Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSET PURCHASE AGREEMENT BY AND AMONG

RCSH OPERATIONS, INC., AS PURCHASER AND

DESERT ISLAND RESTAURANTS, L.L.C.

 

HONOLULU STEAK HOUSE, LLC MAUI STEAK HOUSE LLC WAILEA STEAK HOUSE LLC

BEACHWALK STEAK HOUSE, LLC LAVA COAST STEAK HOUSE, LLC

KAUAI STEAK HOUSE, LLC, COLLECTIVELY AS SELLERS AND

THE PRINCIPAL

 

 

 

 

Dated as of November 2, 2017

 

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Table of Contents

 

Page

 

ARTICLE
IDEFINITIONS......................................................................................................1

 

1.1Certain Definitions
.........................................................................................................1

 

ARTICLE IISALE AND PURCHASE OF ASSETS
.............................................................10

 

2.1Sale and Purchase of the Assets
...................................................................................10

 

2.2Excluded Assets
...........................................................................................................11

 

2.3Assumed Liabilities
.....................................................................................................11

 

2.4Excluded Liabilities
.....................................................................................................12

 

2.5Non-Assignable Assets
................................................................................................13

 

ARTICLE IIICONSIDERATION
............................................................................................13

 

3.1Consideration
...............................................................................................................13

 

3.2Purchase Price
Adjustments.........................................................................................13

 

3.3Withholding
.................................................................................................................14

 

3.4Purchase Price Allocation
............................................................................................14

 

ARTICLE IVCLOSING
...........................................................................................................14

 

4.1Closing
.........................................................................................................................14

 

4.2Deliverables
.................................................................................................................14

 

ARTICLE VREPRESENTATIONS AND WARRANTIES OF THE SELLERS AND

THE PRINCIPAL
...............................................................................................15

 

5.1Organization and Good Standing
.................................................................................15

 

5.2Authorization of Agreement
........................................................................................15

 

5.3Conflicts; Consents of Third Parties
............................................................................16

 

5.4Capitalization
...............................................................................................................16

 

5.5Subsidiaries
..................................................................................................................17

 

5.6Financial
Information...................................................................................................17

 

5.7Undisclosed
Liabilities.................................................................................................17

 

5.8Absence of Certain
Developments...............................................................................17

 

5.9Taxes
............................................................................................................................18

 

5.10Real Property
...............................................................................................................21

 

5.11Tangible Personal Property; Title to and Sufficiency of Assets
..................................22

 

5.12Intellectual
Property.....................................................................................................23

 

 

 

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Table of Contents

(continued)

 

 

Page

 

 

5.13Material
Contracts........................................................................................................25

 

5.14Employee Benefits Plans
.............................................................................................26

 

5.15Labor
............................................................................................................................26

 

5.16Legal Proceedings
........................................................................................................27

 

5.17Compliance with Laws; Permits
..................................................................................27

 

5.18Environmental
Matters.................................................................................................27

 

5.19Suppliers and
Customers..............................................................................................29

 

5.20Financial Advisors
.......................................................................................................29

 

5.21Inventory
......................................................................................................................29

 

5.22Accounts Receivable; Bank Accounts; Books and Records
........................................30

 

5.23Transactions With Related Parties
...............................................................................30

 

5.24Gift
Cards.....................................................................................................................30

 

5.25Liquor
Licenses............................................................................................................30

 

5.26Sellers’
Employees.......................................................................................................31

 

5.27Information Security
....................................................................................................31

 

5.28Full Disclosure
.............................................................................................................31

 

ARTICLE VIREPRESENTATIONS AND WARRANTIES OF PURCHASER....................32

 

6.1Organization and Good Standing
.................................................................................32

 

6.2Authorization of Agreement
........................................................................................32

 

6.3Conflicts; Consents of Third Parties
............................................................................32

 

6.4Litigation
......................................................................................................................33

 

6.5Financial Advisors
.......................................................................................................33

 

ARTICLE VIICOVENANTS
....................................................................................................33

 

7.1Conduct of Business Prior to the Closing
....................................................................33

 

7.2Access to Information
..................................................................................................34

 

7.3Exclusivity
...................................................................................................................34

 

7.4Notice of Certain Events
..............................................................................................35

 

7.5Governmental and Third-Party Notices and
Consents.................................................35

 

7.6Closing Efforts
.............................................................................................................36

 

7.7Further
Assurances.......................................................................................................36

 

 

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Table of Contents

(continued)

 

 

Page

 

 

7.8Confidentiality
.............................................................................................................36

 

7.9Preservation of Records
...............................................................................................37

 

7.10Publicity
.......................................................................................................................37

 

7.11Collection of Receivables
............................................................................................37

 

7.12Tax Matters
..................................................................................................................37

 

7.13Employees
....................................................................................................................38

 

7.14Non-Assignable Contracts and Permits and Liquor
Licenses......................................39

 

7.15Continuing Existence of Sellers
...................................................................................40

 

7.16Post-Closing Audited Financial
Statements.................................................................40

 

7.17Gift
Cards.....................................................................................................................40

 

7.18Redemption of Gift Cards
............................................................................................41

 

7.19Non-Competition and Non-Solicitation
.......................................................................41

 

7.20Real Property Lease Notices
........................................................................................41

 

7.21Report of Bulk Sale or Transfer; Tax Clearance Certificates
......................................41

 

7.22Survivability.................................................................................................................41

 

ARTICLE VIII CONDITIONS TO CLOSING
...........................................................................41

 

8.1Conditions to Obligations of the Purchaser
.................................................................41

 

8.2Conditions to Obligations of the Sellers
......................................................................43

 

ARTICLE IXINDEMNIFICATION
........................................................................................44

 

9.1Survival
........................................................................................................................44

 

9.2Indemnification by the Sellers and the Principal
.........................................................44

 

9.3Indemnification by Purchaser
......................................................................................45

 

9.4Indemnification Procedures
.........................................................................................46

 

9.5Additional Indemnification Provisions
........................................................................48

 

9.6Tax Treatment of Indemnity
Payments........................................................................49

 

9.7Exclusive Remedy
.......................................................................................................49

 

9.8Gift Card Escrow Account
...........................................................................................49

 

9.9Liability Escrow
Arrangement.....................................................................................49

 

ARTICLE
XTERMINATION.................................................................................................49

 

10.1Termination..................................................................................................................49

 

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Table of Contents

(continued)

 

 

Page

 

 

10.2Effect of
Termination...................................................................................................50

 

ARTICLE XIMISCELLANEOUS
...........................................................................................50

 

11.1Expenses
......................................................................................................................50

 

11.2Submission to Jurisdiction; Consent to Service of Process
.........................................50

 

11.3Entire Agreement; Amendments and Waivers
............................................................50

 

11.4Governing Law
............................................................................................................51

 

11.5Notices
.........................................................................................................................51

 

11.6Severability
..................................................................................................................52

 

11.7Binding Effect; No Third-Party Beneficiaries; Assignment
........................................52

 

11.8Specific Performance
...................................................................................................52

 

11.9Counterparts
.................................................................................................................53

 

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Schedules

 

Schedule 2.1Purchased Assets Schedule 2.2Excluded Assets Schedule 5.3Required
Consents Schedule 5.6Financial Information Schedule 5.10Real Property Leases
Schedule 5.11Personal Property Leases Schedule 5.12Intellectual Property
Schedule 5.13Material Contracts Schedule 5.14Employee Benefits Plans

Schedule 5.15Employment Agreements Schedule 5.16Legal Proceedings Schedule
5.17Permits

Schedule 5.19Suppliers and Customers

Schedule 5.23Transactions With Related Parties

Schedule 5.25Liquor Licenses

Schedule 6.3Purchaser Consents Schedule 7.21Bulk Sale Tax Report Form

 

Exhibits

 

Exhibit A – Form of Bill of Sale

Exhibit B – Form of Assignment and Assumption Agreement

Exhibit C – Form of Domain Name Assignment

Exhibit D – W. Randall Schoch Consulting Agreement

Exhibit E – Desert Island Restaurants Management Agreement

Exhibit F – Desert Islands Restaurants, LLC Non-Competition and Non-Solicitation
Agreement

Exhibit G – W. Randall Schoch Non-Competition and Non-Solicitation Agreement

Exhibit H – Gift Card Escrow and Reimbursement Agreement

Exhibit I – Indemnification Escrow Agreement

Exhibit J – Management Services Agreement

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of November 2,

2017, is made by and among RCSH Operations, Inc., a California corporation (the
“Purchaser”), Desert Island Restaurants, L.L.C., an Arizona limited liability
company, Honolulu Steak House, LLC, a Hawaii limited liability company, Maui
Steak House LLC, a Hawaii limited liability company, Wailea Steak House LLC, a
Hawaii limited liability company, Beachwalk Steak House, LLC, an Arizona limited
liability company, Lava Coast Steak House, LLC, an Arizona limited liability
company, and Kauai Steak House, LLC, an Arizona limited liability company (each,
a “Seller” and collectively, the “Sellers”), and the Principal (as defined
below).

 

W I T N E S S E T H:

 

This Agreement contemplates a transaction in which Purchaser will purchase all
of Sellers’ undivided right, title and interest, of any kind and nature,
relating, directly or indirectly, to the development, ownership and operation of
the Restaurants and the trade names associated therewith.

 

WHEREAS, the Sellers are engaged in the business of owning and operating six
existing

Ruth’s Chris Steak House restaurants operating in Hawaii (the “Business”);

 

WHEREAS, the Principal owns all of the issued and outstanding equity interests
in

Desert Island Restaurants, L.L.C. (“DIR”).  DIR is the sole and exclusive
manager of each Seller and each Seller is a manager-managed limited liability
company; and

 

WHEREAS, the Sellers desire to sell to the Purchaser the Purchased Assets (as
defined below), including the Business, and the Purchaser desires to acquire the
same from the Sellers, upon the terms and subject to the conditions hereinafter
set forth.

 

NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements hereinafter contained, the parties hereto
hereby agree as follows:

ARTICLE I DEFINITIONS

 

1.1Certain Definitions.

 

(a)For purposes of this Agreement, the following terms shall have the meanings
specified in this Section 1.1:

 

“Accounts Receivable” means all accounts receivable of the Sellers.

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person, and the term “control” (including
the terms “controlled by” and

“under common control with”) means the possession, directly or indirectly, of
the power to direct

 

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or cause the direction of the management and policies of such Person, whether
through ownership of voting securities, by contract or otherwise.

 

“Books and Records” means all books and records of, or related to, the Business,
wherever situated, including books, ledgers, files, reports, certificates,
documents, plans, operating records, data, manuals, price lists, mailing lists,
email lists, lists of customers, directories, sales and promotional materials,
purchasing materials, inventory records, personnel records, research, design and
product and/or services development files, accounting records and all related
documentation, in each case, irrespective of the media in which such books and
records are stored.

 

“Business Day” means any day of the year on which national banking institutions
in New York, New York are open to the public for conducting business and are not
required or authorized to close (for avoidance of doubt, excluding weekends).

 

“Business Employees” has the meaning set forth in Section 5.26(a) below.

 

“Code” means the Internal Revenue Code of 1986, as amended, together with the
rules and regulations promulgated thereunder.

 

“Comps” means any cards, vouchers, credits or other arrangements issued on a
complimentary basis by the Sellers to vendors and customers and redeemable for
food or beverages at Ruth’s Chris Steak House restaurants in Hawaii.

 

“Contract” means any written or oral agreement, contract, purchase or sale
order, license, indenture, note, mortgage, guarantee, bond, lease, commitment,
easement, right of way, arrangement or understanding.

 

“Environment” means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, stream sediments, ambient air
(including the air within buildings and natural or man-made structures above or
below ground), plant and animal life, and any other environmental medium or
natural resource.

 

“Environmental Law” means any Law, and any Order or binding agreement with any
Governmental Body relating to (i) pollution (or the cleanup thereof) or the
generation, manufacturing, processing, production, use, treatment,
transportation, storage, handling, recycling, reclamation, disposal, or
remediation of any Hazardous Substance or the Release of Hazardous Substances,
or protection, preservation or restoration of the Environment, (ii) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation,

(iii) human health and safety with respect to exposures to and management of
Hazardous Substances, or (iv) occupational health and safety. The term
“Environmental Law” includes, without limitation, the following (including their
implanting regulations and any state analogs): the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
§§

6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the
Clean Water

 

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Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of
1976, as amended,

15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know
Act of 1986,

42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean
Air Act

Amendments of 1990, 42 U.S.C. §§ 7401 et seq. and the Occupational Safety and
Health Act of

1970, as amended, 29 U.S.C. §§ 651 et seq.

 

“Environmental Permits” means all Permits required under or issued pursuant to
any Environmental Law.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
together with the rules and regulations promulgated thereunder.

 

“Expenses” means any and all notices, actions, suits, proceedings, claims,
demands, assessments, judgments, awards, settlements, costs, charges, interest,
penalties, fees (including reasonable investigation fees) and expenses,
including reasonable attorneys’ and other professionals’ fees and disbursements.

 

“Financial Statements” means, as prepared in accordance with the income tax
basis of accounting, (i) the unaudited balance sheets of the Sellers as of
December 31, 2016 and December 31, 2015 and the unaudited statements of income,
changes in members’ equity and cash flows of the Sellers for the fiscal years
ended December 31, 2016 and December 31, 2015,

and (ii) the Most Recent Balance Sheet and unaudited statements of income,
changes in members’ equity and cash flows of the Sellers for the partial year
period ending as of the Most Recent Balance Sheet Date.

 

“FIRPTA Certificate” means a certificate pursuant to Treasury Regulations
Section 1.1445-2(b) that no Seller is a foreign person within the meaning of
Section 1445 of the Code.

 

“Franchise Agreements” means each of (i) the Franchise Agreement dated April 1,

1989, between Ruth’s Chris Steak House Franchise, Inc. and Steak House #4, Inc.
and Paul M. Fleming; (ii) the Franchise Agreement dated July 29, 1998, between
Ruth’s Chris Steak House Franchise, Inc. and Maui Steak House LLC; (iii) the
Franchise Agreement dated October 11,

2000, between Ruth’s Chris Steak House Franchise, Inc. and Wailea Steak House
LLC; (iv) the Franchise Agreement dated April 21, 2006, between Ruth’s Chris
Steak House Franchise, Inc. and Beachwalk Steak House, LLC; (v) the Franchise
Agreement dated April 21, 2006, between Ruth’s Chris Steak House Franchise, Inc.
and Lava Coast Steak House, LLC; and (vi) the Franchise Agreement dated March 2,
2017, between Ruth’s Chris Steak House Franchise, Inc. and Kauai Steak House,
LLC.

 

“GAAP” means generally accepted accounting principles in the United States of

America in effect from time to time, applied consistently with past practice.

 

“Gift Cards” means any pre-paid balance cards and any other arrangements which
are sold by the Sellers to customers or to a retailer for resale to customers
and redeemable for the purchase of food or beverages at a Ruth’s Chris Steak
House restaurant.

 

“Gift Card Liability Period” has the meaning set forth in Section 7.17 below.

 

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“Governmental Body” means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).

 

“Hazardous Substance” means any substance presently listed, defined, designated
or classified as hazardous, toxic, radioactive, or dangerous, or otherwise
regulated, under any Environmental Law.  Hazardous Substance includes any
substance to which exposure is regulated by any Governmental Body or any
Environmental Law including any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or byproduct thereof, radon, radioactive
material, asbestos, or asbestos containing material, urea formaldehyde, foam
insulation or polychlorinated biphenyls.

 

“House Accounts” means any arrangements by means of vouchers, credits or trade
or barter accounts which are extended by the Sellers to third parties and
customers and redeemable for the purchase of food or beverages at Ruth’s Chris
Steak House restaurants in Hawaii and that do not generate a corresponding
account receivable in favor of Purchaser. For the sake of clarity, house
accounts with an existing credit attributable to services provided to Sellers on
trade are considered a House Account under this definition.  However,
arrangements where vouchers are presented in exchange for meals and upon
redemption the voucher sponsor (e.g., the Japanese Tourism Bureau) is invoiced
for the redeemed vouchers are not considered a House Account.

 

“Indemnification Claim” means any claim in respect of which payment may be
sought under Article IX of this Agreement.

 

“Intellectual Property” means all of the following in any jurisdiction
throughout the world: (i) all patents (including, without limitation, utility
patents, design patents, industrial designs, plant patents, inventors’
certificates and utility models), patent applications (including docketed patent
disclosures awaiting filing, reissues, divisions, continuations,
continuations-in- part and extensions), and patent disclosures, together with
all reissuances, continuations, continuations-in-part, revisions, extensions,
and reexaminations thereof (collectively, “Patents”); (ii) all trademarks,
service marks, trade names, service names, brand names, trade dress rights,
logos, slogans, Internet domain names and individual, corporate, business and
product names, together with all translations, adaptations, derivations, and
combinations thereof, together with the goodwill associated with any of the
foregoing, and all applications, registrations and

renewals thereof (collectively, “Marks”); (iii) all copyrightable works, all
copyrights and applications, registrations and renewals therefor, works of
authorship and mask work rights (collectively, “Copyrights”); (iv) all trade
secrets and confidential business information (including ideas, research and
development, knowhow, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
lists of past and present customers, pricing and cost information, and business
and marketing plans and proposals); (v) all Internet domain names, websites and
social media accounts (including but not limited to Facebook, Twitter,
Instagram, Tumblr, and Linkedin), together with login and password information,
and rights in the telephone numbers, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith; (vi) all Software (including source code, executable code,
data, databases, and related

 

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--------------------------------------------------------------------------------

documentation) and Technology; (vii) all advertising and promotional materials;
(viii) all other proprietary rights; and (ix) all copies and tangible
embodiments of any of the foregoing in any form or medium whatsoever.

 

“IRS” means the Internal Revenue Service.

 

“Kauai Restaurant” means the restaurant located at 2829 Ala Kalanikaumaka St.,

#F207-A, Koloa, HI 96756.

 

“Key Business Employees” has the meaning set forth in Section 5.26(a) below.

 

“Knowledge of the Sellers” means (i) the actual knowledge of any Seller or
Principal and (ii) the knowledge that any Seller or Principal, after reasonable
investigation, would have obtained in the ordinary conduct of its business.

 

“Laws” means all foreign, federal, state and local laws, common law, statutes,
codes, ordinances, rules, regulations, resolutions and Orders.

 

“Legal Proceeding” means any judicial, administrative or arbitral action,
notice, suit, claim, inquiry, investigation or proceeding (public or private) by
or before a Governmental Body, Taxing Authority or arbitrator.

 

“Liability” means any debt, liability or obligation (whether direct or indirect,
absolute or contingent, accrued or unaccrued, known or unknown, liquidated or
unliquidated, or due or to become due) and including all costs and expenses
relating thereto.

 

“Lien” means any lien, encumbrance, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement, title
defect, servitude, covenant, transfer restriction, encroachment, reservation,
municipal bond, irregularities of title, or any other restriction or limitation
of any kind.

 

“Material Adverse Effect” means such facts, circumstances, events, or changes
that are, individually or in the aggregate, materially adverse to the (i) the
business, assets, prospects, properties, results of operations, condition
(financial or otherwise) or performance of any Seller, the Business or the
Purchased Assets or (ii) the ability of any Seller to consummate any of the
transactions contemplated by this Agreement, but shall not include (x) any
change affecting economic or financial conditions generally or (y) any change
affecting the Sellers’ industry as a whole, provided such change does not
disproportionately affect any Seller.

 

“Most Recent Balance Sheet” means the unaudited balance sheet of the Sellers as
of the Most Recent Balance Sheet Date.

 

“Most Recent Balance Sheet Date” means June 14, 2017.

 

“Order” means any order, injunction, judgment, decree, determination, ruling,
writ, assessment or arbitration or other award of a Governmental Body.

 

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“Ordinary Course of Business” means the ordinary and usual course of business of
the Sellers related to the Business and consistent with past practices and
applicable Law.

 

“Permits” means any approvals, authorizations, consents, licenses, permits,
certificates, waivers and similar rights obtained, or required to be obtained,
from a Governmental Body.

 

“Person” means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.

 

 

 

 

Date.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing

 

 

“Principal” means W. Randall Schoch, individually and as Trustee of the Schoch

Revocable Living Trust dated November 19, 2001.

 

“Promotional Discounts” means any incentives issued by Sellers to customers in
connection with marketing and promotional strategies resulting in discounts or
credits that may be applied to the purchase of food or beverages at Ruth’s Chris
Steak House restaurants in Hawaii.

 

“Release” means any releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing, dumping, dispersal or
leaching of a Hazardous Substance into the Environment, including the
abandonment or discarding of barrels, containers, and other receptacles
containing Hazardous Substances, or as otherwise defined under Environmental
Laws.

 

“Representative” means, with respect to any Person, any and all managers,
directors, officers, employees, consultants, financial advisors, counsel,
accountants, or other agents or intermediaries of such Person.

 

“Restaurants” means each of the restaurants located at (i) 500 Ala Moana Blvd.
St.

#6C, Honolulu, HI 96813, (ii) 900 Front St., Lahaina, Maui, HI 96761, (iii) The
Shops at Wailea,

3750 Wailea Alanui, Wailea, Maui, HI 96753, (iv) Waikiki Beachwalk, 226 Lewers
St., #L236, Honolulu, HI 96815, (v) 68-1330 Mauna Lani Drive, Ste 121, Kohala
Coast, HI 96743, and (vi) the Kauai Restaurant.

 

“Schedules” means the disclosure schedules of the Sellers and the Purchaser, as
applicable, accompanying this Agreement.

 

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

 

“Seller Closing Certificate” means a certificate, dated as of the Closing Date
and signed by a duly authorized officer of each Seller, that each of the
conditions set forth in Section

8.1(a) and Section 8.1(b) have been satisfied.

 

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“Seller IP” means the Intellectual Property used by each Seller, or necessary
for use, in the conduct of the Business as currently conducted and as currently
contemplated to be conducted.

 

“Seller Secretary’s Certificate” means a certificate of the Secretary (or
equivalent officer) of each Seller certifying that attached thereto are
certified copies of each Seller’s Articles of Organization and Operating
Agreement, and true and complete copies of all resolutions of

each Seller’s manager and members approving the execution, delivery and
performance of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, and that all
such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated hereby and thereby, and
certifying the names and signatures of the officers of each Seller authorized to
sign this Agreement, the Transaction Documents and the other documents to be
delivered hereunder and thereunder.

 

“Seller Tax” means any Tax, if and to the extent that any Seller is or may be
potentially liable under applicable Law, under contract or on any other grounds
(including, but not limited to, as a transferee or successor, under Code Section
6901 or Treasury Regulation Section 1.1502-6, as a result of any Tax sharing or
other agreement, or by operation of law) for any such Tax).

 

“Seller Tax Return” means any return, election, declaration, report, schedule,
information return, document, information, opinion, statement, or any amendment
to any of the foregoing (including, without limitation, any consolidated,
combined or unitary return) filed or required to be filed with any Taxing
Authority, if, in any manner or to any extent, relating to or inclusive of each
Seller or any Seller Tax.

 

“Software” means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise, (iii)
descriptions, flow-charts and other work product used to design, plan, organize
and develop any of the foregoing, screens, user interfaces, report formats,
firmware, development tools, templates, menus, buttons and icons, and (iv) all
documentation including user manuals and other training documentation related to
any of the foregoing.

 

“Straddle Period” means any Tax period beginning before the Closing Date and
ending after the Closing Date.

 

“Subsidiary” means any Person of which a majority of the outstanding voting
securities or other voting equity interests are owned, directly or indirectly,
by any Seller or with respect to which any Seller, directly or indirectly, has
the power to elect a majority of such Person’s board of directors or similar
governing body or otherwise to direct the business and policies of such Person.

 

“Tax Return” means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or

 

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required to be filed with or submitted to, any Taxing Authority in connection
with the determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of or
compliance with any Law relating to any Tax.

 

“Taxes” means (i) all federal, state, local or foreign taxes, charges, fees,
imposts, levies or other assessments, including, without limitation, all net
income, gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or
additional amounts imposed by any Taxing Authority in connection with any item
described in clause (i), and (iii) any transferee liability in respect of any
items described in clauses (i) and/or (ii).

 

“Taxing Authority” means any (i) nation, state, county, city, town, village,
district, or other jurisdiction of any nature, (ii) federal, state, local,
municipal, foreign, or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal), (iv)
multi-national organization or body, or (v) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.

 

“Technology” means, collectively, all trade secrets, designs, formulae,
algorithms, procedures, methods, techniques, ideas, know-how, research and
development, technical data, programs, subroutines, tools, materials,
specifications, processes, inventions (whether patentable or unpatentable and
whether or not reduced to practice), apparatus, creations, improvements and
other similar materials, and all recordings, graphs, drawings, reports,
analyses, and other works

of authorship, and other tangible embodiments of the foregoing, in any form,
whether or not specifically listed herein, and all related technology used by
any Seller in connection with, or that relate to, the Business.

 

“Transaction Documents” means (i) this Agreement, (ii) the bill of sale with
respect to the Purchased Assets, in the form attached hereto as Exhibit A (the
“Bill of Sale”), (iii) the assignment and assumption agreement with respect to
the Assumed Liabilities, in the form attached hereto as Exhibit B (the
“Assignment and Assumption Agreement”), (iv) the domain name assignment, in the
form attached hereto as Exhibit C (the “Domain Name

Assignment”), (v) each Seller’s income tax withholding form, in the form
provided previously to the Purchaser, (vi) the Seller Closing Certificate, (vii)
the Seller Secretary’s Certificate, (viii) the FIRPTA Certificate, (ix) the W.
Randall Schoch Consulting Agreement in the form attached hereto as Exhibit D ,
(x) the Desert Island Restaurants Management Agreement in the form attached
hereto as Exhibit E (the “DIR Management Agreement”), (xi) the Desert Islands
Restaurants, LLC Non-Competition and Non-Solicitation Agreement in the form
attached hereto as Exhibit F, (xii) the W. Randall Schoch Non-Competition and
Non-Solicitation Agreement in the form attached hereto as Exhibit G, (xiii) the
Gift Card Escrow and Reimbursement Agreement in the form attached hereto as
Exhibit H (the “Gift Card Escrow and Reimbursement Agreement”), (xiv) the
Indemnification Escrow Agreement in the form attached hereto as

Exhibit I (the “Indemnification Escrow Agreement”), (xv) the Management Services
Agreement

 

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in the form attached hereto as Exhibit J (“Management Services Agreement”) (xvi)
any other document or instrument to be executed and delivered on or prior to the
Closing in connection

with the transactions contemplated by this Agreement or any of the other
Transaction Documents, as reasonably requested by the Purchaser, and (xvii) any
Schedule, Annex or Exhibit to any of

the foregoing.

 

“Treasury Regulations” means the final or temporary regulations that have been
promulgated under the Code by the U.S. Department of the Treasury, and any
successor regulations.

 

(b)Other Definitional and Interpretive Matters.  Unless otherwise expressly
provided, for purposes of this Agreement, the following rules of interpretation
shall apply:

 

(ii)Calculation of Time Period.  When calculating the period of time before
which, within which or following which any act is to be done or step taken
pursuant to

this Agreement, the date that is the reference date in calculating such period
shall be excluded. If the last day of such period is a non-Business Day, the
period in question shall end on the next succeeding Business Day.

 

 

 

 

dollars.

(iii)Dollars.  Any reference in this Agreement to $ shall mean U.S.

 

 

(iv)Exhibits/Schedules.  The Exhibits and Schedules to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this
Agreement.  All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein.  Any capitalized terms used in any Schedule or Exhibit but not otherwise
defined therein shall be defined as set forth in this Agreement.  The specific
disclosures set forth in the Schedules shall be organized to correspond to a
specific section reference in this Agreement to which the qualifying and
correspondingly numbered disclosure relates, together with appropriate cross
references when disclosure is applicable to other sections of this Agreement,
and any disclosure set forth in one section of the Schedules

shall not apply to, and shall not be deemed to be disclosed for purposes of, any
other section of the Schedules without a specific cross-reference to such other
section to which such disclosure is also applicable.

 

(v)       Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.

 

(vi)Headings.  The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement.  All references in this
Agreement to any “Section” are to the corresponding Section of this Agreement
unless otherwise specified.

 

(vii)Herein.  The words “herein,” “hereinafter,” “hereof,” and “hereunder” used
herein refer to this Agreement as a whole and not merely to a subdivision in
which such words appear unless the context otherwise requires.

 

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(viii)    Including.  The word “including” or any variation thereof means
“including, without limitation” and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.

 

(ix)Made Available. An item shall be considered “made available” to the
Purchaser, to the extent such phrase appears in this Agreement, only if such
item has been provided in writing to the Purchaser.

 

(x)Reflected On or Set Forth In. An item arising with respect to a specific
representation or warranty shall be deemed to be “reflected on” or “set forth
in” a balance sheet or financial statements or information, to the extent any
such phrase appears in

such representation or warranty, if (A) there is a reserve, accrual or other
similar item underlying a number on such balance sheet or financial statements
or information that relate to the subject matter of such representation, (B)
such item is otherwise specifically set forth on the balance sheet or financial
statements or information or (C) such item is reflected on the balance sheet or
financial statements or information and is specifically set forth in the notes
thereto.

 

(c)The parties hereto have participated jointly in the negotiation and drafting
of this Agreement and, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as jointly drafted by
the parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provision of this
Agreement.

 

ARTICLE II

 

SALE AND PURCHASE OF ASSETS

 

2.1Sale and Purchase of the Assets.  Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Sellers shall sell,
assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall
purchase and acquire from the Sellers, free and clear of all Liens, all right,
title and interest of the Sellers in and to all of its properties, assets,
contracts and rights, of every kind and description and wherever located,
related to, used in or intended for use in connection with the Business as
currently conducted or currently contemplated to be conducted, other than the
Excluded Assets (as defined below) (collectively, the “Purchased Assets”),
including without limitation the following:

 

(a)all fixed assets, including, without limitation, all furniture, fixtures,
equipment, machinery, tools, vehicles, office equipment, supplies, computers,
telephones and other tangible personal property wherever located, including,
without limitation, those set forth on Schedule 2.1(a);

 

(b)all inventory, stock in trade, merchandise, goods, supplies and other
products, raw materials, work in progress, finished products, supply and
packaging items, promotional materials and similar items, wherever located,
including, without limitation, those set forth on Schedule 2.1(b) (collectively,
the “Inventory”);

 

(c)all Permits, including, without limitation, those set forth on Schedule 5.17;

 

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(d)       all contracts set forth on Schedule 2.1(d) (the “Assumed Contracts”)
and all customer deposits and prepayments associated with any Assumed Contracts
(the “Customer Deposits”), including, without limitation, those Customer
Deposits set forth on Schedule 2.1(d);

 

(e)all rights under or pursuant to all representations, warranties, guarantees
and indemnities made by any third party related to any Purchased Assets;

 

(f)all real property, leaseholds and subleaseholds in real property, and
easements, rights-of-way and other appurtenants thereto;

 

(g)all insurance proceeds, condemnation proceeds or rights, transferable or
assignable claims for insurance proceeds, and any other claims, deposits
(including security deposits), prepayments, prepaid assets, prepaid expenses (to
be allocated pro rata), prepaid revenues, refunds, causes of action, rights of
recovery, rights of setoff and rights of recoupment (including any such item
related to the payment of Taxes);

 

(h)all of the goodwill and going concern value relating to the Business or any
of the Purchased Assets;

 

(i)all of the Seller IP; and

 

(j)all other intangible and tangible assets, including, without limitation, all
Books and Records, computer hardware, Software and electronic data, all supplier
information, lists and correspondence, all customer information, reservation
data, lists and correspondence, all licensee information, lists and
correspondence, equipment logs, operating guides and manuals,

all sales records, all research, statistical, production, marketing and
promotional materials, records, files, reports and other documents and data, all
business post office boxes and business telephone listings, all research results
and other know-how, and all other materials, records, files and data, in
whatever form contained.

 

2.2Excluded Assets.  Except as otherwise set forth in Section 2.1, from and
after the Closing, the Sellers shall retain all of its existing right, title and
interest in and to (a) all Contracts that are not Assumed Contracts, (b) the
corporate seals, organizational documents, minute books, stock books, Tax
Returns, books of account or other records relating to the organization and
existence of each Seller as a limited liability company, (c) any Seller Benefit
Plan (as defined below) and the assets attributable thereto, (d) the personal
memorabilia items set forth on Schedule 2.2, (e) accounts receivable as of the
Closing Date, and (f) the Tenant Improvement Allowance under that certain The
Shops at Kukui’ula Lease dated February 22, 2017 for the Kauai Restaurant (the
“Kauai TI Allowance”) (collectively, the “Excluded Assets”).

 

2.3Assumed Liabilities.  Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing, the Purchaser shall assume and pay, honor,
perform and discharge when due (a) all executory obligations under the Assumed
Contracts (i) arising after the Closing, (ii) not related to, or arising out of,
any breach of any Assumed Contract occurring or existing prior to the Closing,
and (iii) not related to, or arising out of, any act or omission by any Seller
or any event, circumstance or condition with respect to the Business occurring
or existing prior to the Closing, (b) all obligations assumed by the Purchaser
under Section 7.13, Section 7.17 and Section 7.18, and (c) all obligations with
respect to any accrued, but unpaid and unused, paid

 

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time off of any employees of any Seller as of the Closing Date (collectively,
the “Assumed

Liabilities”).

 

2.4Excluded Liabilities.  Notwithstanding anything to the contrary in this
Agreement, the Purchaser shall not assume or in any way be responsible for, and
the Sellers shall remain obligated to pay, honor, perform and discharge, all of
the Liabilities of the Sellers (other than the Assumed Liabilities)
(collectively, the “Excluded Liabilities”), including, without limitation:

 

(a)any Liabilities arising out of or relating to each Seller’s ownership, use or
operation of the Business and the Purchased Assets, in each case prior to the
Closing arising by operation of law under any common law or statutory doctrine
(other than the Assumed Liabilities);

 

(b)any Liabilities based upon, relating to, arising under or with respect to the
Excluded Assets or the ownership, operation or use of any businesses of the
Sellers or any of their Affiliates, other than the Business, whether before, at
or after the Closing;

 

(c)all payables and indebtedness of the Sellers;

 

(d)any Liabilities directly or indirectly arising out of or related to any
breach of Contract occurring or existing prior to the Closing;

 

(e)any liabilities or obligations for (i) Taxes relating to the Business, the
Purchased Assets or the Assumed Liabilities for the Pre-Closing Tax Period, (ii)
Taxes relating to the Business, the Purchased Assets or the Assumed Liabilities
for the portion of any Straddle

Period ending on and including the Closing Date and (iii) any other Taxes of the
Sellers or any of their equity holders or Affiliates, including Taxes that arise
as a result of the sale of the Business or the Purchased Assets pursuant to this
Agreement;

 

(f)any Liabilities of the Sellers based upon, relating to, or arising under or
with respect to (i) any Seller Benefit Plan, (ii) the employment or termination
of employment of (x) any employee of any Seller employed by the Purchaser
following the Closing with respect to periods on or prior to the Closing and (y)
any current or former employee, consultant, independent contractor, leased
employee or other agent who is not employed by the Purchaser following the
Closing at any time, and (iii) workers’ compensation claims, unemployment
insurance premiums or any claims arising under any federal, state or local tax
withholding, employment, labor or discrimination Laws of (x) any employee
employed by the Purchaser following the Closing which relate to events occurring
on or prior to the Closing and (y) any current or former employee, consultant,
independent contractor, leased employee or other agent who is not employed by
the Purchaser following the Closing which relate to events occurring at any
time;

 

(g)any Liability based upon, arising under or with respect to any Environmental
Law, including any Liability of the Sellers in any way pertaining to or arising
from the acts, omissions or strict liability of any predecessor of the Sellers;

 

(h)any Liability based upon, arising under or with respect to any matter
disclosed or required to be disclosed in Schedule 5.16; and

 

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(i)any Liability based upon, arising under or with respect to any warranty given
or sold by the Sellers, regardless of whether any warranty claim has been made
to date.

 

2.5Non-Assignable Assets. Notwithstanding anything in this Agreement to the
contrary, to the extent that the assignment of any Assumed Contract or the
transfer of any property or asset (including but not limited to any Permit)
requires the consent of any other Person, or shall be subject to any option by
any other Person by virtue of a request for permission to assign or transfer, or
by reason of or pursuant to any transfer to the Purchaser, this Agreement shall
not constitute an agreement to assign any such Assumed Contract, property or
asset or any claim or right or any benefit arising thereunder or resulting
therefrom if any such attempted assignment would constitute a default thereunder
or in any way adversely affect the

rights of the Purchaser thereunder. If consent to the assignment or transfer of
any such Assumed Contract, property or asset is not obtained, or if an attempted
assignment thereof would be ineffective or would affect the rights of the
Purchaser thereunder, then, at the Purchaser’s

request, the Sellers shall cooperate with the Purchaser in any reasonable
arrangement designed to provide to the Purchaser the benefits under such Assumed
Contracts, properties and assets, including without limitation, enforcement for
the account of the Purchaser of any and all rights

of the Sellers against the other party thereto arising out of the breach or
cancellation thereof by such party or otherwise; provided that such cooperation
by the Sellers shall not cause the Sellers to violate any terms of such Assumed
Contract; provided, further, that the Purchaser shall

assume all of the post-Closing liabilities of the Sellers under such Assumed
Contracts (other than Excluded Liabilities) to the extent to which the Purchaser
receives the post-Closing benefits thereof.

 

ARTICLE III

 

CONSIDERATION

 

3.1Consideration.  Purchaser agrees to pay to the Sellers at the Closing the
aggregate sum of Thirty-Five Million Dollars ($35,000,000.00), subject to the
adjustments described in Section 3.2 (the “Purchase Price”), payable by transfer
of immediately available funds. The Purchase Price includes One Million Three
Hundred Thousand Dollars ($1,300,000.00), excluding the Kauai TI Allowance, in
development and construction expenditures incurred and paid by the Sellers prior
to Closing for the Kauai Restaurant.

 

3.2Purchase Price Adjustments.  On the Closing Date:

 

(a)The Purchaser and the Sellers shall determine the amount of petty cash, if
any, in the Sellers’ accounts, and the Purchase Price shall be increased by such
amounts.

 

(b)The Purchase Price shall be decreased by the aggregate amount payable to
Sellers’ employees relating to all accrued, but unpaid and unused, paid time off
of Sellers’ employees as of the Closing Date.

 

(c)The Purchaser and the Sellers shall mutually determine the value of the
Inventory as of the Closing Date (the “Closing Date Inventory Value”), based on
the results of an inventory count of the Business as of the date immediately
prior to the Closing Date, and the

 

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Purchase Price shall be increased by an amount equal to 50% of the Closing Date
Inventory

Value.

 

3.3Withholding.  Notwithstanding anything to the contrary herein, the Purchaser

shall be entitled to deduct and withhold any Taxes required to be deducted and
withheld from the Purchase Price by applicable Law.  To the extent that amounts
are so deducted and withheld by the Purchaser, such amounts shall be treated for
all purposes of this Agreement as having been paid to the Sellers.

 

3.4Purchase Price Allocation.  The Sellers and the Purchaser hereby agree that
the Purchase Price (and any other items required for Tax purposes) shall be
allocated for purposes of Taxes, among each of the Sellers and further among the
Purchased Assets (including, but not limited to (i) Inventory of stock in trade,
(ii) furniture and fixtures, (iii) machinery and equipment, (iv) land and
buildings, (v) covenants not to compete, (vi) goodwill and other intangible
assets, and (vii) other assets) in accordance with the rules of Section 1060 of
the Code and the Treasury Regulations promulgated thereunder and any similar
provision of state, local or foreign law.  The Purchaser shall retain Grant
Thornton LLP to prepare the allocation (the “Purchase Price Allocation”), and
such allocation by Grant Thornton LLP shall be final and binding on the Sellers
and Purchaser.  The Purchaser and Sellers shall (a) cooperate in the filing

of any forms (including Form 8594 under Section 1060 of the Code) with respect
to the Purchase Price Allocation, including any amendments to such forms
required pursuant to this Agreement with respect to any adjustments to the
Purchase Price and (b) file all federal, state and local Tax Returns and related
tax documents consistent with such allocations, as the same may be adjusted
pursuant to the terms of Section 3.2 or any other provisions of this Agreement,
and not take any position (whether in audits, Tax Returns or otherwise)
inconsistent with such allocation unless otherwise required by applicable
law.  Notwithstanding anything in this Agreement to the contrary, (i) no
amendment to the Purchase Price Allocation shall be effective without the
approval and consent of Purchaser and Sellers, and (ii) the Sellers and the
Purchaser hereby

agree that $5,550,000 of the Purchase Price shall be allocated to DIR.

 

ARTICLE IV

 

CLOSING

 

4.1Closing.  On the terms and subject to the conditions set forth in this
Agreement, the closing of the sale and purchase of the Purchased Assets provided
for in Section 2.1 hereof and the assumption of the Assumed Liabilities provided
for in Section 2.3 hereof (the “Closing”) shall take place remotely via the
exchange of electronic copies of documents, and shall be deemed to have taken
place simultaneously with the satisfaction of the conditions to Closing set
forth in Article VIII. The date on which the Closing is to occur is herein
referred to as the “Closing Date.”

 

4.2Deliverables.   On or prior to the Closing:

 

 

(a)

the Sellers shall deliver to the Purchaser: (ii)the Books and Records,

 

 

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(iii)the Required Consents (as defined below), and

 

(iv)evidence, satisfactory to the Purchaser, of the repayment of all of each
Seller’s existing indebtedness secured by Liens on any of the Purchased Assets
and the release or termination of all such Liens.

 

 

(b)

each Seller and the Principal shall execute and deliver to the Purchaser:
(ii)each of the Transaction Documents to which it is a party,

 

(iii)such other instruments of conveyance as the Purchaser may reasonably
request in order to effect the sale, transfer, conveyance and assignment to the
Purchaser of valid ownership of the Purchased Assets;

 

(c)the Purchaser shall execute and deliver to the Sellers each of the

Transaction Documents to which it is a party; and

 

(d)the Purchaser shall deliver to the Sellers the Purchase Price.

ARTICLE V REPRESENTATIONS AND WARRANTIES

OF THE SELLERS AND THE PRINCIPAL

 

The Sellers and the Principal hereby jointly and severally represent and warrant
to the

Purchaser as follows:

 

5.1Organization and Good Standing.  Each Seller is duly organized, validly
existing and in good standing under the Laws of the state of its formation and
has all requisite power and authority to own, lease and operate its properties
and assets and carry on its business.  Each Seller is duly qualified or
authorized to do business and is in good standing under the Laws of each
jurisdiction in which it owns, leases or operates its properties and assets and
each other jurisdiction in which the conduct of its business or the ownership of
its properties and assets requires such qualification or authorization.  Each
Seller has made available to the Purchaser a true and complete copy of the
articles of organization of the Seller, as currently in effect, certified as of
a recent date by the Secretary of State of the state of its formation, and a
true and complete copy of the operating agreement of the Seller, as currently in
effect.

 

5.2Authorization of Agreement.  Each Seller and the Principal have all requisite
power and authority to execute and deliver this Agreement and each other
Transaction Document (to which any of them is a party) in connection with the
consummation of the transactions contemplated by this Agreement, to perform
their respective obligations hereunder and

thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery of this Agreement and the other Transaction
Documents, the performance of each Seller’s and the Principal’s obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite action
on the part of the Sellers and the Principal.  This Agreement has been duly and
validly executed and delivered by each Seller and each Principal, and (assuming
the due

 

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authorization, execution and delivery by the other parties hereto and thereto)
constitutes the legal, valid and binding obligation of the Sellers and the
Principal, enforceable against the Sellers and the Principal in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).

 

5.3Conflicts; Consents of Third Parties.

 

(a)Except as set forth on Schedule 5.3(a) (the “Required Consents”), none of the
execution or delivery by the Sellers or the Principal of this Agreement or any
of the other Transaction Documents, the consummation of any of the transactions
contemplated hereby or thereby, or compliance by the Sellers or any Principal
with any of the provisions hereof or thereof does or will conflict with, or
result in any violation of, or constitute a breach of or a

default (with or without notice or lapse of time, or both) under, or result in
the loss of any benefit under, or permit the acceleration of any obligation
under, or give rise to a right of termination, modification or cancellation
under, or result in the creation of any Lien, upon any of the Purchased Assets
under, any provision of (i) the articles of organization or operating agreement
of each Seller or similar organizational documents of the Principal (as
applicable); (ii) any material Contract or Permit to which the Business, the
Sellers or any Principal is a party or by which the Sellers, any Principal or
any of the Purchased Assets is bound; (iii) any Order of any Governmental Body
applicable to the Business, the Sellers or any Principal or by which the
Sellers, any Principal or any of the Purchased Assets is bound; or (iv) any
applicable Law.

 

(b)Except for the Required Consents, no consent, waiver, approval, Order, Permit
or authorization of, or declaration, registration or filing with, or
notification to, any Person or Governmental Body is required on the part of the
Sellers or any Principal in connection with the execution, delivery or
performance of this Agreement or any of the other Transaction Documents, the
compliance by the Sellers and the Principal with any of the provisions hereof or
thereof, or the consummation of any of the transactions contemplated hereby or
thereby.

 

5.4Capitalization.

 

(a)The Schoch Revocable Living Trust dated November 19, 2001 is the direct owner
of all of the issued and outstanding equity interests in DIR.

 

(b)Except as set forth in this Agreement: (i) no person has any right to
purchase any capital stock, membership interest, capital interest, profits
interest, economic interest, voting rights, or ownership of the Sellers or any
of the issued and outstanding equity interests in the Sellers (the “Interests”);
(ii) other than the Interests, there are no outstanding shares of capital stock,
membership interests, capital interests, profits interests, economic

interests, voting rights or other ownership interests in the Sellers, and no
options, warrants, rights, calls or commitments with respect thereto; and (iii)
there are no contracts, arrangements, commitments or restrictions relating to
the transfer, sale or purchase of any of the Interests,

except for restrictions on transfer stated in the operating agreement of each
Seller and DIR.

 

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5.5Subsidiaries.  The Sellers have not had, and currently do not have, any
Subsidiaries and, other than DIR, which is a manager in other companies, do not
control, directly or indirectly, or have any direct or indirect equity
participation or similar interest in any other Person.

 

5.6Financial Information.  The Sellers have provided the Financial Statements to
the Purchaser.  The Financial Statements (a) comply as to form in all material
respects with applicable tax basis accounting requirements, (b) are correct and
complete in all material respects and (c) fairly present the financial position
of the Sellers as of the dates thereof and the results of its operations and
cash flows for the period indicated, consistent with the books and records of

the Sellers, except that the Financial Statements are subject to normal and
recurring year-end adjustments, including tax depreciation,  which will not be
material, except the tax depreciation, in amount or effect and do not include
footnotes.  Since the beginning of the period covered by the Financial
Statements, there has been no change in any accounting principles, principles,
methods or practices of the Sellers.  No audit firm has ever declined or
indicated its inability to issue an opinion with respect to any financial
statements of the Sellers.

 

5.7Undisclosed Liabilities.  The Sellers do not have any Liabilities of any kind
or nature that are or may have a Lien on any of the Purchased Assets or may
otherwise have a Material Adverse Effect, except for Liabilities (i) set forth
in the Financial Statements and (ii) incurred in the Ordinary Course of Business
after the Most Recent Balance Sheet Date that, both individually and in the
aggregate, involve amounts of less than $10,000.

 

5.8Absence of Certain Developments.  Since January 1, 2017, the Sellers have
conducted the Business only in the Ordinary Course of Business and there has not
been any:

 

(a)to the Knowledge of the Sellers, event, change, occurrence or circumstance
that, individually or in the aggregate, has had, or would reasonably be expected
to have, a Material Adverse Effect;

 

(b)issuance or sale of any membership interests or other securities of the
Sellers or any options, warrants or other rights to acquire any such membership
interests or other securities (except pursuant to the conversion or exercise of
options, warrants or other convertible securities outstanding on the date
hereof);

 

(c)creation, incurrence, assumption or guarantee of any indebtedness in
connection with the Business other than the Assumed Contracts and Real Property
Leases;

 

(d)acquisition, sale, lease, license or disposition of any assets or property,
other than purchases and sales of assets in the Ordinary Course of Business;

 

(e)imposition of any Lien on any of the Purchased Assets;

 

(f)discharge or satisfaction of any Lien or payment of any Liability other than
in the Ordinary Course of Business or as otherwise required by this Agreement;

 

(g)amendment of its articles of organization or operating agreement in a manner
that could have an adverse effect on the transactions contemplated by this
Agreement;

 

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(h)entry into, amendment or termination of any action or omission that would
constitute a violation of or default under, or waiver of any rights under, any
of the Purchased Assets;

 

(i)       entry into, adoption, modification or termination of any Seller
Benefit Plan or any employment, severance, retention or other Contract, or
(except for normal increases in the Ordinary Course of Business for employees
who are not Affiliates) increases in the

compensation or fringe benefits of, or material modification of the employment
terms of, any current or former employee, officer, manager, independent director
or consultant of the Business, or payment of any bonus or other benefit to any
current or former employee, officer, manager, independent director or consultant
of the Business (except for existing payment obligations outstanding as of the
date hereof) or hiring of any new officers or (except in the Ordinary Course of
Business) any new employees;

 

(j)change in any accounting methods, principles or practices, except insofar as
may be required by a generally applicable change in GAAP (although Sellers do
not follow GAAP accounting), or any new elections, or changes to any current
elections, with respect to Taxes that affect the Purchased Assets;

 

(k)any uninsured damage, destruction, loss or casualty to any property or assets
of the Business or the Sellers;

 

(l)to the Knowledge of the Sellers, occurrence of a data breach or compromise of
any Seller’s information security systems; or

 

(m)entry into any Contract to do any of the foregoing, or any action or omission
that would result in any of the foregoing.

 

5.9Taxes.

 

(a)Each Seller has:

 

(i)duly and timely filed, or caused to be filed, in accordance with applicable
Law all Seller Tax Returns required to be filed by or with respect to such
Seller, each of which is true, correct and complete, except that each Seller has
not reported on its Hawaii General Excise/Use Tax Returns (Form G-45) the value
of management services provided by DIR and DIR has not filed Hawaii General
Excise/Use Tax Returns (Form G-45) reporting the management fees received from
the Sellers for such management services,

 

(ii)duly and timely paid in full, or caused to be paid in full, all Seller

Taxes due and payable with respect to such Seller on or prior to the Closing
Date, and

 

(iii)with respect to such Seller, properly accrued on its books and records a
provision for the payment of all Seller Taxes that are due, are claimed to be
due, or may or will become due with respect to any Pre-Closing Period or the
portion ending on the Closing Date of any Straddle Period, except that each
Seller has not reported on its Hawaii General Excise/Use Tax Returns (Form G-45)
the value of management services provided by

 

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DIR and DIR has not filed Hawaii General Excise/Use Tax Returns (Form G-45)
reporting the management fees received from the Sellers for such management
services.

 

(b)No extension of time to file a Seller Tax Return, which Seller Tax Return has
not since been filed in accordance with applicable Law, has been filed. There is
no power of attorney in effect with respect or relating to any Seller Tax or
Seller Tax Return, except to the extent reasonably required to secure tax
clearance certificates.

 

(c)No Seller Tax Return has ever been filed, and no Seller Tax has ever been
determined, on a consolidated, combined, unitary or other similar basis
(including, but not limited to, a consolidated federal income Tax
return).  There is no actual or potential theory or circumstance (including, but
not limited to, as a transferee or successor, under Code Section

6901 or Treasury Regulation Section 1.1502-6, as result of a Tax sharing
agreement or other contract or by operation of law) under which such Seller is
or may be liable for any Tax determined, in whole or in part, by taking into
account any income, sale, asset of or any activity conducted by any other
Person.

 

(d)       Each Seller has complied in all respects with all applicable Law
relating to the deposit, collection, withholding, payment or remittance of any
Tax (including, but not limited to, Code Section 3402).

 

(e)There is no lien for any Tax upon any asset or property of each Seller

(except for any statutory lien for any Tax not yet due).

 

(f)No Legal Proceeding is pending, or to the Knowledge of each Seller,
threatened or proposed with regard to any Seller Tax or Seller Tax Return. To
the Knowledge of each Seller, no event or circumstance results in any
significant risk that any such Legal Proceeding will occur.

 

(g)The statute of limitations relating to any Seller Tax or any Seller Tax
Return has never been modified, extended or waived, nor to the Knowledge of each
Seller, has any request been made in writing for any such modification,
extension or waiver.

 

(h)       Any assessment, deficiency, adjustment or other similar item relating
to any Seller Tax or Seller Tax Return has been reported to all Taxing
Authorities in accordance with applicable Law.

 

(i)No jurisdiction where no Seller Tax Return has been filed or no Seller Tax
has been paid has made or, to the Knowledge of each Seller, threatened to make a
claim for the payment of any Seller Tax or the filing of any Seller Tax Return.

 

(j)Each Seller is not a party to any agreement with any Taxing Authority

(including, but not limited to, any closing agreement within the meaning of Code
Section 7121

or any analogous provision of applicable Law). No private letter or other ruling
or determination from any Taxing Authority relating to any Seller Tax or Seller
Tax Return has ever been requested or received.

 

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(k)Each Seller is not and has never been a beneficiary or otherwise participated
in any reportable transaction within the meaning of Treasury Regulation Section

1.6011-4(b)(1).

 

(l)None of the Purchased Assets or the Assumed Liabilities is a contract,
agreement or other arrangement that (i) results or could result in any amount
that is not deductible under Code Section 162, Code Section 280G, Code Section
404 or any similar provision of applicable Law, or (ii) is or could become
subject to Code Section 409A or any similar provision of applicable Law.

 

(m)     None of the Purchased Assets is “tax-exempt bond-financed property” or
“tax-exempt use property,” within the meaning of Code Section 168(h) or any
similar provision of applicable Law.

 

(n)None of the Purchased Assets is (i) required to be treated as being owned by
any other Person pursuant to any provision of applicable Law (including, but not
limited to, the “safe harbor” leasing provisions of Code Section 168(f)(8), as
in effect prior to the repeal of those “safe harbor” leasing provisions), (ii)
subject to Code Section 168(g)(1)(A), or (iii) subject to a disqualified
leaseback or long-term lease agreement as defined in Code Section 467.

 

(o)No Seller is a party to any joint venture, partnership or other agreement,
contract or arrangement (whether written or oral) which could be treated as a
partnership for federal income tax purposes, other than a partnership that is
wholly-owned, directly or indirectly, by such Seller.

 

(p)No Seller (i) has, and has ever had, a permanent establishment in any country
outside the United States and is, and has been, subject to Tax in a jurisdiction
outside the United States, (ii) has entered into a gain recognition agreement
pursuant to Treasury Regulation Section 1.367(a)-8, and (iii) has transferred an
intangible the transfer of which would be subject to the rules of Code Section
367(d).

 

(q)No Seller is or has been a passive foreign investment company within the
meaning of Code Section 1297.  No Seller owns, directly or indirectly, any
equity interest in any Person that is or has ever been a passive foreign
investment company within the meaning of Code Section 1297.

 

(r)No Subsidiary or any other Person in which any Seller owns, directly or
indirectly, any equity interest has any item of income which could constitute
subpart F income within the meaning of Code Section 952 for the period
commencing on the first day of any Straddle Period and ending at the close of
business on the Closing Date.

 

(s)No Subsidiary or any other Person in which any Seller owns, directly or
indirectly, any equity interest holds assets that constitute U.S. property
within the meaning of Code Section 956.

 

(t)No Seller has been classified as other than a partnership or a disregarded
entity for U.S. federal income tax purposes at all times since its formation.

 

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(u)No Seller is a “foreign person” within the meaning of Code Section 1445.

 

5.10Real Property.

 

(a)The Sellers do not own any real property. Schedule 5.10(a) contains a true
and correct description of all leases, licenses, permits, subleases, and
occupancy agreements or arrangements, together with any amendments thereto
effective as of immediately prior to the Closing (the “Real Property Leases”),
with respect to all real property used, occupied or held for use in connection
with the Business (the “Leased Real Property”). No Person has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered its interest
under any Real Property Lease, or subleased all or any part of the space demised
thereby, or granted any right to the possession, use, occupancy or enjoyment of
any Leased Real Property. No option has been exercised under any of such Real
Property Leases, except options whose exercise has been evidenced by a written
document, a true, complete and accurate copy of which has been

delivered to the Purchaser with the corresponding Real Property Lease.  None of
the Sellers nor, to the Knowledge of the Sellers, any of the other parties to
any of the Real Property Leases is in default under any of the Real Property
Leases, and no amount due under any of the Real Property Leases remains unpaid,
no controversy, claim, dispute or disagreement exists between any of the parties
to any of the Real Property Leases, and no event has occurred which with the
passage of time or giving of notice, or both, would constitute a default under
any of the Real Property Leases.

 

(b)The Leased Real Property constitutes all of the land, buildings, structures,
improvements, fixtures and other interests and rights in real property that are
used or occupied by the Sellers in connection with the Business.  The Leased
Real Property has access to public roads and to all utilities necessary for the
operation of the Business as now conducted and proposed to be conducted.  There
is no pending or, to the Knowledge of the Sellers, threatened condemnation of
any part of the Leased Real Property by any Governmental Body.  The Sellers have
not received any notice from any utility company or municipality of any fact or
condition which

could result in the discontinuation of presently available or otherwise
necessary sewer, water, electric, gas telephone or other utilities or services
for the Leased Real Property. All public utilities required for the operation of
the Leased Real Property and necessary for the conduct of the Business are
installed and operating, and all installation and connection charges, to the
Knowledge of the Sellers, are paid in full.  Effective as of immediately prior
to the Closing, the Sellers are in sole possession of the Leased Real Property.

 

(c)To the Knowledge of the Sellers, there are no encroachments upon any of the
parcels comprising the Leased Real Property (other than such encroachments as
would not adversely affect the usability of the Leased Real Property) and no
portion of any improvement encroaches upon any property not included within the
Leased Real Property or upon the area of any easement affecting the Leased Real
Property.

 

(d)       To the Knowledge of the Sellers, the Leased Real Property and fixtures
and improvements thereon are in good operating condition without structural
defects, ordinary wear and tear excepted. All mechanical and other building
systems located on the Leased Real Property are (i) in good operating condition,
and no condition exists requiring material repairs, alterations or corrections,
and (ii) suitable, sufficient and appropriate in all respects for their

 

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current and contemplated uses, ordinary wear and tear excepted.  None of the
improvements located on the Leased Real Property or uses being made of the
Leased Real Property constitute a legal non-conforming use or otherwise require
any special dispensation, variance or special permit under any Law.

 

(e)To the Knowledge of the Sellers, the Leased Real Property is not subject to
zoning, use or building code restrictions that would prohibit, and no state of
facts exists with respect to the Leased Real Property that would prevent, the
continued leasing or use of such Leased Real Property in the Business as now
conducted or proposed to be conducted.  Without limiting the foregoing, to the
Knowledge of the Sellers, there is no pending or proposed Legal Proceeding to
change or redefine the zoning classification of all or any portion of any of the
Leased Real Property.

 

(f)None of the Real Property Leases have been modified, amended or supplemented,
except as specified in Schedule 5.10(a).

 

(g)The landlords under the Real Property Leases have neither given nor received
any written notice of default, which default remains uncured.

 

5.11Tangible Personal Property; Title to and Sufficiency of Assets.

 

(a)Schedule 5.11 sets forth all leases of personal property to which the Sellers
are a party and used or held for use in connection with the Business (“Personal
Property Leases”) and all personal property owned by the Sellers having a book
value in excess of $5,000. True, complete and accurate copies of the Personal
Property Leases, or if any Personal Property Leases are not in writing, true,
complete and accurate descriptions thereof, have been delivered

to the Purchaser.  Each of such Personal Property Leases is in full force and
effect and is valid, binding and enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar Laws affecting creditors’ rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing. The Sellers have not
received any written notice of any default or any event that with notice or
lapse of time, or both, would constitute a default, by any Seller under any of
the Personal Property Leases.

 

(b)The Sellers have good, valid and marketable title to all of the Purchased
Assets, including, without limitation, all assets related to, used in, or
intended for use in, the conduct of the Business or reflected in the Financial
Statements and all assets purchased by the Sellers since the Most Recent Balance
Sheet Date (except for assets reflected in the Financial Statements or acquired
since the Most Recent Balance Sheet Date that have been sold or otherwise
disposed of in the Ordinary Course of Business), free and clear of all
Liens.  All tangible personal property owned by the Sellers or subject to
Personal Property Leases is in good operating condition and repair, ordinary
wear and tear excepted, and is suitable and adequate for the uses for which it
is intended or is being used. The Purchased Assets (i) include all tangible and
intangible assets, properties and rights necessary to conduct the Business
following the Closing Date in the same manner as it is currently conducted, and
as it is currently contemplated to be conducted, and (ii) constitute all of the
tangible and intangible assets, properties and rights of the Sellers other than
the Excluded Assets.  Neither any Principal nor any of its Affiliates

 

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owns any asset or property related to, used in or intended for use in connection
with the Business; provided, however, that, for the avoidance of doubt, to the
extent any Principal or any of its Affiliates does own any such asset or
property, then such asset or property is included in the Purchased Assets and
the representations and warranties in this Article V that apply to (x) the
Sellers shall also be deemed to apply to each Principal and its Affiliates with
respect to such

asset or property or (y) the Purchased Assets shall also be deemed to apply to
such asset or property.

 

5.12Intellectual Property.

 

(a)Schedule 5.12(a) identifies all Intellectual Property (other than widely
available, commercial off-the-shelf third-party Software licensed to the Sellers
on a non- exclusive basis) licensed to the Sellers (the “Licensed Intellectual
Property”).  To the Knowledge of Sellers, each Seller is in full compliance with
all terms and conditions of any Contract, license or sub-license with respect to
any Licensed Intellectual Property and no Seller is in breach or default of any
Contract, license or sub-license in respect of any Licensed Intellectual
Property which could result in the termination of any such Contract, license or
sub-license. With respect

to each item of Licensed Intellectual Property, the license, agreement or
permission covering such Licensed Intellectual Property (each, a “License
Agreement”) is and, following the consummation of the contemplated transaction
will be, legal, valid, binding and enforceable by the Sellers or the Purchaser,
as applicable, against all other parties thereto, and in full force and effect
on identical terms following the consummation of the contemplated transactions,
provided the licensors in each such License Agreement comply with the terms and
conditions of the License Agreement.

 

(b)No Seller has any Patents or applications therefore, or pending applications
for registration of Marks, or registered Copyrights or applications for
registration of Copyrights. Schedule 5.12(b) identifies all Intellectual
Property owned by the Sellers (the “Owned Intellectual Property”), including
all: (i) registered and unregistered Marks (excluding Internet domain names);
(iii) unregistered Copyrights; (iv) registered Internet domain names; (v) trade
names; and (vi) social media pages.  Without limiting the generality of the
foregoing, all assignments from Persons necessary or appropriate to vest
ownership in the Sellers of any Owned Intellectual Property have been obtained
and recorded.  To the Knowledge of the Sellers, all of the other rights within
the Seller IP are valid and subsisting.  No Seller is subject to any

Order that restricts or impairs the use of any Owned Intellectual Property as
currently used in the

Business.

 

(c)The Owned Intellectual Property and the Licensed Intellectual Property
include all Intellectual Property used in the Business and there are no other
items of Intellectual Property that are used in the Business.  Neither the
execution, delivery or performance of this Agreement or any of the other
Transaction Documents nor the consummation of any of the transactions
contemplated hereby or thereby will result in the release, disclosure or
delivery of any Owned Intellectual Property or Licensed Intellectual Property,
by or to any escrow agent or other Person, or in the grant, assignment or
transfer to any other Person of any license or other right to any Owned
Intellectual Property or Licensed Intellectual Property, or in the termination
or modification of (or right to terminate or modify) any Owned Intellectual
Property or Licensed Intellectual Property.

 

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(d)Schedule 5.12(d) identifies each Contract pursuant to which any Person has
been granted any license by any Seller under, or otherwise has received or
acquired from, any Seller any right (whether or not currently exercisable) or
interest in, including the right to use, any Owned Intellectual Property,
including through non-assertion, settlement or similar agreements or otherwise.
Subject to the foregoing Contracts, the Sellers own all right, title and
interest in and to the Owned Intellectual Property, and have the right to use
the Licensed Intellectual Property (subject, in each case, to any applicable
license to the Sellers covering such Licensed Intellectual Property), free and
clear of all Liens.  The Sellers have the sole and exclusive right to bring
actions for infringement or unauthorized use of all of the Owned Intellectual
Property.

 

(e)The Sellers have taken commercially reasonable steps to maintain the
confidentiality of their confidential or proprietary information.

 

(f)No current or former member, stockholder, officer, consultant, manager,
employee or vendor of the Sellers has any ownership claim, ownership right
(whether or not currently exercisable) or ownership interest in or to any Owned
Intellectual Property.

 

(g)The Sellers have taken commercially reasonable steps to protect the Owned
Intellectual Property.  The Sellers have not received any opinion of counsel
(whether internal or external, written or oral) relating to the patentability,
infringement, validity or enforceability of any Owned Intellectual Property. To
the Knowledge of the Sellers, during the past five (5) years, no Person has
infringed, misappropriated or otherwise violated, and no Person is currently
infringing, misappropriating or otherwise violating, any Owned Intellectual
Property or rights of the Sellers in any Licensed Intellectual Property.

 

(h)To the Knowledge of the Sellers, the Sellers have not infringed,
misappropriated or otherwise violated, or is currently infringing,
misappropriating or otherwise violating, any Intellectual Property right of any
other Person; no Legal Proceeding alleging any such infringement,
misappropriation or violation is pending or, to the Knowledge of the Sellers,
threatened against the Sellers; and the use of the Owned Intellectual Property
and of the Licensed Intellectual Property, if used in the Business in accordance
with the terms of the applicable licenses and in the manner currently used, will
not infringe, misappropriate or violate any (x)

Law existing prior to the Closing or (y) right of any Person.

 

(i)No Legal Proceeding is pending or, to the Knowledge of the Sellers,
threatened against the Sellers (i) based upon, challenging or seeking to deny or
restrict the use by the Sellers of any of the Owned Intellectual Property or
Licensed Intellectual Property or challenging the validity, enforceability or
effectiveness thereof; (ii) alleging that the Sellers have infringed,
misappropriated or otherwise violated, or is currently infringing,
misappropriating or otherwise violating, any Intellectual Property right of any
other Person; or (iii) alleging that any of the licenses listed on Schedule
5.12(a) conflicts with the terms of any third-party license or

any other agreement.  The Sellers have not received any written correspondence
or opinion relating to potential infringement, misappropriation or violation (i)
by the Sellers of any Intellectual Property of any Person or (ii) by any Person
of any of the Owned Intellectual Property or the Licensed Intellectual Property.

 

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(j)For the avoidance of doubt, the foregoing representations and warranties
apply with respect to the United States and each foreign jurisdiction in which
the Business is conducted in any manner or in which the Sellers or any licensee
thereof uses, or holds for use, any Seller IP.

 

5.13Material Contracts.

 

(a)       Schedule 5.13(a) sets forth a true, correct and complete list of all
Contracts to which each Seller is a party or by which each Seller, or any of its
assets or properties, is bound that (i) involve payments or receipts by each
Seller in any year in excess of $25,000, (ii)

evidence or relate to indebtedness (including, without limitation, guarantees)
or Liens, (iii) involve the disposition of any significant portion of the assets
or business of any Seller (other than sales of products in the Ordinary Course
of Business) or the acquisition of the assets of business of any other Person
(other than purchases of inventory or components in the Ordinary Course of
Business, (iv) involve any current or former officer, manager, or member of any
Seller or an Affiliate thereof, (v) evidence or relate to any employment,
agency, distribution, dealer or sales relationship, (vi) contain an obligation
of confidentiality with respect to information furnished by any Seller to a
third party or received by any Seller from a third party, were not entered into
in the Ordinary Course of Business and are currently in effect, (vii) are not
terminable without penalty by less than 30 days’ notice (other than as a result
of a breach or a bankruptcy event), (viii) limit or restrict any Seller from
engaging in, or the conduct of, the Business in any manner, (ix) are for the
sale, purchase, license, transfer or development of any Seller’s products or
Intellectual Property (excluding Contracts for the purchase and sale of any
Seller’s products entered into in the Ordinary Course of Business), (x) contain
any provisions requiring any Seller to indemnify any other party (excluding
indemnities contained in Contracts for the purchase or sale of products entered
into in the Ordinary Course of Business), (xi) are

with any Governmental Body, (xii) constitute a license, sub-license,
sponsorship, marketing, joint venture, partnership or similar Contract, (xiii)
involve any powers of attorney with respect to the Business or any Purchased
Asset, or (xiv) are otherwise material to any Seller or the Business
(collectively, the “Material Contracts”).

 

(b)Each Material Contract is a valid, binding and enforceable obligation of

the Sellers party thereto and, to the Knowledge of the Sellers, of the other
party or parties thereto, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting creditors’ rights generally and general principles of equity
(regardless of whether considered in a proceeding at law or in equity), and each
Material Contract is in full force and effect.  Complete and correct copies of
each Material Contract (including all modifications, amendments and supplements
thereto and waivers thereunder) have been made available to the Purchaser.

 

(c)No Seller nor any other party thereto is in breach of or default under any
term of any Material Contract and no event has occurred that with notice or
lapse of time, or both, would constitute a breach of or a default by any Seller
or any other party under any Material Contract.  There are no material disputes
pending or, to the Knowledge of the Sellers, threatened under any Assumed
Contract.

 

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(d)No Seller has received written notice of termination, cancellation or non-
renewal that is currently in effect with respect to any Material Contract and,
to the Knowledge of the Sellers, no other party to a Material Contract plans to
terminate, cancel or not renew any such Material Contract.

 

5.14Employee Benefits Plans.

 

(a)Schedule 5.14(a) lists each “Employee Benefit Plan” (as defined in Section
3(3) of ERISA) and any other employee plan, program, policy, practices,
procedure, arrangement or agreement maintained, contributed to or required to be
contributed to by the Sellers (each, a “Seller Benefit Plan”).  Each Seller
Benefit Plan has been administered in accordance with its terms.  The Benefit
Plans are, and have been operated, in compliance with the applicable provisions
of ERISA, the Code and other applicable Laws.

 

(b)Seller has no obligation to contribute, maintain or sponsor any “employee
pension plans” (as defined in Section 3(3) of ERISA). All contributions,
premiums and benefit payments to or in connection with the Seller Benefit Plans
that are required to have been made as of the date hereof in accordance with the
terms of the Seller Benefit Plans have been timely

made or have been reflected in the Financial Statements. No Seller Benefit Plan
is subject to Title IV of ERISA. No Seller Benefit Plan provides for
post-retirement medical, life insurance or other benefits promised, provided or
otherwise due now or in the future to current, former or retired employees other
than as required by Section 4980B(f) of the Code.

 

(c)No amount required to be paid or payable to or with respect to any employee
or other service provider of the Sellers in connection with the transactions
contemplated hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an “excess parachute
payment” within the meaning of Section 280G of the Code.

 

5.15Labor.

 

(a)(i) To the Knowledge of Sellers, each Seller is in compliance, in all
material respects, with all applicable Laws regarding employment and employment
practices, including, without limitation, all applicable Laws regarding terms
and conditions of employment, health and safety, wages and hours, child labor,
immigration, employment discrimination, equal employment opportunity,
affirmative action, plant closures and layoffs, workers’ compensation, labor
relations, disability rights or benefits, employee leave issues, worker
classification, and unemployment insurance, (ii) since January 1, 2014, no
Seller has received written notice of the intent of any Governmental Body
responsible for the enforcement of any such Laws to conduct

an investigation with respect to or relating to any such Laws, or written notice
that such investigation is in progress, and (iii) no Seller is a party to, or
otherwise bound by, any Order relating to employees or employment practices.

 

(b)No Seller is a party to or bound by any collective bargaining agreement or
similar agreement with any labor organization or is negotiating any such
agreement.  There are no (i) pending unfair labor practice or other labor or
employment charges, complaints, grievances, arbitration proceedings or other
Legal Proceedings against any Seller nor, to the

 

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Knowledge of the Sellers, is any such charge, complaint, grievance, proceeding
or other Legal Proceeding threatened, (ii) labor strikes, disputes, slowdowns,
work stoppages or lockouts that have occurred within the past three (3) years or
that are pending or, to the Knowledge of the Sellers, threatened against any
Seller, and (iii) to the Knowledge of the Sellers, attempts by any employees of
any Seller to unionize or collectively bargain with any Seller. No Seller has
engaged in any unfair labor practice.

 

(c)All compensation, including wages, commissions and bonuses payable to any
employees of the Sellers for services performed on or prior to the date hereof
have been paid in full, will be paid in full by the day of the employee’s
separation, or are included in accrued liabilities to be retained by Sellers,
and there are no outstanding agreements, understandings or commitments of any
Seller with respect to any compensation, commissions or bonuses. To the
Knowledge of each Seller, such Seller has withheld all amounts required by law
or agreement to be withheld from the wages or salaries of employees and such
Seller is not liable for any arrears of any tax or penalties for failure to
comply with the foregoing. All employees classified as exempt under the Fair
Labor Standards Act and state and local wage and hour laws or individuals
providing services as independent contractors or consultants are properly
classified in all

material respects are properly classified in all material respects.

 

(d)Except as disclosed in Schedule 5.15, the Sellers are not party to any
written or other employment, labor or compensation agreements with any
employees.

 

5.16Legal Proceedings.  Except as disclosed in Schedule 5.16, (a) there are no
Legal Proceedings pending or, to the Knowledge of the Sellers, threatened
against the Business, any Seller or any of the Purchased Assets, nor are any of
the foregoing subject to any Order; (b) there are no Legal Proceedings pending
or, to the Knowledge of the Sellers, threatened that are reasonably likely to
prohibit or limit the ability of any Seller to enter into this Agreement or any
of the other Transaction Documents, to consummate any of the transactions
contemplated hereby or thereby or to perform any of its obligations hereunder or
thereunder; and (c) there are no judgments, orders or decrees outstanding
against any Seller or any of its properties or assets.

 

5.17Compliance with Laws; Permits.

 

(a)       Each Seller is in compliance, in all material respects, with all Laws
applicable to any of the Purchased Assets, the Business and its operations. No
Seller has received written notice of the violation of any such Laws.

 

(b)Schedule 5.17 sets forth a true, correct and complete list of all Permits
held by each Seller.  Each Seller has all Permits that are required for the
operation of the Business as currently conducted and as currently contemplated
to be conducted.  All Permits are valid, binding and in full force and
effect.  No Seller is in default or violation (and no event has occurred which,
with notice or the lapse of time, or both, would constitute a default or
violation) of any term, condition or provision of any such Permit.

 

5.18Environmental Matters.

 

(a)(i)The operations of each Seller are in compliance with and have complied
with all applicable Environmental Laws.

 

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(ii)Each Seller has obtained and is in compliance with all Permits (each of
which is listed on Schedule 5.17) and Asbestos Management Plans required by
Environmental Laws, and necessary for the current operation or use of the
Business and the Purchased Assets, and for any Permits that may expire prior to
Closing, each Seller has filed any renewal applications required by
Environmental Laws to ensure the Permits will remain in full force and effect up
until and after Closing.

 

(b)There has been no Release of Hazardous Materials by any Seller at any
location and there are no environmental conditions or circumstances, including,
without limitation, the presence or Release of any Hazardous Substance, on any
Leased Real Property, or any property to which any Hazardous Substances or waste
generated by operations or use of any of its assets by any Seller was
transported or disposed of, (i) relating to, arising out of, or resulting from
failure by any Seller to comply with, any applicable Environmental Law or
Environmental Permit, or from a Release or threatened Release of any Hazardous
Substance into the Environment or (ii) which require cleanup or remediation by
any Seller pursuant to any Environmental Law (collectively, “Environmental
Conditions”).

 

(c)To the Knowledge of the Sellers, no Seller nor any of their predecessors has
designed, manufactured, sold, marketed, installed or distributed products or
other items containing asbestos, urea formaldehyde or polychlorinated biphenyls
(“PCBs”).

 

(d)     No Seller has any Liability under any Environmental Law, nor is it
responsible for or has it assumed any Liability of any other Person under any
Environmental Law, whether by Contract, Real Property Lease, settlement or other
written and legally binding arrangement between or among any Seller and any
other Person, or by operation of Law or otherwise.   No valid and subsisting
Lien arising under or pursuant to any applicable Environmental Law exists
against any Seller or any of the Leased Real Property, the Business or Purchased
Assets.

 

(e)No Seller has received any written information request or other communication
from a Governmental Body and there are no Legal Proceedings pending or, to the
Knowledge of the Sellers, threatened, against any Seller or its predecessors
relating to any violation, or alleged violation of, or Liability under, any
Environmental Law or relating in any way to any Environmental Law, Hazardous
Substance or any Environmental Permit or other authorization of any Governmental
Body required under any Environmental Law, including,

without limitation, (i) any and all claims by Governmental Bodies for
enforcement, investigation, cleanup, removal, response, corrective, remedial,
monitoring, or other actions, damages, fines or penalties pursuant to any
applicable Environmental Law, and (ii) any and all claims by any one

or more Persons seeking damages, contribution, indemnification, cost recovery,
compensation, injunctive or other relief resulting from a Release of any
Hazardous Substance or arising from alleged injury or threat of injury to
health, safety, property, natural resources or the Environment (collectively,
“Environmental Claims”).

 

(f)To the Knowledge of Sellers, there has not been any underground or
aboveground storage tank or other underground storage receptacle or related
piping, or any impoundment or other disposal area, in each case containing any
Hazardous Substance located on, at, or under any Leased Real Property and no
asbestos or PCBs have been used or disposed

 

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of, or have been located at, on, or under any such property, except in
compliance with

Environmental Laws.

 

(g)Each Seller has provided to the Purchaser and its authorized representatives
true and complete copies of all records and files, Permits, Orders,
environmental audits, reports, Contracts and other material environmental
documents, studies, analysis, tests and monitoring in the possession or control
of such Seller concerning the existence of any Hazardous Substance or any other
environmental concern at any Leased Real Property or relating to the Business or
Purchased Assets or concerning compliance by such Seller with, or Liability
under, any Environmental Law.

 

(h)Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will require any notification,
registration, reporting, filing, investigation or remediation under any
Environmental Law.

 

5.19Suppliers and Customers.  Except as set forth on Schedule 5.19, no supplier
that accounted for more than five percent (5%) of the annual purchases of any
Seller in the aggregate since January 1, 2015, no customer that accounted for
more than five percent (5%) of the annual sales of any Seller in the aggregate
since January 1, 2015, and no other supplier or customer material to the
Business or any Seller (including, but not limited to, any supplier who is a
sole available source of supply of any product or service), has terminated or
threatened to terminate its relationship with any Seller, nor has it during the
preceding twelve (12) months decreased or delayed materially or threatened to
decrease or delay materially, its services or supplies to any Seller or its
usage of the services or products of any Seller, and to the Knowledge of the
Sellers, there is no state of facts or events which could reasonably be expected
to form the basis for such a decrease or delay. To the Knowledge of the Sellers,
the consummation of the transactions contemplated by the Transaction Documents
will not adversely affect the business relationship heretofore maintained by any
Seller with any of its suppliers or customers. No Seller is required to provide
any bonding or any other financial security arrangements in connection with any
transactions with any customers or suppliers.

 

5.20Financial Advisors. No Person has acted, directly or indirectly, as a
broker, finder or financial advisor for any Seller in connection with the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment from the

Purchaser in respect thereof.

 

5.21Inventory.  All Inventory, whether or not reflected in the Financial
Statements, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete, damaged, defective or
slow-moving items that have been written off or written

down to fair market value or for which adequate reserves have been established.
All Inventory is owned by the Sellers free and clear of all Liens, and no
Inventory is held on a consignment basis. The quantities of each item of
Inventory (whether raw materials, work-in-process or finished goods) are not
excessive, but are reasonable in the present circumstances of the Sellers.  All
Inventory is (i) of merchantable quality, (ii) suitable for sale under existing
quality control standards and (iii) is in compliance with all applicable
regulations and standards of any Governmental Body, and all beverage inventory
has been stored properly.

 

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5.22Accounts Receivable; Bank Accounts; Books and Records.

 

(a)The Accounts Receivable shown in the Financial Statements provided by the
Sellers pursuant to Section 5.6 (including an accounts receivable aging schedule
for the Business dated as of the Most Recent Balance Sheet Date), or thereafter
acquired by it, (i) have arisen or will arise from the sale of goods or services
in bona fide transactions in the Ordinary Course of Business to Persons not
Affiliated with the Sellers, (ii) constitute only valid, undisputed claims of
the Sellers not subject to claims of set-off or other defenses or counterclaims
other than normal cash discounts accrued in the Ordinary Course of Business, and
(iii) subject to a reserve for bad debts shown on the Most Recent Balance Sheet
or, with respect to Accounts Receivable arising after the Most Recent Balance
Sheet Date, on the accounting records of the Business, are collectible in full
within sixty (60) days after billing.  The Sellers have not received any written
notice from an account debtor stating that any Account Receivable is subject to
any contest, claim or setoff by such account debtor.

 

(b)The books of account and other Books and Records of the Sellers, all of which
have been made available to the Purchaser prior to the Closing Date, are
complete and accurate and have been maintained in accordance with sound business
practice and applicable requirements of Law, except as noted therein.  To the
Knowledge of the Sellers, the books of account and other Books and Records of
the Sellers do not contain any material misstatements, and there are no
incidents of fraud that could cause or result in any such material
misstatements.

 

5.23Transactions With Related Parties.  Except as set forth on Schedule 5.23,
neither any current or former member of any Seller (including, but not limited
to, any Principal), nor any Affiliate of such Person, is currently a party to
any transaction with the Business or the Sellers, including, without limitation,
any Contract providing for the employment of, furnishing of services by, rental
of assets from or to, or otherwise requiring payments to, any such Person. None
of the Purchased Assets include any Contract with, or obligation to provide any
benefit to, any Principal or any of his Affiliates.

 

5.24Gift Cards.  All Gift Cards have been issued and sold without an expiration
date. Other than the Gift Cards, Comps, House Accounts and Promotional
Discounts, the Sellers have no liability in respect of any gift cards, coupons,
discounts or similar liabilities with respect to the Business or the Purchased
Assets.

 

5.25Liquor Licenses.  Schedule 5.25 sets forth a complete list as of the date of
this Agreement of all liquor licenses (including, without limitation, beer and
wine licenses) held or used by each Seller, including the Person in whose name
such license is issued, date of issuance and renewal date (collectively, the
“Liquor Licenses”). Each of the Sellers is in compliance in all material
respects with all applicable state, municipal and other governmental laws,
regulations and rules with respect to the sale of liquor and all alcoholic
beverages and has the right to sell liquor at retail for consumption within each
of the restaurant locations of such Seller, subject to and in accordance with
all applicable provisions of the Liquor Licenses. To the Knowledge of

the Sellers, since January 1, 2017, (i) there have been no Legal Proceedings
brought or threatened to be brought by or before a Governmental Body in respect
of any such Liquor License or the activities of such Seller in connection with
any such Liquor License (or in connection with any other liquor license
previously held or used by such Seller), (ii) no such

 

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Liquor License is subject to any due but unpaid tax obligation owed to a
Governmental Body, the outstanding nature of which would preclude transfer of
such Liquor License from any of the Sellers to the Purchaser, and (iii) no such
Liquor License has been threatened by a Governmental Body to be revoked, limited
or not renewed.

 

5.26Sellers’ Employees.

 

(a)The Sellers have provided to the Purchaser a list of all of the employees of
the Sellers employed as of the date hereof in connection with the Business (by
type or classification) and their respective rates of compensation (including
the portions thereof attributable to bonuses or other extraordinary
compensation), benefits and length of employment, also as of the date hereof.
Sellers’ employees identified on such list as hourly employees or non-
management employees are referred to herein as the “Business Employees” and
Sellers’ employees identified on such list as management employees are referred
to herein as the “Key Business Employees”.

 

(b)To the Knowledge of Sellers, no Key Business Employee has any plans or has
notified Sellers that such employee intends to terminate employment with any
Seller. Except as disclosed to the Purchasers, no Key Business Employees have
indicated that they intend to retire within the next five years.

 

(c)Sellers will provide to Purchaser access to complete copies of all

employee files including but not limited to Business Employee and Key Business
Employee files maintained in electronic or other format as maintained by
Sellers.  Purchaser shall keep all information in the files confidential and use
it only for human resource purposes.

 

5.27Information Security.

 

(a)To the Knowledge of the Sellers, the Business has not suffered a security
breach with respect to any proprietary data or trade secrets in the last
twenty-four (24) months.

 

(b)The Sellers, in respect of the Business, (i) have an informal privacy policy
regarding the collection and use of information that identifies, or could
reasonably be used to identify, any natural persons (including names, addresses,
telephone numbers, email addresses, social security numbers, and/or account
information) (“Personal Information”) and (ii) to the Knowledge of Sellers, are
in compliance, and have complied, with the privacy policies

applicable to the Business, all applicable Laws regarding information privacy
and security and the collection, use, disposal, disclosure, maintenance and
transmission of Personal Information in connection with the Business and, to the
extent applicable, the Payment Card Industry Data Security Standard (PCI
DSS).  No claim or action is pending or threatened in writing against any Seller
relating to its use of Personal Information in the conduct of the
Business.  Neither the execution, delivery or performance of this Agreement or
any Transaction Document nor the consummation of any of the transactions
contemplated hereby will result in any violation of (i) any privacy policies
applicable to the Business or (ii) any agreement of any Seller with respect to
the collection, use, disposal, disclosure, maintenance, and transmission of
Personal Information.

 

5.28Full Disclosure.  No representation or warranty by any Seller in this
Agreement, and no document furnished or to be furnished to the Purchaser
pursuant to this Agreement, or in

 

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connection herewith or with the transactions contemplated hereby, to the
Knowledge of the Sellers, contain or will contain any untrue or misleading
statement of material fact or omits or will omit any material fact necessary to
make the statements contained herein or therein, in light of the circumstances
under which made, not misleading.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER The Purchaser hereby represents and
warrants to the Sellers as follows:

 

6.1Organization and Good Standing.  The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware and has all requisite corporate power and authority to own, lease
and operate its properties and assets and carry on its business.

 

6.2Authorization of Agreement.  The Purchaser has all requisite corporate power
and authority to execute and deliver this Agreement and each other Transaction
Document to which

it is a party in connection with the consummation of the transactions
contemplated by this Agreement, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery by the Purchaser of this Agreement and any
other Transaction Document to which it is a party, the performance of the
Purchaser’s obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Purchaser. This Agreement has been
duly and validly executed and delivered by the Purchaser, and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting
creditors’ rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).

 

6.3Conflicts; Consents of Third Parties.

 

(a)Except as set forth on Schedule 6.3, none of the execution or delivery by the
Purchaser of this Agreement or any other Transaction Document to which it is a
party, the consummation of any of the transactions contemplated hereby or
thereby, or compliance by the Purchaser with any of the provisions hereof or
thereof does or will conflict with, or result in any violation of, or constitute
a breach of or a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, modification or cancellation
under, or result in the creation of any Lien, upon any of the properties or
assets of the Purchaser under, any provision

of (i) the certificate of incorporation, bylaws or other organizational
documents of the Purchaser; (ii) any Contract or Permit to which the Purchaser
is a party or by which the Purchaser or any of its properties or assets is
bound; (iii) any Order of any Governmental Body applicable to the Purchaser or
by which the Purchaser or any of its properties or assets is bound; or (iv) any
applicable Law.

 

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(b)Except as set forth on Schedule 6.3, no consent, waiver, approval, Order,
Permit or authorization of, or declaration, registration or filing with, or
notification to, any Person or Governmental Body is required on the part of the
Purchaser in connection with the execution, delivery or performance of this
Agreement or any other Transaction Document to which it is a party, the
compliance by the Purchaser with any of the provisions hereof or thereof, or the
consummation of any of the transactions contemplated hereby or thereby.

 

6.4Litigation.  There are no Legal Proceedings pending or, to the knowledge of
the Purchaser, threatened that are reasonably likely to prohibit or limit the
ability of the Purchaser to enter into this Agreement or any other Transaction
Document to which it is a party, to consummate any of the transactions
contemplated hereby or thereby or to perform any of its obligations hereunder or
thereunder.

 

6.5Financial Advisors. No Person has acted, directly or indirectly, as a broker,
finder or financial advisor for the Purchaser in connection with the
transactions contemplated by this Agreement. No Person is entitled to any fee or
commission or like payment from the Sellers in respect thereof.

 

ARTICLE VII

 

COVENANTS

 

7.1Conduct of Business Prior to the Closing.  From the date hereof until the
Closing, except as otherwise provided in this Agreement or consented to in
writing by the Purchaser, the Sellers shall (x) conduct the Business in the
Ordinary Course of Business, and (y) use reasonable best efforts to maintain and
preserve intact their respective current Business organization, operations and
franchise and to preserve the rights, franchise, goodwill and relationships of
its employees, customers, lenders, suppliers, regulators and others having
relationships with the Business.  Without limiting the foregoing, from the date
hereof until the Closing Date, each Seller shall:

 

(a)preserve and maintain all Permits required for the conduct of the Business as
currently conducted or the ownership and use of the Purchased Assets;

 

(b)pay the debts, Taxes and other obligations of the Business when due;

 

(c)maintain the properties and assets included in the Purchased Assets in the
same condition as they were on the date of this Agreement, subject to ordinary
wear and tear;

 

(d)not permit any subleases or lease amendments to the Real Property Leases,
without Purchaser’s prior consent, which consent will not be unreasonably
withheld or delayed;

 

(e)continue in full force and effect without modification all insurance
policies, except as required by applicable Law;

 

(f)defend and protect the properties and assets included in the Purchased

Assets from infringement or usurpation;

 

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(g)perform all of its obligations under all Assumed Contracts;

 

(h)maintain the Books and Records in accordance with past practice;

 

(i)comply in all material respects with all Laws applicable to the conduct of
the Business or the ownership and use of the Purchased Assets; and

 

(j)not take or permit any action that would cause any of the changes, events or
conditions described in Section 5.8 to occur.

 

7.2Access to Information.  From the date hereof until the Closing, each Seller
shall (a) permit Representatives of the Purchaser to have access to all
premises, properties, Books and Records, Contracts, other records and documents,
and personnel, relating to the Business, (b) furnish the Purchaser and its
Representatives with such financial, operating and other data and information
related to the Business as the Purchaser or any of its Representatives may
reasonably request, and (c) instruct Representatives of each Seller to cooperate
with the Purchaser in its investigation of the Business.

 

7.3Exclusivity.

 

(a)From the date hereof until the Closing (the “Exclusivity Period”), no Seller
or Principal shall (i) authorize, direct or permit any of its or their
respective Representatives or Affiliates to take any action to directly or
indirectly solicit, initiate, seek, encourage, facilitate, approve, endorse,
recommend or respond to any inquiry, proposal, or offer (whether formal or
informal, written, oral or otherwise) from, or participate in any discussions or
negotiations with, any third party regarding any (A) direct or indirect
acquisition or sale of any Seller in whole or in part, (B) merger,
consolidation, reorganization, recapitalization, liquidation, dissolution or
other business combination or extraordinary corporate transaction involving any
Seller, (C) acquisition, disposition, or listing on any securities exchange of
any portion of the membership interests or voting power of any Seller (whether
by sale, assignment, issuance, proxy, pledge, encumbrance or otherwise, other
than the issuance of membership interests of any Seller upon exercise or
conversion of options, warrants or other equity-based securities issued prior to
the date of this Agreement), (D) acquisition or disposition of any material
asset or material portion of the assets of any Seller (whether by sale,
assignment, option, license, pledge, encumbrance or otherwise, other than bona
fide sales and nonexclusive licenses of products in

the Ordinary Course of Business) (any such transaction described in clauses (A),
(B), (C) or (D) of this Section 7.3(a)(i), a “Third Party Acquisition”); (ii)
furnish any non-public information concerning the business, properties or assets
of any Seller or division of any Seller to any other Person (other than the
Purchaser or its Representatives); or (iii) engage in discussions or
negotiations with any Person (other than the Purchaser and its Representatives)
concerning any Third Party Acquisition.  Each Seller agrees that any such
discussions or negotiations in progress as of the date of this Agreement shall
be immediately terminated and that in no event shall any Seller approve, accept
or enter into an agreement concerning any Third Party Acquisition during the
Exclusivity Period. During the Exclusivity Period, no Seller or Principal shall
authorize, direct or cause any of their respective Representative or Affiliates
to continue or participate in any negotiations or discussions with any Person
for the purpose of effecting an acquisition, joint venture with or strategic
investment in any other Person or business.

 

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(b)Each Seller shall immediately notify any Person with whom or with which
discussions or negotiations of the nature described in Section 7.3(a) are
pending as of the date hereof that such Seller is terminating such discussions
or negotiations. If any Seller receives any inquiry, proposal or offer of the
nature described in Section 7.3(a), such Seller shall, within one (1) day after
such receipt, notify the Purchaser of such inquiry, proposal or offer, including
the identity of the other party and the terms of such inquiry, proposal or
offer.

 

(c)Each Seller agrees that the rights and remedies for noncompliance with this
Section 7.3 shall include having such provision specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach shall cause irreparable injury to the Purchaser and
that money damages would not provide an adequate remedy to the Purchaser.

 

7.4Notice of Certain Events.

 

(a)From the date hereof until the Closing, each Seller and the Principal shall
promptly notify the Purchaser in writing of:

 

(ii)any fact, circumstance, event or action the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, (B) has resulted in, or could
reasonably result in, any representation or warranty made by any Seller
hereunder not being true and correct or (C) has resulted in, or could reasonably
be expected to result in, the failure of any of the conditions set forth in
Section 8.1 to be satisfied;

 

(iii)any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;

 

(iv)any notice or other communication from any Governmental Body in connection
with the transactions contemplated by this Agreement;

 

(v)any Legal Proceedings commenced or, to each Seller’s Knowledge, threatened
against, relating to or involving or otherwise affecting the Business, the
Purchased Assets or the Assumed Liabilities that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
5.16 or that relates to the consummation of the transactions contemplated by
this Agreement; and

 

(vi)the occurrence of any data breach or compromise of any of the

Seller’s information security systems.

 

(b)The Purchaser’s receipt of information pursuant to this Section 7.4 shall not
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by any Seller in this Agreement and shall not be deemed
to amend or supplement the Schedules.

 

7.5Governmental and Third-Party Notices and Consents.

 

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(a)Each party shall use its reasonable best efforts to obtain or caused to be
obtained, at its expense, all waivers, permits, consents, approvals or other
authorizations from Governmental Bodies, and to effect all registrations,
filings and notices with or to Governmental Bodies, as may be required for such
party to consummate the transactions contemplated by this Agreement and to
otherwise comply with all applicable Laws in connection with the consummation of
the transactions contemplated by this Agreement.

 

(b)Each Seller and the Principal shall use their respective reasonable best
efforts to give all notices to third parties in connection with and obtain all
Required Consents.

 

7.6Closing Efforts.  Each party shall use its reasonable best efforts to take
all actions and do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including using its reasonable best
efforts to cause (i) its respective representations and warranties to remain
true, correct and complete in all material respects through the Closing Date and
(ii) the conditions to the obligations of the other party to consummate the
transactions contemplated by this Agreement to be satisfied.

 

7.7Further Assurances.

 

(a)At any time or from time to time after the Closing, at the request of the
Purchaser and without further consideration, each Seller agrees to execute and
deliver to the Purchaser any further documents or instruments and perform any
further acts that may reasonably be deemed necessary, appropriate or advisable
by the Purchaser to vest, record, perfect, support and/or confirm the rights
herein conveyed, or intended so to be, with respect to any of the Purchased
Assets.  Nothing herein shall be deemed a waiver by the Purchaser of their right
to receive at the Closing an effective assignment of such rights by each Seller
as otherwise set forth in this Agreement.

 

(b)After the Closing, at the request of the Purchaser and without further
consideration, each Seller agrees to use its reasonable best efforts to assist
the Purchaser in hiring those former employees of each Seller specified by the
Purchaser.

 

7.8Confidentiality.  Each Seller and the Principal acknowledge that it and its
respective Affiliates possess and may continue to possess after the Closing
knowledge of confidential and valuable business information relating to the
Business and the Purchased Assets not generally known by or available to the
public and agrees, and shall cause its respective Affiliates, at all times (a)
to keep confidential all such information, (b) not to use such confidential
information on its own behalf (except in connection with the transactions
contemplated hereby) or on behalf of any other Person, other than the Purchaser
or the Purchaser’s Affiliates, and (c) not to disclose such confidential
information to any third party (other than to each Seller’s counsel, accountants
and other advisors in connection with the transactions contemplated hereby)
without the Purchaser’s prior written approval; provided, however, that no
Seller or Principal shall have any such obligations with respect to confidential
information that has become a matter of public knowledge or has been or is
hereafter publicly disclosed, in any case through no fault of any Seller, any
Principal or any of their respective Affiliates or representatives.

 

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7.9Preservation of Records. The Purchaser shall have the right for a period of
seven (7) years following the Closing Date to have reasonable access to those
books, records and accounts, including financial and accounting records, tax
records, correspondence, production records, employment records and other
records that are retained by each Seller pursuant to the terms of this Agreement
to the extent that any of the foregoing is needed by the Purchaser for the
purpose of conducting the Business after the Closing and complying with its
obligations under applicable securities, tax, environmental, employment or other
Laws. Neither the Purchaser nor the Sellers shall destroy any such books,
records or accounts retained by it without first

providing the other party with the opportunity to obtain or copy such books,
records, or accounts at such other party’s expense. Promptly upon request by the
Purchaser made at any time following the Closing Date, each Seller shall
authorize the release to the Purchaser of all files pertaining to each Seller,
the Purchased Assets or the Business held by any federal, state, county or local
authorities, agencies or instrumentalities.

 

7.10Publicity.  None of the Sellers, any Principal or any of their respective
Affiliates shall issue any press release or public announcement concerning this
Agreement or any of the transactions contemplated hereby or make any other
public disclosure containing the terms of this Agreement without Purchaser’s
prior consent, which consent shall not be unreasonably

withheld or delayed.  The parties acknowledge that the Purchaser will be
required to make filings with the Securities and Exchange Commission disclosing
the terms of this Agreement and the transactions contemplated thereby.

 

7.11Collection of Receivables.  Following the Closing, if the Purchaser or its
Affiliate receives or collects any funds relating to any Excluded Asset, the
Purchaser or its Affiliate shall remit any such funds to the Sellers within five
(5) Business Days after its receipt thereof.

Further, the Purchaser and the Sellers agree to use their reasonable best
efforts to cooperate in notifying customers, or prior customers, of the Business
to make all payments in connection with the Business directly to the Purchaser
(except as to any Excluded Asset) and shall otherwise direct correspondence and
inquiries relating to the Business to the Purchaser. All payments will be
applied to the oldest accounts receivable unless the payor specifically noted
where to apply them.

 

7.12Tax Matters.

 

(a)Each Seller shall pay, when due, all transfer, documentary, sales, use,
stamp, registration and other similar Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with the consummation of any of the transactions
contemplated by this Agreement and shall, at its own expense, file all necessary
Tax Returns and other documentation with respect to such Taxes, fees and
charges.

 

(b)Following the Closing, the Sellers and the Purchaser shall, as reasonably
requested by the other: (i) assist the other party in preparing any Tax Returns
relating to any Business which such other party is responsible for preparing and
filing; (ii) cooperate fully in preparing for any Tax audit of, or dispute with,
any Taxing Authority regarding, and any Legal Proceeding relating to, liability
for Taxes, in the preparation or conduct of any Legal Proceeding or
investigation of claims, and in connection with the preparation of financial
statements or other

 

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documents to be filed with any Taxing Authority, in each case with respect to
the Business; and (iii) make available to the other party, as reasonably
requested, and to any Taxing Authority all information, records, and documents
relating to Taxes relating to the Business.

 

(c)All real property Taxes, personal property Taxes and similar ad valorem
obligations, if any, levied on the Business or the Purchased Assets for a
Straddle Period, whether or not imposed or assessed before or after the Closing
Date, shall be apportioned between the Purchaser and the Sellers based on the
number of days of such taxable period included in the taxable period prior to
the Closing Date and the number of days of such taxable period after the Closing
Date.  The Sellers shall be liable for the proportionate amount of such Taxes
that is attributable to the taxable period prior to the Closing Date, and the
Purchaser shall be liable for the proportionate amount of such Taxes that is
attributable to such taxable period after the Closing Date.

 

7.13Employees.

 

(a)The employment of all employees of Sellers employed in connection with the
Purchased Assets will be terminated by Sellers as of the later of (i) the
Closing Date or (ii) the date that is sixty (60) days following the delivery of
the statutory notice required under the Hawaii Dislocated Workers Act. Purchaser
will offer employment without loss of seniority to any or all eligible employees
of Sellers employed in connection with the Purchased Assets as listed on a
schedule mutually agreed to between the Purchaser and Sellers, which schedule
shall include all employees of Sellers employed on connection with the Purchased
Assets (except the employees of Desert Island Restaurants, L.L.C.) as of the
Closing Date. With respect to those employees of Sellers who accept the offer of
employment with Purchaser, Purchaser shall not take any action during the ninety
(90) day period following the Closing Date which would constitute a plant
closing or mass layoff (as those terms are defined in the Worker Adjustment and
Retraining Notification (“WARN”) Act).  Further, Sellers shall not within ninety
(90) days of the Closing Date, effectuate an “employment loss”, “plant closing”
or “mass layoff,” as those

terms are defined in the WARN Act or any action which would constitute a
“closing, divestiture, partial closing, or relocation” as those terms are
defined in the Hawaii Dislocated Workers Act, affecting in whole or in part any
of the Restaurants.  The Purchaser shall not assume any of Sellers’s employment
Liabilities that have accrued on or before the Closing Date, including without
limitation unpaid FICA, FUTA, unemployment Tax, pension or profit-sharing plan
contributions, health and welfare benefits, employee fringe benefits,
Liabilities under the WARN Act and Hawaii’s plant closing and displaced workers’
laws, severance benefits, bonuses, vacation time or pay or incentive programs of
any type, nor shall Purchaser acquire any interest

in or obligation under any pension, profit sharing, retirement or other plan of
Sellers. Further, Sellers shall remain liable for all employment Liabilities
arising out of claims alleging discrimination, harassment, retaliation, failure
to pay wages or provide benefits, unlawful termination, misclassification of
employees or any other violation of federal, state or local law filed,
threatened, or otherwise pursued by Sellers’ employees prior to the Closing Date
or based on events that arose prior to the Closing Date.  Sellers shall retain
all severance obligations, if any, to its employees. Sellers shall retain all
Liabilities relating to any Employee Benefit Plan. Notwithstanding the
foregoing, Purchaser shall credit each employee it hires with their past
employment with Sellers for purposes of determining under Purchaser’s policies
any vacation,

 

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sick leave and other paid time off, if any.  Purchaser shall be solely
responsible for any liability for accrued benefits for such employees, if
applicable, from and after the Closing Date.

 

(b)Sellers or Sellers’ ERISA Affiliate shall maintain a Health Plan after the
Closing Date and provide continuation of health coverage pursuant to COBRA for
all M&A Qualified Beneficiaries. “M&A Qualified Beneficiaries” means each
individual who is a “qualified beneficiary” whose “qualifying event” occurred
prior to or in connection with the sale of the Purchased Assets and who is, or
whose qualifying event occurred in connection with, a covered employee whose
last employment prior to the qualifying event was associated with the Purchased
Assets being sold. (The terms within quotes are as defined in COBRA and its
related regulations). On the Closing Date, all Business Employees and Key
Business Employees hired by Purchaser shall become employees of Purchaser and
not of Sellers.

 

(c)Purchaser shall cooperate with Sellers in making any notices required by the
WARN Act or other applicable federal or state laws.

 

(d)Purchaser shall notify Sellers regarding which Business Employees and Key
Business Employees have been employed by Purchaser within ten (10) days
following the Closing Date. Purchaser shall send to the appropriate Social
Security Administration office a duly completed Form W-3 and accompanying copies
of the duly completed Forms W-2. Purchaser shall properly prepare and file a
final Form 941 and Schedule D (Form 941) with respect to the calendar year in
which the Closing Date occurs.

 

Sellers shall furnish to Purchaser the Forms W-4 and W-5 of each Business
Employee and Key Business Employee that Sellers are timely notified is employed
by Purchaser for the portion of the calendar year up to and including the
Closing Date. It is the intent of the parties hereto that the obligations of
Sellers and Purchaser under this Section 7.13 shall be carried out in accordance
with Sections 5 and 6 of Revenue Procedure 2004-53. Sellers shall remain
responsible for Form W-2 reporting obligations for those Business Employees and
Key Business Employees, if any, who do not become employees of Purchaser.

 

(e)Purchaser and Sellers acknowledge that as of the Closing Date they will enter
into the DIR Management Agreement, pursuant to which Sellers shall provide
Purchaser with the services of certain of its employees to assist Purchaser in
the transition period following the Closing Date.

 

7.14Non-Assignable Contracts and Permits and Liquor Licenses.

 

(a)Nothing in this Agreement shall be construed as an attempt to assign to
Purchaser any Contract or Permit which by applicable law or its terms is
non-assignable or the assignment of which would constitute a violation of law,
contract, commitment, or other agreement. To the Knowledge of Sellers, no
Contract or Permit is non-assignable or would, in the event it were assigned,
constitute a violation of any law, contract, commitment or other agreement,
except for the food establishment permit issued by the Department of Health of
the State of Hawaii which is non-assignable and Purchaser must apply for and
secure its own food establishment permit.

 

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(b)If, as of the Closing Date, an attempted assignment of any non-Material
Contract or Permit (other than a Liquor License) would be ineffective or would
affect Purchaser’s rights thereunder so that Purchaser would not in fact receive
all such rights (the “Non-assigned Contracts and Permits”), then such failure
shall not affect the Closing except as hereinafter set forth.  Sellers must
obtain the written approval of the applicable Liquor

Commissions of each county in which the Restaurants are located in connection
with the transfer of the Liquor Licenses into Purchaser’s name as licensee. If,
and so long after the Closing Date as, such assignment shall not have been made
or a temporary liquor license not issued to Purchaser, Sellers shall faithfully
comply with the provisions of the Management Services Agreement in relation to
the sale and consumption of alcoholic beverages at the affected Restaurants.

 

(c)Nothing in this Section 7.14 shall derogate from the parties’ obligations
under Section 7.6.

 

7.15Continuing Existence of Sellers.  Sellers shall maintain their limited
liability company existence for a period of not less than sixty (60) months
after the Closing Date.

 

7.16Post-Closing Audited Financial Statements.  To the extent the Purchaser is
required under any applicable Laws to file or furnish any audited financial
statements prepared in accordance with GAAP to any Governmental Body, including
but not limited to the Securities

and Exchange Commission, the Sellers shall cooperate in good faith (including
making available appropriate employees and outside accountants and providing
relevant information and access to relevant information), during normal business
hours and upon reasonable advance notice, with Purchaser’s preparation within
sixty (60) days after the Closing, at Purchaser’s expense, of audited financial
statements (prepared in accordance with GAAP and Securities Exchange Act Reg.
S-X) for the operations of the Business for the fiscal periods ended December
31, 2015 and December 31, 2016, together with a report on such financial
information by the PCAOB registered accounting firm thereon.

 

7.17Gift Cards.  After the Closing Date it is contemplated that Gift Cards,
House Accounts, Comps and Promotional Discounts sold or issued by Sellers prior
to the Closing Date and which are not redeemed prior to the Closing Date will be
presented to Purchaser for redemption. Following the Closing Date, Purchaser
shall recognize and honor such Gift Cards, House Accounts, Comps and Promotional
Discounts upon presentation. Subject to this Section

7.17 and the Gift Card Escrow and Reimbursement Agreement, for a period of
eighteen (18) months following the Closing Date (the “Gift Card Liability
Period”), Sellers shall reimburse and indemnify Purchaser for any such amount in
accordance with Section 9.2 hereof. Sellers and Purchaser shall enter into the
Gift Card Escrow and Reimbursement Agreement to provide for a cash escrow in the
amount provided therein and such agreement will have a term equal to the

Gift Card Liability Period. Following the expiration of the Gift Card Liability
Period, the Gift Card Escrow Agent shall deliver to Sellers the remaining
balance of the Gift Card Escrow Account in accordance with the Gift Card Escrow
and Reimbursement Agreement. Disbursements to Purchaser in connection with the
redemption of Gift Cards, House Accounts,

Comps and Promotional Discounts during the period of the Gift Card Escrow
Account shall be in accordance with the terms, and subject to the conditions,
set forth in the Gift Card Escrow and Reimbursement Agreement.

 

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7.18Redemption of Gift Cards.  Following the expiration of the Gift Card
Liability Period, Purchaser shall continue to honor any Gift Cards issued by
Sellers prior to the Closing Date and presented to Purchaser for redemption,
subject to Section 7.17 above.

 

7.19Non-Competition and Non-Solicitation.  Both Desert Islands Restaurants,
L.L.C and W. Randall Schoch will execute an agreement not to compete in the form
attached hereto as Exhibit F and Exhibit G, respectively.

 

7.20Real Property Lease Notices.  Sellers will provide the Purchaser with copies
of all notices from any landlord under each Real Property Lease within three (3)
business days of receipt of such notice and vice versa.

 

7.21Report of Bulk Sale or Transfer; Tax Clearance Certificates.  Purchaser and
each Seller acknowledge the allocation of the Purchase Price is required to be
set forth in the Report of Bulk Sale or Transfer required under Section 237-43
of the Hawai‘i Revised Statutes (the

“Bulk Sale Tax Report”), the form of which is attached hereto as Schedule
7.21.  The allocations set forth in the Bulk State Tax Report, or in any other
report required by applicable law that requires the Purchase Price to be
allocated among portions of the Purchased Assets and/or among the Sellers shall
conform to the Purchase Price Allocation as determined by Section 3.4— Purchase
Price Allocation.  Not later than ten (10) Business Days prior to the Closing
Date,

Seller shall file with the State of Hawaiʻi Department of Taxation the Bulk Sale
Tax Report and a special Hawai‘i general excise Tax Return for the Taxes due for
the sale of inventory, pay all Taxes that are payable in connection with the
filing of such return and file such returns and pay any other Taxes, interest
and penalties, if any, as may be required to cause the Department of Taxation to
issue the certificate that said Bulk Sales Tax Report has been filed and that
all taxes, penalties and interest due on the date thereof have been paid, and to
deliver the filed-stamped

report and certification to Purchaser and Seller at the Closing.  Seller and
Purchaser agree that

the Closing Date shall be adjourned as necessary to permit delivery of such
report and certificate issued by the Department of Taxation at Closing.

 

7.22Survivability.  The provisions of this Article VII (except for Section 7.21)
shall survive the Closing Date.

 

ARTICLE VIII CONDITIONS TO CLOSING

8.1Conditions to Obligations of the Purchaser.  The obligation of the Purchaser
to

consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or wavier by the Purchaser) of the following additional
conditions:

 

(a)Other than the representations and warranties of the Sellers and the
Principal contained in Section 5.1, Section 5.2, Section 5.6 and Section 5.20,
the representations and warranties of the Sellers and the Principal set forth in
this Agreement, the other Transaction Documents and any certificate or other
writing delivered pursuant hereto shall be true and correct in all respects (in
the case of any representation or warranty qualified by materiality or Material
Adverse Effect) or in all material respects (in the case of any representation
or warranty not

 

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qualified by materiality or Material Adverse Effect) on and as of the date
hereof and on and as of the Closing Date with the same effect as though made at
and as of such date (except those representations and warranties that address
matters only as of a specified date, the accuracy of which shall be determined
as of that specified date).  The representations and warranties of the Sellers
and the Principal contained in Section 5.1, Section 5.2, Section 5.6 and Section
5.20 shall be true and correct in all respects on and as of the date hereof and
on and as of the Closing Date with the same effect as though made at and as of
such date (except those representations and warranties that address matters only
as of a specified date, the accuracy of which shall be determined as of that
specified date in all respects).

 

(b)The Sellers and the Principal shall have duly performed and complied in all
material respects with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be performed or
complied with by it as of or prior to the Closing Date.

 

(c)The Sellers and the Principal shall have obtained at their own expense (and
shall have provided executed copies thereof to the Purchaser) all Required
Consents, all of which shall be in full force and effect.

 

(d)No Legal Proceeding (i) challenging or seeking to prevent the consummation of
the transactions contemplated by this Agreement, or (ii) that would cause the
transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) that would affect adversely the right of the Purchaser to
own, operate or control any of the Purchased Assets, or to conduct the Business
as currently conducted, following the Closing, and no such judgment, order,
decree, stipulation or injunction shall be in effect.

 

(e)No Material Adverse Effect shall have occurred, and no event or circumstance
shall have occurred or arisen that would reasonably be expected to result in a
Material Adverse Effect.

 

(f)No data breach or compromise of any Seller’s information security systems
shall have occurred.

 

(g)The Sellers and the Principal shall have duly executed and delivered each
Transaction Document (other than this Agreement) to which it is a party and such
other documents or deliverables required of it in connection with the Closing
under Section 4.2.

 

(h)       The Purchaser shall have received all Permits that are necessary for
it to conduct the Business as conducted by the Sellers as of the Closing Date,
except for the Liquor Licenses which will be transferred by Sellers to Purchaser
after the Closing Date.

 

(i)The Sellers shall have delivered to the Purchaser payoff letters with respect
to all secured indebtedness of the Sellers and documents evidencing the release
or termination of all Liens on the Purchased Assets, and copies of UCC
termination statements to be filed upon the Closing with respect to all UCC
financing statement evidencing Liens.

 

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(j)The Sellers shall have terminated the Franchise Agreements and delivered
evidence of such terminations to the Purchaser, provided Purchaser shall cause
the franchisor to enter into such termination agreements.

 

(k)The Purchaser shall have received from the Sellers the results of an
inventory count of the Business as of the date immediately prior to the Closing
Date.

 

8.2Conditions to Obligations of the Sellers.  The obligation of the Sellers to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or wavier by the Sellers) of the following additional conditions:

 

(a)Other than the representations and warranties of the Purchaser contained in
Section 6.1, Section 6.2 and Section 6.5, the representations and warranties of
the Purchaser set forth in this Agreement, the other Transaction Documents and
any certificate or other writing delivered pursuant hereto shall be true and
correct in all respects (in the case of any representation or warranty qualified
by materiality or Material Adverse Effect) or in all material respects (in the
case of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the Closing Date
with the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a specified date,
the accuracy of which shall be determined as of that specified date).  The
representations and warranties of the Purchaser contained in Section 6.1,
Section 6.2 and Section 6.5 shall be true and correct in all respects on and as
of the date hereof and on and as of the Closing Date with the same effect as
though made at and as of such date (except those representations and warranties
that address matters only as of a specified date, the accuracy of which shall be
determined as of that specified date in all respects).

 

(b)The Purchaser shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by this Agreement and
each of the other Transaction Documents to be performed or complied with by it
as of or prior to the Closing Date.

 

(c)No Legal Proceeding (i) challenging or seeking to prevent the consummation of
the transactions contemplated by this Agreement, or (ii) that would cause the
transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) that would affect adversely the right of the Purchaser to
own, operate or control any of the Purchased Assets, or to conduct the Business
as currently conducted, following the Closing, and no such judgment, order,
decree, stipulation or injunction shall be in effect.

 

(d)The Purchaser shall have duly executed and delivered each Transaction
Document (other than this Agreement) and such other documents or deliverables
required of it in connection with the Closing under Section 4.2.

 

(e)The Purchaser shall have paid Sellers the Purchase Price.

 

(f)The Purchaser shall have received from the Sellers the results of an
inventory count of the Business as of the date immediately prior to the Closing
Date.

 

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ARTICLE IX INDEMNIFICATION

9.1Survival.  The representations and warranties of the parties contained in
this

Agreement shall survive for eighteen (18) months after the Closing Date;
provided that the representations and warranties contained in (a) Section 5.1
(Organization and Good Standing), Section 5.2 (Authorization of Agreement),
Section 5.7 (Undisclosed Liabilities), Section 5.11(b) (Title to and Sufficiency
of Assets) and Section 5.21 (Financial Advisors) shall survive indefinitely, and
(b) Section 5.9 (Taxes), Section 5.14 (Employee Benefit Plans) and Section

5.18 (Environmental Matters) (together with the representations and warranties
described in clause (a) of this Section 9.1, each, a “Fundamental
Representation” and collectively, the “Fundamental Representations”) shall
survive for the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation or extension thereof) plus sixty (60) days.
Notwithstanding the foregoing, if a written claim or written notice is given
under this Article IX with respect to any representation or warranty prior to
the expiration of the applicable survival period, the claim with respect to such
representation or warranty shall continue until such claim is finally resolved.

 

9.2Indemnification by the Sellers and the Principal. Subject to Section 9.5
hereof, the Sellers and the Principal, jointly and severally, hereby agree to
reimburse, defend, indemnify and hold harmless the Purchaser and its Affiliates
and their respective directors, officers, employees, stockholders, members,
managers, partners, agents, attorneys, representatives, successors and permitted
assigns (collectively, the “Purchaser Indemnified Parties”) from and against any
and all losses, Liabilities, fines, damages, Taxes and Expenses (individually, a
“Loss” and, collectively, “Losses”) relating to, based upon, resulting from or
arising out of:

 

(a)any inaccuracy or breach of any of the representations or warranties made by
any Seller, the Principal, or both, in this Agreement or any of the other
Transaction Documents;

 

(b)any breach of or failure to perform any covenant or agreement made by any
Seller or the Principal in this Agreement or any of the other Transaction
Documents;

 

(c)the ownership, use or operation of any of the assets or properties of any
Seller (including any of the Purchased Asset) or the Business prior to the
Closing, including but not limited to any claims under the Environmental Laws or
the Release of Hazardous Materials which arise from events or circumstances
prior to the Closing;

 

(d)any of the Excluded Assets or Excluded Liabilities;

 

(e)any and all Taxes (i) relating to any Pre-Closing Tax Period with respect to
the Sellers, the Business or any of the Purchased Assets, (ii) relating to the
portion of any Straddle Period ending on and including the Closing Date with
respect to the Sellers, the

Business or any of the Purchased Assets, (iii) any other Taxes of the Sellers or
any of their equity holders or Affiliates, including any Taxes that arise in
connection with the execution and

delivery of this Agreement or the consummation of any of the transactions
contemplated hereby

 

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(including, without limitation, all transfer, documentary, sales, use, stamp,
registration and other similar Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest));

 

(f)any Environmental Claim or the investigation, remediation or correction of
any Environmental Condition caused by, relating to or arising out of (i) any
condition prior to the Closing at the Leased Real Property or any property
previously owned, leased or operated by any Seller or any of its respective
predecessors in interest, as applicable; and (ii) the operations prior to the
Closing of any Seller or any of its predecessors in interest, as applicable,
including arising out of the disposal, migration, Release or threatened Release
of any Hazardous Substance owned, controlled or possessed by any Seller or any
of its predecessors in interest, as applicable;

 

(g)any failure of the Sellers or any of their predecessors in interest, as
applicable, to comply with any Environmental Law prior to the Closing, including
the installation of any pollution control equipment or other equipment to bring
the Business or Purchased Assets into compliance with all Environmental Laws;

 

(h)any Liability arising under any Environmental Law assumed by the Sellers or
any of its predecessors in interest, as applicable, prior to the Closing
pursuant to the terms of any Contract, Real Property Lease, settlement or other
written and legally binding arrangement between or among the Sellers or any of
its predecessors in interest, as applicable, and any other Person;

 

(i)any matter or Seller Benefit Plan disclosed or required to be disclosed in

Schedule 5.14(a) or Schedule 5.16;

 

(j)100% of the amount of any Gift Cards issued by the Sellers prior to the

Closing Date and presented to Purchaser for redemption during the Gift Card
Liability Period;

 

(k)any and all employment Liabilities arising out of claims alleging
discrimination, harassment, retaliation, failure to pay wages or provide
benefits, unlawful termination, misclassification of employees, or any other
violation of federal, state or local law filed, threatened, or otherwise pursued
by Sellers’ employees prior to the Closing Date or based on events that arose
prior to the Closing Date; or

 

(l)any data breach or compromise of any Seller’s information security systems
that occurred prior to the Closing, regardless of whether any Seller was aware
of any data breach or compromise of its information security systems prior to or
after the Closing; provided, however, that the Purchaser Indemnified Parties’
right to indemnification under this Section 9.2(l) shall expire after eighteen
months following the Closing Date.

 

The foregoing agreement to indemnify shall not include any Loss solely resulting
from a

Purchaser Indemnified Party’s willful misconduct.

 

9.3Indemnification by Purchaser.  Subject to Section 9.5 hereof, the Purchaser

hereby agrees to reimburse, defend, indemnify and hold harmless the Sellers and
their respective directors, officers, employees, stockholders, members,
managers, partners, agents, attorneys,

 

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representatives, successors and permitted assigns (collectively, the “Seller
Indemnified Parties”)

from and against any and all Losses relating to, based upon, resulting from or
arising out of:

 

(a)any inaccuracy or breach of any of the representations or warranties made by
the Purchaser in this Agreement or any of the other Transaction Documents;

 

(b)any breach of or failure to perform any covenant or agreement made by the
Purchaser in this Agreement or any of the other Transaction Documents;

 

(c)any of the Assumed Liabilities; or

 

(d)any Liability relating to the Business arising from and after the Closing
Date, except to the extent expressly covered by the Sellers’ and Principal’s
indemnification obligations under Section 9.2.

 

The foregoing agreement to indemnify shall not include any Loss solely resulting
from a Seller

Indemnified Party’s willful misconduct.

 

9.4Indemnification Procedures.

 

(a)In the event that any Legal Proceedings shall be instituted, or that any
claim shall be asserted, by any Person not party to this Agreement in respect of
an Indemnification Claim, the party seeking indemnification (the “Indemnified
Party”) shall promptly cause written notice of the assertion of any
Indemnification Claim of which it has knowledge that is covered by this
indemnity to be delivered to the party from whom indemnification is sought (the
“Indemnifying Party”); provided that no delay on the part of the Indemnified
Party in giving any such notice shall relieve the Indemnifying Party of any
indemnification obligation hereunder unless (and then solely to the extent that)
the Indemnifying Party is materially prejudiced by such delay. The Indemnifying
Party shall have the right, at its sole option and expense, to engage counsel of
its choice, which must be reasonably satisfactory to the Indemnified Party, to
defend the Indemnified Party against any Indemnification Claim and if the
Indemnifying Party elects to defend against any Indemnification Claim, it shall
within twenty (20) Business Days (or sooner, if the nature of the
Indemnification Claim so requires)

(the “Dispute Period”) notify the Indemnified Party of its intent to do so. If
the Indemnifying Party does not elect within the Dispute Period to defend the
Indemnified Party against any Indemnification Claim, the Indemnified Party may
defend against such Indemnification Claim. If the Indemnifying Party elects to
defend the Indemnified Party against any Indemnification Claim, (i) the
Indemnifying Party shall use its commercially reasonable efforts to defend and

protect the interests of the Indemnified Party with respect to such
Indemnification Claim, (ii) the Indemnified Party, prior to or during the period
in which the Indemnifying Party assumes the defense of such matter, may take
such reasonable actions as the Indemnified Party deems necessary to preserve any
and all rights with respect to such matter, without such actions being construed
as a waiver of the Indemnified Party’s rights to defense and indemnification
pursuant to this Agreement, (iii) the Indemnifying Party shall be deemed to have
agreed that it shall indemnify the Indemnified Party for such Indemnification
Claim pursuant to the provisions of this Article IX and (iv) the Indemnified
Party may participate, at his or its own expense, in the defense of such
Indemnification Claim; provided, however, that such Indemnified Party shall be

 

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entitled to participate in any such defense with separate counsel at the expense
of the Indemnifying Party if (A) so requested by the Indemnifying Party to
participate or (B) based upon the advice of counsel to the Indemnified Party, a
conflict or potential conflict exists between the Indemnified Party and the
Indemnifying Party, or there are defenses available to the Indemnified Party
that are different from or in addition to those available to the Indemnifying
Party, that would make such separate representation advisable; and provided,
further, that the Indemnifying Party shall not be required to pay for more than
one firm of counsel for all Indemnified Parties in connection with an
Indemnification Claim.  The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
Indemnification Claim.  Notwithstanding anything in this Section 9.4 to the
contrary, the

Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise, or permit a default or consent to entry
of any judgment with respect to, any Indemnification Claim (each, a
“Settlement”) unless (i) the claimant and such Indemnifying

Party provide to such Indemnified Party an unqualified release from all
Liability in respect of the Indemnification Claim, (ii) such Settlement does not
impose any Liabilities on the Indemnified Party, and (iii) with respect to any
non-monetary provision of such Settlement, such provisions would not, in the
Indemnified Party’s reasonable judgment, have or be reasonably expected to have
any material adverse effect on the business, assets, properties, condition
(financial or otherwise), results of operations or prospects of the Indemnified
Party.

 

(b)If the Indemnifying Party does not undertake within the Dispute Period to
defend Indemnified Party against an Indemnification Claim, then the Indemnifying
Party shall have the right to participate in any such defense at its sole cost
and expense, but, in such case, the Indemnified Party shall control the
investigation and defense and may settle or take any other actions the
Indemnified Party deems reasonably advisable without in any way waiving or
otherwise affecting the Indemnified Party’s rights to indemnification pursuant
to this Agreement.

 

(c)In the event that an Indemnified Party should have an Indemnification

Claim against the Indemnifying Party hereunder which it determines to assert,
but which does

not involve a Legal Proceeding or claim by a third party, the Indemnified Party
shall send written notice to the Indemnifying Party describing in reasonable
detail the nature of such Indemnification Claim and the Indemnified Party’s
estimate of the amount of Losses attributable to such Indemnification
Claim.  The Indemnifying Party shall have twenty (20) Business Days from the
date such claim notice is delivered during which to notify the Indemnified Party
in writing of any good faith objections it has to the Indemnified Party’s notice
or Indemnification Claim, setting forth in reasonable detail each of the
Indemnifying Party’s objections thereto. If the Indemnifying Party does not
deliver such written notice of objection within such twenty (20) Business Day
period, the Indemnifying Party shall be deemed to have accepted responsibility
for the prompt payment of the Indemnified Party’s Indemnification Claim, and
shall have no further right to contest the validity of such Indemnification
Claim. If the Indemnifying Party does

deliver such written notice of objection within such twenty (20) Business Day
period, the Indemnifying Party and the Indemnified Party shall attempt in good
faith to resolve any such dispute within thirty (30) days of the delivery by the
Indemnifying Party of such written notice of objection, and if not resolved in
such thirty (30) day period, may be resolved through Legal Proceedings brought
by either party or by such other means as such parties mutually agree.

 

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(d)If the Sellers do not deliver a written notice of objection to a Purchaser
Indemnified Party with respect to an Indemnification Claim in accordance with
Section 9.4(c), or an Indemnification Claim of a Purchaser Indemnified Party has
been finally resolved by a Law

of a Governmental Body with respect to which all appeals have been determined or
rights to appeal have expired, by a Settlement or by agreement of such Purchaser
Indemnified Party and the Sellers (in any such case, a “Resolution”), the amount
of Losses incurred by such Purchaser Indemnified Party with respect to such
Indemnification Claim shall be the joint and several obligations of the Sellers
and the Principal and shall be paid to such Purchaser Indemnified Party promptly
following such Resolution.

 

9.5Additional Indemnification Provisions.

 

(a)       Any Indemnification Claim to be made by the Purchaser or the Sellers,
as the case may be, shall be made on or prior to the expiration of the
applicable survival period set forth in Section 9.1, except as otherwise
provided therein.

 

(b)Other than with respect to any representations and warranties the inaccuracy
or breach of which is the result of fraud, on or prior to the Closing, or any
Losses under Section 9.2(j), to which the Indemnity Threshold (as defined below)
shall not apply, none of the Purchaser Indemnified Parties shall be permitted to
recover any Losses under Section 9.2, unless and until the aggregate amount of
Losses under such Section considered together exceeds

$200,000 (the “Indemnity Threshold”), whereupon the Purchaser Indemnified
Parties shall be entitled to indemnification hereunder or otherwise for all such
Losses in excess of the Indemnity Threshold.

 

(c)Other than with respect to any representations and warranties the inaccuracy
or breach of which is the result of fraud, on or prior to the Closing, to which
the Indemnity Threshold shall not apply, none of the Seller Indemnified Parties
shall be permitted to recover any Losses under Section 9.3(a), unless and until
the aggregate amount of Losses under such Section considered together exceeds
the Indemnity Threshold, whereupon the Seller Indemnified Parties shall be
entitled to indemnification hereunder for all such Losses in excess of the
Indemnity Threshold.

 

(d)In no event shall the total indemnification to be paid under Section 9.2 or
Section 9.3 for Losses arising with respect to all matters exceed the Purchase
Price, provided that the indemnification obligation of the Principal under this
Article IX shall not exceed Fifteen Million Dollars ($15,000,000), with the
exception of indemnification for (x) any inaccuracy or breach of any of the
representations and warranties as a result of fraud and (y) any inaccuracy or
breach of any of the Fundamental Representations to which no such limit shall
apply and to

which there shall be no limit on the ability to pursue all legal remedies.

 

(e)       The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or agreement, shall not affect the right to indemnification or other
remedy based on any such representation, warranty, covenant or agreement.

 

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9.6Tax Treatment of Indemnity Payments.  The Sellers and the Purchaser agree to
treat any indemnity payment made pursuant to this Article IX or otherwise as an
adjustment to the consideration for the Purchased Assets for federal, state,
local and foreign income tax purposes.

 

9.7Exclusive Remedy.  The sole and exclusive remedy following Closing for any
breach of or default under this Agreement shall be indemnification in accordance
with this Article IX (including but not limited to Section 9.5(b)), except with
respect to any claim based upon fraud by the Purchaser or the Sellers.

 

9.8Gift Card Escrow Account.  At the Closing, Purchaser, Sellers and a banking
or escrow institution selected by Purchaser with the reasonable consent of
Sellers, as the Gift Card escrow agent, shall enter into the Gift Card Escrow
and Reimbursement Agreement.

 

9.9Liability Escrow Arrangement.  On the Closing Date, Sellers shall deposit a
cash amount equal to Two Million Dollars ($2,000,000.00) (the “Liability Escrow
Fund”) with a banking or other financial institution selected by Purchaser with
the reasonable consent of Sellers as escrow agent, such deposit to be governed
by the terms set forth therein and in the Indemnification Escrow Agreement
attached hereto as Exhibit I. The Liability Escrow Fund shall be available
solely to compensate the Purchaser Indemnified Parties pursuant to the
indemnification obligations of Sellers (exclusive of the Gift Card
indemnification in clause (j) set forth in Section 9.2 above), subject to the
Indemnity Threshold under Section 9.5(b), and shall be exhausted prior to the
Purchaser pursuing any claims in excess of the Liability Escrow Fund.  At the
date which is six (6) months after Closing, if less than ten percent ($200,000)
of the escrow amount has been drawn, then the balance of the escrow account will
be reduced to $1,000,000. This escrow account shall remain in place for twelve
(12) months following Closing.

 

ARTICLE X TERMINATION

10.1Termination.  This Agreement may be terminated at any time prior to the
Closing:

 

(a)by mutual written consent of the parties;

 

(b)by the Purchaser by written notice to the Sellers if:

 

(ii)any Seller is in breach of any representation, warranty or covenant
contained in this Agreement that would give rise to the failure of any of the
conditions specified in Section 8.1 and such breach is not cured within five (5)
days following delivery by the Purchaser to the Seller of written notice
detailing the nature of such breach; or

 

(iii)the Closing shall not have occurred on or before one hundred twenty (120)
days following the date of this Agreement by reason of the failure of any
condition precedent under Article VIII (unless the failure results primarily
from a breach by the Purchaser of any representation, warranty or covenant
contained in this Agreement);

 

(c)by the Sellers by written notice to the Purchaser if:

 

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(ii)the Purchaser is in breach of any representation, warranty or covenant
contained in this Agreement that would give rise to the failure of any of the
conditions specified in Section 8.2 and such breach is not cured within five (5)
days following delivery by the Seller to the Purchaser of written notice
detailing the nature of such breach; or

 

(iii)the Closing shall not have occurred on or before one hundred twenty (120)
days following the date of this Agreement by reason of the failure of any
condition precedent under Article VIII (unless the failure results primarily
from a breach by any Seller of any representation, warranty or covenant
contained in this Agreement).

 

10.2Effect of Termination. If any party terminates this Agreement pursuant to
Section

10.1, all obligations of the parties hereunder shall terminate without any
Liability of any party to the other parties (except for any Liability of a party
for fraud or willful breach of any provision of this Agreement prior to such
termination).

 

ARTICLE XI MISCELLANEOUS

11.1Expenses.  Except as otherwise expressly provided in this Agreement, the

Purchaser and the Sellers shall bear its own Expenses incurred in connection
with the negotiation, preparation and execution of this Agreement and each other
Transaction Document and the consummation of the transactions contemplated
hereby and thereby, including all fees and disbursements of counsel,
accountants, investment bankers and other advisors retained by such party.

 

11.2Submission to Jurisdiction; Consent to Service of Process.

 

(a)The parties hereto hereby irrevocably submit to the exclusive jurisdiction of
any federal or state court located within the State of Hawaii over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims in
respect of such dispute or any suit, action proceeding related thereto shall be
heard and determined in such courts.  The parties hereby irrevocably waive, to
the fullest extent permitted by applicable Law, any objection which they may now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such
dispute.  Each of the parties hereto agrees that a

judgment in any such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by Law.

 

(b)Each of the parties hereto hereby consents to process being served by any
party to this Agreement in any suit, action or proceeding by delivery of a copy
thereof in accordance with the provisions of Section 11.5.

 

11.3Entire Agreement; Amendments and Waivers.  This Agreement (including the
schedules and exhibits hereto) and the Transaction Documents represent the
entire understanding and agreement among the parties hereto with respect to the
subject matter hereof.  This Agreement can be amended, supplemented or changed,
and any provision hereof can be waived, only by written instrument making
specific reference to this Agreement signed by the party

 

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against whom enforcement of any such amendment, supplement, modification or
waiver is sought.  No action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, covenant or agreement contained herein.  The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a further or continuing waiver of such breach or
as a waiver of any other or subsequent breach.  No failure on the part of any
party to exercise, and no delay

in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.

 

11.4Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Hawaii applicable to contracts made and
performed in such State, without reference to conflict of law rules that would
require the application of the Laws of another jurisdiction.

 

11.5Notices.  All notices and other communications under this Agreement shall be
in writing and shall be deemed given (a) when delivered personally by hand (with
written confirmation of receipt), (b) when sent by facsimile (with written
confirmation of transmission) or (c) one (1) Business Day following the day sent
by overnight courier (with written confirmation of receipt), in each case at the
following addresses and facsimile numbers (or to

such other address or facsimile number as a party may have specified by notice
given to the other party(ies) pursuant to this provision):

If to the Sellers or the Principal to: Desert Island Restaurants LLC

6263 N. Scottsdale Rd. # 374

Phoenix, AZ 85250

Attention: W. Randall Schoch

Phone: (480) 945-0088

Facsimile: (602) 224-7876

With a copy to (which shall not constitute notice) to: Sullivan Meheula Lee

733 Bishop Street, Ste. 2900

Honolulu, Hawaii 96813

Attention: Terrence M. Lee, Esq. Phone: 808-599-9555

Facsimile:  808-533-2467

 

If to the Purchaser, to:

 

RCSH Operations, Inc.

c/o Ruth’s Hospitality Group, Inc.

 

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1030 W. Canton Ave. Suite 100

Winter Park, FL 32789

Attention: General Counsel

Phone: (407) 829-3451

With a copy (which shall not constitute notice) to: Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, New York 10019

Attention: Jeffrey Spindler, Esq. Phone:  (212) 451-2300

Facsimile:  (212) 451-2222

 

11.6Severability. If any term or other provision of this Agreement is invalid,
illegal,

or incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially

adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.  Except as otherwise expressly
provided for in this Agreement, nothing contained in any representation or
warranty, or the fact that any

representation or warranty may or may not be more specific than any other
representation or warranty, shall in any way limit or restrict the scope,
applicability or meaning of any other representation or warranty contained in
this Agreement.

 

11.7Binding Effect; No Third-Party Beneficiaries; Assignment.  This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.  Nothing in this Agreement shall
create or be deemed to create any third party beneficiary rights in any Person
not a party to this Agreement, except as otherwise contemplated by Sections 9.2
and 9.3. No assignment of this Agreement or of any rights or obligations
hereunder may be made by the Sellers or the Purchaser, directly or indirectly
(by operation of

law or otherwise), without the prior written consent of the other parties
hereto, and any attempted assignment without the required consents shall be
void; provided, however, that the Purchaser may assign its rights, interests and
obligations hereunder to any Affiliate; provided, further, that no assignment of
any obligations hereunder shall relieve the parties hereto of any such
obligations.  Upon any such permitted assignment, the references in this
Agreement to the Purchaser shall also apply to any such assignee unless the
context otherwise requires.

 

11.8Specific Performance.  The parties acknowledge and agree that any breach of
this Agreement would give rise to irreparable harm for which monetary damages
would not be an adequate remedy.  The Sellers and the Purchaser accordingly
agree that the non-breaching party shall be entitled, in addition to any other
remedies available under applicable Law or this Agreement, to enforce the terms
of this Agreement by decree of specific performance without

 

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the necessity of proving the inadequacy of monetary damages as a remedy and to
obtain injunctive relief against any breach or threatened breach of this
Agreement, without the requirement to post bond or other security.

 

11.9Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original copy of this Agreement and all
of which, when taken together, shall be deemed to constitute one and the same
agreement, and photostatic, .pdf or facsimile copies of fully-executed
counterparts of this Agreement shall be given the same effect as originals.

 

** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK **

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as of the date first written above.

 

PURCHASER:

RCSH OPERATIONS, INC. By:/s/ Michael P. O’Donnell

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

SELLERS:

DESERT ISLAND RESTAURANTS, L.L.C. By:/s/ W. Randall Schoch

Name:W. Randall Schoch, Trustee of

the Schoch Revocable Living

Trust dated November 19, 2001

Title:Manager

 

HONOLULU STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:/s/ W. Randall Schoch

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

MAUI STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

By:/s/ W. Randall Schoch

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

[Signature Page to Asset Purchase Agreement]

4306983-11

 

--------------------------------------------------------------------------------

WAILEA STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

By:/s/ W. Randall Schoch

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

BEACHWALK STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:/s/ W. Randall Schoch

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

LAVA COAST STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:/s/ W. Randall Schoch

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

KAUAI STEAK HOUSE, LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

By:/s/ W. Randall Schoch

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

PRINCIPAL:

 

 

 

/s/ W. Randall Schoch

W. RANDALL SCHOCH, Trustee of the Schoch

Revocable Living Trust dated November 19, 2001

 

[Signature Page to Asset Purchase Agreement]

4306983-11

 

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  EXHIBIT A

 

FORM OF BILL OF SALE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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BILL OF SALE

 

Desert Island Restaurants, L.L.C., Honolulu Steak House, LLC, Maui Steak House
LLC,

Wailea Steak House LLC, Beachwalk Steak House, LLC,

Lava Coast Steak House, LLC, and

Kauai Steak House, LLC

 

Dated: ,

 

Pursuant to the terms of that certain Asset Purchase Agreement, dated as of
November 2, 2017 (the “Purchase Agreement”), by and among RCSH Operations, Inc.,
a California corporation (the “Purchaser”), Desert Island Restaurants, L.L.C.,
an Arizona limited liability company, Honolulu Steak House, LLC, a Hawaii
limited liability company, Maui Steak House LLC, a Hawaii limited liability
company, Wailea Steak House LLC, a Hawaii limited liability company, Beachwalk
Steak House, LLC, an Arizona limited  liability  company, Lava Coast
Steak  House, LLC, an Arizona limited liability company, and Kauai Steak House,
LLC, an Arizona limited liability company (each, a “Seller” and collectively,
the “Sellers”), and the Principal party thereto, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each Seller does hereby sell, assign, transfer, convey and deliver to the
Purchaser, effective as of the date hereof, all of its respective right, title
and interest in and to the Purchased Assets (as defined in the Purchase
Agreement), free and clear of all Liens of any nature whatsoever. Nothing
contained in this Bill of Sale shall be construed to limit or terminate the
representations, warranties, covenants and agreements set forth in the Purchase
Agreement. Capitalized terms used in this Bill of Sale not defined herein shall
have the meanings given to them in the Purchase Agreement.

 

This Bill of Sale shall be binding upon the successors and permitted assigns of
the Sellers and shall inure to the benefit of the successors and permitted
assigns of the Purchaser. In case of any conflict or inconsistency between this
Bill of Sale and the Purchase Agreement, the Purchase Agreement shall prevail.

 

This Bill of Sale shall be governed by the laws of the State of Hawaii, without
regard to conflict of laws rule or principle that might refer the governance or
the construction of this Bill of Sale to the laws of another jurisdiction, and
may not be amended or modified except by a written instrument executed by the
parties hereto.

 

The Sellers agree to execute and deliver to the Purchaser such further
instruments of transfer and assignment as the Purchaser may reasonably from time
to time request in order to transfer and assign to, and vest in, the Purchaser
all of the right, title and interest hereby transferred and assigned or intended
so to be.

 

This Bill of Sale may be executed in one or more counterparts, each of which
shall be deemed to be an original copy of this Bill of Sale and all of which,
when taken together, shall be deemed to constitute one and the same instrument,
and photostatic, .pdf or facsimile copies of fully-executed counterparts of this
Bill of Sale shall be given the same effect as originals.

 

[Signature Page Follows]

 

 

 

4361467-1

 

 

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IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be duly
executed as of the date first written above.

 

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

HONOLULU STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

MAUI STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

WAILEA STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

--------------------------------------------------------------------------------

BEACHWALK STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

LAVA COAST STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

KAUAI STEAK HOUSE, LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

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EXHIBIT B

 

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4361505-1

 

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ASSIGNMENT AND ASSUMPTION AGREEMENT

 

Desert Island Restaurants, L.L.C., Honolulu Steak House, LLC, Maui Steak House
LLC,

Wailea Steak House LLC, Beachwalk Steak House, LLC, Lava Coast Steak House, LLC,
and

Kauai Steak House, LLC

 

This Assignment and Assumption Agreement (this “Agreement”) is dated as of,

 

201

, by and among RCSH Operations, Inc., a California corporation (the
“Purchaser”), and Desert

 

Island Restaurants, L.L.C., an Arizona limited liability company, Honolulu Steak
House, LLC, a Hawaii limited liability company, Maui Steak House LLC, a Hawaii
limited liability company, Wailea Steak House LLC, a Hawaii limited liability
company, Beachwalk Steak House, LLC, an Arizona limited liability company, Lava
Coast Steak House, LLC, an Arizona limited liability company, and Kauai Steak
House, LLC, an Arizona limited liability company (each, a “Seller” and
collectively, the “Sellers”).

 

WHEREAS, pursuant to the Asset Purchase Agreement, dated as of November 2, 2017
(the “Purchase Agreement”), by and among the Purchaser, the Sellers and the
Principal party thereto, the Sellers have agreed to transfer to the Purchaser,
and the Purchaser has agreed to assume from the Sellers, the Assumed
Liabilities; and

 

WHEREAS, capitalized terms used in this Agreement but not defined herein shall
have the meanings given to them in the Purchase Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:

 

1.         ASSIGNMENT AND DELEGATION. The Sellers hereby assign, transfer,
convey and delegate to the Purchaser the Assumed Liabilities (as defined in the
Purchase Agreement) of the Sellers.

 

2.         ASSUMPTION OF OBLIGATIONS AND LIABILITIES.   The Purchaser hereby
assumes, effective as of the date hereof, the Assumed Liabilities of the
Sellers. From and after the date hereof, the Purchaser shall pay, honor, perform
and discharge when due the Assumed Liabilities of the Sellers. The Purchaser
shall not, by entering into this Agreement or any other Transaction Document,
assume or be obligated or liable for any Excluded Liabilities.

 

3.MISCELLANEOUS.

 

3.1       Amendment.   This Agreement can  be amended,  supplemented or changed,
and any provision hereof can be waived, only by written instrument making
specific reference to this Agreement signed by the parties hereto.

 

3.2Interpretation.

 

(a)In case of any conflict between this Agreement and the Purchase Agreement,
the

Purchase Agreement shall prevail.

 

(b)The descriptive headings contained in this Agreement are for convenience of
reference only and shall not affect or be utilized in construing or interpreting
this Agreement.

 

4361505-1

 

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3.3Binding Effect. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and permitted assigns.

 

3.4       Counterparts.   This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement, and photostatic, .pdf or facsimile copies of
fully-executed counterparts of this Agreement shall be given the same effect as
originals.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

4361505-1

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as of the date first written above.

 

PURCHASER:

 

RCSH OPERATIONS, INC.

 

 

By:

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

 

SELLERS:

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

HONOLULU STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

MAUI STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

WAILEA STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

4361505-1

 

--------------------------------------------------------------------------------

 

BEACHWALK STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

LAVA COAST STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

KAUAI STEAK HOUSE, LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

4361505-1

 

--------------------------------------------------------------------------------

EXHIBIT C

 

FORM OF DOMAIN NAME ASSIGNMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4361519-2

 

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DOMAIN NAME ASSIGNMENT

This Domain Name Assignment is effective as of the day of , 201   . WHEREAS,
Desert Island Restaurants, L.L.C., an Arizona limited liability company, with an

address of 623 N. Scottsdale Rd. # 374, Phoenix, AZ 85250 (“Assignor”), owns the
domain names

http://www.ruthschrishawaii.com and http://jp.ruthschrishawaii.com, as well as
common law rights to said domain names (collectively, the “Domain Name”);

 

WHEREAS, RCSH Operations, Inc., a California corporation, with an address of c/o
Ruth’s Hospitality Group, Inc., 1030 W. Canton Ave., Suite 100, Winter Park, FL
32789 (“Assignee”), desires to acquire the Domain Name, together with the
goodwill of the business connected with and symbolized by the Domain Name.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor hereby sells, transfers and assigns,
free and clear of all liens and encumbrances, the Domain Name and the
registration thereof, together with the goodwill of the business connected with
and symbolized by such Domain Name, and any trademark, service mark, or
intellectual property rights relating thereto, to the extent any such trademark,
service mark, or intellectual property rights exist. Assignor shall cooperate
with Assignee and follow Assignee’s reasonable instructions in order to
effectuate the transfer of the Domain Name registrations in a timely manner.
Specifically, within five (5) days of the effective date of this Domain Name
Assignment, Assignor agrees to execute and transmit any necessary documentation
and/or electronic instructions to the registrar of the Domain Name, proposed by
Assignee in reasonable form and content, and/or to correspond, as may be
reasonably requested by Assignee, with the registrar to authorize the transfer
of the Domain Name to Assignee.

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

RCSH OPERATIONS, INC.

 

 

 

By:

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

4361519-2

 

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EXHIBIT D

 

CONSULTING AGREEMENT – W. RANDALL SCHOCH

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4326697-6

 

--------------------------------------------------------------------------------

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (this “Agreement”) is made and entered into this

 

day of

, 201

, between RCSH Operations, Inc., a California

 

corporation (the “Company”), and W. Randall Schoch (“Consultant”). Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Asset Purchase Agreement, dated as of November 2, 2017, among the
Company, Desert Island Restaurants, L.L.C., an Arizona limited liability
company, Honolulu Steak House, LLC, a Hawaii limited liability company, Maui
Steak House LLC, a Hawaii limited liability company, Wailea Steak House LLC, a
Hawaii limited liability company, Beachwalk Steak House, LLC, an Arizona limited
liability company, Lava Coast Steak House, LLC, an Arizona limited liability
company, and Kauai Steak House, LLC, an Arizona limited liability company (each,
a “Seller” and collectively, the “Sellers”), and Consultant (“Asset Purchase
Agreement”).

 

RECITALS

 

WHEREAS, the Sellers are engaged in the business of owning and operating six
existing

Ruth’s Chris Steak House restaurants operating in Hawaii;

 

WHEREAS, pursuant to the terms of the Asset Purchase Agreement, the Company will
purchase from the Sellers the Purchased Assets; and

 

WHEREAS, as a material inducement to cause the Company to enter into the Asset
Purchase Agreement, Consultant has agreed to act as a consultant to the Company
for a period of one year.

 

NOW THEREFORE, the parties agree as follows:

 

1.Services.  Consultant will serve as a consultant to the Company. In such
capacity, Consultant shall use his best efforts to preserve and enhance the good
will of the Company with its customers, its employees, and the restaurant
business, and with the public generally in

Hawaii, including but not limited to: (a) maintaining a visible presence and
involvement at the Restaurants, consistent with historical practice; (b)
introducing the Company to local organizations or groups with which Consultant
has prior relationships; (c) assisting the Company with any marketing efforts in
Hawaii;  (d) voicing support for the Company, its Affiliates and the Ruth’s
Chris brand generally; (e) assisting the Company in the retention and
recruitment of key management and hourly employees; (f) supporting existing, and
assisting the Company in developing new, vendor relationships, including
relationships with landlords; (g) upon request of the Company, assisting the
Company with negotiations of lease renewals or lease amendments relating to the
Restaurants; and (h) otherwise assisting in the smooth transition of ownership
of the Restaurants from the Sellers to the Company. Consultant will report on
his activities periodically to Michael O’Donnell, Chairman & CEO. Upon request
of the Company,

Consultant will make himself available to Mr. O’Donnell and the Company for
consultation on any of the above objectives.

 

2.         Term and Termination.  Unless sooner terminated pursuant to the terms
hereof, this Agreement shall commence on the date hereof and shall continue for
a period of one year (the “Term”). The Term may be extended upon mutual written
agreement between the parties.

 

4326697-6

 

--------------------------------------------------------------------------------

Notwithstanding anything else contained herein to the contrary, and in addition
to any other rights and remedies available at law, in equity or hereunder, the
Company may terminate this Agreement for Cause (as hereinafter defined) at any
time.  For purposes of this Agreement, “Cause” means (a) an intentional act of
fraud, embezzlement, theft or any other material violation of law that occurs
during or in the course of the Term, (b) intentional disclosure of the Company’s
confidential information contrary to the Company’s policies, (c) intentional
breach of any of the Company’s material policies, (d) the willful and continued
failure of Consultant to perform his duties under this Agreement, and (e)
conviction of a crime involving moral turpitude.  Upon any termination by the
Company other than for Cause, the Company shall continue to pay Consultant under
Section 3 hereof for the balance of the Term.

 

3.Fees and Expenses. In consideration for Consultant’s services rendered to the
Company, the Company agrees to pay to Consultant the sum of $500,000, payable
ratably over the twelve-month Term, as full and complete compensation for the
services hereunder.  The Company agrees to reimburse Consultant, upon receipt of
appropriate documentation, for such reasonable out-of-pocket expenses incurred
by Consultant in performing the obligations under this Agreement in an amount
not to exceed $50,000 in the aggregate over the Term.

 

4.Obligations of Consultant; Independent Contractor Status.  Consultant shall
perform the services hereunder in accordance with all applicable laws, rules and
regulations and by following and applying commercially reasonable professional
guidelines and standards. It is expressly understood and agreed that Consultant
shall, at all times, act as an independent contractor with respect to the
Company and not as an employee or agent of the Company, and nothing contained in
this Agreement shall be construed to create a joint venture, partnership,
association or other affiliation, or like relationship, between the Consultant
and the Company. Consultant shall be solely responsible for all of his
withholding taxes, social security taxes, unemployment taxes, and workers’
compensation insurance premiums, subject to Section 5 below.  Consultant
represents that he currently has no agreement with, or any other obligation to,
any third party that conflicts with the terms of this Agreement.

 

5.Trade Secrets and Confidential Information.  Consultant acknowledges that in
the course of providing services under this Agreement, he may receive
information from the Company that has economic value that is not generally known
or readily ascertainable through appropriate means by persons who might find it
useful and as such, Consultant will exercise reasonable efforts to keep such
information confidential.   Consultant shall not disclose such information
outside the Company or use it against the Company. Anything to the contrary
herein notwithstanding, the Company acknowledges and agrees that Consultant: (i)
develops, owns or operates other restaurants and at his discretion may devote
the majority of his time to such restaurants; and (ii) is privy to information,
data, processes, methods and other intellectual property generally known by
seasoned executives in the restaurant industry, and no such information or
property shall be deemed to be owned or transferred to the Company or any Seller
under any “work for hire” or other doctrine.

 

4326697-6

 

--------------------------------------------------------------------------------

6.Notices.

 

(a)All notices provided for or required by this Agreement shall be in writing
and shall be delivered personally to the other party, or mailed by certified or
registered mail (return receipt requested), or delivered by a recognized
overnight courier services, as follows:

 

If to the Company:RCSH Operations, Inc.

c/o Ruth’s Hospitality Group, Inc.

1030 W. Canton Ave. Suite 100

Winter Park, FL 32789

Attention: General Counsel

 

If to Consultant:W. Randall Schoch

c/o Desert Island Restaurants, L.L.C.

6263 N. Scottsdale Rd., #374

Scottsdale, AZ 85250

 

(b)Notices delivered pursuant to Section 6(a) hereof shall be deemed given: at
the time delivered, if personally delivered; three (3) business days after being
deposited in the mail, if mailed; and one (1) business day after timely delivery
to the courier, if by overnight courier.

 

(c)Either party hereto may change the address to which notice is to be sent by
written notice to the other party in accordance with the provisions of this
Section 6.

 

7.Miscellaneous.  This Agreement may only be amended, modified, or supplemented
by an agreement in writing signed by each party hereto, and any of the terms
thereof may be waived, only by a written document signed by each party to this
Agreement or, in the case of waiver, by the party or parties waiving
compliance.  Consultant may not assign this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
Company. This Agreement shall be governed by and construed in accordance with
the Laws of the State of Florida applicable to contracts made and performed in
such State, without reference to conflict of law rules that would require the
application of the Laws of another jurisdiction. This Agreement may be executed
in two or more counterparts, each of

which shall be deemed to be an original copy of this Agreement and all of which,
when taken together, shall be deemed to constitute one and the same agreement,
and photostatic, .pdf or facsimile copies of fully-executed counterparts of this
Agreement shall be given the same effect as originals.

[Signature page follows]

 

4326697-6

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
witnessed by their signatures below.

 

COMPANY:

 

RCSH OPERATIONS, INC.

 

 

By:

 

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

CONSULTANT:

 

 

 

 

W. Randall Schoch

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Consulting Agreement]

 

4326697-6

 

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EXHIBIT E

 

DESERT ISLAND RESTAURANTS MANAGEMENT AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

4320535-7

 

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DESERT ISLAND RESTAURANTS MANAGEMENT AGREEMENT

 

 

 

This MANAGEMENT AGREEMENT (the “Agreement”) is made as of this

day

 

of, 201

, by and between RCSH Operations, Inc., a California corporation (the

 

“Owner”), and Desert Island Restaurants, L.L.C., an Arizona limited liability
company (“DIR”).

 

BACKGROUND

 

A.The Owner and DIR, together with Honolulu Steak House, LLC, a Hawaii limited
liability company, Maui Steak House LLC, a Hawaii limited liability company,
Wailea Steak House LLC, a Hawaii limited liability company, Beachwalk Steak
House, LLC, an Arizona limited liability company, Lava Coast Steak House, LLC,
an Arizona limited liability company, and Kauai Steak House, LLC, an Arizona
limited liability company (each a “Seller” and collectively, the “Sellers”) and
the Principal (as defined therein) have entered into that certain Asset Purchase
Agreement, dated as of November 2, 2017 (the “Purchase Agreement”).

 

B.All capitalized terms not otherwise defined in this Agreement have the
meanings provided in the Purchase Agreement.

 

C.The parties desire to agree on certain transition issues in connection with
the consummation of the Purchase Agreement on the terms and conditions set forth
herein.

 

TERMS OF AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein
made, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

 

1.General.

 

a.DIR agrees and acknowledges that, as of the Closing Date, DIR intends to
provide certain information technology services, as listed in Exhibit A (the “IT
Services”), certain purchasing services, as listed in Exhibit B (the “Purchasing
Services”), and certain finance, accounting and other administrative services,
as listed in Exhibit C (the “Support Services”) with respect to the operation of
the Business which were used prior to Closing on a transitional basis to enable
the Owner to continue to operate the Business on an uninterrupted

basis in a manner generally consistent with the Sellers’ historical practices.
The parties agree that network changes may be necessary to ensure on-going
security to the Sellers’ and DIR’s environment during the Term (as defined
below).

 

b.The parties recognize that during the Term, the Owner will, as circumstances
permit, reduce or phase-out the Services (as defined in Section 3.b.2) set forth
herein. Accordingly, as promptly as practicable following the execution of this
Agreement, the Owner agrees to use commercially reasonable efforts to make a
transition of each Service to its own internal organization or to obtain
alternate third-party sources to provide the Services. The parties will
cooperate in an orderly reduction or phase-out of the Services. The Owner agrees
to

 

2

4320535-7

 

--------------------------------------------------------------------------------

coordinate any network changes with DIR so that the Sellers and DIR can make any
changes necessary to ensure on-going security of the Sellers’ and DIR’s network
and data.

 

c.DIR shall request approval from Owner prior to hiring or utilizing third-
party subcontractors to provide all or part of any Service hereunder, such
consent not to be unreasonably withheld.

 

2.Term.

 

a.The term of this Agreement (the “Term”), and all Services to be provided
hereunder, shall commence on the Closing Date and shall terminate on the earlier
of:

 

(1)180 days thereafter; or

 

 

 

 

parties.

(2)termination of this Agreement by the mutual written consent of the

 

 

b.Owner shall have the right to terminate any Service provided hereunder after
giving at least thirty days’ written notice to DIR specifying the specific
Service to be discontinued and the effective date.

 

c.Either party shall have the right to terminate this Agreement with respect to
any Service, in whole or in part, if the other party commits a material breach
of this Agreement and fails to cure such breach within 10 days after receiving
written notice of such breach.

 

d.The Term may only be extended upon mutual written agreement of the parties,
which shall be in each party’s sole discretion.

 

3.Compensation.

 

a.Responsibility for Wages and Fees. For such time as any employees of DIR are
providing Services to the Owner under this Agreement, (1) such employees will
remain employees of DIR and shall not be deemed to be employees of the Owner for
any purpose, and (2) DIR shall be solely responsible for the payment and
provision of all wages, bonuses, and commissions, employee benefits, including
severance and worker’s compensation, and the withholding and payment of
applicable Taxes relating to such employment.

 

b.Terms of Payment for Services.

 

(1)As consideration for provision of the IT Services, the Purchasing Services
and the Support Services, the Owner shall pay DIR $45,000.00 per month (the
“Monthly Services Fee”), which shall be due on the tenth calendar day of each
calendar month for the IT Services, the Purchasing Services and the Support
Services rendered by DIR in such month.

 

(2)As consideration for provision of any additional information technology
services not listed on Exhibit A but that may be provided following mutual

 

3

4320535-7

 

--------------------------------------------------------------------------------

agreement by the parties (the “Additional IT Services”, and together with the IT
Services, the Purchasing Services and the Support Services, the “Services”), the
Owner shall pay DIR at a rate of $100.00 per hour, if DIR provides such
Additional IT Services using its internal resources, or the Owner shall pay DIR
the applicable hourly rate (together with any general excise taxes) on a
“pass-through” basis, subject to any applicable minimums, if a third party
provides the

Additional IT Services (in either instance, the “Additional IT Services Fee”).

 

(3)In addition to the Monthly Services Fee and any Additional IT Services Fee,
in the event that DIR incurs any valid out-of-pocket expenses in the provision
of any Service, including, without limitation, payments to third-party service
providers, subcontractors, and purchasing consultants and costs associated with
maintaining DIR’s existing systems environment, but excluding payments made to
employees of DIR or any of its Affiliates pursuant to Section 3.a (such included
expenses, collectively, “Out-of-Pocket Costs”), the Owner shall reimburse the
DIR for all such Out-of-Pocket Costs, in accordance with Section 3.c. DIR shall
obtain written approval from Owner before incurring Out-of-Pocket Costs in
excess of

$10,000, such approval not to be unreasonably withheld.  To the extent any
license fees are due during the Term, DIR shall cooperate with Owner to minimize
the cost of such fees and negotiate appropriate coverage and duration of such
license.

 

c.Invoicing. Any charges for the Services shall be incurred on a weekly basis,
and unless otherwise specified in Exhibit B, DIR shall provide the Owner, in
accordance with Section 9.g, with invoices (“Invoices”) issued once every two
weeks, which shall set forth in reasonable detail, with such supporting
documentation as the Owner may request with respect to any Out-of-Pocket Costs,
amounts payable under this Agreement. The Owner shall make payments to DIR
pursuant to this Agreement within 14 days after the date such Invoice is given
from DIR to the Owner.

 

d.Taxes.  The Owner shall be responsible for all sales or use Taxes imposed or
assessed as a result of the provision of Services by DIR, currently equal to
4.712%.

 

4.Use of the Premises.

 

a.During the Term, DIR, its Affiliates, their respective employees, and any
third-party service providers or subcontractors who provide the Services shall
have access to the Purchased Assets, premises and any books and records of the
Business reasonably necessary for the purpose of transitioning the Business and
otherwise monitoring the Business solely as it relates to the provision of the
Services under this Agreement. Such employees of DIR, their Affiliates and
employees of any third-party service providers or subcontractors shall be
permitted to reasonable use of the premises and facilities, including telephone
and Internet access, at no additional cost.

 

b.DIR shall not be obligated to pay rent or any other similar fee with respect
to their use of the Owner’s facilities or assets during the Term.

 

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4320535-7

 

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5.Confidentiality.  Each party agrees to maintain, and to cause its respective
Affiliates, representatives and agents to maintain in strict confidence all
confidential information in accordance with Section 7.8 of the Purchase
Agreement.

 

6.Limitation of Liability; Insurance; Indemnification.

 

a.In no event shall either party be liable to the other party for lost profits
or for any punitive, indirect, special, incidental or consequential damages,
except in the case of gross negligence or willful misconduct, other than as set
forth in Sections 6.c or 6.d of this

Agreement. Except in the case of gross negligence or willful misconduct on the
part of DIR or as set forth in Section 6.d of this Agreement, DIR’s sole
liability and the Owner’s sole remedy for any breach of DIR’s obligation to
provide Services pursuant to this Agreement shall be for DIR to perform or
re-perform such Services at no cost to the Owner.

 

b.The Owner shall carry, maintain and pay the premium for general liability
insurance coverage for the Restaurants and the Services and shall name DIR as an
additional insured under all such liability insurance policies. The Owner shall
provide to DIR a certificate evidencing such insurance coverage if so requested.

 

c.Subject to the limitations set forth in Section 6.a of this Agreement, and in
addition to the provisions of Section 9.3 of the Purchase Agreement, the Owner
shall indemnify and hold harmless DIR, as one of the Seller Indemnified Parties
(“DIR Indemnified Party”) in respect of any Losses of any DIR Indemnified Party
as a result of, in connection with, or arising out of the provision of the
Services and, to the extent through the Owner’s negligence or willful
misconduct, data breaches. The Owner’s responsibility for any such Losses shall
not be subject

to the limitations of Section 9.5(c) of the Purchase Agreement.

 

d.Notwithstanding the limitations set forth in Section 6.a of this Agreement,
and in addition to the provisions of Section 9.2 of the Purchase Agreement, DIR
shall indemnify and hold harmless the Owner in respect of any Losses of the
Owner as a result of, in connection with, or arising out of any data breach, but
only to the extent such Loss was caused by DIR’s negligence or willful
misconduct. DIR’s responsibility for any such Losses shall not be subject to the
limitations of Section 9.5(b) of the Purchase Agreement.

 

7.Standard of Care. DIR shall use good faith efforts to provide the Services
under this Agreement in accordance with the same standard of care followed by
DIR in the operation of the Business prior to Closing.

 

8.Force Majeure. If DIR is unable to perform any of its duties or fulfill any of
its covenants or obligations under this Agreement as a result of causes beyond
its control and without its fault or negligence, including but not limited to
acts of God or government, fire, flood, terrorism, war, governmental controls,
and labor strife, then the obligations of DIR under this Agreement with respect
to any Service shall be suspended during the period that DIR is prevented or
hindered from providing such Service, or the Owner is prevented or hindered from
receiving such Service, and DIR shall not be deemed to be in default of this
Agreement during the continuance of such events which rendered them unable to
perform. DIR shall promptly thereafter take such action as is reasonably
necessary to enable it to resume performance of its

 

5

4320535-7

 

--------------------------------------------------------------------------------

duties and obligations under this Agreement.

 

9.Miscellaneous.

 

a.This Agreement shall be binding upon and inure to the benefit of the parties
named herein and their respective successors and permitted assigns. No party may
assign this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other parties hereto.

 

b.This Agreement constitutes the entire agreement between the parties with
respect to the subject matter contained herein and supersedes any prior
understandings, agreements, or representations by or between the parties,
written or oral, to the extent they relate in any way to the subject matter
hereof. In the event and to the extent that there is a conflict between the
provisions of this Agreement and the provisions of the Purchase Agreement as it
relates to the Services hereunder, the provisions of this Agreement shall
control.

 

 

 

 

Agreement.

c.Sections 3, 5 and 6 shall survive indefinitely beyond the Term of this

 

 

d.No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing, signed by each of the parties hereto and identified in such
writing as an amendment to this Agreement. Any waiver by any party of any breach
hereunder, whether intentional or not, must be in writing by the waiving party
and shall not be deemed to extend to any other or subsequent breach hereunder.

 

e.The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.

 

f.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 jurisdiction.

 

g.Any notice, request, information or other document to be given under this
Agreement shall be given in accordance with the provision set forth in Section
11.5 of the Purchase Agreement.

 

h.This Agreement and any disputes arising under it shall be governed and
construed in accordance with the laws of Hawaii, without reference to its
conflicts of law principles. All disputes arising under this Agreement shall be
resolved in accordance with Section 11.2 of the Purchase Agreement.

 

i.         This Agreement is not intended to and shall not be construed as
creating a joint venture, partnership, agency or other association within the
meaning of the common law or under the laws of the state in which any party is
incorporated, organized, or conducting business. It is the intent of the parties
that with respect to providing transitional assistance hereunder, DIR is an
independent contractor. Each party hereby acknowledges responsibility for full
payment of

 

6

4320535-7

 

--------------------------------------------------------------------------------

wages and other compensation to all employees and agents engaged in the
performance of its services and obligations under this Agreement.

 

j.This Agreement shall not confer any rights or remedies upon any Person other
than the parties hereto and their respective successors and permitted assigns.

 

k.         This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.

 

l.The Exhibits identified in this Agreement are incorporated herein by reference
and made a part hereof.

 

[Signatures appear on the following page]

 

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4320535-7

 

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

 

RCSH OPERATIONS, INC.

 

 

By:

 

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Desert Island Restaurants Management Agreement]

 

8

4320535-7

 

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EXHIBIT A IT Services

 

1.

DIR will make reasonable efforts to provide use and break/fix support for the
Restaurants and assistance to Owner in transition efforts, to the extent allowed
by law or contractual agreement and consistent with historical practices,
including continuing to maintain and support network hardware and access, for:

 

 

 

a.

the current Aloha hardware and software and related support and maintenance,
including but not limited to the point-of-sale system;

 

 

b.PeopleMatter software and support;

 

c.Restaurant Accounting System;

 

 

d.

support of all current websites (foreign and domestic) including hosting and
maintenance, social networks, all reservation systems and email marketing;

 

 

e.current marketing system for banquet contracts and booking;

 

f.any media that has been purchased or authorized; and

 

 

g.

all custom or other software, including but not limited to any spreadsheets,
required to run the Business consistent with historical practices.

 

 

2.DIR will make reasonable efforts to provide:

 

 

a.

data files to the Owner for use in payroll processing on the Owner’s systems and
assistance in creating export files to load HR/Payroll system data (historical
and on-going) to support payroll processing; and

 

 

 

b.

data files or spreadsheets of financial restaurant data, including but not
limited to data relating to sales, vendor information, purchasing transactions
and taxes (current and historical).

 

 

 

3.

For any information technology services provided by a third party, DIR will use
commercially reasonable efforts to cause such third party to continue to provide
such support.

 

 

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EXHIBIT B Purchasing Services

 

1.

DIR will work with the Owner in good faith to continue to enable Owner to
purchase Inventory for the Restaurants from all suppliers of the Restaurants
prior to the Closing Date at the same FOB price available to the Sellers.

 

 

2.DIR will instruct all third party suppliers to provide such Inventory at the
Sellers’ same

FOB cost.

 

3.DIR, in collaboration with the Owner, will make reasonable efforts to:

 

 

a.

review volume commitments and expirations of contracts with current national
food and packaging suppliers and counsel whether to renew such contracts;

 

 

 

b.

provide reporting support on products distributed through distribution channels,
including supplier inventories, proprietary products, and smallwares;

 

 

 

c.

assist in transfer of all national distributed products to the Owner’s
designated distributors;

 

 

d.provide support for limited time offers/holiday promotions;

 

e.assist in transfer of proprietary smallwares to the Owner’s designated
distributor;

 

f.provide support for processing purchasing transactions;

 

 

g.

provide purchasing support for regionally distributed products (e.g., seafood,
produce); and

 

 

 

h.

other services consistent with the specifically listed Purchasing Services in
this Exhibit B that are necessary for the Owner to continue to operate the
Business following the Closing Date and mutually agreed to by the parties.

 

 

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EXHIBIT C Support Services

DIR will make reasonable efforts to provide assistance in connection with
transitioning all finance, accounting, human resources and other administrative
services relating to the Business to the Owner, including but not limited to the
following:

 

 

1.

If needed, DIR will work with the Owner in good faith at the Owner’s cost and
expense to cause the Sellers’ Gift Card processor to continue to provide such
services for the Owner under the existing Sellers’ contract but billed directly
to the Owner, or if the third party processor will not directly bill the Owner,
the Owner will pay or reimburse DIR for all costs incurred by DIR for the
processing of Gift Cards for the Restaurants on and after the Closing Date.

 

 

 

2.

If needed, DIR will work with the Owner in good faith at the Owner’s cost and
expense to cause the Sellers’ credit card merchant processor to continue to
provide such services for the Owner under the Sellers’ existing contract.

 

 

 

3.

DIR will continue, at the Owner’s sole discretion and to the extent legally
permissible, to collect and provide the employee data necessary for the Owner to
process payroll for the Restaurants.

 

 

 

4.

DIR will, at the Owner’s sole discretion, assist with daily accounting processes
for the Restaurants, including daily sales reporting, invoice processing,
payroll accounting and treasury accounting.

 

 

 

5.

DIR will continue, at the Owner’s sole discretion, to provide treasury services
for the Business, including providing bank deposit accounts, bank disbursement
accounts and armored car services for each restaurant location as well as for
the Business as a whole, to the extent needed.

 

 

 

6.

DIR will continue to provide marketing support for existing programs, including
but not limited to those with the Japanese Tourism Bureau, ANA, H.I.S. Hawaii
and various hotels, resorts and travel agencies which send customers to the
Business.

 

 

 

7.

DIR will continue to provide support for local and international advertising
programs, website hosting, translation services, social media marketing,
concierge referrals and local public relations matters.

 

 

8.DIR will coordinate with Owner to transfer information from Sellers’ guest
database to

Owner, including emails and contact information for guests.

 

9.DIR will assist with processing vendor invoices and accounts payable matters.

 

 

10.

DIR will assist with human resources services, including recruiting, employment
verification, hiring, training, health & safety certifications, benefits,
workers

 

 

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compensation claim processing, performance management and termination, all as
directed and requested by Owner.

 

12

4320535-7

 

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EXHIBIT F

 

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 1 of 5

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NON-COMPETITION AND NON-SOLICITATION AGREEMENT

 

THIS NON-COMPETITION AND NON-SOLICITATION AGREEMENT (this

 

“Agreement”) is made and entered into this

day of

_, 201

, between

 

RCSH Operations, Inc., a California corporation (the “Company”), and Desert
Island

Restaurants, L.L.C., an Arizona limited liability company (“Consultant”).
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Asset Purchase Agreement, dated as of November 2, 2017,
among the Company, as the Purchaser, Consultant and the other Sellers (as
defined therein) party thereto, and the Principal (as defined therein) (“Asset
Purchase Agreement”).

 

RECITALS

 

WHEREAS, the Company, and its parent company and affiliates, as a result of the
expenditure of time, skill, effort and money, developed and owns a unique system
(the “System”) for the development and operation of full-service restaurants
under the name and mark Ruth’s Chris Steak House (“RCSH Restaurants”);

 

WHEREAS, the System includes, but is not limited to, certain trade names,
service marks, trademarks, symbols, logos, emblems and indicia of origin,
including, but not limited to, the mark Ruth’s Chris Steak House and such other
trade names, service marks, trademarks, symbols, logos, emblems and indicia of
origin as the Company may develop in the future to identify for the public the
source of services and products marketed under such marks (“Marks”) and under
the System and representing the System’s high standards of quality, appearance
and service; special recipes and menu items; uniform standards, specifications
and procedures for operations; quality and uniformity of products and services
offered; procedures for inventory and management and financial control; training
and assistance; and advertising and promotional programs; all of which may be
changed, improved and further developed by the Company from time to time and are
used by the Company in connection with the operation of the System, but
excluding such information and knowledge possessed or obtained by Consultant
independently through its own industry knowledge and experience without the aid
or involvement of the Company or the System (“Proprietary Information”);

 

WHEREAS, the Marks and Proprietary Information provide economic advantages to
the Company and many are not generally known to, and are not readily
ascertainable by proper means by, the Company’s competitors who could obtain
economic value from knowledge and use of the Marks and Proprietary Information;

 

WHEREAS, the Company has taken and intends to take all reasonable steps to
maintain the confidentiality and secrecy of the Proprietary Information;

 

WHEREAS, the Company has previously granted the Sellers certain franchise
rights, including use of the System and the Proprietary Information, relating to
the ownership, operation and development of the Restaurants pursuant to the
Franchise Agreements;

 

WHEREAS, the Company and Consultant have agreed on the importance to the Company
and other licensed users of the System of restricting use, access and
dissemination of the Proprietary Information and the Sellers and Consultant have
agreed in the Asset Purchase

 

Page 2 of 5

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--------------------------------------------------------------------------------

Agreement that the Company’s obligation to purchase the Purchased Assets is
subject to the condition that Consultant enters into this Agreement; and

 

WHEREAS, in order to induce the Company to consummate the purchases under the
Asset Purchase Agreement on the Closing Date, Consultant is willing to execute,
deliver, perform and be bound by this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the parties agree as follows:

 

1.Confidentiality Agreement.

 

(a)The Company has disclosed to Consultant and its Affiliates some or all of the
Proprietary Information relating to the System and not generally known by the
public or competitors. All non-public, proprietary or confidential information,
including, without limitation, the System, drawings, specifications, techniques
and compilations of data, which the Company or its Affiliates provided to
Consultant, whether prior to or following the date of this Agreement, will be
deemed confidential Proprietary Information for the purposes of this Agreement.

 

(b)Consultant acknowledges that Consultant and its Affiliates previously
received the Proprietary Information in confidence and will, at all times,
maintain them, or cause them to be maintained, in confidence and will not use
this information for any reason whatsoever except as may be otherwise permitted
in the Consulting Agreement dated as of the date hereof between the Company and
Consultant.

 

(c)Consultant will not, and will cause its Affiliates, not to, at any time
disclose, copy documents or compilations containing some or all of the
Proprietary Information, or permit the disclosure of the Proprietary Information
unless required by law and Consultant acknowledges that such information shall
remain confidential. Consultant shall not use or adopt any secret recipes,
formulas, or other Proprietary Information, use or duplicate the System or any
portion thereof or assist others to do so.

 

(d)On the Closing Date, Consultant will surrender, and will cause its
Affiliates, to surrender, any material containing some or all of the Proprietary
Information to Company, including copies of recipes and other instructions or
materials, unless otherwise required under the Franchise Agreements to surrender
such materials on an earlier date.

 

(e)For a period of five (5) years following the Closing Date, Consultant will
not, and will cause its Affiliates not to, at any time, directly or indirectly
engage in any act or omission of act which causes Consultant or any Affiliates
to engage in any act which will defame or disparage the RCSH Restaurants or the
goodwill associated with the Proprietary Information and the System.

 

2.Non-Competition and Non-Solicitation.

 

(a)In consideration of the Purchase Price paid by the Company on the Closing
Date to the Sellers pursuant to the Asset Purchase Agreement and in order to
protect the goodwill and

 

Page 3 of 5

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unique qualities of the System, the confidentiality and value of the Proprietary
Information, and the goodwill associated with Business, Consultant agrees and
covenants that, during the period commencing on the Closing Date and ending on
the five (5) year anniversary thereof within the State of Hawaii and the two (2)
year anniversary thereof outside of the State of Hawaii (the “Restricted
Period”):

 

(i)Consultant will not, will cause its Affiliates not to, (A) assist others in
any business or service substantially similar to the RCSH Restaurants existing
as of the date of this Agreement, or (B) divert, or attempt to divert, directly
or indirectly, any business, business opportunity, or customer of the RCSH
Restaurants to any competitor engaged in a business similar to the RCSH
Restaurants existing as of the date of this Agreement, including a fine

dining restaurant that offers steak as the primary menu item;

 

(ii)Consultant will not, and will cause its Affiliates not to, (A) assist others
in any business or service substantially similar to the RCSH Restaurants
existing as of the date of this Agreement to, (B) knowingly employ, or seek to
employ, any person who is as of Closing Date, or was at any time within the
twelve (12) months immediately preceding the Closing Date, employed by (x) the
Company or any of its Affiliates, (y) by any Seller, Consultant or any of their
respective Affiliates, or (z) any other franchisee or developer of the Company,
or otherwise directly or indirectly induce such person to leave that person’s
employment;

 

(iii)Consultant will not, directly or indirectly, for itself or through, on
behalf of, or in conjunction with any Person, without the prior written consent
of the Company, own, maintain, operate, engage in or have any financial or
beneficial interest of five percent (5%) or more of any publicly-traded company
in (including any interest in corporations, partnerships, trusts, unincorporated
associations or joint ventures), or advise, assist or make loans to, any
restaurant business that is of a character and concept similar to the RCSH
Restaurants existing as of the date of this Agreement, including any fine dining
restaurant that offers steak as the

primary menu item; and

 

(iv)within the State of Hawaii, Consultant will not, and will cause its

Affiliates not to, solicit, induce, influence or attempt to influence any
supplier, lessor, licensor, or any other Person who has a business relationship
with the Company, any Affiliate of Company,

or had a business relationship with any Seller, to discontinue or reduce the
extent or scope of such relationship with the Company.

 

(b)Consultant agrees that the foregoing covenants are reasonable with respect to
their duration, geographic area and scope, to protect, among other things, the
Company’s acquisition

of the goodwill associated with the Business. If a judicial or arbitral
determination is made that any provision of this Section 2 constitutes an
unreasonable or otherwise unenforceable restriction against Consultant or any of
its Affiliates, then the provisions of this Section 2 shall be rendered void
only to the extent such judicial or arbitral determination finds such provisions
to be unenforceable. In that regard, any judicial or arbitral authority
construing this Section 2 shall be empowered to sever any prohibited business
activity, time period or geographical area from the coverage of any such
agreements and to apply the remaining provisions of this Section 2 to the
remaining business activities, time periods and/or geographical areas not so
severed.  Moreover, in the event that any provision, or the application thereof,
of this Section 2 is determined not to

 

Page 4 of 5

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--------------------------------------------------------------------------------

be specifically enforceable, the Company shall nevertheless be entitled to
recover monetary damages as a result of the breach of such agreement.

 

3.Miscellaneous

 

(a)Consultant agrees that, in the event of a breach of this Agreement, the
Company would be irreparably injured and be without an adequate remedy at law.
Therefore, in the event of such a breach, or attempted breach of any of the
provisions hereof, the Company will be entitled to enforce the provisions of
this Agreement and will be entitled, in addition to any other remedies which are
made available to it at law or in equity, to an injunction prohibiting such
breach.

 

(b)The non-prevailing party agrees to pay all reasonable expenses (including
court costs and reasonable attorneys’ fees) incurred by the prevailing party (as
determined by the court) in enforcing this Agreement.

 

(c)       Any failure by the Company to object to or take action with respect to
any breach of any provision of this Agreement by Consultant will not operate or
be construed as a waiver of or consent to that breach or any subsequent breach
by Consultant.

 

(d)       Consultant acknowledges the receipt and adequacy of the consideration
payable under the Asset Purchase Agreement, a portion of which is good and
valuable consideration in exchange for Consultant making the covenants contained
in this Agreement and agreeing to be legally bound by the covenants contained in
this Agreement (and all other terms hereof).

 

(e)Consultant acknowledges (i) its responsibility to cause the Sellers and its
other Affiliates to comply with the limitations in this Agreement and (ii) that
any action taken by any of the Sellers or its other Affiliates that would, if
taken by Consultant directly, constitute a breach of this Agreement shall
constitute a breach for which Consultant is liable hereunder.

 

(f)This Agreement shall be governed by and construed in accordance with the Laws
of the State of Hawaii applicable to contracts made and performed in such State,
without reference to conflict of law rules that would require the application of
the Laws of another jurisdiction.  The parties hereto hereby irrevocably submit
to the exclusive jurisdiction of any federal or state court located within the
State of Hawaii over any dispute arising out of or relating to this Agreement or
any of the transactions contemplated hereby and each party hereby irrevocably
agrees that all claims in respect of such dispute or any suit, action proceeding
related thereto shall be heard and determined in such courts.  The parties
hereby irrevocably waive, to

the fullest extent permitted by applicable Law, any objection which they may now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such
dispute.  Each of the parties hereto agrees that a judgment in any such dispute
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

 

(g)This Agreement contains the entire agreement of the parties regarding the
subject matter hereof. This Agreement may be modified only by a duly authorized
writing executed by all parties.

 

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(h)All notices provided for or required by this Agreement shall be in writing
and shall be delivered personally to the other party, or mailed by certified or
registered mail (return receipt requested), or delivered by a recognized
overnight courier services, as follows:

 

If to the Company:RCSH Operations, Inc.

c/o Ruth’s Hospitality Group, Inc.

1030 W. Canton Ave. Suite 100

Winter Park, FL 32789

Attention: General Counsel

 

If to Consultant:Desert Island Restaurants, L.L.C.

6263 N. Scottsdale Rd, #374

Scottsdale, AZ 85250

 

Notices delivered pursuant to this Section 3(h) hereof shall be deemed given: at
the time delivered, if personally delivered; three (3) business days after being
deposited in the mail, if mailed; and one (1) business day after timely delivery
to the courier, if by overnight courier. Either party hereto may change the
address to which notice is to be sent by written notice to the other party in
accordance with the provisions of this Section 3(h).

 

(i)The rights and remedies of the Company under this Agreement are fully
assignable and transferable to any of the Company’s Affiliates and will inure to
the benefit of such assignee. The respective obligations of Consultant hereunder
may not be assigned by Consultant without the prior written consent of the
Company,

 

(j)Consultant hereby represents to the Company that Consultant has read and
understands, and agrees to be bound by, the terms of this Agreement.  Consultant
acknowledges that the geographic scope and duration of the covenants contained
in this Agreement are the result of arm’s-length bargaining and are fair and
reasonable in light of (i) the importance of the goodwill acquired by the
Company via the Asset Purchase Agreement, (ii) the nature and wide geographic
scope of the operations of the RCSH Restaurants, and (iii) the fact that the
RCSH Restaurants are conducted throughout, and derived from, the entire
geographic area where competition is restricted by this Agreement. It is the
desire and intent of the parties that the provisions of this Agreement be
enforced to the fullest extent permitted under applicable law, whether now or
hereafter in effect and therefore, to the extent permitted by applicable law,
the parties hereto waive any provision of applicable law that would render any
provision of this Agreement invalid or unenforceable.

 

(k)This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original copy of this Agreement and all of which, when
taken together, shall be deemed to constitute one and the same agreement, and
photostatic, .pdf or facsimile copies of fully-executed counterparts of this
Agreement shall be given the same effect as originals.

 

[Signatures on following page]

 

 

 

 

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IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
witnessed by their signatures below.

 

COMPANY:

 

RCSH OPERATIONS, INC.

 

 

By:

 

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

 

CONSULTANT:

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Non-Competition and Non-Solicitation Agreement]

 

4363243-3

 

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EXHIBIT G

 

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

W. RANDALL SCHOCH

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 1 of 5

4326899-5

 

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NON-COMPETITION AND NON-SOLICITATION AGREEMENT

 

THIS NON-COMPETITION AND NON-SOLICITATION AGREEMENT (this

 

“Agreement”) is made and entered into this

day of

_, 201

, between

 

RCSH Operations, Inc., a California corporation (the “Company”), and W. Randall
Schoch (“Consultant”). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Asset Purchase Agreement, dated
as of November 2, 2017, among the Company, as the Purchaser, the Sellers (as
defined therein) party thereto, and Consultant (“Asset Purchase Agreement”).

 

RECITALS

 

WHEREAS, the Company, and its parent company and affiliates, as a result of the
expenditure of time, skill, effort and money, developed and owns a unique system
(the “System”) for the development and operation of full-service restaurants
under the name and mark Ruth’s Chris Steak House (“RCSH Restaurants”);

 

WHEREAS, the System includes, but is not limited to, certain trade names,
service marks, trademarks, symbols, logos, emblems and indicia of origin,
including, but not limited to, the mark Ruth’s Chris Steak House and such other
trade names, service marks, trademarks, symbols, logos, emblems and indicia of
origin as the Company may develop in the future to identify for the public the
source of services and products marketed under such marks (“Marks”) and under
the System and representing the System’s high standards of quality, appearance
and service; special recipes and menu items; uniform standards, specifications
and procedures for operations; quality and uniformity of products and services
offered; procedures for inventory and management and financial control; training
and assistance; and advertising and promotional programs; all of which may be
changed, improved and further developed by the Company from time to time and are
used by the Company in connection with the operation of the System, but
excluding such information and knowledge possessed or obtained by Consultant
independently through his own industry knowledge and experience without the aid
or involvement of the Company or the System (“Proprietary Information”);

 

WHEREAS, the Marks and Proprietary Information provide economic advantages to
the Company and many are not generally known to, and are not readily
ascertainable by proper means by, the Company’s competitors who could obtain
economic value from knowledge and use of the Marks and Proprietary Information;

 

WHEREAS, the Company has taken and intends to take all reasonable steps to
maintain the confidentiality and secrecy of the Proprietary Information;

 

WHEREAS, the Company has previously granted the Sellers certain franchise
rights, including use of the System and the Proprietary Information, relating to
the ownership, operation and development of the Restaurants pursuant to the
Franchise Agreements;

 

WHEREAS, the Company and Consultant have agreed on the importance to the Company
and other licensed users of the System of restricting use, access and
dissemination of the Proprietary Information and the Sellers and Consultant have
agreed in the Asset Purchase

 

Page 2 of 5

4326899-5

 

--------------------------------------------------------------------------------

Agreement that the Company’s obligation to purchase the Purchased Assets is
subject to the condition that Consultant enters into this Agreement; and

 

WHEREAS, in order to induce the Company to consummate the purchases under the
Asset Purchase Agreement on the Closing Date, Consultant is willing to execute,
deliver, perform and be bound by this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the parties agree as follows:

 

1.Confidentiality Agreement.

 

(a)The Company has disclosed to Consultant and his Affiliates some or all of the
Proprietary Information relating to the System and not generally known by the
public or competitors. All non-public, proprietary or confidential information,
including, without limitation, the System, drawings, specifications, techniques
and compilations of data, which the Company or its Affiliates provided to
Consultant, whether prior to or following the date of this Agreement, will be
deemed confidential Proprietary Information for the purposes of this Agreement.

 

(b)Consultant acknowledges that Consultant and his Affiliates previously
received the Proprietary Information in confidence and will, at all times,
maintain them, or cause them to be maintained, in confidence and will not use
this information for any reason whatsoever except as may be otherwise permitted
in the Consulting Agreement dated as of the date hereof between the Company and
Consultant.

 

(c)Consultant will not, and will cause his Affiliates, not to, at any time
disclose, copy documents or compilations containing some or all of the
Proprietary Information, or permit the disclosure of the Proprietary Information
unless required by law and Consultant acknowledges that such information shall
remain confidential. Consultant shall not use or adopt any secret recipes,
formulas, or other Proprietary Information, use or duplicate the System or any
portion thereof or assist others to do so.

 

(d)On the Closing Date, Consultant will surrender, and will cause his
Affiliates, to surrender, any material containing some or all of the Proprietary
Information to Company, including copies of recipes and other instructions or
materials, unless otherwise required under the Franchise Agreements to surrender
such materials on an earlier date.

 

(e)       For a period of five (5) years following the Closing Date, Consultant
will not, and will cause his Affiliates not to, at any time, directly or
indirectly engage in any act or omission of act which causes Consultant or any
Affiliates to engage in any act which will defame or

disparage the RCSH Restaurants or the goodwill associated with the Proprietary
Information and the System.

 

2.Non-Competition and Non-Solicitation.

 

(a)In consideration of the Purchase Price paid by the Company on the Closing
Date to the Sellers pursuant to the Asset Purchase Agreement, $250,000 of which
is being allocated to

 

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--------------------------------------------------------------------------------

Consultant’s obligations under this Agreement (the “Allocation”), and in order
to protect the goodwill and unique qualities of the System, the confidentiality
and value of the Proprietary Information, and the goodwill associated with
Business, Consultant agrees and covenants that, during the period commencing on
the Closing Date and ending on the five (5) year anniversary thereof within the
State of Hawaii and the two (2) year anniversary thereof outside of the State of
Hawaii (the “Restricted Period”):

 

(i)Consultant will not, will cause his Affiliates not to, (A) assist others in
any business or service substantially similar to the RCSH Restaurants existing
as of the date of this Agreement, or (B) divert, or attempt to divert, directly
or indirectly, any business, business opportunity, or customer of the RCSH
Restaurants to any competitor engaged in a business similar to the RCSH
Restaurants existing as of the date of this Agreement, including a fine

dining restaurant that offers steak as the primary menu item;

 

(ii)Consultant will not, and will cause his Affiliates not to, (A) assist others
in any business or service substantially similar to the RCSH Restaurants
existing as of the date of this Agreement to, (B) knowingly employ, or seek to
employ, any person who is as of Closing Date, or was at any time within the
twelve (12) months immediately preceding the Closing Date, employed by (x) the
Company or any of its Affiliates, (y) by any Seller, Consultant or any of

their respective Affiliates, or (z) any other franchisee or developer of the
Company, or otherwise directly or indirectly induce such person to leave that
person’s employment;

 

(iii)Consultant will not, directly or indirectly, for himself or through, on
behalf of, or in conjunction with any Person, without the prior written consent
of the Company, own, maintain, operate, engage in or have any financial or
beneficial interest of five percent (5%) or more of any publicly-traded company
in (including any interest in corporations, partnerships, trusts, unincorporated
associations or joint ventures), or advise, assist or make loans to, any
restaurant business that is of a character and concept similar to the RCSH
Restaurants existing as of the date of this Agreement, including any fine dining
restaurant that offers steak as the

primary menu item; and

 

(iv)within the State of Hawaii, Consultant will not, and will cause his

Affiliates not to, solicit, induce, influence or attempt to influence any
supplier, lessor, licensor, or any other Person who has a business relationship
with the Company, any Affiliate of Company,

or had a business relationship with any Seller, to discontinue or reduce the
extent or scope of such relationship with the Company.

 

(b)Consultant agrees that the foregoing covenants are reasonable with respect to
their duration, geographic area and scope, to protect, among other things, the
Company’s acquisition

of the goodwill associated with the Business. If a judicial or arbitral
determination is made that any provision of this Section 2 constitutes an
unreasonable or otherwise unenforceable restriction against Consultant or any of
his Affiliates, then the provisions of this Section 2 shall be rendered void
only to the extent such judicial or arbitral determination finds such provisions
to be unenforceable. In that regard, any judicial or arbitral authority
construing this Section 2 shall be empowered to sever any prohibited business
activity, time period or geographical area from the coverage of any such
agreements and to apply the remaining provisions of this Section 2 to the
remaining business activities, time periods and/or geographical areas not so
severed.  Moreover,

 

Page 4 of 5

4326899-5

 

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in the event that any provision, or the application thereof, of this Section 2
is determined not to be specifically enforceable, the Company shall nevertheless
be entitled to recover monetary damages as a result of the breach of such
agreement.

 

3.Miscellaneous

 

(a)Consultant agrees that, in the event of a breach of this Agreement, the
Company would be irreparably injured and be without an adequate remedy at law.
Therefore, in the event of such a breach, or attempted breach of any of the
provisions hereof, the Company will be entitled to enforce the provisions of
this Agreement and will be entitled, in addition to any other remedies which are
made available to it at law or in equity, to an injunction prohibiting such
breach.

 

(b)The non-prevailing party agrees to pay all reasonable expenses (including
court costs and reasonable attorneys’ fees) incurred by the prevailing party (as
determined by the court) in enforcing this Agreement.

 

(c)       Any failure by the Company to object to or take action with respect to
any breach of any provision of this Agreement by Consultant will not operate or
be construed as a waiver of or consent to that breach or any subsequent breach
by Consultant.

 

(d)Consultant acknowledges the receipt and adequacy of the consideration payable
under the Asset Purchase Agreement, and that the Allocation is good and valuable
consideration in exchange for Consultant making the covenants contained in this
Agreement and agreeing to be legally bound by the covenants contained in this
Agreement (and all other terms hereof).

 

(e)Consultant acknowledges (i) his responsibility to cause the Sellers and his
other Affiliates to comply with the limitations in this Agreement and (ii) that
any action taken by any of the Sellers or his other Affiliates that would, if
taken by Consultant directly, constitute a breach of this Agreement shall
constitute a breach for which Consultant is liable hereunder.

 

(f)This Agreement shall be governed by and construed in accordance with the Laws
of the State of Hawaii applicable to contracts made and performed in such State,
without reference to conflict of law rules that would require the application of
the Laws of another jurisdiction.  The parties hereto hereby irrevocably submit
to the exclusive jurisdiction of any federal or state court located within the
State of Hawaii over any dispute arising out of or relating to this Agreement or
any of the transactions contemplated hereby and each party hereby irrevocably
agrees that all claims in respect of such dispute or any suit, action proceeding
related thereto shall be heard and determined in such courts.  The parties
hereby irrevocably waive, to

the fullest extent permitted by applicable Law, any objection which they may now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such
dispute.  Each of the parties hereto agrees that a judgment in any such dispute
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

 

(g)This Agreement contains the entire agreement of the parties regarding the
subject matter hereof. This Agreement may be modified only by a duly authorized
writing executed by all parties.

 

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4326899-5

 

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(h)All notices provided for or required by this Agreement shall be in writing
and shall be delivered personally to the other party, or mailed by certified or
registered mail (return receipt requested), or delivered by a recognized
overnight courier services, as follows:

 

If to the Company:RCSH Operations, Inc.

c/o Ruth’s Hospitality Group, Inc.

1030 W. Canton Ave. Suite 100

Winter Park, FL 32789

Attention: General Counsel

 

If to Consultant:W. Randall Schoch

c/o Desert Island Restaurants, L.L.C.

6263 N. Scottsdale Rd, #374

Scottsdale, AZ 85250

 

Notices delivered pursuant to this Section 3(h) hereof shall be deemed given: at
the time delivered, if personally delivered; three (3) business days after being
deposited in the mail, if mailed; and one (1) business day after timely delivery
to the courier, if by overnight courier. Either party hereto may change the
address to which notice is to be sent by written notice to the other party in
accordance with the provisions of this Section 3(h).

 

(i)The rights and remedies of the Company under this Agreement are fully
assignable and transferable to any of the Company’s Affiliates and will inure to
the benefit of such assignee. The respective obligations of Consultant hereunder
may not be assigned by Consultant without the prior written consent of the
Company,

 

(j)Consultant hereby represents to the Company that Consultant has read and
understands, and agrees to be bound by, the terms of this Agreement.  Consultant
acknowledges that the geographic scope and duration of the covenants contained
in this Agreement are the result of arm’s-length bargaining and are fair and
reasonable in light of (i) the importance of the goodwill acquired by the
Company via the Asset Purchase Agreement, (ii) the nature and wide geographic
scope of the operations of the RCSH Restaurants, and (iii) the fact that the
RCSH Restaurants are conducted throughout, and derived from, the entire
geographic area where competition is restricted by this Agreement. It is the
desire and intent of the parties that the provisions of this Agreement be
enforced to the fullest extent permitted under applicable law, whether now or
hereafter in effect and therefore, to the extent permitted by applicable law,
the parties hereto waive any provision of applicable law that would render any
provision of this Agreement invalid or unenforceable.

 

(k)This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original copy of this Agreement and all of which, when
taken together, shall be deemed to constitute one and the same agreement, and
photostatic, .pdf or facsimile copies of fully-executed counterparts of this
Agreement shall be given the same effect as originals.

 

[Signatures on following page]

 

 

 

Page 5 of 5

 

4326899-5

 

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IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
witnessed by their signatures below.

 

COMPANY:

 

RCSH OPERATIONS, INC.

 

 

By:

 

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

CONSULTANT:

 

 

 

 

W. Randall Schoch

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Non-Competition and Non-Solicitation Agreement]

 

4326899-5

 

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EXHIBIT H

 

GIFT CARD ESCROW AND REIMBURSEMENT AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4320478-4

 

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GIFT CARD ESCROW AND REIMBURSEMENT AGREEMENT

 

This GIFT CARD ESCROW AND REIMBURSEMENT AGREEMENT (this

 

“Agreement”), dated

, 201

, is by and among RCSH Operations, Inc., a

 

California corporation (the “Purchaser”), Desert Island Restaurants, L.L.C., an
Arizona limited liability company, Honolulu Steak House, LLC, a Hawaii limited
liability company, Maui Steak House LLC, a Hawaii limited liability company,
Wailea Steak House LLC, a Hawaii limited liability company, Beachwalk Steak
House, LLC, an Arizona limited liability company, Lava Coast Steak House, LLC,
an Arizona limited liability company, and Kauai Steak House, LLC, an Arizona
limited liability company (each, a “Seller” and collectively, the “Sellers”),
and Title Guaranty Escrow Services, Inc., a Hawaii corporation (“Title Guaranty
Escrow”), as escrow agent (the “Escrow Agent”) (each a “Party” and,
collectively, the “Parties”). Capitalized terms used but not defined herein
shall have the meanings given to them in that certain Asset Purchase Agreement
(“Asset Purchase Agreement”), dated November 2, 2017, by and among the
Purchaser, the Sellers and the Principal (as defined therein). The Parties
acknowledge that the Escrow Agent is not a party to, has not received and will
not be responsible for the Asset Purchase Agreement.

 

W I T N E S S E T H

 

WHEREAS, pursuant to the Asset Purchase Agreement, the Sellers have agreed to
sell to the Purchaser, and the Purchaser has agreed to purchase from the
Sellers, the Purchased Assets, upon the terms and subject to the conditions set
forth therein;

 

WHEREAS, pursuant to the terms of Section 9.8 of the Asset Purchase Agreement,
the Purchaser and the Sellers desire to establish an escrow account for the
benefit of the Purchaser to secure certain obligations of the Sellers to
indemnify the Purchaser for the value of Gift Card redemptions, House Accounts,
Comps and Promotional Discounts by the Purchaser for an 18- month period after
the Closing Date, as set forth in Section 7.17 of the Asset Purchase Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual agreements and covenants
contained herein and in the Asset Purchase Agreement, the parties hereto hereby
agree as follows:

 

1.Appointment of Escrow Agent.

 

The Purchaser and the Sellers hereby appoint Title Guaranty Escrow as the Escrow
Agent for the purposes set forth herein and the Escrow Agent hereby accepts such
appointment.

 

2.Certain Definitions.

 

“Comps” means any cards, vouchers, credits or other arrangements issued on a
complimentary basis by Sellers to vendors and customer and redeemable for food
or beverages at Ruth’s Chris Steak House restaurants in Hawaii.

 

4320478-4

 

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“Gift Cards” means any pre-paid balance cards and any other arrangements which
are sold by the Sellers to customers or to a retailer for resale to customers
and redeemable for the purchase of food or beverages at a Ruth’s Chris Steak
House restaurant.

 

“Gift Card Outstanding Balance” shall mean the total sum of the liabilities for

outstanding Gift Cards, presented to and redeemed by the Purchaser for a period
of eighteen (18)

months following the Closing Date.

 

“House Accounts” means any arrangements by means of vouchers, credits or trade
or barter accounts which are extended by Sellers to third parties and customers
and redeemable for the purchase of food or beverages at Ruth’s Chris Steak House
restaurants in Hawaii and that do not generate a corresponding accounts
receivable in favor of Purchaser. For the sake of clarity, house accounts with
an existing credit attributable to services provided to Sellers on trade are
considered a House Account under this definition.  However, arrangements where
vouchers are presented in exchange for meals and upon redemption the voucher
sponsor (e.g., the Japanese Tourism Bureau) is invoiced for the redeemed
vouchers are not considered a House Account.

 

“Promotional Discounts” means any incentives issued by Sellers to customers in
connection with marketing and promotional strategies resulting in discounts or
credits that may be applied to the purchase of food or beverages at Ruth’s Chris
Steak House restaurants in Hawaii.

 

3.Deposit Into Escrow Account.

 

(a) Concurrently with the execution and delivery of this Agreement, in
accordance with Section 7.17 and Section 9.8 of the Asset Purchase Agreement,
the Sellers shall deposit with the Escrow Agent and the Escrow Agent will
acknowledge upon receipt an amount equal to

 

$[] (the “Escrowed Funds Balance”) to be held in Account No. [

] (the

 

“Escrow Account”) and disbursed by the Escrow Agent in accordance with the terms
and conditions set forth in this Agreement. As used in this Agreement, the term
“Escrowed Funds” shall be deemed to include any interest or other income earned
thereon.

 

(b) Notwithstanding anything herein to the contrary, during the term of this
Agreement, the Purchaser shall be entitled to receive 100% of the value of any
Gift Cards redeemed up to the Gift Card Outstanding Balance from the Escrow
Account.

 

(c)   The Purchaser and Sellers agree that Purchaser will honor House Accounts,
Comps and Promotional Discounts which are redeemed following the Closing
Date.  To the extent the total sum of Comps and Promotional Discounts redeemed
during the six (6) months following the Closing Date exceeds Three Percent (3%)
of gross sales, then Purchaser shall be entitled to receive reimbursement from
the Escrowed Funds Balance for the amount in excess of that threshold (the
“Excess C&PD”). In calculating Excess C&PD, the cost of goods sold for the food
or beverage item will be used and not the sales price. For example, if a
promotional voucher for a free piece of chocolate cake is redeemed, the cost of
goods sold is 20% and the price is $10 for that item, $2.00 will be used and not
the $10.00 sale price in calculating Excess C&PD. If a promotional voucher for a
$20 discount on any meals of at least $100 is redeemed and cost of goods sold
are 30%, only $6.00 will be used.

 

4320478-4

 

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(d) The Purchaser and the Sellers acknowledge and agree that this Agreement
constitutes a substantial restriction on the rights of the Sellers with respect
to the Escrowed Funds and that the Purchaser and the Sellers shall treat the
Escrowed Funds as an installment obligation.

 

4.Investment of Escrowed Funds.

 

During the term of this Agreement, the Escrowed Funds shall be deposited in an
interest bearing account with a federally insured financial institution or
invested in such other investments as shall be directed in writing by the
Sellers and as shall be acceptable to the Purchaser and the Escrow Agent. The
Parties acknowledge that the Escrow Agent charges and collects fees for services
rendered pursuant to this Agreement. Unless otherwise instructed in writing by
the Sellers, the Escrow Agent shall invest and reinvest the Escrowed Funds in
the interest bearing account or other investment, as applicable.

 

5.Disbursements From the Escrow Account; Closing.

 

(a) The Escrow Agent shall disburse the Escrowed Funds to the Purchaser by
intrabank transfer of collected funds or wire when accompanied by valid wire
instructions in the amounts specified thereon upon presentment jointly by the
Purchaser and the Sellers to the Escrow Agent of documentation from the
Purchaser reflecting customer charges against Gift Cards and House Accounts (the
“GC&HA Charges”), and for any Excess C&PD.  Disbursement Requests (as defined
below) will not be made more frequently than on a monthly basis.

 

(b) All of the joint requests from the Purchaser and Desert Island Restaurants,
L.L.C., as authorized agent for the Sellers, for disbursements of Escrowed Funds
to the Purchaser shall be accompanied with instructions from Purchaser and
approved by Sellers for payment thereof in substantially the form attached
hereto as Schedule 1 which instructions include a certification by the Purchaser
that the GC&HA Charges were made and the Excess C&PD were incurred within
eighteen (18) months following the Closing Date (the “Disbursement Requests”).

 

(c) The Escrow Agent shall honor and make disbursements to the Purchaser for all
Disbursement Requests presented to the Escrow Agent within eighteen (18) months
after the Closing Date. Within three (3) Business Days (as hereinafter defined)
following the eighteen (18) month anniversary of this Agreement and subject to a
final reconciliation process with Purchaser and Sellers, the Escrow Agent shall
distribute to the Sellers the balance (if any) of the Escrowed Funds, in
accordance with written payment instructions from Sellers and Purchaser.

 

(d) In addition to disbursements under Section 5(a), 5(b), and 5(c) of this
Agreement, the Escrow Agent is authorized and directed to deliver the Escrowed
Funds in accordance with the written instructions of Purchaser and Sellers. When
directions or instructions from more than one party are required, such
directions or instructions may be given by separate instruments of

similar tenor. Any party may act hereunder through an agent or attorney in fact,
provided satisfactory written evidence of such authority is first furnished to
the Escrow Agent. The Escrow Agent may conclusively rely on the authenticity of
such directions or instructions delivered by email. Distributions shall be made
only from the Escrowed Funds and within a reasonable time after the Escrow
Agent’s receipt of such instructions.

 

4320478-4

 

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6.Compensation of Escrow Agent.

 

Purchaser and Sellers agree jointly and severally to (i) pay the Escrow Agent
upon execution of this Agreement and from time to time thereafter reasonable
compensation for the services to be rendered hereunder, which, unless otherwise
agreed in writing, shall be as described in Exhibit B (to be attached hereto
upon selection of an Escrow Agent), and (ii) pay or reimburse the Escrow Agent
upon request for all expenses, disbursements and advances, including reasonable
attorney’s fees and expenses, incurred or made by it in connection with the
performance, modification and termination of this Agreement. As between the
Purchaser and the Sellers, such fees and expenses of the Escrow Agent shall be
shared equally.

 

7.Concerning the Escrow Agent.

 

(a) Notwithstanding any provision contained herein to the contrary, the Escrow
Agent, including its officers, directors, employees and agents, will:

 

(i) Not be liable for any action taken or omitted under this Agreement so long
as it will have acted in good faith and without gross negligence or willful
misconduct;

 

(ii)  Have no responsibility to inquire into or determine the genuineness,
authenticity, or sufficiency of any securities, checks, or other documents or
instruments submitted to it in connection with its duties hereunder;

 

(iii)  Be entitled to deem the signatories of any documents or instruments
submitted to it hereunder as being those purported to be authorized to sign such
documents or instruments on behalf of the parties hereto, and will be entitled
to rely upon the genuineness of the signatures of such signatories without
inquiry and without requiring substantiating evidence of any kind;

 

(iv) Be entitled to refrain from taking any action contemplated by this
Agreement in the event that it becomes aware of any disagreement between the
other Parties hereto as to any facts or as to the happening of any contemplated
event precedent to such action. In the event that the Escrow Agent shall be
uncertain as to its duties or rights hereunder or shall receive instructions,
claims or demands from any Party which, in its opinion, conflict with any of the
provisions of this Agreement, it shall be entitled to refrain from taking any
action and its sole obligation shall be to keep safely all funds held in escrow
until it shall be directed otherwise in writing by all of the other Parties or
by a final order or judgment of a court of competent jurisdiction. The Escrow
Agent may interplead all of the assets held hereunder into the Circuit Court of
the First Circuit, State of Hawaii, or may seek a declaratory judgment in the
event that such circumstances arise, and thereafter be fully relieved from any
and all liability or obligation with respect to such interpleaded assets or any
action or inaction based on such declaratory judgment;

 

(v) Be indemnified and saved harmless jointly and severally by the other Parties
from any and all losses, liabilities, claims, proceedings, suits, demands,
penalties, costs and expenses, including without limitation reasonable fees and
expenses of outside counsel and experts and preparation to defend any of the
foregoing (“Losses”), which may be incurred by it as a result of its execution,
delivery or performance of this Agreement, unless such Losses are

 

4320478-4

 

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caused by the bad faith, gross negligence or willful misconduct of the Escrow
Agent, and the provisions of this Section 7(a)(v) will survive the resignation
or removal of the Escrow Agent and the termination of this Agreement.  The
Purchaser and the Sellers hereby grant the Escrow Agent a lien on, right of
set-off against and security interest in the Escrowed Funds for the payment of
any claim for indemnification, compensation, expenses and amounts due hereunder;

 

(vi) Have only those duties as are specifically provided herein, which will be
deemed purely ministerial in nature, and will under no circumstance be deemed a
fiduciary for any of the other Parties. The Escrow Agent will neither be
responsible for, nor chargeable with, knowledge of the terms and conditions of
any other agreement, instrument or document between the other parties hereto, in
connection herewith, including without limitation the Asset Purchase Agreement.
This Agreement sets forth all matters pertinent to the Escrow Account and the
Escrowed Funds contemplated hereunder, and no additional obligations of the
Escrow Agent will be inferred from the terms of this Agreement or any other
Agreement. IN NO EVENT WILL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY,
FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND
WHATSOEVER (INCLUDING BUT NOT LIMITED TO LOST PROFITS), EVEN IF THE ESCROW AGENT
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF
THE FORM OF ACTION;

 

(vii)  Have the right, but not the obligation, to consult with and retain
counsel of its choice with respect to matters (including but not limited to
litigation) arising out of this Agreement and will not be liable for action
taken or omitted to be taken by the Escrow Agent in good faith in accordance
with the advice of such counsel; and

 

(viii)  Have the right to perform any of its duties hereunder through agents,
attorneys, custodians or nominees.

 

8.Attachment of Escrow Account; Compliance with Legal Orders.

 

In the event that the Escrowed Funds are or will be attached, garnished or
levied upon, or the delivery thereof will be stayed or enjoined, by an order of
any court of competent

jurisdiction, or any order, judgment or decree will be made or entered by any
court order affecting the Escrowed Funds, the Escrow Agent is hereby expressly
authorized, in its sole discretion, to obey and comply with all writs, orders or
decrees so entered or issued, which it is advised by legal counsel of its own
choosing is binding upon it, whether with or without jurisdiction, and in the
event that the Escrow Agent obeys or complies with any such writ, order or
decree it will not be liable to any of the other Parties or to any other person,
firm or corporation, by reason of such compliance notwithstanding such writ,
order or decree be subsequently reversed, modified, annulled, set aside or
vacated.

 

9.Resignation or Removal of Escrow Agent.

 

(a) The Escrow Agent may resign as such following the giving of thirty (30)
days’ prior notice to the Purchaser and the Sellers. Similarly, the Escrow Agent
may be removed and replaced following the giving of thirty (30) days’ prior
notice to the Escrow Agent by the other Parties. In either event, the duties of
the Escrow Agent will terminate thirty (30) days after

 

4320478-4

 

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receipt of such notice (or as of such earlier date as may be mutually
agreeable); and the Escrow Agent will then deliver the balance of the moneys or
assets then in its possession to a successor escrow agent as will be appointed
by the Purchaser and the Sellers as evidenced by notice to the Escrow Agent.

 

(b) If the Purchaser and the Sellers hereto have failed to appoint a successor
to the Escrow Agent prior to the expiration of thirty days following receipt of
the notice of resignation or removal, the Escrow Agent may appoint a successor
or petition the Circuit Court of the First Circuit, State of Hawaii, for the
appointment of a successor escrow agent or for other appropriate relief, and any
such resulting appointment shall be finding upon all of the parties hereto.

 

10.       Term.

 

This Escrow Agreement shall automatically terminate as of the end of the
eighteenth month following the Closing Date and upon disbursement of all of the
Escrowed Funds in accordance with Section 5 hereof.

 

11.       Notices.

 

All notices, requests, demands, claims, and other communications hereunder will
be in writing. Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given (i) if served personally, on the day of
such service, or (ii) if mailed by certified or registered mail (return receipt
requested), on the second Business Day after mailing, and (iii) if transmitted
by recognized overnight carrier, on the next Business Day after tender to the
carrier. Such communications shall be sent to the following addresses:

 

If to the Sellers:         c/o Desert Island Restaurants LLC

6263 N. Scottsdale Rd. # 374

Scottsdale, AZ 85250

Attention: W. Randall Schoch

Phone:   (480) 945-0088

Facsimile:  (602) 224-7876

 

 

Copy to:

Sullivan Meheula Lee, LLLP Pacific Guardian Center Makai Tower

 

733 Bishop Street, Suite 2900

Attention: Terrence Lee

Phone: (808) 628-7530

Facsimile: (808) 533-2467

 

If to Purchaser:RCSH Operations, Inc.

c/o Ruth’s Hospitality Group, Inc.

1030 W. Canton Ave. Suite 100

Winter Park, FL 32789

Attention: General Counsel

Phone: (407) 829-3451

 

4320478-4

 

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Copy to:Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, New York 10019

Attention: Jeffrey Spindler, Esq. Phone:  (212) 451-2300

Facsimile:  (212) 451-2222

 

If to the Escrow Agent:Title Guaranty Escrow Services, Inc

235 Queen Street

Honolulu, Hawaii 96813

Attention: Barbara Paulo

Phone:  (808) 521-0209

Facsimile:  (808) 521-0280

 

Notwithstanding the above, in the case of communications delivered to the Escrow
Agent such communications shall be deemed to have been given on the date
received by the Escrow Agent. In the event that the Escrow Agent, in its sole
discretion, shall determine that an emergency exists, the Escrow Agent may use
such other means of communication as the Escrow Agent deems appropriate. For
purposes of this Agreement, “Business Day” shall mean any day other than a
Saturday, Sunday or any other day on which the Escrow Agent located at the
notice address set forth above is authorized or required by law or executive
order to remain closed.

 

12.Governing Law.

 

This Agreement shall be construed in accordance with the laws of the State of
Hawaii without regard to the conflicts of law principles thereof. The Parties
further herby waive any right to a trial by jury with respect to any lawsuit or
judicial proceeding arising or relating to this Agreement. Disputes between the
Purchaser and the Sellers shall be governed by the law described in the Asset
Purchase Agreement.

 

13.Amendments and Waiver.

 

No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing, signed by each of the parties hereto and identified in such
writing as an amendment to this Agreement. No waiver by any party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.

 

14.Assignment.

 

This Agreement shall be binding upon and inure to the benefit of the parties
named herein and their respective successors and permitted assigns. No party may
assign this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other parties hereto or thereto,
except that the Purchaser may assign some or all of its rights, interests and
obligations pursuant to this Agreement to one or more one of its

 

4320478-4

 

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subsidiaries without the consent of any Seller or the Escrow Agent; provided
that the Purchaser shall remain liable for its obligations hereunder.

 

15.Force Majeure.

 

Notwithstanding any other provisions of this Agreement, the Escrow Agent shall
not be obligated to perform any obligation hereunder and will not incur any
liability for the nonperformance or breach of any obligation hereunder to the
extent that the Escrow Agent is delayed in performing, unable to perform or
breaches such obligation because of acts of God, war, terrorism, fire, floods,
strikes, electrical outages, equipment or transmission failures, or other causes
reasonably beyond its control.

 

16.Asset Purchase Agreement.

 

In the event of a conflict between the terms and provisions of this Agreement
and the terms and provisions of the Asset Purchase Agreement, the terms and
provisions of the Asset Purchase Agreement shall control for the Purchaser and
the Sellers and this Agreement shall control for the Escrow Agent.

 

17.Funds Transfer.

 

In the event funds transfer instructions are given (other than in writing at the
time of execution of this Agreement, as indicated in Section 11 above), whether
in writing, by facsimile or otherwise, the Escrow Agent is authorized to seek
confirmation of such instructions by telephone call-back to the person or
persons designated on Exhibit A hereto, and the Escrow Agent may rely upon the
confirmation of anyone purporting to be the person or persons so designated.
Each funds transfer instruction shall be executed by an authorized signatory.  A
list of such authorized signatories is set forth on Exhibit A. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The Escrow Agent and the
beneficiary’s bank in any funds transfer may rely solely upon any account
numbers or similar identifying numbers provided by the Purchaser or the Sellers
to identify (i) the beneficiary, (ii) the beneficiary’s bank, or (iii) an
intermediary bank. The Escrow Agent may apply any of the escrowed funds for any
payment order it executes using any such identifying number, even when its use
may result in a person other than the beneficiary being paid, or the transfer of
funds to a bank other than the beneficiary’s bank or an intermediary bank so
designated. The Parties acknowledge that these security procedures are
commercially reasonable.

 

18.TINs; Tax Matters.

 

The Purchaser and the Sellers each represent that their respective correct
Taxpayer Identification Number (“TIN”) assigned by the Internal Revenue Service
(“IRS”) or any other taxing authority is set forth on the signature page hereof.
In addition, all interest or other income earned under the Agreement shall be
allocated and/or paid as directed in a joint written direction of the Sellers
and the Purchaser and reported by the recipient to the Internal Revenue Service.
If Internal Revenue Service rules that all or any portion of the Gift Card
redemptions during the term of this Agreement are taxable to any Seller or the
Purchaser, the taxed party shall be entitled to take a deduction with respect to
such portion of the redemptions on its applicable federal

 

4320478-4

 

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income tax return. Notwithstanding such written directions, the Escrow Agent
shall report and, as required, withhold any taxes as it determines may be
required by any law or regulation in effect at the time of the distribution. In
the absence of timely direction, all proceeds of the Escrowed Funds shall be
retained in the Escrowed Funds and reinvested from time to time by the

Escrow Agent as provided in Section 4. In the event that any earnings remain
undistributed at the end of any calendar year, the Escrow Agent shall report to
the Internal Revenue Service or such other authority such earnings as it deems
appropriate or as required by any applicable law or regulation or, to the extent
consistent therewith, as directed in writing by the Purchaser and the Sellers.
The Escrow Agent shall have no responsibility for the preparation and/or filing
or any

tax or other payments required to be made by the Purchaser or Seller in
connection with this Agreement. The Escrow Agent shall have no responsibility
for the payment of taxes by the Purchaser or the Sellers unless directed to do
so by the appropriate authorized party.

 

19.Severability and Operation of Law.

 

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.

 

20.Extension; Waiver.

 

The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
Further, no waiver by either party of any term, condition, default, or breach
shall constitute or be construed as a waiver of any other term, condition,
default, or breach of this Agreement.

 

21.Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original copy of this Agreement and all of which, when taken
together, shall be deemed to constitute one and the same agreement, and
photostatic, .pdf or facsimile copies of fully-executed counterparts of this
Agreement shall be given the same effect as originals.

 

22.Entire Agreement

 

This Agreement (including the documents referred to herein) constitutes the
entire agreement between the parties and supersedes any prior understandings,
agreements, or representations by or between the parties, written or oral, to
the extent they related in any way to the subject matter hereof.

 

23.No Third Party Beneficiaries.

 

This Agreement shall not confer any rights or remedies upon any Person other
than the parties hereto and their respective successors and permitted assigns,
except as otherwise expressly provided herein.

 

[Signatures on following page]

 

4320478-4

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
effective the day and year first above written.

 

PURCHASER

RCSH OPERATIONS, INC. By:

Name:Michael P. O’Donnell

Title:Chief Executive Officer

TIN:

 

SELLERS:

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

HONOLULU STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

TIN:

 

MAUI STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

TIN:

 

4320478-4

 

--------------------------------------------------------------------------------

WAILEA STEAK HOUSE LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

TIN:

 

BEACHWALK STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

TIN:

 

LAVA COAST STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

TIN:

 

KAUAI STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

TIN:

 

4320478-4

 

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ESCROW AGENT

 

TITLE GUARANTY ESCROW SERVICES, INC.

 

By: Name: Title:

 

4320478-4

 

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EXHIBIT A

 

Telephone Number(s) for Call-Backs and

Person(s) Designated to Give and Confirm Funds Transfer Instruction

 

If to the Purchaser:

 

NameTelephone NumberSignature

1.

 

2.

 

 

 

If to the Sellers:

 

NameTelephone NumberSignature

1.

 

2.

 

 

 

Inasmuch as you are the only individual who can confirm wire transfers, we will
call you to confirm any federal funds wire transfer payment order purportedly
issued by you. Your continued issuance of payment orders to us and confirmation
in accordance with this procedure

will constitute your agreement (1) to the call-back security procedure outlined
herein and (2) that the security procedure outlined herein constitutes a
commercially reasonable method of verifying the authenticity of payment orders.
Moreover, you agree to accept any risk associated with a deviation from this
bank policy.

 

Telephone call-backs shall be made to each of the Purchaser and each Seller if
joint instructions are required pursuant to this Agreement. All funds transfer
instructions must include the signature of the person(s) authorizing said fund
transfer.

 

4320478-4

 

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EXHIBIT B Compensation of Escrow Agent

 

[To be provided by Escrow Agent]

 

4320478-4

 

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Schedule 1

(Date)

 

Via Facsimile and U.S. Mail

 

Attn: Fax:

Re:(the “Gift Card Escrow Account”)

 

Ladies and Gentlemen:

 

Reference is made to that certain Gift Card Escrow and Reimbursement Agreement
(the

 

“Escrow Agreement”) entered into as of the

day of

, 2017 by and among

 

RCSH Operations, Inc., a California corporation (the “Purchaser”), Desert Island
Restaurants, L.L.C., an Arizona limited liability company, Honolulu Steak House,
LLC, a Hawaii limited liability company, Maui Steak House LLC, a Hawaii limited
liability company, Wailea Steak House LLC, a Hawaii limited liability company,
Beachwalk Steak House, LLC, an Arizona limited liability company, Lava Coast
Steak House, LLC, an Arizona limited liability company, and Kauai Steak House,
LLC, an Arizona limited liability company (each, a “Seller” and collectively,
the “Sellers”), and Title Guaranty Escrow Services, Inc., a Hawaii corporation,
as escrow agent (the “Escrow Agent”). All terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Escrow Agreement.

 

Pursuant to Section 5 of the Escrow Agreement, we are entitled to direct
disbursement

 

from the Escrow Account in the amount of $

in connection with CG&HA

 

Charges and, if applicable, Excess C&PD. Attached hereto is documentation
substantiating the CG&HA Charges and, if applicable, Excess C&PD as of the date
hereof. We hereby authorize and direct the Escrow Agent to disburse such amount
directly to the Purchaser’s account as set forth below. We hereby certify that
we believe in good faith the foregoing amount is entitled to be disbursed under
the Escrow Agreement and that the CG&HA Charges and, if applicable, Excess C&PD
were made within 18 months following the Closing Date (on or about

). Please make the payment as follows: []

Thank you for your assistance in this matter.

 

4320478-4

 

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Sincerely,

RCSH OPERATIONS, INC. By:

Name: Title:

 

APPROVED:

 

DESERT ISLAND RESTAURANTS, L.L.C., by its Sole Manager:

 

 

 

 

W. Randall Schoch, Trustee of the Schoch

Revocable Living Trust dated November 19,

2001

 

In its Capacity as Authorized Agent for Sellers

 

4320478-4

 

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EXHIBIT I

 

INDEMNIFICATION ESCROW AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4330909-5

 

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INDEMNIFICATION ESCROW AGREEMENT

 

 

This Indemnification Escrow Agreement, dated this

day of

_, 201

(this

 

“Escrow Agreement”), is entered into by and among RCSH Operations, Inc., a
California corporation (the “Purchaser”), Desert Island Restaurants, L.L.C., an
Arizona limited liability company, Honolulu Steak House, LLC, a Hawaii limited
liability company, Maui Steak House LLC, a Hawaii limited liability company,
Wailea Steak House LLC, a Hawaii limited liability company, Beachwalk Steak
House, LLC, an Arizona limited  liability  company, Lava Coast Steak  House,
LLC, an Arizona limited liability company, and Kauai Steak House, LLC, an
Arizona limited liability company (each, a “Seller” and collectively, the
“Sellers” and together with the Purchaser, the “Transaction Parties”) and Title
Guaranty Escrow Services, Inc. (Attn: Barbara Paulo), as escrow agent (“Escrow
Agent”). Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in that certain Asset Purchase Agreement (the
“Asset Purchase Agreement”), dated as of November 2, 2017 by and among the
Purchaser, the Sellers and the Principal (as defined therein).

 

WHEREAS, pursuant to the Asset Purchase Agreement, the Sellers have agreed to
sell to the Purchaser, and the Purchaser has agreed to purchase from the
Sellers, the Purchased Assets (as defined in the Asset Purchase Agreement), upon
the terms and subject to the conditions set forth therein;

 

WHEREAS, pursuant to Section 9.9 of the Asset Purchase Agreement, in order to
secure certain indemnification obligations of the Seller, the Purchaser and the
Sellers have agreed that on the Closing Date, the Sellers shall deposit certain
cash funds with Escrow Agent;

 

WHEREAS, the parties acknowledge that Escrow Agent is not a party to, is not
bound by and has no duties or obligations under, the Asset Purchase Agreement,
that all references in this Escrow Agreement to the Asset Purchase Agreement are
for convenience, and that Escrow Agent shall have no implied duties beyond the
express duties set forth in this Escrow Agreement; and

 

WHEREAS, Escrow Agent has agreed to accept, hold, and disburse the Escrow
Account Balance

(as defined in Section 1(d) below) in accordance with the express terms of this
Escrow Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual agreements and covenants
contained herein and in the Asset Purchase Agreement, the parties hereto hereby
agree as follows:

 

1.Appointment of Escrow Agent; Escrow Account.

 

(a)       The Purchaser and the Sellers hereby designate and appoint Escrow
Agent as escrow agent to act in accordance with the terms of this Escrow
Agreement, and Escrow Agent agrees to act as such escrow agent on the terms,
conditions and provisions provided in this Escrow Agreement.

 

(b)       On the Closing Date, the Sellers shall deposit with Escrow Agent an
aggregate amount equal to Two Million Dollars ($2,000,000) in immediately
available funds (the “Escrow Amount”).

 

(c)       Escrow Agent shall hold the Escrow Amount as part of the Escrow
Account Balance in a segregated account and, subject to the terms and conditions
hereof, shall invest and reinvest the Escrow Account Balance as directed in
Section 2 hereof.

 

(d)       As of any given date, the sum of (x) the then remaining Escrow Amount,
plus (y) any related interest and other income (“Escrow Earnings”) earned on the
Escrow Amount and any prior Escrow Earnings, shall be hereinafter referred to
collectively as the “Escrow Account Balance.” Escrow

 

4330909-5

 

--------------------------------------------------------------------------------

Agent shall hold, invest, reinvest, administer, distribute and dispose of the
Escrow Account Balance in accordance with the terms and conditions of this
Escrow Agreement.

 

2.Investment of Escrow Account Balance.

 

(a)       Until the release of the entire amount of the Escrow Account Balance,
pursuant to the terms hereof, and the termination of this Escrow Agreement, the
Escrow Account Balance shall be fully invested and reinvested by Escrow Agent
(a) in a segregated bank money market deposit account as set forth in Exhibit A
hereto or (b) as jointly directed in writing by the Purchaser and the Sellers in
any other type of investment or interest bearing account offered by Escrow
Agent. Escrow Agent is hereby authorized and directed to sell or redeem any such
investments as it deems necessary to make any payments or distributions required
under this Escrow Agreement.   Escrow Agent shall have no responsibility or
liability for any loss that may result from any investment or sale of investment
made pursuant to this Escrow Agreement, unless such loss, liability, cost,
damage or expense shall have been finally adjudicated to have been directly
caused by the willful misconduct or gross negligence of Escrow Agent. Escrow
Agent is hereby authorized, in making or disposing of any investment permitted
by this Escrow Agreement, to deal with itself (in its individual capacity) or
with any one or more of its affiliates, whether it or any such affiliate is
acting as agent of Escrow Agent or for any third person or dealing as principal
for its own account. The Transaction Parties acknowledge that Escrow Agent is
not providing investment supervision, recommendations, or advice.

 

(b)       Escrow Agent shall hold the Escrow Account Balance in accordance with
this Escrow Agreement and shall release amounts from the Escrow Account Balance
only as provided by Section 3 hereof or as otherwise jointly directed in writing
by the Purchaser and the Sellers.

 

(c)       The Transaction Parties agree that confirmations of permitted
investments are not required to be issued by Escrow Agent for each month in
which a monthly statement is rendered. No statement needs to be rendered for any
fund or account if no activity occurred in such fund or account during such
month. Notwithstanding the foregoing, the Transaction Parties may obtain
confirmations at no additional cost upon its written request to Escrow Agent.

 

3.Releases from Escrow.

 

(a)Claims Process/Payments Under Escrow Releases.

 

(i)If prior to or on the date that is twelve (12) months following the Closing
Date (the “Escrow Expiration Date”), the Purchaser or any other Purchaser
Indemnified Party has a claim for indemnification under the Asset Purchase
Agreement (other than a claim for indemnification under Section 9.2(h) of the
Asset Purchase Agreement) (a “Claim”), the Purchaser shall deliver a written
indemnification claim notice executed by an officer of the Purchaser (a “Claim
Notice”) to the Sellers and Escrow Agent.  Such Claim Notice shall specify in
reasonable detail the Losses claimed (and a good faith reasonable estimate
thereof, which amount shall be referred to as the “Claimed Amount”), including
the nature of and the underlying factual and legal basis for such claim.

 

(ii)       Following delivery of a Claim Notice to the Sellers and Escrow Agent,
if, within ten (10) Business Days after such Claim Notice is delivered to the
Sellers (the “Dispute Period”), the Sellers deliver a written response to the
Purchaser, with a copy to Escrow Agent (a “Response Notice”), agreeing that the
full Claimed Amount is owed to the Purchaser Indemnified Party, or if no
Response Notice is delivered to the Purchaser and Escrow Agent prior to the
expiration of the Dispute Period, the Sellers shall be conclusively deemed to
have consented to the recovery by the Purchaser Indemnified Party of the full
amount of the Claimed Amount. As promptly as practicable after

 

2

4330909-5

 

--------------------------------------------------------------------------------

the expiration of the Dispute Period, if the Sellers delivered a Response Notice
agreeing that the full Claimed Amount is owed to the Purchaser Indemnified
Party, or if no Response Notice is delivered to the Purchaser and Escrow Agent
prior to the expiration of the Dispute Period, Escrow Agent shall pay to the
Purchaser from the Escrow Account Balance (if such amount is greater than zero)
an amount equal to the lesser of the Claimed Amount and the Escrow Account
Balance.

 

(iii)       If within the Dispute Period (x) the Sellers delivers a Response
Notice to the Purchaser, with a copy to Escrow Agent, contesting all or part of
the Claimed Amount and (y) the Purchaser and the Sellers are unable to agree on
a resolution of the Claim within twenty (20) Business Days after the Sellers
deliver a Response Notice to the Purchaser (upon the expiration of which either
Transaction Party shall notify Escrow Agent), then the contested Claimed Amount
stated in the Claim Notice shall be deemed to constitute a “Contested Claim” and
Escrow Agent shall not distribute the amount of such Contested Claim to any
Transaction Party, but rather Escrow Agent shall reserve the amount of the
Contested Claim (subject, as between the Transaction Parties, to the dispute
resolution procedures and provisions set forth in the Asset Purchase Agreement)
(which amount for each Contested Claim is referred to herein as the “Claim
Reserve”). Any portion of the Claimed Amount that is not a Contested Claim shall
be paid by Escrow Agent to the Purchaser.

 

(b)       Contested Claim Disbursements. The amount constituting the Claim
Reserve (or any portion thereof) for each Contested Claim shall be paid from the
Escrow Account Balance only (1) in accordance with a joint written instruction
by the Purchaser and the Sellers delivered to Escrow Agent (a “Joint Written
Instruction”) or (2) pursuant to, and only to the extent expressly set forth in,
a final, binding and non-appealable order of a court of competent jurisdiction
pursuant to the dispute resolution procedures and provisions set forth in the
Asset Purchase Agreement as to the validity and amount of any Contested Claim,
which decision complies with the terms of the Asset Purchase Agreement and is
sent to Escrow Agent by the Sellers or the Purchaser (a “Final Determination”)
certifying that such Final Determination is final, and which payment shall be
processed as follows: promptly following the Final Determination of a Contested
Claim giving rise to any Claim Reserve with respect to the Escrow Amount, and
after payment by Escrow Agent of the Contested Claim as so directed in such
Final Determination, (i) if the Escrow Expiration Date has passed, Escrow Agent
shall release and disburse to the Sellers the amount of the Escrow Account
Balance, less the amount of Claim Reserves for all other Contested Claims, if
any; and (ii) if the Escrow Expiration Date has not yet passed, upon receipt by
Escrow Agent of a Final Determination or Joint Written Instruction of the
Purchaser and the Sellers, any portion of the Claim Reserve not disbursed to the
Purchaser from the Escrow Account as set forth in the Final Determination or
Joint Written Instruction, shall cease to be a Claim Reserve and shall revert to
the Escrow Account Balance.

 

(c)       Early Reduction of Escrow Account Balance.  If, at the date that is
six (6) months following the Closing Date, the then remaining Escrow Amount is
at least $1,800,000, then Escrow Agent shall release and disburse to the Sellers
an amount equal to (i) the amount of the then outstanding Escrow Account
Balance, less (ii) $1,000,000.

 

(d)       Distributions Following Escrow Expiration Date.   Within fifteen (15)
Business Days following the Escrow Expiration Date, the Transaction Parties
shall jointly instruct Escrow Agent by means of a Joint Written Instruction to
distribute to the Sellers an aggregate amount in cash (if such amount is greater
than zero) equal to (i) the Escrow Account Balance, less (ii) the amount of all
Claim Reserves and any Claim Notice against the Escrow Account Balance pursuant
to the terms set forth herein and the Asset Purchase Agreement.

 

(e)Disbursements. All disbursements from the Escrow Account Balance by Escrow

Agent shall be pursuant to the terms of this Escrow Agreement. Notwithstanding
any other provision in

 

3

4330909-5

 

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this Escrow Agreement, disbursements shall be made from the Escrow Account
Balance by Escrow Agent pursuant to (i) the instructions set forth in any
applicable Joint Written Instruction or (ii) the terms of this Escrow Agreement
that do not require Joint Written Instruction.

 

4.          Security Procedure for Funds Transfers. Escrow Agent shall confirm
each funds transfer instruction received in the name of a Transaction Party by
means of the security procedure selected by such Transaction Party and
communicated to Escrow Agent through a signed certificate in the form of Exhibit
B-1 or Exhibit B-2 attached hereto, which upon receipt by Escrow Agent shall
become a part of this Escrow Agreement. Once delivered to Escrow Agent, Exhibit
B-1 or Exhibit B-2 may be revised or rescinded only in writing and signed by an
authorized representative of such Transaction Party.   Such revisions or
rescissions shall be effective only after actual receipt and following such
period of time as may be necessary to afford Escrow Agent a reasonable
opportunity to act on it. If a revised Exhibit B-1 or Exhibit B-2 or a
rescission of an existing Exhibit B-1 or Exhibit B-2 is delivered to Escrow
Agent by an entity that is a successor-in-interest to such Transaction Party,
such document shall be accompanied by additional documentation satisfactory to
Escrow Agent showing that such entity has succeeded to the rights and
responsibilities of the Transaction Party under this Escrow Agreement.   The
Transaction Parties understand that Escrow Agent’s inability to receive or
confirm funds transfer instructions pursuant to the security procedure selected
by such Transaction Party may result in a delay in accomplishing such funds
transfer, and agree that Escrow Agent shall not be liable for any loss caused by
any such delay.

 

5.         Termination.   This Escrow Agreement shall terminate on the date on
which Escrow Agent shall have delivered the entire amounts of the Escrow Account
Balance in accordance with the provisions of this Escrow Agreement, and this
Escrow Agreement shall be of no further force and effect except that the
provisions of Sections 7(a), 7(b), and 7(d) hereof shall survive termination.

 

6.Duties of Escrow Agent.

 

(a)       Scope of Responsibility. Notwithstanding any provision to the
contrary, Escrow Agent is obligated only to perform the duties specifically set
forth in this Escrow Agreement, which shall be deemed purely ministerial in
nature and which shall include the safe custody of the Escrow Account Balance
actually in the possession of Escrow Agent. Under no circumstances will Escrow
Agent be deemed to be a fiduciary to any of the Purchaser or the Sellers or any
other person under this Escrow Agreement. Escrow Agent will not be responsible
or liable for the failure of any Transaction Party to perform in accordance with
this Escrow Agreement. Escrow Agent shall neither be responsible for, nor
chargeable with, knowledge of the terms and conditions of any other agreement,
instrument, or document other than this Escrow Agreement, whether or not an
original or a copy of such agreement has been provided to Escrow Agent; and
Escrow Agent shall have no duty to know or inquire as to the performance or
nonperformance of any provision of any such agreement, instrument, or document.
References in this Escrow Agreement to any other agreement, instrument, or
document are for the convenience of the Purchaser and the Sellers, and Escrow
Agent has no duties or obligations with respect thereto.   This Escrow Agreement
sets forth all matters pertinent to the  escrow contemplated hereunder, and no
additional obligations of Escrow Agent shall be inferred or implied from the
terms of this Escrow Agreement or any other agreement.

 

(b)       Attorneys and Agents. Escrow Agent shall be entitled to rely on and
shall not be liable for any action taken or omitted to be taken by Escrow Agent
in accordance with the advice of counsel or other professionals retained or
consulted by Escrow Agent. Escrow Agent shall be reimbursed as set forth herein
for any and all reasonable compensation (reasonable fees, expenses and other
costs) paid and/or reimbursed to such counsel and/or professionals. Escrow Agent
may perform any and all of its duties through its agents, representatives,
attorneys, custodians, and/or nominees.

 

4

4330909-5

 

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(c)       Reliance. Escrow Agent shall not be liable for any action taken or not
taken by it in accordance with the written direction or written consent of the
Transaction Parties or their respective agents, representatives, successors, or
assigns. Escrow Agent shall not be liable for acting or refraining from acting
upon any written notice, request, consent, direction, requisition, certificate,
order, affidavit, letter, or other paper or document believed by it to be
genuine and correct and to have been signed or sent by  the proper person or
persons, without further inquiry  into the person’s or persons’ authority.
Concurrent with the execution of this Escrow Agreement, the Transaction Parties
shall deliver to Escrow Agent authorized signers’ forms in the form of Exhibit
B-1 or Exhibit B-2 to this Escrow Agreement, which shall contain authorized
signer designation in Part I thereof.

 

(d)Right Not Duty Undertaken. The permissive rights of Escrow Agent to do things
enumerated in this Escrow Agreement shall not be construed as duties.

 

(e)       No Financial Obligation. No provision of this Escrow Agreement shall
require Escrow Agent to risk or advance its own funds or otherwise incur any
financial liability or potential financial liability  in the performance of its
duties or the exercise of its rights under this Escrow Agreement.

 

(f)         Account Statements. Subject to Section 2(c) hereof, during the term
hereof, Escrow Agent shall deliver monthly  account statements to
the  Transaction  Parties with respect to the Escrow Account Balance for the
prior month, which statements shall include the account balance, disbursements
made pursuant to this Escrow Agreement, and Escrow Earnings earned during the
preceding month.

 

7.Provisions Concerning Escrow Agent. In order to induce Escrow Agent to act as
escrow agent hereunder, the Transaction Parties agree that:

 

(a)       Indemnification. The Transaction Parties, jointly and severally, shall
indemnify, defend and hold Escrow Agent harmless from and against any and all
loss, liability, cost, damage and expense, including, without limitation,
reasonable attorneys’ fees and expenses or other professional fees and expenses
that Escrow Agent may suffer or incur by reason of any action, claim or
proceeding brought against Escrow Agent, arising out of or relating in any way
to this Escrow Agreement or any transaction to which this Escrow Agreement
relates (the “Escrow Agent Damage”), unless such loss, liability, cost, damage
or expense shall have been finally adjudicated to have been directly caused by
the willful misconduct or gross negligence of Escrow Agent. The indemnification
provided for under this Section

7(a) shall be allocated and paid in the same manner as the fees and expenses
under Section 7(d) below, unless determined by a court of competent jurisdiction
that such indemnification shall be allocated based

on the relative fault of each Transaction Party in causing the Escrow Agent
Damage. The provisions of

this Section 7(a) shall survive the resignation or removal of Escrow Agent and
the termination of this

Escrow Agreement.

 

(b)       Limitation of Liability.     ESCROW AGENT SHALL NOT BE LIABLE,
DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF  
THE   SERVICES   PROVIDED   HEREUNDER,   OTHER   THAN   DAMAGES,   LOSSES   OR
EXPENSES THAT HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY RESULTED FROM  
ESCROW   AGENT’S   GROSS   NEGLIGENCE   OR   WILLFUL   MISCONDUCT,   OR (II)
SPECIAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY KIND
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, LOST PROFITS), EVEN IF ESCROW AGENT
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF
THE FORM OF ACTION.

 

5

4330909-5

 

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(c)       Resignation or Removal. Escrow Agent may resign by furnishing written
notice of its resignation to the Transaction Parties, and the Transaction
Parties may remove Escrow Agent by furnishing to Escrow Agent a joint written
notice of its removal along with payment of all fees and expenses to which it is
entitled through the date of termination. Such resignation or removal, as the
case may be, shall be effective thirty (30) days after the delivery of such
notice or upon the earlier appointment of a successor, and Escrow Agent’s sole
responsibility thereafter shall be to safely keep the Escrow Account Balance and
to deliver the same to a successor escrow agent as shall be selected by the
Purchaser (with the reasonable consent of the Sellers), as evidenced by a
written notice filed with Escrow Agent or in accordance with a court order. If
the Purchaser has failed to appoint a successor escrow agent prior to the
expiration of thirty (30) days following the delivery of such notice of
resignation or removal, Escrow Agent may petition any court of competent
jurisdiction for the appointment of a successor escrow agent or for other
appropriate relief, and any such resulting appointment shall be binding upon the
Transaction Parties.

 

(d)       Compensation. Escrow Agent shall be entitled to compensation for its
services as stated in the fee schedule attached hereto as Exhibit C, which
compensation shall be paid one-half by the Purchaser and one-half by the
Sellers. The fee agreed upon for the services rendered hereunder is intended as
full compensation for Escrow Agent’s services as contemplated by this Escrow
Agreement; provided, however, that in the event that the conditions for the
disbursement of funds under this Escrow Agreement are not fulfilled, or Escrow
Agent renders any service not contemplated in this Escrow Agreement, or there is
any assignment of interest in the subject matter of this Escrow Agreement, or
any material modification hereof, or if any material controversy arises
hereunder, or Escrow Agent is made a party to any litigation pertaining to this
Escrow Agreement or the subject matter hereof, then Escrow Agent shall be
compensated for such extraordinary services and reimbursed for all costs and
expenses, including reasonable attorneys’ fees and expenses, occasioned by any
such delay, controversy, litigation or event. If any amount due to Escrow Agent
hereunder is not paid within thirty (30) days of the date due, Escrow Agent, in
its sole discretion, may charge interest on such amount at 10% per annum. Any
interest charged by Escrow Agent shall be paid by the Transaction Party whose
payment is late. Escrow Agent shall have, and is hereby granted, a prior lien
upon the Escrow Account Balance with respect to its unpaid fees, non-reimbursed
expenses and unsatisfied indemnification rights, superior to the interests of
any other persons or entities and is hereby granted the right to set off and
deduct any unpaid fees, non- reimbursed expenses and unsatisfied indemnification
rights from the Escrow Account.

 

(e)       Disagreements. If any conflict, disagreement or dispute arises
between, among, or involving any of the Transaction Parties concerning the
meaning or validity of any provision hereunder or concerning any other matter
relating to this Escrow Agreement, or Escrow Agent is in doubt as to the action
to be taken hereunder, Escrow Agent is authorized to retain the Escrow Account
Balance until Escrow Agent (i) receives a final, non-appealable order of a court
of competent jurisdiction directing delivery of the Escrow Account Balance, (ii)
receives a written agreement executed by each of the Transaction Parties
involved in such disagreement or dispute directing delivery of the Escrow
Account Balance, in which event Escrow Agent shall be authorized to disburse the
Escrow Account Balance in accordance with such final court order, or agreement,
or (iii) files an interpleader action in any court of competent jurisdiction,
and upon a grant by such court of relief by interpleader, Escrow Agent shall be
relieved of all liability as to the Escrow Account Balance and shall be entitled
to recover reasonable attorneys’ fees, expenses and other costs incurred in
commencing and maintaining any such interpleader action.   Escrow Agent shall be
entitled to act on any such agreement or court order without further question,
inquiry, or consent.

 

(f)         Merger or Consolidation. A corporation or association into which
Escrow Agent may be converted or merged, or with which it may be consolidated,
or to which it may sell or transfer all or substantially all of its corporate
trust business and assets as a whole or substantially as a whole, or a

 

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corporation or association resulting from any such conversion, sale, merger,
consolidation or transfer to which Escrow Agent is a party, may be and become
the successor escrow agent under this Escrow Agreement and may have and succeed
to the rights, powers, duties, immunities and privileges as its predecessor,
without the execution or filing of any instrument or paper or the performance of
any further act; provided that and only if such corporation or association is a
bank or trust company organized under the laws of the State of Delaware and has
a combined capital and surplus of not less than $50,000,000.

 

(g)       Attachment of Escrow Amount; Compliance with Legal Orders. In the
event that any Escrow Amount shall be attached, garnished or levied upon by any
court order, or the delivery thereof shall be stayed or enjoined by an order of
a court, or any order, judgment or decree shall be made or entered by any court
order affecting the Escrow Amount, Escrow Agent is hereby expressly authorized,
in its sole discretion, to respond as it deems appropriate or to comply with all
writs, orders or decrees so entered or issued, or that it is advised by legal
counsel of its own choosing is binding upon it, whether with or without
jurisdiction. In the event that Escrow Agent obeys or complies with any such
writ, order or decree,  it shall not be liable to any  of the
Transaction  Parties or to  any other person, firm or corporation, should, by
reason of such compliance notwithstanding, such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated.

 

(h)       Force Majeure. Escrow Agent shall not be responsible or liable for any
failure or delay in the performance of its obligation under this Escrow
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond its reasonable control, including, without limitation, acts of God;
earthquakes; fire; flood; wars; acts of terrorism; civil or military
disturbances; sabotage; epidemic; riots; interruptions, loss or malfunctions of
utilities, computer (hardware or software) or communications services;
accidents; labor disputes; acts of civil or military authority or governmental
action; it being understood that Escrow Agent shall use commercially reasonable
efforts that are consistent with accepted practices in the banking industry to
resume performance as soon as reasonably practicable under the circumstances.

 

8.Tax Matters.

 

(a)       Upon execution of this Escrow Agreement, each of the Transaction
Parties shall provide Escrow Agent with a fully executed IRS form W-9, which
shall include such Transaction Party’s Taxpayer Identification Numbers assigned
by the Internal Revenue Service.  Notwithstanding the terms of this Escrow
Agreement, Escrow Agent shall report and, as required, withhold any taxes as is
required by any law or regulation in effect at the time of any distribution
based upon the information and documentation provided.

 

(b)       For income tax purposes,  the  Transaction Parties  agree to  treat
the Escrow Account Balance as beneficially owned by the Purchaser.   The
Purchaser shall pay all taxes on the Escrow Earnings and shall, without any
Joint Written Instruction, receive a distribution of the Escrow Earnings earned
during a calendar year within thirty (30) calendar days after the end of such
calendar year. The Sellers and the Purchaser intend and agree, for all tax
purposes, that amounts distributed to the Sellers, if any, in a year following
the Closing Date from the Escrow Account Balance shall (except to the extent
attributable to imputed interest as required by applicable law) be treated as
the proceeds of an installment sale pursuant to Section 453 of the Internal
Revenue Code of 1986, as amended, and shall not be treated as constructively
received by the Sellers unless, and until, distributed to the Sellers pursuant
to this Escrow Agreement.

 

(c)       Any tax returns required to be filed, other than the tax and
information returns required to be reported by Escrow Agent as described in
Section 8(a) hereof, will be prepared and filed by the Purchaser or Sellers, as
applicable, with the IRS and any other taxing authority as required by law.

 

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The Sellers and the Purchaser acknowledge and agree that Escrow Agent shall have
no responsibility for the preparation and/or filing of any tax return, other
than the tax and information returns required to be reported by Escrow Agent as
described in Section 8(a) hereof. In the absence of written direction from the
Sellers and the Purchaser, all proceeds of the Escrow Account Balance shall be
retained in the applicable Escrow Account Balance and reinvested from time to
time by Escrow Agent as provided in this Escrow Agreement. Escrow Agent shall
withhold any taxes it deems appropriate in accordance with applicable law,
including, but not limited to, required withholding in the absence of proper tax
documentation, and shall remit such taxes to the appropriate authorities.

 

(d)       To the extent that Escrow Agent becomes liable for the payment of any
taxes in respect of income derived from the investment of the Escrow Account
Balance, Escrow Agent shall satisfy such liability to the extent possible from
the applicable Escrow Account Balance.  The Transaction Parties, jointly and
severally, shall indemnify, defend and hold Escrow Agent harmless from and
against any tax, late payment, interest, penalty or other cost or expense that
may be assessed against Escrow Agent on or with respect to the Escrow Account
Balance and the investment thereof unless such tax, late payment, interest,
penalty or other expense was directly caused by the gross negligence or willful
misconduct of Escrow Agent.   The indemnification provided by this Section 8(d)
is in addition to the indemnification provided in Section 7(a) and shall survive
the resignation or removal of Escrow Agent and the termination of this Escrow
Agreement.

 

9.Miscellaneous.

 

(a)       Successors and Assigns. This Escrow Agreement shall be binding on and
inure to the benefit of the Transaction Parties and Escrow Agent and their
respective successors and permitted assigns. No other persons shall have any
rights under this Escrow Agreement. No assignment of the interest of any of the
Transaction Parties shall be binding unless and until written notice of such
assignment shall be delivered to the other Transaction Parties and Escrow Agent
and shall require the prior written consent of each other Transaction Party and
Escrow Agent (such consent not to be unreasonably withheld, conditioned or
delayed); except that the Purchaser may assign some or all of its rights,
interests and obligations pursuant to this Escrow Agreement to one or more one
of its subsidiaries without the consent of any Seller, the Principal or the
Escrow Agent; provided that the Purchaser shall remain liable for its
obligations hereunder.

 

(b)       Escheat.   The Transaction Parties are aware that under applicable
state law, property that is presumed abandoned may, under certain circumstances,
escheat to the applicable state. Escrow Agent shall have no liability to the
Transaction Parties, their respective heirs, legal representatives, successors
and assigns, or any other party, should any or all of the Escrow Amount escheat
by operation of law.

 

(c)       Notices.   All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) if served
personally, on the day of such service, or (ii) if mailed by certified or
registered mail  (return receipt  requested),  on  the  second  Business
Day  after mailing, and  (iii) if transmitted by recognized overnight carrier,
on the next Business Day after tender to the carrier. Such communications shall
be sent to the following addresses:

 

If to the Sellers:Desert Island Restaurants, L.L.C.

6263 N. Scottsdale Rd. # 374

Scottsdale, AZ 85250

Attention: W. Randall Schoch

Phone: (480) 945-0088

 

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Facsimile: (602) 224-7876

 

 

Copy to:

Sullivan Meheula Lee, LLLP Pacific Guardian Center Makai Tower

 

733 Bishop Street, Suite 2900

Attention: Terrence Lee

Phone: (808) 628-7530

Facsimile: (808) 533-2467

 

If to Purchaser:RCSH Operations, Inc.

c/o Ruth’s Hospitality Group, Inc.

1030 W. Canton Ave. Suite 100

Winter Park, FL 32789

Attention: General Counsel

Phone: (407) 829-3451

 

Copy to:Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, New York 10019

Attention: Jeffrey Spindler, Esq. Phone: (212) 451-2300

Facsimile: (212) 451-2222

 

If to the Escrow Agent:Title Guaranty Escrow Services, Inc

235 Queen Street

Honolulu, Hawaii 96813

Attention: Barbara Paulo

Phone: (808) 521-0209

Facsimile: (808) 521-0280

 

(d)       Amendment and Modification.   This Escrow Agreement may be amended,
modified or supplemented only by written agreement of each of the Purchaser,
Escrow Agent and the Sellers.

 

(e)       Governing Law; Venue.     This Escrow Agreement shall be construed in
accordance with the laws of the State of Hawaii without regard to the conflicts
of law principles thereof. The parties further herby waive any right to a trial
by jury with respect to any lawsuit or judicial proceeding arising or relating
to this Escrow Agreement. Disputes between the Purchaser and the Sellers shall
be governed by the law described in the Asset Purchase Agreement

 

(f)         Counterparts.   This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement, and photostatic, .pdf or facsimile copies of
fully-executed counterparts of this Agreement shall be given the same effect as
originals.

 

(g)       Interpretation. The section and paragraph headings contained in this
Escrow Agreement are solely for the purpose of reference, are not part of this
Escrow Agreement, and shall not in any way affect the meaning or interpretation
of this Escrow Agreement. When a reference is made in this

 

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Escrow Agreement to sections, exhibits or schedules, such reference shall be to
a section, exhibit or schedule to this Escrow Agreement unless otherwise
indicated.

 

(h)       Severability. In the event that any part of this Escrow Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, such provision shall survive to the extent it is not so
declared, and all of the other provisions of this Escrow Agreement shall remain
in full force and effect.

 

(i)         Waivers. The failure of any party at any time or times to require
performance of any provision under this Escrow Agreement shall in no manner
affect the right at a later time to enforce the same performance. A waiver by
any party of any such condition or breach of any term, covenant, representation,
or warranty contained in this Escrow Agreement, in any one or more instances,
shall neither be construed as a further or continuing waiver of any such
condition or breach nor a waiver of any other condition or breach of any other
term, covenant, representation, or warranty contained in this Escrow Agreement.

 

(j)       Entire Agreement. This Escrow Agreement together with the Asset
Purchase Agreement, including the exhibits and schedules attached hereto and
thereto, embodies the entire agreement and understanding of the parties in
respect of the subject matter hereof.   There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein or therein. In the event that any of
the terms of this Escrow Agreement conflict with any of the terms of the Asset
Purchase Agreement with regard to the matters set forth herein, the terms of
this Escrow Agreement shall govern.

 

(k)       Publication; Disclosure.   By executing this Escrow Agreement, the
parties acknowledge that this Escrow Agreement (including related attachments)
contains certain information that is sensitive and confidential in nature and
agree that such information needs to be protected from improper disclosure,
including the publication or dissemination of this Escrow Agreement and related
information to individuals or entities not a party to this Escrow Agreement. The
parties further agree to take reasonable measures to mitigate any risks
associated with the publication or disclosure of this Escrow Agreement and
information contained therein. If a party must disclose or publish this Escrow
Agreement or information contained therein pursuant to any regulatory,
statutory, or governmental requirement, as well as any judicial, or
administrative order, subpoena or discovery request, it shall notify in writing
the other parties of the legal requirement to do so as soon as practicable after
becoming so obligated. If any party becomes aware of any threatened or actual
unauthorized disclosure, publication or use of this Escrow Agreement, that party
shall promptly notify in writing the other parties.

 

[Remainder of page left intentionally blank]

 

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4330909-5

 

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

 

PURCHASER:

 

RCSH OPERATIONS, INC.

 

 

By:

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

 

SELLERS:

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

HONOLULU STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

MAUI STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

WAILEA STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

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BEACHWALK STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

LAVA COAST STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

KAUAI STEAK HOUSE, LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

ESCROW AGENT:

 

TITLE GUARANTY ESCROW SERVICES, INC.

 

 

By:

 

Name: Title:

 

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4330909-5

 

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EXHIBIT A

 

AGENCY AND CUSTODY ACCOUNT DIRECTION FOR CASH BALANCES

[ ] DEPOSIT ACCOUNTS

 

 

Direction to use the following [

] Deposit Account for Cash Balances for

 

the escrow account (the “Account”) established under the Escrow Agreement to
which this

Exhibit A is attached.

 

You are hereby directed to deposit, as indicated below, or as we jointly shall
direct further in writing from time to time, all cash in the Account(s) in the
following money market deposit account of
[                                       ] (Bank):

 

[ACCOUNT NAME]

 

The Purchaser and the Sellers acknowledge that amounts on deposit in the Account
are insured, subject to the applicable rules and regulations of the Federal
Deposit Insurance Corporation (FDIC), in the basic FDIC insurance amount of
$250,000 per depositor, per issued bank. This includes principal and accrued
interest up to a total of $250,000.

 

Escrow Agent understands that the Purchaser and the Sellers may jointly instruct
Escrow Agent to change this direction at any time and that it shall continue in
effect until revoked or modified by written notice to Escrow Agent.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4330909-5

 

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EXHIBIT B-1

 

RCSH Operations, Inc. (the “Purchaser”) certifies that the names, titles,
telephone numbers, e-mail addresses and specimen signatures set forth in Parts I
and II of this Exhibit B-1 identify the persons authorized to provide direction
and initiate or confirm transactions, including funds transfer instructions, on
behalf of the Purchaser and that the option checked in Part III of this Exhibit
B-1 is the security procedure selected by the Purchaser for use in verifying
that a funds transfer instruction received by Escrow Agent is that of the
Purchaser.

 

The Purchaser has reviewed each of the security procedures and has determined
that the option checked in Part III of this Exhibit B-1 best meets its
requirements; given the size, type and frequency of the instructions it will
issue to Escrow Agent. By selecting the security procedure specified in Part III
of this Exhibit B-1, the Purchaser acknowledges that it has elected not to use
the other security procedures described and agrees to be bound by any funds
transfer instruction, whether or not authorized, issued in its name and accepted
by Escrow Agent in compliance with the particular security procedure chosen by
the Purchaser.

 

NOTICE: The security procedure selected by the Purchaser will not be used to
detect errors in the funds transfer instructions given by the Purchaser.  If a
funds transfer instruction describes the beneficiary of the payment
inconsistently by name and account number, payment may be made on the basis of
the account number even if it identifies a person different from the named
beneficiary. If a funds transfer instruction describes a participating financial
institution inconsistently by name and identification number, the identification
number may  be relied upon as the proper identification of the financial
institution. Therefore, it is important that the Purchaser take such steps as it
deems prudent to ensure that there are no such inconsistencies in the funds
transfer instructions it sends to Escrow Agent.

Part I

Name, Title, Telephone Number, Electronic Mail (“e-mail”) Address and Specimen
Signature for person(s) designated to provide direction, including but not
limited to funds transfer instructions, and to otherwise act on behalf of the
Purchaser.

 

Name

Title

Telephone

Number

E-mail Address

Specimen Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Part II

Name, Title, Telephone Number and E-mail Address for person(s) designated to
confirm funds transfer instructions

 

Name

Title

Telephone

Number

E-mail Address

 

 

 

 

 

 

 

 

 

 

 

 

 

4330909-5

 

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Part III

 

Means for delivery of instructions and/or confirmations

 

The security procedure to be used with respect to funds transfer instructions is
checked below:

 

Option 1. Confirmation by telephone call-back. Escrow Agent shall confirm funds
transfer instructions by telephone call-back to a person at the telephone number
designated on Part II above.   The person confirming the funds transfer
instruction shall be a person other than the person from whom the funds transfer
instruction was received, unless only one person is designated in both Parts I
and II of this Exhibit B-1.

CHECK box, if applicable:

If Escrow Agent is unable to obtain confirmation by telephone call-back, Escrow
Agent may, at its discretion, confirm by e-mail, as described in Option 2.

 

Option 2. Confirmation by e-mail. Escrow Agent shall confirm funds transfer
instructions by e- mail to a person at the e-mail address specified for such
person in Part II of this Exhibit B-1. The person confirming the funds transfer
instruction shall be a person other than the person from whom the funds transfer
instruction was received, unless only one person is designated in both Parts I
and II of this Exhibit B-1.   The Purchaser understands the risks associated
with communicating sensitive matters, including time sensitive matters, by
e-mail. The Purchaser further acknowledges that instructions and data sent by
e-mail may be less confidential or secure than instructions or data transmitted
by other methods. Escrow Agent shall not be liable for any loss of the
confidentiality of instructions and data prior to receipt by Escrow Agent.

CHECK box, if applicable:

If Escrow Agent is unable to obtain confirmation by e-mail, Escrow Agent may, at
its discretion, confirm by telephone call-back, as described in Option 1.

 

Option 3. Delivery of funds transfer instructions by password protected file
transfer system only - no confirmation. Escrow Agent offers the option to
deliver funds transfer instructions through a password protected file transfer
system. If the Purchaser wishes to use the password protected file transfer
system, further instructions will be provided by Escrow Agent. If the Purchaser
chooses this Option 3, it agrees that no further confirmation of funds
transfer  instructions will be performed by Escrow Agent.

 

Option 4. Delivery of funds transfer instructions by password protected file
transfer system with confirmation.   Same as Option 3 above, but Escrow Agent
shall confirm funds transfer instructions by       telephone call-back or    
e-mail (must check at least one, may check both) to a person at the telephone
number or e-mail address designated on Part II above. By checking a box in the
prior sentence, the party shall be deemed to have agreed to the terms of such
confirmation option as more fully described in Option 1 and Option 2 above.

 

Dated this day of , 201

 

4330909-5

 

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EXHIBIT B-2

 

Each of Desert Island Restaurants, L.L.C., Honolulu Steak House, LLC, Maui Steak
House LLC, Wailea Steak House LLC, Beachwalk Steak House, LLC, Lava Coast Steak
House, LLC and Kauai Steak House, LLC (the “Sellers”) certifies that the names,
titles, telephone numbers, e-mail addresses and specimen signatures set forth in
Parts I and II of this Exhibit B-2 identify the person authorized to provide
direction and initiate or confirm transactions, including funds transfer
instructions, on behalf of the Sellers, and that the option checked in Part III
of this Exhibit B-2 is the security procedure selected by the Sellers for use in
verifying that a funds transfer instruction received by Escrow Agent is that of
the Sellers.

 

The Sellers have reviewed each of the security procedures and have determined
that the option checked in Part III of this Exhibit B-2 best meets its
requirements; given the size, type and frequency of the instructions it will
issue to Escrow Agent. By selecting the security procedure specified in Part III
of this Exhibit B-2, the Sellers acknowledge that they have elected not to use
the other security procedures described and agree to be bound by any funds
transfer instruction, whether or not authorized, issued in their name and
accepted by Escrow Agent in compliance with the particular security procedure
chosen by the Sellers.

 

NOTICE: The security procedure selected by the Sellers will not be used to
detect errors in the funds transfer instructions given by the Sellers. If a
funds transfer instruction describes the beneficiary of the payment
inconsistently by name and account number, payment may be made on the basis of
the account number even if it identifies a person different from the named
beneficiary. If a funds transfer instruction describes a participating financial
institution inconsistently by name and identification number, the identification
number may  be relied upon as the proper identification of the financial
institution. Therefore, it is important that the Sellers take such steps as it
deems prudent to ensure that there are no such inconsistencies in the funds
transfer instructions it sends to Escrow Agent.

 

Part I

Name, Title, Telephone Number, Electronic Mail (“e-mail”) Address and Specimen
Signature for person(s) designated to provide direction, including but not
limited to funds transfer instructions, and to otherwise act on behalf of the
Sellers

 

 

Name

 

Title

 

Telephone

Number

 

E-mail Address

 

Specimen Signature

 

 

 

 

 

Part II

Name, Title, Telephone Number and E-mail Address for person(s) designated to
confirm funds transfer instructions

 

 

Name

 

Title

 

Telephone

Number

 

E-mail Address

 

 

 

 

 

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Part III

 

Means for delivery of instructions and/or confirmations

 

The security procedure to be used with respect to funds transfer instructions is
checked below:

 

Option 1. Confirmation by telephone call-back. Escrow Agent shall confirm funds
transfer instructions by telephone call-back to a person at the telephone number
designated on Part II above.   The person confirming the funds transfer
instruction shall be a person other than the person from whom the funds transfer
instruction was received, unless only one person is designated in both Parts I
and II of this Exhibit B-2.

CHECK box, if applicable:

If Escrow Agent is unable to obtain confirmation by telephone call-back, Escrow
Agent may, at its discretion, confirm by e-mail, as described in Option 2.

 

Option 2. Confirmation by e-mail. Escrow Agent shall confirm funds transfer
instructions by e- mail to a person at the e-mail address specified for such
person in Part II of this Exhibit B-2. The person confirming the funds transfer
instruction shall be a person other than the person from whom the funds transfer
instruction was received, unless only one person is designated in both Parts I
and II of this Exhibit B-2.     The Sellers understand the risks associated with
communicating sensitive matters, including time sensitive matters, by e-mail.
The Sellers further acknowledge that instructions and data sent by e-mail may be
less confidential or secure than instructions or data transmitted by other
methods. Escrow Agent shall not be liable for any loss of the confidentiality of
instructions and data prior to receipt by Escrow Agent.

CHECK box, if applicable:

If Escrow Agent is unable to obtain confirmation by e-mail, Escrow Agent may, at
its discretion, confirm by telephone call-back, as described in Option 1.

 

Option 3. Delivery of funds transfer instructions by password protected file
transfer system only - no confirmation. Escrow Agent offers the option to
deliver funds transfer instructions through a password protected file transfer
system. If the Sellers wish to use the password protected file transfer system,
further instructions will be provided by Escrow Agent. If the Sellers choose
this Option 3, they agree that no further confirmation of funds transfer
instructions will be performed by Escrow Agent.

 

Option 4. Delivery of funds transfer instructions by password protected file
transfer system with confirmation.   Same as Option 3 above, but Escrow Agent
shall confirm funds transfer instructions by       telephone call-back or    
e-mail (must check at least one, may check both) to a person at the telephone
number or e-mail address designated on Part II above. By checking a box in the
prior sentence, the party shall be deemed to have agreed to the terms of such
confirmation option as more fully described in Option 1 and Option 2 above.

 

4330909-5

 

--------------------------------------------------------------------------------

Dated this day of , 201

 

SELLERS:

 

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

HONOLULU STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

MAUI STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

WAILEA STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

BEACHWALK STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

 

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

4330909-5

 

--------------------------------------------------------------------------------

LAVA COAST STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

KAUAI STEAK HOUSE, LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

4330909-5

 

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EXHIBIT C

 

FEE SCHEDULE

 

4330909-5

 

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EXHIBIT J

 

MANAGEMENT SERVICES AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4363268-4

 

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MANAGEMENT SERVICES AGREEMENT

 

This Management Services Agreement (the “Agreement”) is made and entered into as

 

of, 201

, by and among HONOLULU STEAK HOUSE, LLC, a Hawaii

 

limited liability company, MAUI STEAK HOUSE LLC, a Hawaii limited liability
company, WAILEA STEAK HOUSE LLC, a Hawaii limited liability company, BEACHWALK
STEAK HOUSE, LLC, an Arizona limited liability company, LAVA COAST STEAK HOUSE,
LLC, an Arizona limited liability company, and KAUAI STEAK HOUSE, LLC, an
Arizona limited liability company (each, a “Seller” and collectively, the
“Sellers”) and RCSH OPERATIONS, INC., a California corporation (the “Buyer”).
Each of the Sellers and Buyer are sometimes referred to herein as a “Party” or
collectively as the “Parties”. Capitalized terms used in this Agreement but not
defined herein shall have the meanings given to them in the Asset Purchase
Agreement (defined below).

 

WITNESSETH:

 

WHEREAS, Sellers and Buyer are parties to that certain Asset Purchase Agreement
made and entered into as of November 2, 2017 (the “Asset Purchase Agreement”);

 

WHEREAS, pursuant to the Asset Purchase Agreement, among other things, Buyer
will acquire the Purchased Assets, all on the terms and conditions set forth in
the Asset Purchase Agreement; and

 

WHEREAS, the Sellers currently hold liquor licenses as follows: (a) License No.
E1052 (Restaurant Row) and License No. R0811 (Waikiki) issued by the Liquor
Commission of the City and County of Honolulu; (b) License No. REST-G-640 issued
by the Liquor Commission of the County of Hawaii; (c) License No. 2G-077 (Kauai)
issued by the Liquor Commission of the County of Kauai; and (d) License No. 153
(Maui) and License No. 320 (Wailea) issued by the Liquor Commission of the
County of Maui (collectively and individually the “License”), which License is
to be transferred to Buyer, subject to the approval of the foregoing Liquor
Commissions (collectively and individually the “Liquor Commission”), which
transfer will not take place until after the Closing Date.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
Parties contained herein and in the Asset Purchase Agreement, and in order to
define the roles and responsibilities of the Parties as they relate to the
transition of Sellers’ employees, including without limitation Sellers’ Business
Employees, with respect to the Business and compliance with federal and state
labor and employment law, as well as the scope of services provided by Sellers
which will include exclusive control and management by Sellers of all liquor
operations until such time as the License can be transferred to Buyer, and
Buyer’s consideration for such services, the Parties agree as follows:

 

1.Services; Term.

 

(a)       Employment Services. In the event that the Closing Date occurs prior
to the date that is sixty-five (65) days from the date that Sellers provide
notice in compliance with Haw. Rev. Stat. §394B9 and Haw. Admin. Rules
§12-506-7, which shall be deemed to have been satisfied automatically and
without further action by Sellers upon the transmittal by

 

4363268-4

 

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Sellers of notices to Business Employees and the Director of the Department of
Labor and Industrial Relations for the State of Hawaii in substantially the form
of the draft notices attached hereto as Exhibit 1 (such sixty-five-day period,
the “Notice Period”), then during the period commencing on the Closing Date and
ending automatically and without further action by the Parties at 5:00 PM Hawaii
Standard Time on the date of expiration of the Notice Period (the “Employment
Services Termination Date”):

 

(i)       Sellers shall continue to employ  all Business Employees who were
employed immediately before the Closing Date to perform the same duties and
functions that they performed immediately before the Closing Date, at the same
wages, hours and other terms and conditions of employment that were in effect
immediately before the Closing Date.

 

(ii)       Sellers shall continue to be the employer of all   Business
Employees, in the same manner in which Sellers employed such Business Employees
immediately prior to the Closing Date, with Desert Island Restaurants, L.L.C.
(“DIR”), together with their agents and contractors, continuing to operate the
Business and the daily activities and affairs with respect to the Business
Employees pursuant to the terms of the management agreement to be entered into
by and between Buyer and DIR as of the Closing Date (as it may be amended,
modified or otherwise supplemented from time to time) or any management
agreement entered into thereafter by and between Buyer and any successor
third-party manager.

 

(iii)     Buyer shall have no responsibilities with regard to the Business
Employees and shall exercise no control over the worksite conditions under which
the Business Employees perform their services prior to the Employment Services
Termination Date.

 

(iv)     Notwithstanding the foregoing, Sellers shall not authorize any changes
in employee benefits that would, or would reasonably be expected to, materially
increase Buyer’s liabilities under this Agreement without Buyer’s advance
written consent.

 

(v)       Buyer shall have no authority to control Business Employees' terms and
conditions of employment, either direct, indirect, or even reserved. These terms
and conditions of employment include not only hiring, firing, discipline,
supervision, direction, and determining wages and hours, but it also dictating
the number of workers to be supplied, controlling scheduling, seniority,
overtime, and assigning work and determining the manner and method of how work
is to be performed.

 

(b)       Liquor Licensing. Until the earlier to occur of (i) five (5) business
days after the date on which the Liquor Commission either approves the transfer
of the License to Buyer or issues to Buyer a temporary liquor license covering
all operations currently covered by the License, and (ii) six (6) months after
the Closing Date (the “License Service Termination Date”), Sellers shall have
exclusive control and management of the liquor operations at each Restaurant,
which location is set forth in the applicable License (the “Licensed Premises”),
and shall keep the License in good standing to permit the uninterrupted sale and
serving of alcoholic

 

2

4363268-4

 

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beverages at the Licensed Premises, including but not limited to renewing the
License as may be necessary. In this regard, Sellers shall cause Business
Employees and the respective liquor operations under the License to be in full
compliance with all applicable liquor related laws, rules, and regulations.
Sellers agree to cooperate with Buyer in transferring the License to Buyer. Such
cooperation shall include: (1) prompt compliance with all reasonable requests of
Buyer for the execution of documents required in connection with such transfer;
(2) compliance with any reasonable request of Buyer in connection with the
issuance of a temporary license to Buyer; (3) promptly providing all required
federal and state tax clearances for the transfer of the License to Buyer; (4)
promptly securing any and all necessary approvals to ensure that the Licensed
Premises are fully and accurately covered by the License, (5) promptly paying
any outstanding fees and fines owed to the Liquor Commission arising from
circumstances preceding the Closing Date; and (6) if required by the Liquor
Commission, personal appearance by such officers, managers, directors or
employees of Sellers as required by the Liquor Commission, provided that,
without duplication of other sums payable hereunder, Sellers’ reasonable
out-of-pocket expenses (excluding any unpaid taxes, fees or fines owed by
Sellers arising from circumstances prior to the Closing Date) in connection with
the foregoing shall be reimbursed by Buyer, but Sellers shall receive no fee or
other consideration for such transfer of the License.

 

(c)Services. The services to be provided by Sellers under this Agreement are
referred to herein collectively as the “Services”.

 

(d)       Consideration. Except as otherwise  provided  in the  last
sentence  of Section 1(b), above, Buyer shall pay to Sellers an amount equal to
Sellers’ actual cost in performing Sellers’ obligations under this Agreement,
including without limitation, Sellers’ obligations to perform the Services and
to continue to employ the Business Employees under this Agreement. In no event
shall Sellers be entitled to generate any mark-up or profit on the Services.
Hawaii General Excise Tax (“Hawaii GET”) at the rate of (i) 4.712%, in the case
of the Restaurants located in Honolulu, and (ii) 4.166%, in the case of the
other Restaurants, shall be added to all invoices and shall be paid by Buyer,
unless Buyer obtains a written ruling from the Hawaii State Tax Department that
certain amounts received by Sellers are excluded under Haw. Rev. Stat. Section
237-24.7(1); if Buyer obtains such a ruling, Sellers agree to apply for a refund
of Hawaii GET previously paid on amounts determined to be properly excludable
and upon receipt of any such refund to immediately forward the same to Buyer. No
general excise tax will be paid on the cost of reimbursing Sellers for liquor
inventory or for costs which are paid by way of offset against revenues from
liquor sales. Sellers shall advise Buyer of the specific amounts which Sellers
disburse for employee wages, salaries, payroll taxes, insurance premiums, and
benefits, including retirement, vacation, sick pay, and health benefits, in case
the tax department rules that they are exempt. For purposes of this Agreement,
“actual cost” shall include, but not be limited to, the following: (1) wages and
salaries; (2) payroll taxes; (3) costs and fees for any employment service
provider; (4) premiums for workers’ compensation insurance, temporary disability
insurance, health insurance and other insurance required by this Agreement
otherwise by applicable law to be carried by Sellers, and any deductibles for
claims made based on any illness or injury occurring between the Closing Date
and the Employment Services Termination Date; (5) premiums for long term
disability insurance and life insurance; (6) contributions to 401(k), pension,
retirement, and profit-sharing plans based on any hours worked by Business
Employees between the Closing Date and the Employment Services Termination Date;
(7) if not included within wages, sums actually paid for vacation and sick

 

3

4363268-4

 

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leave taken between the Closing Date and the Employment Services Termination
Date, (8) any costs or liabilities incurred by the Business Employees in
performing their functions from and after the Closing Date to the extent
reimbursable by Sellers, (9) the cost of purchasing new liquor inventory for
sale and payment of Hawaii GET on liquor sales, and (10) any and all other fees
and costs including without limitation attorneys’ fees and consultant fees that
are deemed necessary in Sellers’ reasonable discretion to provide the Services
and perform its obligations under this Agreement.

 

(e)Payment.

 

(i)       Employment Services. No later than seven (7)  business days before
each pay date, Sellers shall provide Buyer an invoice for the estimated payroll
expenses for the payroll period for such pay date. Within two (2) business days
after Buyer receives such invoice, Buyer shall deposit (or cause the deposit of)
cash in the invoiced amount to Sellers’ payroll account listed on Exhibit 2
attached hereto. Sellers shall hold and disburse such sums consistent with
Sellers’ ordinary business practices in place prior to the Closing Date. All
such amounts shall be held by Sellers in trust for disbursement, and Sellers
shall maintain records concerning the accounts and provide an accounting thereof
at the request of Buyer (but not more frequently than monthly). Beginning with
the second invoice, each invoice shall include a reconciliation of actual
payroll expenses for the preceding payroll period with the estimated amounts.
Each invoice shall credit to Buyer the amount, if any, that actual payroll
expenses for the previous payroll period are less than the invoiced amounts
deposited by Buyer for such payroll period.   Sellers shall deliver to Buyer a
final reconciliation and invoice for unpaid expenses (or reimbursement for
overpaid expenses, as the case may be) within ten (10) business days after the
Employment Service Termination Date.

 

(ii)Other Costs and Expenses. For all other costs and expenses described herein
that Sellers incur (other than payroll expenses covered by Section 1(e)(i)
above), Sellers shall provide Buyer with invoices from time to time (but no more
frequently than monthly).  Buyer shall pay all such invoices in full in cash, by
wire transfer or by way of cashier’s check within ten (10) days following
Buyer’s receipt of monthly invoices for such expenses. Any payments made to
Sellers by wire transfer shall be sent per the wiring instructions attached as
Exhibit 3 to this Agreement.

 

(iii)      Late Charges, Etc. Any late payment charge, interest or other fee or
expense incurred by Sellers as a result of Buyer’s failure to pay any invoice
when due shall be recoverable by Sellers pursuant to Section 1(d) hereof.

 

2.Obligations of the Parties.

 

(a)In the event that the Closing Date occurs prior to the Employment Services
Termination Date, then Sellers shall use commercially reasonable efforts to
perform, or to cause its contractors and agents to perform the following: (1)
hiring, disciplining and terminating the Business Employees at any time in
accordance with applicable law; exercising sole management rights and control of
the Business Employees at the workplace, including the day-to-day job duties of
Business Employees; determining the suitability of Business Employees

 

4

4363268-4

 

--------------------------------------------------------------------------------

for employment; matching Business Employees work skills with job requirements;
assigning Business Employees job duties; determining appropriate times, methods
and performance requirements for jobs performed by Business Employees; and
determining the appropriate level of compensation for Business Employees. (Buyer
has no reserved right of direction or control over the Business Employees.); (2)
remaining solely responsible for compliance with county, state and federal laws
and regulations applicable to the workplace and relationship with the Business
Employees, including without limitation, employment discrimination laws, wage
and hour laws, immigration laws, and all other county, state and federal laws
relating to any aspects of the employment relationship (3) timely and accurately
paying the Business Employees all wages, benefits, vacation pay, sick pay and
other forms of compensation earned or accrued through the Employment Services
Termination Date; (4) properly and timely complying with all laws governing
reporting, collection and payment of federal and state payroll taxes on wages
paid, including: (a) federal income tax withholding provisions of the Internal
Revenue Code; (b) state and/or local income tax withholding and unemployment tax
provisions; (c) Federal Insurance Contributions Act (“FICA”) contributions; (d)
Federal Unemployment Tax Act contributions; (e) court ordered wage garnishments
(e.g., judgments, tax liens, child support

orders, etc.); and (f) laws governing the payment of wages including the FLSA
and Hawaii Wage and Hour laws including, but not limited to Hawaii Revised
Statutes Chapters 387 and 388;

(5) providing the Business Employees and their dependents all workers
compensation, temporary disability and prepaid health care coverage and benefits
required, and administering, managing and processing any Business Employee
claims for these coverages and benefits, through the Employment Services
Termination Date; (6) providing the Business Employees and their qualifying
beneficiaries the opportunity to elect health care continuation coverage, except
Buyer will provide continuation coverage if Sellers maintain no coverage after
the Employment Service Termination Date, and continued coverage to any Business
Employee hospitalized or prevented by sickness from working for a period not to
exceed three months following the month during which the employee became
hospitalized from working as required by Hawaii Revised Statutes

§393-15, except Buyer will provide the coverage if Sellers maintains no coverage
after the Employment Service Termination Date; (7) paying all benefits, making
all contributions and satisfying all conditions required by plan documents and
applicable laws for any employee welfare benefit plans that cover the Business
Employees or their dependents and maintaining any

profit sharing or pension plans covering Business Employees according to the
terms of the plans, the Internal Revenue Code and the Employee Retirement Income
Security Act; (8) complying with all laws concerning equal employment
opportunity and non-discrimination; (9) complying with any applicable labor
laws; (10) providing the Business Employees who begin to take leave prior to the
Employment Services Termination Date all rights that they may have, until the
Employment Services Termination Date, except Buyer will offer any legally
required health care coverage and reinstatement for leave extending past that
date; (11) appropriately responding to

any violations of occupational safety and health regulations that are cited
prior to the Employment Services Termination Date; (12) Promptly and effectively
addressing any internal complaints or allegations of workplace safety
violations, allegations of employment discrimination, harassment or retaliation,
wage violations and workplace misconduct and/or other allegations regarding
violations of law; (13) Defending any action commenced by a Business Employee or

government agency pertaining to the Business Employee’s employment with the
Sellers and immediately notifying Sellers’ EPLI insurer of any claim alleging
violation of law at Sellers’ worksite or the Business Employees’ employment;
(14) providing the employees and the director

 

5

4363268-4

 

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of labor and industrial relations advance written notice as required by Haw.
Rev. Stat. §394B-9 and Haw. Admin. Rules §12-506-7; (15) providing the employees
who become eligible the dislocated workers allowance required by Chapter 394B-10
and Haw. Admin. Rules §12-506-8, (16) maintaining a safe and healthful working
environment; (17) continuing the workers compensation, automobile liability,
general liability and employment practices liability insurance coverage with
respect to the Business Employees in effect immediately before the Closing Date,
and confirming part of the fees paid by Buyer are used to secure worker’s
compensation coverage; and (18) complying with all other applicable laws, rules,
and regulations.

 

(b)       During the period commencing on the date hereof, through and including
the License Service Termination Date, Sellers shall use commercially reasonable
efforts, or cause its contractors and agents, to comply with all laws, rules and
regulations applicable to the License and the respective liquor operations.

 

(c)       Buyer shall have no responsibility for complying with any obligations
with respect to the Business Employees until the Employment Service Termination
Date.

 

(d)Buyer shall cooperate with Sellers to the extent required in order for

Sellers to perform its obligations under this Agreement.

 

(e)     On or before the Employment Service Termination Date, Sellers shall
provide Buyer with an updated schedule of Sellers’ employees, including the
name, address and social security number of each employee, their annual salary
or hourly wage, the amount of any accrued vacation and sick leave or severance
pay benefits, the amount of any bonuses paid within the past 12 months, a list
and description of any grievances or claims (including workers compensation,
discrimination or ADA claims) filed prior to the Employment Services Termination
Date, a description of any special accommodation made with respect to any
employee for ADA compliance purposes, and copies of all employment records with
respect to the employees hired by Buyer.

 

(f)       All gross revenues from the sale of alcoholic beverages shall be
offset against the costs incurred by Sellers in performing the Services
hereunder, including the cost of purchasing the liquor inventory. After the
issuance of the temporary license or approval of the transfer of the License to
Buyer and on or before the License Service Termination Date, Sellers shall, to
the extent required by the Liquor Commission, return the remaining liquor
inventory to the vendors for credit, which credit shall be offset against the
costs incurred by Sellers in performing the Services hereunder. Any remaining
inventory shall be transferred to Buyer at no cost on the License Service
Termination Date.

 

(g)       Sellers shall promptly notify Buyer of any notice of violations or
other citations it may receive from the Liquor Commission, the Honolulu Police
Department, or other law enforcement agency related to any violations occurring
in connection with the liquor operations or affecting the License prior to the
License Service Termination Date. To the extent that any citations or notice of
violations are issued with respect to the period prior to the License Service
Termination Date, Sellers shall be responsible for paying any fines or other
penalties assessed by the Liquor Commission or any law enforcement agency in
connection therewith.

 

6

4363268-4

 

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3.Performance Standard.

 

Sellers shall use commercially reasonable efforts to provide the Services at the
same quality and level of performance, and with substantially the same degree of
care, as applied to such services prior to the Closing Date.

 

4.Confidentiality.

 

Sellers will handle and protect from disclosure all proprietary and confidential
information disclosed to them by Buyer with respect to the Services in the same
general manner as they handle and protect its own information that it considers
proprietary and confidential.

 

5.Points of Contact.

 

The following individuals shall serve as the points of contact for all questions
and issues relating to the Services:

 

Sellers:W. Randall Schoch

6263 N. Scottsdale Rd., #374

Scottsdale, AZ 85250

Telephone: (480) 945-0088

Email: rschoch@direstaurants.com

 

Buyer:General Counsel

1030 W. Canton Ave., Ste. 100

Winter Park, FL 32789

Telephone: (407) 829-3451

Email: agivens@rhgi.com

 

6.Records.

 

The Parties shall provide to each other all information and records reasonably
required to maintain full and accurate books relating to the Business Employees
and the provision of Services and the cost thereof and all other records
relevant to this Agreement. Upon reasonable notice from another Party, each
Party shall make available for inspection and copy by such other Party’s agents
such information, books and records during reasonable business hours.

 

7.Indemnification: No Consequential Damages; Limitation on Liability.

 

(a)       Buyer shall defend, indemnify and hold harmless Sellers and their
respective partners, members, shareholders, direct and indirect owners, agents,
employees, officers, directors and affiliates (“Seller Indemnified Parties”)
from and against any and all claims, actions, costs, damages, liabilities,
losses, and expenses of any kind (including, without limitation, reasonable,
attorneys’ fees, consultant fees and costs) (“Indemnified Claims”) incurred or
suffered by any one or more of the Seller Indemnified Parties as a result of
Sellers’ or their Affiliates’ providing the Services and performing their
obligations under this Agreement, except to the extent Indemnified Claims arise
from the breach of this Agreement by any Seller or the gross negligence, bad
faith or willful misconduct of any Seller (excluding

 

7

4363268-4

 

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Business Employees, except with respect to acts taken or omissions by such
Business Employees at the direction of any Seller or any of their Affiliates and
except with respect to actions or omissions of Business Employees resulting from
the gross negligence, bad faith or willful misconduct of any Seller or any of
their Affiliates in hiring or supervising such Business Employees). Buyer’s
obligations under this Section 7(a) shall survive the termination of this
Agreement.

 

(b)       IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANOTHER FOR INDIRECT,
INCIDENTAL, EXEMPLARY, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (INCLUDING BUT
NOT LIMITED TO LOST REVENUE, PROFITS OR OTHER BUSINESS LOSSES OR OPPORTUNITIES),
EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY THEREOF.

 

8.No Third Party Beneficiaries.

 

This Agreement is for the sole benefit of the Parties hereto and nothing
expressed or implied shall give or be construed to give any other person any
legal or equitable rights hereunder, whether as a third party beneficiary or
otherwise.

 

9.Entire Agreement.

 

This Agreement supersedes all prior agreements and understandings between the
Parties hereto with respect to the provision of the Services except for any
prior written agreement that expressly states that it is not superseded by this
Agreement.

 

10.Amendment and Modification.

 

This Agreement may be amended, modified or supplemented only by written
agreement of the Parties hereto.

 

11.Waiver of Compliance; Consents.

 

Except as otherwise provided in this Agreement, any failure of any of the
Parties hereto to comply with any obligation, covenant, agreement or condition
herein may be waived by the Party entitled to the benefits thereof only by a
written instrument signed by the Party granting such waiver, but any such waiver
of such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent failure to comply
therewith.

 

12.Notices.

 

All notices and other communications hereunder shall be in writing and delivered
personally or by facsimile transmission with completed transmission
acknowledgment, or mailed by overnight delivery via a nationally recognized
courier or registered or certified first class mail (return receipt requested),
postage prepaid, to the recipient party at its address below (or at such other
address or facsimile number for a Party as shall be specified by like notice),
and all notices shall be effective upon delivery or refusal of delivery:

 

If to Sellers:W. Randall Schoch

 

8

4363268-4

 

--------------------------------------------------------------------------------

c/o Desert Island Restaurants, LLC

6263 N. Scottsdale Rd., #374

Scottsdale, AZ 85250

Telephone:  (480) 945-0088

Facsimile:  (480) 945-4747

 

with a copy to:Sullivan Meheula Lee

733 Bishop Street, Ste. 2900

Honolulu, Hawaii 96813

Attention: Terrence M. Lee, Esq. Telephone:  (808) 628-7530

Facsimile:  (808) 533-2467

 

If to Buyer:RCSH Operations, Inc.

c/o Ruth’s Hospitality Group, Inc.

1030 W. Canton Avenue, Ste. 100

Winter Park, FL 32789

Attn: General Counsel

Telephone:  (407) 829-3451

 

with a copy to:Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, NY 10019

Attention: Jeffrey Spindler, Esq. Telephone: (212) 451-2300

Facsimile: (212) 451-2222

 

13.Assignment.

 

This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the Parties hereto and their respective successors and
permitted assigns, but, except to the extent permitted by this Section 13,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any Party hereto, including by operation of law, without
the prior written consent of the other Parties, nor is this Agreement intended
to confer upon any other person except the Parties hereto any rights, interests,
obligations or remedies hereunder.

 

14.Construction of Agreement.

 

The  terms and provisions of  this Agreement represent the  results of
negotiations between Buyer and Sellers, each of which has been represented by
counsel of its own choosing, and none of which has acted under duress or
compulsion, whether legal, economic or otherwise. Accordingly, the terms and
provisions of this Agreement shall be interpreted and construed in accordance
with their usual and customary meanings, and Buyer and Sellers hereby waive the
application in connection with the interpretation and construction of this
Agreement of any rule of law to the effect that ambiguous or conflicting terms
or provisions contained in this

 

9

4363268-4

 

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Agreement shall be interpreted or construed against the Party whose attorney
prepared the executed draft or any earlier draft of this Agreement.

 

15.Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 

16.Section Headings.

 

The section headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.

 

17.Severability.

 

If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party hereto. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the greatest extent possible.

 

18.Force Majeure.

 

The Parties hereto will not be liable to the other Parties for failure or delay
in performance under this Agreement (other than any failure or delay in
performance of an obligation to pay money) due to circumstances beyond the
Party’s reasonable control. Each Party agrees to notify the other Parties
promptly of any such circumstance delaying its performance and to resume
performance as soon as reasonably practicable.

 

19.Governing Law.

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of Hawaii (without giving effect to conflict of law principles) as to
all matters, including but not limited to matters of validity, construction,
effect, performance and remedies.

 

20.Waiver of Jury Trial.

 

The Parties hereby knowingly, voluntarily and intentionally waive the right to a
trial by jury in respect of any litigation based hereon, arising out of, under
or in connection with this Agreement or any other documents contemplated to be
executed in conjunction herewith, or any course of conduct, course of dealings,
statements (whether verbal or written) or actions of either party or any
exercise by either party of its respective rights under this Agreement, this
waiver being a material inducement for the parties to enter into this Agreement.

 

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4363268-4

 

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21.Liquor Commission Approval

 

The Parties: (a) acknowledge that this Agreement is subject to the review and
approval of the Liquor Commission, and (b) agree to promptly amend this
Agreement to the extent required to obtain such approval, provided that a Party
shall not be required to agree to any such amendment which materially and
adversely changes its rights under this Agreement.

 

[Signature page follows]

 

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4363268-4

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
day and year first above written.

 

PURCHASER:

 

RCSH OPERATIONS, INC.

 

 

By:

 

Name:Michael P. O’Donnell

Title:Chief Executive Officer

 

 

SELLERS:

 

HONOLULU STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

MAUI STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

 

WAILEA STEAK HOUSE LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

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4363268-4

 

--------------------------------------------------------------------------------

BEACHWALK STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

LAVA COAST STEAK HOUSE, LLC, by its

Manager:

DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

 

 

KAUAI STEAK HOUSE, LLC, by its Manager: DESERT ISLAND RESTAURANTS, L.L.C.

 

 

By:

Name:

W. Randall Schoch, Trustee of the Schoch Revocable Living Trust dated November
19, 2001

 

Title:Manager

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