			--			--			197
(Note 4)
Minimum pension liability, net of tax
benefit of $139		--		--			--			--			(209	)		--			--			(209	)

Total comprehensive income		20,795

BALANCES AT MAY 30, 2002		21,584		9,606			41,523			300,623			(1,866	)		--			(17,402	)		354,068
Cash dividends:
$.20 per share Class B Common Stock		--		--			--			(1,905	)		--			--			--			(1,905	)
$.22 per share Common Stock		--		--			--			(4,371	)		--			--			--			(4,371	)
Exercise of stock options		--		--			(59	)		--			--			--			1,408			1,349
Purchase of treasury stock		--		--			--			--			--			--			(386	)		(386	)
Savings and profit-sharing contribution		--		--			208			--			--			--			446			654
Reissuance of treasury stock		--		--			79			--			--			--			171			250
Conversions of Class B Common Stock		100		(100	)		--			--			--			--			--			--
Components of comprehensive income:
Net earnings		--		--			--			20,556			--			--			--			20,556
Change in unrealized loss on available
for sale investments, net of tax		--		--			--			--			179			--			--			179
effect of $118
Amortization of loss on swap
agreement, net of tax effect of $471		--		--			--			--			706			--			--			706
(Note 4)
Minimum pension liability, net of tax
benefit of $787		--		--			--			--			(1,200	)		--			--			(1,200	)

Total comprehensive income		20,241

BALANCES AT MAY 29, 2003		21,684		9,506			41,751			314,903			(2,181	)		--			(15,763	)		369,900
Cash dividends:
$.20 per share Class B Common Stock		--		--			--			(1,875	)		--			--			--			(1,875	)
$.22 per share Common Stock		--		--			--			(4,468	)		--			--			--			(4,468	)
Exercise of stock options		--		--			537			--			--			--			2,597			3,134
Purchase of treasury stock		--		--			--			--			--			--			(512	)		(512	)
Savings and profit-sharing contribution		--		--			302			--			--			--			390			692
Reissuance of treasury stock		--		--			99			--			--			--			149			248
Issuance of Restricted Stock		--		--			263			--			--			(731	)		468			--
Amortization of unearned compensation on
Restricted Stock		--		--			--			--			--			101			--			101
Conversions of Class B Common Stock		182		(182	)		--			--			--			--			--			--
Components of comprehensive income:
Net earnings		--		--			--			24,611			--			--			--			24,611
Change in unrealized gain on available
for sale investments, net of tax effect		--		--			--			--			151			--			--			151
of $101
Amortization of loss on swap
agreement, net of tax effect of $269		--		--			--			--			402			--			--			402
(Note 4)
Minimum pension liability, net of tax
effect of $880		--		--			--			--			1,339			--			--			1,339

Total comprehensive income		26,503

BALANCES AT MAY 27, 2004	$	21,866	$	9,324		$	42,952		$	333,171		$	(289	)	$	(630	)	$	(12,671	)	$	393,723

See accompanying notes.

-33-

THE MARCUS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Year ended
	May 27, 2004			May 29, 2003			May 30, 2002
OPERATING ACTIVITIES
Net earnings	$	24,611		$	20,556		$	22,460
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Losses on loans to and investments in joint
ventures, net of distributions		1,051			3,229			2,551
Gain on disposition of property, equipment
and investments in joint ventures		(2,174	)		(4,161	)		(2,496	)
Amortization of loss on swap agreement		671			1,177			328
Amortization of unearned compensation on
Restricted Stock		101			--			--
Depreciation and amortization		46,036			45,365			44,887
Deferred income taxes		1,252			460			5,984
Deferred compensation and other		1,423			3,513			1,170
Contribution of the Company's stock to
savings and profit-sharing plan		692			654			509
Loss on available for sale securities		--			494			--
Changes in operating assets and liabilities:
Accounts and notes receivable		13,367			(2,083	)		(1,837	)
Real estate and development costs		(1,100	)		(2,806	)		2,467
Other current assets		(557	)		(1,259	)		180
Accounts payable		(3,207	)		3,512			88
Income taxes		4,344			2,892			(3,916	)
Taxes other than income taxes		35			(265	)		717
Accrued compensation		1,517			542			986
Other accrued liabilities		3,796			(252	)		(1,008	)

Total adjustments		67,247			51,012			50,610

Net cash provided by operating activities		91,858			71,568			73,070
INVESTING ACTIVITIES
Capital expenditures		(50,915	)		(26,004	)		(48,899	)
Net proceeds from disposals of property, equipment
and other assets		8,751			11,752			1,666
Decrease (increase) in other assets		1,187			(3,003	)		(4,422	)
Purchase of interest in joint ventures		(4,500	)		(649	)		--
Payment on joint venture debt guarantee		(930	)		--			--
Cash received from (advanced to) joint ventures		102			(1,819	)		(1,013	)

Net cash used in investing activities		(46,305	)		(19,723	)		(52,668	)
FINANCING ACTIVITIES
Debt transactions:
Net proceeds from issuance of notes payable and
long-term debt		10,840			551			75,000
Principal payments on notes payable and long-term debt		(49,330	)		(46,908	)		(83,559	)
Payment on swap agreement termination		--			--			(2,791	)
Equity transactions:
Treasury stock transactions, except for stock options		(264	)		(136	)		35
Exercise of stock options		3,134			1,349			1,267
Dividends paid		(6,343	)		(6,276	)		(6,239	)

Net cash used in financing activities		(41,963	)		(51,420	)		(16,287	)

Net increase in cash and cash equivalents		3,590			425			4,115
Cash and cash equivalents at beginning of year		6,039			5,614			1,499

Cash and cash equivalents at end of year	$	9,629		$	6,039		$	5,614

See accompanying notes.

-34-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 27, 2004

1. Description of Business and Summary of Significant Accounting Policies

Description of Business – The Marcus Corporation and its subsidiaries (the Company) operate principally in three business segments:

Limited-Service Lodging: Operates and franchises lodging facilities, under the names Baymont Inns, Baymont Inns & Suites, Budgetel Inn and Woodfield Suites, located in 32 states.

Theatres: Operates multiscreen motion picture theatres in Wisconsin, Illinois, Ohio and Minnesota and a family entertainment center in Wisconsin.

Hotels and Resorts: Owns and operates full service hotels and resorts in Wisconsin, Missouri and California, manages full service hotels in Wisconsin, Minnesota, Texas and California and operates a vacation ownership development in Wisconsin.

Principles of Consolidation – The consolidated financial statements include the accounts of The Marcus Corporation and all of its subsidiaries. Investments in affiliates which are 50% or less owned by the Company for which the Company exercises significant influence or for which the affiliate maintains separate equity accounts, are accounted for on the equity method. All intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Year – The Company reports on a 52/53-week year ending the last Thursday of May. All segments had a 52-week year in fiscal 2004, 2003 and 2002.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash Equivalents – The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Financial Instruments – The carrying value of the Company’s financial instruments (including cash and cash equivalents, accounts receivable, notes receivable and investments) and accounts payable approximates fair value. The fair value of the Company’s $194,243,000 of senior notes is approximately $208,627,000 at May 27, 2004. The carrying amounts of the Company’s remaining long-term debt based on the respective rates and prepayment provisions of the senior notes due May 31, 2005, approximate their fair value.

Accounts and Notes Receivable – The Company evaluates the collectibility of its accounts and notes receivable based on a number of factors. For larger accounts, an allowance for doubtful accounts is recorded based on the applicable parties’ ability and likelihood to pay based on management’s review of the facts. For all other accounts, the Company recognizes an allowance based on length of time the receivable is past due based on historical experience and industry practice.

-35-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

Long-Lived Assets – The Company periodically considers whether indicators of impairment of long-lived assets held for use are present. If such indicators are present, the Company determines whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than their carrying amounts. The Company recognizes any impairment losses based on the excess of the carrying amount of the assets over their fair value. For the purpose of determining fair value, defined as the amount at which an asset or group of assets could be bought or sold in a current transaction between willing parties, the Company utilizes currently available market valuations of similar assets in its respective industries, often expressed as a given multiple of operating cash flow. The Company evaluated the ongoing value of its property and equipment and other long-lived assets as of May 27, 2004, May 29, 2003, and May 30, 2002, and determined that there was no significant impact on the Company’s results of operations, other than the joint venture investment charge during fiscal 2003 described in Note 9.

Intangible Assets – The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” effective June 1, 2001. Under SFAS No. 142, goodwill is no longer amortized but reviewed for impairment annually, or more frequently if certain indicators arise. The Company completed the transitional impairment test in fiscal 2002 and performed an annual impairment test as of the Company’s year-end date in fiscal 2004, 2003 and 2002 and deemed that no impairment loss was necessary. With the adoption of SFAS No. 142, the Company ceased amortization of goodwill with a net book value of $11,806,000 as of June 1, 2001. The majority of the Company’s goodwill relates to its Theatres segment.

Capitalization of Interest – The Company capitalizes interest during construction periods by adding such interest to the cost of property and equipment. Interest of approximately $296,000, $91,000 and $715,000 was capitalized in fiscal 2004, 2003 and 2002, respectively.

Investments – Available for sale securities are stated at fair market value, with unrealized gains and losses reported as a component of shareholders’ equity. The cost of securities sold is based upon the specific identification method. Realized gains and losses and declines in value judged to be other-than-temporary are included in investment income (loss). The Company evaluates securities for other-than-temporary impairment on a periodic basis and principally considers the type of security, the severity of the decline in fair value and the duration of the decline in fair value in determining whether a security’s decline in fair value is other-than-temporary. In fiscal 2003, the Company recognized a $494,000 other-than-temporary investment loss on a security whose market value was substantially below cost.

Revenue Recognition – The Company recognizes revenue from its rooms as earned on the close of business each day. Revenues from theatre admissions, concessions and food and beverage sales are recognized at the time of sale. Revenues from advanced ticket and gift certificate sales are recorded as deferred revenue and are recognized when tickets or gift certificates are used or expire.

The following are included in other revenues:

The Company has entered into franchise agreements that grant to franchisees the right to own and operate a Baymont Inn or Baymont Inn & Suites at a particular location for a specified term, as defined in the license agreement. An initial franchise fee, as defined in the license agreement, is also collected upon receipt of a prospective licensee’s application and is recognized as income when operations commence. Royalty and marketing fee assessments are recognized when actually earned and are receivable from the franchisee.

-36-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

Management fees for theatres and hotels under management agreements are recognized as earned based on the terms of the agreements and include both base fees and incentive fees.

Sale of vacation intervals are recognized on an accrual basis after a binding sales contract has been executed, a 10% minimum down payment is received, the recission period has expired, construction is substantially complete and certain minimum sales levels have been reached. If all the criteria are met except that construction is not substantially complete, revenues are recognized on the percentage-of-completion basis. For sales that do not qualify for either accrual or percentage-of-completion accounting, all revenue is deferred using the deposit method. Deferred revenue is included in other accrued liabilities.

When minimum sales levels are met, revenues are recognized on the percentage-of-completion or accrual methods. Development costs, including construction costs, interest and other carrying costs, which are allocated based on relative sales values, are included as real estate and development costs in the accompanying consolidated balance sheets.

Advertising and Marketing Costs – The Company generally expenses all advertising and marketing costs as incurred.

Depreciation and Amortization – Depreciation and amortization of property and equipment are provided using the straight-line method over the following estimated useful lives:

	Years
Land improvements	15 - 39
Buildings and improvements	25 - 39
Leasehold improvements	3 - 39
Furniture, fixtures and equipment	3 - 20

Preopening Expenses – Costs incurred prior to opening new or remodeled facilities are expensed as incurred.

Earnings Per Share (EPS) – Basic EPS is computed by dividing net earnings by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options and non-vested restricted stock.

-37-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

The following table illustrates the computation of basic and dilutive earnings per share for earnings from continuing operations and provides a reconciliation of the number of weighted-average basic and diluted shares outstanding:

	May 27, 2004		May 29, 2003		May 30, 2002
	(in thousands, except per share data)
Numerator:
Earnings from continuing operations	$	24,611	$	19,307	$	22,460

Denominator:
Denominator for basic EPS		29,630		29,388		29,245
Effect of dilutive employee stock options and
non-vested restricted stock		220		161		225

Denominator for diluted EPS		29,850		29,549		29,470

Earnings per share from continuing operations:
Basic	$	0.83	$	0.66	$	0.77
Diluted	$	0.82	$	0.66	$	0.76

Options to purchase 280,701 shares, 627,926 shares and 396,002 shares of common stock at prices ranging from $16.07 to $18.13 per share, $14.25 to $18.13 per share and $14.38 to $18.13 per share were outstanding at May 27, 2004, May 29, 2003, and May 30, 2002, respectively, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares, and, therefore, the effect would be antidilutive.

Comprehensive Income – Accumulated other comprehensive loss presented in the accompanying consolidated balance sheets consists of the following, all presented net of tax:

	May 27, 2004			May 29, 2003
	(in thousands)
Unrealized gain on available for sale investments	$	151		$	--
Unrecognized loss on interest rate swap agreement		(370	)		(772	)
Minimum pension liability		(70	)		(1,409	)

	$	(289	)	$	(2,181	)

Stock-Based Compensation – The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), in accounting for its employee stock options. Under APB No. 25, because the number of shares is fixed and the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

Pro forma information regarding net earnings and earnings per share required by SFAS No. 123, “Accounting for Stock-Based Compensation,” has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: risk-free interest rates of 3.3%, 2.5% and 4.5% for fiscal 2004, 2003 and 2002, respectively; a dividend yield of 1.5%, 1.6% and 1.5% for fiscal 2004, 2003 and 2002, respectively; volatility factors of the expected market price of the Company’s Common Stock of 45%, 45% and 42% for fiscal 2004, 2003 and 2002, respectively; and an expected life of the option of approximately five years in fiscal 2004 and six years in fiscal 2003 and 2002.

-38-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. Had compensation cost been determined based upon the fair value at the grant date for awards under the plans based on the provisions of SFAS No. 123, the Company’s pro forma earnings and earnings per share would have been as follows:

	Year ended
	May 27, 2004			May 29, 2003			May 30, 2002
	(in thousands, except per share data)
Net earnings, as reported	$	24,611		$	20,556		$	22,460
Deduct: stock-based employee compensation expense
determined under the fair value method for all
option awards, net of related tax effects		(1,071	)		(1,189	)		(1,145	)

Pro forma net earnings	$	23,540		$	19,367		$	21,315

Earnings per share:
Basic - as reported	$	0.83		$	0.70		$	0.77
Basic - pro forma	$	0.79		$	0.66		$	0.73
Diluted - as reported	$	0.82		$	0.70		$	0.76
Diluted - pro forma	$	0.79		$	0.66		$	0.72

New Accounting Pronouncements – In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). FIN 46 requires variable interest entities to be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entity’s expected losses or residual benefits. The adoption of the provisions of FIN 46 in fiscal 2004 did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

2. Discontinued Operations

On May 24, 2001, the Company sold its 30 KFC and KFC/Taco Bell 2-in-1 restaurants. The asset purchase agreement provided for a potential additional future purchase price payment to the Company if certain performance conditions were met. The Company received additional proceeds of $2,050,000 on July 9, 2002, pursuant to this agreement and recognized an additional gain on the sale of the restaurant segment of $1,249,000, net of income taxes of $801,000. The gain is presented as discontinued operations in the accompanying consolidated financial statements.

3. Additional Balance Sheet Information

The composition of accounts and notes receivable is as follows:

	May 27, 2004		May 29, 2003
	(in thousands)
Trade receivables, net of allowance of $650 and $610, respectively	$	6,533	$	5,299
Current notes receivable for interval ownership		1,146		1,112
Other notes receivables		685		9,915
Other receivables		4,454		9,733

	$	12,818	$	26,059

-39-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Additional Balance Sheet Information (continued)

The composition of property and equipment, which is stated at cost, is as follows:

	May 27, 2004		May 29, 2003
	(in thousands)
Land and improvements	$	86,321	$	88,997
Buildings and improvements		630,683		623,156
Leasehold improvements		9,294		9,010
Furniture, fixtures and equipment		297,201		272,961
Construction in progress		19,689		6,850

		1,043,188		1,000,974
Less accumulated depreciation and amortization		388,709		345,171

	$	654,479	$	655,803

The composition of other assets is as follows:

	May 27, 2004		May 29, 2003
	(in thousands)
Favorable lease rights	$	13,353	$	13,353
Long-term notes receivable for interval ownership, net		6,275		6,664
Split dollar life insurance policies		4,870		4,931
Other assets		9,484		10,188

	$	33,982	$	35,136

The Company’s long-term notes receivable for interval ownership are net of a reserve for uncollectible amounts of $760,000 and $718,000 as of May 27, 2004 and May 29, 2003, respectively. The notes bear fixed-rate interest between 11.79% and 16.90% over the seven-year or ten-year terms of the loans. The weighted-average rate of interest on outstanding notes receivable for interval ownership is 15.21%. The notes are collateralized by the underlying vacation intervals.

The Company also has deferred revenue of $4,755,000 and $3,305,000, which is included in other accrued liabilities, as of May 27, 2004 and May 29, 2003, respectively.

-40-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Long-Term Debt

Long-term debt is summarized as follows:

	May 27, 2004		May 29, 2003
	(in thousands, except payment data)
Mortgage notes due 2009	$	13,464	$	3,602
Industrial Development Revenue Bonds due 2006		1,110		1,554
Senior notes due May 31, 2005, with monthly principal and
interest payments of $362,000, bearing interest at 10.22%		4,441		8,128
Senior notes		194,243		205,000
Unsecured term notes		--		19,629
Commercial paper		23,618		37,984
Other		246		316

		237,122		276,213
Less current maturities		26,321		72,906

	$	210,801	$	203,307

The mortgage notes, both fixed rate and adjustable, bear interest from 4.75% to 7.68% at May 27, 2004. The Industrial Development Revenue Bonds bear interest at adjustable rates from 3.68% to 3.92%. The mortgage notes and the Industrial Development Revenue Bonds are secured by the related land, buildings and equipment.

The $194,243,000 of senior notes maturing in 2008 through 2014 require annual principal payments in varying installments and bear interest payable semiannually at fixed rates ranging from 6.66% to 7.93%, with a weighted-average fixed rate of 7.32% at May 27, 2004.

The Company issues commercial paper through an agreement with two banks, up to a maximum of $65,000,000, which bears interest at rates ranging from 1.35% to 1.40% at May 27, 2004. The agreements require the Company to maintain unused bank lines of credit at least equal to the principal amount of outstanding commercial paper.

At May 27, 2004, the Company had a credit line totaling $125,000,000 in place. No borrowings are outstanding on the $125,000,000 line, which bears interest at LIBOR plus a margin which adjusts based on the Company’s borrowing levels. This agreement matures in April 2009 and requires an annual facility fee of 0.20% on the total commitment. Based on commercial paper outstanding, availability under the line at May 27, 2004, totaled $101,382,000.

The Company has the ability and intent to replace commercial paper borrowings with long-term borrowings under its credit line. Accordingly, the Company has classified these borrowings at May 27, 2004 as long-term. As of May 29, 2003, the Company classified outstanding borrowings under commercial paper agreements, backed by unused lines of credit, as current, pending the new revolving credit agreement entered into during fiscal 2004.

-41-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Long-Term Debt (continued)

Scheduled annual principal payments on long-term debt for the years subsequent to May 27, 2004, are:

Fiscal Year	(in thousands)
2005		$	26,321
2006			36,086
2007			28,543
2008			34,216
2009			55,356
Thereafter			56,600

		$	237,122

Interest paid, net of amounts capitalized, in fiscal 2004, 2003 and 2002 totaled $16,422,000, $18,450,000 and $17,581,000, respectively.

On June 1, 2001, the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which requires the Company to recognize its derivatives as either assets or liabilities on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. Derivatives that are not hedges must be adjusted to fair value through earnings.

The Company utilizes derivatives principally to manage market risks and reduce its exposure resulting from fluctuations in interest rates. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions. From June 1, 2001 to May 3, 2002, the Company had an interest rate swap agreement that was considered effective and qualified as a cash flow hedge. For derivatives that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive loss and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The Company’s swap agreement effectively converted $25 million of the Company’s borrowings under revolving credit agreements from floating-rate debt to a fixed-rate basis. The adoption of SFAS No. 133 on June 1, 2001, resulted in a charge for the cumulative effect of an accounting change of $1,830,000 ($1,098,000 net of tax) in other comprehensive loss. Through May 3, 2002, the Company recorded the $961,000 ($577,000 net of tax) decrease in fair value related to the cash flow hedge to other comprehensive loss. On May 3, 2002, the Company terminated the swap, at which time cash flow hedge accounting ceased. The fair value of the swap on the date of termination was a liability of $2,791,000. The Company repaid borrowings under the revolving credit facility previously hedged out of proceeds from its April 2002 issuance of additional senior notes. In fiscal 2004 and 2003, and from May 3, 2002 through May 30, 2002, the Company reclassified $671,000 ($402,000 net of tax), $1,177,000 ($706,000 net of tax) and $328,000 ($197,000 net of tax) from other comprehensive loss to interest expense. The remaining loss at May 27, 2004, in accumulated other comprehensive loss will be reclassified into earnings as interest expense through November 15, 2005, the remaining life of the original hedge. The Company expects to reclassify approximately $432,000 ($259,000 net of tax) of loss into earnings during fiscal 2005.

-42-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Shareholders’ Equity

Shareholders may convert their shares of Class B Common Stock into shares of Common Stock at any time. Class B Common Stock shareholders are substantially restricted in their ability to transfer their Class B Common Stock. Holders of Common Stock are entitled to cash dividends per share equal to 110% of all dividends declared and paid on each share of the Class B Common Stock. Holders of Class B Common Stock are entitled to ten votes per share while holders of Common Stock are entitled to one vote per share on any matters brought before the shareholders of the Company. Liquidation rights are the same for both classes of stock.

During fiscal 2004, the Company granted 50,000 shares of Restricted Stock. The Restricted Stock may not be sold, transferred, pledged or assigned, except as provided by the vesting schedule, included in the Company’s equity incentive plan. The Restricted Stock cumulatively vests 25% after three years of the grant date, 50% after five years of the grant date, 75% after ten years of the grant date and 100% upon retirement. The fair value of the Restricted Stock on the grant date was $731,000 and is being amortized to compensation expense.

Shareholders have approved the issuance of up to 3,237,500 shares of Common Stock under various stock option plans. The options generally become exercisable 40% after two years, 60% after three years and 80% after four years. The remaining options are exercisable five years after the date of the grant. At May 27, 2004, there were 1,408,104 shares available for grants under the plans.

A summary of the Company’s stock option activity and related information follows:

	May 27, 2004					May 29, 2003					May 30, 2002
	Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price
	(options in thousands)
Outstanding at beginning of
year		1,898		$	13.72		1,872		$	13.18		1,608		$	12.79
Granted		186			14.64		330			15.52		517			14.05
Exercised		(257	)		12.20		(135	)		9.98		(107	)		11.78
Forfeited		(81	)		13.89		(169	)		14.05		(146	)		12.96

Outstanding at end of year		1,746		$	14.04		1,898		$	13.72		1,872		$	13.18

Exercisable at end of year		830		$	13.97		788		$	13.66		729		$	13.55

Weighted-average fair value of
options granted during year				$	5.61				$	5.78				$	5.14

-43-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Shareholders’ Equity (continued)

Exercise prices for options outstanding as of May 27, 2004, ranged from $10.31 to $18.13. The weighted-average remaining contractual life of those options is 6.1 years. Additional information related to these options segregated by exercise price range is as follows:

	Exercise Price Range
	$9.22 to $10.875		$10.8751 to $14.50		$14.51 to $18.125
	(options in thousands)
Options outstanding		20		973		753
Weighted-average exercise price of options outstanding	$	10.31	$	12.78	$	15.77
Weighted-average remaining contractual life of options outstanding
		5.9		5.7		6.6
Options exercisable		10		534		285
Weighted-average exercise price of options exercisable	$	10.31	$	12.58	$	16.72

Through May 27, 2004, the Company’s Board of Directors has approved the repurchase of up to 4,687,500 shares of Common Stock to be held in treasury. The Company intends to reissue these shares upon the exercise of stock options and for savings and profit-sharing plan contributions. The Company purchased 33,676, 25,758 and 15,516 shares pursuant to these authorizations during fiscal 2004, 2003 and 2002, respectively. At May 27, 2004, there were 1,899,833 shares available for repurchase under these authorizations.

The Company’s Board of Directors has authorized the issuance of up to 750,000 shares of Common Stock for The Marcus Corporation Dividend Reinvestment and Associate Stock Purchase Plan. At May 27, 2004, there were 610,121 shares available under this authorization.

The Company’s loan agreements include, among other covenants, restrictions on retained earnings and maintenance of certain financial ratios. At May 27, 2004, retained earnings of approximately $81,952,000 were unrestricted.

6. Employee Benefit Plans

The Company has a qualified profit-sharing savings plan (401(k) plan) covering eligible employees. The 401(k) plan provides for a contribution of a minimum of 1% of defined compensation for all plan participants and matching of 25% of employee contributions up to 6% of defined compensation. In addition, the Company may make additional discretionary contributions. The Company also sponsors unfunded nonqualified, defined-benefit and deferred compensation plans. Pension and profit-sharing expense for all plans was $2,575,000, $2,186,000 and $1,907,000 for fiscal 2004, 2003 and 2002, respectively.

-44-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. Employee Benefit Plans (continued)

The status of the Company’s unfunded nonqualified, defined-benefit plan based on the respective May 27, 2004 and May 29, 2003, measurement dates is as follows:

	May 27, 2004			May 29, 2003
	(in thousands)
Change in benefit obligation:
Net benefit obligation at beginning of year	$	13,191		$	9,942
Service cost		463			306
Interest cost		767			746
Actuarial (gain) loss		(1,524	)		2,358
Benefits paid		(221	)		(161	)

Net benefit obligation at end of year	$	12,676		$	13,191

Funded status at end of year	$	(12,676	)	$	(13,191	)
Unrecognized net actuarial loss		2,749			4,435
Unrecognized prior service cost		13			18
Unrecognized transition obligation		75			150

Net amount recognized at end of year	$	(9,839	)	$	(8,588	)

Amounts recognized in the statement of financial position consist of:
Accrued benefit liability	$	(9,839	)	$	(8,588	)
Additional minimum liability		(204	)		(2,503	)
Intangible asset		89			168
Accumulated other comprehensive income		70			1,409
Deferred tax asset		45			926

Net amount recognized at end of year	$	(9,839	)	$	(8,588	)

Net periodic pension cost:
Service cost	$	463		$	306
Interest cost		767			746
Net amortization of prior service cost and transition obligation		242			151

	$	1,472		$	1,203

The accumulated benefit obligation was $10,043,000 and $11,090,000 as of May 27, 2004 and May 29, 2003, respectively.

The benefit obligations were determined using an assumed weighted-average discount rate of 6.50% and 5.75% in 2004 and 2003, respectively, and an annual salary rate increase of 5.0% for both years.

The net periodic benefit cost was determined using an assumed discount rate of 5.75% and 7.25% in 2004 and 2003, respectively, and an annual salary rate increase of 5.0% for both years.

-45-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. Employee Benefit Plans (continued)

Benefit payments expected to be paid subsequent to May 27, 2004, are:

Fiscal Year	(in thousands)
2005		$	598
2006			584
2007			664
2008			665
2009			797
Years 2010 - 2014			4,236

7. Income Taxes

The Company recognizes deferred tax assets and liabilities based upon the expected future tax consequences of events that have been included in the financial statements or tax returns. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates for the year in which the differences are expected to reverse.

The components of the net deferred tax liability were as follows:

	May 27, 2004		May 29, 2003
	(in thousands)
Deferred tax assets:
Accrued employee benefits	$	5,397	$	5,917
Other		1,295		2,451

Total deferred tax assets		6,692		8,368
Deferred tax liability:
Depreciation and amortization		47,102		47,136

Net deferred tax liability included in balance sheet	$	40,410	$	38,768

Income tax expense consists of the following:

	Year ended
	May 27, 2004		May 29, 2003		May 30, 2002
	(in thousands)
Currently payable:
Federal	$	11,671	$	9,737	$	4,517
State		2,928		2,993		539
Deferred		1,252		460		5,984

	$	15,851	$	13,190	$	11,040

-46-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Income Taxes (continued)

Income tax expense is included in the accompanying consolidated statements of earnings as follows:

	Year ended
	May 27, 2004		May 29, 2003		May 30, 2002
	(in thousands)
Continuing operations	$	15,851	$	12,389	$	11,040
Discontinued operations		--		801		--

	$	15,851	$	13,190	$	11,040

A reconciliation of the statutory federal tax rate to the effective tax rate for continuing operations follows:

	Year ended
	May 27, 2004			May 29, 2003			May 30, 2002
Statutory federal tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal
income tax benefit		4.7			4.7			5.9
Other		(0.5	)		(0.6	)		(7.9	)

		39.2	%		39.1	%		33.0	%

Included in other are historic federal and state tax credits for the year ended May 30, 2002.

Income taxes paid, net of refunds received, in fiscal 2004, 2003 and 2002 totaled $12,907,000, $13,456,000 and $12,552,000, respectively.

8. Commitments, License Rights and Contingencies

Lease Commitments – The Company leases real estate under various noncancellable operating leases with an initial term greater than one year. Percentage rentals are based on the revenues at the specific rented property. Certain sublease agreements include buyout incentives. Rent expense charged to operations under these leases was as follows:

	Year ended
	May 27, 2004			May 29, 2003			May 30, 2002
	(in thousands)
Fixed minimum rentals	$	2,308		$	2,279		$	2,839
Percentage rentals		177			170			162
Sublease rental income		(42	)		(42	)		(43	)

	$	2,443		$	2,407		$	2,958

Payments to affiliated parties for lease obligations were $179,000 in fiscal 2004, 2003 and 2002.

-47-

THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. Commitments, License Rights and Contingencies (continued)

Aggregate minimum rental commitments at May 27, 2004, are as follows:

Fiscal Year	(in thousands)
2005		$	2,744
2006			3,107
2007			3,044
2008			2,967
2009			2,968
Thereafter			35,237

		$	50,067

Included in the above commitments is $2,024,000 in minimum rental commitments to affiliated parties.

Commitments – The Company has commitments for the completion of construction at various properties and the purchase of various properties totaling approximately $11,594,000 at May 27, 2004.

License Rights – The Company has license rights to operate two hotels using the Hilton trademark. Under the terms of the license, the Company is obligated to pay fees based on defined gross sales.

Contingencies – The Company guarantees the debt of joint ventures and other entities totaling $15,067,000 at May 27, 2004. The debt of the joint ventures is collateralized by the real estate, buildings and improvements and all equipment of each joint venture.

9. Joint Venture Transactions

At May 27, 2004 and May 29, 2003, the Company held investments with aggregate carrying values of $6,483,000 and $1,880,000, respectively, in various joint ventures, which are accounted for under the equity method. During fiscal 2004, the Company recorded a $585,000 loss on the termination and disposal of a joint venture and paid $930,000 under the Company’s guarantee of the joint venture’s outstanding debt. During fiscal 2003, the Company recorded an impairment loss of $600,000, determined as the amount by which the carrying value exceeds the fair value of these investments.

The Company has receivables from the joint ventures of $2,939,000 and $3,626,000 at May 27, 2004 and May 29, 2003, respectively, net of a $1,953,000 allowance in fiscal 2003. The Company earns interest on $2,666,000 and $3,317,000 of the net receivables at approximately prime to prime plus 1.5% at May 27, 2004 and May 29, 2003, respectively.

Included in notes payable at May 27, 2004 and May 29, 2003, is $1,066,000 and $465,000, respectively, due to joint ventures in connection with cash advanced to the Company. The Company pays interest on the cash advances based on the 90-day certificate of deposit rates.

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THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. Business Segment Information

The Company evaluates performance and allocates resources based on the operating income (loss) of each segment. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

Following is a summary of business segment information for fiscal 2002 through 2004:

	Limited- Service Lodging		Theatres		Hotels/ Resorts		Corporate Items			Total
	(in thousands)
Fiscal 2004
Revenues	$	127,781	$	155,732	$	124,471	$	1,223		$	409,207
Operating income (loss)		13,821		38,933		9,003		(8,333	)		53,424
Depreciation and amortization		19,587		11,782		13,135		1,532			46,036
Assets		295,736		204,711		205,509		38,913			744,869
Capital expenditures and other		32,700		10,973		6,843		399			50,915
Fiscal 2003
Revenues	$	126,612	$	150,383	$	118,490	$	1,430		$	396,915
Operating income (loss)		11,523		36,162		8,820		(7,120	)		49,385
Depreciation and amortization		18,800		11,987		12,996		1,582			45,365
Assets		284,818		207,440		207,289		55,910			755,457
Capital expenditures and other		11,983		4,173		6,688		3,160			26,004
Fiscal 2002
Revenues	$	125,711	$	147,311	$	114,914	$	1,897		$	389,833
Operating income (loss)		13,509		34,682		6,263		(6,996	)		47,458
Depreciation and amortization		19,234		12,276		11,805		1,572			44,887
Assets		292,286		219,672		213,005		49,823			774,786
Capital expenditures and other		12,832		2,194		33,442		431			48,899

Corporate items include amounts not allocable to the business segments. Corporate revenues consist principally of rent and the corporate operating loss includes general corporate expenses. Corporate information technology costs and accounting shared services costs are allocated to the business segments based upon several factors, including actual usage and segment revenues. Corporate assets primarily include cash and cash equivalents, notes receivable, receivables from joint ventures and land held for development.

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THE MARCUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

11. Unaudited Quarterly Financial Information (in thousands, except per share data)

	13 Weeks Ended
Fiscal 2004	August 28, 2003		November 27, 2003		February 26, 2004		May 27, 2004
Revenues	$	120,795	$	94,648	$	94,431	$	99,333
Operating income		25,641		10,737		7,447		9,599
Net earnings		12,945		4,803		2,284		4,579
Net earnings per basic share	$	0.44	$	0.16	$	0.08	$	0.15
Net earnings per diluted share	$	0.44	$	0.16	$	0.08	$	0.15

	13 Weeks Ended
Fiscal 2003	August 28, 2003		November 27, 2003		February 26, 2004		May 27, 2004
Revenues	$	119,577	$	88,787	$	91,986	$	96,565
Operating income		25,155		7,752		7,750		8,728
Net earnings		13,587		2,552		1,735		2,682
Net earnings per basic share	$	0.46	$	0.09	$	0.06	$	0.09
Net earnings per diluted share	$	0.46	$	0.09	$	0.06	$	0.09

12. Subsequent Event

On July 15, 2004, the Company announced it signed a definitive agreement to sell its limited-service lodging division for approximately $395,000,000 in cash, excluding certain joint ventures and subject to certain adjustments. The assets to be sold consist primarily of land, buildings and equipment with a net book value of approximately $261,000,000 as of May 27, 2004. The sale is expected to close in the summer or early fall of 2004. Upon consummation of the sale, the Company expects to recognize a significant gain on the sale of discontinued operations during fiscal 2005, net of applicable income taxes.

-50-

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

(a)

Evaluation of disclosure controls and procedures.

Based on their evaluations, as of the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or furnish under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

(b)

Changes in internal controls over financial reporting.

There were no significant changes in our internal controls identified in connection with the evaluation required by Rule 13a-15(b) of the Exchange Act that occurred during our fourth quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART III

Item 10. Directors and Executive Officers of the Company.

The information required by this item with respect to directors is incorporated herein by reference to the information pertaining thereto set forth under the caption entitled “Election of Directors” in the definitive Proxy Statement for our 2004 Annual Meeting of Shareholders scheduled to be held on October 6, 2004 (our “Proxy Statement”). The information required with respect to executive officers appears at the end of Part I of this Form 10-K. The required information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by directors and executive officers is incorporated by reference to the information pertaining thereto set forth under the caption entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement.

We have adopted a written code of conduct that applies to all of our employees, which is available on our corporate web site (www.marcuscorp.com). No amendments to our code of conduct, or waivers from our code of conduct with respect to any of our executive officers or directors, have been made. If, in the future, we amend our code of conduct, or grant waivers from our code of conduct with respect to any of our executive officers or directors, we will make information regarding such amendments or waivers available on our corporate web site (www.marcuscorp.com) for a period of at least 12 months.

Item 11. Executive Compensation.

The information required by this item is incorporated herein by reference to the information pertaining thereto set forth under the caption entitled “Executive Compensation” in our Proxy Statement.

-51-

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The following table lists certain information about our three stock option plans, our 1987 Stock Option Plan, our 1995 Equity Incentive Plan and our 1994 Nonemployee Director Stock Option Plan, all of which were approved by our shareholders:

Number of securities to be issued upon the exercise of outstanding options	Weighted-average exercise price of outstanding options	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
1,746,000	$14.04	1,408,000

The other information required by this item is incorporated herein by reference to the information pertaining thereto set forth under the caption entitled “Stock Ownership of Management and Others” in our Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

The information required by this item, to the extent applicable, is incorporated herein by reference to the information pertaining thereto set forth under the caption entitled “Certain Transactions” in our Proxy Statement.

Item 14. Principal Accounting Fees and Services.

The information required by this item is incorporated by reference herein to the information pertaining thereto set forth under the caption “Other Matters” in our Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1)

Financial Statements.

The information required by this item is set forth in "Item 8. Financial Statements and Supplementary Data" above.

(a)(2)

Financial Statement Schedules.

All schedules are omitted because they are inapplicable, not required under the instructions or the financial information is included in the consolidated financial statements or notes thereto.

(a)(3)

Exhibits.

The exhibits filed herewith or incorporated by reference herein are set forth on the attached Exhibit Index.*

(b)

Reports on Form 8-K.

We furnished a Form 8-K to the Securities and Exchange Commission on March 18, 2004 reporting (under Items 7 and 9) our financial results for the quarter and 39 weeks ended February 27, 2004.

Exhibits to this Form 10-K will be furnished to shareholders upon advance payment of a fee of $0.20 per page, plus mailing expenses. Requests for copies should be addressed to Thomas F. Kissinger, General Counsel and Secretary, The Marcus Corporation, 100 East Wisconsin Avenue, Suite 1900, Milwaukee, Wisconsin 53202-4125.

-52-

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, we have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE MARCUS CORPORATION
Date: August 10, 2004	By: /s/ Stephen H. Marcus
	Stephen H. Marcus,
	Chairman of the Board, President
	and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of us and in the capacities as of the date indicated above.

By: /s/ Stephen H. Marcus	By: /s/ Daniel F. McKeithan, Jr.
Stephen H. Marcus, Chairman of the	Daniel F. McKeithan, Jr., Director
Board, President and Chief Executive
Officer (Principal Executive Officer)
By: /s/ Douglas A. Neis	By: /s/ Diane Marcus, Gershowitz
Douglas A. Neis, Chief Financial	Diane Marcus Gershowitz, Director
Officer and Treasurer (Principal
Financial Officer and Accounting
Officer)
By: /s/ Bruce J. Olson	By: /s/ Timothy E. Hoeksema
Bruce J. Olson, Director	Timothy E. Hoeksema, Director
By: /s/ Philip L. Milstein	By: /s/ Allan H. Selig
Philip L. Milstein, Director	Allan H. Selig, Director
By: /s/ Bronson J. Haase	By: /s/ James D. Ericson
Bronson J. Haase, Director	James D. Ericson, Director

S-1

EXHIBIT INDEX

2.1	Asset Purchase Agreement dated July 14, 2004, by and between certain subsidiaries of The Marcus Corporation and La Quinta Corporation.

3.1	Restated Articles of Incorporation. [[Incorporated by reference to Exhibit 3.2 to our Quarterly Report on Form 10-Q for the quarterly period ended November 13, 1997.]]

3.2	Bylaws, as amended as of January 8, 2003. [[Incorporated by reference to Exhibit 3.2 to our Quarterly Report on Form 10-Q for the quarterly period ended November 28, 2002.]]

4.1	Senior Note Purchase Agreement dated May 31, 1990, between the Company and The Northwestern Mutual Life Insurance Company. [[Incorporated by reference to Exhibit 4 to our Annual Report on Form 10-K for the fiscal year ended May 31, 1990.]]

4.2	The Marcus Corporation Note Purchase Agreement dated October 25, 1996. [[Incorporated by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q for the quarterly period ended November 14, 1996.]]

4.3	First Supplement to Note Purchase Agreements dated May 15, 1998. [[Incorporated by reference to Exhibit 4.3 to our Annual Report on Form 10-K for the fiscal year ended May 28, 1998.]]

4.4	Second Supplement to Note Purchase Agreements dated May 7, 1999. [[Incorporated by reference to Exhibit 4.4 to our Annual Report on Form 10-K for the fiscal year ended May 27, 1999.]]

4.5	Third Supplement to Note Purchase Agreements dated April 1, 2002. [[Incorporated by reference to Exhibit 4.6 to our Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2002.]]

4.6	Credit Agreement dated April 30, 2004, by and among The Marcus Corporation, U.S. Bank National Association, Bank of America, N.A., Bank One, NA, LaSalle Bank National Association, and the other financial institutions party hereto.

Other than as set forth in Exhibits 4.1, 4.2, 4.3, 4.4, 4.5 and 4.6, we have numerous instruments which define the rights of holders of long-term debt. These instruments, primarily promissory notes, have arisen from the purchase of operating properties in the ordinary course of business. These instruments are not being filed with this Annual Report on Form 10-K in reliance upon Item 601(b)(4)(iii) of Regulation S-K. Copies of these instruments will be furnished to the Securities and Exchange Commission upon request.

We are the guarantor and/or obligor under various loan agreements in connection with operating properties (primarily Baymont Inns & Suites) which were financed through the issuance of industrial development bonds. These loan agreements and the additional documentation relating to these projects are not being filed with this Annual Report on Form 10-K in reliance upon Item 601(b)(4)(iii) of Regulation S-K. Copies of these documents will be furnished to the Securities and Exchange Commission upon request.

10.1*

The Marcus Corporation 1995 Equity Incentive Plan, as amended. [[Incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K for the fiscal year ended May 27, 1999.]]

10.2*

The Marcus Corporation 1994 Nonemployee Director Stock Option Plan. [[Incorporated by reference to Exhibit A to our 1994 Proxy Statement.]]

E-1

10.3*

Proposed form of The Marcus Corporation 2004 Equity Incentive Plan. [[Incorporated by reference to Exhibit A to our 2004 Proxy Statement.]]

10.4*

The Marcus Corporation VMAX Incentive Plan Terms.

21	Our subsidiaries as of May 27, 2004.

23	Consent of Ernst & Young LLP.

31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.ss.1350

99	Proxy Statement for the 2004 Annual Meeting of Shareholders. (The Proxy Statement for the 2004 Annual Meeting of Shareholders will be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after the end of the Company’s fiscal year.)

*	This exhibit is a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of Form 10-K.

E-2

EX-2.1 2 cmw848a.htm ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT

by and between

LA QUINTA CORPORATION

and

CERTAIN SUBSIDIARIES OF THE MARCUS CORPORATION

JULY 14, 2004

1.	SALE OF ASSETS	3
	1.1 Purchased Assets	3
	1.2 Excluded Assets	6
	1.3 Procedures for Purchased Assets not Transferable	7
2.	ASSUMPTION OF LIABILITIES	8
	2.1 Assumed Liabilities	8
	2.2 Excluded Liabilities	8
3.	PURCHASE PRICE PAYMENT	10
	3.1 Purchase Price	10
	3.2 Payment of Purchase Price	11
	3.3 Aggregate Joint Venture Purchase Price	12
	3.4 Ovations® Liability	15
	3.5 Allocation of Purchase Price	16
4.	REPRESENTATIONS AND WARRANTIES OF THE MARCUS ENTITIES	17
	4.1 Corporate	17
	4.2 No Real Property Violation	18
	4.3 Financial Statements	18
	4.4 No Corporate Violations	19
	4.5 Utilities	19
	4.6 Taxes	20
	4.7 Condemnation; Eminent Domain	20
	4.8 Inventory	20
	4.9 Absence of Certain Changes	20
	4.10 No Litigation	22
	4.11 Ordinary Course	23
	4.12 Compliance With Laws and Orders; Permits; Environmental Matters; Title	23
	4.13 Condition	25
	4.14 Insurance	25
	4.15 Contracts and Commitments	26
	4.16 Labor Matters	26
	4.17 Employee Benefit Plans	27
	4.18 Assets Necessary to Marcus Mid-Priced Lodging Businesses	28
	4.19 Affiliated Relationships	28
	4.20 Not a Foreign Person	28
	4.21 No Brokers or Finders	28
	4.22 Trade Rights	28
	4.23 Franchise Matters	31
	4.24 Space Leasing	34
	4.25 Bookings	34
	4.26 Shared Facilities	34
	4.27 Rights to Purchase	34
	4.28 Joint Ventures	34
	4.29 No Shareholder Vote	35


5.	REPRESENTATIONS AND WARRANTIES OF BUYER	35
	5.1 Corporate	35
	5.2 No Violation	35
	5.3 Financial Capability	36
	5.4 No Brokers or Finders	36
6.	EMPLOYEES - EMPLOYEE BENEFITS	36
	6.1 Employees; Affected Employees	36
	6.2 Payroll Tax	38
	6.3 Employee Benefit Plans	38
7.	PRE-CLOSING COVENANTS	39
	7.1 No Change in Financial Commitment(s)	39
	7.2 Access to Information and Records	40
	7.3 Conduct of Business Pending the Closing	41
	7.4 Material Consents	45
	7.5 No Solicitation or Negotiations With Other Parties	45
	7.6 Notice of Developments	46
	7.7 HSR Act Filings	46
	7.8 Additional Agreements	47
	7.9 Adverse Diligence Discoveries	47
	7.10 Meeting With Franchisees	52
	7.11 Liquor License; Other Licenses and Permits	52
	7.12 Integration and Interface Development	53
	7.13 Letters of Credit	53
	7.14 Subdivision Properties	53
	7.15 Restrictions on Real Property	57
	7.16 Data Room Web Site	58
	7.17 New Ovations Agreements	58
	7.18 Change in Officers	58
	7.19 Further Assurances	58
	7.20 Property-Level Contracts	58
	7.21 Disclosure of Transaction Stay/Severance Plan	58
8.	CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS	58
	8.1 Representations and Warranties True on the Closing Date	59
	8.2 Compliance With Agreement	59
	8.3 Absence of Litigation	59
	8.4 HSR Waiting Period	59
	8.5 Leases Relative to Subdivision Properties	59
	8.6 Closing Documents	59
	8.7 Consents, etc.	59
	8.8 Acts of Terror	59
	8.9 Estoppel Certificates	59
	8.10 Title Insurance Policies	60
	8.11 Employee Data	60


9.	CONDITIONS PRECEDENT TO THE MARCUS ENTITIES' OBLIGATIONS	60
	9.1 Representations and Warranties True on the Closing Date	60
	9.2 Compliance With Agreement	60
	9.3 Absence of Litigation	60
	9.4 HSR Waiting Period	61
	9.5 Leases Relative to Subdivision Properties	61
	9.6 Closing Documents	61
10.	RISK OF LOSS	61
	10.1 Casualty	61
	10.2 Condemnation	62
11.	SURVIVAL; INDEMNIFICATION	63
	11.1 Survival	63
	11.2 Indemnification By the Marcus Entities	64
	11.3 Indemnification By Buyer	64
	11.4 Indemnification of Third Party Claims	65
	11.5 Claims Procedure	66
	11.6 Limitations on Indemnification	67
	11.7 Exclusivity of Indemnification	68
12.	CLOSING	68
	12.1 Deliveries by the Marcus Entities	68
	12.2 Deliveries by Buyer	71
	12.3 Adjustments and Prorations	72
13.	TERMINATION	74
	13.1 Right of Termination Without Breach	74
	13.2 Other Terminations	74
14.	POST-CLOSING COVENANTS	76
	14.1 Confidential Information	76
	14.2 Use of Baymont and Woodfield Names	77
	14.3 Bulk Sales Compliance	77
	14.4 Records and Retention and Access	77
	14.5 Insurance	78
	14.6 Financial Information	78
	14.7 Tax Matters	80
	14.8 Post-Closing Accounts Payable Matters	80
	14.9 Post-Closing Accounts Receivable Matters	81
	14.10 Guest Baggage	81
	14.11 Safe Deposits	81
	14.12 Nonsolicitation; Cooperation	81
	14.13 Division of Subdivision Properties	84
	14.14 Section 1031 Exchanges	84
	14.15 Further Assurances	84
	14.16 Excluded Properties	85

iii


15.	RESOLUTION OF DISPUTES	85
	15.1 Arbitration	85
	15.2 Arbitrators	86
	15.3 Procedures; No Appeal	86
	15.4 Authority	86
	15.5 Entry of Judgment	86
	15.6 Confidentiality	86
	15.7 Continued Performance	86
	15.8 Tolling	86
16.	DEFINITIONS	86
17.	MISCELLANEOUS	99
	17.1 Schedules	99
	17.2 Assignment; Parties in Interest	99
	17.3 Recordings	100
	17.4 Law Governing Agreement	100
	17.5 Amendment and Modification	100
	17.6 Notice	100
	17.7 Expenses	101
	17.8 Publicity	102
	17.9 Disclaimer	102
	17.10 Knowledge	102
	17.11 Forecasts; Memorandum; Due Diligence	102
	17.12 Buyer's Experience	103
	17.13 Entire Agreement	104
	17.14 Counterparts; Facsimile Signatures	104
	17.15 Severability	104
	17.16 Headings	104
	17.17 Construction	104
	17.18 Incorporation of Schedules	104
	17.19 Materiality Threshold	104

Exhibits

Exhibit A	Financial Terms of Joint Venture Offers
Exhibit A-1	Aggregate Individual JV Price
Exhibit B	Form of Guarantee of The Marcus Corporation
Exhibit C-1	Form of Opinion of Foley & Lardner LLP
Exhibit C-2	Form of Opinion of Goodwin Procter LLP
Exhibit D	Real Property Purchase Price Allocation
Exhibit E	Form of Interim Beverage Services Agreement
Exhibit F	Integration and Interface Development Workplan
Exhibit G	Form of Subdivision Parcel Lease
Exhibit H	Form of Transition Services Agreement
Exhibit I	Form of New JV Property Management Agreement

Schedules


Schedule 1.1(a)(1)	Marcus Owned Real Property
Schedule 1.1(a)(2)	Selling Joint Venture Owned Real Property
Schedule 1.1(b)	Real Property Leases
Schedule 1.1(d)(1)	Marcus Personal Property Leases
Schedule 1.1(d)(2)	Selling Joint Venture Personal Property Leases
Schedule 1.1(e)(1)	Marcus Contracts
Schedule 1.1(e)(2)	Selling Joint Venture Contracts
Schedule 1.1(h)	Computer Software
Schedule 1.1(i)	Websites
Schedule 1.1(m)(1)	Marcus Assigned Licenses and Permits
Schedule 1.1(m)(2)	Selling Joint Venture Assigned Licenses and Permits
Schedule 1.2(g)	Retained Real Property
Schedule 1.2(m)	Shared Assets
Schedule 3.3(b)	Selling Joint Venture Operating/Partnership Agreements
Schedule 4.2	Marcus Material Consents
Schedule 4.3	Financial Statements
Schedule 4.4	Exceptions to No Corporate Violations
Schedule 4.6(a)	Taxes
Schedule 4.6(b)	Disputes and Exceptions to Absence of Waiver of Statute of Limitations
Schedule 4.8	Exceptions to Inventory Location
Schedule 4.9	Exceptions to Absence of Certain Changes
Schedule 4.10	Litigation
Schedule 4.12(a)	Exceptions to Compliance with Laws and Orders and Other Matters
Schedule 4.12(b)	Exceptions to Compliance with Licenses and Permits
Schedule 4.12(c)	Environmental Matters
Schedule 4.12(d)	Liens
Schedule 4.14	Insurance
Schedule 4.15	Marcus Material Contracts
Schedule 4.16(a)	Labor Matters
Schedule 4.16(b)	Affirmative Action and Prevailing Wage Obligations
Schedule 4.16(e)	Contingent Workers



Schedule 4.17	Employee Benefits Plans
Schedule 4.17(b)	Exceptions to Payments or Increases under Employee Benefits Plans
Schedule 4.18	Exceptions to Assets Necessary to Marcus Mid-Priced Lodging Businesses
Schedule 4.19	Affiliated Relationships
Schedule 4.22(a)	Scheduled Trade Rights
Schedule 4.22(b)	Trade Rights Not Owned or Licensed to Marcus Entities
Schedule 4.22(c)	Due Maintenance Fees
Schedule 4.22(d)	Domain Names
Schedule 4.22(e)	Licensed Trade Rights
Schedule 4.22(f)	Trade Rights Licensed Out
Schedule 4.22(h)	Trade Right Infringement
Schedule 4.23(d)	Exceptions to Delivery of Baymont Circular
Schedule 4.23(g)	Exceptions to Compliance with Franchise Documents
Schedule 4.23(h)	Exceptions to Absence of Notice of Noncompliance
Schedule 4.23(j)	Exceptions to Absence of Offering of Franchises
Schedule 4.23(k)	Exceptions to Absence of Assumption of Liability
Schedule 4.23(l)	Exceptions to Absence of Leasing or Subleasing
Schedule 4.23(m)	Exceptions to Absence of Financing Arrangement
Schedule 4.23(n)	Exceptions to Service by the Marcus Entities
Schedule 4.23(o)	Franchise Documents
Schedule 4.23(p)	Exceptions to Compliance with Franchise Laws
Schedule 4.23(q)	Exceptions to Absence of Notice or Consent
Schedule 4.23(u)	Exceptions to Claims Asserted by Franchisees
Schedule 4.23(v)	Exceptions to Franchise Document Renewals
Schedule 4.24	Space Leases
Schedule 4.25	Bookings
Schedule 4.26	Exception to Shared Facilities
Schedule 6.1(a)	Employees
Schedule 6.1(b)	Employment Sites and Employment Losses
Schedule 7.11	Liquor Licenses
Schedule 7.14	Subdivision Properties
Schedule 8.7	Consents Required for Closing

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT (this “Agreement”) dated July 14, 2004, by and between LA QUINTA CORPORATION, a Delaware corporation (“Buyer”); and each of the other signatories to this Agreement, each of which is a wholly-owned direct or indirect subsidiary of Marcus (collectively, the “Marcus Entities”). THE MARCUS CORPORATION, a Wisconsin corporation (“Marcus”), hereby joins in this Agreement solely to cooperate and be a direct and primary obligor to the full and prompt performance of the obligations of the Marcus Entities under Article 11 of this Agreement pursuant to that certain Guarantee, Cooperation and Non-Interference Agreement of The Marcus Corporation in the form attached hereto as Exhibit B. All defined terms used herein shall have the meaning set forth in Article 16 or elsewhere in this Agreement.

R E C I T A L S

A. Marcus, through its subsidiaries, is engaged in three businesses: limited service, mid-priced without food and beverage lodging, movie theatres and full service hotels and resorts.

B. Marcus Consid, LLC, a wholly-owned subsidiary of Marcus (“Marcus Consid”), owns certain real estate that is utilized in the Marcus Mid–Priced Lodging Businesses (as defined below) and that is located in Alabama, Georgia, Indiana, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, Oklahoma, Pennsylvania, Texas, Utah and Wisconsin.

C. Marcus Non, LLC, a wholly-owned subsidiary of Marcus (“Marcus Non”), owns certain real estate that is utilized in the Marcus Mid–Priced Lodging Businesses and that is located in Arkansas, Colorado, Connecticut, Illinois, Iowa, Massachusetts, Michigan, Minnesota, New York, North Carolina, Ohio, and Tennessee.

D. Marcus Fl, LLC, a wholly-owned subsidiary of Marcus (“Marcus Fl”), owns certain real estate that is utilized in the Marcus Mid–Priced Lodging Businesses and that is located in Florida.

E. Baymont Partners, LLC, a wholly-owned subsidiary of Marcus (“Baymont Partners”), owns certain real estate that is utilized in the Marcus Mid-Priced Lodging Businesses and that is located in Ohio and Tennessee.

F. Marcus-Anderson Partnership, a wholly-owned subsidiary of Marcus (“Marcus-Anderson Partnership”), owns certain real estate that is utilized in the Marcus Mid-Priced Lodging Businesses and that is located in Florida, Ohio and South Carolina.

G. Marcus Consid, Marcus Non, Marcus Fl, Baymont Partners and Marcus-Anderson Partnership own or ground lease (or sub-ground lease or sub-sub-ground lease) all of the real estate assets used in the Marcus Mid–Priced Lodging Businesses, with the exception of real estate owned or ground leased (or sub-ground lease or sub-sub-ground lease) by the Joint Ventures, which own or ground lease (or sub-ground lease or sub-sub-ground lease) all of the remaining real estate assets used in the Marcus Mid–Priced Lodging Businesses.

H. Baymont Inns, Inc., a wholly-owned subsidiary of Marcus (“Baymont”), is in the limited service, mid–price without food and beverage segment of the lodging industry through (i) its operation of Baymont Inn and Baymont Inn & Suites lodging facilities (excluding any applicable Excluded Properties, “Baymont Hotels”), (ii) its franchising of Baymont Hotels and (iii) its operation of one Budgetel Inn owned by Marcus Consid (collectively, but excluding any business of the applicable Excluded Properties, the “Baymont Business”).

I. Baymont owns all of the Trade Rights and certain other assets associated with the Baymont Business and manages the Baymont Business through its subsidiaries.

J. Baymont Inns Hospitality LLC, a wholly-owned subsidiary of Baymont (“Baymont Hospitality”), (i) owns, leases or otherwise has a right to use all of the furniture, fixtures, equipment and other tangible and intangible personal property associated with the owned Baymont Hotels and Budgetel Inn, with the exception of furniture, fixtures, equipment and other tangible and intangible personal property at the hotels owned by the Joint Ventures, (ii) operates the owned Baymont Hotels and Budgetel Inn and (iii) owns, leases or otherwise has a right to use all of the furniture, fixtures, equipment and other tangible and intangible personal property associated with all of the Woodfield Suites lodging facilities (excluding any applicable Excluded Properties, “Woodfield Hotels”). Such furnishings, fixtures, equipment and other tangible and intangible personal property owned by Baymont Hospitality constitutes all of the furnishings, fixtures, equipment and other tangible and intangible personal property used in the operation and maintenance of the Marcus Mid-Priced Lodging Businesses (other than the Trade Rights and the Franchise Documents).

K. Baymont Partners owns the Marcus Entities’ interests in each of the Joint Ventures.

L. Baymont Franchises International, LLC, a wholly-owned subsidiary of Baymont (“Baymont Franchises”), operates the franchising operations of the Baymont Business and is the franchisor of each of the franchised Baymont Hotels.

M. Woodfield Suites, Inc., a wholly-owned subsidiary of Marcus (“Woodfield”), is in the mid–market segment of the lodging industry through its operation of Woodfield Hotels (excluding the business of the applicable Excluded Properties, the “Woodfield Business” and, with the Baymont Business, the “Marcus Mid–Priced Lodging Businesses”).

N. Woodfield owns all of the Trade Rights associated with the Woodfield Business. Baymont Hospitality operates all of the Woodfield Suites hotels.

O. Woodfield Suites Franchises International, Inc., a wholly-owned subsidiary of Woodfield (“Woodfield Franchises”), owns the right to franchise Woodfield Hotels and the franchising operations of the Woodfield Business, but no such franchises have been awarded.

P. Woodfield Suites Hospitality Corporation, a wholly-owned subsidiary of Woodfield, through several wholly owned subsidiaries, owns all of the liquor licenses associated with the Woodfield Hotels and the Woodfield Business.

Q. Buyer desires to purchase from the Marcus Entities and the Selling Joint Ventures, and the Marcus Entities desire to sell and transfer to Buyer, and to cause the Selling Joint Ventures to sell and transfer to Buyer, all of the business, rights, claims and assets of the Marcus Entities, the Selling Joint Ventures or their Affiliates used or held for use by the Marcus Entities, the Selling Joint Ventures or their Affiliates in the operation of the Marcus Mid–Priced Lodging Businesses, except as expressly disclosed in Schedule 4.18 hereto and the Marcus Entities and the Selling Joint Ventures further desire to assign to Buyer, and Buyer desires to assume, pay, honor, discharge and perform the Assumed Liabilities set forth in Section 2.1.

NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows:

1.	SALE OF ASSETS

1.1 Purchased Assets. Subject to the terms and conditions of this Agreement, on the Closing Date, the Marcus Entities shall sell, convey, transfer, assign and deliver to Buyer and, as applicable, cause the Selling Joint Ventures to sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase, accept and acquire (and assume to the limited extent expressly provided in this Agreement) from the Marcus Entities and the Selling Joint Ventures, all of the business, rights, claims and assets (of every kind, nature, character and description, whether real, personal or mixed, whether tangible or intangible, whether accrued, contingent or otherwise, and wherever situated) of the Marcus Entities, the Selling Joint Ventures and their Affiliates used or held for use in the operation of the Marcus Mid–Priced Lodging Businesses as conducted in accordance with past practices, together with all rights and privileges associated with such assets, other than the Excluded Assets (collectively, the “Purchased Assets”), as of the Closing Date, free and clear of all Liens, including, without limitation, the following specified assets:

1.1(a) Owned Real Property. All of the real property related to the Marcus Mid-Priced Lodging Businesses, including buildings, structures, fixtures, improvements and all appurtenant rights (including, without limitation, any rights owned by the Marcus Entities or the Selling Joint Ventures in adjacent streets and ways (open or proposed), easements, development rights, air rights, mineral and other subsurface rights, water rights, and rights under restrictive covenants) owned by (i) the Marcus Entities described on Schedule 1.1(a)(1) (the “Marcus Owned Real Property”) and (ii) the Selling Joint Ventures described on Schedule 1.1(a)(2) (the “Selling Joint Venture Owned Real Property,” and, collectively with the Marcus Owned Real Property, the “Owned Real Property”).

1.1(b) Leased Real Property. Subject to Section 1.3, all of the Marcus Entities’ rights in, to and under all of their real property leases related to the Marcus Mid–Priced Lodging Businesses, all of which are set forth on Schedule 1.1(b) (the “Real Property Leases”).

1.1(c) Owned Personal Property. All of the equipment, computers, telecommunications and information technology systems, supplies, furniture, fixtures, machinery, tools, vehicles, appliances, art work, signage, appliances, draperies, carpeting, rugs, keys and all other tangible personal property (excluding the Inventory and Computer Software) related to the Marcus Mid–Priced Lodging Businesses and owned by (i) the Marcus Entities (“Marcus Owned Personal Property”) and (ii) the Selling Joint Ventures (the “Selling Joint Venture Owned Personal Property” and, collectively with the Marcus Owned Personal Property, the “Owned Personal Property”).

1.1(d) Personal Property Leases. Subject to Section 1.3, all of the Marcus Entities’ and Selling Joint Ventures’ rights in, to and under all of their leases of billboards (regardless of whether such leases may be considered real property leases), equipment, computers, furniture, fixtures, machinery, tools, vehicles, appliances, art work, signage, appliances, draperies, carpeting, rugs, keys and other personal property, together with all deposits made thereunder, related to the Marcus Mid–Priced Lodging Businesses, all of which are set forth on Schedule 1.1(d)(1) (the “Marcus Personal Property Leases”) and all of the Selling Joint Ventures’ similar lease rights, all of which are set forth on Schedule 1.1(d)(2) (the “Selling Joint Venture Personal Property Leases” and, collectively with the Marcus Personal Property Leases, the “Personal Property Leases”).

1.1(e) Contracts. Subject to Section 1.3, all of (i) the Marcus Entities’ rights in, to and under all of their Contracts, including those which are set forth on Schedule 1.1(e)(1) (the “Marcus Contracts”) and the franchise agreements, if any, entered into pursuant to Section 14.16 and (ii) the Selling Joint Ventures’ rights in, to and under all of their Contracts, including those which are set forth on Schedule 1.1(e)(2) (the “Selling Joint Venture Contracts” and, collectively with the Marcus Contracts and the franchise agreements, if any, entered into pursuant to Section 14.16, the “Assigned Contracts”).

1.1(f) Inventory. All of the Marcus Entities’ and the Selling Joint Ventures’ inventory, including that which is ordered for future use at the Properties, as of the Closing Date, including, without limitation, all mattresses, pillows, bed linens, towels, powder goods, soaps, cleaning supplies, toiletries, stationery, menus, directories, and other printed materials and any other supplies, together with all food and beverages (whether opened or unopened) (the “Inventory”).

1.1(g) Trade Rights. All of the Marcus Entities’ and the Selling Joint Ventures’ rights, title and interest in and to any and all Trade Rights used in the operation of the Marcus Mid–Priced Lodging Businesses, including, without limitation, all Trade Rights in and to the names “Baymont,” “Woodfield,” “Budgetel” and “Ovations” (the “Marcus Trade Rights”).

1.1(h) Computer Software. Subject to Section 1.3, all of the Marcus Entities’ and, if applicable, the Selling Joint Ventures’ rights, title and interest in and to any computer source codes, programs and other software including, but not limited to, all machine readable code, printed listings of code, documentation, booking engines and related property and information (the “Computer Software”), and all escrow, maintenance, hosting, outsourcing and other agreements related to such Computer Software and other technology, in each case, used in the operation of the Marcus Mid-Priced Lodging Businesses, including, without limitation, those items set forth on Schedule 1.1(h).

1.1(i) Websites. All of the Marcus Entities’ and the Selling Joint Ventures’ rights, title and interest in and to any domain names and websites and any intranet used in connection with the Marcus Mid–Priced Lodging Businesses, including, without limitation, all Trade Rights related thereto and the domain names and websites identified on Schedule 1.1(i).

1.1(j) Sales Literature. All of the Marcus Entities’ and the Selling Joint Ventures’ sales literature, promotional literature, catalogs and similar materials used in the operation of the Marcus Mid–Priced Lodging Businesses, including, without limitation, all copyrights therein.

1.1(k) Records and Files. All of the Marcus Entities’ and the Selling Joint Ventures’ Records and Files related to the operation of the Marcus Mid–Priced Lodging Businesses, including, without limitation, all customer records and historical guest and transaction information stored or maintained in Marcus’ data warehouse in machine readable form (the “Marcus Records and Files”), subject to the Marcus Entities’ access rights under Section 14.4(a) hereof.

1.1(l) Prepaid Expenses. All of the Marcus Entities’ and the Selling Joint Ventures’ security, vendor, utility and other deposits and other prepaid expenses related to the Marcus Mid–Priced Lodging Businesses.

1.1(m) Licenses and Permits. Subject to Sections 1.3 and 7.11, all of the Marcus Entities’ and the Selling Joint Ventures’ Licenses and Permits used in the operation of the Marcus Mid–Priced Lodging Businesses, each of which is held on the Closing Date by (i) the Marcus Entities, including, without limitation, those items set forth on Schedule 1.1(m)(1) (the “Marcus Assigned Licenses and Permits”) and (ii) the Selling Joint Ventures, including, without limitation, those items set forth on Schedule 1.1(m)(2) (the “Selling Joint Venture Assigned Licenses and Permits”) and, collectively with the Marcus Assigned Licenses and Permits, the “Assigned Licenses and Permits”).

1.1(n) Warranties. Subject to Section 1.3, all warranties and guaranties held by the Marcus Entities and the Selling Joint Ventures with respect to any of the Purchased Assets (the “Warranties”).

1.1(o) Bookings. Subject, in the case of bookings and reservations that include the Closing Date, to Section 12.3, all of the Marcus Entities’ and the Selling Joint Ventures’ bookings and reservations for guest rooms or other facilities at the Properties (the “Bookings”) as of the Closing for periods after Closing, together with all deposits paid or payable to the Marcus Entities and the Selling Joint Ventures with respect thereto.

1.1(p) Franchises. All of the Marcus Entities’ and the Selling Joint Ventures’ rights and privileges of the franchisor or licensor under each of the Franchise Documents, including, without limitation, any cash balances under any advertising and marketing funds and other funds and cooperatives and franchise contract deposits.

1.1(q) General Intangibles. All of the Marcus Entities’ and the Selling Joint Ventures’ other intangible rights and assets, including their toll-free telephone numbers and all reservation system related telephone numbers and information system spread-sheet and database systems (excluding all causes of action arising out of occurrences before the Closing, except to the extent that they relate to the Assumed Liabilities) which are, in each case, used in, or related to, the operation and ownership of the Marcus Mid–Priced Lodging Businesses.

1.2 Excluded Assets. The Purchased Assets shall not include, the Marcus Entities and the Selling Joint Ventures shall not sell, convey, transfer, assign or deliver to Buyer, and Buyer shall not purchase, assume, accept or acquire from the Marcus Entities or the Selling Joint Ventures the following specified assets, and all assets not used in the operation of the Marcus Mid-Priced Lodging Businesses (collectively, the “Excluded Assets”):

1.2(a) Cash and Cash Equivalents. Except for deposits expressly included in Section 1.1, all of the Marcus Entities’ and the Selling Joint Ventures’ cash and cash equivalents.

1.2(b) Consideration. The consideration delivered and to be delivered by Buyer to the Marcus Entities and the Selling Joint Ventures pursuant to this Agreement and the Ancillary Agreements.

1.2(c) Rights and Benefits. The rights and benefits which accrue or will accrue to the Marcus Entities and the Selling Joint Ventures under this Agreement and the Ancillary Agreements.

1.2(d) Corporate Existence. The Marcus Entities’ and the Joint Ventures’ company, limited liability or partnership franchises, their organizational documents, corporate seals, stock or membership interest books, minute books and other records having exclusively to do with the organization, maintenance and existence of such entities.

1.2(e) Attorney-Client Privilege. Any and all of the Marcus Entities’ and the Selling Joint Ventures’ and any of their Affiliates’ rights and interest in and to that information which, in the good faith opinion of counsel to the Marcus Entities (including Marcus’ General Counsel), would be subject to the attorney client and/or attorney work product privilege between any law firm and such entity or entities as a result of such law firm’s legal representation of such entity or entities in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.

1.2(f) Other Acquisition Proposals. Any other acquisition proposals and inquiries with respect thereto relating to the sale or transfer of the Purchased Assets, the assets of any of the Joint Ventures or the Marcus Mid–Priced Lodging Businesses (or any portion thereof).

1.2(g) Retained Real Property. Subject, as applicable, to Sections 7.14 and 7.15, other than the Owned Real Property and the Properties subject to the Real Property Leases, all of the real property, including buildings, structures, fixtures, improvements and all appurtenant rights (including, without limitation, any rights in adjacent streets and ways (open or proposed), easements, development rights, air rights, mineral and other subsurface rights, water rights, and rights under restrictive covenants), owned by any Marcus Entity or any Selling Joint Venture not used in or required for the operation of the Mid-Priced Lodging Businesses and described on Schedule 1.2(g) and any other real property owned by a Marcus Entity, Marcus or any Affiliate of Marcus and located adjacent to, or within one-quarter (1/4) mile of, any Use-Restricted Property (the “Retained Real Property”).

1.2(h) Tax Credits and Records. All of the Marcus Entities’ and the Selling Joint Ventures’ federal, state and local income and franchise Tax credits and Tax refund claims with respect to any period prior to the Closing Date and associated returns and records.

1.2(i) Obligations of Affiliates. All notes, drafts, accounts receivable or other obligations for the payment of money, made or owed by any Affiliate of the Marcus Entities to any of the Marcus Entities or the Selling Joint Ventures or any of their direct or indirect subsidiaries pertaining to the period at or prior to the Closing Date.

1.2(j) Litigation. All rights and interests in and recoveries under, including all such rights, interest and recoveries arising out of counterclaims, the Retained Litigation.

1.2(k) Accounts Receivable. All of the Marcus Entities and the Selling Joint Ventures’ Accounts Receivable.

1.2(l) Excluded Properties. The Excluded Properties and assets used solely in the operation of one or more Excluded Properties.

1.2(m) Shared Assets. All of the Marcus Entities’ rights and interests in those assets set forth on Schedule 1.2(m).

1.3 Procedures for Purchased Assets not Transferable. Subject to Sections 7.4 and 7.11, if any of the Contracts, Personal Property Leases, Computer Software, Licenses and Permits, any letters of credit supporting the obligations of third parties, or Warranties is not assignable or transferable either by virtue of the provisions thereof or under applicable Law without the consent of some party or parties and any such consent is not obtained prior to the Closing, this Agreement and the related instruments of transfer shall not constitute an assignment thereof or an attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof, and, unless otherwise agreed between Buyer and the Marcus Entities and/or the Selling Joint Ventures, as applicable, with respect to such Contract, Personal Property Leases, Computer Software, Licenses and Permits, any letters of credit supporting the obligations of third parties, or Warranties, Buyer shall not assume the Marcus Entities’ and/or the Selling Joint Ventures’, as applicable, obligations with respect thereto, but the Marcus Entities and/or the Selling Joint Ventures, as applicable, shall use reasonable efforts to obtain any such consent as soon as possible after the Closing or otherwise obtain for Buyer the practical benefit of such contract, agreement, property or rights and Buyer shall use reasonable efforts to assist in that endeavor; provided, however, that nothing in this Section 1.3 shall require the Marcus Entities or other Selling Joint Ventures to pay or agree to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions.

2.	ASSUMPTION OF LIABILITIES

2.1 Assumed Liabilities. Subject to the terms and conditions of this Agreement, on the Closing Date, the Marcus Entities and the Selling Joint Ventures shall assign to Buyer, and Buyer shall assume and agree to pay, honor, discharge and perform only the following Liabilities (the “Assumed Liabilities”):

2.1(a) Any Liabilities that arise and accrue from and after the Closing Date on account of Buyer’s ownership, conduct or operation of the Marcus Mid-Priced Lodging Businesses and/or Buyer’s use of the Purchased Assets, including under the Assigned Contracts and the Assigned Licenses and Permits;

2.1(b) Any Liabilities arising under the Ovations program and any other rewards or similar program of the Marcus Mid–Priced Lodging Businesses;

2.1(c) Any Liabilities with respect to deposit obligations for future bookings for which Buyer receives a credit hereunder;

2.1(d) Any Liabilities for breaches of the representations and warranties of the Marcus Entities and the Selling Joint Ventures herein for which indemnification is not required to be provided by the Marcus Entities;

2.1(e) Any Liabilities for any Adverse Diligence Discovery for which the Purchase Price is not adjusted pursuant to this Agreement;

2.1(f) Any Liabilities for Litigation related to the ownership, conduct, or operation of the Marcus Mid-Priced Lodging Businesses based on actions that occurred both prior to and after the Closing that are first asserted against Buyer, any Marcus Entity or any Selling Joint Venture in writing on or after the second anniversary of the Closing Date;

2.1(g) Any unused vacation to the extent earned by Affected Employees while employed by the Marcus Entities for which Buyer receives a credit hereunder;

2.1(h) Any Liabilities associated with COBRA, if any, with respect to all Affected Employees;

2.1(i) Any Liabilities for which Buyer receives a credit hereunder; and

2.1(j) Any Liabilities of the Marcus Entities to be borne by Buyer pursuant to Section 17.7(c).

2.2 Excluded Liabilities. The Marcus Entities and the Selling Joint Ventures are not assigning to Buyer and Buyer is neither assuming nor agreeing to pay, honor, discharge and perform any Liabilities of the Marcus Entities or the Selling Joint Ventures that are not explicitly Assumed Liabilities (the “Excluded Liabilities”), including, without limitation, the following Specifically Identified Excluded Liabilities:

2.2(a) Any Liabilities that arise or have arisen out of, in respect of or as the result of the ownership or operation of the Excluded Assets, including the shared assets set forth on Schedule 1.2(m), whether arising before or after the Closing Date;

2.2(b) Subject to Section 2.2(i), any Liabilities for any Infringement or alleged Infringement of the rights of any other Person relating to Trade Rights the proximate cause of which arise or have arisen out of, in respect of or as the result of (A) the ownership, operation or transfer of the Trade Rights at or prior to the Closing, or (B) the ownership or operation of any Trade Right that does not constitute a Purchased Asset;

2.2(c) Any Liability to any broker, finder or agent employed by the Marcus Entities, the Selling Joint Ventures or their Affiliates for any brokerage fees, finders fees or commissions with respect to the transactions contemplated by this Agreement;

2.2(d) Subject to Section 6.1(c), all Liabilities related to pre-Transfer Date employment by or service to a Marcus Entity or a Selling Joint Venture by any Employee or Contingent Worker including without limitation under any Employee Plans/Agreements (including any 401(k) plan) or similar plans, agreements or policies of the Marcus Entities, the Selling Joint Ventures or their Affiliates, whether arising before or after the Closing Date, including, without limitation, employee or employer contributions to any employee benefit or pension plan and obligations and liabilities for payroll, severance pay, Transaction Stay/Severance Payments, accrued vacation, personal days, sick leave, bonuses and all other compensation, and any Taxes, withholding and Tax reporting associated therewith, or any unemployment or workers compensation benefit;

2.2(e) Any Liabilities for Taxes owed by the Marcus Entities or their Affiliates for any period, whether payable before or after the Closing, including, without limitation (i) any Liability for Taxes of any other Person under Treasury Regulation Section 1.1502-6 (or any similar provision of applicable state, local or foreign law), as a transferee or successor, by contract, or otherwise, and (ii) other than as set forth in Section 17.7(c), any Liability for Taxes arising in connection with, or as a result of, the transactions contemplated by this Agreement or the Ancillary Agreements;

2.2(f) Any Liabilities of the Marcus Entities whether arising prior to or after the Closing Date under any inter-company payables of the Marcus Entities to any of their Affiliates;

2.2(g) Any Liabilities relating to any Liens or other exceptions to good and marketable title (or, with respect to the Properties subject to the Real Property Leases, leasehold title) to any of the Purchased Assets;

2.2(h) Except as otherwise expressly provided in Section 2.1, any Liabilities for accounts payable related to the operation of the Marcus Mid-Priced Lodging Businesses prior to the Closing, including, without limitation, any accounts payable relating to any goods or services provided for the benefit of the Marcus Entities and/or the Selling Joint Ventures prior to the Closing Date;

2.2(i) Any Liabilities for any Litigation (including, without limitation, any Litigation relating to personal injury, property damages, employee related matters or environmental matters and any third-party Litigation relating to the Marcus Entities’ ability to consummate the transactions contemplated by this Agreement) against Buyer, any Marcus Entity, any Selling Joint Venture, the Marcus Mid-Priced Lodging Businesses or otherwise affecting any of the Purchased Assets the proximate cause of which is based on any event, act, omission, or other state of facts first occurring or existing prior to the Closing Date; including, without limitation, any Liabilities based on any event, act, omission or other state of facts, occurring or existing both prior to and after the Closing Date, to the extent such are first asserted against Buyer, any Marcus Entity, any Selling Joint Venture or any of their Affiliates in writing prior to the second anniversary of the Closing Date;

2.2(j) Liabilities for which the Marcus Entities or the Selling Joint Ventures receive a credit hereunder;

2.2(k) Any Liabilities with respect to claims by any co-owners of any Joint Ventures arising from the operation of the Marcus Mid-Priced Lodging Businesses prior to the Closing Date or related solely to the transactions contemplated by this Agreement;

2.2(l) Subject to Sections 2.1(b), 2.2(i) and 12.3 and excluding Liabilities associated with reservations for periods including and after the Closing Date, any Liabilities to any guest or customer of the Marcus Mid-Priced Lodging Businesses arising from the operation of the Marcus Mid-Priced Lodging Businesses prior to the Closing Date;

2.2(m) Any material breach of the last sentence of Section 4.23(o);

2.2(n) Any Liabilities for breaches of the representations and warranties of the Marcus Entities and the Selling Joint Ventures herein for which indemnification is required to be provided by the Marcus Entities;

2.2(o) Any Liabilities of Buyer to be borne by the Marcus Entities pursuant to Section 17.7(c); and

2.2(p) Any general and administrative Liabilities associated with the Marcus Entities’ Milwaukee, Wisconsin headquarters, except those assumed by Buyer pursuant to Article 6.

3.	PURCHASE PRICE PAYMENT

3.1 Purchase Price. The purchase price (the “Purchase Price”) for the Purchased Assets shall be (a) the assumption of the Assumed Liabilities plus (b) the Aggregate Joint Venture Purchase Price (as determined pursuant to Section 3.3), plus (c) Three Hundred Ninety-One Million One Hundred Seventy-Five Thousand Dollars ($391,175,000) (the “Marcus Entity Cash Purchase Price”), minus (d) the Estimated Ovations^® Amount determined in accordance with Section 3.4hereof; provided that, after the Closing Date and following determination of the Final Ovations Amount and payment of any amounts associated therewith in accordance with Section 3.4, such amounts shall be substituted for the Estimated Ovations Amount when using the term “Purchase Price.” In addition, the Purchase Price shall be subject to the adjustments and prorations specified in this Agreement, including the adjustments and prorations in Sections 6.1(c), 7.9, 12.3 and 17.7(c) and Article 10.

3.2 Payment of Purchase Price. The Purchase Price shall be paid by Buyer as follows:

3.2(a) Earnest Money Deposit.

3.2(a)(i) Payment to Escrow Company; Investment of Earnest Money Deposit. On the date hereof (or, if this Agreement is executed after 2 p.m. New York time, within one business day thereafter), Buyer shall pay to Chicago Title Insurance Company, as escrow agent hereunder (in such capacity, the “Escrow Company”) an amount equal to Sixteen Million Dollars ($16,000,000) as a cash deposit (together with all interest earned thereon, the “Earnest Money Deposit”). The Earnest Money Deposit shall be invested in an interest bearing money market account (or such other investments as the Marcus Entities and Buyer may mutually agree upon in their reasonable discretion) with interest earned thereon for the benefit of the party entitled to receive the Earnest Money Deposit.

3.2(a)(ii) Release by Escrow Company; Disputes. At the Closing, the Earnest Money Deposit shall be delivered to the Marcus Entities. In the event of a termination of this Agreement, the Earnest Money Deposit will either be returned to Buyer or delivered to the Marcus Entities as provided for in Section 13.2(c). Any dispute, controversy or claim arising out of or relating to the Earnest Money Deposit shall be settled in accordance with Article 15 hereof, provided, that all costs, fees and expenses, including, without limitation, reasonable attorneys fees and court costs incurred by the prevailing party determined to be entitled to retain the entire Earnest Money Deposit shall be reimbursed by the non-prevailing party.

3.2(b) Assumption of Liabilities. At the Closing, Buyer shall deliver to the Marcus Entities an assumption of the Assumed Liabilities in accordance with Section 12.2(c) to evidence the assumption of the Assumed Liabilities.

3.2(c) Cash to the Marcus Entities. At the Closing, Buyer shall deliver to the Marcus Entities (or, to a third party designated by the Marcus Entities in writing to facilitate one or more like kind exchanges, as permitted by Section 14.14) in cash (i) the Marcus Entity Cash Purchase Price, minus the Earnest Money Deposit (subject to its payment to the Marcus Entities pursuant to Section 3.2(a)) plus (ii) the Aggregate Joint Venture Purchase Price, minus, (iii) the Estimated Ovations Amount, subject in each case to the prorations and adjustments provided for in Sections 6.1(c), 7.9, 12.3 and 17.7(c) and Article 10 (collectively, the “Closing Date Cash Amount”). Notwithstanding the foregoing, a portion of the Closing Date Cash Amount allocated to the Subdivision Properties shall, to the extent required under Section 7.14, be deposited with the Escrow Company and distributed pursuant to Section 7.14.

3.2(d) Method of Payment. All payments under this Section 3.2 shall be made by wire transfer of immediately available funds to an account designated in writing by the Buyer or the Marcus Entities, as applicable, prior to the time for payment specified herein.

3.3 Aggregate Joint Venture Purchase Price.

3.3(a) Joint Venture Offers.

3.3(a)(i) Exhibit A attached hereto sets forth for the Joint Venture set forth thereon (i) the purchase price (the “JV Asset Price”) which Buyer is willing to pay for the assets of such Joint Venture (the “Joint Venture Property”) and (ii) the purchase price (the “JV Property Management Price”) which Buyer is willing to pay for the management rights (the “JV Management Rights”) associated with such Joint Venture Property. The transactions subject to this Section 3.3 are subject to the waiver of Rights of First Refusal (as defined below) or the receipt of the consent of the partners in the Joint Ventures other than Baymont Partners (the “Third Party Partners”). The Buyer acknowledges that the Marcus Entities may decide to retain, in their sole discretion and for such period as they determine in their sole discretion, some or all of the purchase price otherwise payable to the Third Party Partners to satisfy any claims Buyer may have hereunder with respect to the assets sold by such Selling Joint Ventures.

3.3(a)(ii) Exhibit A-1 attached hereto sets forth for each Joint Venture set forth thereon (i) the sum of the JV Asset Price and the JV Management Price (the “Aggregate Individual JV Price”) and (ii) the maximum amount of the Aggregate Individual JV Price that the Buyer is willing to allocate to the applicable JV Management Rights (shown on Exhibit A-1 as “Maximum JV Property Management Price”). Within fifteen (15) days after the date hereof, the Marcus Entities shall send Buyer a notice regarding whether it will, with respect to each Joint Venture set forth on Exhibit A-1, either (a) choose to have such Joint Venture treated in accordance with Section 3.3(a)(i) (in which case Buyer and the Marcus Entities shall mutually determine the amount of the applicable JV Property Management Price and the applicable JV Asset Price, the total of both of which shall, for each Joint Venture Property, equal the applicable Aggregate Individual JV Price) or (b) enter into a franchise agreement for the operation of such Joint Venture Property as a Baymont Hotel identical, in all material respects, to the franchise agreements currently used by the Marcus Entities; provided, however, that notwithstanding anything to the contrary contained in this Agreement including, without limitation, Section 14.16, such franchise agreement shall contain a twenty (20) year term with a right to terminate after five (5) years and a requirement to pay penalties, liquidated damages and other such usual and customary remedies in the event of any termination of the franchise agreement by the franchisee prior to (but not after) the fifth anniversary of the commencement of the term of such franchise agreement other than as a result of an event of default by the franchisor. If the Marcus Entities have elected pursuant to clause (a) above to have such Joint Venture treated in accordance with Section 3.3(a)(i) but Buyer and the Marcus Entities do not mutually agree on the amount of the applicable JV Property Management Price and the applicable JV Asset Price within two (2) business days after such election, then such election shall be deemed revoked and the parties shall enter into a new franchise agreement pursuant to clause (b) above.

3.3(b) Joint Venture Right of First Refusal. The partnership or operating agreements for the five (5) Joint Ventures described on Schedule 3.3(b) provide that, in the event the Joint Venture receives a bona fide offer to purchase the Joint Venture Property, the Third Party Partners may refuse to allow the sale of the Joint Venture Property if they, instead, exercise their right (the “Right of First Refusal”) to purchase the Joint Venture Property on the same terms and conditions as presented in the bona fide offer. Within five (5) business days after the date of this Agreement (or, in the case of the Joint Ventures set forth in Exhibit A-1, within five (5) business days after the applicable JV Asset Price is determined and in accordance with Section 3.3(a)(ii)), Baymont Partners shall send to each of the applicable Third Party Partners in such Joint Ventures a notice containing Buyer’s offer to purchase the Joint Venture Property for a purchase price equal to the applicable JV Asset Price. Such notice shall comply with the Right of First Refusal and notice provisions of the applicable Joint Venture or operating agreement, and a copy of each such notice shall be sent contemporaneously to Buyer. Within two (2) business days after receiving any notice from a Third Party Partner of its election to purchase the Joint Venture Property (or its election to waive its Right of First Refusal), but in no event later than thirty (30) days after delivery of the Right of First Refusal notice, the Marcus Entities shall communicate the decision of the Third Party Partners to Buyer, confirming such communication with a copy of the written notice from the Third Party Partners. If the Third Party Partners agree to the sale of Joint Venture Property (the “Selling Third Party Partners”), then Baymont Partners shall (i) cause such Joint Venture Property to be sold to Buyer for the JV Asset Price for such Joint Venture and (ii) sell the applicable JV Management Rights to Buyer for the JV Property Management Price for such Joint Venture. If any Third Party Partners exercise their Right of First Refusal, then such Joint Venture Property shall be subject to Sections 3.3(d) and 14.16.

3.3(c) Third Party Partner Consents. Baymont Partners agrees to use reasonable efforts to obtain the consent of the Third Party Partners for the sale of the Willowbrook Limited Partnership Joint Venture Property to Buyer for the JV Asset Price set forth for such Joint Venture Property in Exhibit A-1; provided, however, that Baymont Partners shall not be required to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions in order to obtain such consent. If all applicable Third Party Partners agree to the sale of such Joint Venture Property, then that Joint Venture shall be deemed to be included in the term “Selling Joint Ventures” and Baymont Partners shall (i) cause such Joint Venture Property to be sold to Buyer for the JV Asset Price set forth for such Joint Venture in Exhibit A-1 and (ii) shall sell the applicable JV Management Rights to Buyer for the JV Property Management Price set forth for such Joint Venture in Exhibit A-1. If any of such Third Party Partners fail to consent to such sale, then such Joint Venture Property shall be subject to Sections 3.3(d) and 14.16.

3.3(d) JV Property Management Agreement. In the event that a Joint Venture Property is not purchased by Buyer as a result of the Third Party Partner’s exercise of its Right of First Refusal or failure to consent to such sale, as the case may be, Baymont Partners will use reasonable efforts to arrange for such nonselling Joint Venture (or successor entity if the Third Party Partners take title in a different entity following the exercise of their Right of First Refusal) either (i) to consent to an assignment of the existing Management Agreement for the applicable Joint Venture Property to Buyer as manager if such Management Agreement contains a remaining term of at least twenty (20) years (including all remaining extension options which may be unilaterally exercised by the manager thereunder in its sole discretion) (each, an “Assigned JV Property Management Agreement”) or (ii) to enter into a new twenty (20) year management agreement with Buyer in the form attached to this Agreement as Exhibit C for the operation of the applicable Joint Venture Property under the trade name selected by Buyer if the remaining term of the existing Management Agreement for the applicable Joint Venture Property is less than twenty (20) years (including all remaining extension options which may be unilaterally exercised by the manager thereunder in its sole discretion) (each, a “New JV Property Management Agreement”); provided, however, that (i) Baymont Partners shall not be required to pay or agree to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions in order to arrange for such consent to an Assigned JV Property Management Agreement or entry into such New JV Property Management Agreement and (ii) since there is no existing Management Agreement for the Joint Venture Property owned by Willowbrook Motel Limited Partnership, only clause (ii) above shall be applicable to such Joint Venture. If a Joint Venture or successor entity either consents to an Assigned JV Property Management Agreement or enters into a New JV Property Management Agreement with Buyer as set forth above, then Buyer shall pay to the Marcus Entities the JV Property Management Price for the applicable Joint Venture Property.

3.3(e) Cooperation. If a Joint Venture Property is not purchased by Buyer as a result of the Third Party Partner’s exercise of its Right of First Refusal or failure to consent to such sale, as the case may be, and such Third Party Partner also does not consent to an Assigned JV Property Management Agreement or a New JV Management Agreement pursuant to Section 3.3(d), then the Marcus Entities shall reasonably cooperate in connection with and shall not oppose Buyer’s efforts to obtain the consent of such Third Party Partner to a franchise agreement for the operation of the applicable Joint Venture Property as a Baymont Hotel on the terms set forth in clause (b) of Section 3.3(a)(ii) including, without limitation, the provisions for penalties, liquidated damages and other such usual and customary remedies in the event of any termination of such franchise agreement by the franchisee prior to the fifth (5^th) anniversary thereof; provided, however, that the Marcus Entities shall have no obligation to incur any unreimbursed out-of-pocket costs or agree to any unfavorable terms or conditions in connection with such cooperation.

3.3(f) Definitions.

3.3(f)(i) “Aggregate Joint Venture Price” shall mean the sum of the Joint Venture Purchase Prices.

3.3(f)(ii) “Joint Venture Purchase Price” shall, with respect to any Joint Venture, be either (A) if Third Party Partners in a Joint Venture elect to exercise their Right of First Refusal or fail to consent to a sale, as applicable, and consent to an Assigned JV Property Management Agreement or enter into a New JV Property Management Agreement, then the applicable JV Property Management Price, (B) if Third Party Partners in a Joint Venture elect to exercise their Right of First Refusal or fail to consent to a sale, as applicable, but such Joint Venture (or successor entity) does not consent to an Assigned JV Property Management Agreement or enter into a New JV Property Management Agreement, zero, or (C) if Third Party Partners elect not to exercise their Right of First Refusal or consent to the sale, as applicable, and the Joint Venture Property is sold to Buyer, the sum of (i) the applicable JV Asset Price, plus (ii) the applicable JV Property Management Price hereto.

3.3(f)(iii) “Selling Joint Venture” shall mean each Joint Venture that sells its Joint Venture Property to Buyer pursuant to this Agreement and the Ancillary Agreements.

3.4 Ovations^® Liability.

3.4(a) On or before ten (10) business days prior to the scheduled Closing Date, the Marcus Entities shall in good faith prepare, with the assistance of Buyer, a schedule (the “Estimated Ovations Schedule”) summarizing the estimated accrued liabilities under the Ovations or similar guest rewards program of the Marcus Entities determined in accordance with Marcus GAAP as of such date (the “Estimated Ovations Amount”), together with the assumptions underlying such estimated accrued liabilities. The Estimated Ovations Schedule shall be prepared from the internal financial records of the Marcus Mid–Priced Lodging Businesses. Prior to Closing, the Buyer shall have the right to inspect and object to this schedule and the Marcus Entities shall provide reasonable access to Buyer for the purposes of this inspection.

3.4(b) As soon as reasonably practical after the Closing Date, the Marcus Entities shall prepare in good faith a schedule (the “Final Ovations Schedule”) setting forth the type of data set forth on the Estimated Ovations Schedule. The Final Ovations Schedule shall be prepared from the internal financial records of the Marcus Mid–Priced Lodging Businesses (as then conducted by Buyer or an Affiliate thereof) and shall be prepared in accordance with Marcus GAAP as of such date and otherwise in a manner entirely consistent with the Estimated Ovations Schedule. The Marcus Entities shall, within thirty (30) days of the Closing Date, deliver the Final Ovations Schedule to the Buyer. The Final Ovations Schedule, and the estimated accrued liabilities under the Ovations or similar guest rewards programs of the Marcus Mid-Priced Lodging Businesses as of the Closing Date reflected thereon and prepared in accordance with the Estimated Ovations

Schedule (the “Final Ovations Amount”) shall be binding upon the parties upon approval of such Final Ovations Schedule by Buyer. If Buyer does not believe that the Final Ovations Schedule and the calculation of the Final Ovations Amount stated thereon were prepared and calculated in a manner entirely consistent with the Estimated Ovations Schedule, and Buyer and the Marcus Entities cannot mutually agree on the same, then either the Marcus Entities or Buyer may at any time give notice (an “Ovations Appraisal Notice”) to the other party. Within five (5) business days after an Ovations Appraisal Notice is given, the Marcus Entities and Buyer each shall provide to KPMG LLP or, if KPMG LLP declines to be so retained, another mutually agreed upon national accounting firm (the “Ovations Valuation Expert”), with a copy to the other party, their opinion (each an “Ovations Opinion”) as to the proper valuation of the Final Ovations Amount, together with such supporting documentation as they may desire to provide. If one party fails to deliver its Ovations Opinion within such five business day period but the other party has timely delivered its Ovations Opinion, then the Final Ovations Amount shall automatically and conclusively be deemed to be the amount set forth in the Ovations Opinion so delivered by such party. If both parties have timely delivered their Ovations Opinions to the Ovations Valuation Expert, then the Final Ovations Amount shall be determined “baseball style” such that the Ovations Valuation Expert must choose, as the Final Ovations Amount, the amount set forth in either the Marcus Entities’ or Buyer’s Ovations Opinion, and shall have no right to make any other determination as to the Final Ovations Amount. The Ovations Valuation Expert shall choose the Final Ovations Amount set forth in either the Marcus Entities’ or Buyer’s Ovations Opinion within five (5) business days after the delivery of both of the Ovations Opinions, and such determination shall be final and binding on the Marcus Entities and Buyer, without any Liability to the Ovations Valuation Expert.

3.4(c) Within three (3) business days following determination of the Final Ovations Amount in accordance with Section 3.4(b), (i) in the event the Final Ovations Amount is less than the Estimated Ovations Amount, Buyer shall pay to the Marcus Entities an amount from the Buyer equal to the difference between such amounts and, (ii) in the event the Final Ovations Amount is greater than the Estimated Ovations Amount, the Marcus Entities shall pay to the Buyer the difference between such amounts, in each case by wire transfer of immediately available funds.

3.4(d) Nothing in this Section 3.4 shall affect the prorations provided for in Section 12.3.

3.4(e) Except as expressly set forth in this Section 3.4, the Marcus Entities shall have no post-Closing Liabilities related to the Ovations program.

3.5 Allocation of Purchase Price. Buyer and the Marcus Entities shall cooperate to prepare, to the extent practicable, prior to the Closing Date, a mutually agreed upon allocation of the Purchase Price among the Purchased Assets in accordance with Section 1060 of the Code and the Treasury Regulations thereunder. Buyer and the Marcus Entities shall endeavor in good faith to agree upon a mutually satisfactory allocation of the Purchase Price, failing which, the matter shall, after Closing, be referred to an independent appraisal or accounting firm mutually agreed upon by the parties for resolution of such dispute. The determination of the independent appraisal or accounting firm shall be binding on both the Buyer and the Marcus Entities. The Marcus Entities and Buyer will follow and use the allocation determined according to this Section 3.5 in all Tax Returns, filings or other related reports made by them to any Tax authorities, and neither the Marcus Entities nor Buyer shall file any such Tax returns, filings or other related reports that are inconsistent with such allocation. To the extent that disclosures of this allocation are required to be made by the parties to the Internal Revenue Service (“IRS”) under the provisions of Section 1060 of the Code, or any regulations thereunder, Buyer and the Marcus Entities will disclose such reports to the other prior to filing with the IRS. The Marcus Entities and Buyer acknowledge and agree that Buyer may, in its discretion and at its sole expense, retain an independent appraisal firm to assist in the preparation of the allocation of the Purchase Price among the Purchased Assets, but that in no event shall such appraised values be deemed to constitute the valuations that will be established pursuant to this Section 3.5. Similarly, (i) in no event will the valuations set forth in Exhibit D be deemed to constitute the valuations attributable to the Purchased Assets for purposes of this Section 3.5 unless otherwise agreed by the parties, each in their sole discretion and (ii) in no event will the allocation of the Purchase Price under this Section 3.5 be deemed to constitute the valuations of the Purchased Assets for any other purpose.

4.	REPRESENTATIONS AND WARRANTIES OF THE MARCUS ENTITIES

The Marcus Entities, jointly and severally, make the following representations and warranties to Buyer, each of which is true and correct on the date hereof and shall remain true and correct in all material respects to and including the Closing Date and shall expire after the Closing on the date set forth in Section 11.1. For purposes of this Article 4, the Marcus Entities shall be deemed to include the Joint Ventures and exclude the Excluded Properties except where the context clearly contemplates otherwise. All representations, warranties or covenants of the Marcus Entities included in the Recitals (or contemplated thereby) are incorporated herein and expressly agreed to and acknowledged by the Marcus Entities. EXCEPT AS SPECIFICALLY PROVIDED IN THIS ARTICLE 4 OR IN ANY DEED DELIVERED BY THE MARCUS ENTITIES AT CLOSING, THE SALE, TRANSFER AND CONVEYANCE OF THE PURCHASED ASSETS BY THE MARCUS ENTITIES TO BUYER AND BUYER’S PURCHASE OF THE PURCHASED ASSETS IS MADE “AS IS” AND “WHERE IS” AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES BY THE MARCUS ENTITIES OF ANY KIND, NATURE OR DESCRIPTION WHATSOEVER, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AND/OR REPRESENTATIONS OF QUALITY, MERCHANTABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR PHYSICAL CONDITION. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE PURCHASED ASSETS, THE MARCUS ENTITIES SHALL HAVE NO RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO, EXCEPT AS SPECIFICALLY SET FORTH IN ARTICLE 11. THIS AGREEMENT SHALL NOT BE GOVERNED BY THE WARRANTIES PROVIDED BY ARTICLE 2 OF THE UNIFORM COMMERCIAL CODE AS ADOPTED IN ANY JURISDICTION.

4.1 Corporate.

4.1(a) Organization. Each of the Marcus Entities is duly organized, validly existing and in good standing under the Laws of its state of organization or formation, as applicable, and (i) is qualified to do business in the jurisdiction in which the Properties it holds are located except where the failure to so qualify would not have a Property Material Adverse Effect and (ii) except where the failure to so qualify would not have a Material Adverse Effect, is qualified to do business in each jurisdiction in which such qualification is necessary.

4.1(b) Authorization; Validity. Each of the Marcus Entities has all requisite power and authority under its organizational documents and the Laws of its state of organization or formation, as applicable, to execute and deliver this Agreement and the Ancillary Agreements as to which it is or will be a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. No other or further act or proceeding on the part of any Marcus Entity is necessary to authorize this Agreement or the Ancillary Agreements or consummation by them of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, the Ancillary Agreements will constitute, valid and binding agreements of the Marcus Entities, enforceable against them in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally.

4.1(c) Power. The Marcus Entities have all requisite power and authority to own, operate and lease the Purchased Assets, to carry on the Marcus Mid–Priced Lodging Businesses as and where such are now being conducted by them, to enter into this Agreement and the Ancillary Agreements as to which they are or will be a party and to carry out the transactions by them contemplated hereby and thereby.

4.2 No Real Property Violation. Except as described on Schedule 4.2 (those matters described on Schedules 4.2 and 4.4 are herein referred to as the “Marcus Material Consents”), the execution and delivery of this Agreement or the Ancillary Agreements as to which they are or will be a party and the performance or consummation by the Marcus Entities of the transactions contemplated hereby and thereby did not and will not (a) contravene, conflict with, or result in a breach or violation of any applicable Law or Order of any Government Entity to which Marcus, the Marcus Entities or the Selling Joint Ventures or their respective assets or properties (including the Purchased Assets) are subject, except for any such contravention, conflict, breach or violation which does not have, in the case of a Law, Order or other restriction applicable to a Property, a Property Material Adverse Effect or, otherwise, a Material Adverse Effect; or (b) contravene, conflict with, result in a breach of, constitute a default under, result in the creation of any Lien upon any of the Purchased Assets under, result in the acceleration of any obligation under, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, indenture, loan, credit agreement or note, Lien, or other arrangement to which any of the Marcus Entities or the Selling Joint Ventures is a party or by which it is bound or to which any of its assets (including the Purchased Assets) is subject (or result in the creation or imposition of any Lien upon any of its assets, including the Purchased Assets).

4.3 Financial Statements. Included as Schedule 4.3 are copies of the Financial Statements, the Recent Financial Statement and the historical financial statements included in the offering circular provided on behalf of the Marcus Entities to Buyer (collectively, the “Bid Document Financial Statements”).

All of the Bid Document Financial Statements (including, if applicable, any notes and schedules contained therein or annexed thereto and, in the case of the Recent Financial Statements, subject to normal and recurring year-end adjustments not material in amount) (i) have been prepared on a consistent basis (other than, if applicable, as specified in the notes thereto) in accordance with Marcus GAAP (taking into account the absence of any balance sheet and excluding (a) all projections for 2004 and (b) such items that are not calculated in accordance with generally accepted accounting principles such as RevPAR, number of rooms, number of hotels, number of available rooms, number of occupied rooms, occupancy percentage, average daily rate and EBITDA), and (ii) excluding all projections for 2004, fairly present in all material respects the EBITDA, RevPAR, number of rooms, occupancy percentage, average daily rate, number of hotels, number of available rooms and number of occupied rooms of the Marcus Mid-Priced Lodging Businesses as of the dates and for the years and periods indicated, each as presented therein. The Bid Document Financial Statements were derived from the historical audited financial statements of Marcus included in its annual reports on Form 10-K filed with the SEC and can be reasonably reconciled back to the financial records supporting such Marcus SEC filings.

4.4 No Corporate Violations. Except as described on Schedule 4.4 (those matters described on Schedule 4.4are also included in the definition of “Marcus Material Consents”), the execution and delivery of this Agreement or the Ancillary Agreements as to which they are or will be a party and the performance or consummation by the Marcus Entities of the transactions contemplated hereby or thereby did not and will not (a) contravene, conflict with or result in a breach or violation of any applicable Law or Order of any Government Entity, or court to which Marcus, the Marcus Entities are subject, except for any such contravention, conflict, breach or violation which does not have (i) in the case of a Law, Order or other restriction applicable to the Baymont Franchises, a Franchise Material Adverse Effect, or (ii) otherwise, a Material Adverse Effect, (b) contravene, conflict with or result in a violation or breach of any provision of the organizational documents of Marcus, the Marcus Entities or the Selling Joint Ventures or require further approval of the Marcus Board of Directors or approval of the Marcus stockholders, or (c) except for (i) applicable requirements of the HSR Act and (ii) WARN obligations associated with Employees who work at the Marcus Entities’ headquarters and the Baymont Inn located in Milwaukee and provided that Buyer complies with its obligations set forth in Section 6.1, require any authorization, consent, approval, exemption or other action by or notice to any Government Entity (including, without limitation, under any “plant closing” or similar Law) or Person.

4.5 Utilities. To the Marcus Entities’ knowledge, all utilities and similar services necessary for the use and operation of the Properties as operated in accordance with past practices (including, without limitation, gas, water, electricity, telephone, and cable television) are available thereto from public ways or through easements and are of sufficient capacity to meet the needs and requirements necessary for the current use and operation of each of the Properties, except where such non-availability would not have a Property Material Adverse Effect. To the Marcus Entities’ knowledge, no fact, condition or proceeding exists which would result in the termination or material impairment of the furnishing of such utilities to any of the Properties.

4.6 Taxes.

4.6(a) Tax Returns. All Tax Returns required to be filed by or on behalf of the Marcus Entities have been timely filed and are correct and complete in all material respects and all Taxes required to be paid by the Marcus Entities have been paid, other than Taxes not yet due and payable. Except as disclosed on Schedule 4.6(a), no Taxes or special assessments of any kind (special, bond or otherwise) are or have been levied with respect to the Properties, or any portion thereof, or the Marcus Mid–Priced Lodging Businesses, which are outstanding or unpaid, other than amounts not yet due and payable or if due and payable, not yet delinquent, or that will not be paid at or prior to Closing. The Purchased Assets are not subject to any Liens that will not be paid in full, and the Lien released (or, in the case of Liens affecting any Property, insured over by the title company insuring title to the Property as required hereunder), at or prior to Closing, for Taxes owed for periods prior to the Closing Date, and no such Liens will arise by operation of Law after the Closing Date with respect to Taxes accruing on or before the Closing Date, other than Taxes not yet due and payable.

4.6(b) Disputes. There is no pending material dispute or claim concerning any Tax liability relating to the Purchased Assets (including the Properties) or the Marcus Mid–Priced Lodging Businesses (A) claimed or raised by any Government Entity in writing or (B) to the knowledge of the Marcus Entities, based upon personal contact with any agent of such Government Entity. No Marcus Entity nor any Selling Joint Venture has received any written notice of any audit of any Taxes payable with respect to any of the Purchased Assets (including the Properties) which has not been resolved or completed, and, except as set forth on Schedule 4.6(b), no Marcus Entity or Selling Joint Venture is currently contesting any such Taxes or seeking an abatement or rollback of any Taxes. Except as set forth on Schedule 4.6(b), none of the Marcus Entities has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. None of the Marcus Entities is a party to any Income Tax allocation or sharing agreement.

4.7 Condemnation; Eminent Domain. There are no pending condemnation proceedings, nor, to the knowledge of the Marcus Entities, have there been any condemnation proceedings threatened in writing, related to any of the Properties or proceedings seeking the taking of any portion of the Properties through the power of eminent domain.

4.8 Inventory. Except as described on Schedule 4.8, all Inventory of the Marcus Mid–Priced Lodging Businesses is located on premises owned or leased by the Marcus Entities. The Marcus Entities have, and as of the Closing Date will have, such Inventory (of a quality usable in the ordinary course of business) as is reasonably necessary to meet the needs of the Marcus Mid–Priced Lodging Businesses in the ordinary course of business consistent with past practice.

4.9 Absence of Certain Changes. Except as and to the extent described on Schedule 4.9 and the Transaction Stay/Severance Payments, or otherwise contemplated or required by this Agreement, since the date of the Recent Financial Statement there has not been:

4.9(a) Material Adverse Effect. Any event or circumstance that, individually or in the aggregate, could reasonably be expected to have (i) in the case of an event or circumstance affecting a Property, a Property Material Adverse Effect , (ii) in the case of an event or circumstance affecting Baymont Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect;

4.9(b) Material Increase in Compensation. Except as required or contemplated by Article 6, and except for bonuses and benefits payable for the Marcus Entities’ fiscal 2004 year consistent with ordinary course and past practices and ordinary and normal salary and bonus increases to any of the Employees, officers, or Contingent Workers of the Marcus Mid–Priced Lodging Businesses in the ordinary course of business, any material increase in the salaries, wages or other programs of a compensatory nature payable or to become payable to any Employee, officer, or Contingent Worker of the Marcus Mid–Priced Lodging Businesses (including, without limitation, any increase or change pursuant to any Employee Plan/Agreement);

4.9(c) Commitments. Any material commitment, obligation or liability of any nature incurred by the Marcus Entities related to the Marcus Mid–Priced Lodging Businesses that would be an Assigned Contract or Assumed Liability, other than in the ordinary course of business and consistent with past practices;

4.9(d) Liens. Any Lien made on any of the Purchased Assets which is not in the ordinary course of business and will not be terminated at or prior to Closing; provided, however, that in no event shall any mortgage or deed of trust, security interest, or other monetary lien or any lease, reciprocal easement agreement or other material title encumbrance be deemed to be in the ordinary course of business, except the leases contemplated by Section 7.14 and the instruments contemplated by Section 7.15;

4.9(e) Material Amendment of Assigned Contracts. Any entering into, material amendment or termination before the stated term of any Assigned Contract, or any waiver of material rights thereunder, other than in the ordinary course of business and consistent with past practices;

4.9(f) Loans and Advances. Any loan or advance to any Employee or officer of the Marcus Mid–Priced Lodging Businesses, other than advances in the ordinary course of business for travel and entertainment and similar out-of-pocket expenses;

4.9(g) Contingent Liabilities. Any contingent liability relating to the Marcus Mid–Priced Lodging Businesses incurred by any Marcus Entity with respect to the obligations of others or any cancellation of any material debt or claim owing to, or waiver of any material right of, any Marcus Entity relating to the Marcus Mid–Priced Lodging Businesses, other than in the ordinary course of business;

4.9(h) Purchase or Sale. Any purchase, sale or other disposition, or any agreement or other arrangement for the purchase, sale or other disposition, of any of the Purchased Assets other than in the ordinary course of business;

4.9(i) Labor Dispute. Any labor dispute including, without limitation, picketing of any nature, strike, lockout or demand by any labor organization, Employees and/or Contingent Workers for union recognition or a union representation election, or claim of unfair labor practices relating to the Marcus Mid–Priced Lodging Businesses, which, individually or in the aggregate, could reasonably be expected to have a Property Material Adverse Effect;

4.9(j) Management. Any grant of severance or termination pay to any officer or Employee of the Marcus Entities rendering services principally to the Marcus Mid-Priced Lodging Businesses or any increase in benefits payable under any existing severance or termination pay policies or employment agreements applicable to the officers or management of the Marcus Entities;

4.9(k) Bookkeeping. Any material change in the manner of keeping books, accounts or records, accounting methods or practices, or pricing policies used with respect to the Marcus Mid–Priced Lodging Businesses;

4.9(l) Transactions. Any other transaction entered into by the Marcus Entities relating to the Marcus Mid–Priced Lodging Businesses other than (a) transactions in the ordinary course of business, the transactions with Buyer contemplated hereby, and (b) transactions relating to the Retained Real Property or Excluded Properties;

4.9(m) Capital Asset Acquisitions or Sales. Any purchase or sale by any of the Marcus Entities of any capital asset (or bulk purchases of capital assets) which is used or held for used principally in the Marcus Mid–Priced Lodging Businesses costing more than $25,000, individually or in the aggregate, other than transactions permitted by Section 4.9(l);

4.9(n) Insurance. Any material change in the kind and amount of insurance maintained by the Marcus Entities relating to the Marcus Mid–Priced Lodging Businesses other than in the ordinary course of business; or

4.9(o) Other Agreements. Any agreement or understanding whether in writing or otherwise, that would result in any of the transactions or events or require any of the Marcus Entities to take any of the actions specified in Section 4.9(a) through 4.9(n) above.

4.10 No Litigation. Except as described on Schedule 4.10, there is no Litigation pending or, to the Marcus Entities’ knowledge, threatened in writing against any Marcus Entity, Selling Joint Venture, the Marcus Mid–Priced Lodging Businesses or otherwise affecting any of the Purchased Assets which, if adversely determined, would result in (i) the case of any Litigation with respect to any Property, a Property Material Adverse Effect, (ii) the case of any Litigation with respect to Baymont Franchises, a Franchise Material Adverse Effect or (iii) otherwise, a Material Adverse Effect. Except as described on Schedule 4.10, neither the Marcus Entities, the Marcus Mid–Priced Lodging Businesses nor the Purchased Assets is subject to any Order, which would result in (x) in the case of any Litigation with respect to any Property, a Property Material Adverse Effect, (y) in the case of any Litigation with respect to the Baymont Franchises, a Franchise Material Adverse Effect or (z) otherwise, a Material Adverse Effect. All current Litigation affecting the Marcus Mid–Priced Lodging Businesses is identified on Schedule 4.10.

4.11 Ordinary Course. Since the date of the Recent Financial Statements, the Marcus Mid-Priced Lodging Businesses have been conducted in the ordinary course and consistent with prior practices.

4.12 Compliance With Laws and Orders; Permits; Environmental Matters; Title.

4.12(a) Compliance. To the Marcus Entities’ knowledge and except as described on Schedule 4.12(a), the Marcus Entities are in compliance with all applicable Laws and Orders in the operation of the Marcus Mid–Priced Lodging Businesses, except for instances of noncompliance which would not have (i) in the case of Laws or Orders applicable to any Property, a Property Material Adverse Effect, (ii) in the case of any Laws or Orders applicable to Baymont Franchises or Woodfield Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect. Except as described on Schedule 4.12(a), to the Marcus Entities’ knowledge, no Marcus Entity or Selling Joint Venture has, within the past five years, received written notice of any violation or alleged violation of any Laws or Orders at any Property which had or would have had (i) in the case of Laws or Orders applicable to any Property, a Property Material Adverse Effect, (ii) in the case of any Laws or Orders applicable to Baymont Franchises or Woodfield Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect. Except as described on Schedule 4.12(a), to the Marcus Entities’ knowledge, no Marcus Entity or Selling Joint Venture is subject to any Liability for past or continuing violations of any Laws or Orders regarding the operation of the Marcus Mid–Priced Lodging Businesses which would have (i) in the case of Laws or Orders applicable to any Property, a Property Material Adverse Effect, (ii) in the case of any Laws or Orders applicable to Baymont Franchises or Woodfield Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect. All reports and returns relative to any Purchased Asset required to be filed by the Marcus Entities (or any of them) with any Government Entity have, to the Marcus Entities’ knowledge, been filed, and were accurate and complete when filed, except for instances which would not have (i) in the case of reports and returns applicable to any Property, in a Property Material Adverse Effect, (ii) in the case of reports and returns applicable to Baymont Franchises or Woodfield Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect. Without limiting the foregoing, to the knowledge of the Marcus Entities (i) the use of each Property for its present use(s) is currently an allowed, permitted, conditional, special or legal nonconforming use(s) under applicable zoning Laws, except where such noncompliance would not have a Property Material Adverse Effect, (ii) the building improvements at each Property comply with all current setback, height, floor area ratio, lot coverage and other requirements under applicable zoning Laws, (iii) the parking at each of the Properties complies with the current parking requirements under applicable zoning Laws, (iv) except as set forth in Schedule 4.12(a), no use of any off-site facilities for parking or otherwise is necessary to ensure compliance with any zoning Laws or other Laws applicable to the Properties, and (v) there are no pending requests, applications or proceedings filed with, under review by, or pending determination by any Governmental Entity to alter or restrict the zoning or impose other use(s) restrictions applicable to the Properties.

4.12(b) Licenses and Permits. To the Marcus Entities’ knowledge, the Marcus Entities have all Licenses and Permits required for the conduct of the Marcus Mid–Priced Lodging Businesses and operation of the Properties as operated in accordance with past practices, except for such failures to obtain such Licenses and Permits which would not have (i) in the case of Licenses and Permits applicable to a Property, a Property Material Adverse Effect, (ii) in the case of Licenses and Permits applicable to Baymont Franchises or Woodfield Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect. All Licenses and Permits required for the conduct of the Marcus Mid–Priced Lodging Businesses and operation of the Properties as operated in accordance with past practices are in full force and effect, except for instances which would not have (i) in the case of Licenses and Permits applicable to a Property, a Property Material Adverse Effect, (ii) in the case of Licenses and Permits applicable to Baymont Franchises or Woodfield Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect. Except as described on Schedule 4.12(b), the Marcus Entities are and have been in compliance with all such Licenses and Permits, except for instances of noncompliance which would not have a (i) in the case of Licenses and Permits applicable to a Property, a Property Material Adverse Effect, (ii) in the case of Licenses and Permits applicable to Baymont Franchises or Woodfield Franchises, a Franchise Material Adverse Effect, or (iii) otherwise, a Material Adverse Effect.

4.12(c) Environmental Matters. Without limiting the generality of the foregoing provisions of this Section 4.12, except as described on Schedule 4.12(c): (i) to the Marcus Entities’ knowledge, the Marcus Mid–Priced Lodging Businesses are being operated in compliance with all Environmental Laws, except for instances of noncompliance which would not have a Property Material Adverse Effect, (ii) during the period of ownership of the Properties by any Marcus Entity or Selling Joint Venture, no Marcus Entity or Selling Joint Venture has received any written notice from any Government Entity or neighboring, upgradient or downgradient property owner or other third party regarding any non compliance with or violation of any Environmental Laws with respect to the Properties or the presence or release of Hazardous Substances in violation of Environmental Laws in, on, under, or from the Properties, and, to the knowledge of the Marcus Entities, there is no current noncompliance of any of the Properties with Environmental Laws, except for instances of noncompliance which would not have a Property Material Adverse Effect, and there has not been any release of Hazardous Substances in violation of Environmental Laws or which required any so-called “response action” (which may include remediation) under any Environmental Law or other requirement of any Government Entity in, on, under or from any of the Properties, and (iii) during the period of ownership of the Properties by any Marcus Entity or Selling Joint Venture, no Marcus Entity or Selling Joint Venture has made or been requested in writing to make any report or disclosure to any Government Entity relating to a release of Hazardous Substances to or from any of the Properties.

4.12(d) Title to Purchased Assets. The Marcus Entities or the Selling Joint Ventures, as applicable, have good and marketable title (or, with respect to leased property, leasehold title) to all of the Purchased Assets, free and clear of all Liens, except for those Liens described in Schedule 4.12(d); and, in the case of the Marcus Owned Real Property, Permitted Real Property Liens and Liens that will be satisfied as of Closing. At Closing, Buyer will receive good and marketable (or, with respect to leased property, leasehold) title to all the Purchased Assets, in the case of real property, free and clear of all Liens except (i) those described in Schedule 4.12(d) and (ii) Permitted Real Property Liens. Except for those matters described in Schedule 4.12(d) and those matters not known to the Marcus Entities and which would not have a Property Material Adverse Effect or a Franchise Material Adverse Effect, no Marcus Entity or Selling Joint Venture nor any third party is in default under any reciprocal easement agreement, easement, restrictive covenant or other matter affecting title to any of the Properties. To the Marcus Entities’ knowledge, each Property abuts directly on a public way or has direct access to a public way though valid easements of record, or, where access to a Property is currently obtained by means of an adjacent property owned by a Marcus Entity, by an easement benefiting the Property reasonably acceptable to Buyer, which easement shall be recorded at or prior to Closing. The Marcus Entities shall provide to Buyer correct and complete copies of any reciprocal easement agreement, shared access agreement, shared parking facilities agreement or similar agreement affecting any of the Properties. To the knowledge of the Marcus Entities, (a) no building or other improvements at any of the Properties encroach onto any adjoining real property and no building or other improvements located primarily on any adjoining real property encroach onto any of the Properties and (b) no building or other improvements at any of the Properties encroach onto any easement area or other restricted area for the benefit of third parties, in each case except to the extent that such encroachment would not reasonably be expected to have a Property Material Adverse Effect.

4.12(e) Franchise Matters. Notwithstanding the generality of the foregoing, none of the representations and warranties in this Section 4.12 shall apply to matters specifically addressed in Section 4.23.

4.13 Condition. To the knowledge of the Marcus Entities and except for ordinary wear and tear, in each case taking into account age and geographic location of the Property, there is no structural, foundation, roof, mechanical, electrical, plumbing, HVAC or other building system defects at any of the Properties except such defects as would not have a Property Material Adverse Effect. The Marcus Entities and the Joint Ventures have, in the aggregate, expended not less than $23.8 million for capital expenditures of the Marcus Mid–Priced Lodging Business (including capital expenditures related to the Properties owned by the Joint Ventures, but excluding capital expenditures related to the Chicago Hotel) for the fiscal year-ended May 27, 2004 in accordance with the capital expenditure budget previously provided by the Marcus Entities to Buyer.

4.14 Insurance. Set forth in Schedule 4.14 is a list and description of all policies of fire, liability, product liability, workers compensation, health and other forms of insurance presently in effect with respect to the Marcus Mid–Priced Lodging Businesses and the Purchased Assets; copies of such policies have heretofore been delivered to Buyer. Said insurance policies and arrangements are in full force and effect (or replacement or renewal policies therefore will have been obtained), all premiums with respect thereto are currently paid, and to their knowledge, the Marcus Entities are in compliance in all material respects with the terms of such policies. The Marcus Entities have not received any notice from any insurance carrier nor do the Marcus Entities have knowledge of, defects or inadequacies which if not corrected would result in termination of insurance coverage or increase its cost.

4.15 Contracts and Commitments. All Assigned Contracts are valid and are in full force and effect and constitute legal, valid and binding obligations of the Marcus Entities or the Selling Joint Ventures, as applicable, and, to the knowledge of the Marcus Entities, the other parties thereto and are enforceable in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally. Neither the Marcus Entities or any of the Selling Joint Ventures nor, to the knowledge of the Marcus Entities, any other party to any Marcus Material Contract, is in default in complying with any material provisions thereof, and no condition or event or facts exists which, with notice, lapse of time or both would constitute a default of a material provision thereof on the part of the Marcus Entities or any of the Selling Joint Ventures or, to the knowledge of the Marcus Entities, on the part of any other party thereto. All Marcus Material Contracts are described on Schedule 4.15 hereto.

4.16 Labor Matters.

4.16(a) Except as set forth in Schedule 4.16(a), within the last five years the Marcus Mid–Priced Lodging Businesses have not experienced any picketing of any nature, material organized labor disputes, union organization attempts or any work stoppage due to labor disagreements in connection with its business. No labor organization represents for purposes of collective bargaining or has been recognized as the bargaining representative of any Employees or Contingent Workers. Except to the extent set forth in Schedule 4.16(a), (a) except for any case as would not have a Material Adverse Effect, the Marcus Entities are in compliance with all applicable Laws respecting employment and employment practices, including, without limitation, terms and conditions of employment and wages and hours; (b) except for any case as would not have a Material Adverse Effect, there is no unfair labor practice charge or complaint pertaining to any employment-related matter against any Marcus Entity pending or, to the knowledge of the Marcus Entities, threatened in writing; (c) there is no labor strike, dispute, request for union representation, slowdown or stoppage actually pending or, to the knowledge of the Marcus Entities, threatened in writing against or affecting any Marcus Entity; (d) no question concerning union representation has been raised or, to the knowledge of the Marcus Entities, has been threatened in writing respecting the Employees or Contingent Workers of any Marcus Entity; (e) no grievance, nor any arbitration proceeding arising out of or under collective bargaining agreements, is pending and no such claim therefor exists; and (f) there are no administrative charges or court complaints against any Marcus Entity concerning alleged employment discrimination or other employment related matters pending before the U.S. Equal Employment Opportunity Commission, National Labor Relations Board, or any other Government Entity, nor, to the knowledge of the Marcus Entities, have any such matters been threatened in writing. To the knowledge of the Marcus Entities, except as set forth in Schedule 4.16(a), since September 15, 2003, except for claims that have been resolved, there have been no credible claims by any Employees called into Marcus’ “Careline” concerning alleged employment discrimination, sexual harassment, wage and hour violations or retaliation.

4.16(b) Except as set forth in Schedule 4.16(b), to the knowledge of the Marcus Entities, no Marcus Entity is subject to any affirmative action or prevailing wage obligations and no Marcus Entity has knowledge of any audit of any employment practices pending, scheduled or threatened in writing.

4.16(c) To the knowledge of the Marcus Entities, each Marcus Entity has, in all material respects, properly classified and treated for all employment-related purposes, including, without limitation, in respect of wage and hour, tax, and employee benefits purposes, all Contingent Workers.

4.16(d) To the knowledge of the Marcus Entities, all Employees are authorized to work in the United States in accordance with the requirements of the Immigration Reform and Control Act of 1986 and all Employees are employed in the United States.

4.16(e) Except as set forth on Schedule 4.16(e), the only Contingent Workers are those individuals that provide periodic, non-exclusive services on a seasonal basis.

4.17 Employee Benefit Plans. Schedule 4.17 sets forth all of the Marcus Employee Plan/Agreements relating to the Marcus Mid-Priced Lodging Businesses. True and complete copies of all the Marcus Employee Plan/Agreements and, where applicable, the most recent summary plan description, have heretofore been provided to Buyer.

4.17(a) Each of the Marcus Employee Plan/Agreements that is intended to be “qualified” within the meaning of Section 401(a) of the Code has a favorable determination letter from the IRS and no Marcus Entity knows of any fact or set of circumstances that would adversely affect such qualification prior to the Closing Date.

4.17(b) Except for the Transaction Stay/Severance Payments or as required by Article 6 of this Agreement or as described in Schedule 4.17(b), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment (including without limitation, severance, golden parachute or otherwise) becoming due under any Marcus Employee Plan/Agreement to any Employee; (ii) materially increase the benefits otherwise payable under any Marcus Employee Plan/Agreement to any Employee; or (iii) other than the potential acceleration of the vesting of stock options and restricted stock unless prohibited by the plans under which such options and restricted stock were issued, result in any material acceleration of the time or payment or vesting of any material benefit to any Employee.

4.17(c) Except as expressly contemplated by this Agreement, none of the Marcus Employee Plan/Agreements will obligate Buyers to assume or perform any obligation thereunder as a result of the transactions contemplated by this Agreement, or any agreement or document executed pursuant hereto.

4.18 Assets Necessary to Marcus Mid–Priced Lodging Businesses. Except as disclosed in Schedule 4.18, the Purchased Assets and the assets of the Joint Ventures, together with the services to be provided to Buyer or its Affiliates under the Transition Service Agreement, and together with such rights to the Subdivision Properties granted to Buyer in accordance with Section 7.14 hereof, constitute all property and assets, tangible and intangible, and all leases, Licenses and Permits and other agreements, which are used or held for use in the Marcus Mid–Priced Lodging Businesses as conducted in accordance with past practices.

4.19 Affiliated Relationships. To the Marcus Entities’ knowledge, except as described in Schedule 4.19, no Affiliate of any Marcus Entity has any direct or indirect interest in (a) any customer, competitor or supplier which does a material amount of business with any Marcus Entity or (b) any Purchased Asset.

4.20 Not a Foreign Person. None of the Marcus Entities and none of the Selling Joint Ventures is a “foreign person” within the meaning of Section 1445 of the Code, as amended, and the regulations promulgated thereunder.

4.21 No Brokers or Finders. Other than Goldman Sachs & Co., neither the Marcus Entities nor any of their Affiliates have retained, employed or used any broker or finder in connection with the transactions provided for herein or the negotiation hereof. The Marcus Entities shall pay any fee or commission owing to Goldman Sachs & Co. in connection with the transactions contemplated by this Agreement, and shall jointly and severally indemnify, defend and hold harmless Buyer and each of its Affiliates from and against all Losses asserted against, resulting to, imposed upon, or incurred by Buyer, its Affiliates, the Marcus Mid–Priced Lodging Businesses, the Purchased Assets or the Assumed Liabilities transferred to Buyer pursuant to this Agreement, by reason of, arising out of or resulting from any failure to pay such fee or commission.

4.22 Trade Rights.

4.22(a) Scheduled Trade Rights. Schedule 4.22(a) contains an accurate and complete list of all Registered Owned Trade Rights, and all domain names owned or purported to be owned by any of the Marcus Entities or the Selling Joint Ventures and used in the operation of the Marcus Mid–Priced Lodging Businesses and identifies the name of the entity which owns or purports to own each of the foregoing items. Schedule 4.22(a) also contains an accurate and complete list of all Trade Rights of third parties which are used by any Marcus Entity or any Selling Joint Venture in the operation of the Marcus Mid–Priced Lodging Businesses and the corresponding license, sublicense or other agreement with such third party, including computer software licenses, maintenance agreements, services agreements, hosting agreements, outsourcing agreements, e-distribution agreements and other technology agreements (collectively, the “Licensed Trade Rights”) and identifies the name of the entity which is using such Licensed Trade Right, other than commercially available software with a total license fee of less than $5,000. The Owned Trade Rights and Licensed Trade Rights collectively constitute all of the Marcus Trade Rights.

4.22(b) Ownership of Trade Rights. Except as set forth in Schedule 4.22(b), on the Closing Date, Buyer will either own or have the adequate and enforceable right to use pursuant to an appropriate agreement (as listed as a licensee in Schedule 4.22(b) with respect to the Licensed Trade Rights), free and clear of all Liens and payment obligations, all Marcus Trade Rights, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally. The Marcus Trade Rights constitute all Trade Rights used by any Marcus Entity or any Selling Joint Venture in the operation of the Marcus Mid-Priced Lodging Businesses.

4.22(c) Registered Owned Trade Rights. All Registered Owned Trade Rights are valid and enforceable, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally. Except as set forth in Schedule 4.22(c), there are no past due, unpaid maintenance fees, examination fees, annuities or other governmental fees or past due filings or affidavits of use on the Registered Owned Trade Rights.

4.22(d) Domain Names. Schedule 4.22(d) lists all domain names used by any Marcus Entity or any Selling Joint Venture in connection with the Marcus Mid–Priced Lodging Businesses, and all agreements related to the use of such domain names and the respective Internet protocol addresses. Except as listed on Schedule 4.22(d), the Marcus Entities or the Selling Joint Ventures own all of such domain names and the associated websites.

4.22(e) Licensed Trade Rights. Except as listed in Schedule 4.22(e), with respect to the Licensed Trade Rights: (a) the agreement governing each Licensed Trade Right is legal, valid, binding, enforceable and in full force and effect against the applicable Marcus Entity and/or the applicable Selling Joint Venture, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally; (b) subject to obtaining any necessary consents and Buyer’s compliance with the terms thereof, the agreement will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing Date, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally; and (c) to the knowledge of the Marcus Entities, no third party to the agreement is in breach or default in any material respect, no transaction contemplated by this Agreement will result in a breach or default in any material respect, and no event has occurred, nor, subject to obtaining all necessary consents, will the transactions contemplated by this Agreement cause an occurrence, which with notice or lapse of time would constitute a material breach or default by any of the Marcus Entities or the Selling Joint Ventures or permit termination, modification or acceleration thereunder.

4.22(f) Trade Rights Licensed Out. Except as set forth in Schedule 4.22(f) and except pursuant to their agreements with their franchisees and the Joint Ventures, none of the Marcus Entities, the Selling Joint Ventures or any of their Affiliates have granted any licenses of or other rights to use any Marcus Trade Rights to any third party.

4.22(g) Confidential Information. The Marcus Entities and their Affiliates have taken reasonable actions (which do not include obtaining non-disclosure agreements with any employees) to protect and preserve the confidentiality of all trade secrets and confidential information included in the Owned Trade Rights (“Confidential Information”) taking into account, as applicable, the actions associated with the “auction” for the Marcus Mid-Priced Lodging Businesses. Without limiting any of the foregoing, to the knowledge of the Marcus Entities, no material Confidential Information material to the Marcus Mid–Priced Lodging Businesses has been disclosed or authorized to be disclosed to any third party (excluding Franchisees and potential or prospective Franchisees), other than pursuant to a non-disclosure agreement that protects such entity’s proprietary interests in and to such Confidential Information on the terms set forth in such non-disclosure agreement or under circumstances in which the third party is under a legal duty not to disclose such Confidential Information on the terms set forth in such non-disclosure agreement.

4.22(h) Infringement. Except as set forth in Schedule 4.22(h), neither operation of the Marcus Mid-Priced Lodging Businesses nor any Marcus Trade Right interferes with, infringes upon, misappropriates or otherwise comes into conflict with or has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Trade Rights (other than patents) or, to the knowledge of the Marcus Entities, any patents, of any third party, there are no pending or, to the knowledge of Marcus, any of the Marcus Entities, any of the Selling Joint Ventures or any of their Affiliates, claims threatened in writing against Marcus, any of the Marcus Entities, any of the Selling Joint Ventures or any of their Affiliates and none of Marcus, the Marcus Entities, any of the Selling Joint Ventures or any of their Affiliates has received any written charge, complaint, claim or notice alleging any such interference, infringement, misappropriation or violation. Except as set forth in Schedule 4.22(h), no third party has, to the knowledge of Marcus, the Marcus Entities, any of the Selling Joint Ventures or any of their Affiliates, interfered with, infringed upon, misappropriated or otherwise come into conflict with any Owned Trade Rights or any Licensed Trade Rights exclusively licensed to Marcus, a Marcus Entity, any of the Selling Joint Ventures or any of their Affiliates.

4.22(i) Guest Data. The Marcus Records and Files contain all guest data and guest data bases developed and retained by the Marcus Entities in connection with and/or currently used by the Marcus Entities in connection with the Marcus Mid–Priced Lodging Businesses including, without limitation, all such information stored or maintained in Marcus’ data warehouse.

4.22(j) Privacy Policies. Except as would not have a Material Adverse Effect on the Marcus Entities, the Purchased Assets or the Marcus Mid-Priced Lodging Businesses, the operation of the Marcus Mid–Priced Lodging Businesses have at all times complied with all applicable regulations and the publicly available privacy, security and other policies of Marcus, each of the Marcus Entities, any of the Selling Joint Ventures or any of their Affiliates, including those provided on the websites operated in connection with the Marcus Mid–Priced Lodging Businesses, relating to the collection, storage and onward transfer of all personally identifiable information collected by Marcus, the Marcus Entities, any of the Selling Joint Ventures or any of their Affiliates or any third parties having access to any of the databases of records of any of the foregoing. Additionally, the transactions contemplated by this Agreement will not result in, and the receipt and use by Buyer of the Purchased Assets will not result in a breach or default under any applicable regulation or the publicly available privacy, security and other policies of Marcus, any of the Marcus Entities, any of the Selling Joint Ventures or any of their Affiliates, including those provided on websites operated in conjunction with the Marcus Mid-Priced Lodging Businesses.

4.23 Franchise Matters.

4.23(a) The Franchise Offering Circular for Prospective Franchisees issued by Baymont Franchises on August 27, 2003 (the “Baymont 2004 Circular”) and all franchise offering circulars for which any potential claims have not expired pursuant to any applicable statute of limitations used in connection with the offer and sale of a franchise or an investment in a franchise to operate a Baymont Hotel, or its predecessor, a Budgetel lodging facility (collectively with the Baymont 2004 Circular, the “Baymont Circulars”) were prepared in compliance in all material respects with the Uniform Franchise Offering Circular Guidelines and related federal and state regulations; are, or with respect to the Baymont Circulars excluding the Baymont 2004 Circular, were, true, accurate and complete in all material respects during the entire period any of the Baymont Circulars was used in connection with the offer or sale of a franchise to operate a Baymont Hotel or Budgetel lodging facility; and as of the issuance and dissemination date, did not misstate or omit any information material to a reasonable prospective purchaser of a franchise or an investment in a franchise to operate a Baymont Hotel or a Budgetel lodging facility.

4.23(b) Baymont Franchises has not amended the Baymont 2004 Circular since the date of its issuance, and, to the extent that it is still disseminating the Baymont 2004 Circular, it is doing so in accordance with applicable Laws in connection with the offer and sale of franchises.

4.23(c) Since the date of issuance of the Baymont 2004 Circular, other than the transactions contemplated by this Agreement, there has been no material change in the business, financial condition or affairs of Baymont Franchises, its franchise program or its franchise system that would require an amendment to the Baymont 2004 Circular.

4.23(d) Except as described on Schedule 4.23(d), Baymont Franchises has timely delivered to all prospective and existing Baymont Hotel Franchisees a complete and accurate copy of the appropriate Baymont Circular in accordance with applicable Law and has obtained executed receipts thereof from all prospective and existing Baymont Hotel Franchisees.

4.23(e) Woodfield Franchises has never offered or sold franchises for the establishment or operation of a Woodfield Hotel nor otherwise granted to any party the right, directly or indirectly, to establish or operate a Woodfield Hotel, nor has it ever distributed a Franchise Offering Circular for Prospective Franchisees to any unrelated third party.

4.23(f) Neither Marcus nor any of the Marcus Entities have ever used franchise brokers in connection with the offer or sale of franchises.

4.23(g) Except as described in Schedule 4.23(g), Baymont Franchises is, in all material respects, in compliance with all Franchise Documents to which it is a party as well as all obligations and duties owing with respect to all advertising and marketing funds and other funds and cooperatives under which Baymont Franchises administers or collects monies on behalf of Franchisees, and, since January 1, 1999, none of the Marcus Entities has received any unresolved written notice of noncompliance from any Franchisee with respect to any such Franchise Document or a breach of any obligations or duties with respect to such funds that could result in a Franchise Material Adverse Effect. Through the date hereof, there are and, to the knowledge of the Marcus Entities, have been no franchise relationships to which Baymont Franchises or any of the Marcus Entities is a party, either existing, expired or terminated, that have given rise to any currently unresolved claims or disputes that could result in a Franchise Material Adverse Effect.

4.23(h) Except as described in Schedule 4.23(h), to the Marcus Entities’ knowledge, all Franchisees are, in all material respects, in compliance with all Franchise Documents, and, since January 1, 1999, none of the Marcus Entities has delivered any unresolved notice of noncompliance with any Franchise Document or the franchise related thereto, and none of the Marcus Entities is aware of any fact, circumstance, act or omission that would give rise to a claim of noncompliance with any Franchise Documents by any present or former Franchisee that could result in a Franchise Material Adverse Effect.

4.23(i) Except as described in Schedule 4.10, through the date hereof, there is no Litigation pending or, to the knowledge of the Marcus Entities, threatened against Marcus or any of the Marcus Entities related to any franchise or the franchise systems of Baymont Franchises and none of the Marcus Entities has knowledge of any factual or legal basis which is reasonably likely to result in one or more Franchisees prevailing in Litigation against one or more Marcus Entity.

4.23(j) Except as described in Schedule 4.23(j), neither Marcus nor any of the Marcus Entities has offered, sold or granted a Baymont franchise or a Woodfield franchise outside of the United States.

4.23(k) Except as described in Schedule 4.23(k), neither Marcus nor any of the Marcus Entities is currently a guarantor or is otherwise party to an agreement pursuant to which it agreed to become directly or contingently liable (as a co-signor or otherwise) for the obligations of any Franchisee.

4.23(l) Except as described in Schedule 4.23(l), neither Marcus nor any of the Marcus Entities are currently leasing or subleasing any real or personal property to any Franchisees.

4.23(m) Except as described in Schedule 4.23(m), neither Marcus nor any of the Marcus Entities has any currently outstanding offer regarding, or is currently a party to, any financing arrangement with any Franchisee.

4.23(n) Except as described on Schedule 4.23(n), there are no area or regional representatives, development agents, regional directors or other persons or entities that currently provide support services to Franchisees on behalf of Baymont Franchises, other than employees of the various Marcus Entities.

4.23(o) Baymont Franchises has delivered or made available to Buyer copies of all of the Franchise Documents (or, in the case of the license agreements, the forms of such agreements, along with all modifications or amendments thereto), all of which Franchise Documents are listed in Schedule 4.23(o). All such copies are true, correct, complete and authentic reproductions of the original Franchise Documents they purport to represent. Each such Franchise Document has been duly executed by the applicable Marcus Entity and constitutes its valid and binding agreement, enforceable against it or by it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally. The Franchise Documents constitute all agreements between Baymont Franchises and the Franchisees and there exist no other agreements, oral or written, between Baymont Franchises and the Franchisees.

4.23(p) Except as set forth in Schedule 4.23(p) or as would not constitute a Franchise Material Adverse Effect, since January 1, 1999, the Marcus Entities have complied with, and have not received any written notice from any Franchisee or Government Entity with respect to any violation or alleged violation of any federal, state, local or foreign Laws which govern the offer, sale, terms, operation, advertisement, modification, renewal, transfer or termination of franchises and business opportunities including, without limitation, the FTC Trade Regulation Rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures” and all state and foreign franchise disclosure and/or registration acts, franchise termination Laws, franchisee rights Laws, business opportunity Laws, similar Laws of other jurisdictions and all material regulations promulgated under the foregoing.

4.23(q) Except as set forth in Schedule 4.23(q), the purchase by Buyer of the Purchased Assets, including all Franchise Documents, will not require approval by any Franchisee.

4.23(r) No Franchise Document is subject to any right of rescission or termination (excluding only the express grant of termination rights contained in the Franchise Documents or by Law). Since January 1, 1999, no Franchisee has asserted in writing such a right of rescission or termination, or has asserted in writing an intention to cease operating its franchised outlet or not renew its franchise.

4.23(s) None of the Marcus Entities has sold, assigned, transferred, conveyed, pledged, granted a security interest in, or otherwise disposed of any interest in any of the Franchise Documents or its rights thereunder, and Baymont Franchises is the sole beneficiary of the Franchise Documents and owns the rights of the franchisor thereunder, free and clear of any Liens.

4.23(t) Neither Marcus nor any of the Marcus Entities nor, to the knowledge of the Marcus Entities, any of their respective agents or representatives has engaged in any fraudulent or deceptive action, error, omission, misrepresentation, practice, negligence or similar occurrence with respect to the offer or sale of any franchise to a Franchisee or in the filing, registration, execution or delivery of any material Franchise Document, franchise disclosure document or related instrument.

4.23(u) The Marcus Entities have, in all material respects, fully accounted for and administered in accordance with applicable Law and all applicable agreements all advertising funds and other marketing moneys contributed by Franchisees. Except as set forth in Schedule 4.23(u), prior to the date hereof, since January 1, 1999, no Franchisee has asserted a written claim with respect to the expenditure or management of any such advertising funds or marketing monies by any of the Marcus Entities and, to the knowledge of the Marcus Entities, there exists no legal or factual basis for any such claim.

4.23(v) Except as described in Schedule 4.23(v), no Franchise Document has been renewed, no third party renewal rights have vested under and none of the Marcus Entities has refused to consent to the renewal of any Franchise Document.

4.24 Space Leasing. Except as set forth on Schedule 4.24, there are no tenant leases, concessions or other occupancy agreements affecting any of the Properties.

4.25 Bookings. Attached as Schedule 4.25 is a correct and complete list, as of a recent date, of all on-going agreements for the use or occupancy of guest rooms (excluding such agreements as they pertain to short term transient hotel guests) and for the use of meeting and banquet facilities or other facilities at the Properties for any time after the Closing, including all deposits held by or on behalf of the Marcus Entities or the applicable Selling Joint Venture with respect thereto. Schedule 4.25 shall be updated by the Marcus Entities two business days prior to Closing and delivered to Buyer at Closing.

4.26 Shared Facilities. Except as set forth on Schedule 4.26, all hotel operations are conducted at the Properties, and no Property relies on the use of off-site facilities, equipment, software, systems or other property or rights not included in the Purchased Assets in order to operate the Properties as operated in accordance with past practices and to comply in all material respects with any Laws.

4.27 Rights to Purchase. Other than the Rights of First Refusal or consent to sale rights of Third Party Partners, no Marcus Entity or Selling Joint Venture has granted any unexpired option, right of first refusal or similar right in favor of any person or entity, other than Buyer, to purchase or otherwise acquire any of the Purchased Assets or any portion thereof or interest therein.

4.28 Joint Ventures. The Marcus Entities have provided to Buyer a correct and complete copy of the operating agreement or partnership agreement governing each of the Joint Ventures and each management or franchise agreement between a Joint Venture and a Marcus Entity and the Decatur, Illinois Management Contract, including all amendments and supplements to each of the foregoing.

4.29 No Shareholder Vote. No action or vote of the holders of any class or series of the capital stock of Marcus is necessary to approve and adopt this Agreement or to consummate the sale of the Purchased Assets and the other transactions contemplated by this Agreement and the Ancillary Agreements.

5.	REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer makes the following representations and warranties to each of the Marcus Entities, each of which is true and correct on the date hereof and shall remain true and correct in all material respects to and including the Closing Date.

5.1 Corporate.

5.1(a) Organization. Buyer is duly organized, validly existing and in good standing under the Laws of the State of Delaware

5.1(b) Authorization; Validity. Buyer has all requisite power and authority under its charter documents and the Laws of its state of organization to execute and deliver this Agreement and the Ancillary Agreements as to which it is or will be a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. No other or further act or proceeding on the part of Buyer is necessary to authorize this Agreement or the Ancillary Agreements or the consummation by it of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, the Ancillary Agreements will constitute, valid and binding agreements of Buyer, enforceable against it in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy Laws or by principles of equity that affect the enforcement of creditors’ rights generally.

5.1(c) Power. Buyer has all requisite power to enter into this Agreement and the Ancillary Agreements to which it is a party and to carry out the transactions contemplated hereby and thereby.

5.2 No Violation. Neither the execution and delivery of this Agreement nor the Ancillary Agreements as to which Buyer is or will be a party, nor the performance or consummation by Buyer of the transactions contemplated hereby and thereby will (a) contravene, conflict with, or result in a breach or violation of any applicable Law or Order, or other restriction, whether written or oral, of any Government Entity, or court to which Buyer is subject, (b) contravene, conflict with or result in a violation or breach of any provision of the organizational documents of Buyer or (c) except for applicable requirements of the HSR Act, require any authorization, consent, approval, exemption or other action by or notice to any Government Entity (including, without limitation, under any “plant-closing” or similar Law).

5.3 Financial Capability. Buyer has cash available, which when combined with irrevocable commitments from lenders, will enable it to consummate the transactions contemplated by this Agreement and to pay the Purchase Price at Closing. Buyer is prepared to, and has the financial capability to, satisfy its obligations under the Assumed Liabilities.

5.4 No Brokers or Finders. Other than Lehman Brothers, neither Buyer nor any of its Affiliates has retained, employed or used any broker or finder in connection with the transactions provided for herein or the negotiation hereof. Buyer shall pay any fee or commission owing to Lehman Brothers in connection with the transactions contemplated by this Agreement, and shall jointly and severally indemnify, defend and hold harmless the Marcus Entities, the Selling Joint Ventures and each of their Affiliates from and against all Losses asserted against, resulting to, imposed upon, or incurred by the Marcus Entities, the Selling Joint Ventures or their Affiliates by reason of, arising out of or resulting from any failure to pay such fee or commission.

6.	EMPLOYEES –EMPLOYEE BENEFITS

6.1 Employees; Affected Employees.

6.1(a) Schedule 6.1(a) hereto contains a list of all Persons who currently provide service to the Marcus Mid–Priced Lodging Businesses, including name, date of hire, position, site of work, status (active or inactive; if inactive, expected date of return), regularly scheduled hours per week, base compensation and current bonus opportunity and identification of whether such Person is an Employee or Contingent Worker. At or prior to the Closing the Marcus Entities shall terminate the employment of all Employees of the Marcus Mid–Priced Lodging Businesses (other than those employed at the Marcus corporate headquarters who will not become Affected Employees) and at Buyer’s request, shall terminate all service agreements or contracts relating to the services of Contingent Workers in each case who are then actively employed by Marcus Entities and Selling Joint Ventures and shall pay any and all costs related thereto not specifically allocated to Buyer herein (other than to the extent Buyer does not comply with its obligations under Section 6.1(b)). Prior to the Closing Date but subject to Section 6.1(b), Buyer may, in its discretion and on such terms as it deems appropriate, offer employment to, and the Marcus Entities shall use their reasonable efforts to assist Buyer in employing as new employees of Buyer (without having to pay additional money or enter into any different or new bonus or incentive arrangements, other than as otherwise specifically contemplated herein), the Employees who are in good standing and actively employed on the day immediately preceding the Closing Date, or can reasonably be expected to return to active employment within 180 days following the Closing. Buyer’s offers of employment to Employees who are actively employed must be accepted not less than one (1) week prior to Closing. Employment for those Employees who accept offers of employment shall commence on the Closing Date or such later date as may be specified by Buyer (the Closing Date and such later dates shall be referred to collectively as the “Transfer Dates”). The Marcus Entities and Buyer shall cooperate in good faith to determine their respective employment obligations with respect to Employees who are not actively employed as of the Closing (“Leave Employees”). Subject to their normal policies and practices and in compliance with all applicable Laws, the Marcus Entities shall continue the employment and remain responsible for applicable benefits of all Leave Employees. If a Leave Employee is able to return to work within 180 days of the Closing Date, Buyer shall offer employment to such Leave Employee on terms consistent with this Section 6. Notwithstanding anything to the contrary in this Section 6.1, Affected Employees (as well as other Employees, Contingent Workers and Leave Employees who, prior to the date of this Agreement, were considered to be employed “at will”) shall be (or, in the case of Employees, Contingent Workers and Leave Employees who are not Affected Employees, shall continue to be) considered to be employed “at will” and nothing shall be construed to limit the ability of Buyer, the Marcus Entities or Selling Joint Ventures or any of its Affiliates to terminate the employment of any Affected Employee at any time, whether before or after Closing, for any reason, or to change their terms and conditions of employment, including, but not limited to, the levels of compensation and benefits, if any, in effect from and after the Transfer Date.

6.1(b) Schedule 6.1(b) lists each single site of employment employing a sufficient number of employees that an employer would have advance notice obligations under WARN or similar state or local Laws in the event of a shut down or mass layoff within the Marcus Mid–Priced Lodging Businesses acquired by Buyer. Schedule 6.1(b) sets forth, as of a recent date, for each Employee of the Marcus Mid–Priced Lodging Businesses who has suffered an “employment loss” (as defined under WARN) during the 90-day period preceding the date hereof, including: (A) the name of such Employee, (B) the date of hire of such Employee, (C) such Employee’s regularly scheduled hours of employment over the six month period prior to such “employment loss,” and (D) such Employee’s last work site, job title, assignment and department. The Marcus Entities shall, at Closing, update Schedule 6.1(b) as of a recent date. Buyer shall make offers of employment to a sufficient number of Employees so that no notices or other obligations under WARN, or under any similar provision of any state or local Laws will be required or incurred as a result of the transactions contemplated herein or otherwise; provided, however, that such obligations shall not apply to Employees who work at the Marcus Entities’ corporate headquarters in Milwaukee, Wisconsin. The parties expressly agree that Buyer’s obligations hereunder apply only with respect to Employees employed at single sites of employment as listed on Schedules 6.1(a) and 6.1(b) and that the Marcus Entities shall retain liability under WARN or similar state or local Laws, insofar as they later may be determined to be applicable, for all Employees and all Contingent Workers at the Marcus Entities’ Milwaukee, Wisconsin corporate headquarters.

6.1(c) Buyer will carry-over and recognize all unused vacation to the extent earned by Affected Employees while employed by the Marcus Entities. Affected Employees may then use such carried over vacation in accordance with Buyer’s policies and procedures. The Buyer shall receive a credit, as determined in accordance with Marcus GAAP, against the Purchase Price in the amount of all vacation carried over and the Marcus Entities shall, other than the obligations associated with such credit, have no other obligations or Liabilities related to such vacation to the extent so credited. Buyer shall be responsible for all COBRA obligations with respect to Affected Employees and the applicable Marcus Entity shall be responsible for all COBRA obligations with respect to all other Employees.

6.1(d) Other than as required by Law or any Marcus Employee Plan/Agreement in effect as of the date hereof, all Transaction Stay/Severance Payments shall not include the offer or payment of severance or any type of termination payment to Employees to whom Buyer makes an offer of employment, regardless of whether such offer is accepted, provided that such offer (i) does not require such Employee to relocate and (ii) is for a substantially similar position and for substantially similar compensation.

6.2 Payroll Tax. The Marcus Entities hereby acknowledge that for FICA and FUTA Tax purposes, Buyer or a subsidiary of Buyer qualifies as a successor employer with respect to the Affected Employees. In connection with the foregoing, at Buyer’s option, the Marcus Entities agree to follow or cause the Selling Joint Ventures to follow the “Alternative Procedures” set forth in Section 5 of Revenue Procedure 96-60. Buyer shall notify the Marcus Entities of its intention to follow the “Alternative Procedures” on or promptly after the Closing Date. If the “Alternative Procedures” are followed, the Marcus Entities and Buyer understand that Buyer shall assume the Marcus Entities’ and the Selling Joint Ventures’ entire obligation to furnish a Form W-2, Wage and Tax Statement, to the Affected Employees. In addition to all Records and Files relating to the Affected Employees that the Marcus Entities and the Selling Joint Ventures shall deliver to Buyer as of the Closing Date or as otherwise required by this Agreement, the Marcus Entities and the Selling Joint Ventures shall timely provide Buyer with any and all other information (and in such format and media) as it shall reasonably request to properly comply with the requirements in the preceding sentence, which in no event shall be more than ten (10) business days from the date of a written request for such information.

6.3 Employee Benefit Plans.

6.3(a) As soon as reasonably practicable, following the Closing Date, Buyer may arrange for each Affected Employee participating in any Marcus Employee Plan/Agreement to participate in employee plans of Buyer, in Buyer’s sole discretion, in accordance with the eligibility criteria thereof. If Buyer arranges for participation in such employee plans of Buyer, then (i) all such participants shall receive full credit for years of service with a Marcus Entity, Selling Joint Venture or any of its Affiliates (and service otherwise credited by such Marcus Entity, Selling Joint Venture or Affiliate) prior to the Closing Date for eligibility and vesting purposes; (ii) all such participants shall participate in such employee plans of Buyer on terms no less favorable than those offered by Buyer to similarly situated employees of Buyer; and (iii) to the extent permitted by the applicable employee plans of Buyer, Buyer shall cause any and all pre-existing condition limitations, eligibility waiting periods and evidence of insurability requirements under any group plans to be waived with respect to such participants and their eligible dependents to the same extent that such limitations were waived under the Marcus Employee Plan/Agreement in which such Affected Employee previously participated and shall provide each participant with credit for any deductibles paid under an applicable Marcus Entity or Selling Joint Venture welfare benefit plan prior to the Closing Date for purposes of satisfying any applicable deductible, out of pocket, or similar requirements under any health plans in which such participants are eligible to participate after the Closing Date. As of the Closing, the Marcus Entities shall fully vest each Affected Employee or shall cause each Affected Employee to be fully vested in his or her benefits or accounts under any Marcus Employee Plan/Agreement that is a 401(k) plan (the “Marcus 401(k) Plan”). The Marcus Entities will cause the Marcus 401(k) Plan to permit Affected Employees to receive such distributions. Furthermore, the Marcus Entities shall cause the Marcus 401(k) Plan to be amended to the extent necessary to permit each Affected Employee who has one or more outstanding loans under such plan as of Closing to roll over the promissory note(s) evidencing such loan(s) to the 401(k) plan of Buyer. Notwithstanding anything herein to the contrary, the Marcus Entities shall have no obligation to accelerate the vesting of any of the Marcus stock options held by any Employee and all such options shall cease vesting and terminate in accordance with their terms on the Transfer Date.

6.3(b) Except as provided in Section 6.1(c), in no event shall Buyer or any of its Affiliates be liable for any benefits incurred or accrued by any Affected Employee under the Employee Plan/Agreements maintained by the Marcus Entities on or prior to the relevant Transfer Date. Except as provided in Section 6.1(c), the Marcus Entities, the Selling Joint Ventures and their respective Affiliates, as applicable, will remain responsible for all benefits payable to any Employees or former Employee with respect to service prior to the applicable Transfer Date and to any Employees under the Employee Plan/Agreements maintained by the Marcus Entities who do not become Affected Employees, including, in each case, the Transaction Stay/Severance Payments. The Marcus Entities, the Selling Joint Ventures and their respective Affiliates, as applicable, shall be responsible for providing any Employee or former Employee whose “qualifying event,” within the meaning of Section 4980B(f) of the Code, occurs prior to the Transfer Date (and such Employee’s or former Employee’s “qualified beneficiaries” within the meaning of Section 4980B(f)) with continuation of group health coverage required by Section 4980B(f) under the terms of the applicable group health plan maintained by the Marcus Entities, the Selling Joint Ventures and their respective Affiliates, as applicable, and to the extent required by Law.

6.3(c) The Marcus Entities shall remain solely liable for any unused accrued vacation (except as provided in Section 6.1(c) above), sick or so-called “earned” time with a Marcus Entity, a Selling Joint Venture or any Affiliate thereof, including carryover accrued vacation, sick or so-called “earned” time, salaries and wages, severance or termination payments (including, without limitation, any Transaction Stay/Severance Payments), or any bonus or incentive payments or other forms of compensation or expense reimbursement with a Marcus Entity or any Affiliate thereof with respect to each Employee, including Affected Employees. Subject to Section 2.1(f), the Marcus Entities shall remain solely liable for any worker’s compensation claims in respect of any injury or illness arising from any act or occurrence that occurs prior to the applicable Transfer Date.

7.	PRE-CLOSING COVENANTS

7.1 No Change in Financial Commitment(s). Buyer will not materially change or alter the material terms and conditions of the financing commitments referred to Section 5.3 prior to the Closing without the consent of the Marcus Entities (which consent will not be unreasonably denied, withheld or delayed provided that the Buyer’s ability to consummate the transactions contemplated herein on the scheduled Closing Date is not materially and adversely affected).

7.2 Access to Information and Records. From the date hereof until the Closing, the Marcus Entities shall furnish, and shall cause its Affiliates and the Selling Joint Ventures to furnish, to Buyer, its officers, employees, agents, independent accountants and advisors reasonable access during normal business hours upon reasonable advance notice to the Marcus Entities to (i) all of the Purchased Assets, the Properties, Marcus Records and Files and other financial and operating data and information relating to the Marcus Mid–Priced Lodging Businesses, and (ii) all Employees (including Property-level and corporate administrative personnel) for the purpose of conducting confirmatory investigations, testing and other diligence (collectively, “Diligence”); provided, however, that the Marcus Entities shall not be obligated to provide Buyer with information or data related to the potential sale of the Marcus Mid–Priced Lodging Businesses (or any portion thereof) to any third parties; provided, however, that in each such case, the Marcus Entities shall provide written notice of the specific information or data not so provided and the specific rationale for such exclusion. Any disclosure whatsoever during such investigation by Buyer shall not constitute an enlargement or other modification of the representations or warranties or other obligations of the Marcus Entities beyond those specifically set forth in this Agreement. Buyer shall notify the Marcus Entities in writing of its intent to enter the Properties to conduct its Diligence as soon as practicable but in no event less than forty-eight (48) hours prior to such entry (unless otherwise agreed); (ii) the date and approximate time period of such Property-level Diligence shall be scheduled with the Marcus Entities; and (iii) Buyer shall comply with the insurance requirements set forth below. At the Marcus Entities’election, a representative of the Marcus Entities shall be present during any entry by Buyer or its representatives upon the Properties for Diligence. Buyer shall have the right to conduct, at its sole cost and expense, any inspections, studies or tests that Buyer deems appropriate, provided, however, that Buyer shall arrange for copies of any reports of such inspections, studies or tests to be delivered to the Marcus Entities’ legal counsel at the same time they are delivered to Buyer and providedfurther that Buyer is not permitted to perform any sampling, boring, drilling or other physically intrusive testing into the structures or ground, including, without limitation, a so-called “Phase II” environmental assessment, without the prior consent of the Marcus Entities, which consent shall not be unreasonably withheld. Buyer shall take all necessary actions to ensure that neither it nor any of its representatives unreasonably interfere with guests or Employees of the Properties or ongoing operations occurring at the Properties. Buyer shall not cause or permit any mechanic Liens, materialmen’s Liens, or other Liens to be filed against the Properties as a result of its Diligence.

7.2(a) To the extent within the possession or control of the Marcus Entities, the Marcus Entities have provided or will provide to Buyer, within five (5) business days after the execution and delivery of this Agreement, with respect to each of the Properties correct and complete copies of (i) the most current title insurance policies and title reports, commitments and proforma title insurance policies that update such title insurance policies, together with copies of all title exception documents listed therein in their possession, (ii) the most current survey for each Property, (iii) the most current assessments, reports and studies of the condition of the improvements for each Property including, without limitation, structural, roof, HVAC and other building systems, (iv) the most current assessments, reports and studies of the compliance for each Property with the Americans with Disabilities Act, and (v) the most current assessments, reports and studies for each Property with respect to compliance with Environmental Laws and otherwise with respect to environmental matters.

7.2(b) Buyer agrees to indemnify, protect, defend, and hold the Marcus Entities and the Selling Joint Ventures harmless from and against any and all Losses for physical injury or damage to Persons or tangible property suffered or incurred by any of the Marcus Entities and the Selling Joint Ventures as a result of or in connection with any activities of Buyer (including activities of any of Buyer’s employees, representatives, consultants, contractors, or other agents) in conducting its Diligence, including, without limitation, mechanics’ Liens, materialmen’s Liens, or other Liens against the Properties as a result of its Diligence, damage to the Properties, or injury to persons or property resulting from such activities in connection therewith; provided, however, that Buyer’s indemnification obligations hereunder shall not include any obligation or duty whatsoever with respect to any such Losses (including claims that any Property has declined in value) arising out of, resulting from or incurred in connection with the discovery of any existing condition at the Properties. If any Property is physically damaged as a result of Buyer’s Diligence, Buyer shall, at its sole cost, promptly repair such Property to its condition existing prior to such damage to the reasonable satisfaction of the Marcus Entities. Furthermore, Buyer agrees to maintain and cause any of its representatives or agents conducting any Diligence at Properties to maintain and have in effect adequate levels of commercial general liability insurance for personal injury, including bodily injury and death, and property damage.

7.2(c) All information obtained by Buyer, its officers, employees, representatives, agents, consultants, contractors, independent accountants and advisors in connection with its Diligence shall be subject to the terms and conditions of the confidentiality agreement previously executed between Buyer and Marcus.

7.3 Conduct of Business Pending the Closing. With respect to the Marcus Mid-Priced Lodging Businesses, from the date hereof until the Closing, except as otherwise contemplated or required by this Agreement or approved in writing by Buyer (which approval shall not be unreasonably denied, withheld or delayed):

7.3(a) No Material Changes. The Marcus Entities:

7.3(a)(i) will carry on, and will use their reasonable efforts to cause the Selling Joint Ventures to carry on, the Marcus Mid–Priced Lodging Businesses diligently and in the ordinary course of business consistent with past practice, including without limitation, pricing of guest rooms, hiring and training Property-level Employees and maintaining staffing and customer service levels, in each case in the ordinary course of business consistent with past practice;

7.3(a)(ii) will cause Baymont Franchises to carry on the franchise services and support activities of its franchise program (other than franchise sales activities), in each case diligently and in the ordinary course of business consistent with past practice and suspend its franchise sale activities;

7.3(a)(iii) will not make or institute, and will use their reasonable efforts to cause the Selling Joint Ventures not to make or institute, any material changes in their respective methods of purchase, sale, management, marketing or operation of the Marcus Mid–Priced Lodging Businesses other than those made in the ordinary course of business consistent with past practice;

7.3(a)(iv) will not change, and will use their reasonable efforts to cause the Selling Joint Ventures not to change, any of the accounting principles or practices used with respect to the Marcus Mid–Priced Lodging Businesses (except as required by changes in generally accepted accounting principles that become effective after the date hereof, in which case written notice shall be provided to the Buyer);

7.3(a)(v) will not incur, and will use their reasonable efforts to cause the Selling Joint Ventures not to incur, any amount of indebtedness for borrowed money, guarantee any debt of others, mortgage, pledge or otherwise encumber, or create or suffer any material Lien upon, any asset used in the conduct of the Marcus Mid–Priced Lodging Businesses other than debt incurred in the ordinary course of business consistent with prior practice which will not be secured by any Purchased Asset; and

7.3(a)(vi) subject to Sections 4.9 and 6.1 and except for the Transaction Stay/Severance Payments, will not increase the salaries, wages or other programs of a compensatory nature to any Employee, officer or Contingent Worker of the Marcus Mid–Priced Lodging Businesses (including, without limitation, any increase or change pursuant to any Employee Plan/Agreement) other than in the ordinary course of business consistent with past practice.

7.3(b) Maintain Organization. The Marcus Entities will use, and will use their reasonable efforts to cause the Selling Joint Ventures to use, their reasonable efforts (without having to pay or agree to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions, in each case, outside of the ordinary course of business) to maintain, preserve, renew and keep in favor and effect in all material respects the existence, rights and franchises of the Marcus Mid–Priced Lodging Businesses and will use, and will use their reasonable efforts to cause the Selling Joint Ventures to use, their reasonable efforts (without having to pay or agree to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions, in each case, outside of the ordinary course of business) to preserve the organization of the Marcus Mid–Priced Lodging Businesses intact in all material respects, to keep available to Buyer the present officers and key Employees of the Marcus Mid–Priced Lodging Businesses, and to preserve in all material respects for Buyer their present relationships with suppliers, service providers and others having material business relationships with the Marcus Entities, the Selling Joint Ventures or the Marcus Mid–Priced Lodging Businesses.

7.3(c) No Material Breach. The Marcus Entities will not do or omit any act and will use their reasonable efforts to cause the Selling Joint Ventures not to do or omit any act which may cause (i) a breach of any Assigned Contract that is material to the Marcus Mid–Priced Lodging Businesses or any of the Selling Joint Ventures, respectively or (ii) a breach of any representation, warranty, covenant or agreement made by the Marcus Entities herein (including with respect to the Selling Joint Ventures).

7.3(d) Material Contracts. The Marcus Entities will not enter into, and will use their reasonable efforts to cause the Selling Joint Ventures not to enter into, any Contract that would be an Assigned Contract that would be material to the Marcus Mid–Priced Lodging Businesses or any of the Selling Joint Ventures, respectively except in the ordinary course of business consistent with past practice with the prior consent of Buyer, which consent shall not be unreasonably withheld. The Marcus Entities will not purchase, and will cause the Selling Joint Ventures not to purchase, Inventory that would be material to the Marcus Mid–Priced Lodging Businesses or any of the Selling Joint Ventures respectively outside of the ordinary course of business consistent with past practice. The Marcus Entities will not sell, and will use their reasonable efforts to cause the Selling Joint Ventures not to sell, goods or services that would be material to the Marcus Mid–Priced Lodging Businesses or any of the Selling Joint Ventures, respectively, by or on behalf of the Marcus Entities, except sales which are in the ordinary course of business consistent with past practice, including past pricing practices. Other than as contemplated or required in this Agreement, the Marcus Entities will not amend in any material respect or terminate prior to its stated termination date and will cause the Selling Joint Ventures not to so amend or terminate, any Assigned Contract that is material to the Marcus Mid–Priced Lodging Businesses or any of the Selling Joint Ventures, respectively, outside of the ordinary course of business consistent with past practices.

7.3(e) Maintenance of Insurance, Permits and Licenses. The Marcus Entities shall use, and will use their reasonable efforts to cause the Selling Joint Ventures to use, their reasonable efforts to maintain in all material respects all of their insurance in effect as of the date hereof; provided, however, that the replacement or renewal of expired insurance policies with new insurance policies with terms generally consistent with industry practice shall not violate this Section 7.3(e). The Marcus Entities shall maintain in effect and, as required, renew, and shall cause the Selling Joint Ventures to so maintain and renew, all Licenses and Permits that are material to the Marcus Mid–Priced Lodging Businesses or any of the Selling Joint Ventures, respectively, and shall not allow, and shall use their reasonable efforts to cause the Selling Joint Ventures to not allow, any such License or Permit that is material to the Marcus Mid–Priced Lodging Businesses or any of the Selling Joint Ventures, respectively, to lapse or terminate.

7.3(f) Maintenance of Purchased Assets. The Marcus Entities shall, and shall use their reasonable efforts to cause the Selling Joint Ventures to, use, operate, maintain and repair all Purchased Assets in a normal business manner (ordinary wear and tear, in each case taking into account age and geographical location of the Property excepted) in accordance with the ordinary course of business; provided, however, that this Section 7.3(f) or 7.3(a)(i) shall not require the Marcus Entities to replace, improve or materially repair any Property (other than in the ordinary course of business) or to initiate any new renovation of any Property. Other than as contemplated or required by this Agreement, the Marcus Entities shall not, and shall use their reasonable efforts to cause the Selling Joint Ventures not to, sell, transfer, assign, lease or otherwise dispose of any Purchased Assets except for sales or disposals of personal property in the ordinary course of business consistent with past practices where adequate replacements are made, if necessary.

7.3(g) Interim Financials. The Marcus Entities will provide Buyer with interim unaudited management-prepared periodically (i.e., four- or five-week) financial statements that contain information similar to that included in the Recent Financial Statements of the Marcus Mid–Priced Lodging Businesses prepared in accordance with Marcus GAAP as promptly as practical but no later than fifteen (15) days after the end of each four- or five-week period after the date of this Agreement.

7.3(h) Labor and Employment Matters. Except to the extent, in the good faith opinion of counsel to Marcus (including its General Counsel), required by Law, the Marcus Entities shall not recognize, and shall use their reasonable efforts to cause the Selling Joint Ventures not to recognize, a labor organization as the bargaining representative of any Employees or Contingent Workers of the Marcus Mid–Priced Lodging Businesses or enter into, and shall use their reasonable efforts to cause the Selling Joint Ventures not to enter into, any collective bargaining agreement with respect to such Employees or Contingent Workers of such Business.

7.3(i) Confidential Information. From the date hereof until Closing (and thereafter pursuant to, and on the terms set forth in, Section 14.1 hereof), other than as contemplated or required by this Agreement, the Marcus Entities, their Affiliates (including using their reasonable efforts to cause the Selling Joint Ventures) and their representatives will maintain the confidentiality of the Marcus Mid-Priced Lodging Businesses’ confidential and proprietary information in accordance, in all material respects, with their historical practices.

7.3(j) Suspension of Franchise Sales. Immediately after the parties execute this Agreement, Baymont Franchises will suspend the offer and sale of franchises. From and after the execution of this Agreement, neither Woodfield Franchises nor any other Marcus Entity will offer for sale or sell a franchise for a Woodfield Hotel or otherwise grant to any Person (other than Buyer) any right to operate a Woodfield Hotel.

7.3(k) Statements to Prospective Franchisees. After the date hereof, Baymont Franchises will not continue discussions with any prospective franchisee regarding the sale of a franchise. Between the date of the Agreement and the Closing, neither Baymont Franchises nor any other Marcus Entity will enter into a franchise agreement for a Baymont Hotel or otherwise grant to any Person (other than Buyer) any right to operate a Baymont Hotel without Buyer’s prior written approval, which Buyer will not unreasonably delay, but may withhold in its discretion.

7.3(l) Franchise Transactions. Between the date of this Agreement and the Closing, Baymont Franchises will manage its franchise relationships in compliance in all material respects with the applicable Franchise Documents and all applicable franchise Laws.

7.3(m) Modification of Franchises. Between the date of this Agreement and the Closing, Baymont Franchises will not make any material change to or waive or suspend the provisions of any Franchise Document.

7.4 Material Consents. In addition to the more general obligations set forth in Section 7.8 hereof, the Marcus Entities will use, and will use their reasonable efforts to cause the Selling Joint Ventures to use, their reasonable efforts from the date hereof until the Closing to obtain all Marcus Material Consents; provided, however, that the Marcus Entities and the Selling Joint Ventures shall not be required to pay or agree to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions in order to obtain such Marcus Material Consents. Buyer shall use its reasonable efforts to cooperate in obtaining all such Marcus Material Consents; provided, however, that Buyer shall not be required to pay or agree to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions in order to obtain such Marcus Material Consents.

7.5 No Solicitation or Negotiations With Other Parties. Other than with respect to Buyer and its Affiliates, the Marcus Entities represent and warrant that they, their Affiliates and their representatives have ceased any discussions or negotiations (direct and indirect) with any parties with respect to a Proposal or a sale, transfer, assignment or other disposition of one or more Properties (other than with respect to Excluded Assets). The Marcus Entities, their Affiliates and their representatives (i) have terminated any other parties’ (other than Buyer and its representatives) access to the electronic data room and any other diligence materials or activities (including access to personnel, assets, Properties, reports and other information and data) related to the Mid–Priced Lodging Businesses, and (ii) will, within two business days after the date of this Agreement, requested the return or destruction of all confidential information pertaining to the Marcus Mid–Priced Lodging Businesses provided by the Marcus Entities or its representatives to any other party in connection with the evaluation, consideration and negotiation of a transaction involving the Marcus Mid-Priced Lodging Businesses or any of its material assets. From and after the date hereof, the Marcus Entities shall not, nor shall they permit any of their Affiliates to, nor shall they authorize or permit any of their officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained or utilized by it or any of its Affiliates to, directly or indirectly, (x) solicit, initiate or encourage (including by way of furnishing information which has not been previously publicly disseminated), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Proposal or any sale, transfer, assignment or other disposition of any Property (other than with respect to Excluded Assets, but, during the fifteen (15) day period beginning on the date hereof only, including the JV Properties) or (y) participate in any discussions or negotiations regarding any Proposal or any sale, transfer, assignment or other disposition of any Property (other than with respect to Excluded Assets, but, during the fifteen (15) day period beginning on the date hereof only, including the JV Properties). Notwithstanding the previous sentence, neither Marcus nor the Marcus Entities shall, in any way, be prohibited from discussing or negotiating with any party with respect to any direct or indirect acquisition or purchase of Marcus or substantially all of Marcus’ assets (including the Excluded Assets), provided that any such acquisition or purchase (i) expressly excludes the Marcus Mid–Priced Lodging Businesses (and no information relating thereto is furnished to, or retained by, such party other than as it relates to this Agreement and its terms and conditions and other publicly available information), and (ii) the obligations under this Agreement will be assumed by such party in the event such transaction is consummated without relieving the Marcus Entities or Marcus of their obligations hereunder.

7.6 Notice of Developments.

7.6(a) Seller Obligations. From the date hereof until the Closing, the Marcus Entities shall promptly deliver, and shall use their reasonable efforts to cause the Selling Joint Ventures to so deliver, to the Buyer supplemental information in writing concerning events or circumstances occurring subsequent to the date hereof which would render any representation, warranty or statement in this Agreement made by the Marcus Entities (including in the schedules hereto) inaccurate in any material respect if such representation, warranty or statement were required to be made following such event or circumstance. No such supplemental information shall be deemed to cure any misrepresentation or breach of warranty or constitute an amendment of any representation, warranty or statement in this Agreement or schedule hereto; provided that nothing in this subsection shall extend or alter the date at which any representation or warranty is made pursuant to this Agreement.

7.6(b) Buyer Obligations. From the date hereof until the Closing, the Buyer shall promptly deliver to the Marcus Entities supplemental information in writing concerning events or circumstances occurring subsequent to the date hereof which would render any representation, warranty or statement in this Agreement made by Buyer inaccurate in any material respect at any time after the date of this Agreement until the Closing Date. No such supplemental information shall be deemed to cure any misrepresentation or breach of warranty or constitute an amendment of any representation, warranty or statement in this Agreement; provided that nothing in this subsection shall extend or alter the date at which any representation or warranty is made pursuant to this Agreement.

7.7 HSR Act Filings. Each of the parties hereto undertakes and agrees to file as soon as reasonably practicable, and in any event prior to July 26, 2004, a Notification and Report Form under the HSR Act with the FTC and the Antitrust Division. Each of the parties hereto shall (a) respond as promptly as reasonably practicable to any inquiries received from the FTC or the Antitrust Division for additional information or documentation and to all inquiries and requests received from any State Attorney General or other governmental authority in connection with antitrust matters, and (b) not extend any waiting period under the HSR Act or enter into any agreement with the FTC or the Antitrust Division not to consummate the transactions contemplated by this Agreement, except with the prior written consent of the other parties hereto (subject to applicable Law). The Marcus Entities shall use, and shall use their reasonable efforts to cause the Joint Ventures to use, their respective reasonable efforts to obtain and furnish the information required to be included in all filings and submissions contemplated by this Section 7.7. Each party shall (a) promptly notify the other parties of any communication to that party from the FTC, the Antitrust Division, any State Attorney General or any other Government Entity and, subject to applicable Law, permit the other parties to review in advance any proposed written communication to any of the foregoing; (b) not agree to participate in any substantive meeting or discussion with any governmental authority in respect of any filings, investigation or inquiry concerning this Agreement or the transactions contemplated hereby unless it consults with the other parties in advance and, to the extent permitted by such Government Entity, gives the other parties the opportunity to attend and participate thereat; and (c) furnish the other parties with copies of all correspondence, filings, and communications between them and their Affiliates and their respective representatives on the one hand, and any Government Entity or members or their respective staffs on the other hand, with respect to this Agreement and the transactions contemplated hereby. Notwithstanding the foregoing, in no event shall the Buyer be required to sell, divest or otherwise dispose of any assets, businesses or lines of business in order to comply with the foregoing, nor shall the Buyer be required to agree to or observe any restrictions or limitations on its ability to conduct or engage in any line of business in order to comply with the foregoing. Buyer shall pay all of the filing fees associated with any filings under the HSR Act, provided that each party shall pay its own costs and expenses related to the preparation of such reports.

7.8 Additional Agreements. Subject to the terms and conditions herein provided including Sections 1.3 and 7.4, each of the parties hereto agrees to use, and the Marcus Entities agree to use their reasonable efforts to cause the Selling Joint Ventures to use, its reasonable efforts to take, or cause to be taken, all material actions and to do, or cause to be done, all material things reasonably necessary, proper or advisable to consummate and make effective as promptly as reasonably practicable the transactions contemplated by this Agreement and to cooperate, and the Marcus Entities agree to use their reasonable efforts to cause the Selling Joint Ventures to cooperate with each other in connection with the foregoing, including the taking of such material actions as are required under this Agreement to obtain any necessary approvals, orders, exemptions, assignments and authorizations by or from any public or private third party, including, without limitation, any that are required to be obtained under any federal, state or local Law or any Assigned Contracts to which a Marcus Entity or a Selling Joint Venture is a party or by which any of their respective properties or assets are bound, to defend, and the Marcus Entities agree to use their reasonable efforts to cause the Selling Joint Ventures to defend, all Litigation challenging this Agreement or the consummation of the transactions contemplated by this Agreement and to use their reasonable efforts to cause to be lifted or rescinded any injunction or restraining order or other Order adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement.

7.9 Adverse Diligence Discoveries.

7.9(a) Definitions; Interpretation.

7.9(a)(i) Adverse Diligence Discovery. There shall be deemed to be an “Adverse Diligence Discovery” if Buyer’s Diligence discloses that any of the representations and warranties of the Marcus Entities (including with respect to the Marcus Entities, their Affiliates and the Selling Joint Ventures) in Article 4 of this Agreement is breached; provided, however, that for purposes of this Section 7.9(a) only, any knowledge qualifications or limitations contained in the representations and warranties of the Marcus Entities (i.e., the words “to the Marcus Entities’ knowledge” or “to the knowledge of the Marcus Entities” and words of similar import) shall be ignored and shall be deemed deleted from such representations and warranties. Notwithstanding the foregoing, an Adverse Diligence Discovery under this Section 7.9(a) shall exclude the condition of the case goods (including furniture, fixtures and equipment, etc.) and soft goods (including carpeting, bedding and linens, etc.); provided that, except as provided in Section 11.2, no other representations, warranties, covenants, conditions, rights or other obligations under this Agreement shall be affected by this exclusion.

7.9(a)(ii) Adverse Diligence Discovery Amount. “Adverse Diligence Discovery Amount” shall mean, with respect to any Property, the sum of (i) with respect to all Adverse Diligence Discoveries that are susceptible to reasonable cure, the aggregate amount of all reasonable costs and expenses to reasonably cure all of such Adverse Diligence Discoveries and (ii) with respect to all Adverse Diligence Discoveries that are not susceptible to reasonable cure, either (x) the aggregate adverse impact on the operational value of such Property, or (y) with respect to Adverse Diligence Discoveries relating to a breach of Section 4.12(a) (but only with respect to Environmental Laws and Hazardous Substances released in violation of any Environmental Law or which release requires any so-called “response action” (which may include remediation) under any Environmental Law or other requirement of any Government Entity) or Section 4.12(c), the value of such Property in each case as determined pursuant to Section 7.9(d).

7.9(a)(iii) Excluded Diligence Amounts. “Excluded Diligence Amounts” shall mean any Adverse Diligence Discovery Amount related to an Adverse Diligence Discovery resulting from (w) a breach of the Excepted Representations and Warranties; (x) any fraud, intentional misrepresentation or a deliberate or willful breach by the Marcus Entities of any of their representations, warranties or covenants under this Agreement; and (y) any failure by Marcus Entities to pay, perform and discharge when due any of the Specifically Identified Excluded Liabilities.

7.9(a)(iv) Reasonable Cure; Reasonably Cured. When used herein, “reasonable” cure or “reasonably” cure will, as appropriate, allow the Marcus Entities to repair all items or conditions that constituted the Adverse Diligence Discovery and shall not require the Marcus Entities to cure an Advance Due Diligence Discovery based on a “replacement cost” standard or otherwise replace an item except if such replacement would be reasonably necessary to effect such cure.

7.9(b) Notice. Buyer shall give written notice to the Marcus Entities of any Adverse Diligence Discovery promptly after obtaining knowledge thereof, and, in any event, on or before three (3) business days prior to the scheduled Closing Date. In the event of an Adverse Diligence Discovery during the three (3) business days prior to the scheduled Closing Date, such Adverse Diligence Discovery shall be addressed promptly following the Closing in accordance with this Section 7.9. Such written notice shall, to the extent known to Buyer, contain the information otherwise required under Section 11.5(a) for an indemnification claim under Article 11.

7.9(c) Right to Cure. To the extent that an Adverse Diligence Discovery is susceptible to reasonable cure prior to Closing, then, the Marcus Entities may (in their sole discretion) attempt to effect such reasonable cure prior to Closing, and all documented out-of-pocket third party costs incurred in connection with such reasonable cure attempt shall be (i) borne by the party that would be required to bear the impact of such Adverse Diligence Discovery pursuant to this Section 7.9 if such Adverse Diligence Discovery were not reasonably cured and (ii) made available to Buyer. In the event that an Adverse Diligence Discovery is not reasonably cured by any efforts of the Marcus Entities prior to Closing, the provisions of this Section 7.9 shall apply with respect to such Adverse Diligence Discovery.

7.9(d) Investigation; Dispute Resolution.

7.9(d)(i) Investigation. Upon receipt of any notice pursuant to and in compliance with Section 7.9(b), the Marcus Entities shall have three (3) business days to investigate the Adverse Diligence Discovery summarized therein. Buyer shall make available to the Marcus Entities and their authorized representatives, the information relied upon by the Buyer to substantiate all Adverse Diligence Discoveries summarized in any such notices, as well as any other information bearing thereon reasonably requested by the Marcus Entities and then available to Buyer.

7.9(d)(ii) Mutual Resolution of Disputes. If and to the extent the Marcus Entities and Buyer do not agree on (a) any Adverse Diligence Discovery Amount, (b) whether any Adverse Diligence Discovery is susceptible to reasonable cure or (c) what is required to reasonably cure an Adverse Diligence Discovery, then the Chief Financial Officer and General Counsel of each of the Marcus Entities and Buyer shall meet in person or telephonically as soon as reasonably practical in order to mutually resolve such disagreement.

7.9(d)(iii) Third Party Resolution of Disputes. If and to the extent the process summarized in Section 7.9(d)(ii) does not resolve the parties’ disagreement and any Adverse Diligence Discovery has not been reasonably cured on or before Closing by the Marcus Entities, then the following dispute resolution procedures shall apply:

7.9(d)(iii)(A) Adverse Diligence Discoveries Effect Upon Certain Properties. If an Adverse Diligence Discovery is of a nature that prevents the transfer to Buyer of good title to a Property hereunder in accordance with this Agreement, then the applicable Property shall be excluded from this Agreement and the Purchase Price reduced by the portion of the Purchase Price allocated thereto pursuant to Exhibit D, subject to the limitations set forth in Section 7.9(g). Such excluded Property shall either be subject to Section 14.16 or, if the parties mutually agree, then the Closing solely with respect to such Property shall be delayed to a mutually agreed upon date.

7.9(d)(iii)(B) Disputes Regarding Adverse Diligence Discoveries. To the extent that Section 7.9(d)(iii)(A) is inapplicable, either the Marcus Entities or Buyer may initiate the process set forth in this Section 7.9(d)(iii)(B) at any time by giving notice (the “Appraisal Notice”) to the other party. Within five (5) business days after an Appraisal Notice is given, the Marcus Entities and Buyer each shall provide to Horwath Hospitality Investment Advisors, or such other independent valuation expert mutually agreed to by the parties (the “Valuation Expert”), with a copy to the other party, its opinion (each an “Adverse Impact Opinion”) as to the Adverse Diligence Discovery Amount (the “Adverse Diligence Discovery Value Impact”), together with such supporting documentation as they may desire to provide. If one party fails to deliver its Adverse Impact Opinion within such five (5) business day period but the other party has timely delivered its Adverse Impact Opinion, then the Adverse Diligence Discovery Value Impact shall automatically and conclusively be deemed to be the amount set forth in the Adverse Impact Opinion so delivered by such party. If both parties have timely delivered their Adverse Impact Opinions to the Valuation Expert, then the Adverse Diligence Discovery Value Impact shall be determined “baseball style” such that the Valuation Expert must choose as the Adverse Diligence Discovery Value Impact the amount set forth in either the Marcus Entities’ or Buyer’s Adverse Impact Opinion, and shall have no right to make any other determination as to the Adverse Diligence Discovery Value Impact. The Valuation Expert shall choose the Adverse Diligence Discovery Value Impact set forth in either the Marcus Entities’ or Buyer’s Adverse Impact Opinion within five (5) Business Days after the delivery of both of the Adverse Impact Opinions, and such determination shall be final and binding on the Marcus Entities and Buyer, without any Liability to the Valuation Expert.

7.9(e) Purchase Price Adjustment.

7.9(e)(i) Non-Excluded Diligence Amounts. If the Adverse Diligence Discovery Amount (excluding Excluded Diligence Amounts) is:

7.9(e)(i)(A) less than or equal to Four Million Dollars ($4,000,000) (such amount is the “Adverse Diligence Discovery Deductible”), then the Marcus Entities and Buyer shall proceed to Closing and the Purchase Price shall be reduced by (A) $0 plus (B) the aggregate Excluded Diligence Amounts;

7.9(e)(i)(B) more than the Adverse Diligence Discovery Deductible but less than or equal to Forty-Four Million Dollars ($44,000,000) (the “Adverse Diligence Discovery Cap”), then the Marcus Entities and Buyer shall proceed to Closing, except that the Purchase Price shall be reduced by (A) the amount by which the Adverse Diligence Discovery Amount exceeds the Adverse Diligence Discovery Deductible plus (B) the aggregate Excluded Diligence Amounts; or

7.9(e)(i)(C) exceeds the Adverse Diligence Discovery Cap, then Buyer may, within five (5) days after it is determined that the Adverse Diligence Discovery Amount (excluding Excluded Diligence Amounts) exceeds the Adverse Diligence Discovery Cap pursuant to this Section 7.9, send to the Marcus Entities notice of its election to proceed to Closing, in which case the Purchase Price shall be reduced by an amount equal to the sum of (A) Forty Million Dollars ($40,000,000) plus (B) the aggregate Excluded Diligence Amounts. If no such notice is sent by such deadline, or if Buyer otherwise declines to make such election, then this Agreement may be terminated by either Buyer or the Marcus Entities in its entirety, in which event the Escrow Company will return the Earnest Money Deposit to Buyer, whereupon this Agreement shall terminate and the parties shall have no further obligations or liabilities under this Agreement except those that expressly survive termination of this Agreement.

7.9(e)(ii) Excluded Diligence Amount Deductible and Cap. The Marcus Entities shall be fully liable for all Excluded Diligence Amounts; provided, however, that if the aggregate Excluded Diligence Amounts equal or exceed the cash Purchase Price, then the Marcus Entities may terminate this Agreement, in which event the Escrow Company will return the Earnest Money Deposit to Buyer, whereupon this Agreement shall terminate and the parties shall have no further obligations or liabilities under this Agreement except those that expressly survive termination of this Agreement.

7.9(f) Exclusion of Properties. Notwithstanding anything to the contrary contained in this Agreement (but subject to the Marcus Entities’ right to reasonably cure under Section 7.9(c)), in addition to the foregoing rights and remedies, if the aggregate Adverse Diligence Discovery Amount with respect to any Property resulting from Adverse Diligence Discoveries with respect to the representations and warranties of the Marcus Entities in Section 4.12(a) (but only with respect to Environmental Laws and Hazardous Substances released in violation of Environmental Law or which release requires any so-called “response action” (which may include remediation) under any Environmental Law or other requirement of any Government Entity is required to be remediated pursuant to any Environmental Law), Section 4.12(c) or Section 4.13 (with respect to the first sentence only) exceeds 17.5% of the portion of the Purchase Price allocated to the applicable Property pursuant to Exhibit D, then at Buyer’s request such Property shall be excluded from this Agreement and the Purchase Price shall be reduced by the portion of the Purchase Price allocated thereto pursuant to Exhibit D subject to the limitations set forth in Section 7.9(g); provided, however, that, for purposes of this Section 7.9(f) only, any knowledge, materiality (including any material adverse effect) and/or similar qualifications or limitations contained in the representations and warranties of the Marcus Entities in Sections 4.12(a), 4.12(c) and 4.13 (with respect to the first sentence only) shall be ignored and shall be deemed deleted from each such representation and warranty. All such Excluded Properties excluded pursuant to this Section 7.9(f) shall either be subject to Section 14.16 or, if the parties mutually agree, then the Closing solely with respect to such Property shall be delayed to a mutually agreed upon date.

7.9(g) Right to Terminate. Notwithstanding anything to the contrary contained in this Agreement, if more than nine (9) Properties (or such other higher number mutually agreed upon by Buyer and the Marcus Entities) are excluded from this Agreement or the Purchase Price is to be reduced by more than Forty Million Dollars ($40,000,000) (excluding Purchase Price reductions due to Excluded Diligence Amounts) pursuant to this Article 7 and/or Article 10, then either the Marcus Entities or Buyer shall have the right to terminate this Agreement in its entirety by giving written notice to such effect to the other party, in which event the Escrow Company will return the Earnest Money Deposit to Buyer, whereupon this Agreement shall terminate and the parties shall have no further obligations or liabilities under this Agreement except those that expressly survive termination of this Agreement.

7.10 Meeting With Franchisees. After the parties publicly announce the transactions contemplated by this Agreement, the Marcus Entities will cooperate with Buyer in arranging, at Buyer’s sole cost, regional, local and one-on-one meetings with each of the Franchisees (including the Franchisee of the Baymont Hotel located in Decatur, Illinois). The Marcus Entities shall have the right, but not the obligation, to send at least one senior executive of Baymont Franchises or Baymont Hotels to each meeting.

7.11 Liquor License; Other Licenses and Permits. Subject to Section 1.3, as promptly as practicable following the date of this Agreement, Buyer shall complete, execute and file with the applicable liquor licensing authority all necessary applications for transfer of all liquor licenses, each of which are listed on Schedule 7.11 (each a “Liquor License”) held by any of the Marcus Entities for the service or provision of alcoholic beverages at any of the Properties or the issuance of a new Liquor License to Buyer. Buyer specifically acknowledges and agrees that the transfer of the Liquor License to Buyer on the Closing Date shall not be a condition to Buyer’s obligation to close the transaction contemplated under this Agreement; provided, however, that if the parties are unable to cause the transfer of the existing Liquor Licenses to Buyer or its designee on the Closing Date or to cause the issuance of a new Liquor License to Buyer or its designee as of the Closing Date, then the Marcus Entities and Buyer shall reasonably cooperate in good faith to implement arrangements whereby the appropriate license holding Marcus Entities shall manage the purchase, sale and service of alcoholic beverages at the Properties where liquor is currently being served on behalf of Buyer or its designee following the Closing Date pending the transfer of the existing Liquor Licenses to Buyer or its designee or the issuance of new Liquor Licenses to Buyer or its designee; provided, however, that such arrangements shall comply with customary practices utilized on hotel purchase and sale transactions in the jurisdictions in which the Properties are located and applicable Laws. Without limiting the foregoing, such arrangements may include entering into an Interim Beverage Services Agreement in the form attached hereto as Exhibit E, which form shall be modified as mutually and reasonably agreed by the parties to reflect custom and practice in each applicable jurisdiction. Buyer and the Marcus Entities shall use reasonable efforts to effect the transfer of all Licenses and Permits to Buyer (other than Licenses and Permits that are not transferable under applicable Law) and to enable Buyer to obtain new Licenses and Permits to replace any nontransferable License and Permits.

7.12 Integration and Interface Development. From the date hereof until the Closing, the parties shall cooperate and use reasonable efforts to effect an efficient integration of the Marcus Mid-Priced Lodging Businesses into Buyer’s operations. Such cooperation and efforts shall include, without limitation, reasonable efforts to cooperate with respect to (i) the exchange of human resources related information (including information to facilitate the extension by Buyer of offers of employment to certain Employees); (ii) the training of Affected Employees; (iii) the implementation of the workplan attached hereto as Exhibit F, as the same may be amended or supplemented by the mutual agreement of the parties prior to the Closing to facilitate the integration and interface development; and (iv) the development or modification of interfaces between the relevant information technology systems of the Marcus Mid-Priced Lodging Businesses and such systems of Buyer (including, without limitation, the installation of software, communication links, hardware and other systems and source codes). Nothing in this Section 7.12 shall require the Marcus Entities or other Selling Joint Ventures to pay any of their Employees overtime or pay or agree to pay additional unreasonable amounts of money or agree to any new or additional unreasonably unfavorable terms or conditions.

7.13 Letters of Credit. To the extent that there are letters of credit supporting the obligations of other parties to any of the Assigned Contracts and subject to Section 1.3, the Marcus Entities shall use reasonable efforts to deliver one of the following for each such letter of credit: (i) if such letter of credit is, by its terms, assignable, such letter of credit together with a duly executed assignment of such letter of credit which cites Buyer as the beneficiary thereof or (ii), if such letter of credit is not, by its terms, assignable to Buyer, such letter of credit together with a commitment in form reasonably satisfactory to Buyer by the bank issuing such letter of credit to reissue such letter of credit with Buyer as the beneficiary thereof upon surrender of the outstanding letter of credit, in which case the Marcus Entities agree to surrender such letter of credit at Closing. Buyer shall use reasonable efforts to assist the Marcus Entities in obtaining any such replacement letters of credit including, without limitation, exercising Buyer’s rights and remedies under the applicable Assigned Contract in order to cause the Assigned Contract counterparty to obtain any replacement letter of credit.

7.14 Subdivision Properties. Buyer and the Marcus Entities hereby acknowledge that the Baymont Hotels and Woodfield Hotels located on the Real Property described in Schedule 7.14 hereto (individually, a “Subdivision Property,” and collectively, the “Subdivision Properties”) are not legally divided parcels of land such that the Baymont Hotel facility or Woodfield Hotel facility, as applicable, is legally separate from the immediately adjacent land and/or land and improvements.

7.14(a) Boundaries of Parcels. Prior to Closing, Buyer and the Marcus Entities shall mutually agree upon the boundaries of the portion of each Subdivision Property (including the land and improvements thereon) to be conveyed to Buyer (individually, a “Buyer’s Subdivision Parcel”, and collectively, the “Buyer’s Subdivision Parcels”), and that portion (including the land and improvements thereon) to be retained by the applicable Marcus Entity (individually, a “Retained Subdivision Parcel”, and collectively, the “Retained Subdivision Parcels”). Notwithstanding the foregoing, the parties hereby acknowledge and agree that all improvements comprising each Baymont Hotel facility or Woodfield Hotel facility, as applicable, and all related parking spaces required by local zoning ordinances and otherwise used in the operation of the Baymont Hotel facility or Woodfield Hotel facility, as appropriate, consistent with past practice, shall be included within the boundaries of each Buyer’s Subdivision Parcel, and each Buyer’s Subdivision Parcel shall comply with all zoning Laws, subdivision Laws and other Laws applicable thereto. In addition, the parties hereby acknowledge and agree that each Buyer’s Subdivision Parcel shall abut directly on a public way, with curb cuts that comply with all Laws, or shall have direct access to a public way pursuant to a valid easement of record reasonably acceptable to Buyer, which easement shall be included as an insured parcel in the title insurance policy issued pursuant to Section 8.10 hereof. The boundaries of each Buyer’s Subdivision Parcel shall also be sufficient: (i) to permit the Escrow Company to issue to Buyer the title insurance policy required under Section 8.10 hereof including, to the extent available in such jurisdiction under applicable Laws, a zoning 3.1 endorsement with parking, and an access endorsement insuring access, either directly or through an insured easement, to a public way, or to the extent such endorsements are not available in such jurisdictions, written confirmation from the applicable municipal zoning administrator/land use planning department confirming that such Buyer’s Subdivision Parcel complies with all applicable zoning and land division ordinances; and (ii) for the surveyor to issue an updated ALTA/ACSM survey of the Subdivision Property showing such subdivision. Any reciprocal easement agreements, shared parking agreements or similar easements or agreements affecting any Buyer’s Subdivision Parcel and entered into in connection with such land division shall be subject to the reasonable mutual approval of the Marcus Entities and Buyer.

7.14(b) Land Division Process. The Marcus Entities shall commence, and shall use reasonable best efforts to pursue to completion at their sole cost and expense, the land division of each Subdivision Property in accordance with the mutually agreed-upon plans and boundaries, and otherwise in accordance with all Laws applicable to each Subdivision Property. Buyer agrees to reasonably cooperate, at no cost to Buyer, with the Marcus Entities in obtaining all necessary approvals of the land division and conveyance of the Buyer’s Subdivision Parcels to Buyer.

7.14(c) Treatment of Subdivision Properties at Closing. At Closing, to the extent any Subdivision Properties have not then been legally divided in accordance with the requirements of this Section 7.14, Buyer or an Affiliate, as tenant, and the applicable Marcus Entity, as landlord, shall enter into a lease agreement in the form attached hereto as Exhibit G, providing for annual rent of One Dollar ($1.00), pursuant to which Buyer or an Affiliate shall lease from the applicable Marcus Entity, and the applicable Marcus Entity shall lease to Buyer, Buyer’s Subdivision Parcel including all improvements thereon, and all Owned Personal Property, Inventory and Computer Software, and the Marcus Entities shall deliver to Buyer the applicable documents set forth in Section 12.1 and all related Contracts, Personal Property Leases, Records and Files, Licenses and Permits, Warranties and future Bookings and other intangible rights and assets, each to the extent the same would be transferred to Buyer if such Buyer’s Subdivision Parcel would be a Property conveyed to Buyer on the Closing Date, located at or used in connection with the operation of the applicable Buyer’s Subdivision Parcel until such time as the land division is approved by all applicable Government Entities and otherwise meets the requirements of this Section 7.14, and Buyer’s Subdivision Parcel may be legally conveyed to Buyer, or such lease is terminated as provided in Section 7.14(e). To the extent such items cannot be leased or conveyed to Buyer, as applicable, the Marcus Entities shall also take such efforts as would be required by Section 1.3 as if such Buyer’s Subdivision Parcel were a Property. At Closing, Buyer shall deposit into escrow with the Escrow Company the portion of the Purchase Price (net of all prorations required hereunder) allocated to each Subdivision Property pursuant to Exhibit D, that has not then been legally divided and approved by all applicable Government Entities and otherwise satisfies the requirements of this Section 7.14, which portion of the Purchase Price shall be held by the Escrow Company, in escrow, pending final approval of the land division and the satisfaction of the other requirements of this Section 7.14 with respect to such Subdivision Property, and conveyance of such Buyer’s Subdivision Parcel to Buyer, or the return of such funds to Buyer as provided in Section 7.14(e).

7.14(d) Conveyance Upon Receipt of Approvals. Promptly after receiving all necessary approvals from all applicable Government Entities, and the satisfaction of the other requirements in this Section 7.14, relative to each Subdivision Property: (i) Buyer and the Marcus Entities shall jointly instruct the Escrow Company to release to the Marcus Entities such portion of the Purchase Price, along with all interest thereon (which shall be reported as income of the Marcus Entities), allocated to the Subdivision Property for which all necessary approvals have been obtained, and (ii) the Marcus Entities shall deliver to Buyer a deed and a bill of sale, in the forms required under this Agreement, together with such tax declaration forms as may be required by applicable Laws, conveying or assigning, as appropriate, to Buyer Buyer’s Subdivision Parcel and the other property leased by Buyer or an Affiliate relative to such Buyer’s Subdivision Parcel pursuant to Section 7.14(c), as well as the title company affidavits required under Section 12.1(x) and other ancillary documents provided for in Section 12.1 to the extent applicable.

7.14(e) Failure to Obtain Approvals. At any time upon the written agreement of Buyer and the Marcus Entities, or in the event the Marcus Entities are unable to obtain, on or before the Termination Date (as defined in Exhibit G), approval of all applicable Government Entities of the land division of any Subdivision Property in accordance with the terms and requirements of this Section 7.14 relative to such Subdivision Property, then at Buyer’s election, either:

7.14(e)(i) the applicable Subdivision Property shall be excluded from this Agreement, and the Marcus Entities and Buyer shall jointly instruct the Escrow Company to release to Buyer such portion of the Purchase Price allocated to such Subdivision Property, including all interest thereon (but minus any outstanding amounts due to the applicable Marcus Entity under the terms of the lease between the applicable Marcus Entity and Buyer (or its Affiliate)), and adjusted for the reproration of the items provided in Section 12.3 hereof as of the time of the termination of the applicable lease and the transfer of possession back to the applicable Marcus Entity), and such excluded Subdivision Property shall be an Excluded Property subject to Section 14.16, the lease with respect thereto shall be automatically terminated, and all related Contracts, Personal Property Leases, Records and Files, Licenses and Permits, Warranties and future Bookings and other intangible rights and assets shall be assigned back to and be assumed by the Marcus Entities; or

7.14(e)(ii) the Marcus Entities shall: (a) sell the building and other real property improvements located on the applicable Buyer’s Subdivision Parcel and the associated Owned Personal Property, Inventory, and Computer Software and, to the extent not previously assigned to Buyer, shall assign to Buyer all Contracts, Personal Property Leases, Records and Files, Licenses and Permits, Warranties, Bookings and other general intangible rights and assets used in connection with the ownership or operation of the applicable Buyer’s Subdivision Parcel, in each case pursuant to the documents and procedures set forth in Sections 12.1 and 12.2, for an aggregate purchase price equal to the component of the Purchase Price allocated to such Subdivision Property in Exhibit D times a fraction, the numerator of which is the amount allocated to such building and other real property improvements, and to the associated Owned Personal Property and the other aforementioned items, each to the extent not previously conveyed to Buyer pursuant to Section 3.5, and the denominator of which is the total amount (i.e., land, improvements and associated Owned Personal Property) allocated to such Subdivision Property pursuant to Section 3.5, and (b) enter into a ninety-nine (99) year “financeable” ground lease with Buyer for Buyer’s Subdivision Parcel upon the terms and conditions set forth in this Section 7.14(e)(ii), and upon such other terms and conditions as may be mutually and reasonably agreed upon by the applicable Marcus Entity and Buyer. In no event would the Marcus Entities be required to subordinate their fee interest in Buyer’s Subdivision Parcel subject to such ground lease to any mortgage or deed of trust financing of Buyer. Any such ground lease shall be sufficient for Buyer to obtain a leasehold title insurance policy insuring such leasehold interest consistent with the provisions of Section 8.10 hereof, and otherwise reasonably satisfactory to both parties thereto, and shall provide for rent which, if paid over the term of such ground lease, would provide the Marcus Entities with total rent, discounted to present value using a discount rate of 6.5%, equal to the component of the Purchase Price allocated to such Subdivision Property in Exhibit D times a fraction, the numerator of which is the amount allocated to the land portion of such Subdivision Property pursuant to Section 3.5 and the denominator of which is the total amount (i.e land, improvements and associated Owned Personal Property) allocated to such Subdivision Property pursuant to Section 3.5. If the parties cannot agree on any of the terms of such “financeable” ground lease, then, at either party’s election, such dispute shall be resolved by binding arbitration pursuant to Section 15.

7.14(f) Marcus Entities Representations and Warranties. Notwithstanding that Buyer’s Subdivision Parcels may be leased to Buyer pursuant to this Section 7.14, Buyer shall have the right to bring claims for breaches of the representations and warranties and covenants of the Marcus Entities pursuant to Article 11 hereof as if Buyer had purchased Buyer’s Subdivision Parcels at Closing, and such claims shall be subject to all of the provisions of Article 11 of this Agreement as if Buyer had purchased Buyer’s Subdivision Parcels; provided, however, that with respect to any claims for breaches of any representations and warranties and covenants of the Marcus Entities contained herein that apply solely to the physical condition of or compliance with laws of a specific Buyer’s Subdivision Parcel, the Marcus Entities shall have no obligation to make any indemnification for any Losses relating thereto, and such claims shall be ignored for purposes of determining whether the Deductible and Indemnification Cap have been met, unless Buyer shall have, prior to undertaking any work or incurring any cost to effectuate a cure of such breach, notified the Marcus Entities in writing of such breach and provided the Marcus Entities with the opportunity to cure the same, and the Marcus Entities fail to cure the same as provided in this Section. Upon receipt of Buyer’s written notice of such breach, the Marcus Entities shall have the option to undertake and perform such work or take such actions, at the sole expense of the Marcus Entities, as may be necessary to effect a reasonable cure; provided that: (i) Buyer shall have the right to approve, in its reasonable discretion, the scope of work proposed by the Marcus Entities, and (ii) the Marcus Entities shall promptly commence, and diligently prosecute to completion, the work set forth in the scope of work approved by Buyer. In the event the Marcus Entities take no action to propose a scope of work or commence action to cure the breach within thirty (30) days after Buyer delivers to the Marcus Entities written notice of the same, Buyer may undertake such work, and/or incur such costs, as deemed reasonably necessary by Buyer to cure the same. In such case, Buyer shall have the right to bring a claim for the breach of the representations and warranties and covenants of the Marcus Entities pursuant to Article 11 hereof as if Buyer had purchased the applicable Buyer’s Subdivision Parcel at Closing, and such claim shall be subject to all of the provisions of Article 11 of this Agreement as if Buyer had purchased the applicable Buyer’s Subdivision Parcel at Closing. Notwithstanding anything to the contrary set forth above, to the extent that any claim by Buyer for breaches of any representations and warranties or covenants of the Marcus Entities apply solely to defects in the physical condition of or the noncompliance with Laws of the improvements on a specific Buyer’s Subdivision Parcel, and the consequence of such breach results in an emergency situation that requires immediate repairs to the applicable building or other improvements in order to avoid imminent injury to persons or further damage to property, then Buyer shall have the right to institute such emergency repairs immediately as long as it promptly provides notice to the Marcus Entities thereof.

7.15 Restrictions on Real Property. Buyer hereby acknowledges and agrees that no Use Restricted Property shall, for a period of fifteen (15) years after the Closing Date, be used or operated in any manner other than as a hotel or lodging facility and uses ancillary thereto (including, but not limited to, restaurant and food service uses), without the prior written consent of the Marcus Entities, which consent shall not be unreasonably withheld. Such limitations on use of the Use Restricted Properties shall automatically terminate as of the fifteenth (15^th) anniversary of the Closing Date. Buyer also acknowledges and agrees that the Marcus Entities shall execute and deliver to Buyer, at Closing, a recordable restrictive covenant to such effect in form reasonably acceptable to Buyer. Buyer from time to time after the Closing Date, at the request of the Marcus Entities shall execute and deliver further instruments, and take such other actions, consistent with this provision to evidence Buyer’s agreement hereunder. The Marcus Entities hereby acknowledge and agree that no Retained Real Property adjacent to, or located within ¼ mile of, any Use Restricted Property shall, for a period of fifteen (15) years after the Closing Date, be used or operated as a Competing Hotel without the prior written consent of Buyer. Such limitations on use of each Retained Real Property adjacent to, or located within ¼ mile of, any Use Restricted Property shall automatically terminate as of the fifteenth (15^th) anniversary of the Closing Date. The Marcus Entities also hereby acknowledge and agree that the Marcus Entities shall execute and deliver to Buyer at Closing, a recordable restrictive covenant to such effect in form reasonably acceptable to Buyer. The Marcus Entities from time to time after the Closing Date, at the request of Buyer shall execute and deliver further instruments, and take such other actions, consistent with this provision to evidence the Marcus Entities’ agreement hereunder.

7.16 Data Room Web Site. The Marcus Entities shall notify Buyer of any new documents or materials posted on the data room web site maintained by the Marcus Entities within 24 hours of such posting.

7.17 New Ovations Agreements. If Buyer desires to continue to offer, as rewards under the Ovations programs, rewards provided by Affiliates of the Marcus Entities, then prior to Closing, Buyer and such Affiliates shall negotiate mutually agreed upon contracts (the “New Ovations Agreements”) governing such rewards.

7.18 Change in Officers. The Marcus Entities shall give Buyers prompt notice of any change in any personnel at the general manager position or any more senior position in the Marcus Mid-Priced Lodging Businesses.

7.19 Further Assurances. The Marcus Entities from time to time prior to the Closing, at the request of Buyer, shall cooperate with and provide assistance to Buyer in removing the Purchased Assets from the Marcus Entities’ or the Selling Joint Ventures’ premises (or wherever located).

7.20 Property-Level Contracts. Promptly after the date hereof, the Marcus Entities shall use reasonable efforts (including soliciting information from each general manager) to deliver a list of all Assigned Contracts, a list of all Marcus Personal Property Leases, a list of all Selling Joint Venture Personal Property Leases, a list of all Assigned Licenses and Permits and a list of all Bookings, in each case not otherwise included in the applicable Schedules relating to such item.

7.21 Disclosure of Transaction Stay/Severance Plan. Subject to Section 6.1(d), the Marcus Entities shall, promptly after finalizing any formal plan pursuant to which any Transaction Stay/Severance Payments are made, disclose such plan to Buyer.

8.	CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS

Each and every obligation of Buyer to be performed on the Closing Date shall be subject to the satisfaction prior to or at the Closing of each of the following conditions:

8.1 Representations and Warranties True on the Closing Date. Each of the representations and warranties made by the Marcus Entities (including with respect to Marcus, its Affiliates and the Joint Ventures) in Article 4 of this Agreement shall be true and correct when made and shall be true and correct at and as of the Closing Date as though such representations and warranties were made or given on and as of the Closing Date, except (a) for any changes permitted by the terms of this Agreement consented to in writing by Buyer or (b) to the extent any failure of such representations and warranties to be true and correct in all material respects would not have a Material Adverse Effect.

8.2 Compliance With Agreement. The Marcus Entities shall have performed and complied with all of their agreements and obligations under this Agreement which are to be performed or complied with by them prior to or on the Closing Date, except to the extent that any failure to perform or comply with such agreements or obligations has been consented to in writing by Buyer or would not have a Material Adverse Effect.

8.3 Absence of Litigation. No Litigation or investigation by any Government Entity shall have been commenced and shall be continuing or shall be threatened in writing against Buyer, any of the Marcus Entities, any of the Joint Ventures, Marcus or any of their respective Affiliates wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) restrict, prevent or prohibit consummation of the transactions contemplated by this Agreement, (ii) cause the transactions contemplated by this Agreement to be rescinded following consummation, (iii) have a Material Adverse Effect, or (iv) require the Buyer, upon consummation of any of the transactions contemplated by this Agreement, to hold separate or dispose of any of the assets of the Marcus Mid–Priced Lodging Businesses or impose limitations on the ability of the Buyer to control in any respect the business, assets or operations of the Marcus Mid–Priced Lodging Businesses, and no such judgment, order, decree, stipulation or injunction shall be in effect.

8.4 HSR Waiting Period. All applicable waiting periods (and any extensions thereof) related to the HSR Act shall have expired or otherwise been terminated.

8.5 Leases Relative to Subdivision Properties. The applicable Marcus Entities holding fee simple title to the Subdivision Properties shall have entered into leases for each of the Buyer’s Subdivision Parcels in the form attached hereto as Exhibit G.

8.6 Closing Documents. The Marcus Entities shall have delivered or caused to be delivered the documents specified in Section 12.1 hereof.

8.7 Consents, etc. Any consent, authorization, order or approval of (or filing or registration with) any third party identified in Schedule 8.7 shall have been obtained, at the Marcus Entities’ sole cost.

8.8 Acts of Terror. Since the date of the Agreement, there shall have not occurred any acts of terror targeting two or more Properties that have a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect.

8.9 Estoppel Certificates. Receipt by Buyer of estoppel certificates in form and substance reasonably satisfactory to Buyer from (a) each of the lessors under the Real Property Leases, and (b) counterparties to any reciprocal easement or shared use agreement or similar agreement affecting any of the Properties.

8.10 Title Insurance Policies. The willingness of the Escrow Company to issue to Buyer, at customary title company rates, standard ALTA 1992 form (or if such form is not available in a particular jurisdiction under applicable Laws, the form customarily used in such jurisdiction) owner’s insurance policies insuring good and marketable fee simple (or leasehold in the case of the Properties subject to the Real Property Leases) title on each of the Properties, subject only to the Permitted Real Property Liens and such other exceptions to title as are permissible under the provisions of this Agreement and as are consistent with the representations and warranties and covenants of the Marcus Entities in this Agreement with respect to title, and including owners’ comprehensive, zoning form 3.1, same as survey, creditor’s rights, access, contiguity, subdivision and utility endorsements to the extent such endorsements are available under applicable Laws governing the issuance of title insurance in each state where a Property is located, deletion of standard exceptions and, if applicable, so-called “gap” coverage.

8.11 Employee Data. The Marcus Entities shall deliver to Buyer in a machine readable format not less than ten (10) business days prior to Closing such information regarding Affected Employees as is set forth in Schedule 6.1(a).

9.	CONDITIONS PRECEDENT TO THE MARCUS ENTITIES’ OBLIGATIONS

Each and every obligation of the Marcus Entities to be performed on the Closing Date shall be subject to the satisfaction prior to or at the Closing of each of the following conditions:

9.1 Representations and Warranties True on the Closing Date. Each of the representations and warranties made by Buyer in Article 5 of this Agreement shall be true and correct when made and shall be true and correct at and as of the Closing Date as though such representations and warranties were made or given on and as of the Closing Date, except (a) for any changes permitted by the terms of this Agreement consented to in writing by the Marcus Entities or (b) to the extent any failure of such representations and warranties to be true and correct in all material respects would not have a Material Adverse Effect.

9.2 Compliance With Agreement. Buyer shall have performed and complied with all of its agreements and obligations under this Agreement which are to be performed or complied with by Buyer prior to or on the Closing Date, except to the extent that any failure to perform or comply with such agreements or obligations have been consented to in writing by the Marcus Entities or would not restrict, prevent or prohibit Buyer’s ability to consummate the transactions contemplated by this Agreement or would not have a Material Adverse Effect.

9.3 Absence of Litigation. No Litigation or investigation by any Government Entity shall have been commenced and shall be continuing or shall be threatened in writing against Buyer, the Marcus Entities, the Joint Ventures, Marcus or any of their respective Affiliates with respect to the transactions contemplated hereby which would restrict, prevent, or prohibit the consummation of the transactions contemplated by this Agreement.

9.4 HSR Waiting Period. All applicable waiting periods (and extensions thereof) related to the HSR Act shall have expired or otherwise been terminated.

9.5 Leases Relative to Subdivision Properties. Buyer shall have entered into the leases described in Section 8.5 for each of the Buyer’s Subdivision Parcels in the form attached hereto as Exhibit G.

9.6 Closing Documents. The Buyer shall have delivered or caused to be delivered the cash portions of the Purchase Price contemplated by Section 12.2(a) and the documents specified in Section 12.2.

10.

RISK OF LOSS

10.1 Casualty. If, at any time after the date of this Agreement and prior to Closing or earlier termination of this Agreement, any Property or any material portion thereof is damaged or destroyed by fire or any other casualty (a “Casualty”), the Marcus Entities shall give written notice of such Casualty to Buyer promptly after the occurrence of such Casualty.

10.1(a) Material Casualty. If the estimated amount required to fully repair or restore the Property damaged by such Casualty to its condition immediately prior to such Casualty, as reasonably agreed to by the Marcus Entities and the Buyer, equals or exceeds 17.5% of the portion of the Purchase Price allocated to the applicable Property pursuant to Exhibit D (a “Material Casualty”) and the Casualty was not caused by Buyer or any person that conducted inspections by or on behalf of Buyer, or their respective employees or agents, then Buyer shall have the right to elect, by providing written notice to the Marcus Entities within ten (10) Business Days after Buyer’s receipt of the Marcus Entities’ written notice of such Casualty and the Parties’ agreement on the estimated cost to repair or restore, to (a) cause the affected Property to be excluded from this Agreement and reduce the Purchase Price by the amount thereof allocated to such Property subject to limits in Section 7.9(g) (in which case the Property shall either be an Excluded Property subject to Section 14.16 or, if the parties mutually agree, then the Closing solely with respect to such Property shall be delayed to a mutually agreed upon date), or (b) proceed to Closing, in which case the Marcus Entities shall (i) provide Buyer with a credit against the Purchase Price in an amount equal to the applicable insurance deductible, and (ii) transfer and assign to Buyer all of the Marcus Entities’ right, title and interest in and to all claims and proceeds from all casualty and lost profits insurance policies maintained by the Marcus Entities with respect to the affected Property, except those proceeds allocable to lost profits and costs incurred by the Marcus Entities for the period prior to the Closing. If Buyer fails to provide written notice of its election to the Marcus Entities within such time period, then Buyer shall be deemed to have elected to proceed to Closing pursuant to clause (b) of the preceding sentence. If the Closing is scheduled to occur within Buyer’s ten (10) day election period, the Closing Date, with respect to such Property only, shall be postponed until the date which is five (5) Business Days after the expiration of such ten (10) day election period. If the Marcus Entities and the Buyer are unable to agree on the estimated costs to repair or restore as provided herein within ten (10) Business Days after Buyer’s receipt of the Marcus Entities’ written notice of such Casualty, the determination of the estimated costs to repair or restore shall be made by the Valuation Expert as promptly as possible thereafter and the Closing, with respect to such Property only, shall be extended accordingly.

10.1(b) Non-Material Casualty. In the event of any (i) Casualty which is not a Material Casualty, or (ii) Material Casualty which is caused by Buyer or any person that conducted inspections by or on behalf of Buyer, or their respective employees or agents, then Buyer shall not have the right to terminate this Agreement, but shall proceed to Closing, in which case the Marcus Entities shall (A) provide Buyer with a credit against the Purchase Price (except if such Casualty is caused by Buyer or any Person that conducted inspections and/or Diligence by or on behalf of Buyer) in an amount equal to the applicable insurance deductible plus any uninsured amount of the repair or restoration cost, and (B) transfer and assign to Buyer all of the Marcus Entities’ right, title and interest in and to all claims and proceeds from all casualty and lost profits insurance policies maintained by the Marcus Entities with respect to the applicable Property, except those proceeds allocable to any lost profits or costs incurred by the Marcus Entities for the period prior to the Closing. If the Marcus Entities and the Buyer are unable to agree on the estimated costs to repair or restore as provided herein, the determination of the estimated costs to repair or restore shall be made by the Valuation Expert prior to the Closing Date.

10.2 Condemnation. If, at any time after the date of this Agreement and prior to Closing, any Government Entity commences any condemnation proceeding or other proceeding in eminent domain with respect to all or any portion of a Property (a “Condemnation”), the Marcus Entities shall give written notice of such Condemnation to Buyer promptly after the Marcus Entities receive notice of such Condemnation.

10.2(a) Material Condemnation. If the Condemnation would result in the loss in value of more than 17.5% of the portion of the Purchase Price allocated to the applicable Property pursuant to Exhibit D (a “Material Condemnation”), then Buyer shall have the right to elect, by providing written notice to the Marcus Entities within ten (10) Business Days after Buyer’s receipt of the Marcus Entities’ written notice of such Condemnation and agreement on the loss in operational value (if applicable), to (A) reduce the Purchase Price by the amount thereof allocated to such Property subject to conditions in Section 7.9(g), in which case the Property shall be an Excluded Property subject to Section 14.16 or (B) proceed to Closing, without terminating this Agreement, in which case the Marcus Entities shall assign to Buyer all of the Marcus Entities’ right, title and interest in all claims, proceeds and awards from such Condemnation. If Buyer fails to provide written notice of its election to the Marcus Entities within such time period, then Buyer shall be deemed to have elected to proceed to Closing pursuant to clause (B) of the preceding sentence. If the Closing is scheduled to occur within Buyer’s ten (10) day election period, the Closing shall be postponed until the date which is five (5) Business Days after the expiration of such ten (10) day election period. If the Marcus Entities and the Buyer are unable to agree on the loss in value (if applicable) as provided herein within ten (10) Business Days after Buyer’s receipt of the Marcus Entities’ written notice of such Condemnation, the determination of such loss in value shall be made pursuant to the dispute resolution process described in Section 7.9(d)(ii) and 7.9(d)(iii).

10.2(b) Non-Material Condemnation. In the event of any Condemnation other than a Material Condemnation, Buyer shall not have the right to terminate this Agreement, but shall proceed to Closing, in which case the Marcus Entities shall assign to Buyer all of the Marcus Entities’ right, title and interest in all claims, proceeds and awards from such Condemnation.

11.

SURVIVAL; INDEMNIFICATION

11.1 Survival. All of the representations and warranties of the Buyer and Marcus Entities contained in this Agreement shall survive the Closing (even if the Buyer knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing, other than knowledge of Adverse Diligence Discoveries for which the Purchase Price was adjusted) and continue in full force and effect for a period of 12 months thereafter; provided, however, that the representations and warranties of the Marcus Entities contained in Section 4.12(c) shall survive the Closing (even if the Buyer knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing, other than knowledge of Adverse Diligence Discoveries for which the Purchase Price was adjusted) and continue in full force and effect for a period of 24 months thereafter; provided, however, that the representations and warranties of the Marcus Entities contained in Sections 4.6, 4.17, 4.20, 4.23(a), 4.23(d), 4.23(p), 4.23(t) and 4.23(u) (with respect to Section 4.23(u)only, only the first sentence thereof, and only to the extent related solely to events that occurred prior to the date hereof) shall survive the Closing (even if the Buyer knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing, other than knowledge of Adverse Diligence Discoveries for which the Purchase Price was adjusted) and continue in full force and effect until sixty (60) days after the expiration of the applicable statute of limitations; providedfurther, however, that there shall be no limitation as to time for any claims pursuant to this Article 11 relating to, arising out of or resulting from (u) breaches of the Excepted Representations and Warranties (even if Buyer knew or had any reason to know of any misrepresentation or breach of warranty or covenant at the time of Closing, other than knowledge of Adverse Diligence Discoveries for which the Purchase Price was adjusted); (v) fraud or intentional misrepresentation by the Marcus Entities of any of their representations, warranties or covenants in this Agreement; (w) deliberate or willful breach by the Marcus Entities of any of their representations, warranties or covenants in this Agreement; (x) the breach of any covenant of the Marcus Entities contained in this Agreement (excluding, solely for purposes of this provision (x), Articles4, 8, 9, 15 (other than Sections 15.6and 15.7), 16, 17 (other than Sections 17.2, 17.3, 17.5, 17.7, 17.8, 17.9, 17.13, 17.18 and 17.19) and Sections3.1, 3.2, 13.1, and 13.2(b))); (y) any claim asserted or instituted against Buyer or any of its properties or assets by a third party seeking to assert, or claiming ownership or rights to ownership of any of the Purchased Assets; and (z) any of the Marcus Entities’ or Selling Joint Ventures’ failure to pay, perform and discharge, when due, any of the Excluded Liabilities, but only to the extent that such Excluded Liabilities are Specifically Identified Excluded Liabilities. Subject to the limitations set forth in the preceding sentence, claims with respect to the pre-Closing covenants of this Agreement may be made only through the date that is twelve (12) months after the Closing. Each Party’s indemnification obligations with respect to representations, warranties, covenants, and obligations in this Agreement shall survive until the applicable representation, warranty, covenant or obligation period ends pursuant to this Section; provided, however, that if an Indemnified Party (as defined below) delivers to an Indemnifying Party (as defined below), before expiration of a representation or warranty, either a notice of claim based upon a breach of such representation or warranty, or a notice that, as a result of a legal proceeding instituted by or written claim made by a third party, the Indemnified Party reasonably expects to incur Liabilities, including those as a result of claims, as a result of a breach of such representation or warranty (an “Expected Claim Notice”) that includes the information required by, and otherwise complies with, Section 11.5(a), then such representation or warranty shall survive until, but only for purposes of, the resolution of the matter covered by such Expected Claim Notice. If the legal proceeding or written claim with respect to which an Expected Claim Notice has been given is definitively withdrawn or resolved in favor of the Indemnified Party, the Indemnified Party shall promptly so notify the Indemnifying Party.

11.2 Indemnification By the Marcus Entities. Subject to the terms and conditions of this Article 11, from and after the Closing Date, the Marcus Entities hereby agree to jointly and severally indemnify, defend and hold harmless Buyer and each of its Affiliates from and against all Losses (including without limitation reasonable amounts paid to enforce the provisions of this Article 11, subject to a determination under Section 11.5) asserted against, resulting from, imposed upon, or incurred by Buyer, its Affiliates, the Marcus Mid–Priced Lodging Businesses, the Purchased Assets transferred to Buyer pursuant to this Agreement, by reason of, arising out of or resulting from: (a) fraud or intentional misrepresentation by the Marcus Entities of any of their representations, warranties or covenants under this Agreement; (b) a deliberate or willful breach by the Marcus Entities of any of their representations, warranties or covenants under this Agreement; (c) the inaccuracy or breach of any representation or warranty of the Marcus Entities contained in or made pursuant to Article 4 of this Agreement (excluding any representation or warranty to the extent related to the condition of case goods (including furniture, fixtures and equipment, etc.) and soft goods (including carpeting, bedding and linens, etc.); provided, that, other than as set forth in Section 7.9, no other representations, warranties, covenants, conditions, rights or other obligations under this Agreement shall be affected by this exclusion; (d) the breach of any covenant of the Marcus Entities contained in this Agreement (excluding, solely for purposes of this provision (d), Articles4, 8, 9, 15(other than Sections 15.6 and 15.7), 16, 17 (other than Sections 17.2, 17.3, 17.5, 17.7, 17.8, 17.9, 17.13, 17.18 and 17.19) and Sections 3.1, 3.2, 13.1, and 13.2(b))); (e) any Marcus Entities’ or Selling Joint Ventures’ failure to pay, perform and discharge, when due, any of the Excluded Liabilities; (f) any Marcus Entities or Selling Joint Ventures’ failure to pay, perform and discharge, when due any of the Excluded Liabilities that are not Specifically Identified Excluded Liabilities; (g) any claim by any third party seeking to assert, or claiming ownership or rights to ownership of any Purchased Asset; and (h) any claim asserted or instituted against Buyer, or any of its properties or assets, by any third party related to any Excluded Liability; provided, however, that no indemnification shall be available from Marcus Entities under this Section 11.2 for any Liability to the extent accounted for in a Purchase Price adjustment pursuant to Section 7.9.

11.3 Indemnification By Buyer. Subject to the terms and conditions of this Article 11 from and after the Closing Date, Buyer hereby agrees to indemnify, defend and hold harmless the Marcus Entities and each of its Affiliates from and against all Losses (including without limitation reasonable amounts paid to enforce the provisions of this Article 11, subject to a determination under Section 11.5) asserted against, resulting from, imposed upon or incurred by any such person, directly or indirectly, by reason of or resulting from (a) fraud or intentional misrepresentation by Buyer of any of its representations, warranties or covenants under this Agreement; (b) a deliberate or willful breach by the Buyer of any of its representations, warranties or covenants under this Agreement; (c) the inaccuracy or breach of any representation or warranty of Buyer contained in or made pursuant to this Agreement; (d) the breach of any covenant of Buyer in this Agreement (excluding, solely for purposes of this provision (d), Articles5, 8, 9, 15 (other than Sections 15.6 and 15.7), 16, 17 (other than Sections 17.2, 17.3, 17.5, 17.7, 17.8, 17.9, 17.13, 17.18 and 17.19) and Sections 3.1, 3.2, 13.1, and 13.2(a)); (e) Buyer’s failure to pay, perform and discharge, when due, any of the Assumed Liabilities; or (f) any claim asserted or instituted against the Marcus Entities, or any of their properties or assets, by any third party related to any Assumed Liability.

11.4 Indemnification of Third Party Claims. The following provisions shall apply solely to any claim subject to indemnification which is (i) Litigation filed or instituted by any third party or (ii) any other form of Litigation instituted by any Government Entity:

11.4(a) Notice and Defense. The party or parties to be indemnified (whether one or more, the “Indemnified Party”) will give the party from whom indemnification is sought (the “Indemnifying Party”) written notice of any such claim within 30 days of becoming aware of any such claim, and the Indemnifying Party will undertake the defense thereof by representatives chosen by it unless the Indemnifying Party disputes the propriety of such claim for indemnification against it under the provisions of this Article 11 (in which case the provisions of Section 11.5 shall govern the resolution of such disputed indemnification claim). To the extent the Indemnifying Party undertakes the defense of such claim and for so long as the Indemnifying Party is defending any such claim actively and in good faith, the Indemnified Party shall not settle or agree to an adjudication of such claim. The Indemnified Party shall make available to the Indemnifying Party or its representatives all records and other materials required by them and in the possession or under the control of the Indemnified Party, for the use of the Indemnifying Party and its representatives in defending any such claim, and shall in other respects give reasonable cooperation in such defense.

11.4(b) Failure to Defend. If the Indemnifying Party, within a reasonable time after notice of any such claim, fails to defend such claim actively and in good faith or if the claim for indemnification against it is otherwise disputed by the Indemnifying Party, then the Indemnified Party will (upon further notice) have the right to undertake the defense of the claim subject to its rights against the Indemnifying Party under this Article 11. In such event, the Indemnified Party shall not settle or compromise any such claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

11.4(c) Right to Participate. Notwithstanding a party’s responsibility for the defense of a claim, the other party shall have the right to participate, at its own expense and with its own counsel, in the defense of a claim and the party having responsibility for defense of the claim (the “Defending Party”) shall consult with the other party from time to time on all material matters relating to the defense of such claim. The Defending Party shall provide the other party with copies of all pleadings and material correspondence relating to such claim.

11.5 Claims Procedure. The following exclusive procedure shall govern any and all indemnification claims against an Indemnifying Party which may be brought pursuant to the provisions of this Agreement:

11.5(a) Notice. The Indemnified Party shall give written notice to the Indemnifying Party of all claims, whether between the parties or raised by a third party, that could constitute a claim for indemnification under this Article 11 within 30 days of becoming aware of such claim. The written notice shall specify to the extent known by the Indemnified Party (i) the factual basis for such claim and the alleged violation of this Agreement; (ii) the dollar amount of the claim and the basis therefor; and (iii) copies of all underlying correspondence or communication from a third party or otherwise with respect to the foundation of such claim.

11.5(b) Determination Procedure. With respect to indemnification claims between the parties, following receipt of notice from the Indemnified Party of a claim, the Indemnifying Party shall have 30 days to make such investigation of the claim as the Indemnifying Party deems necessary or desirable. With respect to indemnification claims relating to the claims of third parties, the Indemnifying Party shall have a reasonable period, given the nature of the third party claim and any response time required by such third party, to make such investigation of the claim as the Indemnifying Party deems necessary or desirable. For purposes of such investigation, the Indemnified Party agrees to make available to the Indemnifying Party and/or its authorized representatives the information relied upon by the Indemnified Party to substantiate the claim, as well as any other information bearing thereon reasonably requested by the Indemnifying Party. If the Indemnified Party and the Indemnifying Party agree at or prior to the expiration of such investigation period (or any mutually agreed upon extension thereof) to the validity and amount of such claim, then the Indemnifying Party shall immediately pay to the Indemnified Party the full amount of the claim, less any applicable Deductible (as defined in Section 11.6(b)) and subject to the limitations herein. If the Indemnified Party and the Indemnifying Party do not agree within 30 days from the date of a claim hereunder (or any mutually agreed upon extension thereof, including subsequent to the final determination of a third-party indemnification claim), then the Indemnified Party and the Indemnifying Party shall appoint a panel of three neutral arbitrators (one selected by the Indemnified Party, one by the Indemnifying Party and one by the first two arbitrators) and the arbitrators thus appointed shall settle the dispute, provided that any other specific dispute resolution procedures expressly specified elsewhere in this Agreement shall govern the matters covered thereby. If the Indemnified Party and the Indemnifying Party, or any one of them, are unwilling or unable to appoint an arbitrator, or if a duly appointed arbitrator refuses to act or is incapable of acting and the Indemnified Party and the Indemnifying Party, or any of them, are unwilling or unable to concur in or agree upon the appointment of a new arbitrator to fill the vacancy, or any appointment is not made within 15 business days after service of a written notice to concur in or agree upon the appointment of an arbitrator or a new arbitrator, as the case may be, application may be made by either party to a court of competent jurisdiction for the appointment of an arbitrator or a new arbitrator, as the case may be. The arbitration shall be conducted in New York, New York pursuant to the Commercial Arbitration Rules of the American Arbitration Association of New York. The decision of the arbitrators shall be final, conclusive and binding upon the parties. Any expenses of such arbitration including, without limitation, the fees of the arbitrators and, if determined appropriate by the arbitrators, the reasonable costs of the non-prevailing party, as the case may be, shall be paid by either the Indemnifying Party or Indemnified Party as determined appropriate by the arbitrators.

11.6 Limitations on Indemnification. The following limitations shall apply to all claims for indemnification under this Article 11:

11.6(a) Time Limitation. No claim or action for indemnification shall be brought under this Article 11 after the requisite survival period set forth in Section 11.1.

11.6(b) Amount Limitation. Buyer shall not be entitled to indemnification under Section 11.2 unless the Marcus Entities’ indemnification obligations to Buyer pursuant to such Section 11.2 exceeds the amount (the “Deductible”), if any, equal to (i) Four Million Dollars ($4,000,000) less (ii) the aggregate of any Adverse Diligence Discovery Amount actually borne by Buyer (either due to the lack of a Purchase Price adjustment on account of any Adverse Diligence Discoveries or because Buyer bears the cost of any reasonable cure) pursuant to the provisions of Section 7.9, and then only to the extent that the aggregate of such indemnification obligations exceed the Deductible. The Marcus Entities’ indemnification obligations under Section 11.2. shall be limited to the amount (the “Indemnification Cap”), if any, equal to (a) Forty Million Dollars ($40,000,000) less (b) any Adverse Diligence Discovery Amount actually borne by the Marcus Entities (either due to a Purchase Price adjustment on account of Adverse Diligence Discoveries except for a purchase price adjustment as a result of a Property becoming an Excluded Property or because the Marcus Entities bear the cost of any reasonable cure) pursuant to the provisions of Section 7.9 (excluding Excluded Diligence Amounts). Notwithstanding the foregoing, the Marcus Entities shall be fully liable for, and the Deductible and Indemnification Cap shall not apply to, any claims for indemnification made by Buyer pursuant to this Article 11 relating to, arising out of or resulting from (u) breaches of the Excepted Representations and Warranties (even if Buyer knew or had any reason to know of any misrepresentation or breach of warranty or covenant at the time of Closing, other than knowledge of Adverse Diligence Discoveries for which the Purchase Price was adjusted); (v) fraud or intentional misrepresentation by the Marcus Entities of any of their representations, warranties or covenants in this Agreement; (w) deliberate or willful breach by the Marcus Entities of any of their representations, warranties or covenants in this Agreement; (x) the breach of any covenant of the Marcus Entities contained in this Agreement (excluding, solely for purposes of this provision (x), Articles4, 8, 9, 15 (other than Sections 15.6 and 15.7), 16, 17 (other than Sections 17.2, 17.3, 17.5, 17.7, 17.8, 17.9, 17.13, 17.18 and 17.19) and Sections 3.1, 3.2, 13.1, and 13.2(b))); (y) any claim by any third party seeking to assert, or claiming ownership or rights to ownership of any of the Purchased Assets; and (z) any of the Marcus Entities’ or Selling Joint Ventures’ failure to pay, perform and discharge, when due, any of the Specifically Identified Excluded Liabilities, it being acknowledged and agreed to that the Excluded Liabilities that are not Specifically Identified Excluded Liabilities shall be subject to the limitations of this Section 11.6(b).

11.6(c) Insurance and Tax Effect. The obligation of any Indemnifying Party to indemnify the Indemnified Party against any claim under this Article 11 shall be reduced by the full amount of any insurance proceeds actually collected or to be collected pursuant to a valid claim provided that the insurer has acknowledged liability in writing by the Indemnified Party with respect to such claim; provided that the Indemnified Party shall only be required to use its reasonable efforts to pursue such insurance. In the event that an Indemnified Party receives insurance proceeds with respect to a claim for which the Indemnified Party has previously received indemnification pursuant to this Article 11, such Indemnified Party shall promptly reimburse the Indemnifying Party for the amount of such indemnification to the extent of such insurance proceeds. All claims for indemnification hereunder against any Indemnifying Party shall be reduced to take into account any net cash Tax benefits receivable by the Indemnified Party as a result of such claim or the underlying reasons therefor.

11.7 Exclusivity of Indemnification. Except with respect to breaches of representations, warranties or covenants in this Agreement involving fraud, intentional misrepresentation or a deliberate or willful breach, indemnification under this Article 11 shall be the exclusive means of recovery (except with respect to any equitable remedy sought by any party) by either party against the other for any breach or violation, or alleged breach or violation, of the representations, warranties and covenants under this Agreement after the Closing Date and shall be in lieu of any other common law or statutory rights or remedies.

12.

CLOSING

The Closing of the transactions contemplated herein shall be conditioned upon (i) the conditions precedent set forth in Articles 8 and 9 being satisfied or waived in writing and (ii) Buyer receiving, on or prior to ten (10) days prior to the Closing Date, with respect to each of the Properties: (a) title insurance commitments; (b) updated ALTA surveys; (c) Phase I environmental reports and (d) property condition reports; provided, however, that Closing shall not be delayed beyond the Outside Date as a result of Buyer’s failure to receive any of the items in clauses (ii)(c) and (ii)(d) and failures to receive any of the items in clauses (ii)(a) and (ii)(b) shall have the effect provided elsewhere in this Agreement. Subject to rescheduling that may be required by the previous sentence, the closing of this transaction (the “Closing”) shall take place at the offices of Foley & Lardner LLP, 777 East Wisconsin Avenue, Milwaukee Wisconsin 53202, at 9:00 A.M. on August 16, 2004 or at such other time and place as the parties hereto shall agree upon. Such date is referred to in this Agreement as the “Closing Date.” A pre-Closing shall be conducted on the day prior to the Closing Date at which all documents and other items to be delivered at Closing will be inspected and preapproved by all of the parties. The Closing shall be deemed to be effective for all business, accounting, financial, Tax, legal and other purposes as of 12:01 A.M. on the Closing Date.

12.1 Deliveries by the Marcus Entities. At the Closing, the Marcus Entities shall deliver, or cause to be delivered, to Buyer the following items in each case duly executed or otherwise in form and substance reasonably satisfactory to Buyer:

12.1(a) Leases. The leases required by Section 8.5.

12.1(b) Deeds. Warranty deeds to the Owned Real Property.

12.1(c) Bill of Sale. One or more mutually agreed upon assignments and bills of sale, duly executed by the Marcus Entities and the Selling Joint Ventures.

12.1(d) Assignment of Leases. Subject to Section 1.3, one or more assignments of leases, duly executed by the Marcus Entities, and, if applicable, the Selling Joint Ventures and, if required, with the consent of the landlords under the leases being assigned and, with respect to the Real Property Leases, landlord estoppels.

12.1(e) Contracts. Original, fully executed copies of all Assigned Contracts (or copies if originals are not available) in the possession of the Marcus Entities or the Selling Joint Ventures will be made available to Buyer.

12.1(f) Licenses and Permits. Subject to Section 1.3, the Assigned Licenses and Permits.

12.1(g) Assignment of the Assigned Contracts, Licenses and Permits. Subject to Sections 1.3, 7.4, 7.8 and 7.11, a general assignment of the Assigned Contracts, Licenses and Permits and other intangibles executed by the Marcus Entities, and if applicable, the Selling Joint Ventures.

12.1(h) Environmental Disclosure Forms. Duly executed environmental disclosure forms, as and to the extent required by applicable Law will be made available to Buyer.

12.1(i) Certificates of Occupancy. Copies of the final duly issued certificates of occupancy for each Property, as and to the extent required by applicable Law will be made available to Buyer.

12.1(j) Articles of Formation; Authorizing Resolutions. Copies of the charter or other organizational documents of each Marcus Entity and Selling Joint Venture and all amendments thereto, and resolutions adopted by the board of directors, managers or members thereof, as applicable, approving this Agreement and the transactions contemplated hereby, in each case duly certified by that entity’s Secretary.

12.1(k) Good Standing Certificates. Certificates from the state of organization of the Marcus Entities evidencing that such entities are in good standing in that state as of recent dates prior to the Closing.

12.1(l) Incumbency Certificates. A certificate executed on behalf of each Marcus Entity as to the incumbency, and authenticating the signatures of, the officers thereof executing this Agreement and the Ancillary Agreements delivered hereunder on behalf of such entity. If any officer of any Selling Joint Venture is required to execute one or more Ancillary Agreements, then the Marcus Entities shall also submit such a certificate with respect to such officer.

12.1(m) Section 1445(b) Certifications. Non-foreign person affidavits for the Marcus Entities and Selling Joint Ventures complying with Section 1445(b) of the Code.

12.1(n) Bring Down Certificate. Certificates duly executed by officers of the Marcus Entities confirming the matters set forth in Sections 8.1 and 8.2.

12.1(o) Consents. All Marcus Material Consents and such other consents as have been received by the Marcus Entities in fulfilling their obligations under Sections 1.3 and 7.4 hereof.

12.1(p) Transition Services Agreement. The Transition Services Agreement in substantially the form attached as Exhibit H hereto duly executed by Marcus and such Affiliates of Marcus as are necessary to perform the services contemplated thereby.

12.1(q) Trade Right Assignment. Assignments of all Marcus Trade Rights.

12.1(r) Opinion of Counsel to Marcus and the Marcus Entities. An opinion of Foley and Lardner LLP substantially in the form attached hereto as Exhibit C-1.

12.1(s) Administered Fund Documents. Copies of all financial statements and accountings, including statements of receipts, income, disbursements and an accounting of the contributions and expenditures as of or within five (5) days prior to the Closing Date of all advertising and marketing funds and other funds and cooperatives under which Baymont Franchises administers or collects monies on behalf of Franchisees, and fully-executed original copies of all documents necessary to transfer fully Baymont Franchise’s dominion, control and possession of such monies will be made available to Buyer.

12.1(t) Notices. Notices to lessors under the Personal Property Leases and to the other parties to Assigned Contracts (and other parties reasonably requested by Buyer) of change in ownership of the Properties, to the extent requested by Buyer will be made available to Buyer.

12.1(u) Transfer Tax Declarations. Any required real estate transfer Tax declarations or similar documentation required to evidence the payment of any Tax imposed by any Government Entity, together with any change of ownership statements required under applicable Law.

12.1(v) Closing Statement. The Preliminary Closing Statement, executed by the Marcus Entities.

12.1(w) Original Documents, Keys, etc. To the extent not previously delivered to Buyer, all originals (or copies if originals are not available), of the Real Property Leases, Personal Property Leases, Records and Files, Licenses and Permits, written employment contracts for Affected Employees, keys and lock combinations (which shall be delivered at each Property) in the Marcus Entities’ possession or control will be made available to Buyer.

12.1(x) Title Company Affidavits. Such instruments, documents, affidavits and certificates as may be reasonably required by Chicago Title Insurance Company insuring title hereunder as a condition to the issuance of the title insurance policies to Buyer consistent with the terms of this Agreement including, without limitation, customary affidavits as to parties in possession and mechanics’ liens and a so-called “gap indemnity” in customary form.

12.1(y) Estoppels. Originals of all estoppels required to be delivered to Buyer at or prior to Closing pursuant to this Agreement or otherwise received by the Marcus Entities.

12.1(z) New Ovations Agreements. The New Ovations Agreements, executed by the Marcus Entities, if applicable.

12.1(aa) Forms I-9. Completed Form I-9s and other health and safety files required by the Occupational Safety and Health Act to be (or reasonably requested to be) delivered to Buyer with respect to the Affected Employees.

12.1(bb) Letters of Credit. The documents, if any, required by Section 7.13.

12.1(cc) Other Documents. All other documents, instruments or writings required to be delivered or made available to Buyer at or prior to the Closing pursuant to this Agreement and such other certificates of authority and documents as Buyer may reasonably request sufficiently in advance of Closing or which are reasonably required to effectuate the transactions described herein.

12.2 Deliveries by Buyer. At the Closing, Buyer shall deliver to the Marcus Entities the following items, in each case duly executed or otherwise in form and substance reasonably satisfactory to the Marcus Entities:

12.2(a) Purchase Price. The Closing Date Cash Amount as required by Section 3.2(c) hereof.

12.2(b) Earnest Money Escrow Instructions. The written instructions required to have the Earnest Money Deposit wired to the Marcus Entities on the Closing Date.

12.2(c) Assumption of Liabilities. An assumption of the Assumed Liabilities (which will exclude any Liabilities under any Assigned Contract, Assigned Permit or License for which consent is required but which has not been obtained prior to the Closing), duly executed by Buyer.

12.2(d) Incumbency Certificate. A certificate executed on behalf of Buyer as to the incumbency, and authenticating the signatures of, the officers executing this Agreement and the Ancillary Agreements delivered hereunder on behalf of Buyer.

12.2(e) Authorizing Resolutions. Resolutions adopted by the board of directors of Buyer approving this Agreement and the transactions contemplated hereby, duly certified by Buyer’s Secretary.

12.2(f) Bring Down Certificate. A certificate duly executed by an officer of Buyer confirming the matters set forth in Sections 9.1 and 9.2.

12.2(g) Leases. The leases required by Section 8.5.

12.2(h) Closing Statement. The Preliminary Closing Statement, executed by Buyer.

12.2(i) Opinion of Counsel to Buyer. An opinion of Goodwin Procter LLP substantially in the form attached hereto as Exhibit C-2.

12.2(j) New Ovations Agreements. The New Ovations Agreements, executed by Buyer, if applicable.

12.2(k) Other Documents. All other documents, instruments or writings required to be delivered to the Marcus Entities at or prior to the Closing pursuant to this Agreement and such other certificates of authority and documents as the Marcus Entities may reasonably request or which are reasonably required to effectuate the transactions described herein.

12.3 Adjustments and Prorations. The following matters and items shall be apportioned between the Marcus Entities and Buyer or, where appropriate, credited in total to a particular party, as of 11:59 P.M. (Milwaukee time) on the date prior to the Closing Date (the “Cut-off Time”) as provided below:

12.3(a) Prorated Items.

12.3(a)(i) Room Revenues. At the Closing, the Marcus Entities shall receive (i) all charges accrued to the open accounts of any guests or customers staying at the Properties as of the Cut-off Time for all room nights up to (but not including) the night during which the Cut-off Time occurs and (ii) fifty percent (50%) of all charges for the room night which includes the Cut-off Time, in each case less amounts payable on account of third party collection costs (e.g. fees retained by credit card companies, banks or other collection companies, travel agent commissions and other third party commissions), and Buyer shall be entitled to retain all deposits made and amounts collected with respect to such charges. Revenue from the Properties attributable to food and beverage (including alcoholic beverages) and other sales or services through the close of business on the night immediately preceding the Closing Date shall belong to the Marcus Entities (such revenue to be determined based on completion of the night auditor’s run on the night of the Cut-Off Time). Thereafter, revenue from the Properties attributable to food and beverage and other sales or services shall belong to Buyer. Each of Buyer and the Marcus Entities shall be responsible for the payment of any sales and/or Properties/motel occupancy taxes collected or otherwise due and payable in connection with the revenue allocated to such party under this Section 12.3 and shall indemnify, defend and hold the other party harmless from and against any and all Losses suffered or incurred as a result of the failure to pay such taxes.

12.3(a)(ii) Taxes and Assessments. All ad valorem taxes, special or general assessments, property Taxes, water and sewer rents, rates and charges, vault charges, canopy permit fees, and similar fees shall be prorated as of the Cut-off Time; provided, however, that if any taxes or assessments assessed for the period prior to the Closing are paid by the Marcus Entities in installments, then the Marcus Entities shall pay on or before Closing Date any remaining installments thereof. If the amount of any such item is not ascertainable on the Closing Date, the adjustment therefor shall be based on the most recent available bill and shall be reprorated upon receipt of the actual bill.

12.3(a)(iii) Utility Contracts. Telephone, steam (and other Assigned Contracts for the supply of heat), electric power, gas, lighting, internet access, satellite service, cable television and other utility services shall be prorated as of the Cut-off Time, with the Marcus Entities receiving a credit for each deposit, if any, made by the Marcus Entities as security for any such utility service or supply if the same is transferable and provided such deposit remains on account for the benefit of Buyer. Where possible, readings as of the Cut-off Time (or as close thereto as practicable) will be secured for all utilities on the Closing Date.

12.3(a)(iv) Assigned Contracts. Subject to Section 14.11 with respect to accounts payable, any amounts prepaid, payable or accrued under any Assigned Contracts shall be prorated as of the Cut-off Time.

12.3(a)(v) Licenses and Permits Fees. Fees paid or payable for Licenses and Permits (other than Licenses and Permits that are not transferable to Buyer under applicable Laws or otherwise not transferred to Buyer pursuant to the provisions of this agreement) shall be prorated as of the Cut-off Time.

12.3(a)(vi) Bookings Deposits and Miscellaneous Properties Matters. Buyer shall receive a credit for: (i) advance payments or deposits, if any, made pursuant to any Bookings, (ii) all commissions due to credit and referral organizations accrued prior to the Closing Date and (iii) all outstanding gift certificates, coupons issued for any use of any facilities at the Properties including, without limitation, rooms and food and beverage, and any commitments made for the free use of any facilities at the Properties. The Marcus Entities shall receive a credit for coin machine, telephone, washroom, and checkroom revenues relating to the period pre-Closing.

12.3(a)(vii) Franchise Funds and Cooperatives. Buyer shall receive a credit for the cash balances under any advertising and marketing funds and other funds and cooperatives.

12.3(a)(viii) Other. Such other items as are expressly provided to be prorated or otherwise adjusted or credited for in this Agreement shall be so prorated, adjusted or credited.

Notwithstanding any provision of this Article 12, the obligations arising under the Ovations or similar guest rewards program shall not be pro rated.

12.3(b) Payment. Any net credit due to the Marcus Entities as a result of the adjustments and prorations under Section 12.3(a) to the extent then determinable shall be paid to the Marcus Entities in cash at the time of Closing. Any net credit due to Buyer as a result of the adjustments and prorations under this Section 12.3(b) to the extent then determinable shall be credited against the Purchase Price at the time of Closing.

12.3(c) Closing Statement Preparation. Each party shall cause its designated representatives to enter the Properties only at reasonable times and without unreasonably interfering with operations, both before and after the Closing Date, for the purpose of making such inventories, examinations, and audits of the Properties, and of the Books and Records, as they deem necessary to make the adjustments and prorations required under Section 12.3(a), or for any other purposes anticipated by this Agreement. Based upon such inventories, examinations, and audits, two (2) business days prior to the Closing, the representatives of the parties shall jointly prepare a preliminary closing statement (the “Preliminary Closing Statement”) which shall show the net amount due either to the Marcus Entities or Buyer as a result thereof, and such net amount will be added to, or subtracted from the payment of the Purchase Price. Within sixty (60) days following the Closing Date, the Marcus Entities and Buyer shall agree on a final closing statement (the “Final Closing Statement”) setting forth the final determination of all items to be included on the Closing Statement. The net amount due the Marcus Entities or Buyer, if any, by reason of adjustments to the Preliminary Closing Statement as shown in the Final Closing Statement, shall be paid in cash by the party obligated therefor within ten (10) days following the date of the Final Closing Statement.

12.3(d) Prorations Disputes. In the event the representatives of the parties are unable to reach agreement with respect to preparation of the Preliminary Closing Statement then, except as hereinafter provided, the disputed amount shall be held in a joint order Escrow, pending agreement of the parties or a determination pursuant to this Section 12.3(d), and the Closing shall occur as scheduled. Buyer shall be required to deposit in the Escrow any additional sum of the disputed amount which it may be required to pay and the Marcus Entities shall be required to deposit in the Escrow any sum of the disputed amount which it may be required to credit or pay to Buyer. In the event the representatives of the parties are unable to reach agreement with respect to either the Preliminary Closing Statement or the Final Closing Statement, the parties shall submit their dispute to the Neutral Auditor.

13.

TERMINATION

13.1 Right of Termination Without Breach. This Agreement may be terminated without further liability of any party at any time prior to the Closing by a mutual written agreement of Buyer and the Marcus Entities that determines who shall be entitled to receive and retain the Earnest Money Deposit.

13.2 Other Terminations.

13.2(a) Termination by Buyer. If (i) there has been a material violation or material breach by the Marcus Entities of any of the agreements, representations or warranties contained in this Agreement (which has not been waived subsequently in writing by Buyer) after written notice thereof has been provided to the Marcus Entities and such violation or breach has not been cured within a 15-day period (beginning on the date that such notice is received and unless Buyer has materially breached any of the representations, warranties or covenants set forth in this Agreement or such material violation or material breach by the Marcus Entities is caused by a breach of this Agreement by Buyer), (ii) the Closing has not occurred by the Outside Date because there has been a failure of satisfaction of a condition to the obligations of Buyer (which has not been waived in writing by Buyer) after written notice thereof has been provided to the Marcus Entities, and the Marcus Entities have failed to reasonably cure such failure of satisfaction of such condition within a 15-day period (beginning on the date that such notice is received and unless Buyer has materially breached any of the representations, warranties or covenants set forth in this Agreement or such failure of satisfaction of such condition is caused by a breach of this Agreement by Buyer), or (iii) an Adverse Diligence Discovery termination decision is made by Buyer under and in accordance with Section 7.9, then Buyer may, by written notice to the Marcus Entities at any time prior to the Closing that such violation, breach or failure is continuing, terminate this Agreement with the effect set forth in Section 13.2(c) hereof.

13.2(b) Termination by the Marcus Entities. If (i) there has been a material violation or material breach by Buyer of any of the agreements, representations or warranties contained in this Agreement (which has not been waived subsequently in writing by the Marcus Entities), after written notice thereof has been provided to Buyer such violation or breach has not been cured within a 15-day period (beginning on the date that such notice is received and unless the Marcus Entities have materially breached any of the representations, warranties or covenants set forth in this Agreement or such material violation or material breach by Buyer is caused by a breach of this Agreement by the Marcus Entities), (ii) the Closing has not occurred by the Outside Date because there has been a failure of satisfaction of a condition to the obligations of the Marcus Entities (which has not been waived in writing by the Marcus Entities) after written notice thereof has been provided to Buyer, and Buyer has failed to reasonably cure such failure of satisfaction of such condition within a 15-day period (beginning on the date that such notice is received and unless the Marcus Entities have materially breached any of the representations, warranties or covenants set forth in this Agreement or such failure of satisfaction of such condition is caused by a breach of this Agreement by the Marcus Entities), or (iii) an Adverse Diligence Discovery termination decision is made by Marcus Entities under and in accordance with Section 7.9(g), then the Marcus Entities may, by written notice to Buyer at any time prior to the Closing that such violation, breach or failure attempt is continuing, terminate this Agreement with the effect set forth in Section 13.2(c) hereof.

13.2(c) Effect of Termination. If this Agreement is terminated pursuant to Section 13.2(a) or Section 13.2(b)(iii), then the Escrow Company shall return the Earnest Money Deposit to Buyer by wire transfer of immediately available funds to an account designated by Buyer in writing in advance. If this Agreement is terminated by the Marcus Entities pursuant to Section 13.2(b)(i) or Section 13.2(b)(ii) (excluding a termination as a result of the expiration or termination of all applicable waiting periods under the HSR Act, then the Escrow Company shall deliver the Earnest Money Deposit to Baymont by wire transfer of immediately available funds to an account designated by Baymont in writing in advance. Termination of this Agreement pursuant to this Article 13 shall not in any way terminate, limit or restrict the rights and remedies of any party hereto against any other party which has violated, breached or failed to satisfy any of the representations, warranties, covenants, agreements, conditions or other provisions of this Agreement prior to termination hereof. In addition to the right of any party under common law to redress for any such breach or violation, each party whose breach or violation has occurred prior to termination shall jointly and severally indemnify each other party for whose benefit such representation, warranty, covenant, agreement or other provision was made (“Indemnified Party”) from and against all losses, damages (including, without limitation, consequential damages), costs and expenses (including, without limitation, interest (including prejudgment interest in any litigated matter), penalties, court costs, and attorneys fees and expenses) asserted against, resulting to, imposed upon, or incurred by the indemnified party, directly or indirectly, by reason of, arising out of or resulting from such breach or violation. Upon a termination of this Agreement, (i) Buyer shall return or destroy all confidential information pertaining to the Marcus Mid-Priced Lodging Businesses in its possession, (ii) the confidentiality agreement previously executed between Buyer and Marcus shall remain in full force and effect and (iii) the Marcus Entities shall promptly return all software, hardware and other assets used to develop or modify the interfaces or other systems described in Section 7.12 to Buyer at no cost to the Marcus Entities and Buyer shall be responsible for the reasonable costs to perform any material repair or replacement required as a result of any material damage as a result of the removal of such software, hardware and other assets. Subject to the foregoing, the parties’ obligations under Section 17.7 shall survive termination.

13.2(d) Treatment of Earnest Money Deposit. Notwithstanding anything to the contrary in this Agreement, the Earnest Money Deposit shall not be deemed to be in the nature of liquidated damages nor shall it be deemed to be an admission by either party as to the level of damages in the event of a breach or violation of this Agreement and receipt and retention of the Earnest Money Deposit by either party shall not in any way terminate, limit or restrict its rights and remedies against the other Party.

14.

POST-CLOSING COVENANTS

14.1 Confidential Information. Except as required by Law or Order or otherwise expressly permitted by this Agreement, the Marcus Entities and their Affiliates shall not, except as requested by Buyer, use for any commercial purpose, disclose to any person, or keep or make copies of documents, tapes, discs, programs or other information storage media containing, any confidential information concerning the Marcus Mid–Priced Lodging Businesses, the Purchased Assets, or the Assumed Liabilities, all such information being deemed to be transferred to Buyer hereunder. For purposes hereof, “confidential information” shall mean and include, without limitation, all Trade Rights in which the Marcus Entities and their Affiliates have an interest, all Marcus Mid–Priced Lodging Businesses’ customer and vendor lists and related information, all information concerning the Marcus Mid–Priced Lodging Businesses’ costs, prices, sales, marketing and distribution methods, properties and assets, liabilities, finances, all privileged communications and work product, and any other information related to the Marcus Mid–Priced Lodging Businesses not disclosed to the public directly by the Marcus Entities prior to the date hereof. The foregoing provisions shall not apply to any information which is an Excluded Asset or which relates solely to one or more Excluded Assets, and except as may further be necessary for the Marcus Entities or any of their Affiliates to pay or satisfy its Liabilities, prepare documents to be filed with the SEC, Tax Returns and other reports, and to otherwise wind up and conclude their business and affairs.

14.2 Use of Baymont and Woodfield Names. Except as allowed by agreements between the Marcus Entities and Buyer entered into at or after Closing (particularly with respect to Excluded Properties) as promptly as practicable following the Closing, the Marcus Entities shall take all necessary action to amend, and shall cause their Affiliates (including Marcus and taking reasonable efforts to cause the remaining Joint Ventures to do the same) to so take and amend, their names to names that do not include either “Baymont,” “Woodfield,”“Budgetel” or “Ovations” or any other name similar thereto. Following the Closing, none of Marcus, the Marcus Entities or any of their Affiliates shall, without the prior written consent of Buyer, make any commercial use of either “Baymont,”“Woodfield,” or “Budgetel” or “Ovations” or any other trademark, service mark, trade dress, trade name or logo used in the Marcus Mid–Priced Lodging Businesses, or any other name confusingly similar thereto, except as may be necessary for the Marcus Entities or any of their Affiliates to pay or satisfy its Liabilities, prepare documents to be filed with the SEC, Tax Returns and other reports, and to otherwise wind up and conclude their business and affairs.

14.3 Bulk Sales Compliance. Buyer hereby waives compliance by the Marcus Entities from their obligations to comply with all provisions of the bulk sales or bulk transfer statutes of Wisconsin and all other applicable states and indemnifies and holds harmless the Marcus Entities against any Liabilities which may arise from such noncompliance.

14.4 Records and Retention and Access.

14.4(a) Buyer Records. Buyer shall keep and preserve in an organized and retrievable manner the Records and Files it receives from the Marcus Entities for at least seven years from the Closing Date. Buyer shall neither dispose of nor destroy such Records and Files without first offering to turn over possession thereof to the Marcus Entities by written notice at least thirty (30) days prior to the proposed date of such disposition or destruction. While such Records and Files remain in existence, each party shall allow the other party, its representatives, attorneys and accountants, at the requesting party’s expense, access to the Records and Files upon reasonable request and advance notice and during normal business hours for the purpose of interviewing, examining and copying in connection with such parties’ preparation of financial statements and Tax Returns.

14.4(b) Seller Records. The Marcus Entities shall keep and preserve, and shall cause their Affiliates to keep and preserve, in an organized and retrievable manner the records and files related to the Marcus Mid–Priced Lodging Businesses that it does not deliver to Buyer hereby for at least seven years from the Closing Date. The Marcus Entities shall neither dispose of nor destroy, and shall cause their Affiliates to neither dispose of nor destroy, such records and files without first offering to turn over possession thereof to the Buyer by written notice at least thirty (30) days prior to the proposed date of such disposition or destruction. While such Records and Files remain in existence, each party shall allow the other party, its representatives, attorneys and accountants, at the requesting party’s expense, access to the Records and Files upon reasonable request and advance notice and during normal business hours for the purpose of interviewing, examining and copying in connection with such parties’ preparation of financial statements and Tax Returns. Until the fifth anniversary of the Closing Date, Buyer shall have reasonable access to the returns and records referred to in Section 1.2(h) hereof and may make excerpts therefrom and copies thereof.

14.5 Insurance.

14.5(a) Assignment of Insurance. The Marcus Entities shall use, and shall cause their Affiliates (including reasonable efforts to cause the Selling Joint Ventures) to use, reasonable efforts to assign to Buyer, to the fullest extent, all of the benefits and rights under any insurance policies held by them and/or any of their Affiliates and the Selling Joint Ventures with respect to any Liabilities arising out of, related to or in connection with the Purchased Assets, the Assumed Liabilities and for the Marcus Mid–Priced Lodging Businesses (other than benefits and rights to the extent related to Excluded Assets or Excluded Liabilities) with respect to events occurring prior to the Closing Date. Buyer shall have the right to such benefits and rights only to the extent actually paid or payable, and exclusive of any deductibles (including pass through deductibles for which either party or any Affiliate of such party is required to reimburse the insurer). To the extent such assignment is not permitted, the Marcus Entities shall use, and shall cause their Affiliates to use, reasonable efforts on Buyer’s behalf to obtain such proceeds or benefits for Buyer, or otherwise to provide Buyer with the benefit equivalent to that which would have been available had such assignment been permitted.

14.5(b) Cooperation Regarding Insurance. The Marcus Entities shall cooperate, and shall cause their Affiliates (including reasonable efforts by the Selling Joint Ventures) to cooperate, with Buyer in obtaining insurance policies for the Marcus Mid-Priced Lodging Businesses to be in effect from and after Closing. Notwithstanding such assistance, all decisions with respect to such policies shall be made solely by Buyer, and neither the Marcus Entities nor such Affiliate (including the Selling Joint Ventures) thereof, shall have any liability, whether to Buyer or to any other Person, whether as an advisor, broker or otherwise, under any other theory, in connection with providing such assistance and cooperation. The Marcus Entities make no assurances whatsoever with respect to such insurance coverage, including the availability or price thereof.

14.6 Financial Information.

14.6(a) If Buyer or an Affiliate of Buyer is required under applicable Law to file the Historical Financial Information with the SEC and Buyer requests, in writing, that the Marcus Entities cooperate in the preparation of such Historical Financial Information (as and to the extent provided in this Section 14.16), then the Marcus Entities shall use its reasonable efforts to, subject to Section 14.6(b), prepare and deliver, or cause to be prepared and delivered, to Buyer the Historical Financial Information (including audited and, if applicable, unaudited financial information), including a manually signed accountants’ report from Ernst & Young (the “Audit Accountants”), of and relating to the Marcus Mid–Priced Lodging Businesses. The Historical Financial Information delivered will be prepared based on the books and records of the Marcus Entities and will be prepared in accordance with Marcus GAAP and will present fairly the financial condition and results of operations of the Marcus Mid–Priced Lodging Businesses as of the dates and for the periods indicated. The consent of the Audit Accountants to the filing of their report on the Historical Financial Information shall be accompanied by the consent of the Audit Accountants to the filing of their report on the Historical Financial Information in a Current Report on Form 8-K and the incorporation by reference of such report to filings made under the Securities Act of 1933, as amended.

14.6(b) If Buyer or an Affiliate of Buyer is required under applicable Law to file the Historical Financial Information with the SEC, the Marcus Entities will assist Buyer in the preparation of the pro forma financial information relating to the acquisition of the Marcus Mid–Priced Lodging Businesses required pursuant to Item 7 of the Current Report on Form 8-K as contemplated by the Exchange Act and the rules and regulations promulgated thereunder (the “Pro Forma Information” and, together with the Historical Financial Information, the “Required Information”), including without limitation providing such financial and other information, records and documents relating to the Marcus Mid–Priced Lodging Businesses as may be necessary to prepare such Pro Forma Information, providing reasonable access to such of its entities personnel, advisors and accountants as may be necessary to prepare such Pro Forma Information, and generally cooperating with Buyer’s reasonable requests in order to facilitate such preparation. The parties acknowledge that the foregoing financial information must be filed by the Buyer with the SEC under cover of an amendment to a Current Report on Form 8-K in a timely manner. The parties also acknowledge that any Buyer filings under the Securities Act that require the Required Information also necessitate timely cooperation, including cooperation in the performance of incremental audit procedures necessary under the Securities Act and the delivery of a manually signed consent of the Audit Accountants, by Marcus Entities to facilitate the execution and filing of an accountant’s consent. Notwithstanding the foregoing, the parties acknowledge that, due to Buyer’s uncertainty regarding whether the foregoing financial information must be filed with the SEC, the Marcus Entities can make no assurance that the Required Information can be prepared and delivered on or before the date that the Required Information must be filed by the Buyer with the SEC under cover of an amendment to a Current Report on Form 8-K. Accordingly, the Marcus Entities shall have no Liability whatsoever if the Required Information is not prepared and delivered prior to the date that such amendment to a Current Report on Form 8-K must be filed, provided that the Marcus Entities have complied with their obligations to cooperate and use the efforts required under this Section 14.6.

14.6(c) Buyer shall reimburse all of the Marcus Entities’ and the Selling Joint Ventures’ reasonable costs associated with this Section 14.6, including out-of-pocket costs associated with the services provided by the Audit Accountants.

14.7 Tax Matters.

14.7(a) The Marcus Entities and the Selling Joint Ventures will be responsible for the preparation and filing of all Tax Returns for the Marcus Entities and Selling Joint Ventures, as applicable, for all periods, whether or not ending on or prior to the Closing Date (including the consolidated, unitary, and combined tax returns for the Seller which include the operations of the Marcus Mid–Priced Lodging Businesses for any period ending on or before the Closing Date). With respect to the Purchased Assets, the Marcus Entities shall also be responsible for the preparation and filing of all property Tax Returns related to periods ending on or prior to the Closing Date, regardless of when due. The Marcus Entities shall be responsible for the conduct and settlement of any claims or refunds for any Taxes corresponding to any Tax Return described in this Section 14.7(a). The Marcus Entities and the Selling Joint Ventures will make all payments when due as required with respect to any such Tax Return.

14.7(b) With respect to the Purchased Assets, the Buyer will be responsible for the preparation and filing of all property Tax Returns related to periods ending after the Closing Date. The Buyer shall be responsible for the conduct and settlement of any claims or refunds for any Taxes corresponding to any Tax Return described in this Section 14.7(b). The Buyer will make all payments when due as required with respect to any such Tax Return.

14.7(c) Each party agrees from time to time following the Closing to cooperate with the other parties in connection with, and agrees to provide reasonable access in a timely manner to the accounting and Tax related books and records of and related to the Marcus Mid–Priced Lodging Businesses, in a manner sufficient to enable such other parties to complete their respective Tax Returns, accounting and regulatory filings, and any contest, audit or other dispute related to such Tax Returns or filings.

14.8 Post-Closing Accounts Payable Matters. The parties shall cooperate in evaluating customary trade and similar payables relating to or arising from activities before and after the Closing to determine for whose account invoices, bills and other demands for payment should be designated. Such cooperation shall include determining if any such invoice, bill or demand represents an Assumed Liability, an Excluded Liability or a Specifically Identified Excluded Liability. This covenant shall not expand or diminish the respective Assumed Liabilities, Excluded Liabilities and Specifically Identified Excluded Liabilities. To the extent Buyer receives invoices relating to Specifically Identified Excluded Liabilities and pays a Marcus Entity’s or a Joint Venture’s obligations thereunder, the Buyer shall present evidence of such payment to the Marcus Entities and the Marcus Entities shall reimburse the Buyer within ten (10) business days thereafter. To the extent a Marcus Entity or a Joint Venture receives invoices related to an Assumed Liability and pays the Buyer’s obligations thereunder, the Marcus Entities shall present evidence of such payment to the Buyer and the Buyer shall reimburse the Marcus Entities within ten (10) business days thereafter. Notwithstanding the foregoing, to the extent any such bill, invoice or other demand for payment has been addressed through the proration provisions of this Agreement, such provision shall be given effect to when satisfying the obligations under this Section 14.8.

14.9 Post-Closing Accounts Receivable Matters. The parties shall cooperate in evaluating customary Accounts Receivable relating to or arising from activities before and after the Closing to determine for whose account payments received therein should be designated. To the extent Buyer receives payment for Accounts Receivable arising prior to the Closing, the Buyer shall reimburse the Marcus Entities within ten (10) business days thereafter. To the extent a Marcus Entity or a Selling Joint Venture receives payments relating to or arising from activities after the Closing the Marcus Entities shall reimburse the Buyer within ten (10) business days thereafter.

14.10 Guest Baggage. All baggage of guests who are still in the Properties on the Closing Date, which has been checked with or left in the care of the Marcus Entities shall be inventoried, sealed, and tagged jointly by the Marcus Entities and Buyer on the Closing Date. Buyer hereby indemnifies the Marcus Entities against any Losses in connection with such baggage arising out of the acts of omissions of Buyer or its Affiliates (or any of their employees or agents) after the Closing Date. The Marcus Entities hereby indemnify Buyer and its Indemnified Parties against any Liabilities in connection with baggage arising out of the acts or omissions of the Marcus Entities or its Affiliates (or any of their employees or agents) prior to the Closing Date. The provisions of this Section 14.10 shall survive Closing.

14.11 Safe Deposits. Immediately after the Closing, the Marcus Entities shall send written notice to guests or tenants or other persons who have safe deposit boxes, if any, advising of the sale of the Property to Buyer and requesting immediate removal of the contents thereof or the removal thereof and concurrent re-deposit of such contents pursuant to new safe deposit agreements with Buyer. The Marcus Entities shall have a representative present when the boxes are opened, in the presence of a representative of the Buyer. Any property contained in the safe deposit boxes after such re-deposit shall be the responsibility of Buyer, and Buyer agrees to indemnify and hold harmless the Marcus Entities and its Indemnified Parties from and against any Liabilities arising out of or with respect to such property. Upon Closing, the Marcus Entities shall deliver to Buyer all keys in the possession or control of the Marcus Entities for all safe deposit boxes not then in use and a list of all safe deposit boxes which are then in use but where the contents have not been removed and re-deposited as set forth above, including the name and room number of such depositor. The Marcus Entities and Buyer shall continue to use reasonable efforts to cause such depositors to remove the contents and re-deposit such contents pursuant to new safe deposit agreements with Buyer as set forth above. The Marcus Entities shall continue to be responsible for, and shall indemnify and hold harmless Buyer and its Indemnified Parties from and against any Liabilities arising out of or with respect to the contents of any safe deposit box prior to the time that the contents thereof are removed and re-deposited pursuant to a new safe deposit agreement with Buyer as set forth above.

14.12 Nonsolicitation; Cooperation.

14.12(a) Definitions.

14.12(a)(i) “Competing Activities” shall mean the ownership, operation, marketing, franchising or sales of Competing Hotels.

14.12(a)(ii) “Competing Hotels” shall mean hotel or other lodging properties operating in the mid-priced lodging without food and beverage, economy or budget sector (as defined by Smith Travel Research) anywhere in the United States (including the District of Columbia).

14.12(b) Non-Solicitation.

14.12(b)(i) By Buyer. Buyer agrees that, for a period commencing on the Closing Date and ending on the second (2nd) anniversary of the Closing Date, it will not, and it will cause each of its subsidiaries and its and their respective Affiliates which are entities not to solicit for employment any of the employees of the Marcus Entities or any of their Affiliates (other than Affected Employees) without the prior written consent of the Marcus Entities, which the Marcus Entities may grant or withhold in their discretion; provided, however, that the foregoing shall not apply to (i) any employee who has been separated from employment with the Marcus Entities and their Affiliates for at least 180 days; (ii) non-salaried and clerical employees; and (iii) employees who respond to solicitations made to the public generally.

14.12(b)(ii) By the Marcus Entities. Each of the Marcus Entities agrees that, for a period commencing on the Closing Date and ending on the second (2nd) anniversary of the Closing Date, it will not, and it will cause each of its subsidiaries and its and their respective Affiliates which are entities not to (a) solicit for employment any employees of Buyer or any of its Affiliates, including without limitation any Affected Employee, without the prior written consent of Buyer, which Buyer may grant or withhold in its discretion; provided, however, that the foregoing shall not apply to (i) any Affected Employee who has been separated from employment with Buyer for at least 180 days; (ii) non-salaried and clerical employees; and (iii) Affected Employees who respond to solicitations made to the public generally, or (b) solicit any Franchisee with respect to its franchised Baymont Inn or any Competing Activities to become a franchisee of the Marcus Entities or any of their respective Affiliates.

14.12(c) Cooperation by the Marcus Entities. Each of the Marcus Entities agrees that, for a period commencing on the Closing Date and ending on the third (3rd) anniversary of the Closing Date (the “Cooperative Period”):

14.12(c)(i) it will not, and it will cause each of its Affiliates which are entities not to, without the advance written consent of Buyer, which Buyer may grant or withhold in its discretion, either directly or indirectly (i) initiate or create a new brand of Competing Hotels; or (ii) purchase any entity or asset or merge with or otherwise enter into a business combination with any entity, all of the business of which consists of Competing Activities.

14.12(c)(ii) if it or any of its Affiliates which are entities (the “Marcus Acquiror”) acquires, merges with or otherwise participates in a business combination with any entity (a “Target”) and more than 5% of the combined annual consolidated revenues of both Target and Marcus are derived from Competing Activities, then:

14.12(c)(ii)(A) the Marcus Acquiror may, but need not, invite Buyer to purchase the Target’s assets and operations constituting the Target’s Competing Activities (“Target’s Competing Activities”) for a mutually agreed upon cash purchase price and otherwise on substantially the same terms and conditions as the Marcus Acquiror acquired the Target’s other assets and operations.

14.12(c)(ii)(B) the Marcus Acquiror shall take reasonable efforts to, within twelve (12) months of acquiring such Target, sell the Target’s Competing Activities. Prior to sending any confidential information regarding the Target’s Competing Activities to any third parties in an effort to solicit a purchase bid therefor, the Marcus Acquiror shall provide to Buyer a notice (a “Bid Notice”) that the Marcus Acquiror intends to begin attempting to sell the Target’s Competing Activities. Buyer shall then have thirty (30) days after receipt of a Bid Notice to submit a purchase bid for the Target’s Competing Activities, including the cash purchase price and other material terms and conditions. If Buyer submits a purchase bid in response to a Bid Notice, then the Marcus Acquiror shall negotiate exclusively with Buyer for the sale of the Target’s Competing Activities for a period of thirty (30) days following receipt of Buyer’s purchase bid. The Marcus Acquiror shall not be obligated to accept any purchase bid submitted by Buyer. If Buyer fails to submit a purchase bid responding to a Bid Notice within thirty (30) days or otherwise decides not to submit a purchase bid or the Marcus Acquiror determines not to accept any such purchase bid submitted by Buyer after receipt of a Bid Notice, then the Marcus Acquiror shall have the right to sell the Target’s Competing Activities to any third parties on any terms and conditions it so determines.

14.12(d) Non-Contravention. Each of the Marcus Entities and Buyer agrees that, during the Cooperative Period, it will not, and it will cause each of its subsidiaries and its respective Affiliates which are entities not to, engage in any practice the purpose of which is to evade the provisions of this Article 14.

14.12(e) Geographic Area. The parties hereto agree that the duration and area for which the covenants set forth in this Section 14.12 are to be effective are reasonable. In the event that any court determines that the time period or the area included in the covenant contained in Section 14.9, or both of them, are unreasonable and that such covenant is to that extent unenforceable, the parties hereto agree that such covenant shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable. The parties hereto intend that each covenant set forth herein shall be deemed to be a series of separate covenants, one for each and every state and other political subdivision to which it is applicable.

14.12(f) Material Inducement. It is understood and agreed that the covenants of the parties contained in Section 14.12 are material inducements to the willingness of the other party to enter into this Agreement and to consummate the transactions contemplated hereunder.

14.12(g) Termination. This Section 14.12 shall terminate upon a sale or merger of Marcus or Buyer, as the case may be, or a sale or transfer of all or substantially all of its consolidated assets, in each case, to an entity that is not Affiliate thereof.

14.13 Division of Subdivision Properties. The Marcus Entities shall undertake reasonable efforts to pursue completion of the land division of the Subdivision Properties pursuant to the provisions of Section 7.14 hereof.

14.14 Section 1031 Exchanges. Buyer acknowledges that the Marcus Entities may desire to transfer any or all of the Properties in a transaction intending to qualify in whole or in part for nonrecognition of gain pursuant to Section 1031 of the Code. If the Marcus Entities so desire, they shall provide Buyer with a written statement, at least five (5) days prior to Closing, stating the Marcus Entities’ intent to qualify the transfer of the Properties specified in such statement as a tax-deferred exchange under Section 1031 of the Code. Buyer agrees that at the request of the Marcus Entities, and subject to the terms of this Agreement, at the Closing Date Buyer shall pay the portion of the Purchase Price allocable to the Properties specified in the written statement to any single “qualified intermediary” (as defined in Treasury Regulation Section 1.1031(k)-1(g)(4)) designated by the Marcus Entities in lieu of and in complete satisfaction of the portion of the Purchase Price allocable to the Properties specified in the written notice otherwise payable to the Marcus Entities. Buyer shall in good faith cooperate with the Marcus Entities by executing such documents, instruments, deeds or escrow instructions reasonably requested by the Marcus Entities in furtherance of their intended treatment of any such transfers as subject to Section 1031 of the Code. Notwithstanding anything else in this Section 14.14, nothing in this Section 14.14 shall: (A) permit the Marcus Entities to delay the transfer of the Properties to the Buyer as required by this Agreement, (B) require Buyer to purchase any asset to be used in the 1031 exchange (or otherwise not specifically required by this Agreement), or (C) require Buyer to make any payment of any portion of the Purchase Price to any person other than the Marcus Entities, the Escrow Company, or the Marcus Entities’ designated qualified intermediary. If Buyer’s reasonable out-of-pocket costs associated with this Section 14.14exceed $50,000, then the Marcus Entities shall, promptly after receiving written documentation with respect to all such expenses, reimburse Buyer for such excess. Except for such out-of-pocket costs not exceeding $50,000, the Marcus Entities shall indemnify and hold harmless Buyer for any cost, claim or liability incurred by or claimed by any person against Buyer or its Affiliates in connection with this Section 14.14.

14.15 Further Assurances. The Marcus Entities from time to time after the Closing through the third anniversary of the Closing Date at the request of Buyer shall, and shall use reasonable efforts to cause the Selling Joint Ventures to, (a) execute and deliver further instruments of transfer and assignment (in addition to those specified in this Agreement) and take such other actions as Buyer may reasonably request to more effectively transfer and assign to, and vest in, Buyer each of the Purchased Assets consistent with this Agreement and (b), if applicable, cooperate with and provide assistance to Buyer in removing the Purchased Assets from the Marcus Entities’ or the Selling Joint Ventures’ premises (or wherever located), at Buyer’s sole cost provided that Buyer shall reimburse the Marcus Entities and the Selling Joint Ventures for all reasonable out-of-pocket costs associated with such cooperation and assistance.

14.16 Excluded Properties. The Marcus Entities shall, at Closing, cause the existing franchise agreement with any Marcus Entity for any Excluded Property to be terminated, and at or prior to Closing, at the Marcus Entities’ or applicable Selling Joint Venture’s option, the Marcus Entities and/or such Selling Joint Ventures shall enter into franchise agreements with respect to each such Excluded Property mutually agreed upon by the Marcus Entities and Buyer; provided, however, that Buyer’s consent shall be required for any franchise agreement on any Excluded Property that is not operated as a Baymont Hotel as of the date of this Agreement including, without limitation, the Chicago Hotel. In the case of Baymont Hotels, such franchise agreements shall be, in all material respects, identical to those being used by the Marcus Entities immediately prior to Closing, and in the case of Woodfield Hotels shall be in form consistent with a franchise offering circular duly filed with the FTC and approved by Buyer, except that in each case such franchise agreements shall permit the termination thereof at the franchisee’s option at any time prior to the fifth anniversary of Closing, which termination shall not trigger any penalties, liquidated damages, payments or other obligations of the Marcus Entities or applicable Joint Ventures. Notwithstanding anything herein to the contrary, the Marcus Entities may sell any or all of the Excluded Properties at any time either before or after Closing and nothing herein shall prohibit the Marcus Entities to take the actions that they believe are necessary and appropriate to sell such Excluded Properties provided that (i) such actions and sales do not prevent the Marcus Entities from transferring to Buyer good title to the Properties hereunder in accordance with this Agreement and (ii) if the transferee will be a franchisee of Buyer, the transferee must enter into a new franchise agreement with Buyer and shall be subject to the reasonable approval of Buyer as a franchisee. If an Excluded Property will not be subject to a franchise agreement with Buyer or an Affiliate of Buyer, then the Marcus Entities shall, in the case of an Excluded Property owned by a Marcus Entity, cause the removal of all signage and other property bearing any of the Marcus Trade Rights and otherwise to decommission such Excluded Property as a Baymont Hotel or Woodfield Hotel, as applicable, and, in the case of an Excluded Property owned by a non-Selling Joint Venture, shall exercise its rights under any management agreement or franchise agreement and otherwise use reasonable efforts to cause such decommissioning, in each case at no cost to Buyer.

15.

RESOLUTION OF DISPUTES

15.1 Arbitration. After the Closing and as otherwise provided in this Agreement, except as otherwise provided herein, any dispute, controversy or claim arising out of or relating to this Agreement or any Ancillary Agreement or the performance by the parties of its or their terms shall be settled by binding arbitration held in New York, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association of New York, New York then in effect, except as specifically otherwise provided in this Article 15.

15.2 Arbitrators. The panel to be appointed shall consist of three neutral arbitrators (one to be chosen by Buyer, one to be chosen by the Marcus Entities, and one to be chosen by the first two chosen arbitrators).

15.3 Procedures; No Appeal. The arbitrators shall allow such discovery as the arbitrators determine appropriate under the circumstances and shall resolve the dispute as expeditiously as practicable, and if reasonably practicable, within 120 days after the selection of the arbitrators. The arbitrators shall give the parties written notice of the decision, with the reasons therefor set out, and shall have 30 days thereafter to reconsider and modify such decision if any party so requests within 10 days after the decision. Thereafter, the decision of the arbitrators shall be final, binding, and nonappealable with respect to all persons, including (without limitation) persons who have failed or refused to participate in the arbitration process.

15.4 Authority. The arbitrators shall have authority to award relief under legal or equitable principles, including interim or preliminary relief, and to allocate responsibility for the costs of the arbitration and to award recovery of attorneys fees and expenses in such manner as is determined to be appropriate by the arbitrators.

15.5 Entry of Judgment. Judgment upon the award rendered by the arbitrators may be entered in any court having in personam and subject matter jurisdiction. The Marcus Entities and Buyer hereby submit to the in personam jurisdiction of the Federal and State courts in Wisconsin, for the purpose of confirming any such award and entering judgment thereon.

15.6 Confidentiality. All proceedings under this Article 15, and all evidence given or discovered pursuant hereto, shall be maintained in confidence by all parties and by the arbitrators.

15.7 Continued Performance. The fact that the dispute resolution procedures specified in this Article 15 shall have been or may be invoked shall not excuse any party from performing its obligations under this Agreement and during the pendency of any such procedure all parties shall continue to perform their respective obligations in good faith, subject to any rights to terminate this Agreement that may be available to any party.

15.8 Tolling. All applicable statutes of limitation shall be tolled while the procedures specified in this Article 14 are pending. The parties will take such action, if any, required to effectuate such tolling.

16.

DEFINITIONS

All defined terms used herein shall have the meaning set forth in this Article 16 or elsewhere in this Agreement.

“Accounts Receivable” shall mean all accounts receivable of the Marcus Mid–Priced Lodging Businesses arising prior to the Closing, including, without limitation, charges for the use or occupancy of any guest, conference or banquet rooms or other facilities at the Properties, or any other goods or services provided by or on behalf of the Marcus Entities and the Selling Joint Ventures at the Properties.

“Adverse Diligence Discovery Amount” shall have the meaning set forth in Section 7.9(a)(ii).

“Adverse Diligence Discovery Cap” shall have the meaning set forth in Section 7.9(e)(i)(B).

“Adverse Diligence Discovery Deductible” shall have the meaning set forth in Section 7.9(e)(i)(A).

“Adverse Diligence Discovery Value Impact” shall have the meaning set forth in Section 7.9(d)(iii)(B).

“Adverse Diligence Discovery” shall have the meaning set forth in Section 7.9(a)(i).

“Adverse Impact Opinion” shall have the meaning set forth in Section 7.9(d)(iii)(B).

“Affected Employees” shall mean Employees who are, directly or through a subsidiary, employed by Buyer immediately after the Closing.

“Affiliate” means, with respect to the Person in question, (i) any shareholders, directors or officers of such Person; (ii) any spouse, children or family members of such Person; or (iii) any other Person that, directly or indirectly, (a) owns or controls fifty percent (50%) or more of the outstanding voting and/or equity interests of such Person, or (b) controls, is controlled by or is under common control with, the Person in question. For the purposes of this definition, the term “control” and its derivations means having the power, directly or indirectly, to direct the management, policies or general conduct of business of the Person in question, whether by the ownership of voting securities, contract or otherwise.

“Aggregate Individual JV Price” shall have the meaning set forth in Section 3.3(a)(ii).

“Aggregate Joint Venture Purchase Price” shall have the meaning set forth in Section 3.3(f)(i)

“Agreement” shall have the meaning set forth in the preamble to this Agreement.

“Ancillary Agreements” shall mean the documents listed in Sections 12.1 and 12.2.

“Antitrust Division” shall mean the Antitrust Division of the United States Department of Justice.

“Appraisal Notice” shall have the meaning set forth in Section 7.9(d)(iii)(B).

“Assigned Contracts” shall have the meaning set forth in Section 1.1(e).

“Assigned JV Property Management Agreement” shall have the meaning set forth in Section 3.3(d).

“Assigned Licenses and Permits” shall have the meaning set forth in Section 1.1(m).

“Assumed Liabilities” shall have the meaning set forth in Section 2.1.

“Audit Accountants” shall have the meaning set forth in Section 14.6(a).

“Baymont 2004 Circular” shall have the meaning set forth in Section 4.23(a).

“Baymont Business” shall have the meaning set forth in the Recitals to this Agreement.

“Baymont Circulars” shall have the meaning set forth in Section 4.23(a).

“Baymont Franchises”shall have the meaning set forth in the Recitals to this Agreement.

“Baymont Hospitality” shall have the meaning set forth in the Recitals to this Agreement.

“Baymont Hotels” shall have the meaning set forth in the Recitals to this Agreement.

“Baymont Partners” shall have the meaning as set forth in the Recitals to this Agreement.

“Baymont” shall have the meaning set forth in the Recitals to this Agreement.

“Bid Document Financial Statements” shall have the meaning set forth in Section 4.3.

“Bid Notice” shall have the meaning set forth in Section 14.12(c)(ii)(B).

“Bookings” shall have the meaning set forth in Section 1.1(o).

“Buyer’s Subdivision Parcels” shall have the meaning set forth in Section 7.14(a).

“Buyer” shall have the meaning set forth in the preamble to this Agreement.

“Casualty” shall have the meaning set forth in Section 10.1.

“Chicago Hotel” shall mean the hotel project located at 630 North Rush Street, Chicago, Illinois that is currently under development by the Marcus Entities.

“Closing Date Cash Amount” shall have the meaning set forth in Section 3.2(c).

“Closing Date” shall have the meaning set forth in Article 12.

“Closing” shall have the meaning set forth in Article 12.

“COBRA” shall mean the requirements of Part 6 of Subtitle B of Title I of ERISA.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Competing Activities” shall have the meaning set forth in Section 14.12(a)(i).

“Competing Hotels” shall have the meaning set forth in Section 14.12(a)(ii).

“Computer Software” shall have the meaning set forth in Section 1.1(h).

“Condemnation” shall have the meaning set forth in Section 10.2.

“Confidential Information” shall have the meaning set forth in Section 4.22(g).

“Contingent Worker” shall mean any individual, other than Employees, who provides services primarily to the operation of the Marcus Mid–Priced Lodging Businesses, and the payments therefore are treated by such Marcus Entity or Selling Joint Venture as other than payments to an Employee for Tax and benefit purposes.

“Contracts” shall mean all agreements, contracts, leases, subleases, indentures, instruments, commitments creating a Lien on the properties or assets of other Persons, guaranties provided in support of the obligations of other Persons, customer orders, purchase orders, sales orders, corporate rate agreements, consulting contracts, supply agreements, service agreements, booking and reservation agreements, credit card service agreements, development agreements, licenses, sublicenses, Franchise Documents, joint venture agreements, partnership agreements, management agreements, including, without limitation, the Decatur, Illinois Management Contract, and other similar arrangements and commitments of or relating to the Marcus Mid-Priced Lodging Businesses or the Purchased Assets (including any rights thereunder), but specifically excluding all Employee Plans/Agreements.

“Cooperative Period” shall have the meaning set forth in Section 14.12(c).

“Cut-off Time” shall have the meaning set forth in Section 12.3.

“Decatur, Illinois Management Contract” shall mean that Management Agreement dated December 30, 1983 between Executive Development Co., as owner, and Baymont, as manager, as amended by letter agreement dated June 27, 2002 between Executive Development Co. and Baymont, pertaining to the Baymont Hotel located at 5100 Hickory Point Frontage Road, Decatur, Illinois.

“Deductible”shall have the meaning set forth in Section 11.6(b).

“Defending Party” shall have the meaning set forth in Section 11.4(c).

“Diligence” shall have the meaning set forth in Section 7.2.

“Earnest Money Deposit” shall have the meaning set forth in Section 3.2(a)(i).

“EBITDA” shall mean earnings before interest, taxes, depreciation and amortization, as specifically presented in and subject to the qualifications and exclusions set forth in Sections IV.E. and IV.F. of the Memorandum.

“Employee Plans/Agreements” shall mean and include all pension, thrift, savings, profit sharing, retirement, multi-employer retirement plan, incentive bonus or other bonus, medical, dental, life, accident insurance, benefit, employee welfare, disability, group insurance, stock purchase, stock option, stock appreciation, stock bonus, executive or deferred compensation, hospitalization and other similar fringe or employee benefit plans, programs and arrangements, and any employment agreements, retention agreements, consulting contracts, “golden parachutes,” collective bargaining agreements, severance agreements or plans, vacation and sick leave plans, programs, arrangements and policies, including, without limitation, all “employee benefit plans” (as defined in Section 3(3) of ERISA), all employee manuals, and all written statements of policies, practices or understandings relating to employment, which are provided to, for the benefit of, or relate to, any Employees, whether formal or informal, written or oral, and whether or not subject to ERISA.

“Employees” shall mean, other than Property-level employees who work at Excluded Properties, all persons who spend a majority of their business time related to the operations of the Marcus Mid–Priced Lodging Businesses and are identified by the Marcus Entities or the Selling Joint Ventures as employees thereof for tax and benefit purposes, including without limitation all Property-level employees of the Marcus Entities and the Selling Joint Ventures, all employees of the Marcus Entities performing services related to or arising under the franchise programs, franchise agreements and management agreements and all regional and divisional level employees of the Marcus Entities and Marcus Mid–Priced Lodging Businesses.

“Environmental Laws” shall mean the Clean Water Act (33 U.S.C. Section 1251 et. seq.), the Clean Air Act (42 U.S.C. Section 7401 et. seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) (“RCRA”), the Toxic Substances Control Act (15 U.S.C. Section 2601 et. seq.) (the “Toxic Substances Control Act”), and the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) (“CERCLA”), and their state and local counterparts and all regulations promulgated pursuant to any of the foregoing.

“ERISA”shall mean the Employee Retirement Income Security Act of 1974, as amended.

“Escrow Company” shall have the meaning set forth in Section 3.2(a)(i).

“Estimated Ovations Amount” shall have the meaning set forth in Section 3.4(a).

“Estimated Ovations Schedule” shall have the meaning set forth in Section 3.4(a).

“Excepted Representations and Warranties” shall mean the representations and warranties made pursuant to Sections 4.1, 4.3(with respect to clause (ii) of the second sentence only), 4.4, 4.6, 4.12(d) (with respect to the first and second sentences only), 4.21, 4.22(b) (with respect to the first sentence only), 4.23(a), 4.23(g)(with respect to the first sentence only), 4.23(r) (with respect to the second sentence only, but only to the extent solely related to events and circumstances prior to the date hereof), 4.23(s) and 4.27.

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

“Excluded Assets” shall have the meaning set forth in Section 1.2.

“Excluded Diligence Amounts” shall have the meaning set forth in Section 7.9(a)(iii).

“Excluded Liabilities” shall have the meaning set forth in Section 2.2.

“Excluded Property” shall mean the Baymont Inns owned by the 802 California Ontario, LLC, BN/MC Associates-Cook and Hoffman Northwest, the Chicago Hotel, and the other Properties excluded from the transactions contemplated by this Agreement pursuant to any provision of this Agreement, including without limitation, Sections 3.3, 7.9(e), 7.14(e)(i), 10.1, or 10.2.

“Expected Claim Notice” shall have the meaning set forth in Section 11.1.

“Final Closing Statement” shall have the meaning set forth in Section 12.3(c).

“Final Ovations Amount” shall have the meaning set forth in Section 3.4(b).

“Final Ovations Schedule” shall have the meaning set forth in Section 3.4(b).

“Financial Statements” shall mean, as of May 29, 2003 and May 30, 2002, the unaudited statement of EBITDA of the Marcus Mid–Priced Lodging Businesses for the fiscal year then ended.

“Forecasts” shall have the meaning set forth in Section 17.11.

“Franchise Documents” shall mean all franchise agreements, development agreements and any other agreements between a Marcus Entity and a Franchisee which directly or indirectly grant the right to develop, establish or operate a Baymont Hotel or a Woodfield Hotel, respectively, and any agreements ancillary between a Marcus Entity and a Franchisee thereto, including any rights of first refusal and options.

“Franchise Material Adverse Effect” shall mean any event or condition that materially and adversely affects the financial condition, operations or value of Baymont Franchises’ franchise system taken as a whole, including, without limitation, the Franchise Documents, franchise operations and the right to offer and sell franchises, excluding events or conditions affecting the lodging industry and/or the general or local economy generally.

“Franchisee” shall mean any franchisee, master franchisee, developer, area developer or other individual or entity that hold the rights to develop or operate either Baymont Hotels or Woodfield Hotels.

“FTC” shall mean the United States Federal Trade Commission.

“Government Entity” shall mean any court, arbitrator, department, commission, board, bureau, agency, authority, instrumentality or other body, whether federal, state, municipal, foreign or other.

“Hazardous Substances” shall mean any substance which is or contains: (i) any “hazardous substance” as currently defined in Section 101(14) of CERCLA (as defined in “Environmental Laws”) or any regulations promulgated under CERCLA; (ii) any “hazardous waste” as currently defined in RCRA (as defined in “Environmental Laws”) or regulations promulgated under RCRA; (iii) any substance regulated by the Toxic Substances Control Act (as defined in “Environmental Laws”); (iv) gasoline, diesel fuel or other petroleum hydrocarbons; (v) asbestos and asbestos containing materials, in any form, whether friable or nonfriable; (vi) polychlorinated biphenyls; (vii) radon gas; and (viii) any additional substances or materials which are currently regulated as hazardous or toxic under any Environmental Laws. Hazardous Materials shall include, without limitation, any substance, the presence of which on any real property requires reporting, investigation or remediation under Environmental Laws.

“Historical Financial Information” shall mean the financial information which is required to be filed by Buyer with the SEC pursuant to Item 7 of the Current Report on Form 8-K as contemplated by the Exchange Act, and the rules and regulations promulgated thereunder.

“HSR Act” shall mean the Hart Scott Rodino Antitrust Improvements Act of 1976.

“Indemnification Cap” shall have the meaning set forth in Section 11.6(b).

“Indemnified Party” shall have the meaning set forth in Section 11.4(a).

“Indemnifying Party” shall have the meaning set forth in Section 11.4(a).

“Infringement” shall mean any infringement, impairment, dilution, misappropriation or other violation or misuse of the rights of any other Person.

“Inventory”shall have the meaning set forth in Section 1.1(f).

“IRS” shall have the meaning set forth in Section 3.5.

“Joint Venture Property” shall have the meaning set forth in Section 3.3(a)(i).

“Joint Venture Purchase Price” shall have the meaning set forth in Section 3.3(f)(ii).

“Joint Ventures” means the entities which operate the Baymont Hotels as joint ventures between Baymont Partners and Third Party Partners, all of which are set forth on Exhibit A and Exhibit A-1.

“JV Asset Price” shall have the meaning set forth in Section 3.3(a).

“JV Management Rights” shall have the meaning set forth in Section 3.3(a)(i).

“JV Property Management Agreement” shall have the meaning set forth in Section 3.3(d).

“JV Property Management Price”shall have the meaning set forth in Section 3.3(a)(i).

“Law” shall mean any constitution, statute, law, ordinance, rule, authorization or regulation promulgated or issued by a Government Entity, including, without limitation, the Americans with Disabilities Act.

“Leave Employees” shall have the meaning set forth in Section 6.1(a).

“Liability” or “Liabilities” shall mean and include any direct or indirect indebtedness, guaranty, endorsement, claim, loss, debt, demand, judgment, fine, penalty, settlement, damage, deficiency, cost, expense, obligation or responsibility of any nature or kind, fixed or unfixed, accrued, absolute or contingent, known or unknown, asserted or unasserted, liquidated or unliquidated, matured or unmatured, secured or unsecured, including all costs and expenses (legal, accounting or otherwise) relating thereto.

“Licensed Trade Rights” shall have the meaning set forth in Section 4.22(a).

“Licenses and Permits” shall mean all licenses, permits, consents, approvals, authorizations, registrations and certifications of all applicable Government Entities and all certification organizations.

“Liens” shall mean all deeds of trust, mortgages, liens (statutory or otherwise), security interests, claims, pledges, licenses, equities, options, conditional sales contracts, assessments, levies, easements, covenants, reservations, restrictions, rights-of-way, exceptions, limitations, charges or encumbrances of any nature whatsoever.

“Liquor License” shall have the meaning set forth in Section 7.11.

“Litigation” shall mean any legal or equitable action, suit, proceeding, arbitration, claim, investigation or inquiry, whether civil, criminal or administrative.

“Losses” shall include all Liabilities and all losses, damages, judgments, awards, penalties and settlements; provided, however, that the term “Losses”, solely with respect to claims between the Marcus Entities, Buyer and their respective Affiliates, shall expressly exclude consequential damages, lost profits, punitive damages, diminution of value or damages calculated based on valuation formulas using a multiple of revenues, earnings, profits, cash flows, discounted present value or the like.

“Marcus 401(k) Plan” shall have the meaning set forth in Section 6.3(a).

“Marcus Acquiror” shall have the meaning set forth in Section 14.12(c)(ii).

“Marcus Assigned Licenses and Permits” shall have the meaning set forth in Section 1.1(m).

“Marcus Consid” shall have the meaning set forth in the Recitals to this Agreement.

“Marcus Contracts” shall have the meaning set forth in Section 1.1(e).

“Marcus Entities” shall have the meaning set forth in the preamble to this Agreement.

“Marcus Entity Cash Purchase Price” shall have the meaning set forth in Section 3.1.

“Marcus Fl” shall have the meaning set forth in the Recitals to this Agreement.

“Marcus GAAP” shall mean prepared in accordance with generally accepted accounting principles using the same accounting principles and procedures that were used by Marcus in preparing the Financial Statements, on a basis consistent with the preparation of the Recent Financial Statement.

“Marcus Material Consents” shall have the meaning set forth in Section 4.2.

“Marcus Material Contracts” shall mean all Contracts, commitments, plans, agreements and Licenses which are (i) material to the operation of the Marcus Mid–Priced Lodging Businesses, including, without limitation, the franchise businesses related thereto, and (ii) with respect to any Property, material to that Property.

“Marcus Mid–Priced Lodging Businesses” shall have the meaning set forth in the Recitals to this Agreement.

“Marcus Non” shall have the meaning set forth in the Recitals to this Agreement.

“Marcus Owned Personal Property” shall have the meaning set forth in Section 1.1(c).

“Marcus Owned Real Property” shall have the meaning as set forth in Section 1.1(a).

“Marcus Personal Property Leases” shall have the meaning as set forth in Section 1.1(d).

“Marcus Records and Files” shall have the meaning set forth in Section 1.1(k).

“Marcus Trade Rights” shall have the meaning set forth in Section 1.1(g).

“Marcus” shall have the meaning set forth in the preamble to this Agreement.

“Marcus-Anderson Partnership” shall have the meaning set forth in the Recitals to this Agreement.

“Material Adverse Effect” shall mean, individually or in the aggregate, a material adverse effect on the Marcus Mid–Priced Lodging Businesses or the assets, properties, results of operations or financial condition of the Marcus Mid–Priced Lodging Businesses, in each case taken as a whole, excluding events or conditions affecting the lodging industry and/or the general or local economy generally.

“Material Casualty” shall have the meaning set forth in Section 10.1(a).

“Material Condemnation” shall have the meaning set forth in Section 10.2(a).

“Memorandum” shall have the meaning set forth in Section 17.11.

“New Ovations Agreement” shall have the meaning set forth in Section 7.17.

“Order”shall mean any order, writ, injunction, judgment, plan, award or decree of any Government Entity.

“Outside Date” shall mean October 1, 2004.

“Ovations Appraisal Notice” shall have the meaning set forth in Section 3.4(b).

“Ovations Opinion” shall have the meaning set forth in Section 3.4(b).

“Ovations Valuation Expert” shall have the meaning set forth in Section 3.4(b).

“Owned Personal Property” shall have the meaning set forth in Section 1.1(c).

“Owned Real Property” shall have the meaning set forth in Section 1.1(a).

“Owned Trade Rights” shall mean all Trade Rights owned or purported to be owned by any Marcus Entity or any of the Selling Joint Ventures and used in the operation of the Marcus Mid-Priced Lodging Businesses.

“Permitted Real Property Liens” shall mean Liens for Taxes or assessments not yet due and payable, municipal and zoning ordinances, easements for public or private utilities, easements for ingress, egress, access, parking and signage, access restrictions and restrictive covenants, in each case of record as of the date hereof, none of which interfere in any material respect with, or adversely impact in any material respect, the use, value or operation of the applicable Real Property as utilized in accordance with past practices, and such instruments as may be recorded pursuant to Section 7.15 hereof.

“Person” shall mean an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a Government Entity (or any department, agency or political subdivision thereof).

“Personal Property Leases” shall have the meaning set forth in Section 1.1(d).

“Preliminary Closing Statement” shall have the meaning set forth in Section 12.3(c).

“Pro Forma Information” shall have the meaning set forth in Section 14.6.

“Property Material Adverse Effect”shall mean a material adverse effect on the operation of a Property as operated in accordance with past practices, or the operational value of a Property when taken as a whole, excluding events or conditions affecting the lodging industry and/or the general or local economy generally.

“Property” or “Properties” shall mean each of the Baymont Hotels and Woodfield Hotels located on either the Owned Real Property or the property subject to a Real Property Lease, including all owned or leased parking areas, green spaces and other areas utilized or required in operation of such hotels in accordance with past practices, excluding each of the Excluded Properties.

“Proposal” means any inquiry, proposal or offer from any person (other than Buyer and its Affiliates and representatives) relating to any direct or indirect (i) merger, consolidation or similar transaction involving the Marcus Entities or the Marcus Mid–Priced Lodging Businesses, (ii) sale, lease or other disposition, directly or indirectly, by merger, consolidation, share exchange or otherwise, of any of the Purchased Assets other than sales within the ordinary course of business consistent with past practice, (iii) tender offer or exchange offer in which any person shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the right to acquire beneficial ownership, or any “group” (as such term is defined under the Exchange Act) shall have been formed which beneficially owns or has the right to acquire beneficial ownership of, 10% or more of the outstanding shares of any class or series of capital stock of Marcus Entities, (iv) recapitalization, restructuring, liquidation, dissolution, or other similar type of transaction with respect to or involving the Marcus Mid–Priced Lodging Businesses or (v) transaction that is similar in form, substance or purpose to any of the foregoing transactions.

“Purchase Price” shall have the meaning set forth in Section 3.1.

“Purchased Assets” shall have the meaning set forth in Section 1.1.

“Real Property Leases” shall have the meaning set forth in Section 1.1(b).

“Recent Financial Statement” shall mean an unaudited statement of EBITDA of Marcus Mid–Priced Lodging Businesses as of May 27, 2004, and the related unaudited statements of income for the year then ended and for the corresponding period of the prior year.

“Records and Files” shall mean all books, records, ledgers, files, documents, correspondence, price lists, invoices, customer lists, databases, guest records, bookings and reservations records and all files and records related thereto (including all historical guest and transaction information stored or maintained in Marcus’ data warehouse), supplier lists and all files and records related thereto, vendor lists and all files and records related thereto, accounting records and other similar business records, operating data and other similar data, operating manuals and similar documents customarily delivered to Franchisees or which set forth guidelines with respect to the operation of their respective franchises, electronic records, sales agent lists and all files and records related thereto, architectural plans, drawings, blueprints, and specifications, creative materials, advertising and promotional materials, marketing databases, customer profiles, studies, reports, and other similar printed or written materials used in the conduct of, or that relate to, the Marcus Mid–Priced Lodging Businesses or are otherwise included in the Purchased Assets or otherwise used in connection with the conduct of the Marcus Mid–Priced Lodging Businesses.

“Registered Owned Trade Rights” shall mean all of the Owned Trade Rights which are issued by, registered with, or the subject of an application filed with, as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office or any similar office or agency in the world.

“Required Information” shall have the meaning set forth in Section 14.6.

“Retained Litigation” shall mean the Litigation, the Liability for which is to be borne by the Marcus Entities and/or the Joint Ventures hereunder.

“Retained Real Property” shall have the meaning set forth in Section 1.2(g).

“Retained Subdivision Parcels” shall have the meaning set forth in Section 7.14(a).

“Right of First Refusal” shall have the meaning set forth in Section 3.3(b).

“SEC” shall mean the United States Securities and Exchange Commission.

“Selling Joint Venture Assigned Licenses and Permits” shall have the meaning set forth in Section 1.1(m).

“Selling Joint Venture Contracts” shall have the meaning set forth in Section 1.1(e).

“Selling Joint Venture Owned Personal Property”shall have the meaning set forth in Section 1.1(c).

“Selling Joint Venture Owned Real Property” shall have the meaning set forth in Section 1.1(a).

“Selling Joint Venture Personal Property Leases” shall have the meaning set forth in Section 1.1(d).

“Selling Joint Venture” shall have the meaning set forth in Section 3.3(f)(iii).

“Selling Third Party Partners” shall have the meaning set forth in Section 3.3(b).

“Specifically Identified Excluded Liabilities” shall mean those Excluded Liabilities, and only those Excluded Liabilities, specifically set forth and enumerated in Sections 2.2(a) through 2.2(p) and shall not include any other Excluded Liabilities.

“Subdivision Properties” shall have the meaning set forth in Section 7.14.

“Target’s Competing Activities” shall have the meaning set forth in Section 14.12(c)(ii)(A).

“Target” shall have the meaning set forth in Section 14.12(c)(ii).

“Tax Return” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Tax” or “Taxes” shall mean any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto.

“Third Party Partners” shall have the meaning set forth in Section 3.3(a)(i).

“Trade Rights” shall mean and include: (i) all copyrights and all other rights associated therewith in both published and unpublished works of authorship and all derivatives thereof; (ii) all patents, patent applications, patent rights and all proprietary rights; (iii) all inventions, know-how, discoveries, improvements, confidential and proprietary information, designs, trade secrets, shop and royalty rights, employee covenants and agreements respecting intellectual property and non-competition and all other types of intellectual property; (iv) all trademarks, trade names, trade dress, service marks, logos and domain names; and (v) all applications to register and all registrations of any of the foregoing, all goodwill associated with any of the foregoing, all rights to receive royalties with respect thereto, and all claims for past, present or future Infringement or breach thereof.

“Transaction Stay/Severance Payments” shall mean the “stay” or “transaction” bonuses and/or severance payments and benefits to be paid or provided by one or more of Marcus, the Marcus Entities and/or the Selling Joint Ventures to the Employees.

“Transfer Cost” shall have the meaning set forth in Section 17.7(c).

“Transfer Dates” shall have the meaning set forth in Section 6.1(a).

“Use Restricted Property” or “Use Restricted Properties” shall mean each of the Properties commonly known as: (a) 3730 West College Avenue, Appleton, Wisconsin; (b) 3920 West College Avenue, Appleton, Wisconsin; (c) 20391 West Bluemound Road, Brookfield, Wisconsin; (d) 2801 Hillside Drive, Delafield, Wisconsin; (e) 15300 West Rock Ridge Road, New Berlin, Wisconsin; and (f) 7141 South 13^th Street, Oak Creek, Wisconsin.

“Valuation Expert” shall have the meaning set forth in Section 7.9(d)(iii)(B).

“WARN”shall mean the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101 et seq.

“Warranties” shall have the meaning set forth in Section 1.1(n).

“Woodfield Business” shall have the meaning set forth in the Recitals to this Agreement.

“Woodfield Franchises” shall have the meaning set forth in the Recitals to this Agreement.

“Woodfield Hotels” shall have the meaning set forth in Recitals to this Agreement.

“Woodfield”shall have the meaning set forth in the Recitals to this Agreement.

17.

MISCELLANEOUS

17.1 Schedules. Disclosure in any Schedule hereto shall constitute disclosure for all purposes under this Agreement and in response to any other Schedule under this Agreement; provided that the disclosure in any such Schedule contains the requisite specificity and particularity required in such other Schedule. Disclosure of a document or information in any Schedule hereto is not intended as a representation or warranty as to the material nature of such document or information nor does it establish any standard of materiality upon which to judge the inclusion or omission of other documents or information in that Schedule or other Schedules.

17.2 Assignment; Parties in Interest.

17.2(a) Assignment. Except as expressly provided herein, the rights and obligations of a party hereunder may not be assigned, transferred or encumbered without the prior written consent of the other parties. Buyer may assign its rights and interest in and to this Agreement to one or more of its Affiliates upon advance written notice to the Marcus Entities; provided, however, notwithstanding such assignment, Buyer shall remain directly and primarily liable to the Marcus Entities for its obligations hereunder and no such assignment will affect the Marcus Entities’ ability to pursue Buyer for claims arising hereunder or under any Ancillary Agreement.

17.2(b) Parties in Interest; No Third Party Beneficiaries. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the respective successors and permitted assigns of the parties hereto. Nothing contained herein shall be deemed to confer upon any other Person other than the parties hereto any right or remedy under or by reason of this Agreement.

17.2(c) Marcus Transactions. In the event of a sale of all or substantially all of the assets of Marcus and/or a Marcus Entity, the Marcus Entities agree that the buyer of such assets shall assume and become jointly liable for the obligations of the Marcus Entities hereunder and any such buyer shall become so liable, provided that such assignment shall not relieve the Marcus Entities of their obligations hereunder.

17.3 Recordings. Neither this Agreement nor any notice or memorandum thereof shall be recorded in any real property records for any jurisdiction. Any such recordation (other than recordations pursuant to Section 7.15) shall constitute a default under this Agreement by the recording party.

17.4 Law Governing Agreement. This Agreement shall be construed and interpreted according to the internal Laws of the State of Wisconsin, excluding any choice of Law rules that may direct the application of the Laws of another jurisdiction.

17.5 Amendment and Modification. The parties hereto may amend, modify and supplement this Agreement in such manner as may be agreed upon by them in writing.

17.6 Notice. All notices, requests, demands and other communications hereunder shall be given in writing and shall be: (a) personally delivered; (b) sent by telecopier or facsimile transmission; or (c) sent to the parties at their respective addresses indicated herein by registered or certified U.S. mail, return receipt requested and postage prepaid, or by private overnight mail courier service. The respective addresses to be used for all such notices, demands or requests are as follows:

(a)

If to Buyer, to:

Sandra K. Michel
La Quinta Corporation
909 Hidden Ridge, Suite 600
Irving, TX 75038
Facsimile: (214) 492-6616

(with a copy, which shall not constitute notice, to)

Scott F. Duggan
Goodwin Procter LLP
Exchange Place
53 State Street
Boston, MA 02109
Facsimile: (617) 523-1231

or to such other person or address as Buyer shall furnish to the Marcus Entities in writing.

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(b)

If to the Marcus Entities, to:

Thomas F. Kissinger
The Marcus Corporation
100 East Wisconsin Avenue
Milwaukee, WI 53202
Facsimile: (414) 905-2669

(with a copy, which shall not constitute notice, to)

Steven R. Barth
Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee Wisconsin 53202-5306
Facsimile: (414) 297-4900

or to such other person or address as the Marcus Entities shall furnish to Buyer in writing.

If personally delivered, such communication shall be deemed delivered upon actual receipt; if sent by overnight courier pursuant to this paragraph, such communication shall be deemed delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph, such communication shall be deemed delivered as of the date of delivery indicated on the receipt issued by the relevant postal service, or, if the addressee fails or refuses to accept delivery, as of the date of such failure or refusal. Any party to this Agreement may change its address for the purposes of this Agreement by giving notice thereof in accordance with this Section 17.6.

17.7 Expenses. Regardless of whether or not the transactions contemplated hereby are consummated:

17.7(a) Brokerage. The Marcus Entities agree to hold Buyer harmless from and against all Losses for brokerage commissions, finder’s fees and investment banking fees incurred through any act of the Marcus Entities or any of their Affiliates in connection with the execution of this Agreement or the transactions provided for herein, including all fees and costs of Goldman Sachs & Co. Buyer agrees to hold the Marcus Entities harmless from and against all Losses for brokerage commissions, finder’s fees, and investment banking fees incurred through any act of Buyer or any of its Affiliates in connection with the execution of this Agreement or the transactions provided for herein, including all fees and costs of Lehman Brothers.

17.7(b) Dispute-Related Fees. If any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement, the prevailing party therein shall be entitled to receive from the other party the prevailing party’s costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any judgment therein.

101

17.7(c) Other. The Marcus Entities and Buyer shall each pay 50% of the following expenses: (i) transfer Taxes, deed stamps, sales Taxes and similar Taxes, including sales Taxes on the Owned Personal Property and Inventory, and charges payable to any Government Entity in the connection with the transfer of the Purchased Assets and Assumed Liabilities (the “Transfer Cost”); (ii) Earnest Money Deposit escrow fees; (iii) the cost to obtain updated title insurance commitments for the Properties and premiums for title insurance policies (including endorsements) issued to Buyer at Closing; (iv) the cost to obtain updated surveys of each of the Properties; (v) costs and expenses incurred in connection with the transfer of Licenses and Permits and warranties; and (vi) recording fees to record the deeds for the Properties (or to secure assignments of the Real Property Leases, as applicable. The Buyers shall pay all fees with respect to (w) filings under the HSR Act; (x) any environmental studies commissioned by or on behalf of the Buyer with respect to the Properties; and (y) any structural or engineering reports commissioned by or on behalf of the Buyer with respect to the Properties. The Marcus Entities shall pay all fees for the recording of discharges of any title encumbrances required under this Agreement to be discharged by the Marcus Entitles at or before Closing. Buyer’s costs associated with the exchanges contemplated by Section 14.14 shall be borne as set forth in such Section. The parties shall provide such certificates and other information and otherwise cooperate to the extent reasonably required to minimize Transfer Costs and to file Tax returns. Except as otherwise provided herein, each of the parties shall bear its own expenses and the expenses of is legal, accounting and other professional counsel and other agents in connection with the transactions contemplated hereby.

17.8 Publicity. The parties agree that, except in the performance of the obligations under this Agreement, no party shall, with respect to this Agreement and the transactions contemplated hereby, make any public announcements, issue press releases or otherwise furnish information regarding this Agreement or the transactions contemplated to any third party without the consent of the other parties, which consent shall not be unreasonably withheld, delayed or conditioned, except as required by Law, the rules and regulations of the SEC or the New York Stock Exchange or unless such action is taken based on advice of counsel given in good faith.

17.9 Disclaimer. Except as set forth in Article 4, the Marcus Entities have not made any representation or warranty, either express or implied, concerning the subject matter of this Agreement and Buyer has not relied on any such further representation or warranty. This Agreement shall not be governed by the warranties provided by Article 2 of the Uniform Commercial Code as adopted in any jurisdiction.

17.10 Knowledge. Whenever the words “to the knowledge of the Marcus Entities,” or words of similar import are used in this Agreement, such term or terms shall mean the actual knowledge of Stephen H. Marcus, James R. Abrahamson, Douglas A. Neis, Jay Wolfe, Thomas F. Kissinger, Joy Trent, Victor Delgado, Ellen Bennett, Carol Brauer, David Bedway, Alex Karason, Mark Johnson, Jim Essig, Jeff Tomachek, Dan Danielle, Jane Hoida, Craig Farrell, Charles Barcus, Kim Lueck and Jane Durment.

17.11 Forecasts; Memorandum; Due Diligence. Prior to and during the negotiation of this Agreement, Goldman Sachs &Co. prepared various projections, forecasts, budgets and the like relating to the Marcus Mid–Priced Lodging Businesses and their future revenues, earnings, cash flow and other economic data, including the underlying assumptions and basis therefor (collectively, “Forecasts”). These Forecasts, together with certain other information pertaining to the investment considerations, history, business, products and services, product development, market, industry and similar data of or relating to the Marcus Entities were set forth in a confidential memorandum prepared by Goldman Sachs & Co. (the “Memorandum”). Buyer acknowledges and agrees as follows with respect to the Forecasts and Memorandum (except, in all cases, the Bid Document Financial Statements) and the Marcus Entities:

102

17.11(a) Buyer has not relied, for any purpose, on the Forecasts or the Memorandum, or the Marcus Entities’ or its agents’ participation in the preparation thereof, including, without limitation, in Buyer’s determination to enter into this Agreement or to pay or deliver the Purchase Price to be paid in this Agreement; the Marcus Entities and their agents shall have no responsibility or Liability relating in any way, directly or indirectly, for the Forecasts or the Memorandum, the participation of the Marcus Entities or their agents in their preparation or the use or distribution thereof by Buyer; such Forecasts and the Memorandum shall not constitute representations or warranties of the Marcus Entities for purposes of this Agreement or otherwise; and

17.11(b) The Forecasts and the Memorandum include assumptions, estimates and projections about future results of operations of the Marcus Mid–Priced Lodging Businesses and general business conditions that have been prepared by Goldman Sachs & Co. on behalf of the Marcus Entities and, as such, the Forecasts and the Memorandum are inherently uncertain and the actual results of the Marcus Mid–Priced Lodging Businesses will vary, and may vary by material amounts, from those contained in the Forecasts and the Memorandum; provided, however, the Marcus Entities represent and warrant to Buyer that the Marcus Entities had no knowledge of any facts which would have reasonably led them to believe that, when issued, the Forecasts with respect to the Marcus Mid–Priced Lodging Businesses and the Memorandum with respect to the Marcus Entities were misleading in any material respect; provided, however, that it is understood and agreed that the Memorandum has not been updated or amended since its issuance date and events and circumstances have changed since that date and further that such Forecasts are inherently highly speculative and uncertain in nature and that there can be no assurance or guarantee that any future results projected therein will not be materially different than as set forth.

17.12 Buyer’s Experience. Buyer acknowledges that it, together with its representatives, have had an opportunity to inspect the Marcus Records and Files, the Purchased Assets, the assets of Marcus and the Marcus Entities and the Properties, to ask questions of the officers and key employees of Marcus and the Marcus Entities and to perform an adequate “due diligence”investigation of the Marcus Entities, the Joint Ventures and the Marcus Mid–Priced Lodging Businesses. Buyer is acquiring the Marcus Mid–Priced Lodging Businesses subject hereto solely based upon its investigation of the Marcus Mid–Priced Lodging Businesses and the representations and warranties made by the Marcus Entities in this Agreement and not in reliance upon any written or oral statements made by any other person (which statements, if made, have not been authorized by the Marcus Entities). Buyer acknowledges and confirms that it has made an independent review and investigation of the Marcus Mid–Priced Lodging Businesses; that it, either alone or with its financial advisors, has the necessary background and expertise to evaluate the same; it is thoroughly familiar with the industry, and recognizes that it is an extremely competitive industry; that it has examined and considered in detail such information, documentation and financial statements and reports which it deems necessary and material to such review and investigation; that it has had access to and the opportunity to inspect any and all records, instruments, documents, financial statements, reports and budgets and other information of the Marcus Entities which it deemed necessary and material in such determination; that it has had the opportunity to ask questions of and receive answers to such questions from Marcus and the Marcus Entities, and to obtain any additional information which it requested; that no written or oral statements were made or other financial projections or estimates furnished to it by or on behalf of Marcus or the Marcus Entities as to future profitability of the Marcus Mid–Priced Lodging Businesses that have been relied upon by, or represented in that Agreement to, the Buyer.

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17.13 Entire Agreement. This Agreement, the Ancillary Agreements and the Confidential Letter Agreement between Buyer and Marcus dated the date hereof embody the entire agreement between the parties hereto with respect to the transactions contemplated herein, and there have been and are no agreements, representations or warranties between the parties other than those set forth or provided for herein.

17.14 Counterparts; Facsimile Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

17.15 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

17.16 Headings. The headings in this Agreement are inserted for convenience only and shall not constitute a part hereof.

17.17 Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” shall mean including without limitation.

17.18 Incorporation of Schedules. The Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

17.19 Materiality Threshold. The parties hereby agree and acknowledge that in no event shall the 17.5% threshold used in Section 7.9(f), Section 10.1(a) or Section 10.2(a) be deemed to constitute an admission or indication as to materiality for any other purposes of this Agreement including, without limitation, in determining whether there has been a Material Adverse Effect, a Property Material Adverse Effect or a Franchise Material Adverse Effect.

[Signature Page Follows]

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

BUYER:
LA QUINTA CORPORATION
Tax Payer I.D. #:______________________________________
By: /s/ Francis W. Cash
Name: Francis W. Cash
Title: President and Chief Executive Officer
THE MARCUS ENTITIES:
BAYMONT INNS, INC.	WOODFIELD SUITES, INC.
Tax Payer I.D. #:_____________________________________	Tax Payer I.D. #:_____________________________________
By: /s/ Stephen H. Marcus	By: /s/ Stephen H. Marcus
Name: Stephen H. Marcus	Name: Stephen H. Marcus
Title: President	Title: President
MARCUS CONSID, LLC	MARCUS NON, LLC
Tax Payer I.D. #:_____________________________________	Tax Payer I.D. #:_____________________________________
By: The Marcus Corporation, Sole Member	By: The Marcus Corporation, Sole Member
By: /s/ Stephen H. Marcus	By: /s/ Stephen H. Marcus
Name: Stephen H. Marcus	Name: Stephen H. Marcus
Title: President	Title: President
MARCUS FL, LLC	BAYMONT FRANCHISES INTERNATIONAL, LLC
Tax Payer I.D. #:_____________________________________	Tax Payer I.D. #:_____________________________________
By: The Marcus Corporation, Sole Member	By: Baymont Inns, Inc., Sole Member
By: /s/ Stephen H. Marcus	By: /s/ Stephen H. Marcus
Name: Stephen H. Marcus	Name: Stephen H. Marcus
Title: President	Title: President

S-1



BAYMONT PARTNERS, LLC	WOODFIELD SUITES HOSPITALITY CORPORATION
Tax Payer I.D. #:_____________________________________	Tax Payer I.D. #:_____________________________________
By: Baymont Inns, Inc., Sole Member
By: /s/ Stephen H. Marcus	By: /s/ Stephen H. Marcus
Name: Stephen H. Marcus	Name: Stephen H. Marcus
Title: President	Title: President
WOODFIELD SUITES FRANCHISES INTERNATIONAL, INC.	MARCUS-ANDERSON PARTNERSHIP
Tax Payer I.D. #:______________________________________	Tax Payer I.D. #:______________________________________
	By: Baymont Partners, LLC
	By: Baymont Inns, Inc., Sole Member
By: /s/ Stephen H. Marcus	By: /s/ Stephen H. Marcus
Name: Stephen H. Marcus	Name: Stephen H. Marcus
Title: President	Title: President
BAYMONT INNS HOSPITALITY LLC
Tax Payer I.D. #:______________________________________
By: Baymont Inns, Inc., Sole Member
By: /s/ Stephen H. Marcus
Name: Stephen H. Marcus
Title: President

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EX-4.6 3 cmw848b.htm CREDIT AGREEMENT

EXECUTION VERSION

CREDIT AGREEMENT

Dated as of April 30, 2004

among

THE MARCUS CORPORATION,

U.S. BANK NATIONAL ASSOCIATION
as Administrative Agent,

BANK OF AMERICA, N.A.,
BANK ONE, NA, and
LASALLE BANK NATIONAL ASSOCIATION
As Co-Documentation Agents

and

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

		Page
ARTICLE I	DEFINITIONS	1
1.1.	Certain Defined Terms	1
1.2.	Other Interpretive Provisions	12
1.3.	Accounting Principles	13
ARTICLE II	THE CREDITS	13
2.1.	Amounts and Terms of Commitments	13
2.2.	Swingline Loans	13
2.3.	Loan Accounts	14
2.4.	Procedure for Borrowing	14
2.5.	Conversion and Continuation Elections	15
2.6.	Changes in Aggregate Commitments	16
2.7.	Optional Prepayments	17
2.8.	Repayment	18
2.9.	Interest	18
2.10.	Fees	18
2.11.	Computation of Fees and Interest	19
2.12.	Payments by the Company	19
2.13.	Payments by the Banks to the Agent	19
2.14.	Sharing of Payments, Etc	20
ARTICLE III	TAXES, YIELD PROTECTION AND ILLEGALITY	21
3.1.	Taxes	21
3.2.	Illegality	22
3.3.	Increased Costs and Reduction of Return	22
3.4.	Funding Losses	23
3.5.	Inability to Determine Rates	23
3.6.	Certificates of Banks	24
3.7.	Substitution of Banks	24
3.8.	Survival	24
ARTICLE IV	CONDITIONS PRECEDENT	24
4.1.	Conditions of Initial Loans	24
4.2.	Conditions to All Borrowings	25
ARTICLE V	REPRESENTATIONS AND WARRANTIES	25
5.1.	Corporate Existence and Power	26
5.2.	Corporate Authorization; No Contravention	26
5.3.	Governmental Authorization	26
5.4.	Binding Effect	26
5.5.	Litigation	27
5.6.	No Default	27
5.7.	ERISA Compliance	27

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5.8.	Use of Proceeds; Margin Regulations	28
5.9.	Title to Properties	28
5.10.	Taxes	28
5.11.	Financial Condition	28
5.12.	Environmental Matters	28
5.13.	Regulated Entities	29
5.14.	No Burdensome Restrictions	29
5.15.	Copyrights, Patents, Trademarks and Licenses, Etc.	29
5.16.	Subsidiaries	29
5.17.	Insurance	29
5.18.	Full Disclosure	29
5.19.	Subsidiary Indebtedness	30
ARTICLE VI	AFFIRMATIVE COVENANTS	30
6.1.	Financial Statements	30
6.2.	Certificates; Other Information	30
6.3.	Notices	31
6.4.	Preservation of Corporate Existence, Etc	31
6.5.	Maintenance of Property	32
6.6.	Insurance	32
6.7.	Payment of Obligations	32
6.8.	Compliance with Laws	32
6.9.	Employee Benefit Plans	33
6.10.	Accounting; Inspection of Property and Books and Records	33
6.11.	Environmental Laws	33
6.12.	Use of Proceeds	33
6.13.	Contingent Obligations	33
ARTICLE VII	NEGATIVE COVENANTS	33
7.1.	Limitation on Liens	34
7.2.	Disposition of Assets	34
7.3.	Merger; Purchase of Assets; Acquisitions; Etc.	35
7.4.	Loans and Investments	35
7.5.	Limitation on Subsidiary Indebtedness	36
7.6.	Transactions with Affiliates	36
7.7.	Use of Proceeds	36
7.8.	Restricted Payments	36
7.9.	Change in Business	36
7.10.	Accounting Changes	36
7.11.	Funded Debt Ratio	36
7.12.	Fixed Charge Coverage Ratio	36
7.13.	Subsidiary Dividends	37
ARTICLE VIII	EVENTS OF DEFAULT	37
8.1.	Event of Default	37
8.2.	Remedies	39
8.3.	Rights Not Exclusive	39

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ARTICLE IX	THE AGENT	39
9.1.	Appointment and Authorization	39
9.2.	Delegation of Duties	40
9.3.	Liability of Agent	40
9.4.	Reliance by Agent	40
9.5.	Notice of Default	40
9.6.	Credit Decision	41
9.7.	Indemnification	41
9.8.	Agent in Individual Capacity	42
9.9.	Successor Agent	42
9.10.	Withholding Tax	42
9.11.	Co-Documentation Agents	43
ARTICLE X	MISCELLANEOUS	43
10.1.	Amendments and Waivers	43
10.2.	Notices	44
10.3.	No Waiver; Cumulative Remedies	45
10.4.	Costs and Expenses	45
10.5.	Indemnity	45
10.6.	Payments Set Aside	46
10.7.	Successors and Assigns	46
10.8.	Assignments, Participations, Etc	46
10.9.	Confidentiality	47
10.10.	Set-off	48
10.11.	Automatic Debits of Fees	48
10.12.	Notification of Addresses, Lending Offices, Etc.	49
10.13.	Counterparts	49
10.14.	Severability	49
10.15.	No Third Parties Benefited	49
10.16.	Governing Law and Jurisdiction	49
10.17.	Waiver of Jury Trial	49
10.18.	Entire Agreement	50

SCHEDULES
Schedule 1.1	Pricing Schedule
Schedule 2.1	Commitments and Pro Rata Shares
Schedule 5.16	Subsidiaries of The Marcus Corporation as of February 18, 2004
Schedule 7.1	Liens on Existing Property
Schedule 7.4	Loans and Investments
EXHIBITS
Exhibit 2.4	Notice of Borrowing
Exhibit 2.5	Notice of Conversion/Continuation
Exhibit 2.6(b)	Commitment Increase Request
Exhibit 6.2(a)	The Marcus Corporation Compliance Certificate
Exhibit 10.8(i)	Notice of Assignment and Acceptance
Exhibit 10.8(ii)	Form of Assignment and Acceptance Agreement

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CREDIT AGREEMENT

This CREDIT AGREEMENT is entered into as of April 30, 2004, among THE MARCUS CORPORATION, a Wisconsin corporation (the “Company”), the several financial institutions from time to time party to this Agreement (collectively, the “Banks”; individually, a “Bank”), and U.S. Bank National Association, a national banking association, as administrative agent for the Banks (in such capacity, the “Agent”), and Bank of America, N.A., Bank One, NA, and LaSalle Bank National Association, all national banking associations, as Co-Documentation Agents (in such capacity, each a “Co-Documentation Agent”).

WHEREAS, the Banks have agreed to make available to the Company a revolving credit facility upon the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

ARTICLE I
DEFINITIONS

1.1. Certain Defined Terms. The following terms have the following meanings:

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Company or the Subsidiary is the surviving entity.

“Adjusted Consolidated Cash Flow” means, for any period, the Consolidated Net Income of the Company and its Subsidiaries plus (a) depreciation and amortization for such period, (b) all current and deferred taxes on income, provision for taxes on income, provision for taxes on unremitted foreign earnings which are included in consolidated gross revenues and current additions to reserves, and (c) Interest and Rental Expense for the Company and its Subsidiaries on a consolidated basis.

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise.

“Agent” means U.S. Bank National Association in its capacity as administrative agent for the Banks hereunder, and any successor administrative agent arising under Section 9.9.

“Agent-Related Persons” means U.S. Bank National Association and any successor administrative agent arising under Section 9.9, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

“Agent’s Payment Office” means the address for payments set forth on the signature page hereto in relation to the Agent, or such other address as the Agent may from time to time specify.

“Agreement” means this Credit Agreement.

“Applicable Margin” means, at any time, with respect to Offshore Rate Loans and Base Rate Loans, the rate per annum determined in accordance with Schedule 1.1.

“Assignee” has the meaning specified in subsection 10.8(a).

“Attorney Costs” means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel.

“Bank” has the meaning specified in the introductory clause hereto.

“Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.)

“Base Rate” means, for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the prime rate of interest in effect for such day as publicly announced from time to time by the Agent. The prime rate may not be the lowest interest rate charged by the Agent.

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

“Borrowing” means a borrowing hereunder consisting of Loans of the same Type made to the Company on the same day by the Banks under Article II, and, in the case of Offshore Rate Loans, having the same Interest Period.

“Borrowing Date” means any date on which a Borrowing occurs under Section 2.4.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in Chicago or Milwaukee are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.

“Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

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“Capital Lease” means, as to any Person, any lease which, in accordance with GAAP consistently applied, is or should be capitalized on the books of such Person.

“Cash Equivalents” means, as to any Person, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than three months from the date of acquisition, (b) time deposits and certificates of deposit of any commercial bank with a long-term unsecured debt rating of at least A or its equivalent from Standard & Poor’s Ratings Group or at least A-2 or its equivalent from Moody’s Investors Service, Inc., with maturities of not more than three months from the date of acquisition by such Person, (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above, (d) commercial paper issued by any Person incorporated in the United States, which commercial paper is rated at least A-l or the equivalent thereof by Standard & Poor’s Corporation or at least P-l or the equivalent thereof by Moody’s Investors Service, Inc., and in each case maturing not more than three months after the date of acquisition by such Person and (e) investments in money market funds, substantially all the assets of which are comprised of securities of the types described in clauses (a) through (d) above.

“Change of Control” means any event, or combination of events, the result of which is that Stephen H. Marcus, Diane Marcus Gershowitz and their respective heirs, collectively, no longer beneficially own (within the meaning of Rule 13d-3 of the SEC under the Exchange Act) 51% or more of the voting rights with respect to outstanding shares of the Company.

“Closing Date” means the date on which all conditions precedent set forth in Section 4.1 are satisfied or waived by all Banks (or, in the case of subsection 4.1(e), waived by the Person entitled to receive such payment).

“Code” means the Internal Revenue Code of 1986, and regulations promulgated thereunder.

“Commitment”, as to each Bank, has the meaning specified in Section 2.1. As of the date of this Agreement, the amount of the combined Commitments of all Banks is $125,000,000.

“Compliance Certificate” means a certificate substantially in the form of Exhibit 6.2(a).

“Consolidated Net Income” means, for any period, the consolidated gross revenues of the Company and its Subsidiaries, less all operating and nonoperating expenses of the Company and its Subsidiaries, including all charges of a proper character (including current and deferred taxes on income, provision for taxes on income, provisions for taxes on unremitted foreign earnings which are included in consolidated gross revenues, and current additions to reserves), all determined in accordance with GAAP consistently applied, but not including in the computation thereof the amounts (including related expenses and any tax effect related thereto) resulting from (i) any gains or losses resulting from the sale, conversion or other disposition of capital assets (i.e., assets other than current assets), (ii) any gains or losses resulting from the reevaluation of assets, (iii) any gains or losses resulting from an acquisition by the Company or any of its Subsidiaries at a discount of any debt of the Company or any of its Subsidiaries, (iv) any equity of the Company or any of its Subsidiaries in the unremitted earnings of any Person which is not a Subsidiary, (v) any earnings of any Person acquired by the Company or any of its Subsidiaries through purchase, merger or consolidation or otherwise for any time prior to the date of acquisition, (vi) any deferred credit representing the excess of equity in any Subsidiary of the Company at the date of acquisition over the cost of the investment in such Subsidiary, (vii) any restoration to income of any reserve, except to the extent that provision for such reserve was made out of income accrued during such period, (viii) any net gain from the collection of life insurance policies, or (ix) any gain resulting from any other nonrecurring item.

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“Contingent Obligation” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person’s obligation under any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound.

“Controlled Group” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

“Conversion/Continuation Date” means any date on which, under Section 2.5, the Company (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.

“Default” means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default.

“Dollars”, “dollars” and “$” each mean lawful money of the United States.

“Eligible Assignee” means (i) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (iii) a Person that is primarily engaged in the business of commercial banking and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a Person of which a Bank is a Subsidiary; and (iv) any other Person agreed to by the Company and the Agent.

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“Environmental Claims” means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment.

“Environmental Laws” means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters.

“ERISA” means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder.

“Eurodollar Reserve Percentage” has the meaning specified in the definition of “Offshore Rate”.

“Event of Default” means any of the events or circumstances specified in Section 8.1.

“Exchange Act” means the Securities and Exchange Act of 1934, and regulations promulgated thereunder.

“Facility Fee Rate” means, at any time, the rate per annum determined in accordance with Schedule 1.1.

“Federal Funds Rate” means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, “H.15(5l9)”) on the preceding Business Day opposite the caption “Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent.

“Fee Letter” has the meaning specified in subsection 2.10(a).

“FRB” means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.

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“Funded Debt” means all Indebtedness for borrowed money (including obligations under Capital Leases and excluding Contingent Obligations with respect to Indebtedness of other Persons)

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the Closing Date.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

“Indebtedness” of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms) (c) all non-contingent reimbursement or payment obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to Capital Leases; (g) all net obligations with respect to Swap Contracts; (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above.

“Indemnified Liabilities” has the meaning specified in Section 10.5.

“Indemnified Person” has the meaning specified in Section 10.5.

“Independent Auditor” has the meaning specified in subsection 6.1 (a).

“Insolvency Proceeding” means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.

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“Interest and Rental Expense” means, for any period, all amounts recorded and deducted in computing the Company’s Consolidated Net Income for such period in respect of interest charges and expense and rental charges for such period (whether paid or accrued, or a cash or non-cash expense, and in the case of rental payments, including the full amount of those payments made under operating leases or synthetic leases, but only the imputed interest under Capital Leases).

“Interest Payment Date” means, as to an Offshore Rate Loan, the last day of each Interest Period applicable to such Offshore Rate Loan and, as to any Base Rate Loan, the last day of each calendar quarter, provided, however, that if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date.

“Interest Period” means, the period commencing on the Borrowing Date of an Offshore Rate Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation;

provided that:

(i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following 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 preceding Business Day;

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

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

“Investment” means any advance, loan, extension of credit or capital contribution to, or any investment in the capital stock or other equity interest, or debt securities or other obligations of, another Person or any contingent liability incurred for the benefit of another Person.

“IRS” means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code.

“Joint Venture” means a single-purpose corporation, partnership, joint venture or other similar legal arrangement (whether created by contract or conducted through a separate legal entity) now or hereafter formed by the Company or any of its Subsidiaries with another Person in order to conduct a common venture or enterprise with such Person.

“Lending Office” means, as to any Bank, the office or offices of such Bank specified as its “Lending Office” or “Domestic Lending Office” or “Offshore Lending Office”, as the case may be, on Schedule 10.2, or such other office or offices as such Bank may from time to time notify the Company and the Agent.

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“Lien” means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law), but not including the interest of a lessor under an operating lease.

“Loan” means an extension of credit by a Bank to the Company under Article II, and may be a Base Rate Loan or an Offshore Rate Loan (each, a “Type” of Loan). Except where the context indicates otherwise, the term “Loan” shall include Swingline Loans made pursuant to Section 2.2.

“Loan Documents” means this Agreement, any Notes, the Fee Letter, and all other documents delivered to the Agent or any Bank in connection herewith.

“Majority Banks” means at any time Banks then holding in excess of 50% of the then aggregate unpaid principal amount of the Loans, or, if no such principal amount is then outstanding, Banks then having in excess of 50% of the Commitments.

“Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of the FRB.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, liabilities (actual or contingent) properties, condition (financial or otherwise) or prospects of the Company or the Company and its Subsidiaries taken as a whole; (b) a material impairment of the ability of the Company or any Subsidiary to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company or any Subsidiary of any Loan Document.

“Multiemployer Plan” means a “multiemployer plan”, within the meaning of Section 4001(a) (3) of ERISA, to which the Company or any member of the Controlled Group makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions.

“Note” means a promissory note executed by the Company in favor of a Bank pursuant to subsection 2.3(b), in substantially the form of Exhibit F.

“Notice of Borrowing” means a notice in substantially the form of Exhibit A.

“Notice of Conversion/Continuation” means a notice in substantially the form of Exhibit B.

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“Obligations” means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company to any Bank, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising.

“Offshore Rate” means, for any Interest Period, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Agent as follows:

Offshore Rate =	LIBOR Rate
	1.00 - Eurodollar Reserve Percentage

Where,

“Eurodollar Reserve Percentage” means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”) ; and

“LIBOR Rate” means for any Interest Period with respect to an Offshore Rate Loan, the per annum rate of interest determined by the Agent to be the arithmetic average (rounded upward, if necessary, to the nearest 1/16 of 1%) of the offered rates for deposits in United States Dollars for the applicable Interest Period which appear on the Telerate Screen Page 3750 (or such other page of Telerate or such other service on which the appropriate information may be displayed), on the electronic communications terminals in the Agent’s money center, as of 11 a.m., London time, on the applicable Borrowing Date (“Calculation Date”), except as provided below. If fewer than two offered rates appear for the applicable Interest Period or if the appropriate screen is not accessible as of such time, the term “LIBOR Rate” shall mean the per annum rate of interest determined by the Agent to be the average (rounded up, if necessary, to the nearest 1/16 of 1%) of the rates at which deposits in U.S. dollars are offered to the Agent by four major lenders in the London interbank market, as selected by the Agent (“Reference Lenders”), at approximately 11 a.m., London time, on the Calculation Date for the applicable Interest Period and in an amount equal to the principal amount of the applicable Offshore Rate Loan. The Agent will request the principal London office of each of such Reference Lenders to provide a quotation of its rate. If at least two such quotations are provided, the applicable rate will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the applicable rate will be the arithmetic mean of the rates quoted by major lenders in New York City, selected by the Agent, at approximately 11 a.m., New York City time, on the Calculation Date for loans in United States Dollars to leading European lenders for the applicable Interest Period and in an amount equal to the principal amount of the applicable Offshore Rate Loan.

The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage.

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“Offshore Rate Loan” means a Loan that bears interest based on the Offshore Rate.

“Organization Documents” means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation.

“Other Taxes” means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents.

“Participant” has the meaning specified in subsection 10.8(d).

“PBGC” means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA.

“Pension Plan” means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Plan), and to which the Company or any member of the Controlled Group may have any liability with respect to current or former employees of the Company or any member of the Controlled Group, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

“Permitted Liens” has the meaning specified in Section 7.1.

“Person” means an individual, partnership, limited liability company, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.

“Pro Rata Share” means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank’s Commitment divided by the combined Commitments of all Banks.

“Replacement Bank” has the meaning specified in Section 3.7.

“Requirement of Law” means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject.

“Responsible Officer” means the chief executive officer or the president of the Company, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, the chief financial officer or the treasurer of the Company, or any other officer having substantially the same authority and responsibility.

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

“Senior Indebtedness” means all Indebtedness of the Company for money borrowed which is not by its terms subordinated in right of payment to the payment of any other Indebtedness of the Company.

“Subsidiary” of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of the Company.

“Surety Instruments” means all letters of credit (including standby and commercial), banker’s acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments.

“Swap Contract” means any agreement (including any master agreement and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or any other, similar agreement (including any option to enter into any of the foregoing).

“Swingline Lender” has the meaning specified in Section 2.2.

“Swingline Loan” has the meaning specified in Section 2.2.

“Taxes” means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Bank’s net income by the jurisdictions (or any political subdivision thereof) under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a lending office.

“Termination Date” means the earlier to occur of:

(a) April 30, 2009; and

(b) the date on which the Commitments terminate in accordance with the provisions of this Agreement.

“Total Capitalization” means, as to any Person and as of any date, the sum of the shareholders’ equity of such Person, calculated in accordance with GAAP consistently applied, as shown on a balance sheet of such Person, plus the Funded Debt of such Person.

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“Type” has the meaning specified in the definition of “Loan”.

“United States” and “U.S.” each means the United States of America.

“Welfare Plan” means a “welfare plan”, as such term is defined in Section 3(1) of ERISA.

“Wholly-Owned Subsidiary” means any corporation in which (other than directors’ qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Company, or by one or more of the other Wholly-Owned Subsidiaries, or both.

1.2. Other Interpretive Provisions.

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

(b) The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(c) The term “documents” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.

(d) The term “including” is not limiting and means “including without limitation.”

(e) 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.”

(f) Unless otherwise expressly provided herein: (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document; and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

(g) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(h) This Agreement and 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 cumulative and shall each be performed in accordance with their terms.

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(i) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Agent merely because of the Agent’s or Banks’ involvement in their preparation.

1.3. Accounting Principles.

(a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied.

(b) References herein to “fiscal year” and “fiscal quarter” refer to such fiscal periods of the Company.

ARTICLE II
THE CREDITS

2.1. Amounts and Terms of Commitments.

(a) Each Bank severally agrees, on the terms and conditions set forth herein, to make loans to the Company (each such loan, a “Loan”) from time to time on any Business Day during the period from the Closing Date to the Termination Date, in an aggregate amount not to exceed at any time outstanding, together with the principal amount of Loans outstanding in favor of such Bank at such time, the amount set forth next to such Bank’s name on Schedule 2.1 (such amount, as the same may be reduced or increased under Section 2.6 or as a result of one or more assignments under Section 10.8, the Bank’s “Commitment”); provided, however, that, after giving effect to any Borrowing, the aggregate principal amount of all outstanding Loans shall not at any time exceed the combined Commitments. Within the limits of each Bank’s Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.1, prepay under Section 2.7 and reborrow under this Section 2.1.

2.2. Swingline Loans.

(a) From time to time prior to the Termination Date, the Company may obtain Swingline Loans (the “Swingline Loans”) from U.S. Bank National Association (in such capacity, the “Swingline Lender”) up to an aggregate amount of $5,000,000 at any time outstanding, repay such Swingline Loans and reborrow hereunder; provided, however, that the Swingline Lender shall not be obligated to advance any Swingline Loan if (i) any Default or Event of Default has occurred and is continuing or (ii) after giving effect thereto, the sum of the aggregate principal amount of all outstanding Loans would exceed the aggregate Commitment of all of the Banks.

(b) In its sole and absolute discretion, the Swingline Lender may at any time after the occurrence and during the continuance of a Default or Event of Default, on behalf of the Company (which hereby irrevocably authorizes the Swingline Lender to act on its behalf for such purpose), request each Bank to make a Loan, on the date such request is made, in an amount equal to the product of: (i) the ratio of each Bank’s Commitment to the aggregate Commitment of all of the Banks; and (ii) the outstanding principal amount of the Swingline Loans (such product the “Swingline Commitment”). Each Bank shall make the proceeds of such requested Loan available to the Swingline Lender, in immediately available funds, at the office of the Swingline Lender specified herein before 11:00 A.M. (Milwaukee time) on the Business Day following the day such request is made. The proceeds of such Loans shall be immediately applied to repay the outstanding Swingline Loans.

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(c) If any Bank refuses or otherwise fails to make a Loan when requested by the Swingline Lender pursuant to Section 2.2(b) above, such Bank will, by the time and in the manner such Loan was to have been funded to the Swingline Lender, purchase from the Swingline Lender an undivided participating interest in the outstanding Swingline Loans in an amount equal to its Swingline Commitment. Each Bank that so purchases a participation in a Swingline Loan shall thereafter be entitled to receive its applicable pro rata percentage of each payment of principal received on the Swingline Loans and of interest received thereon accruing from the date such Bank funded to the Swingline Lender its participation in such Swingline Loans.

2.3. Loan Accounts.

(a) The Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business. The loan accounts or records maintained by the Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans.

(b) Upon the request of any Bank made through the Agent, the Loans made by such Bank may be evidenced by one or more Notes, instead of loan accounts. Each such Bank shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Bank is irrevocably authorized by the Company to endorse its Note(s) and each Bank’s record shall be conclusive absent manifest error; provided, however, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank.

2.4. Procedure for Borrowing.

(a) The Company shall request an advance hereunder by written notice or by telephonic notice confirmed by mail or by facsimile the same day (which notice will be irrevocable), to the Agent prior to 9:00 a.m. (Milwaukee time): (i) two Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans; and (ii) on the requested Borrowing Date, in the case of Base Rate Loans. Each such request shall be substantially in the form of the Notice of Borrowing attached hereto as Exhibit 2.4, and each such request shall be effective upon receipt by the Agent and shall specify:

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(A) the amount of the Borrowing, which shall be in an aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof;

(B) the requested Borrowing Date, which shall be a Business Day;

(D) the duration of the Interest Period applicable to such Loans included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Borrowing comprised of Offshore Rate Loans, such Interest Period shall be three months.

(b) The Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank’s Pro Rata Share of that Borrowing.

(c) Each Bank will make the amount of its Pro Rata Share of each Borrowing available to the Agent for the account of the Company at the Agent’s Payment Office by 1:00 p.m. (Milwaukee time) on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of all such Loans will then be made available to the Company by the Agent by wire transfer in accordance with written instructions provided to the Agent by the Company of like funds as received by the Agent.

(d) After giving effect to any Borrowing, there may not be more than ten different Interest Periods in effect.

2.5. Conversion and Continuation Elections.

(a) The Company may, upon irrevocable written or telephonic notice (confirmed by mail or facsimile on the same day, if telephonic) to the Agent in accordance with subsection 2.5(b):

(i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Loans of any other Type; or

(ii) elect, as of the last day of the applicable Interest Period, to continue any Offshore Rate Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof);

provided, that if at any time the aggregate amount of Offshore Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $1,000,000, such Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of the Company to continue such Loans as, and convert such Loans into, Offshore Rate Loans shall terminate.

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(b) The Company shall give written or telephonic notice to be received by the Agent not later than 9:00 a.m. (Milwaukee time) at least: (i) two Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) on the Conversion/ Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying:

(A) the proposed Conversion/Continuation Date;

(B) the aggregate amount of Loans to be converted or renewed;

(D) in the case of conversions into or continuations of Offshore Rate Loans, the duration of the requested Interest Period.

Such written notice or written confirmation of telephonic notice shall be substantially in the form of the Notice of Conversion/Continuation attached hereto as Exhibit 2.5.

(c) If upon the expiration of any Interest Period applicable to Offshore Rate Loans, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Loans or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.

(d) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank.

(e) Unless the Majority Banks otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Loan converted into or continued as an Offshore Rate Loan.

(f) After giving effect to any conversion or continuation of Loans, there may not be more than ten different Interest Periods in effect.

2.6. Changes in Aggregate Commitments.

(a) The Company may, upon not less than four Business Days’ prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof; unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the then-outstanding principal amount of the Loans would exceed the amount of the combined Commitments then in effect. Once reduced in accordance with this Section 2.6, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. All accrued commitment fees to, but not including the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination.

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(b) The Company may at any time and from time to time, but no more often than twice prior to the Termination Date, by means of a letter to the Agent substantially in the form of Exhibit 2.6(b), request that the aggregate Commitments be increased by: (a) increasing the Commitment of one or more Banks which have agreed to such increase; and/or (b) adding one or more commercial banks or other Persons as a party hereto with a Commitment in an amount agreed to by any such commercial bank or other Person; providedthat (1) no commercial bank or other Person shall be added as a party hereto without the written consent of the Company and the Agent, (ii) no commercial bank or other Person shall be added as a party hereto unless the Commitment of such commercial bank or other Person equals or exceeds the lowest existing Commitment of an existing Bank immediately prior to any increase in the aggregate Commitments pursuant to this Section 2.6(b) and (iii) in no event shall the aggregate Commitments exceed $175,000,000 without the written consent of all Banks; providedfurther, the aggregate Commitments shall not be increased pursuant to this Section 2.6(b) unless (i) the Company will be in pro forma compliance with all of its covenants under this Agreement before and after giving effect to any increase hereunder and (ii) no Default or Event of Default has occurred and is continuing or will result from any such increase hereunder. Any increase in the aggregate Commitments pursuant to this Section 2.6(b) shall be effective five Business Days after the date on which the Agent has received and accepted the applicable increase letter in the form of Annex 1 to Exhibit G (in the case of an increase in the Commitment of an existing Bank) or assumption letter in the form of Annex 2 to Exhibit G (in the case of the addition of a commercial bank or other Person as a new Bank). The Agent shall promptly notify the Company and the Banks of any increase in the amount of the aggregate Commitments pursuant to this Section 2.6(b) and of the Commitment and Pro Rata Share of each Bank after giving effect thereto. The Company acknowledges that, in order to maintain Loans in accordance with each Bank’s Pro Rata Share, a reallocation of the Commitments as a result of a non-pro-rata increase in the aggregate Commitments may require prepayment or funding of all or portions of certain Loans on the date of such increase and funding of all or portions of Loans on the date of such increase (and any such prepayment or funding shall be subject to the provision of Section 3.4). The Agent shall promptly notify all Banks of any increase in the aggregate Commitments pursuant to this Section 2.6(b).

2.7. Optional Prepayments.

(a) Subject to Section 3.4, the Company may, at any time or from time to time, upon irrevocable notice to the Agent no later than 9:00 a.m. (Milwaukee time) on the date of prepayment, ratably prepay Loans in whole or in part, in minimum amounts of $1,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank’s Pro Rata Share of such prepayment. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with any amounts required pursuant to Section 3.4.

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2.8. Repayment. The Company shall repay to the Banks on the Termination Date the aggregate principal amount of Loans outstanding on such date.

2.9. Interest.

(a) Each Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may be (and subject to the Company’s right to convert to other Types of Loans under Section 2.5), plus the Applicable Margin.

(b) Each Swingline Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at: (i) a rate per annum equal to the Base Rate; or (ii) such rate per annum as is quoted by the Swingline Lender to the Company at the time such Swingline Loan is requested.

(c) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid upon payment of the Loans in full on the Termination Date. During the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Majority Banks.

(d) Notwithstanding subsection (a) of this Section, while any Event of Default exists or after acceleration, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans, at a rate per annum which is determined by adding 2% per annum to the Applicable Margin then in effect for such Loans; provided, however, that, on and after the expiration of any Interest Period applicable to any Offshore Rate Loan outstanding on the date of occurrence of such Event of Default or acceleration, the principal amount of such Offshore Rate Loan shall, during the continuation of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Base Rate plus 2%.

(e) Anything herein to the contrary notwithstanding, the obligations of the Company to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank, and in such event the Company shall pay such Bank interest at the highest rate permitted by applicable law.

2.10. Fees.

(a) Agency Fee. The Company shall pay an agency fee to the Agent for the Agent’s own account, as required by the letter agreement (“Fee Letter”) between the Company and the Agent, dated April 30, 2004.

(b) Facility Fee. The Company shall pay to the Agent for the account of each Bank a facility fee on the Bank’s Commitment (regardless of usage), computed on a quarterly basis in arrears on the last day of each calendar quarter (March 31, June 30, September 30, or December 31), at a rate equal to the Facility Fee Rate. Such facility fee shall accrue from the date hereof through the Termination Date, and shall be due and payable quarterly on the last day of each calendar quarter commencing on June 30, 2004, with the final facility fee payment due and payable on the Termination Date; provided; however, that, the facility fee payments due on June 30, 2004, and on the Termination Date, shall be calculated on the basis of the actual number of days elapsed since the date hereof, or the date of the prior facility fee payment, as applicable. The facility fees provided for in this subsection shall accrue at all times after the date hereof, including at any time during which one or more conditions in Article IV are not met.

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2.11. Computation of Fees and Interest.

(a) All computations of interest for Base Rate Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof.

(b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Company and the Banks in the absence of manifest error.

2.12. Payments by the Company.

(a) All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Banks at the Agent’s Payment Office, and shall be made in dollars and in immediately available funds, no later than 2:00 p.m. (Milwaukee time) on the date specified herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 2:00 p.m. (Milwaukee time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.

(b) Subject to the provisions set forth in the definition of “Interest Period” herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

(c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Banks that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Company has not made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid.

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2.13. Payments by the Banks to the Agent.

(a) Unless the Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day prior to the date of such Borrowing, that such Bank will not make available as and when required hereunder to the Agent for the account of the Company the amount of that Bank’s Pro Rata Share of the Borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank’s Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent’s account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing.

(b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date.

2.14. Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share, such Bank shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank’s ratable share (according to the proportion of (i) the amount of such paying Bank’s required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.9) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments.

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ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY

3.1. Taxes.

(a) Any and all payments by the Company to each Bank or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes. In addition, the Company shall pay all Other Taxes.

(b) The Company agrees to indemnify and hold harmless each Bank and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Bank or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank or the Agent makes written demand therefor.

(c) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then:

(i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Bank or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made;

(ii) the Company shall make such deductions and withholdings;

(iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

(iv) the Company shall also pay to each Bank or the Agent for the account of such Bank, at the time interest is paid, all additional amounts which the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes or Other Taxes had not been imposed.

(d) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent.

(e) If the Company is required to pay additional amounts to any Bank or the Agent pursuant to subsection (c) of this Section, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue, if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank.

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3.2. Illegality.

(a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company through the Agent, any obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the Agent and the Company that the circumstances giving rise to such determination no longer exist.

(b) If a Bank determines that it is unlawful to maintain any Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), prepay in full such Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 3.4, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan. If the Company is required to so prepay any Offshore Rate Loan, then concurrently with such prepayment, the Company shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Loan.

(c) If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, the Company may elect, by giving notice to the Bank through the Agent that all Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans.

(d) Before giving any notice to the Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.

3.3. Increased Costs and Reduction of Return.

(a) If any Bank determines that, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance by that Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loans, then the Company shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs.

(b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank’s or such corporation’s policies with respect to capital adequacy and such Bank’s desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitments, loans, credits or obligations under this Agreement, then, upon demand of such Bank to the Company through the Agent, the Company shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase.

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3.4. Funding Losses.

The Company shall reimburse each Bank and hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of:

(a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Loan;

(b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion Continuation;

(d) the prepayment or other payment (including after acceleration thereof) of an Offshore Rate Loan on a day that is not the last day of the relevant Interest Period; or

(e) the automatic conversion under Section 2.5 of any Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period;

including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Company to the Banks under this Section and under subsection 3.3(a), each Offshore Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the IBOR used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and f or a comparable period, whether or not such Offshore Rate Loan is in fact so funded.

3.5. Inability to Determine Rates. If the Agent determines that for any reason adequate and reasonable means do not exist for determining the Offshore Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan, or that the Offshore Rate applicable pursuant to subsection 2.9(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to such Banks of funding such Loan, the Agent will promptly so notify the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall be suspended until the Agent with the consent of the Majority Banks revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Banks shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of Offshore Rate Loans.

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3.6. Certificates of Banks. Any Bank claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Bank hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error.

3.7. Substitution of Banks. Upon the receipt by the Company from any Bank (an “Affected Bank”) of a claim for compensation under Section 3.3, the Company may: (i) request the Affected Bank to use its best efforts to obtain a replacement bank or financial institution satisfactory to the Company to acquire and assume all or a ratable part of all of such Affected Bank’s Loans and Commitment (a “Replacement Bank”); (ii) request one more of the other Banks to acquire and assume all or part of such Affected Bank’s Loans and Commitment; or (iii) designate a Replacement Bank. Any such designation of a Replacement Bank under clause (i) or (iii) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld).

3.8. Survival. The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations.

ARTICLE IV
CONDITIONS PRECEDENT

4.1. Conditions of Initial Loans. The obligation of each Bank to make its initial Loan hereunder is subject to the condition that the Agent have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and each Bank, and in sufficient copies for each Bank:

(a) Credit Agreement. This Agreement executed by each party thereto;

(b) Resolutions; Incumbency.

(i) Copies of the resolutions of the board of directors of the Company authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; and

(ii) A certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to execute, deliver and perform this Agreement, and all other Loan Documents to be delivered by it hereunder;

(c)Organization Documents. The articles or certificate of incorporation and the bylaws of the Company as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date.

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(d) Legal Opinions. An opinion of Robin J. Irwin, counsel to the Company, addressed to the Agent and the Banks;

(e) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date; including any such costs, fees and expenses arising under or referenced in Sections 2.9 and 10.4;

(f) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that:

(i) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date;

(ii) no Default or Event of Default exists or would result from the initial Borrowing; and

(iii) there has occurred since May 29, 2003, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect;

(g) Other Documents. Such other approvals, opinions, documents or materials as the Agent or any Bank may reasonably request.

4.2. Conditions to All Borrowings. The obligation of each Bank to make any Loan to be made by it (including its initial Loan) is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date:

(a) Notice of Borrowing. The Agent shall have received a Notice of Borrowing in substantially the same form as Exhibit 2.4(a);

(b) Continuation of Representations and Warranties. The representations and warranties in Article V shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of such Borrowing Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); and

Each Notice of Borrowing submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of each Borrowing Date, that the conditions in Section 4.2 are satisfied.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to the Agent and each Bank that:

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5.1. Corporate Existence and Power. The Company and each of its Subsidiaries:

(a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation;

(b) has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents;

(c) is duly qualified as a foreign corporation and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and

(d) is in compliance with all Requirements of Law; except, with respect to clauses (c) and (d), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.

5.2. Corporate Authorization; No Contravention. The execution, delivery and performance by the Company and its Subsidiaries of this Agreement and each other Loan Document to which such Person is party, have been duly authorized by all necessary corporate action, and do not and will not:

(a) contravene the terms of any of that Person’s Organization Documents;

(b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or

(c) violate any Requirement of Law, except to the extent that such violation could not reasonably be expected to have a Material Adverse Effect.

5.3. Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company or any of its Subsidiaries of the Agreement or any other Loan Document.

5.4. Binding Effect. This Agreement and each other Loan Document to which the Company or any of its Subsidiaries is a party constitute the legal, valid and binding obligations of the Company and any of its Subsidiaries to the extent it is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

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5.5. Litigation. There are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, or its Subsidiaries or any of their respective properties which:

(a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or

(b) if determined adversely to the Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided.

5.6. No Default. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company or the execution, delivery and performance of a Guaranty by any Subsidiary. As of the Closing Date, neither the Company nor any Subsidiary is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Closing Date, create an Event of Default under subsection 8.1 (e).

5.7. ERISA Compliance.

(a) During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement or the making of any Loan hereunder, (i) no steps have been taken to terminate any Pension Plan and (ii) no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Company or any Subsidiary of any material liability, fine or penalty.

(b) All contributions (if any) have been made to any Multiemployer Plan that are required to be made by the Company or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable law; neither the Company nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Plan (except a single withdrawal, with respect to which the liability of the Company and the members of the Controlled Group shall not exceed $1,000,000), incurred any withdrawal liability with respect to any such plan, received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, might result in a withdrawal or partial withdrawal from any such plan; and neither the Company nor any member of the Controlled Group has received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

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5.8 .Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be used solely for the purposes set forth in and permitted by Section 6.12 and Section 7.7. Neither the Company nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.

5.9. Title to Properties. The Company and each Subsidiary have good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. The property of the Company and its Subsidiaries is subject to no Liens, other than Permitted Liens.

5.10. Taxes. The Company and its Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Company or any Subsidiary that would, if made, have a Material Adverse Effect.

5.11. Financial Condition.

(a) The audited consolidated financial statements of the Company and its Subsidiaries dated May 29, 2003 and the unaudited consolidated financial statements of the Company and its Subsidiaries dated February 28, 2004, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal year or period ended on such dates:

(i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein;

(ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and

(iii) show all material indebtedness and other liabilities, direct or contingent, of the Company and its consolidated Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Contingent Obligations.

(b) Since May 29, 2003, there has been no Material Adverse Effect.

5.12. Environmental Matters. The Company and its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof the Company has reasonably concluded that such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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5.13. Regulated Entities. None of the Company, any Person controlling the Company, or any Subsidiary, is an “Investment Company” within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness.

5.14. No Burdensome Restrictions. Neither the Company nor any Subsidiary is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect.

5.15. Copyrights, Patents, Trademarks and Licenses, Etc. The Company or its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, except to the extent any such conflict could not reasonably be expected to have a Material Adverse Effect. To the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any Subsidiary infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Company, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect.

5.16. Subsidiaries. As of the Closing Date, the Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 5.16 hereto and, except as specifically disclosed in part (b) of Schedule 5.16, has no equity investments in any other corporation or entity, which, as to any one corporation or entity, are equal to or greater than 20% of the aggregate ownership interests in such corporation or entity or the value of which equity investments in any one corporation or entity is equal to or greater than $100,000.

5.17. Insurance. The properties of the Company and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or such Subsidiary operates.

5.18. Full Disclosure. None of the representations or warranties made by the Company or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company or any Subsidiary in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Company to the Banks prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.

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5.19. Subsidiary Indebtedness. No Subsidiary has outstanding any Contingent Obligations with respect to Indebtedness of the Company.

ARTICLE VI
AFFIRMATIVE COVENANTS

So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:

6.1. Financial Statements. The Company shall deliver to the Agent and the Banks, in form and detail satisfactory to the Agent and the Majority Banks:

(a) as soon as available, but not later than 110 days after the end of each fiscal year, a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Ernst & Young LLP or another nationally-recognized independent public accounting firm (“Independent Auditor”) which report shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Company’s or any Subsidiary’s records;

(b) as soon as available, but not later than 60 days after the end of each of the first three fiscal quarters of each fiscal year, a copy of the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter and the related consolidated statements of income, shareholders’ equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position and the results of operations of the Company and the Subsidiaries.

6.2. Certificates; Other Information. The Company shall furnish to the Agent and the Banks:

(a) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and 6.1(b), a Compliance Certificate executed by a Responsible Officer in substantially the same form as Exhibit 6.2(a) hereto;

(b) promptly, copies of all financial statements and reports that the Company sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with, the SEC, any securities exchange or the National Association of Securities Dealers, Inc.; and

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(c) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary as the Agent, at the request of any Bank, may from time to time request.

6.3. Notices. The Company shall promptly notify the Agent and each Bank:

(a) of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default;

(b) of any matter that has resulted or may result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Company or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Company or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary; including pursuant to any applicable Environmental Laws;

(c) of the institution of any steps by any member of the Controlled Group or any other Person to terminate any Pension Plan, or the failure of any member of the Controlled Group to make a required contribution to any Pension Plan (if such failure is sufficient to give rise to a lien under Section 302(f) of ERISA) or to any Multiemployer Plan, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Company furnish a bond on or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan or Multiemployer Plan which could result in the incurrence by any member of the Controlled Group of any material liability, fine or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any Multiemployer Plan), or any material increase in the contingent liability of the Company with respect to any post-retirement Welfare Plan benefit, or any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated or that any such plan is or may become insolvent;

(d) of any material change in accounting policies or financial reporting practices by the Company or any of its consolidated Subsidiaries.

Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under subsection 6.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated.

6.4. Preservation of Corporate Existence, Etc. The Company shall, and shall cause each Subsidiary to:

(a) preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation;

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(b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except in connection with transactions permitted by Section 7.3 and sales of assets permitted by Section 7.2.

(d) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

6.5. Maintenance of Property. The Company shall maintain, and shall cause each Subsidiary to maintain, and preserve all its property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

6.6. Insurance. The Company shall maintain, and shall cause each Subsidiary to maintain, with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons.

6.7. Payment of Obligations. The Company shall, and shall cause each Subsidiary to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including:

(a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained, by the Company or such Subsidiary;

(b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and

(c) all indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.

6.8. Compliance with Laws. The Company shall comply, and shall cause each Subsidiary to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except as such may be contested in good faith or as to which a bona fide dispute may exist.

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6.9. Employee Benefit Plans. The Company shall maintain, and cause each of its Subsidiaries to maintain, each Pension Plan in substantial compliance with all applicable requirements of law and regulations.

6.10. Accounting; Inspection of Property and Books and Records. The Company shall maintain a system of accounting (established and administered in accordance with sound business practices to permit preparation of financial statements in accordance with GAAP consistently applied, and to comply with the requirements of this Agreement and the other Loan Documents. The Company shall maintain and shall cause each Subsidiary to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiary. The Company shall permit, and shall cause each Subsidiary to permit, representatives and independent contractors of the Agent or any Bank to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at the expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, when an Event of Default exists the Agent or any Bank may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice.

6.11. Environmental Laws. The Company shall, and shall cause each Subsidiary to, conduct its operations and keep and maintain its property in compliance with all Environmental Laws except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect.

6.12. Use of Proceeds. The Company shall use the proceeds of the Loans for working capital, capital expenditures, commercial paper backup and other general corporate purposes not in contravention of any Requirement of Law or of any Loan Document.

6.13. Contingent Obligations. If any Subsidiary shall have any Contingent Obligations with respect to any Indebtedness of the Company, the Company shall cause such Subsidiary to take such actions as are reasonably necessary, or as the Agent or any Bank may reasonably request from time to time, to guarantee the Obligations.

ARTICLE VII
NEGATIVE COVENANTS

So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:

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7.1. Limitation on Liens. The Company shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following (“Permitted Liens”):

(a) Liens for taxes not delinquent or for taxes being contested in good faith by appropriate proceedings and as to which adequate financial reserves have been established on the books and records of the Company or any Subsidiary;

(b) Liens (other than any Lien imposed by ERISA) created and maintained in the ordinary course of business which are not material in the aggregate, and which would not constitute or result in a Material Adverse Effect, and which constitute (i) pledges or deposits under worker’s compensation laws, unemployment insurance laws or similar legislation, (ii) good faith deposits in connection with bids, tenders, contracts or leases to which the Company or a Subsidiary is a party for a purpose other than borrowing money or obtaining credit, including rent security deposits, (iii) Liens imposed by law, such as those of carriers, warehousemen and mechanics, if payment of the obligation secured thereby is not yet due, (iv) Liens securing taxes, assessments or other charges or levies of any Governmental Authority not yet subject to penalties for nonpayment, and (v) pledges or deposits to secure public or statutory obligations of the Company or a Subsidiary, or surety, customs or appeal bonds to which the Company or a Subsidiary is a party;

(c) Liens affecting real property which constitute minor survey exceptions or defects or irregularities in title, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of such real property; provided, however, that all of the foregoing, in the aggregate, do not at any time materially detract from the value of said properties or materially impair their use in the operation of the businesses of the Company or any Subsidiary;

(d) each Lien described in Schedule 7.1 may be suffered to exist upon the same terms as those existing on the date hereof, but no extension or renewal thereof shall be permitted except for a refinancing in the ordinary course of business for an amount not in excess of the original amount subject to such Lien;

(e) purchase money Liens upon or in property of the Company or a Subsidiary acquired after the Closing Date; provided, however, that no such Lien shall extend to or cover any other property of the Company or a Subsidiary or secure an amount in excess of the lesser of the purchase price or the market value of such property; and

(f) other Liens provided that the aggregate outstanding amount of Indebtedness secured by all such other Liens shall not exceed $30,000,000 at any time after the Closing Date.

7.2. Disposition of Assets. The Company shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except: (a) inventory sold in the ordinary course of business upon customary credit terms and sales of obsolete or damaged material or equipment, (b) sales of assets in connection with sale-leaseback transactions in an amount not to exceed $10,000,000 and (c) other sales of assets not to exceed 10% of the consolidated total assets of the Company and its Subsidiaries in any fiscal year of the Company ending after the Closing Date; except that (x) any Subsidiary may sell, lease, transfer or otherwise dispose of its assets to the Company or any other Subsidiary; and (y) the Company may sell, lease, transfer or otherwise dispose of assets in excess of the limitations set forth above if the proceeds thereof (i) are used to purchase or are committed to purchase other property of a similar nature of at least equivalent value within one year of such sale, lease, transfer or other disposition or (ii) are used to prepay Senior Indebtedness (including the Loans) on a pro-rata basis.

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7.3. Merger; Purchase of Assets; Acquisitions; Etc. The Company shall not, and shall not suffer or permit any Subsidiary to purchase or otherwise acquire, whether in one or a series of transactions, all or a substantial portion of the business, assets, rights, revenues or property, real, personal or mixed, tangible or intangible, of any Person, or all or a substantial portion of the capital stock of or other ownership interest in any other Person; nor merge or consolidate or amalgamate with any other Person or take any other action having a similar effect, nor enter into any Joint Venture or similar arrangement with any other Person; provided, however, that this Section 7.3 shall not prohibit any Acquisition by the Company or any of its Subsidiaries of any Person engaged in substantially the same business as the Company or such Subsidiary if (a) in the case of an Acquisition of stock or a merger, the acquired Person shall be immediately merged with and into the Company or such Subsidiary which shall be the surviving corporation, and (b) immediately after such Acquisition, no Default or Event of Default shall exist or shall have occurred and be continuing and, prior to the consummation of such Acquisition, the Company shall have provided to the Bank a certificate of a Responsible Officer (attaching computations to demonstrate compliance with all financial covenants hereunder) stating that such Acquisition complies with this Section 7.3 and will not cause a Default or Event of Default to occur or continue and that any other conditions under this Agreement and the other Loan Documents relating to such transaction have been satisfied; and provided, further, that this Section 7.3 shall not prohibit any merger or consolidation solely between or among the Company and its Subsidiaries, so long as the Company is the surviving person of such merger or consolidation.

7.4. Loans and Investments. The Company shall not and shall not suffer or permit any Subsidiary to make or commit to make any Investment, other than: (a) Investments in Cash Equivalents; (b) Investments in its existing Subsidiaries; (c) Investments in new Subsidiaries consisting of partnerships or limited liability companies engaged in the business of owning and operating hotels or motels, movie theaters or restaurants; (d) loans or advances to franchisees not to exceed $10,000,000, on a consolidated basis, in the aggregate at any time after the Closing Date; (e) Investments listed in the attached Schedule 7.4, (f) Investments (excluding contingent liabilities) to owners of properties or businesses managed by the Company or a Subsidiary, consistent with the Company’s existing business practices or policies; (g) Investments, consisting of contingent liabilities, to owners of properties or businesses managed by the Company or a Subsidiary not to exceed $25,000,000, on a consolidated basis, in the aggregate at any time after the Closing Date; and (h) other Investments (including contingent liabilities) not to exceed $10,000,000 on a consolidated basis, in the aggregate at any time after the Closing Date.

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7.5. Limitation on Subsidiary Indebtedness. The Company shall not permit any Subsidiary to create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except Indebtedness, which when added to the Indebtedness secured by Liens permitted under Sections 7.1(d), (e) and (f) shall not exceed 20% of Total Capitalization.

7.6. Transactions with Affiliates. The Company shall not, and shall not suffer or permit any Subsidiary to, enter into any transaction with any Affiliate of the Company, except upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would obtain in a comparable arm’s-length transaction with a Person not an Affiliate of the Company or such Subsidiary.

7.7. Use of Proceeds. The Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act.

7.8. Restricted Payments. The Company shall not, and shall not suffer or permit any Subsidiary to, declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding, if a Default or Event of Default has occurred and is continuing or would result from any of the foregoing.

7.9. Change in Business. The Company shall not, and shall not suffer or permit any Subsidiary to, change the nature of its business from that engaged in on the date hereof or engage in any other businesses other than those in which it is engaged on the date hereof or other than those related thereto.

7.10. Accounting Changes. The Company shall not, and shall not suffer or permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Company or of any Subsidiary.

7.11. Funded Debt Ratio. The Company shall not permit or suffer the ratio of Funded Debt to Total Capitalization to exceed at any time 0.55 to 1.0.

7.12. Fixed Charge Coverage Ratio. The Company shall not permit or suffer the ratio at any fiscal quarter end for the four fiscal quarters then ending of Adjusted Consolidated Cash Flow to Interest and Rental Expense to be less than 3.0 to 1.0.

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7.13. Subsidiary Dividends. The Company shall not, and shall not permit any Subsidiary to, enter into any agreement that would restrict the ability of any Subsidiary to pay dividends.

ARTICLE VIII
EVENTS OF DEFAULT

8.1. Event of Default. Any of the following shall constitute an “Event of Default”:

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

(b) Representation or Warranty. Any representation or warranty by the Company or any Subsidiary made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or

(c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in any of Section 6.1, 6.3, 6.4, 6.9 or 6.12 or in Article VII; or

(d) Other Defaults. The Company or any Subsidiary party thereto fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of such failure or (ii) the date upon which written notice thereof is given to the Company by the Agent or any Bank; or

(e) Cross-Default. The Company or any Subsidiary (i) fails to make any payment in respect of any Indebtedness or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $5,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or, cash collateral in respect thereof to be demanded; or

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(f) Insolvency; Voluntary Proceedings. The Company or any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or

(g) Involuntary Proceedings. (i) any involuntary Insolvency Proceeding is commenced or filed against the Company or any Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company’s or any Subsidiary’s properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company or any Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or

(h) Pension Plans. (i) Institution of any steps by the Company or any other Person to terminate a Pension Plan if as a result of such termination the Company could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $10,000,000; (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; or (iii) there shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Plans as a result of such withdrawal (including any outstanding withdrawal liability that the Company and the Controlled Group have incurred on the date of such withdrawal) exceeds $10,000,000; or

(i) Monetary Judgments. One or more non-interlocutory judgments, non-interlocutory orders, decrees or arbitration awards is entered against the Company or any Subsidiary involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $10,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of 30 days after the entry thereof; or

(j) Non-Monetary Judgments. Any non-monetary judgment, order or decree is entered against the Company or any Subsidiary which does or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

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

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(l) Loss of Licenses. The Company or any Subsidiary for any reason loses any material license, permit or franchise, or the Company or any Subsidiary suffers the imposition of any restraining order, escrow, suspension or impound of funds in connection with any proceeding (judicial or administrative) with respect to any material license, permit or franchise; or

(m) Adverse Change. There occurs a Material Adverse Effect.

8.2. Remedies. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Majority Banks,

(a) declare the commitment of each Bank to make Loans to be terminated, whereupon such commitments shall be terminated;

(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and

(c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law;

provided, however, that upon the occurrence of any event specified in subsection (f) or (g) of Section 8.1 (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Bank.

8.3. Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.

ARTICLE IX
THE AGENT

9.1. Appointment and Authorization. Each Bank hereby irrevocably (subject to Section 9.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent.

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9.2. Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

9.3. Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company’s Subsidiaries or Affiliates.

9.4. Reliance by Agent.

(a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks 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 Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks.

(b) For purposes of determining compliance with the conditions specified in Section 4.1, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank.

9.5. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Banks in accordance with Article VIII; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks.

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9.6. Credit Decision. Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Agent-Related Persons.

9.7. Indemnification. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent.

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9.8. Agent in Individual Capacity. U.S. Bank National Association and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though U.S. Bank National Association were not the Agent hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, U.S. Bank National Association or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, U.S. Bank National Association shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms “Bank” and “Banks” include U.S. Bank National Association in its individual capacity.

9.9. Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days’ notice to the Banks. If the Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Agent” shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Article IX and Sections 10.4 and 10.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above.

9.10. Withholding Tax. If any Bank is a “foreign corporation, partnership or trust” within the meaning of the Code and such Bank claims exemption from, or a reduction of, U.S. withholding tax under the Code, such Bank agrees with and in favor of the Agent, to deliver to the Agent such forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Such Bank agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(a) If any Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company to such Bank. To the extent of such percentage amount, the Agent will treat such Bank’s IRS Form W-8BEN as no longer valid.

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(b) If any Bank claiming exemption from United States withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by the Code.

(c) If any Bank is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

(d) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent.

9.11. Co-Documentation Agents. None of the Banks identified on the facing page of this Agreement as a “Co-Documentation Agent” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Banks so identified as a “Co-Documentation Agent” shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

ARTICLE X
MISCELLANEOUS

10.1. Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks) and the Company and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks and the Company and acknowledged by the Agent, do any of the following:

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(a) increase (except as provided in Section 2.6) or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 8.2);

(b) postpone or delay any date for any scheduled payment of principal or any date for payment of interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document;

(c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Loan Document;

(d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or

(e) amend this Section, or Section 2.14, or any provision herein providing for consent or other action by all Banks;

and, provided further, that: (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Lender in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Swingline Lender under this Agreement or any other Loan Document; and (iii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto.

10.2. Notices.

(a) All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 10.2, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 10.2 or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent.

(b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or IX shall not be effective until actually received by the Agent.

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(c) Any agreement of the Agent and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice.

10.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

10.4. Costs and Expenses. The Company shall:

(a) whether or not the transactions contemplated hereby are consummated, pay or reimburse U.S. Bank National Association (including in its capacity as Agent) within ten days after demand (subject to subsection 4.1(e)) for all costs and expenses incurred by U.S. Bank National Association (including in its capacity as Agent) in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by U.S. Bank National Association (including in its capacity as Agent) with respect thereto; and

(b) pay or reimburse the Agent and each Bank within ten days after demand (subject to subsection 4.1(e)) for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any “workout” or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding)

10.5. Indemnity. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”); provided, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations.

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10.6. Payments Set Aside. To the extent that the Company makes a payment to the Agent or the Banks, or the Agent or the Banks exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent.

10.7. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank.

10.8. Assignments, Participations, Etc. Any Bank may, with the written consent of the Company at all times other than during the existence of an Event of Default and the Agent, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company or the Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an “Assignee”) all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder, in a minimum amount of $5,000,000; provided, however, that the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until: (i) written notice of such assignment (in substantially the form of the Notice of Assignment and Acceptance attached hereto as Exhibit 10.8(i)), shall have been given to the Company and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance Agreement in substantially the form of Exhibit 10.8(ii) (“Assignment and Acceptance”); and (iii) the assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $3,500 (including, without limitation, in connection with any assignment by a Bank to a Bank).

(a) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing fee: (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents; and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents.

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(b) Within five Business Days after its receipt of notice by the Agent that it has received an executed Assignment and Acceptance and payment of the processing fee, (and provided that it consents to such assignment in accordance with subsection 10.8(a)), the Company shall execute and deliver to the Agent, new Notes evidencing such Assignee’s assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee’s making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank protanto.

(c) Any Bank may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a “Participant”) participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the “originating Bank”) hereunder and under the other Loan Documents; provided, however, that (i) the originating Bank’s obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank’s rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in the first proviso to Section 10.1. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 3.1, 3.3 and 10.5 as though it were also a Bank hereunder, and if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement.

(d) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

10.9. Confidentiality. Each Bank agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of

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all information identified as “confidential” or “secret” by the Company and provided to it by the Company or any Subsidiary, or by the Agent on such Company’s or Subsidiary’s behalf, under this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Company or any Subsidiary; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Bank, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to the Bank; provided, however, that any Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which the Agent, any Bank or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Bank’s independent auditors and other professional advisors; (G) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company or any Subsidiary is party or is deemed party with such Bank or such Affiliate; and (I) to its Affiliates.

10.10. Set-off. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of the Company against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not the Agent or such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.

10.11. Automatic Debits of Fees. With respect to any commitment fee, arrangement fee, or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent or U.S. Bank National Association under the Loan Documents, the Company hereby irrevocably authorizes U.S. Bank National Association to debit any deposit account of the Company with U.S. Bank National Association in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in U.S. Bank National Association’s sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed a set-off.

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10.12. Notification of Addresses, Lending Offices, Etc. Each Bank shall notify the Agent in writing of any changes in the address to which notices to the Bank should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request.

10.13. Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument.

10.14. Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

10.15. No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.

10.16. Governing Law and Jurisdiction.

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF WISCONSIN; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF WISCONSIN OR OF THE UNITED STATES FOR THE EASTERN DISTRICT OF WISCONSIN, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY WISCONSIN LAW.

10.17. Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO

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THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

10.18. Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

	THE MARCUS CORPORATION
	By: /s/ Stephen H. Marcus
	Name: Stephen H. Marcus
	Title: Chairman of the Board, CEO and President

[signature page 1 of 2 to the Credit Agreement]

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U.S. BANK NATIONAL ASSOCIATION	BANK OF AMERICA, N.A.
By: /s/ Caroline Krider	By: /s/ Mark R. Motuelle
Name: Caroline Krider	Name: Mark R. Motuelle
Title: Vice President & Senior Lender	Title: Vice President
Address: 777 East Wisconsin Avenue	Address: 231 South LaSalle Street
Milwaukee, WI 53202	Chicago, IL 60697
BANK ONE, NA	M&I MARSHALL & ILSLEY BANK
By: /s/ A. F. Maggiore	By: /s/ Ronald J. Carey
Name: Anthony F. Maggiore	Name: Ronald J. Carey
Title: Managing Director, Capital Markets	Title: Vice President
Address: 111 East Wisconsin Avenue
Milwaukee, WI 53202
	By: /s/ James R. Miller
	Name: James R. Miller
WELLS FARGO BANK, N.A	Title: Vice President
By: /s/ Paul J. Hennessy	Address: 770 North Water Street
Name: Paul J. Hennessy	Milwaukee, WI 53202
Title: Vice President
Address: 100 East Wisconsin Avenue
Suite 1400
Milwaukee, WI 53202
LASALLE BANK NATIONAL ASSOCIATION	SUN TRUST BANK
By: /s/ James A Meyer	By: /s/ Frank A. Coe
Name: James A. Meyer	Name: Frank A. Coe
Title: Senior Vice President	Title: Vice President
Address: 411 East Wisconsin Avenue	Address: 303 Peachtree Street
;Milwaukee, WI 53202	Atlanta, GA 30308

[signature page 2 of 2 to the Credit Agreement]

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EX-10.4 4 cmw848h.htm VMAX PLAN

MARCUS CORPORATION
VMAX INCENTIVE PLAN TERMS

Plan Sponsor:
The plan will be sponsored by The Marcus Corporation (“Marcus Corporation” or the “Company”).

Plan Objectives:
The objectives of The Marcus Corporation’s VMAX Incentive Plan are to:

•	Reward employees for their contributions to profitability, returns, and growth.

•	Focus employees on the long-term success of The Marcus Corporation.

•	Align employee rewards with shareholder interests.

•	Provide competitive total compensation opportunities.

Effective Date:
The VMAX Incentive Plan will become effective as of June 1, 2003.

Plan Year:
A Plan Year is from June 1^st to May 31^st and coincides with Marcus Corporation’s fiscal year.

Administration:
The Plan will be administered by the Compensation Committee of The Marcus Corporation’s Board of Directors (the “Committee”), which reserves the authority to amend, interpret, or terminate the plan in whole or in part at any time. The Committee may delegate responsibility for plan administration to such officers of the Company as it determines in its sole discretion from time to time.

Eligibility and Participation:
All salaried employees are eligible to participate. Participants will be selected annually by the Chairman and Chief Executive Officer.

Participating positions will vary by division. In addition, participation will be phased in over the first two Plan Years.

Base Salary:
Base Salary used to determine actual incentive awards will be an individual’s actual rate of Base Salary in effect at the end of the Plan Year, without regard to voluntary salary reductions, such as under the 401(k) Plan, Flexible Benefit Spending Plan, etc. See sections discussing New Hires, Promotions, and Transfers for additional information.

Incentive Opportunity:
Each participant’s target incentive opportunity will be expressed as a percentage of Base Salary and will be determined annually by the CEO and Division Presidents. Target incentive awards will be earned if relevant consolidated, division, district/city, and facility Economic Profit (EP) targets are achieved. In addition, VMAX-eligible division employees will have a portion of their incentive opportunity based on the achievement of operating goals other than EP.

VMAX incentive opportunities will be communicated to employees by the CEO and Division Presidents after consolidated, division, district/city, facility, and individual goals are set at the beginning of each fiscal year.

Incentive Opportunity Weighting and Allocation:
The percentage of incentive opportunity that will be determined by the achievement of consolidated, division, district/city, and/or facility EP performance varies by level within the organization. These weightings may be revised annually based on the CEO’s discretion and Marcus Corporation’s business objectives. (Example: a district director’s incentive opportunity might be weighted 80% based upon achievement of district goals and 20% based upon achievement of division goals).

EP Performance Goals:
chieving sustained growth in EP is the primary goal of the VMAX incentive program. Based on an analysis of shareholders’expected returns, an initial three-year EP target path has been identified for Marcus Corporation and each Division reflecting an expected level of annual improvement in EP. Each year’s target EP performance is expected to be equal to the previous year’s actual EP plus the required improvement amount. The EP target path and required annual EP improvement amounts will be reassessed approximately every three years, or when there is a significant change in the structure of the Company, or if external influences affecting investors’ expectations for the lodging and motion picture theatre industries significantly change.

Other Performance Factors:
To retain focus on non-EP operational results, a portion of individual incentive amounts will be paid based on other performance factors. In all cases, incentives based on other performance measures will not be paid out if EP is below a predetermined level.

Operating Positions: All participants in operating positions will have 20% of their total incentive opportunity based on non-EP performance goals.

Staff Positions: Separate awards of up to 20% of target incentive opportunity are available for staff positions to reward extraordinary contributions or performance. An incentive pool will be funded for this purpose. Awards made from this pool will be determined by the appropriate Division President or the CEO, as appropriate based on the participant’s position.

Individual Performance:
Division Presidents and the CEO reserve the right to eliminate a participant’s incentive award on the basis of sub-standard individual performance. All participants with a performance rating below a predetermined level will be reviewed for this purpose.

Initial Incentive Award Calculation:
The first step in determining an incentive payment is to measure the consolidated, division, district/city and facility EP earned during the Plan Year. The EP calculation method at each division will address the specific needs and considerations of each division. The calculated EP amount is compared to target EP and the EP interval for the Plan Year to determine the percentage of target EP-based incentives earned. The table below illustrates how the interval helps determine the incentive payout assuming an EP interval of $10 million.

	$10 million below target EP	$5 million below target EP	Target EP	$5 million above target EP	$10 million above target EP
EP Incentive Earned	0% of target	50% of target	100% of target	150% of target	200% of target

The actual performance is translated into a percentage of target incentive opportunity (e.g., 50% of target, 150% of target, etc.) by comparing the difference between target and actual EP to the EP interval and interpolating to arrive at the percentage of target incentive earned.

The actual VMAX incentive earned as a percentage of salary is then calculated by multiplying the percentage of target award earned by the participant’s target award expressed as a percentage of salary. This percentage is then multiplied by the participant’s Base Salary, as defined for purposes of the Plan, to calculate the amount of the participant’s initial incentive award.

Incentive Banking:
Once each participant’s initial incentive has been calculated, any incentive amount earned based on EP goal achievement will be subject to the incentive banking process.

In the event that the participant has a percentage of his or her target bonus opportunity allocated to non-EP performance goals, the incentive earned based on non-EP goal achievement will not be banked. Only incentives earned based on EP performance will be banked.

An individual incentive bank balance will be maintained for each participant. In the event of a transfer or other change in a participant’s position, the participant’s bank balance, positive or negative, will remain linked to him or her. The incentive bank balance is a notional amount. It is not funded and is not property of the employee.

The incentive banking process is designed to pay out each year a participant’s balance up to the annual target incentive opportunity, plus one third of any bank balance above the target opportunity amount. The steps below are followed to determine each participant’s annual payout from the incentive bank.

1.	In Year 1, the starting bank balance is zero. In subsequent years, a starting bank balance may be carried forward from the prior year (see step 5 below).

2.	Once the initial EP incentive is determined, it is added to the starting bank balance for the year.

3.	The resulting bank balance will be paid out in full, up to the participant’s target EP-based incentive amount.

4.	If the individual’s bank balance for the year after the addition of the initial incentive amount exceeds target, one-third of any amount over target will also be paid out to the participant.

5.	The remaining two-thirds of the amount over target will be retained and carried forward as the next year’s beginning bank balance. Future initial incentive amounts will offset any negative incentive bank balance.

Attachment A provides example incentive banking calculations.

Eligibility for Incentive Award:
To receive an incentive payment for a Plan Year, a participant must:

•	Be actively employed for at least three months of the Plan Year; and

•	Be employed on the date on which incentive awards are paid to plan participants.

Form and Timing of Payout:
Amounts earned based on EP performance and paid out from the incentive bank and amounts earned based on achievement of other performance measures will be paid in cash following the end of the Plan Year. It is anticipated that payment will be made within 90 days following the Plan Year.

Determination and Communication of Performance Measures and Goals:
Target EP for each Plan Year will be determined for the Company, each Division, and each participating city, district, and property as soon as practicable after the EP results from the previous year are finalized. Non-EP operating performance measures and goals will be determined by each Division President and approved by the CEO. All goals will be finalized and communicated to incentive plan participants as close as possible to the beginning of the Plan Year.

Communication of Performance Achievement
Progress towards the achievement of consolidated, division, district/city, and facility EP goals will be communicated periodically during the Plan Year. A final communication of actual achievement against goals will be issued as soon as possible after results are available following the end of the Plan Year.

New Hires
A newly hired employee will be eligible to participate in the VMAX incentive plan if he/she meets the eligibility and participation criteria and begins work at leastthree months prior to the end of the Plan Year. The newly hired employee’s actual rate of Base Salary at the end of the Plan Year will be prorated based on the number of months worked rounded to the nearest whole month as a proportion of the Plan Year.

Promotions
Eligible participants who are promoted during the Plan Year will receive a prorated incentive payment based on:

•

The number of months worked in each position, rounded to the nearest whole month, as a fraction of the number of months worked during the Plan Year, and

•

The participant's previous and new rates of base salary and incentive opportunities, and

•

If applicable, the EP and other performance goals and actual performance applicable to the participant’s previous and new positions.

Transfers
Participants who transfer between functional areas during the Plan Year will receive a prorated incentive payment based on:

•

The number of months worked in each role, rounded to the nearest whole month, as a fraction of the number of months worked during the Plan Year, and

•

The participant's previous and new rates of base salary and incentive opportunities (if applicable), and

•

If applicable, the EP and other performance goals and actual performance applicable to the participant’s previous and new positions.

Exceptions may be made in the event that a participant is transferred late in the Plan Year and does not serve a minimum number of months in his or her new position. In this case, his/her incentive may be based fully on the results of the pre-transfer location.

Termination of Employment

Voluntary or Involuntary Termination
Upon an employee’s voluntary termination of employment or the involuntary termination of an employee’s employment by The Marcus Corporation with or without cause during the Plan Year, any incentive that would have been earned during the Plan Year will be forfeited. In addition, the employee will forfeit his/her incentive bank balance.

Retirement
Upon a participant’s retirement from The Marcus Corporation at normal or early retirement age, a prorated incentive payment will be made based on the number of months the participant was employed during the Plan Year, rounded to the nearest whole month. This payment will be made at the time that incentive awards are paid to active participants, and will be based on actual goal achievement. All prorata amounts awarded based on EP performance will be subject to the incentive banking process, and the participant’s incentive bank balance will be paid out in full.

Death
Upon a participant’s death, a prorated incentive payment will be made to his/her beneficiary as designated under the Company’s Pension Plus plan, or if no beneficiary has been designated, to the participant’s estate, based on the number of months the participant was employed during the Plan Year, rounded to the nearest whole month. This payment will be made at the time that incentive awards are paid to active participants, and will be based on actual goal achievement. All prorata amounts awarded based on EP performance will be subject to the incentive banking process, and the participant’s incentive bank balance will be paid out in full.

Disability
Upon termination of a participant’s employment due to permanent disability, as defined in the Company’s Long Term Disability Plan, a prorated incentive payment will be made based on the number of months the participant was employed during the Plan Year, rounded to the nearest whole month.

This payment will be made at the time that incentive awards are paid to active participants, and will be based on actual goal achievement. All prorata amounts awarded based on EP performance will be subject to the incentive banking process, and the participant’s incentive bank balance will be paid out in full.

ATTACHMENT A: ILLUSTRATION OF INCENTIVE BANKING

Assumptions:


Base Salary		$50,000
	% of Salary	Dollars
Total Target Bonus Opportunity	10%	$ 5,000
Based on EP	8%	$ 4,000
Based on Other Measures	2%	$ 1,000
Year 1 Initial Incentive Amounts Earned
EP Performance		150% of target
Performance on Other Measures		100% of target

Calculation:


Initial Incentive Amounts
EP Performance (150% of $4,000 target opportunity)	$6,000
Performance on Other Measures (100% of $1,000 target opportunity)	1,000
Incentive Banking¹
Initial EP Incentive Amount	6,000
Beginning Bank Balance	0
Initial Incentive Banked	6,000
Subtotal (Bank Balance)	6,000
Amount Paid from Bank (Bank Balance up to target)	4,000
Subtotal (Bank Balance over target)	2,000
Amount Paid from Bank (1/3 of Bank Balance over target)	667
Ending Bank Balance²	1,333
Total EP-based Incentive Paid	4,667
Incentive Paid Based on Other Measures	1,000
Total Incentive Paid	$5,667

¹ Only EP-based incentive amounts are banked.

²Subject to forfeiture on termination of if future performance results in negative incentive amounts.

ATTACHMENT A: ILLUSTRATION OF INCENTIVE BANKING (CONTINUED)¹

Assumptions:

Salary	$50,000
Target Opportunity (EP-based opportunity only)	8%
Target Total Incentive (EP-based opportunity only)	$ 4,000
Annual Payment	Bank balance up to target + 1/3 of balance over target


		Year 1	Year 2	Year 3	Year 4	Year 5
EP Performance		150% of Target	Target	50% of Target	Negative	Target
Initial EP Incentive Amount	A	$6,000	$4,000	$2,000	($2,000)	$4,000
Beginning Bank Balance	B=F (previous year)	0	1,333	889	0	(2,000)
Initial Incentive Banked	C=A	6,000	4,000	2,000	(2,000)	4,000
Subtotal (Bank Balance)	D=B+C	6,000	5,333	2,889	(2,000)	2,000
Amount Paid from Bank (Bank Balance up to
target)	E=D up to target	4,000	4,000	2,889	0	2,000
Subtotal (Bank Balance over target)	F=D-E	2,000	1,333	0	0	0
Amount Paid from Bank (1/3 of Bank Balance
over target)	G=1/3 F	667	444	0	0	0
Ending Bank Balance2	H=F-G	1,333	889	0	(2,000)	0
Total EP Incentive Paid	I=E+G	$4,667	$4,444	$2,889	$0	$2,000

¹ Only EP-based performance incentives are banked.

² Subject to forfeiture upon termination or if future performance results in negative incentive amounts.

EX-21 5 cmw848c.htm SUBSIDIARIES

Exhibit 21

Subsidiaries of The Marcus Corporation
as of May 27, 2004

The Marcus Corporation owns all of the equity of the following entities:


Name	State of Organization
B&G Realty, Inc.	Wisconsin
Baymont Inns, Inc.	Wisconsin
First American Finance Corporation	Wisconsin
Marcus Hotels, Inc.	Wisconsin
Marcus Restaurants, Inc.	Wisconsin
Marcus Theatres Corporation	Wisconsin
Woodfield Suites, Inc.	Wisconsin
Marcus Consid, LLC	Wisconsin
Marcus Non, LLC	Wisconsin
Marcus Fl, LLC	Delaware

B&G Realty, Inc. is the sole member of the following limited liability company:


Name	State of Organization
Rush Ontario, LLC	Delaware

Baymont Inns, Inc. is the sole member of the following limited liability companies:


Name	State of Organization
Baymont Franchises International, LLC	Wisconsin
Baymont Inns Hospitality LLC	Wisconsin
Baymont Partners, LLC	Wisconsin

Marcus Hotels, Inc. owns all of the equity in the following entities:


Name	State of Organization
Grand Geneva, LLC	Wisconsin
Marcus Development, LLC	Wisconsin
Marcus Hotel Partners, Inc.	Wisconsin
Marcus Hotels Associates, Inc.	Wisconsin
Marcus Hotels Hospitality, LLC	Wisconsin
Marcus Northstar, Inc.	Minnesota
Marcus Vacation Club, Inc.	Wisconsin
Milwaukee City Center, LLC	Wisconsin
Pfister, LLC	Wisconsin
Resort California, LLC	Delaware
Resort Missouri, LLC	Delaware

Marcus Restaurants, Inc. owns all of the stock of the following companies:


Name	State of Organization
Cafe Refreshments, Inc.	Wisconsin
Captains-Kenosha, Inc.	Wisconsin
Colony Inns Restaurant Corporation	Wisconsin
Marc's Carryout Corporation	Wisconsin

Marcus Theatres Corporation owns all of the equity in the following entities:


Name	State of Organization
Family Entertainment, LLC	Wisconsin
Marcus Cinemas of Minnesota and Illinois, Inc.	Illinois
Marcus Cinemas of Ohio, LLC	Wisconsin

Marcus Theatres Corporation and Marcus Cinemas of Minnesota and Illinois, Inc. own all of the equity in the following entity:


Name	State of Organization
Marcus Cinemas of Wisconsin, LLC	Wisconsin

Woodfield Suites, Inc. owns all of the stock of the following companies:


Name	State of Organization
Woodfield Suites Franchises International, Inc.	Wisconsin
Woodfield Suites Hospitality Corporation	Wisconsin

Woodfield Suites Hospitality Corporation owns all of the stock of the following companies:


Name	State of Organization
Woodfield Refreshments, Inc.	Wisconsin
Woodfield Refreshments of Colorado, Inc.	Colorado
Woodfield Refreshments of Ohio, Inc.	Ohio

Woodfield Refreshments, Inc. owns all of the stock of the following company:


Name	State of Organization
Woodfield Refreshments of Texas, Inc.	Texas

EX-23 6 cmw848d.htm CONSENT

Exhibit 23

Consent of Independent Registered Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-63299, No. 33-55695 and No. 333-93345 and Form S-3 No. 333-67594) of The Marcus Corporation of our report, dated July 20, 2004, with respect to the consolidated financial statements of The Marcus Corporation included in the Annual Report (Form 10-K) for the year ended May 27, 2004.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin
August 10, 2004

EX-31.1 7 cmw848e.htm CERTIFICATION

Exhibit 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

I, Stephen H. Marcus, certify that:

1. I have reviewed this Annual Report on Form 10-K of The Marcus Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATE: August 10, 2004

	By: /s/ Stephen H. Marcus
	Stephen H. Marcus,
	Chairman of the Board, President and Chief
	Executive Officer

EX-31.2 8 cmw848f.htm CERTIFICATION

Exhibit 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

I, Douglas A. Neis, certify that:

1. I have reviewed this Annual Report on Form 10-K of The Marcus Corporation;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATE: August 10, 2004

	By: /s/ Douglas A. Neis
	Douglas A. Neis,
	Chief Financial Officer and Treasurer

EX-32 9 cmw848g.htm CERTIFICATION

Exhibit 32

Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. §1350

Solely for the purposes of complying with 18 U.S.C. §1350, we, the undersigned Chief Executive Officer and Chief Financial Officer of The Marcus Corporation (the “Company”), hereby certify, based on our knowledge, that the Annual Report on Form 10-K of the Company for the year ended May 27, 2004 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen H. Marcus
Stephen H. Marcus
Chief Executive Officer

/s/ Douglas A. Neis
Douglas A. Neis
Chief Financial Officer

DATE: August 10, 2004

-----END PRIVACY-ENHANCED MESSAGE-----

FORM 10-K

THE MARCUS CORPORATION

100 East Wisconsin Avenue – Suite 1900Milwaukee, Wisconsin 53202-4125 (414) 905-1000

PART I

Special Note Regarding Forward-Looking Statements

Item 1. Business.

General

Strategic Plans

Theatre Operations

Limited-Service Lodging Operations

Hotels and Resorts Operations

Competition

Seasonality

Environmental Regulation

Employees

Web Site Information and Other Access to Corporate Documents

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

EXECUTIVE OFFICERS OF COMPANY

PART II

Item 5. Market for the Company’s Common Equity, Related Shareholder Matters and Issuer Repurchases of Equity Securities.

Item 6. Selected Financial Data.

Eleven-Year Financial Summary

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

General

Pending Sale of Limited-Service Lodging Division

Consolidated Financial Comparisons

Fiscal 2004 versus Fiscal 2003

Fiscal 2003 versus Fiscal 2002

Current Plans

Theatres

Fiscal 2004 versus Fiscal 2003

Fiscal 2003 versus Fiscal 2002

Limited-Service Lodging

Fiscal 2004 versus Fiscal 2003

Fiscal 2003 versus Fiscal 2002

Hotels and Resorts

Fiscal 2004 versus Fiscal 2003

Fiscal 2003 versus Fiscal 2002

Discontinued Operations

Financial Condition

Liquidity and Capital Resources

Contractual Obligations

Quantitative and Qualitative Disclosures About Market Risk

Critical Accounting Policies and Estimates

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

1. Description of Business and Summary of Significant Accounting Policies

1. Description of Business and Summary of Significant Accounting Policies (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

2. Discontinued Operations

3. Additional Balance Sheet Information

3. Additional Balance Sheet Information (continued)

4. Long-Term Debt

4. Long-Term Debt (continued)

5. Shareholders’ Equity

5. Shareholders’ Equity (continued)

6. Employee Benefit Plans

6. Employee Benefit Plans (continued)

6. Employee Benefit Plans (continued)

7. Income Taxes

7. Income Taxes (continued)

8. Commitments, License Rights and Contingencies

8. Commitments, License Rights and Contingencies (continued)

9. Joint Venture Transactions

10. Business Segment Information

12. Subsequent Event

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

PART III

Item 10. Directors and Executive Officers of the Company.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Item 13. Certain Relationships and Related Transactions.

Item 14. Principal Accounting Fees and Services.

PART IV

100 East Wisconsin Avenue – Suite 1900
Milwaukee, Wisconsin 53202-4125
(414) 905-1000

U.S. BANK NATIONAL ASSOCIATION
as Administrative Agent,

BANK OF AMERICA, N.A.,
BANK ONE, NA, and
LASALLE BANK NATIONAL ASSOCIATION
As Co-Documentation Agents

ARTICLE I
DEFINITIONS

ARTICLE II
THE CREDITS

ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY

ARTICLE IV
CONDITIONS PRECEDENT

ARTICLE V
REPRESENTATIONS AND WARRANTIES

ARTICLE VI
AFFIRMATIVE COVENANTS

ARTICLE VII
NEGATIVE COVENANTS

ARTICLE VIII
EVENTS OF DEFAULT

ARTICLE IX
THE AGENT

ARTICLE X
MISCELLANEOUS

MARCUS CORPORATION
VMAX INCENTIVE PLAN TERMS

ATTACHMENT A: ILLUSTRATION OF INCENTIVE BANKING (CONTINUED)¹

Subsidiaries of The Marcus Corporation
as of May 27, 2004

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934

Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. §1350