ASSET PURCHASE AGREEMENT
 
by and among
 
LUBY’S, INC.,
 
FUDDRUCKERS, INC.,
 
MAGIC BRANDS, LLC,
 
ATLANTIC RESTAURANT VENTURES, INC.,
 
R. WES, INC.,
 
FUDDRUCKERS OF HOWARD COUNTY, LLC
 
and
 
FUDDRUCKERS OF WHITE MARSH, LLC
 
 
 

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TABLE OF CONTENTS
 
Article I DEFINITIONS
2
1.1
Certain Definitions
2
1.2
Terms Defined Elsewhere in this Agreement
8
1.3
Other Definitional and Interpretive Matters
10
Article II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
11
2.1
Purchase and Sale of Assets
11
2.2
Excluded Assets
13
2.3
Assumption of Liabilities
14
2.4
Excluded Liabilities
15
2.5
Assignment of Contracts and Leases
16
2.6
Further Conveyances and Assumption
17
Article III CONSIDERATION
17
3.1
Purchase Price
17
3.2
Purchase Price Deposit
17
Article IV CLOSING AND TERMINATION
18
4.1
Closing Date
18
4.2
Deliveries by the Sellers
18
4.3
Deliveries by the Purchaser
18
4.4
Termination of Agreement
19
4.5
Procedure Upon Termination
20
4.6
Effect of Termination
20
Article V REPRESENTATIONS AND WARRANTIES OF THE SELLERS
20
5.1
Organization and Good Standing
20
5.2
Authorization of Agreement
21
5.3
Conflicts; Consents of Third Parties
21
5.4
Title to Purchased Assets
22
5.5
Taxes
22
5.6
Purchased Intellectual Property
22
5.7
Permits
22
5.8
Environmental Matters
23
5.9
Employee Benefits
24
5.10
Litigation
24
5.11
Material Contracts
24
5.12
Property
25
5.13
Financial Statements
25
5.14
Brokers
26
5.15
Employees
26
5.16
Related Party Transactions
27
5.17
Franchise Matters
27
5.18
Customer Programs
28
5.19
No Other Representations or Warranties; Schedules
28
Article VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
28

 
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6.1
Organization and Good Standing
28
6.2
Authorization of Agreement
28
6.3
Conflicts; Consents of Third Parties
29
6.4
Brokers
29
6.5
Condition of the Purchased Assets
29
6.6
Communications
30
6.7
The Debtors' Privacy Policy
30
Article VII BANKRUPTCY COURT MATTERS
30
7.1
Competing Transaction
30
7.2
Submission to Bankruptcy Court
30
7.3
Sale Order
30
7.4
Lease Designation.
30
Article VIII COVENANTS
31
8.1
Access to Information
31
8.2
Conduct Pending the Closing
31
8.3
Consents; Liquor Licenses
31
8.4
Further Assurances
32
8.5
Preservation of Records
32
8.6
Publicity
32
8.7
Schedules and Exhibits
33
8.8
Payment of Taxes
33
8.9
Motions, Orders, etc
33
8.10
Recurring Charges
33
8.11
Adequate Assurance
34
8.12
Bulk Sales
34
Article IX EMPLOYEES AND EMPLOYEE BENEFITS
35
9.1
Transferred and Retained Employees
36
9.2
Employment Tax Reporting
38
Article X CONDITIONS TO CLOSING
38
10.1
Conditions Precedent to Obligations of the Purchaser
38
10.2
Conditions Precedent to Obligations of the Sellers
39
10.3
Conditions Precedent to Obligations of the Purchaser and the Sellers
39
10.4
Frustration of Closing Conditions
40
Article XI TAXES
40
11.1
Allocation of Taxes
40
11.2
Purchase Price Allocation
40
11.3
Tax Reporting
40
11.4
Cooperation and Audits
40
Article XII MISCELLANEOUS
41
12.1
No Survival of Representations and Warranties
41
12.2
Expenses
41
12.3
Injunctive Relief
41
12.4
Submission to Jurisdiction; Consent to Service of Process
41
12.5
Waiver of Right to Trial by Jury
42
12.6
Entire Agreement; Amendments and Waivers
42
12.7
Governing Law
42

 
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12.8
Notices
42
12.9
Severability
43
12.10
Assignment
44
12.11
Counterparts
44

 
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ASSET PURCHASE AGREEMENT
 
This ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into and dated as of
June 23, 2010 (the “Effective Date”), by and among Luby’s, Inc., a Delaware
corporation (the “Purchaser”), Fuddruckers, Inc., a Texas corporation
(“Fuddruckers”), Magic Brands, LLC, a Delaware limited liability company
(“Magic”, and together with Fuddruckers, collectively, the “Company”), Atlantic
Restaurant Ventures, Inc., a Virginia corporation (“ARVI,” and together with
each of Magic and Fuddruckers, the “Debtors”), R. Wes, Inc., a Texas corporation
(“R. Wes”), Fuddruckers of Howard County, LLC, a Maryland limited liability
company (“Howard County”), and Fuddruckers of White Marsh, LLC, a Maryland
limited liability company (“White Marsh,” and together with R. Wes and Howard
County, the “Non-Debtor Sellers,” and the Non-Debtor Sellers together with the
Debtors, each a “Seller” and, collectively, the “Sellers”).
 
WITNESSETH:
 
WHEREAS, the Sellers are engaged in the business of (i) owning, managing and
operating the chain of Seller-owned restaurants operating under the trade name
“Fuddruckers” in the United States, (ii) franchising the right to operate
Fuddruckers restaurants using the Fuddruckers “System”, and (iii) owning,
managing and operating the chain of restaurants operating under the trade name
“Koo Koo Roo” in the United States (the aforementioned Fuddruckers and Koo Koo
Roo businesses are collectively referred to as the “Business”);
 
WHEREAS, on April 21, 2010, each of the Debtors filed a voluntary petition for
relief (the “Bankruptcy Case”) under chapter 11 of Title 11 of the United States
Code, 11 U.S.C. §§ 101-1532 (as amended, the “Bankruptcy Code”) in the United
States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”);
 
WHEREAS, on May 18, 2010, the Bankruptcy Court entered an Order (the “Bidding
Procedures Order”) (I) Approving Bidding Procedures for the Sale of Assets Free
and Clear of All Liens, Claims, Interests and Encumbrances pursuant to Section
363 of the Bankruptcy Code (the “Bidding Procedures”), (II) Approving Certain
Bidding Protections, (III) Approving the Form and Manner of Notice of the Sale
and Assumption and Assignment of Executory Contracts and Unexpired Leases and
(IV) Scheduling an Auction and Sale Hearing;
 
WHEREAS, upon the terms and subject to the conditions set forth herein, the
Purchaser desires to purchase from the Sellers, and the Sellers desire to sell
to the Purchaser, substantially all of the Sellers’ assets (other than the
Excluded Assets (as defined below)) in exchange for the payment to the Sellers
of the Purchase Price (as defined below) and the assumption by the Purchaser of
certain of the Sellers’ liabilities and obligations;
 
WHEREAS, the Debtors believe, following consultation with their financial
advisors and consideration of available alternatives, that, in light of the
current circumstances, a sale of their assets is necessary to maximize value and
is in the best interest of the Debtors and their creditors; and
 
WHEREAS, the transactions contemplated by this Agreement (the “Transactions”)
are subject to the approval of the Bankruptcy Court and would be consummated
only pursuant to a Sale Order (as defined below) to be entered by the Bankruptcy
Court and applicable provisions of the Bankruptcy Code.
 
 
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NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements hereinafter contained, and intending to be
bound hereby, the parties hereto hereby agree as follows:
 
ARTICLE I
 
DEFINITIONS
 
1.1         Certain Definitions.  For purposes of this Agreement, the following
terms shall have the meanings specified in this Section 1.1 or in other Sections
of this Agreement, as identified in the chart in Section 1.2:
 
“Acquired Location” means each Location that is (i) Owned Real Property, or (ii)
subject to an Assumed Lease other than a Location subject to an Assumed Lease
and that is subleased to a Franchisee.
 
“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 or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.
 
“Asset Price” means (a) Sixty One Million Dollars ($61,000,000.00), or (b) in
the event that the Purchaser elects to remove the Pepsi Contract from Schedule
2.1(b)(vii) such that the Pepsi Contract is not an Assumed Contract hereunder,
Sixty Three Million Four Hundred and Fifty Thousand Dollars ($63,450,000.00).
 
“Assumed Executory Contracts” means all Assumed Contracts and Assumed Leases.
 
“Business Day” means any day of the year on which national banking institutions
in New York are open to the public for conducting business and are not required
or authorized by Law to close.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Contract(s)” means any contract, indenture, note, bond, lease, license,
purchase or sale order, warranties, commitments, franchises, or other written or
oral agreement, other than a Lease, in each case to which a Seller is a party
and that is related or beneficial to the Business.
 
“Cure Costs” means monetary amounts that must be paid and nonmonetary
obligations that otherwise must be satisfied, including pursuant to Sections
365(b)(1)(A) and (B) of the Bankruptcy Code, in connection with the assumption
and/or assignment of the Assumed Executory Contracts, including any amounts
payable in connection with the assumption and assignment of the Spirit Lease.
 
 
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“Customer Programs” means all outstanding gift certificates and gift cards
relating to the Business, and all customer loyalty and rewards programs offered
with respect to the Business, including, without limitation, the “Fudds Club”.
 
“Debtor's DIP Lender” means Wells Fargo Capital Finance, Inc.
 
“Development Agreement” shall mean any master license agreement, master
franchise agreement, multi-unit development agreement, or other agreement
pursuant to which a Franchisee has the right to develop, and/or grant
subfranchises or sublicenses to third parties to develop, multiple Fuddruckers
or Fudds Express Restaurants in a specified territory, including, without
limitation, the Development Agreements described in the current FDD.
 
“Documents” means all files, documents, instruments, papers, books, reports,
records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers,
journals, regulatory filings, operating data and plans, technical documentation,
Intellectual Property records, advertising, marketing and sales documentation
(sales brochures, flyers, pamphlets, web pages, catalogues, etc.), franchise
documentation, personnel files, training and other manuals, maintenance records
and drawings, architectural plans and designs, Tax Returns, financial
statements, supplier lists, title policies, surveys and deeds in the possession
or control of a Seller and relating to the Purchased Assets whether in written
or electronic form.
 
“Employee Benefit Plans” means each deferred compensation and each bonus or
other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
“welfare” plan, fund or program (within the meaning of Section 3(1) of ERISA);
each profit-sharing, stock bonus or other “pension” plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment, termination,
change in control, retention or severance plan, agreement or arrangement; and
each other employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to or required to be
contributed to by the Company, the Sellers or any of their ERISA Affiliates, or
to which the Company, the Sellers or any of their ERISA Affiliates is a party
for the benefit of any employee or former employee of the Company or any
Subsidiary.
 
“Employees” means all individuals, as of the Effective Date, who are employed by
any of the Sellers.
 
“Encumbrances” means any security interest, lien, collateral assignment, right
of setoff, debt, obligation, liability, pledge, levy, charge, escrow,
encumbrance, option, right of first refusal, transfer restriction, conditional
sale contract, title retention contract, mortgage, lease, deed of trust,
hypothecation, indenture, security agreement, easement, servitude, proxy, voting
trust or agreement, transfer restriction under any shareholder or similar
agreement, or any other agreement, arrangement, contract, commitment,
understanding or obligation of any kind whatsoever, whether written or oral.
 
“Environmental Laws” means all federal, state and local Laws relating to
pollution or protection of human health, safety, or the environment from
pollution, including, without limitation, laws relating to releases or
threatened releases of Hazardous Substances into the environment (including,
without limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata).
 
 
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“ERISA Affiliate” means any entity that with the subject Person is:
 
 
(a)
a member of a controlled group of corporations within the meaning of Section
414(b) of the Code;

 
 
(b)
a member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Code;

 
 
(c)
a member of an affiliated service group within the meaning of Section 414(m) of
the Code; or

 
 
(d)
a member of a group of organizations required to be aggregated under Section
414(o) of the Code.

 
“Excluded Contract” means any Contract that is not an Assumed Contract.
 
“Excluded Executory Agreement” means any Excluded Contract and/or Excluded
Lease.
 
“Excluded Lease” means any Lease that is not an Assumed Lease.
 
“Excluded Location” means a Location that is not an Acquired Location.
 
“Excluded Matter” means: (i) any material change in the financial or stock
markets in the United States; (ii) any material change that generally affects
the industry in which the Sellers operate; (iii) any material change arising in
connection with any natural disaster or calamity, acts of God, any national or
international political or social conditions, including the declaration by the
United States of a national emergency or war, or the occurrence of any military
or terrorist attack upon the United States, or any of its territories,
possessions, or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States; (iv) any change in
applicable Laws or GAAP or the interpretation thereof; (v) any actions required
by Law; (vi) any change resulting from the Transactions or the public
announcement thereof; (vii) any change resulting from the commencement or
continuation of the Bankruptcy Case; or (viii) any actions taken by the Sellers
pursuant to (or as contemplated by) orders entered by the Bankruptcy Court in
the Bankruptcy Case or otherwise with the Purchaser’s prior written consent.
 
“FDD” means the franchise disclosure document prepared in accordance with the
FTC Rule (or its predecessor) or any applicable Franchise Law.
 
“Final Order” means an order of a court of competent jurisdiction as to which
the time to file an appeal, a motion for rehearing or reconsideration or a
petition for writ of certiorari has expired and no such appeal, motion or
petition is pending.
 
 
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“Franchise” means any relationship between any Seller and any other Person which
constitutes a “franchise,” as that term is defined under (a) the FTC Rule,
regardless of the jurisdiction in which the franchised business is located or
operates; or (b) the Franchise Law applicable in the jurisdiction in which the
franchised business is located or operates, if any.
 
“Franchise Agreement” means (a) any oral or written agreements pursuant to which
any Seller grants or has granted any Franchise or the right or option (whether
or not subject to certain qualifications or conditions) to acquire any
Franchise, together with any guarantee or other material instrument or agreement
relating thereto (for example, any lease or sublease); and (b) that certain
Fuddruckers Trademark and Technology User Agreement dated as of November 19,
1997 by and between Fuddruckers, Inc. and Fuddruckers-EMA E.C., as amended. As
used in this Agreement, Franchise Agreement includes Development Agreements.
 
“Franchise Law” means the FTC Rule, any other Law regulating the offer and/or
sale of Franchises, business opportunities or seller-assisted marketing plans,
and any Law that regulates the relationship of the parties to a Franchise
Agreement in the area of transfer, termination or non-renewal of a Franchise
Agreement.
 
“Franchisee” means a Person who is a party to a Franchise Agreement with any
Seller.
 
“FTC Rule” means the Federal Trade Commission trade regulation rule entitled
“Disclosure Requirements and Prohibitions Concerning Franchising,” 16 C.F.R
Section 436.1 et seq.
 
“Furniture and Equipment” means all furniture, fixtures, furnishings, equipment,
machinery, computer hardware, tools and tooling, supplies, vehicles, leasehold
improvements, and other tangible personal property owned or used by any of the
Sellers in the conduct of the Business.
 
“GAAP” means generally accepted accounting principles in the United States,
consistently applied throughout the specified period.
 
“Governmental Body” means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether foreign, federal, state, or
local, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).
 
“Hazardous Substances” means any chemical, mixture, waste, substance, material,
pollutant, or contaminant, including without limitation petroleum, asbestos and
asbestos-containing materials, with respect to which liability or standards of
conduct are imposed under any Environmental Laws.
 
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
 
 
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“Intellectual Property” means all intellectual property arising from or in
respect of the following: (i) all patents and applications therefor, (ii) all
trademarks, service marks, trade names, service names, brand names, all trade
dress rights, logos, Internet domain names and general intangibles of a like
nature, together with the goodwill associated with any of the foregoing, and all
applications, registrations and renewals thereof, (iii) copyrights and
registrations and applications therefor, (iv) inventions, trade secrets and
confidential business information, whether patentable or nonpatentable and
whether or not reduced to practice, know-how, manufacturing and product
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(v) all computer software, data and documentation, (vi) other proprietary rights
relating to any of the foregoing subsections (i) through (v), including remedies
against infringements thereof and rights of protection of interest therein under
the Laws of all jurisdictions, and (vii) all rights to sue for and collect
damages for past infringement of any of the foregoing subsections (i) through
(vi).
 
“Inventory” shall mean all inventories, including raw materials, food and
beverage (alcoholic and non-alcoholic) inventories, linens, tableware, glasses,
smallwares, dishes, ingredients, finished product and administrative, cleaning
and other supplies and materials.
 
“Knowledge of the Sellers” means the actual knowledge, after due inquiry, of
those individuals listed on Schedule 1.1(k).
 
“Law” means any federal, state, local or foreign law, statute, code, ordinance,
rule or regulation or common law requirement.
 
“Lease(s)” means all unexpired and previously unterminated leases, subleases,
licenses or other agreements, in each case, pursuant to which the Sellers hold
or use any Leased Real Property, including all amendments, extensions, renewals,
guaranties or other agreements with respect thereto.
 
“Legal Proceeding” means any judicial, administrative or arbitral actions,
suits, proceedings (public or private) or claims, or any proceedings by or
before a Governmental Body.
 
“Liability” means any debt, liability or obligation (whether direct or indirect,
known or unknown, absolute or contingent, accrued or not accrued, liquidated or
unliquidated, or due or to become due), and including all costs and expenses
relating thereto.
 
“Locations” means all of the locations listed on Schedule 1.1(l).
 
“Material Adverse Effect” means a material adverse effect on or change in the
Purchased Assets, taken as a whole, other than to the extent such effect or
change results from or relates to an Excluded Matter; provided, however, that
the act of filing a case under chapter 11 of the Bankruptcy Code by any Seller
does not and shall not constitute a Material Adverse Effect.
 
“Minnesota Locations” means the two (2) locations listed on Schedule 1.1(m).
 
“Minnesota Leases” means the two (2) leases listed on Schedule 1.1(m).
 
“Order” means any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award of a Governmental Body.

 
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“Pepsi Contract” means that certain Fountain Beverage Sales Agreement between
Pepsi-Cola Fountain Company, Inc. and Fuddruckers International, LLC, on behalf
of itself and its various direct and indirect subsidiaries, including, without
limitation, Fuddruckers.
 
“Permits” means any approvals, authorizations, consents, licenses, permits or
certificates of a Governmental Body, including, without limitation, liquor
licenses.
 
“Permitted Exceptions” means, with respect to any of the property or assets of
the Sellers, whether owned as of the Effective Date or thereafter, (i) all
defects, exceptions, restrictions, easements, rights of way and encumbrances of
record of such property or asset and which either (x) are listed on Schedule B
to the title policies listed on Schedule 1.1(p), (y) would not individually (or
in the aggregate with others) be reasonably expected to have a Material Adverse
Effect on the use or enjoyment of such asset, or (z) a title insurer has agreed
to affirmatively insure against loss caused thereby in the applicable title
policy by way of ALTA coverage or other affirmative coverage (except that the
Sellers shall be obligated to remove mortgages, deeds of trust and other
Encumbrances of a definite and ascertainable amount (other than those assumed by
the Purchaser as set forth in this Agreement)); (ii) any statutory liens arising
after the Closing for Taxes, assessments or other governmental charges not yet
due and payable; (iii) zoning, entitlement and other land use and environmental
regulations by any Governmental Body; and (iv) Encumbrances that constitute or
arise from Assumed Liabilities.
 
“Person” means any individual, corporation, limited liability company,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.
 
“Petition Date” means April 21, 2010, which is the date on which each of the
Debtors filed their respective petitions for relief under Chapter 11 of the
Bankruptcy Code.
 
“Register Cash” means, for each Acquired Location, cash in an amount equal to
the amount set forth on Schedule 1.1(r).
 
“Sale Order” means an Order entered by the Bankruptcy Court in substantially the
form annexed hereto as Exhibit A, which attached form is acceptable to the
Purchaser.
 
“Specified Litigation Resolution” means the earliest to occur of (i) the
entering into of any arrangements between the Purchaser and R.J. Management LLC
(or its affiliates) with respect to the Minnesota Locations that would enable
the Sellers/Debtors to deliver to the Purchaser (or its designee, which may in
all events be R.J. Management LLC or its affiliates) possession and control of
the Minnesota Locations free and clear of any legal, equitable and other
interest of R.J. Management LLC and its affiliates (other than pursuant to any
such arrangements) and to assign to the Purchaser (or its designee) the
Minnesota Leases and any Furniture and Equipment owned by the Sellers and
located at the Minnesota Locations free and clear of all Encumbrances, (ii) a
settlement of the Specified Litigation with the written consent of the
Purchaser, or (iii) the date a Final Order that would enable the Sellers/Debtors
to deliver to the Purchaser (or its designee) possession and control of the
Minnesota Locations free and clear of any legal, equitable and other interest of
R.J. Management LLC and its affiliates and to assign to the Purchaser (or its
designee) the Minnesota Leases and any Furniture and Equipment owned by the
Sellers and located at the Minnesota Locations free and clear of all
Encumbrances, is entered by such court and becomes effective; provided that in
the event that one Minnesota Lease (but not the other) has been rejected in
accordance with Section 8.13(c), “Specified Litigation Resolution” means the
earliest to occur of any of the events described in clauses (i), (ii) or (iii)
with respect to the remaining Minnesota Location.
 
 
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“Spirit Lease” means the Master Lease between Fuddruckers and Spirit Master
Funding, LLC, as amended, including as amended by the Sixth Amendment to Master
Lease attached as Schedule 1.1(a). The Spirit Lease shall constitute one Lease
for purposes of Section 2.1(b)(i).
 
“Subsidiary” means each of the Company’s direct and indirect subsidiaries, as
listed on Schedule 5.1.
 
“Tax Authority” means any government, or agency, instrumentality or employee
thereof, charged with the administration of any Law relating to Taxes.
 
“Taxes” means (i) all federal, state, local or foreign taxes, charges 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, (ii) any item described in clause (i) for which a taxpayer is
liable as a transferee or successor, by reason of the regulations under Section
1502 of the Code, or by contract, indemnity or otherwise, and (iii) all
interest, penalties, fines, additions to tax or additional amounts imposed by
any Tax Authority in connection with any item described in clause (i) or (ii).
 
“Tax Return” means all returns, declarations, reports, estimates, information
returns and statements required to be filed in respect of any Taxes (including
any attachments thereto or amendments thereof).
 
“Trust Agent” means Goulston & Storrs - A Professional Corporation.
 
1.2         Terms Defined Elsewhere in this Agreement.  For purposes of this
Agreement, the following terms have the meanings set forth in the sections
indicated:
 
Term
 
Section
     
Additional Excluded Lease
 
2.1(b)(i)
Agreement
 
Preamble
Allocation Statement
 
11.2
ARVI
 
Preamble
Assumed Contracts
 
2.1(b)(vii)
Assumed Leases
 
2.1(b)(i)
Assumed Liabilities
 
2.3
Audited Financial Statements
 
5.13
Bankruptcy Case
 
Recitals
Bankruptcy Code
 
Recitals

 
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Bankruptcy Court
 
Recitals
Bidding Procedures
 
Recitals
Bidding Procedures Order
 
Recitals
Business
 
Recitals
Closing
 
4.1
Closing Date
 
4.1
Company
 
Preamble
Competing Transaction
 
7.1
Confidentiality Agreement
 
4.6
Debtors
 
Preamble
Deposit
 
3.2
DOJ
 
8.15(a)(ii)
Effective Date
 
Preamble
Employee List
 
5.15(a)
Equal Aggregate Compensation Level
 
9.1(a)
Estate Claims
 
2.2(j)
Excluded Assets
 
2.2
Excluded Entities
 
2.2(m)
Excluded Liabilities
 
2.4
Financial Statements
 
5.13
Franchisee Subtenant
 
2.5(f)
FTC
 
8.15(a)(ii)
Fuddruckers
 
Preamble
Howard County
 
Preamble
Interim Period
 
9.1(a)
IP License Agreements
 
5.6(b)
Leased Real Property
 
5.12(b)
Liquor License Approvals
 
8.3
Magic
 
Preamble
Material Contracts
 
5.11(a)
Non-Debtor Sellers
 
Preamble
Owned Real Property
 
5.12(a)
P&L Statements
 
5.13
Periodic Taxes
 
11.1
Pre-Resolution Rejection Notice
 
8.13(c)
Purchased Assets
 
2.1(b)
Purchased Intellectual Property
 
2.1(b)(x)
Purchase Price
 
3.1
Purchased Inventory
 
2.1(b)(iii)
Purchaser
 
Preamble
R. Wes
 
Preamble
Registered Intellectual Property
 
5.6(a)
Rejected Leases
 
2.5(c)
Retained Employees
 
9.1(a)
Salaried Non-Store Employees
 
9.1(a)
Seller or Sellers
 
Preamble

 
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Specified Benefits
 
9.1(a)
Specified Litigation
 
8.13
Subleased Lease
 
2.5(f)
Subsidiary
 
Preamble
Termination Date
 
4.4(a)
Transactions
 
Recitals
Transferred Employees
 
9.1(a)
Unaudited Financial Statements
 
5.13
WARN Act
 
9.1(c)
White Marsh
 
Preamble

 
1.3         Other Definitional and Interpretive Matters.
 
(a)           Unless otherwise expressly provided, for purposes of this
Agreement, the following rules of interpretation shall apply:
 
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. Any reference in this Agreement to $ means U.S. dollars.
 
Exhibits/Schedules. 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 Exhibit or Schedule but
not otherwise defined therein shall be defined as set forth in this Agreement.
 
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.
 
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.
 
Herein. The words such as “herein,” “hereinafter,” “hereof” and “hereunder”
refer to this Agreement as a whole and not merely to a subdivision in which such
words appear unless the context otherwise requires.
 
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.
 
 
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(b)           Construction.  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
 
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
 
2.1         Purchase and Sale of Assets.
 
(a)          On the terms and subject to the conditions set forth in this
Agreement and the Sale Order (and subject to Section 8.13 with respect to the
Minnesota Leases), at the Closing, the Purchaser shall purchase, acquire and
accept from the Sellers, and the Sellers shall sell, transfer, convey, assign
and deliver to the Purchaser, all of the Sellers’ right, title and interest in,
to and under the Purchased Assets, free and clear of all Encumbrances, other
than the Permitted Exceptions and the Assumed Liabilities, to the maximum extent
permitted by Section 363 of the Bankruptcy Code.
 
(b)          For all purposes of and under this Agreement, the term “Purchased
Assets” means all of the properties, assets, and rights of the Sellers (other
than the Excluded Assets) existing as of the Closing, real or personal, tangible
or intangible, including but not limited to:
 
(i)            all Leases of the Sellers set forth in Schedule 2.1(b)(i) (the
“Assumed Leases”), as such Schedule may be amended from time to time by the
Purchaser, in its sole discretion, to remove up to twenty (20) Leases by
delivering written notice to the Sellers at any time prior to the Closing Date
(each of such Leases so removed is called an “Additional Excluded Lease”)
(provided that the Purchaser shall not amend the Schedule to include any
Rejected Leases), together with the Sellers’ interest in all security deposits
related thereto and all permanent fixtures, improvements and appurtenances
thereto and associated with such Assumed Leases;
 
(ii)           all Owned Real Property, together with the Sellers’ interest in
all fixtures, improvements and appurtenances thereto and associated with such
Owned Real Property;
 
(iii)          all Inventory as of the Closing Date, whether at the Acquired
Locations or in transit to any Acquired Location (collectively, the “Purchased
Inventory”);
 
(iv)          all accounts receivable, notes receivable and other receivables
related to the Purchased Assets, except as specifically provided in Section
2.2(o);
 
(v)           intentionally omitted;
 
(vi)          all goodwill incident to the Business and goodwill of the Sellers
associated with the Business or the Purchased Assets;
 
 
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(vii)        all Contracts of the Sellers set forth on Schedule 2.1(b)(vii) or
to be set forth thereon after the Effective Date (and until the Closing Date) at
the sole option of the Purchaser (the “Assumed Contracts”), as such Schedule may
be amended from time to time by the Purchaser, in its sole discretion, by
providing written notice to the Sellers up to the Closing Date, in order to add
or remove Contracts listed thereon (unless any such Contract has already
expired, terminated or been rejected), together with the right to receive income
in respect of such Assumed Contracts on or after the Closing Date, and any
causes of action relating to past or present breaches of the Assumed Contracts;
 
(viii)        all of the Sellers’ prepaid charges and expenses paid in
connection with or relating to any Purchased Asset;
 
(ix)          all Furniture and Equipment at any Acquired Location;
 
(x)           all rights in and to Intellectual Property owned or licensed by
the Sellers, including, without limitation, all rights of the Sellers as
franchisor under the Franchise Agreements with respect to the Fuddruckers
“System”, and all rights of the Sellers to franchise operations manuals,
franchise training manuals and the Sellers’ Uniform Franchise Offering Circular,
and all rights of the Sellers in and to the names “Fuddruckers” and “Koo Koo
Roo”, all, in each case, to the broadest extent the Sellers are permitted by Law
to transfer such Intellectual Property (the “Purchased Intellectual Property”);
 
(xi)          All computers, software, automation systems, accounting systems,
point-of-sale systems (restaurant and corporate level), websites and related
systems, master disks of source codes, and other proprietary information owned
or licensed, whether for general business usage (e.g., accounting, word
processing, graphics, spreadsheet analysis, etc.), or specific,
unique-to-the-business usage, and all computer operating, security or
programming software, owned or licensed and used in the operation of the
Business, including all developments and work-in-progress with regard to any of
the foregoing, all, in each case, to the maximum extent assignable under the
Bankruptcy Code and other applicable Law;
 
(xii)         all Documents that are used in, held for use in or intended to be
used in, or that arise out of, the Business and operations of the Sellers, but
excluding any Documents related to an Excluded Asset; provided, however, that,
following the Closing, the Purchaser shall provide the Sellers copies, upon a
Seller’s reasonable request and at the Sellers’ sole cost and expense, of any
Documents that are Purchased Assets as described in this subclause;
 
(xiii)        all Permits used by the Sellers that relate to the Purchased
Assets, to the maximum extent assignable under the Bankruptcy Code and other
applicable Law;
 
(xiv)        all rights under insurance policies relating to claims arising
prior to the Closing for losses related to any Purchased Assets, or in lieu of
such rights, an amount equal to the proceeds paid pursuant to any such rights
between the Effective Date and the Closing;
 
 
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(xv)         any rights, claims or causes of action of the Sellers against third
parties relating to the Purchased Assets or Assumed Liabilities (excluding,
however, any Estate Claims, any claims with respect to the matters set forth in
Section 2.2(o), and subject to Section 8.14(b) any claims raised in the
Specified Litigation), arising out of events occurring prior to the Closing
Date, including, for the avoidance of doubt, arising out of events occurring
prior to the Petition Date;
 
(xvi)        any rights under or pursuant to any and all warranties,
representations and guarantees, express, implied or otherwise, made by suppliers
and contractors relating to goods sold, or services provided, to the Sellers,
but not including the Sellers’ causes of action that are identified as Excluded
Assets in Section 2.2; and
 
(xvii)       the Register Cash.
 
2.2         Excluded Assets.  Notwithstanding anything to the contrary contained
herein, nothing herein shall be deemed to sell, transfer, assign or convey the
Excluded Assets to the Purchaser, and the Sellers shall retain all right, title
and interest to, in and under, and all obligations with respect to, the Excluded
Assets.  For all purposes of and under this Agreement, the term “Excluded
Assets” means:
 
(a)           all accounts receivable, notes receivable and other receivables
related solely to the Excluded Assets;
 
(b)           all Excluded Locations and the Inventory, Furniture and Equipment
located at any Excluded Location;
 
(c)           all Excluded Executory Agreements;
 
(d)           all of the Sellers’ prepaid charges and expenses paid in
connection with or relating solely to any Excluded Asset;
 
(e)           all deposits (including security deposits for rent, electricity,
telephone or otherwise) and holdbacks (including credit card holdback payments),
in each case related solely to any Excluded Executory Agreement or any other
Excluded Asset;
 
(f)            all personnel records of any Retained Employees and all Employee
Benefit Plans;
 
(g)           all Permits that are not assignable, and all Permits used solely
in respect of the Excluded Locations and not also used or held for use in
respect of the Acquired Locations;
 
(h)           all documents relating to proposals to acquire the Business by
Persons other than the Purchaser;
 
(i)            all claims, rights, interests and proceeds with respect to (i)
Tax refunds, rebates, abatement or other recovery relating to the Sellers’
assets or the conduct of the Business for, or attributable to, the period prior
to the Closing and (ii) Tax refunds, rebates, abatement or other recovery not
relating to the Purchased Assets;
 

 
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(j)           all rights, claims or causes of action of the Sellers (i) against
third parties to the extent any such claim relates to an Excluded Asset or
Excluded Liability, (ii) under Chapter 5 of the Bankruptcy Code, and (iii)
against any current or former directors or officers of the Sellers, and all
rights under insurance policies providing insurance to the Sellers’ respective
directors and officers, and the proceeds thereof with respect to such claims or
causes of action (collectively, the “Estate Claims”);
 
(k)          all Documents related primarily to any Excluded Asset; provided,
that the Sellers shall provide copies of such Documents to the Purchaser upon
request, at the Purchaser’s cost and expense;
 
(l)           all rights under insurance policies relating to claims for losses
related to any Excluded Asset;
 
(m)         all shares of capital stock or other equity interest of any Seller,
and of ARVI of Pikesville, Inc., a Maryland corporation, A.R.I.V. – Rockville,
Inc., a Maryland corporation, and 8725 Metcalf II, Inc., a Kansas corporation
(collectively, the "Excluded Entities"), or any securities convertible into,
exchangeable or exercisable for shares of capital stock or other equity interest
of any Seller or any Excluded Entity;
 
(n)          all minute books, stock ledgers, corporate seals and stock
certificates of the Sellers, and other books and records relating to the
organization and existence of the Sellers as legal entities that the Sellers are
required by Law to retain or that the Sellers determine are reasonably necessary
to retain, including Tax Returns, financial statements and corporate or other
entity filings, but excluding Documents that are Purchased Assets; provided,
that the Sellers shall provide the Purchaser reasonable access, upon the
Purchaser’s reasonable request and at the Purchaser’s sole cost and expense, to
any books and records described in this subclause;
 
(o)          (i) all credit card accounts receivable, deposits and other
holdbacks being held by credit card companies, in each case as of the Closing
Date, in connection with credit cards accepted by the Sellers, and (ii) that
certain receivable owing from R.J. Management LLC to one or more of the Sellers
with respect to obligations under that certain Restaurant Management Agreement
dated April 30, 2007;
 
(p)          all cash, cash equivalents, bank deposits or similar cash items of
the Sellers other than the Register Cash;
 
(q)          all deposits, retainers or on account cash paid to the Sellers’
professionals and advisers (whether retained in the Bankruptcy Case or not); and
 
(r)           all rights of the Sellers under this Agreement.
 
2.3         Assumption of Liabilities.  On the terms and subject to the
conditions and limitations set forth in this Agreement, at the Closing, the
Purchaser shall assume, effective as of the Closing, and shall pay, perform and
discharge in accordance with their respective terms, only the following
Liabilities (without duplication) existing as of the Closing Date (collectively,
the “Assumed Liabilities”):
 

 
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(a)          all Liabilities of the Sellers arising, and to be performed, after
the Closing Date under the Assumed Executory Contracts, but specifically
excluding all obligations or liabilities of any kind whatsoever related to any
matter, circumstance or default existing at or prior to the Closing;
 
(b)         all Liabilities arising, and to be performed, after the Closing Date
with regard to the Purchased Assets, but specifically excluding all obligations
or liabilities of any kind whatsoever related to any matter, circumstance or
default existing at or prior to the Closing;
 
(c)          all Liabilities arising and to be performed after the Closing Date
with regard to the employment by Purchaser of any of the Transferred Employees,
but specifically excluding all obligations or liabilities of any kind whatsoever
related to any matter, circumstance or default existing at or prior to the
Closing;
 
(d)         all Liabilities set forth in Section 2.5(h); and
 
(e)          all Liabilities of the Sellers with respect to Customer Programs.
 
2.4         Excluded Liabilities.  Except for the Assumed Liabilities, the
Purchaser shall not assume and shall be deemed not to have assumed any
Liabilities of the Sellers or the Business of whatever nature, whether presently
in existence or arising hereafter, known or unknown, disputed or undisputed,
contingent or non-contingent, liquidated or unliquidated or otherwise,
including, without limitation, any of the Liabilities set forth below
(collectively, the “Excluded Liabilities”):
 
(a)          all Liabilities of the Sellers with respect to the Excluded Assets;
 
(b)         except as set forth in Sections 8.8, 8.10 and 11.1, all Liabilities
of the Sellers for Taxes, including (i) any Taxes arising as a result of
Sellers’ operation of the Business or ownership of the Purchased Assets prior to
the Closing Date, (ii) any Taxes that will arise as a result of the consummation
of the Transactions, and (iii) any deferred Taxes of any nature;
 
(c)          all Liabilities under any Excluded Executory Agreement or under any
Assumed Executory Agreement which arises after the Closing Date but which is
based on or relates to a breach of such Assumed Executory Agreement occurring
prior to the Closing Date;
 
(d)          all Cure Costs related to the Assumed Executory Contracts
(including, without limitation, unpaid Lease obligations for the month in which
the Petition Date occurs);
 
(e)          all Liabilities to distribute to any of Sellers’ stockholders or
otherwise apply all or any part of the Purchase Price, including any Tax
withholding obligations of the Sellers in connection therewith;
 
(f)           all Liabilities under any employment, severance, retention,
termination or other arrangement or agreement of the Sellers with any Employees;
 
(g)          all Liabilities under that certain Modified Key Employee Incentive
Plan approved by the Bankruptcy Court on May 17, 2010;
 
 
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(h)          all Liabilities arising on or before the Closing Date with regard
to the employment by the Sellers of any Transferred Employees;
 
(i)           all Liabilities related to any Legal Proceeding existing as of or
occurring prior to the Closing Date or other events, conduct or conditions
existing as of or occurring prior to the Closing Date that constitute a
violation or non-compliance with any Law, any judgment, decree or order of any
Governmental Body, or any Permit; and
 
(j)           all Liabilities of the Sellers arising under or related to this
Agreement.
 
2.5         Assignment of Contracts and Leases.
 
(a)          On the Closing Date, the Debtors shall, pursuant to the Sale Order,
assume and assign to the Purchaser the Assumed Executory Contracts.
 
(b)          From the Effective Date through and including the Closing Date, the
Debtors shall (i) not reject any Assumed Executory Contract unless otherwise
agreed to, in writing, by the Purchaser, and (ii) with respect to any Assumed
Lease whose renewal option notice period expires during such period, renew or
otherwise extend such Assumed Lease to the extent permitted pursuant to such
Assumed Lease.
 
(c)          The Debtors have filed a motion to reject those Leases set forth on
Schedule 2.5(c) (the “Rejected Leases”).
 
(d)          The Debtors have served on all counterparties to Assumed Executory
Contracts a notice specifically stating that the Debtors are or may be seeking
to assume and assign the Assumed Executory Contracts and have notified such
parties of the deadline for objecting to the proposed Cure Costs set forth in
such notice.  In the event of an objection to the proposed Cure Costs by a
counterparty, the Debtors shall attempt to resolve such objection (subject to
approval by the Purchaser) or, at the Debtors’ sole cost and expense, shall
litigate such objection under such procedures as the Bankruptcy Court shall
approve and proscribe.  In the event that a dispute regarding the Cure Costs
with respect to an Assumed Executory Contract has not been resolved as of the
Closing Date, the parties shall nonetheless remain obligated to consummate the
Transactions (subject to satisfaction of the conditions to Closing set forth in
Article X).  Within one (1) Business Day after the date on which the Purchaser
designates in writing a Minnesota Lease to be assumed and assigned or rejected
in accordance with Section 8.13, the Debtors shall, at no additional cost or
expense to the Purchaser, take all requisite actions (including, without
limitation, actions required under section 365 of the Bankruptcy Code) to assume
and assign or reject, as applicable, the subject Minnesota Lease to the
Purchaser (or designee identified by the Purchaser) and the Debtors shall
provide notice of such assumption and assignment or rejection by overnight
courier to the applicable lessor.
 
(e)           On the later of (i) the Closing Date, or (ii) as soon as
practicable following final determination by the Bankruptcy Court of any
disputed Cure Costs in accordance with Section 2.5(d), the Debtors shall pay the
Cure Costs to the counterparties to each such Assumed Executory Contract.
 
 
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(f)           The Debtors are the tenant under those Leases identified on
Schedule 2.5(f) (each, a “Subleased Lease”).  Pursuant to each Subleased Lease,
the Debtors have subleased the applicable premises to a Franchisee (the
“Franchisee Subtenant”).  To the extent requested by the Purchaser and agreed to
by the Franchisee Subtenant, the Debtors agree to use their commercially
reasonable efforts to obtain an order of the Bankruptcy Court approving the
assumption and assignment of any Subleased Lease to the Franchisee Subtenant
thereunder, in which event any such Subleased Lease shall not be an Assumed
Lease hereunder.
 
(g)          From and after the Effective Date and until the Closing Date, the
Purchaser and the Debtors will confer with one another with respect to the
assumption and assignment of certain Leases, together with all associated
Inventory, Furniture and Equipment, to a new Franchisee (together with signing a
new Franchise Agreement with that Franchisee).  To the extent mutually agreed
upon, the Debtors agree to use their commercially reasonable efforts to obtain
an order of the Bankruptcy Court approving the assumption and assignment of any
such Lease, Inventory, Furniture and Equipment to such new Franchisee, in which
event any such Lease shall not be an Assumed Lease hereunder.  Each Lease so
assumed and assigned pursuant to this Section 2.5(g) shall reduce the number of
Leases which the Purchaser may remove from Schedule 2.1(b)(i) in accordance with
Section 2.1(b)(i) by one.
 
(h)          If (i) the Purchaser provides written notice in accordance with
Section 2.1(b)(i) of an Additional Excluded Lease, (ii) the Debtors provide
notice to the applicable landlord of the rejection of such Additional Excluded
Lease within twenty-four (24) hours of its receipt of notice from the Purchaser,
and (iii) the timing of the rejection of such Additional Excluded Lease results
in the Debtors’ incurring rent or other occupancy costs under such Additional
Excluded Lease for the month immediately following the month during which the
Closing occurs, then the Purchaser shall pay such rent or other amounts to the
Debtors.
 
2.6         Further Conveyances and Assumption.  From time to time following the
Closing, the Sellers and the Purchaser shall, and shall cause their respective
Affiliates to, execute, acknowledge and deliver all such further conveyances,
notices, assumptions, releases and other instruments, and shall take such
further actions, as may be reasonably necessary or appropriate to assure each of
the Purchaser and the Sellers their respective rights, liabilities and
obligations under this Agreement.
 
ARTICLE III
 
CONSIDERATION
 
3.1         Purchase Price.  The aggregate cash consideration for the Purchased
Assets (the “Purchase Price”) shall be an amount equal to the sum of:  (a) the
Asset Price, plus (b) the amount of the Register Cash, plus (c) the amount of
all security deposits (as reflected in Schedule 5.12(d)) held by the landlords
under and pursuant to the Assumed Leases as of the Closing, and plus or minus
(d) the aggregate amount payable by the Purchaser or the Sellers in accordance
with Sections 8.10 and 11.1.
 
3.2         Purchase Price Deposit.  On June 14, 2010, the Purchaser delivered
to the Trust Agent cash equal to Four Million Three Hundred and Twenty Thousand
Dollars ($4,320,000.00) (the “Deposit”), which Deposit shall be held in trust by
the Trust Agent in an interest-bearing trust account and applied as follows:
 
 
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(a)          if the Closing shall occur, the Trust Agent shall pay the Deposit
(together with interest thereon) to the Sellers to be applied towards the
payment of the Purchase Price;
 
(b)          if this Agreement is terminated by the Sellers pursuant to Section
4.4(f), the Trust Agent shall pay the Deposit (together with interest thereon)
to the Sellers to be retained by the Sellers; and
 
(c)          if this Agreement is terminated other than by the Sellers pursuant
to Section 4.4(f), the Trust Agent shall pay the Deposit (together with interest
thereon) to the Purchaser.
 
3.3         Contingent Payment.  If the Specified Litigation Resolution occurs
prior to the Purchaser delivering a Pre-Resolution Rejection Notice with respect
to both of the Minnesota Leases, then not later than five days after the
occurrence of the Specified Litigation Resolution and the Sellers providing
written notice thereof to the Purchaser, the Purchaser shall pay to the Sellers
an amount, in cash, equal to Two Hundred Thousand Dollars ($200,000.00).
 
ARTICLE IV
 
CLOSING AND TERMINATION
 
4.1         Closing Date.  Subject to the satisfaction of the conditions set
forth in Sections 10.1, 10.2 and 10.3 hereof (or the waiver thereof by the party
entitled to waive the applicable condition), the closing of the purchase and
sale of the Purchased Assets and the assumption of the Assumed Liabilities
provided for in Article II (the “Closing”) shall take place at the offices of
Goulston & Storrs, P.C. in Boston (or at such other place as the parties may
designate in writing) at 10:00 a.m. (Boston time) on July 26, 2010, unless
another time or date, or both, are agreed to in writing by the parties
hereto.  In the event that the Closing does not occur on July 26, 2010, because
the conditions set forth in Sections 10.1, 10.2 and 10.3 hereof had not been
satisfied (or waived by the party entitled to waive the applicable condition) on
such date, then, provided that this Agreement has not been terminated in
accordance with Section 4.4, the Closing shall take place at the offices of
Goulston & Storrs, P.C. in Boston (or at such other place as the parties may
designate in writing) at 10:00 a.m. (Boston time) on the first Business Day
thereafter that the conditions set forth in Article X are satisfied or waived
(other than conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions), unless another
time or date, or both, are agreed to in writing by the parties hereto.  The date
on which the Closing shall be held is referred to as the “Closing Date.”
 
4.2         Deliveries by the Sellers.  At the Closing, the Sellers shall
deliver to the Purchaser:
 
 
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(a)          as applicable, one or more duly executed bills of sale, and/or
special warranty deeds subject only to the Permitted Exceptions, real estate
transfer declarations, and all other documents, instruments or writings of
conveyance and transfer, including, but not limited to all necessary transfer
tax documents, notice to tenants, and such documents as may be reasonably
required by the title company issuing the applicable owner’s title policy, in a
form to be agreed upon by the parties hereto, as may be necessary to convey the
Purchased Assets to the Purchaser, including without limitation one or more duly
executed assignment and assumption agreements in a form to be agreed upon by the
parties hereto with respect to each of the Assumed Leases and Assumed Contracts;
 
(b)          duly executed assignments of the U.S. trademark registrations and
applications included in the Purchased Intellectual Property, in a form suitable
for recording in the U.S. trademark office, and general assignments of all other
Purchased Intellectual Property;
 
(c)          or otherwise put the Purchaser in possession and control of, all of
the Purchased Assets of a tangible nature;
 
(d)          the officer’s certificate required to be delivered pursuant to
Sections 10.1(a) and 10.1(b);
 
(e)          affidavits executed by each Seller that such Seller is not a
foreign person within the meaning of Section 1445(f)(3) of the Code; and
 
(f)           a copy of the Sale Order.
 
4.3         Deliveries by the Purchaser.  At the Closing, the Purchaser shall
deliver to the Sellers:
 
(a)          cash in the amount of the Purchase Price (including through
providing instructions to the Trust Agent to deliver the Deposit, together with
any interest thereon, to the Sellers);
 
(b)          one or more duly executed bills of sale, and/or deed of transfer,
and all other documents, instruments or writings of conveyance and transfer, in
a form to be agreed upon by the parties hereto, as may be necessary to convey
the Purchased Assets to the Purchaser, and for the Purchaser to assume the
Assumed Liabilities, including without limitation one or more duly executed
assignment and assumption agreements in a form to be agreed upon by the parties
hereto with respect to each of the Assumed Leases and Assumed Contracts; and
 
(c)          the officer’s certificate required to be delivered pursuant to
Sections 10.2(a) and 10.2(b).
 
4.4         Termination of Agreement.  This Agreement may be terminated prior to
the Closing as follows:
 
(a)          by the Purchaser or the Sellers, if the Closing shall not have
occurred by the close of business on July 26, 2010 (the “Termination Date”);
provided, however, that if a request for additional information and documentary
material (a so-called “Second Request”) is made with respect to any premerger
notification pursuant to the HSR Act made in connection with the Transactions,
then the Termination Date may be extended by either the Purchaser or the Sellers
by providing written notice thereof to each other party hereto to such date as
may be determined to accommodate the same, subject to the prior consent of the
Debtor’s DIP Lender; provided, further, however, that if the Closing shall not
have occurred on or before the Termination Date due to a material breach of any
representations, warranties, covenants or agreements contained in this Agreement
by the Purchaser or the Sellers, then the breaching party may not terminate this
Agreement pursuant to this Section 4.4(a);
 
 
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(b)           by mutual written consent of the Sellers and the Purchaser;
 
(c)           by the Purchaser, if any condition to the obligations of the
Purchaser set forth in Section 10.1 or 10.3 shall have become incapable of
fulfillment other than as a result of a breach by the Purchaser of any covenant
or agreement contained in this Agreement, and such condition is not waived by
the Purchaser;
 
(d)           by the Sellers, if any condition to the obligations of the Sellers
set forth in Section 10.2 or 10.3 shall have become incapable of fulfillment
other than as a result of a breach by the Sellers of any covenant or agreement
contained in this Agreement, and such condition is not waived by the Sellers;
 
(e)           by the Purchaser, if there shall be a breach by the Sellers of any
representation or warranty, or any covenant or agreement contained in this
Agreement which would result in a failure of a condition set forth in Section
10.1 or 10.3 and which breach has not been cured by the earlier of (i) seven (7)
days after the giving of written notice by the Purchaser to the Sellers of such
breach and (ii) the Termination Date;
 
(f)           by the Sellers, if there shall be a breach by the Purchaser of any
representation or warranty, or any covenant or agreement contained in this
Agreement which would result in a failure of a condition set forth in Sections
10.2 or 10.3 and which breach has not been cured by the earlier of (i) seven (7)
days after the giving of written notice by the Sellers to the Purchaser of such
breach and (ii) the Termination Date; and
 
(g)           by the Sellers or the Purchaser if there shall be in effect a
final non-appealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
Transactions, it being agreed that the parties hereto shall promptly appeal any
adverse determination which is not non-appealable (and pursue such appeal with
reasonable diligence).
 
4.5         Procedure Upon Termination.  In the event of termination pursuant to
Section 4.4, written notice thereof shall forthwith be given to the other party
or parties, and this Agreement shall terminate, and the Transactions shall be
abandoned, without further action by the Purchaser or the Sellers.
 
4.6         Effect of Termination.  In the event that this Agreement is validly
terminated as provided herein, then each of the parties shall be relieved of its
duties and obligations arising under this Agreement after the date of such
termination; provided, however, that the provisions of Articles VII and XII
hereof, and that certain Confidentiality Agreement dated June 4, 2010 (the
“Confidentiality Agreement”), shall survive any such termination and shall be
enforceable hereunder; provided further, however, that nothing in this Section
4.6 or elsewhere in this Agreement shall be deemed to release any party from
liability for any breach of its obligations under this Agreement, except that if
the Purchaser terminates this Agreement under Section 4.4(e) on the basis that
the closing condition in Section 10.1 has failed to have been satisfied, then
such termination shall be the Purchaser’s sole remedy, and neither the Sellers
nor the Purchaser shall have any further liability or obligation with respect to
the same.
 
 
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ARTICLE V
 
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
 
Each Seller hereby jointly and severally represents and warrants to the
Purchaser that:
 
5.1         Organization and Good Standing.  Each Seller is an entity duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization and in each jurisdiction where it is required
by applicable Law to be qualified to do business except where the failure to be
so qualified would not, individually or in the aggregate, be material to the
ownership and operation of the Business, and subject to the limitations imposed
on such Seller under the Bankruptcy Code, has the requisite power and authority
to own, lease and operate its properties and to carry on its business as now
conducted.  Schedule 5.1 sets forth each Seller and the jurisdiction of its
organization.  Each Seller has all requisite power and authority to conduct the
Business as currently conducted and to own and use the assets and properties
owned and used by it.  Except as set forth in Schedule 5.1, none of the Sellers
directly or indirectly control or have any direct or indirect equity
participation or similar interest in any corporation, partnership, limited
liability company, joint venture or other business association or entity.  None
of the Non-Debtor Sellers has any assets other than liquor licenses and none has
any Liabilities except as set forth on Schedule 5.3(b).
 
5.2         Authorization of Agreement.  Subject to such authorization as is
required by the Bankruptcy Court, each Seller has the requisite power and
authority to execute and deliver this Agreement and each other agreement,
document or instrument contemplated hereby or thereby to which it is a party and
to perform its respective obligations hereunder and thereunder.  The execution
and delivery of this Agreement and each other agreement, document or instrument
contemplated hereby or thereby to which it is a party and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate or limited liability company action on the part of each
Seller.  This Agreement and each other agreement, document or instrument
contemplated hereby or thereby to which it is a party has been duly and validly
executed and delivered by each Seller and (assuming the due authorization,
execution and delivery by the other parties hereto and receipt of such
authorizations as is required by the Bankruptcy Court with respect to any
Seller) this Agreement and each other agreement, document or instrument
contemplated hereby or thereby to which it is a party constitutes legal, valid
and binding obligations of each Seller enforceable against such Seller in
accordance with its respective terms, subject 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).
 
 
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5.3         Conflicts; Consents of Third Parties.
 
(a)           The execution and delivery by each Seller of this Agreement and
each other agreement, document or instrument contemplated hereby or thereby to
which it is a party, the consummation of the transactions contemplated hereby
and thereby, or compliance by such Seller with any of the provisions hereof and
thereof do not conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination or cancellation under any provision of (i) the certificate of
incorporation and by-laws or comparable limited liability company organizational
documents of such Seller; (ii) except to the extent not required if the Sale
Order is entered and except as set forth on Schedule 5.3(a), any Contract, Lease
or Permit to which such Seller is a party or by which any of the properties or
assets of such Seller are bound, other than such conflicts, violations,
defaults, terminations or cancellations that would not reasonably be expected to
be material, individually or in the aggregate, to the ownership and operation of
the Business or to the Acquired Location(s) impacted by the conflict, violation,
default, termination or cancellation; (iii) except to the extent not required if
the Sale Order is entered, any Order of any Governmental Body applicable to such
Seller or any of the properties or assets of such Seller as of the Effective
Date; or (iv) except to the extent not required if the Sale Order is entered,
any applicable Law.
 
(b)           Except for the notification required under the HSR Act, except as
set forth on Schedule 5.3(b) and except to the extent not required if the Sale
Order is entered, no consent, waiver, approval, Order, or authorization of, or
declaration or filing with, or notification to, any Person or Governmental Body
is required on the part of the Sellers in connection with the execution and
delivery of this Agreement or any other agreement, document or instrument
contemplated hereby or thereby to which it is a party, the compliance by the
Sellers with any of the provisions hereof or thereof, the consummation of the
transactions contemplated hereby or thereby, the assignment or conveyance of the
Purchased Assets, or the taking by the Sellers of any other action contemplated
hereby or thereby, except for (i) the entry of the Sale Order and receipt of
such other authorizations as is required by the Bankruptcy Court, and (ii) such
consents, waivers, approvals, Orders, authorizations, declarations, filings and
notifications, the failure of which to obtain or make would not reasonably be
expected to be material, individually or in the aggregate, to the ownership and
operation of the Business or to the Acquired Location(s) impacted by such
failure.
 
5.4         Title to Purchased Assets.  The Sellers own and have good and
marketable title to, and, subject to entry of the Sale Order, have the right to
transfer to the Purchaser, the Purchased Assets, free and clear of all
Encumbrances, other than the Permitted Exceptions, those created by the
Purchaser and those set forth on Schedule 5.4.  None of the Excluded Entities
owns or has any rights to any assets used in the operation of the Business.
 
5.5         Taxes.  No power of attorney currently in force has been granted by
the Sellers with respect to the Business that would be binding on the Purchaser
with respect to taxable periods commencing on or after the Closing Date.  Other
than those set forth on Schedule 5.5, there are no liens for Taxes on any of the
Purchased Assets other than Permitted Exceptions.  None of the Sellers is a
foreign person within the meaning of Section 1445(f)(3) of the Code.
 
 
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5.6         Purchased Intellectual Property.
 
(a)           Schedule 5.6(a) lists each item of Intellectual Property owned by
any Seller and used in connection with the Business as of the Effective Date and
for which any Seller has received or applied for a registration, including,
without limitation, any patent, patent application, copyright registration or
application therefor, and trademark, trade name, service mark, domain name
registration or application therefor (“Registered Intellectual Property”).  To
the Knowledge of the Sellers, all of the Registered Intellectual Property is
valid and enforceable.
 
(b)           The Sellers own all right, title and interest in and to, or have a
valid and enforceable right or license to use pursuant to a written agreement
set forth on Schedule 5.6(b) (collectively, the “IP License Agreements”), all
material Intellectual Property used in or necessary for, and material to, the
operation of the Business as currently conducted.
 
(c)           To the Knowledge of the Sellers, no Seller is currently
infringing, misappropriating or otherwise violating, and the operation of the
Business as currently conducted does not infringe, misappropriate or violate,
any Intellectual Property of any Person, except for any infringement,
misappropriation or violation not material to the Business.  Except as set forth
on Schedule 5.6(c), to the Knowledge of the Sellers, no Person is currently
infringing, misappropriating or violating any of the material Intellectual
Property owned by any Seller.
 
(d)           Schedule 5.6(d) sets forth a complete and accurate list of all
material licenses, sublicenses and other agreements, other than the Franchise
Agreements, relating to the licensing of Intellectual Property by any Seller.
 
5.7         Permits.  Schedule 5.7 sets forth a list of all material Permits
held by the Sellers as of the Effective Date.  Except as set forth on Schedule
5.7 and as may have resulted from the commencement of the Bankruptcy Case, all
Permits are valid and in full force and effect and, to the Knowledge of the
Sellers, none of the Sellers are in default under or in violation of any such
Permit, except for such defaults or violations which would not reasonably be
expected, individually or in the aggregate, to be material to the operation of
the Business, as a whole, as currently conducted or material to the Acquired
Location(s) impacted by the default or violation.
 
5.8         Environmental Matters.  Except as set forth on Schedule 5.8 and
except as would be material to the ownership and operation of the Business, no
Seller has received written, or to the Knowledge of the Sellers, oral, notice of
any pending or, to the Knowledge of the Sellers, threatened claim or
investigation by any Governmental Authority or any other Person concerning
material potential liability of any Seller under Environmental Laws in
connection with the ownership or operation of the Business, the Owned Real
Property or the Leased Real Property.  To the Knowledge of the Sellers, there
has not been a release of any Hazardous Substance at, upon, in, from or under
(i) any of the Owned Real Property or Leased Real Property or (ii) at any
location to or from which a Seller has transported or arranged for the
transportation or disposal of Hazardous Substances, in each case, in quantities
or under circumstances that would give rise to any material liability or require
remediation, investigation or clean up pursuant to any Environmental Law.
 
 
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5.9          Employee Benefits.
 
(a)         Schedule 5.9 sets forth a complete and correct list of all Employee
Benefit Plans of the Sellers as of the Effective Date. Except as set forth on
Schedule 5.9, each Employee Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable Law, except
where any failure to be so operated and administered would not, individually or
in the aggregate, be expected to be material to the operation of the Business as
currently conducted and except as may have resulted from the filing of the
Bankruptcy Case. The Sellers have made available to Buyer true and complete
copies of all material Employee Benefit Plans or a description of the benefits
thereunder. Except as set forth on Schedule 5.9, each Employee Benefit Plan
intended to be “qualified” within the meaning of Section 401(a) of the Code is
so qualified and is the subject of a favorable Internal Revenue Service
determination or opinion letter regarding such qualified status and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the Code.
Except as set forth on Schedule 5.9, there are no pending, or to the Knowledge
of the Sellers, threatened claims by or on behalf of any Employee Benefit Plan,
or by any employee or beneficiary covered under any such Plan with respect to
any such Employee Benefit Plan (other than routine claims for benefits). There
are no material outstanding Liabilities of, or related to, any Employee Benefit
Plan, other than Liabilities for benefits to be paid in the ordinary course to
participants in such Employee Benefit Plan and their beneficiaries in accordance
with the terms of such Employee Benefit Plan or as otherwise resulting from the
Bankruptcy Case.
 
(b)           No Seller or ERISA Affiliate sponsors, maintains or otherwise
contributes to or has any liability with respect to any “employee pension
benefit plan” (as defined in Section 3(2) of ERISA) which is or was subject to
Title IV of ERISA, including any “multi-employer plan” (as defined in Section
4001(a)(3) of ERISA), or subject to Section 412 of the Code.
 
(c)           All contributions and payments (including salary deferral
contributions elected by employees) with respect to Employee Benefit Plans that
are due and owing or required to be made by a Seller or an ERISA Affiliate with
respect to periods ending on or before the Closing Date (including periods from
the first day of the current plan year or policy year to the Closing Date) have
been, or will be, made before the Closing Date in accordance with applicable law
and the appropriate plan document, actuarial report, collective bargaining
agreements or insurance contracts or arrangements or as otherwise required by
ERISA or the Code.  With respect to each Employee Benefit Plan, there has not
occurred, and no person or entity is contractually bound to enter into, any
“prohibited transaction” within the meaning of Section 4975(c) of the Code or
Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of
the Code or Section 408 of ERISA.
 
(d)           No Employee Benefit Plan provides post-employment medical, health
or dental coverage other than the continuation of coverage requirements of Part
6 of Title I of ERISA and Section 4980B of the Code and any regulations issued
thereunder.
 
5.10        Litigation.  Except as set forth on Schedule 5.10, there are no
Legal Proceedings pending or, to the Knowledge of the Sellers, threatened
against any Seller before any Governmental Body, which, if adversely determined,
would reasonably be expected to be, individually or in the aggregate, material
to the operation of the Business as currently conducted.  Except as set forth on
Schedule 5.10, there are no Orders outstanding against any Seller which would
reasonably be expected to be, individually or in the aggregate, material to the
operation of the Business as currently conducted.
 
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5.11        Material Contracts.
 
(a)           Schedule 5.11(a) contains a list, as of the Effective Date, of all
Contracts (the “Material Contracts”) pursuant to which any Seller has any rights
or benefits or undertakes any obligations or liabilities with respect to the
Business, that:
 
(i)           has a duration of one year or more and is not terminable without
cause or penalty upon 90 days or less prior written notice by any party;
 
(ii)          requires or could reasonably be expected to require any party
thereto to pay $100,000 or more in any 12 month period;
 
(iii)         contains any non-competition covenant or exclusivity arrangement
binding against any Seller;
 
(iv)        involves any Contract (A) granting or obtaining any right to use any
material Purchased Intellectual Property (including, without limitation, any
Franchise Agreements) or (B) restricting the Sellers’ rights to the use of any
Purchased Intellectual Property;
 
(v)         regards the employment, services, consulting, termination or
severance from employment relating to or for the material benefit of any
director, officer, employee, independent contractor or consultant of any Seller;
 
(vi)        constitutes joint venture, partnership and similar Contracts
involving a sharing of profits or expenses;
 
(vii)       provides for the supply or distribution of products and that is
material to the operation of the Business as currently conducted;
 
(viii)      is an IP License Agreement;
 
(ix)         any agreement for the disposition of any significant portion of the
assets, properties or rights of any Seller or any agreement for the acquisition
by any Seller of the assets, properties or rights of any other Person (other
than purchases of items normally held out for sale by such Person in the
ordinary course of business); or
 
(x)          any agreement (or group of related agreements) under which any
Seller has assumed or guaranteed (or may assume or guarantee) any Liability of a
third party, other than pursuant to a sublease with a Franchisee.
 
(b)           The Sellers have delivered to or made available to the Purchaser a
complete and accurate copy of each Material Contract.  With respect to each
Material Contract, except as set forth in Schedule 5.11(b):  (i) such Material
Contract is legal, valid, binding and enforceable against the Seller and, to the
Knowledge of the Sellers, each other party thereto, and is in full force and
effect except as such enforceability may be subject 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); and (ii) except for breaches and defaults of the type referred to in
Section 365(b)(2) of the Bankruptcy Code, none of the Sellers or, to the
Knowledge of the Sellers, any of the counterparties to such Material Contract,
are in material default under any of the terms of such Material Contract.
 
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5.12        Property.
 
(a)           Schedule 5.12(a) lists all of the locations and parcels of real
estate which are owned by any Seller (the “Owned Real Property”).  Each Seller
listed on Schedule 5.12(a) as the owner of any Owned Real Property has good and
marketable title to such Owned Real Property.
 
(b)           Schedule 5.12(b) lists all of the leasehold interests of any
Seller under leases of real property (the “Leased Real Property”).  The Sellers
have delivered or made available to the Purchaser a true and complete copy of
each of the aforementioned Leases, as it has been amended, modified, restated or
otherwise supplemented.
 
(c)           The base rents set forth on Schedule 5.12(c) accurately reflect in
all material respects the base monthly rents being paid by the applicable Seller
as tenant, and/or being collected by Seller as landlord, under the Assumed
Leases as of the Effective Date.
 
(d)           Schedule 5.12(d) lists, as of the Effective Date, the amount of
all security deposits held by the landlords under all Assumed Leases.
 
5.13        Financial Statements.  The Sellers have provided to the Purchaser a
true and complete copy of: (i) the unaudited balance sheet, statement of income
from operations and profit and loss statement as of and for the eight months
ended February 21, 2010 (the "Unaudited Financial Statements"); (ii) the
unaudited profit and loss statements at Location levels for the eight months
ended February 21, 2010 (“P&L Statements”); and (iii) the audited consolidated
financial statements as of and for the year ended June 28, 2009 (the “Audited
Financial Statements” and together with the Unaudited Financial Statements and
the P&L Statements, the “Financial Statements”).  The Financial Statements
together with the footnotes thereto fairly present in all material respects the
consolidated financial position, results of operations and cash flows of the
Sellers (as applicable) for the respective fiscal periods or as of the
respective dates set forth therein in accordance with GAAP, except with respect
to the Unaudited Financial Statements and the P&L Statements for the absence of
footnotes and normal year end adjustments.
 
5.14        Brokers.  Except for the fees and expenses of FocalPoint Securities,
LLC (for which the Sellers shall be solely responsible), and subject to approval
of the Bankruptcy Court, the Sellers do not have any obligation to pay any fees,
commissions or other similar compensation to any broker, finder, investment
banker, financial advisor or other similar Person in connection with the
Transactions.
 
5.15        Employees.
 
(a)            Schedule 5.15 is a true and complete list, as of the Effective
Date, of all Employees and independent contractors of any Seller whose total
annual compensation for the current fiscal year is expected to exceed $40,000
(the “Employee List”), setting forth for each such individual (i) his or her
position (including whether an employee or independent contractor), (ii) his or
her current salary or hourly wage, (iii) any raises or reductions to his or her
salary or hourly wage received by him or her since January 1, 2009, (iv) a
statement as to whether such person is compensated in whole or in part on a
commission basis, and if so, a description of such commission arrangement, and
(v) the amount of any bonuses, commissions or other compensation paid to him or
her in respect of calendar year 2009 (whether paid in cash, securities or other
property).  Except as indicated on the Employee List, no Employee or consultant
on the Employee List has given or received notice terminating his or her
employment with the Seller.
 
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(b)           No Seller is a party to or otherwise bound by any collective
bargaining agreement or relationship with a labor union or other labor
organization.  No Seller is subject to any charge, demand, petition or
representation proceeding seeking to compel, require or demand that it bargain
with any labor union or labor organization.
 
5.16        Related Party Transactions.  Except as set forth on Schedule 5.16,
no officer, director, direct or indirect owner, or Affiliate of any Seller
(except for another Seller) owns any property or right, tangible or intangible,
that is used in the Business.
 
5.17        Franchise Matters.
 
(a)           Schedule 5.17(a) sets forth the Franchisee of record for each
Person who has a currently-effective Franchise Agreement.  Except as set forth
on Schedule 5.17(a), each of the currently-effective Franchise Agreements is
substantially similar to the form of Franchise Agreement incorporated into the
current FDD, a copy of which form was made available to Purchaser.  Except as
described in Schedule 5.17(a), no Seller has waived any material right or
benefit of any Seller, or any material obligation of any Franchisee, under any
Franchise Agreement.  Except as set forth on Schedule 5.17(a), there are no
other material Contracts in effect between any Seller and any Franchisee (in its
capacity as such) other than the Franchise Agreements.  No Seller nor any of its
Affiliates has, since January 1, 2006 and until the Effective Date, (i) sold
Franchises anywhere in the world except for the United States, Canada, and the
Middle East, and (ii) offered Franchises anywhere in the world except for the
United States, Canada, Mexico, the Middle East, Greece and the Dominican
Republic.
 
(b)           Either the current FDD or Schedule 5.17(b) contains a summary of
each Franchise-related Legal Proceeding or formal mediation proceeding which is
pending or, to the Knowledge of the Sellers, threatened in writing, except where
such Legal Proceeding, either individually or in the aggregate, is not, and
would not reasonably be expected to be, material to the operation of the
Business as currently conducted.
 
(c)           Except as set forth on Schedule 5.17(c), no Franchisee or other
Person has any enforceable right of first refusal, option or other right or
arrangement to sign any Franchise Agreement or acquire any Franchise other than
Franchisees under currently-effective Development Agreements.  Except as set
forth on Schedule 5.17(c), neither the Company nor any of its Subsidiaries has
granted any protected territory or exclusive territory or is otherwise limited
in its right to grant Franchises other than currently-effective Development
Agreements and Franchise Agreements.
 
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(d)           The Sellers have made available to the Purchaser an accurate and
complete copy of each FDD that any Seller has used to offer or sell Franchises
at any time since October 26, 2009.
 
5.18        Customer Programs.  Schedule 5.18 contains a summary of the Customer
Programs under which any Seller has any Liability, together with the amount of
such Liability as of March 31, 2010.
 
5.19        No Other Representations or Warranties; Schedules.  Except for the
representations and warranties contained in this Article V (as modified by the
Schedules hereto): (a) none of the Sellers nor any other Person makes any other
express or implied representation or warranty with respect to the Sellers, the
Business, the Purchased Assets, the Assumed Liabilities or the Transactions, and
(b) each Seller disclaims (i) any other representations or warranties, whether
made by the Sellers, any Affiliate of the Sellers, or any of the Sellers’ or
their Affiliates’ respective officers, directors, managers, employees, agents or
representatives, and whether expressed or implied, at common law, by statute, or
otherwise, relating to the condition of the Purchased Assets (including any
implied or expressed warranty of merchantability or fitness for a particular
purpose) and (ii) all liability and responsibility for any representation,
warranty, projection, forecast, statement, or information made, communicated, or
furnished (orally or in writing) to the Purchaser or its Affiliates or
representatives (including any opinion, information, projection, or advice that
may have been or may be provided to the Purchaser by any director, manager,
officer, employee, agent, consultant, or representative of the Sellers or any of
its Affiliates).  Without limiting the foregoing, the Sellers expressly disclaim
and make no representations or warranties to the Purchaser regarding the
probable success or profitability of the Business.  The disclosure of any matter
or item in any Schedule hereto shall not be deemed to constitute an
acknowledgment that any such matter is required to be disclosed or is material
or that such matter would result in a Material Adverse Effect.
 
ARTICLE VI
 
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
 
The Purchaser hereby represents and warrants to the Sellers that:
 
6.1          Organization and Good Standing.  The Purchaser is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Delaware and has the requisite power and authority to own, lease and
operate its properties and to carry on its business as now conducted.
 
6.2          Authorization of Agreement.  The Purchaser has the requisite power
and authority to execute and deliver this Agreement and each other agreement,
document or instrument contemplated hereby or thereby to which it is a party and
to perform its obligations hereunder and thereunder.  The execution and delivery
of this Agreement and each other agreement, document or instrument contemplated
hereby or thereby to which the Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of the Purchaser.  This Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which the
Purchaser is a party has been duly and validly executed and delivered by it and
(assuming the due authorization, execution and delivery by the other parties
hereto) this Agreement and each other agreement, document or instrument
contemplated hereby or thereby to which it is a party constitutes legal, valid
and binding obligations of it enforceable against it in accordance with its
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).
 
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6.3          Conflicts; Consents of Third Parties.
 
(a)           The execution and delivery by the Purchaser of this Agreement and
each other agreement, document or instrument contemplated hereby or thereby to
which it is a party, the consummation of the transactions contemplated hereby
and thereby, or compliance by it with any of the provisions hereof or thereof do
not conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination
or cancellation under any provision of (i) its certificate of incorporation or
bylaws, (ii) any agreement, contract, indenture, note, bond, lease, license,
approval, authorization, consent, or permit to which  it is a party or by which
any of its properties or assets are bound, other than such conflicts,
violations, defaults, terminations or cancellations that would not reasonably be
expected to cause, individually or in the aggregate, a material adverse effect
on the Purchaser or its ability to consummate the Transactions or perform its
obligations under this Agreement; (iii) any Order of any Governmental Body
applicable to it or any of its properties or assets as of the Effective Date; or
(iv) any applicable Law.
 
(b)           Except for the notification required under the HSR Act, no
consent, waiver, approval, Order, Permit or authorization of, or declaration or
filing with, or notification to, any Person or Governmental Body is required in
connection with the execution and delivery of this Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which the
Purchaser is a party, the compliance by it with any of the provisions hereof or
thereof, the consummation of the transactions contemplated hereby or thereby, or
its taking of any other action contemplated hereby or thereby, except for such
consents, waivers, approvals, Orders, Permits, authorizations, declarations,
filings and notifications, the failure of which to obtain or make, would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Purchaser or its ability to consummate the Transactions or
perform its obligations under this Agreement.
 
6.4          Brokers.  The Purchaser does not have any obligation to pay any
fees, commissions or other similar compensation to any broker, finder,
investment banker, financial advisor or other similar Person in connection with
the Transactions.
 
6.5          Condition of the Purchased Assets.  Notwithstanding anything
contained in this Agreement to the contrary, the Purchaser acknowledges and
agrees that the Sellers are not making any representations or warranties
whatsoever, express or implied, beyond those expressly given by the Sellers in
Article V (as modified by the Schedules hereto), and the Purchaser acknowledges
and agrees that, except for the representations and warranties contained
therein, the Purchased Assets are being transferred on a “where is” and, as to
condition, “as is” basis.  The Purchaser acknowledges that it has conducted and
will conduct its own due diligence and in making the determination to proceed
with the Transaction, the Purchaser has relied and will be relying on the
results of its own independent investigation.
 
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6.6          Communications.  The Purchaser and its Affiliates and
representatives may contact, or engage in any discussions or otherwise
communicate with, any of the Business’s suppliers, franchisees and others with
whom Sellers have material commercial dealings.  The Purchaser shall notify the
Sellers in advance of any of the above-described discussions or
communications.  Notwithstanding anything to the contrary in the Confidentiality
Agreement, nothing in the Confidentiality Agreement shall prohibit any of the
activities contemplated by and conducted in accordance with this Section 6.6.
 
6.7          The Debtors' Privacy Policy.  The Purchaser shall be bound by the
privacy policy posted at www.fuddruckers.com on June 14, 2010 with respect to
any personally identifiable information (as that term is defined in Section
101(41A) of the Bankruptcy Code) collected and maintained by the Debtors prior
to the Closing.
 
ARTICLE VII
 
BANKRUPTCY COURT MATTERS
 
7.1          Court Approval.  This Agreement is subject to approval by the
Bankruptcy Court.
 
7.2          Submission to Bankruptcy Court.  As soon as reasonably practicable
after the date of the Auction (as defined in the Bidding Procedures), the
Debtors shall file with the Bankruptcy Court a notice designating the Purchaser
as the Successful Bidder (as defined in the Bidding Procedures) and attaching a
copy of the Sale Order.  The Debtors and the Purchaser shall cooperate with each
other in obtaining Bankruptcy Court approval of the Sale Order.
 
7.3          Sale Order.  The Purchaser agrees that it will promptly take such
actions as are reasonably requested by the Debtors to assist in obtaining entry
of the Sale Order and a finding of adequate assurance of future performance by
the Purchaser, including furnishing affidavits or other documents or information
for filing with the Bankruptcy Court for the purposes, among others, of
providing necessary assurances of performance by the Purchaser under this
Agreement and demonstrating that the Purchaser is a “good faith” purchaser under
section 363(m) of the Bankruptcy Code and that the Purchase Price was not
controlled by an agreement in violation of Section 363(n) of the Bankruptcy
Code.  In the event the entry of the Sale Order shall be appealed, the Debtors
and the Purchaser shall use their respective reasonable efforts to defend such
appeal.
 
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ARTICLE VIII
 
COVENANTS
 
8.1          Access to Information.  The Sellers agree that, prior to the
Closing Date, the Purchaser shall be entitled, through its officers, employees,
consultants and representatives (including, without limitation, its legal
advisors and accountants), to make such investigation of the properties,
business and operations of the Sellers and such examination of the books and
records and financial and operating data of the Sellers, the Business, the
Purchased Assets and the Assumed Liabilities, and access to the officers, key
employees, accountants and other representatives of the Sellers, as it
reasonably requests and to make extracts and copies of such books and
records.  Any such investigation and examination shall be conducted upon
reasonable advance notice and under reasonable circumstances and shall be
subject to restrictions under applicable Law.  The Purchaser and its
representatives shall cooperate with the Sellers and their representatives and
shall use their reasonable efforts to minimize any disruption to the
Business.  Notwithstanding anything herein to the contrary, no such
investigation or examination shall be permitted to the extent that it would
require the Sellers to disclose information subject to attorney-client
privilege.
 
8.2          Conduct Pending the Closing.  Except (i) as required by applicable
Law, (ii) as otherwise expressly contemplated by this Agreement, or (iii) with
the prior written consent of the Purchaser, during the period from the date of
this Agreement to and through the Closing Date, the Sellers shall, to the extent
commercially reasonable, taking into account the filing of the Bankruptcy Case:
 
 
(A)
conduct their business only in the ordinary course;

 
 
(B)
after the Petition Date the Sellers shall not sell gift certificates and gift
cards at any Seller-owned or -operated Acquired Location, provided that the
Sellers may continue to operate the "Fudds Club" program consistent with past
practice; and

 
 
(C)
use their commercially reasonable efforts to (y) preserve their present business
operations, organization and goodwill, and (z) preserve their present
relationships with suppliers and franchisees.

 
8.3          Consents; Liquor Licenses.  The Sellers shall use their
commercially reasonable efforts, and the Purchaser shall cooperate with the
Sellers, to obtain at the earliest practicable date those consents and approvals
required to consummate the Transactions that are listed in Schedule 8.3;
provided, however, that neither the Sellers nor the Purchaser shall be obligated
to pay any consideration therefor to any third party from whom consent or
approval is requested or to initiate any Legal Proceedings to obtain any such
consent or approval; provided, further, that if requested by the Purchaser, the
Sellers shall initiate such Legal Proceedings requested by the Purchaser to
obtain such consents or approvals or an Order but only if the Purchaser pays to
the Sellers, the Sellers’ good faith and reasonable estimate of any and all out
of pocket expenses and costs (including reasonable attorneys fees) related
thereto.  Without limiting the foregoing, and for clarity only, the Sellers
shall have no responsibility to procure, and the Purchaser shall, at its own
expense and risk, be responsible for procuring, any and all consents,
authorizations, or approvals from, or make any and all registrations or filings
with, any Governmental Body or other third party to the extent that any of the
same are required with respect to any of the Sellers’ liquor licenses as a
result of or on account of the Transactions (collectively, “Liquor License
Approvals”) and the Purchaser having obtained any or all Liquor License
Approvals is not a condition to the Purchaser’s obligations hereunder and any
failure of the Purchaser to have obtained the same shall not excuse the
Purchaser from full performance of its obligations under this Agreement.  The
Sellers shall reasonably cooperate with the Purchaser in connection with the
Purchaser’s efforts to obtain any Liquor License Approvals, including by
entering into temporary management arrangements acceptable to the Sellers, all
at the Purchaser’s sole expense.  
 
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8.4          Further Assurances.  Subject to the other provisions of this
Agreement, each of the Purchaser and the Sellers shall use their commercially
reasonable efforts to (i) take all actions necessary or appropriate to
consummate the Transactions and (ii) cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations to
consummate the Transactions.
 
8.5          Preservation of Records.  The Sellers or their successors and the
Purchaser agree that each of them shall preserve and keep the records held by
them or their Affiliates relating to the Purchased Assets for two years after
the Closing Date (except as provided below) and shall make such records (as well
as former employees of any Seller that are then employed by the Purchaser)
available to the other as may be reasonably required by such party in connection
with, among other things, the Sellers’ (or any subsequently appointed fiduciary
of any Seller’s estate) administration of the Bankruptcy Case, the investigation
and pursuit of Estate Claims, any insurance claims by, Legal Proceedings or Tax
audits against or governmental investigations of the Sellers or the Purchaser or
any of their Affiliates or in order to enable the Sellers or the Purchaser to
comply with their respective obligations under this Agreement and each other
agreement, document or instrument contemplated hereby.  In the event the Sellers
or the Purchaser wish to destroy such records before or within two years, such
party shall first give ninety (90) days prior written notice to the other and
such other party shall have the right at its option and expense, upon prior
written notice given to such party within such ninety (90) day period, to take
possession of the records within one-hundred and eighty (180) days after the
date of such notice.  Access pursuant to this Section 8.5 shall be afforded by
the party in possession of such records, upon receipt of reasonable advance
notice, during normal business hours and at the expense of the requesting party;
provided, however, that (i) any review of such records shall be conducted in
such a manner as not to interfere unreasonably with the operation of the
business of any party, (ii) no party shall be required to take any action that
would constitute a waiver of the attorney-client privilege and (iii) no party
shall be required to supply the other party with any information which such
party is under a legal obligation not to supply.  The party exercising this
right of access shall be solely responsible for any costs or expenses incurred
by it pursuant to this Section 8.5.
 
8.6          Publicity.  Before the Closing Date, none of the parties hereto
shall issue any press release concerning this Agreement or the Transactions
without obtaining the prior written approval of the other party hereto, which
approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of the Purchaser or the Sellers, disclosure is otherwise required by
applicable Law or by the Bankruptcy Court with respect to filings to be made
with the Bankruptcy Court in connection with this Agreement, provided that the
party intending to make such release shall use its commercially reasonable
efforts consistent with such applicable Law or Bankruptcy Court requirement to
consult with the other party with respect to the text thereof.  Notwithstanding
anything to the contrary in this Agreement or the Confidentiality Agreement,
nothing in this Agreement or the Confidentiality Agreement shall prohibit the
Purchaser from making any public disclosures (which may include the filing of
this Agreement as an exhibit to a filing with the Securities and Exchange
Commission) required, in the sole judgment of the Purchaser, by the securities
laws or the rules and regulations of The New York Stock Exchange.
 
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8.7          Schedules and Exhibits.  The Sellers may, at their option, include
in the Schedules items that are not material in order to avoid any
misunderstanding, and such inclusion, or any references to dollar amounts, shall
not be deemed to be an acknowledgement or representation that such items are
material, to establish any standard of materiality or to define further the
meaning of such terms for purposes of this Agreement.
 
8.8          Payment of Taxes.  The Sellers shall be responsible for paying or
otherwise discharging all of their Taxes for all periods (or portions thereof)
ending on or prior to the Closing Date; provided that the Purchaser shall be
responsible for paying, and shall indemnify the Sellers for, all conveyance,
sales, use, excise, value, value added, registration, stamp, property, transfer,
real property transfer, gains, recording registration and similar Taxes,
together with any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto which become payable in connection with the
Transactions (taking into account the provisions of Section 1146 of the
Bankruptcy Code).
 
8.9          Motions, Orders, etc.  The Debtors shall promptly provide the
Purchaser with the proposed final drafts of all documents, motions, orders, or
pleadings that the Debtors propose to file with the Bankruptcy Court which
relate to the approval of this Agreement, the Purchased Assets, the Assumed
Contracts or Assumed Leases or the consummation of the Transactions, or any
provision therein or herein, so as to provide the Purchaser and its counsel with
a reasonable opportunity to review and comment on such documents, motions,
orders, or pleadings prior to filing with the Bankruptcy Court, and insomuch as
is consistent with the Debtors’ fiduciary duties, consider such comments in good
faith.
 
8.10        Recurring Charges.
 
(a)           With respect to any regularly recurring rents, water, telephone,
electricity or other utility charge which relates to the Purchased Assets and is
imposed on a periodic basis and is payable for a period that includes (but does
not end on) the Closing Date, the portion of such charge which relates to the
portion of such period ending prior to the Closing Date shall be deemed to be
the amount of such charge for such entire period multiplied by a fraction the
numerator of which is the number of days in such period ending prior to the
Closing Date and the denominator of which is the number of days in the entire
such period.  The Sellers shall be responsible for the payment of the amount so
deemed to relate to the portion of such period prior to Closing, and the
Purchaser shall pay the amount so deemed to relate to the portion of such period
as of and following Closing.
 
(b)           To the extent any year end adjustments due and payable under any
Assumed Leases including, without limitation, common area maintenance (excluding
common area maintenance under any Assumed Lease with respect to which the prior
year’s reconciliation has already been reflected in the monthly common area
maintenance charge), Taxes and insurance, are not known as of the Closing Date,
the proration with respect thereto between the Sellers and the Purchaser shall
be calculated based on the amounts paid with respect thereto for the prior
year.  To the extent any other amounts described in Section 8.10(a) are not
known as of the Closing Date, the proration with respect thereto between the
Sellers and the Purchaser shall be calculated based on the amounts paid with
respect thereto for the prior period.  There shall be no further proration
between the Sellers and the Purchaser after the Closing Date based on the actual
amounts payable.
 
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(c)           Any amounts payable by the Sellers in accordance with this
Sections 8.10 and 11.1 shall be paid and fully satisfied in accordance with
Section 3.1.  The Purchaser shall pay to any applicable third party all amounts
due and payable after the Closing with respect to the items to which the
proration provisions of this Section 8.10 and Section 11.1 apply.
 
8.11        Adequate Assurance.  The Purchaser will timely provide such
information to the Debtors, as the Debtors believe is reasonably necessary to
provide “adequate assurance,” as that term is used in Section 365 of the
Bankruptcy Code, with respect to the Assumed Leases and the Assumed Contracts.
 
8.12        Bulk Sales.  To the greatest extent permitted by applicable law, the
Purchaser and the Sellers hereby waive compliance by the Purchaser and the
Sellers with the terms of any bulk sales or similar laws in any applicable
jurisdiction in respect of the Transactions.
 
8.13        Specified Litigation.
 
(a)           The parties hereby acknowledge that the Minnesota Locations are
currently occupied and operated by R.J. Management LLC (or its affiliates) and
are the subject of litigation which the Sellers are currently pursuing in order
to, among other things, obtain a Final Order enabling the Sellers to deliver
possession and control of the Minnesota Locations to the Purchaser free and
clear of any claim or interest of R.J. Management LLC (or its affiliates) (not
including any claims to collect the account receivable described in Section
2.2(o)(ii), the “Specified Litigation”).
 
(b)           After the Closing: (i) the Sellers will conduct the Specified
Litigation in accordance with the reasonable instructions and direction of the
Purchaser, and will cooperate with the Purchaser in connection with any
Specified Litigation Resolution, all subject to the ethical duties and
professional judgments of the legal advisors to the Sellers, (ii) the Purchaser
shall cooperate with and otherwise assist the Sellers in the Specified
Litigation, and incident to such cooperation, the Purchaser will make available
any documents required or useful in connection with, and any employees of the
Purchaser (including former employees of the Sellers) as may be required to
serve as witnesses in, the Specified Litigation, and (iii) the Purchaser shall,
subject to Section 8.13(c), reimburse the Sellers for (A) the reasonable
attorneys’ fees and related litigation expenses incurred by the Sellers in
connection with the Specified Litigation on or after the Closing Date, and (B)
obligations incurred and/or paid by the Sellers under the Minnesota Leases after
the Closing Date.
 
(c)           Notwithstanding anything to the contrary contained in this
Agreement, the Purchaser may provide written notice to the Sellers at any time
prior to the occurrence of the Specified Litigation Resolution designating one
or both of the Minnesota Leases as rejected (the “Pre-Resolution Rejection
Notice”) in which case the Purchaser shall not be responsible for reimbursing
the Sellers under Section 8.13(b)(iii) or otherwise for costs and obligations
incurred by the Sellers after the date of such rejection in connection with the
rejected Minnesota Lease.
 
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(d)           For clarity, the Minnesota Locations are Excluded Locations and
the Minnesota Leases are Excluded Leases, provided that within five days after
the occurrence of the Specified Litigation Resolution the Purchaser shall give
written notice to the Sellers designating one or both of the Minnesota Leases as
assumed and assigned to the Purchaser (or its designee) or as rejected.  In the
event that no such notice is given, the Minnesota Leases shall not thereafter be
eligible to become Assumed Leases and may be rejected by the Sellers.
 
(e)           In the event of the assignment and assumption of the Minnesota
Leases to the Purchaser, each of the applicable Seller and the Purchaser shall
execute and deliver to one another an assignment and assumption agreement with
respect thereto, and the Sellers shall transfer title (through appropriate bills
of sale) to the Purchaser of any Furniture and Equipment owned by the Sellers
and located at the Minnesota Locations at such time without additional
consideration (subject to Section 3.3).
 
(f)           At no time shall the Sellers become or be required to become the
employer of any employees of the Minnesota Locations or to operate the Minnesota
Locations.
 
(g)           The Sellers shall not be required to settle the Specified
Litigation unless such settlement does not require (i) the payment of money by
the Sellers (unless such payment is made by the Purchaser (it being agreed that
the Purchaser shall be under no obligation to make any such payment)) or (ii)
the settlement of the account receivable described in Section 2.2(o)(ii).
 
8.14        Fuddruckers Name.
 
(a)           Immediately, and in no event later than five days following the
Closing, each of the Sellers shall, and shall cause each of their subsidiaries
to, (i) change its legal name, as necessary, to a name that does not contain the
words “Fuddruckers”, “Koo Koo Roo” or any other trade name or trade mark
constituting part of the Purchased Intellectual Property, or any designation
similar thereto or derivative thereof, (ii) cease to use any such names or marks
on signage, advertising materials, unused stationery and other material and (c)
cease to use any other Purchased Intellectual Property. Notwithstanding anything
in this Agreement to the contrary, each of the Sellers agrees that the
Purchaser, in addition to any other remedies available to it for any breach or
threatened breach of this Section 8.14(a), shall be entitled to a preliminary
injunction, temporary restraining order or other equivalent relief restraining
the Sellers from any such breach or threatened breach.
 
(b)           Notwithstanding anything to the contrary in this Agreement, the
Purchased Assets include all rights, claims or causes of action of the Sellers
against R.J. Management LLC and its Affiliates relating to infringing,
misappropriating or otherwise violating any Purchased Intellectual Property.
 
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8.15        HSR Act.
 
(a)           The Sellers and the Purchaser shall following the date the Sale
Order is entered by the Bankruptcy Court:
 
(i)           ensure that the filings required of them or any of their
Affiliates under the HSR Act are made on or before July 2, 2010;
 
(ii)          comply at the earliest practicable date with any request for
additional information or documentary material received by the Sellers, the
Purchaser or any of their Affiliates from the United States Federal Trade
Commission (the "FTC") or the Antitrust Division of the United States Department
of Justice (the "DOJ") pursuant to the HSR Act;
 
(iii)         cooperate with each other in connection with any filing under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the Transactions commenced by the FTC or DOJ; and
 
(iv)        advise the other parties promptly of any material communication
received by such party from the FTC or DOJ regarding any of the Transactions.
 
(b)           Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Agreement shall be deemed to require (i) the
Purchaser to divest or hold separate any assets or agree to limit its future
activities, method or place of doing business, (ii) the Purchaser or any Seller
to commence any litigation against any entity in order to facilitate the
consummation of any of the Transactions or (iii) the Purchaser or any Seller to
defend against any litigation brought by any the FTC, DOJ or other Governmental
Body seeking to prevent the consummation of, or impose limitations on, any of
the Transactions.
 
ARTICLE IX
 
EMPLOYEES AND EMPLOYEE BENEFITS
 
9.1          Transferred and Retained Employees.
 
(a)           The parties recognize that the continued employment of the
personnel of the Sellers is significant to the business interests of both the
Purchaser and the Sellers. As a result, the orderly transfer of employment
relationships is important to both parties and the parties shall use their
commercially reasonable efforts to accomplish the transition with as little
disruption to the Business as possible. As of the Closing, the Purchaser shall
offer employment to substantially all of the Sellers’ operating Employees
associated with all Acquired Locations (other than the Minnesota Locations and
the corporate offices in Austin Texas, and North Andover, Massachusetts), and
the Purchaser may offer employment to any other Employee of the Sellers, in each
case initially at the Equal Aggregate Compensation Level (each of the Employees
that accepts such an offer and actually commences employment as of or after the
Closing Date, the “Transferred Employees”, and all other Employees that have not
been terminated by the Sellers prior to the Closing Date, the “Retained
Employees”). The “Equal Aggregate Compensation Level” means that the applicable
Transferred Employee’s level of base compensation and benefits, taken as a
whole, will be substantially similar to the Employee as his/her current level of
aggregate base compensation and Specified Benefits (defined below), taken as a
whole, but excluding and without considering any Employee Benefit Plans that are
not the Specified Benefits. “Specified Benefits” means, to the extent the
Transferred Employee was a participant therein, (x) the 13 Employee Benefit
Plans listed on Schedule 5.9 under the heading “Medical, surgical,
hospitalization, life insurance and other “welfare” plans, funds or programs
(within the meaning of Section 3(1) of ERISA)” and the 4 Employee Benefit Plans
listed on Schedule 5.9 under the heading “Other employee benefit plans, funds,
programs agreements or arrangements,” and (y) the Magic Brands, LLC 401(k) Plan.
Nothing in this Agreement shall require the Purchaser to assume any Employee
Benefit Plan or prevent the Purchaser from enacting other plans or benefits.
 
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In this Agreement, the “Salaried Non-Store Employees” means those Transferred
Employees who are primarily compensated on a salary, rather than an hourly or
wage, basis and who do not spend at least eighty percent (80%) of their working
time working at one restaurant.  The Purchaser shall either (a) employ each
Salaried Non-Store Employee at the Equal Aggregate Compensation Level for a
period of at least six (6) months after the Closing (the “Interim Period”),
unless such Salaried Non-Store Employee quits employment or is terminated for
cause; or (b) if the Purchaser terminates a Salaried Non-Store Employee’s
employment during the Interim Period without cause, the Purchaser shall pay to
that Salaried Non-Store Employee a severance payment in an amount equal to the
unpaid salary that would have been payable to that Salaried Non-Store Employee
during the remainder of the Interim Period.
 
The Purchaser intends to develop and implement one or more appropriate incentive
compensation plans to align compensation with the Purchaser’s business
objectives.
 
Notwithstanding the foregoing provisions, the Purchaser shall have no obligation
to permit any Transferred Employee or Retained Employee to rollover or otherwise
transfer such Employee’s account under any Employee Benefit Plan maintained by
the Seller to any “employee benefit plan” (as defined in Section 3(3) of ERISA)
that the Purchaser offers to the Transferred Employees or the Retained
Employees.  To the extent that any of the Employees has or would have “COBRA”
rights pursuant to Section 4980B of the Code or Part 6 of Title I of ERISA and
any regulations issued thereunder as an “M&A qualified beneficiary” (as defined
in such regulations), the Purchaser shall be solely responsible for providing
such required COBRA coverage to such Employees (and to the spouse or any
qualifying child of any such Employee) in accordance with Treasury Regulation
Section 1.4980B-9.
 
Notwithstanding anything herein to the contrary, the Purchaser shall have no
obligation to provide compensation or benefits with respect to Retained
Employees.  Except as otherwise required by law, all employees will be
employees-at-will.
 
(b)           For purposes of determining eligibility, vesting and the
calculation of the amount of vacation, severance or other benefits under any
“employee benefit plan” (as defined in Section 3(3) of ERISA) that the Purchaser
offers to Transferred Employees, the Purchaser will credit each Transferred
Employee with his or her months and years of service with the Sellers to the
same extent as such Transferred Employee was entitled immediately prior to the
Closing to credit for such service under any similar Employee Benefit Plan.
 
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(c)           The Sellers and the Purchaser shall cooperate to comply with and
take all actions necessary to minimize the obligations arising under the Worker
Adjustment and Retraining Notification Act of 1988 or any similar applicable
state or local Law requiring notice to employees in the event of a closing or
layoff (the “WARN Act”) in connection with any (i) plant closing as defined in
the WARN Act affecting any site of employment or one or more facilities or
operating units within any site of employment of the Sellers; (ii) mass layoff
as defined in the WARN Act affecting any site of employment of the Sellers; or
(iii) similar action under the WARN Act requiring notice to employees in the
event of an employment loss or layoff.  The Sellers shall send such notices
under the WARN Act as the Purchaser may reasonably request or as may be
reasonably required.
 
9.2          Employment Tax Reporting.  With respect to Transferred Employees,
the Purchaser and the Sellers shall use the standard procedure set forth in
Revenue Procedure 2004-53, 2004-34 I.R.B. 320, for purposes of employment tax
reporting.
 
ARTICLE X
 
CONDITIONS TO CLOSING
 
10.1        Conditions Precedent to Obligations of the Purchaser.  The
obligation of the Purchaser to consummate the Transactions is subject to the
fulfillment, on or prior to the Closing Date, of each of the following
conditions (any or all of which may be waived by the Purchaser in whole or in
part to the extent permitted by applicable Law):
 
(a)           the representations and warranties of the Sellers contained in
this Agreement (i) that are not qualified by materiality or a Material Adverse
Effect shall be true and correct in all respects on and as of the Closing Date,
except to the extent expressly made as of an earlier date, in which case as of
such earlier date, and except to the extent that the failure of such
representations and warranties to be true and correct would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
and (ii) that are qualified by materiality or Material Adverse Effect shall be
true and correct in all respects on and as of the Closing Date, except to the
extent expressly made as of an earlier date, in which case as of such earlier
date; and the Purchaser shall have received a certificate signed by authorized
officers of the Sellers, dated the Closing Date, to the foregoing effect;
 
(b)           the Sellers shall have performed and complied in all material
respects with all obligations and agreements required in this Agreement to be
performed or complied with by them prior to the Closing Date, and the Purchaser
shall have received a certificate signed by authorized officers of the Sellers,
dated the Closing Date, to the forgoing effect; and
 
(c)           the Sellers shall have delivered, or caused to be delivered, to
the Purchaser all of the items set forth in Section 4.2.
 
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10.2        Conditions Precedent to Obligations of the Sellers.  The obligations
of the Sellers to consummate the Transactions are subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions (any or all
of which may be waived by the Sellers in whole or in part to the extent
permitted by applicable Law):
 
(a)          The representations and warranties of the Purchaser contained in
this Agreement (i) that are not qualified by materiality shall be true and
correct in all respects on and as of the Closing Date, except to the extent
expressly made as of an earlier date, in which case as of such earlier date, and
except to the extent that the failure of such representations and warranties to
be true and correct would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the Purchaser or its ability to
consummate the Transactions and perform its obligations under this Agreement,
and (ii) that are qualified by materiality shall be true and correct in all
respects on and as of the Closing Date, except to the extent expressly made as
of an earlier date, in which case as of such earlier date, and the Sellers shall
have received a certificate signed by an authorized officer of the Purchaser,
dated the Closing Date, to the foregoing effect;
 
(b)           the Purchaser shall have performed and complied in all material
respects with all obligations and agreements required by this Agreement to be
performed or complied with by the Purchaser on or prior to the Closing Date, and
the Sellers shall have received a certificate signed by an authorized officer of
the Purchaser, dated the Closing Date, to the foregoing effect; and
 
(c)           the Purchaser shall have delivered to the Sellers all of the items
set forth in Section 4.3.
 
10.3        Conditions Precedent to Obligations of the Purchaser and the
Sellers.  The respective obligations of the Purchaser and the Sellers to
consummate the Transactions are subject to the fulfillment, on or prior to the
Closing Date, of each of the following conditions (any or all of which may be
waived by the Purchaser and the Sellers in whole or in part to the extent
permitted by applicable Law):
 
(a)           there shall not be in effect any Order of a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the Transactions;
 
(b)           the Bidding Procedures Order shall not have been stayed, vacated,
modified or supplemented in any material respect without the Purchaser’s prior
written consent;
 
(c)           the Bankruptcy Court shall have entered the Sale Order in form and
substance reasonably acceptable to the Debtors and the Purchaser;
 
(d)           the Sale Order shall have become a Final Order, unless the
Purchaser, in its sole discretion, waives that requirement; and
 
(e)           if applicable, the waiting period applicable to the consummation
of the Transactions under the HSR Act shall have expired or been earlier
terminated.
 
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10.4        Frustration of Closing Conditions.  No party may rely on the failure
of any condition set forth in Sections 10.1, 10.2 or 10.3, as the case may be,
if such failure was caused by such party’s failure to comply with any provision
of this Agreement.
 
ARTICLE XI
 
TAXES
 
11.1        Allocation of Taxes.  Except with respect to matters provided for in
Section 8.10, all Taxes imposed on or with respect to the Purchased Assets on a
periodic basis (including but not limited to real estate Taxes and assessments)
(“Periodic Taxes”) relating to periods beginning on or before and ending after
the Closing Date shall be allocated on a per diem basis to the Sellers and the
Purchaser, respectively, in accordance with Section 164(d) of the Code.  All
Periodic Taxes relating to periods ending on or before the Closing Date shall be
allocated solely to the Sellers.  All Periodic Taxes relating to the periods
beginning after the Closing Date shall be allocated solely to the Purchaser.  If
the actual amounts to be prorated are not known as of the Closing Date, the
prorations shall be made on the basis of Periodic Taxes assessed for the prior
year.  Notwithstanding anything to the contrary set forth in this Section 11.1
but subject to the provisions of Section 8.8, Liabilities for any Taxes
determined by reference to income, capital gains, gross income, gross receipts,
sales, net profits, windfall profits or similar items or resulting from a
transfer of assets incurred during a period beginning before and ending after
the Closing Date shall be allocated solely to the Sellers if such item accrued
during the period ending on and including the Closing Date.
 
11.2        Purchase Price Allocation.  The Sellers and the Purchaser shall
allocate the Purchase Price among the Sellers and among the Purchased Assets of
each Seller in accordance with a statement (the “Allocation Statement”) provided
by the Purchaser to the Sellers as soon as practicable after the Closing.  The
Purchase Price allocated to each Seller shall be comprised first of the Assumed
Liabilities of each Seller and then such portion of each item comprising the
Purchase Price as determined by the Purchaser.  The Allocation Statement shall
be prepared in accordance with Section 1060 of the Code and in no event shall
more than $15,000,000 of the Purchase Price be allocated to the assets of
Magic.  Subject to the immediately preceding sentence, the Purchaser and the
Sellers shall file all Tax Returns (including Form 8594) consistent with, and
shall take no tax position inconsistent with the Allocation Statement.
 
11.3        Tax Reporting.  The Purchaser and the Sellers shall each be
responsible for the preparation and filing of their own Tax Returns.
 
11.4        Cooperation and Audits.  Without expanding the obligations of the
parties pursuant to Section 8.5, the Purchaser and the Sellers shall cooperate
fully with each other regarding tax matters, and shall make available to the
other as reasonably requested all information, records and documents relating to
Taxes governed by this Agreement until the expiration of the applicable statute
of limitations or extension thereof or the conclusion of all audits, appeals or
litigation with respect to such Taxes.
 
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ARTICLE XII
 
MISCELLANEOUS
 
12.1        No Survival of Representations and Warranties.  The parties hereto
agree that the representations and warranties contained in this Agreement shall
not survive the Closing hereunder and no Person shall have any liability for any
breach thereof.  The parties hereto agree that the covenants contained in this
Agreement to be performed at or after the Closing shall survive the Closing
hereunder, and each party hereto shall be liable to the other after the Closing
for any breach thereof.
 
12.2        Expenses.  Except as otherwise provided in this Agreement, each of
the Sellers, on the one hand, and the Purchaser, on the other hand, shall bear
its own expenses incurred in connection with the negotiation and execution of
this Agreement and each other agreement, document and instrument contemplated by
this Agreement and the consummation of the Transactions.  The Purchaser shall
pay any fee payable to the FTC in connection with the pre-merger notification
required by the HSR Act.
 
12.3        Injunctive Relief.  Damages at law may be an inadequate remedy for
the breach of any of the covenants, promises or agreements contained in this
Agreement, and, accordingly, any party hereto shall be entitled to injunctive
relief with respect to any such breach, including without limitation specific
performance of such covenants, promises or agreements or an order enjoining a
party from any threatened, or from the continuation of any actual, breach of the
covenants, promises or agreements contained in this Agreement.  The rights set
forth in this Section 12.3 shall be in addition to any other rights which a
party hereto may have at law or in equity pursuant to this Agreement.
 
12.4        Submission to Jurisdiction; Consent to Service of Process.
 
(a)           Without limiting any party’s right to appeal any order of the
Bankruptcy Court, (i) the Bankruptcy Court shall retain exclusive jurisdiction
to enforce the terms of this Agreement and to decide any claims or disputes
which may arise or result from, or be connected with, this Agreement, any breach
or default hereunder, or the Transactions, and (ii) any and all proceedings
related to the foregoing shall be filed and maintained only in the Bankruptcy
Court, and the parties hereby consent to and submit to the jurisdiction and
venue of the Bankruptcy Court and shall receive notices at such locations as
indicated in Section 12.8 hereof; provided, however, that if the Bankruptcy Case
has closed, the parties agree to unconditionally and irrevocably submit to the
exclusive jurisdiction of the United States District Court for the District of
Delaware and any appellate court thereof, for the resolution of any such claim
or dispute.  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.
 
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(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 12.8.
 
12.5        Waiver of Right to Trial by Jury.  Each party to this Agreement
waives any right to trial by jury in any action, matter or proceeding regarding
this Agreement or any provision hereof.
 
12.6        Entire Agreement; Amendments and Waivers.  This Agreement (including
the Schedules and Exhibits hereto) collectively represent the entire
understanding and agreement between 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 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.  All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
Law.
 
12.7        Governing Law.  This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware applicable to contracts made
and performed in such State.
 
12.8        Notices.  All notices and other communications under this Agreement
shall be in writing and shall be deemed given (i) when delivered personally by
hand, (ii) when sent by facsimile (with written confirmation of transmission) or
(iii) 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 pursuant to this provision):
 
If to the Sellers, to:

c/o Magic Brands, LLC
5700 South MoPac Expressway
Building C, Suite 300
Austin, TX 78749
Attn: Peter Large
Fax: (800) 478-9236
 
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with copies to:

Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
Attn:  Kitt Sawitsky, Esq. and Janice S. Gross, Esq.
Fax:  (617) 574-4112

If to the Purchaser, to:

Luby's, Inc.
13111 Northwest Freeway, Suite 600
Houston, Texas  77040
Attn:  Peter Tropoli, General Counsel
Fax:  (713) 329-6819

With copies to:

Bracewell & Giuliani LLP
711 Louisiana Street, Suite 2300
Houston, Texas  77002
Attn:  William S. Anderson
Fax:  (713) 437-5370

and

Fuqua & Associates, P.C.
2777 Allen Parkway, Suite 480
Houston, TX  77019-2162
Attn:  Richard L. Fuqua
Fax:  (713) 960-1064

and

Morris, Nichols, Arsht & Tunnell LLP.
1201 N. Market Street, 18th Floor.
Wilmington, DE 19801
Attn: Gregory W. Werkheiser
Fax: (302) 425-4663

12.9        Severability.  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 or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
Transactions 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 are consummated as originally contemplated to the greatest extent
possible.
 
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12.10      Assignmen.  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 or entity not a party to this
Agreement.  No assignment of this Agreement or of any rights or obligations
hereunder may be made by any Seller or the Purchaser (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 that
the Purchaser may assign some or all of its rights and obligations hereunder to
one or more Affiliates formed by it prior to the Closing without the consent of
any Seller.  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 Sellers or the Purchaser shall also apply to
any such assignee unless the context otherwise requires.
 
12.11      Counterparts.  This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement
 
[Remainder of Page Intentionally Left Blank]

 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
written above.
 
THE PURCHASER:
     
LUBY'S, INC.
       
By:
     
Name:
   
Title:
 

 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
written above
 
THE SELLERS:
 
FUDDRUCKERS, INC.
 
R. WES, INC.
         
By:
/s/ Peter Large
 
By:
/s/ Michael Mason
 
Name:  Peter Large
   
Name:  Michael Mason
 
Title:  President
   
Title:  President
         
MAGIC BRANDS, LLC
 
FUDDRUCKERS OF HOWARD COUNTY,
LLC
     
By:  KCI, LLC, its sole Manager
 
By:  Fuddruckers, Inc., its Managing Member
     
By:
/s/ Peter Large
 
By:
/s/ Peter Large
 
Name:  Peter Large
   
Name:  Peter Large
 
Title:  Manager
   
Title:  President
         
ATLANTIC RESTAURANT VENTURES,
INC.
 
FUDDRUCKERS OF WHITE MARSH, LLC
     
By:
/s/ Peter Large
 
By:  Fuddruckers, Inc., its Managing Member
 
Name:  Peter Large
     
Title:  Director
 
By:
/s/ Peter Large
       
Name:  Peter Large
       
Title:  President

 
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