Exhibit 10.1


 






 


ASSET PURCHASE AGREEMENT


 


AMONG


 


RED ROBIN INTERNATIONAL, INC.


(as Buyer),


 


AND


 


DANE COUNTY ROBINS, INC.


MINNESOTA ROBINS, INC.


AND


HENNEPIN COUNTY ROBINS, INC.


(as Sellers)


 


April 15, 2008


 






 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  PURCHASE AND SALE OF ASSETS; ASSUMPTION OF
  LIABILITIES

  	
  1

  
	
  1.1

  	
  Purchased Assets

  	
  1

  
	
  1.2

  	
  Excluded Assets

  	
  3

  
	
  1.3

  	
  Assumed Liabilities

  	
  3

  
	
  1.4

  	
  Excluded Liabilities

  	
  4

  
	
  ARTICLE II

  	
  CONSIDERATION, CLOSING AND POST-CLOSING
  ADJUSTMENTS

  	
  6

  
	
  2.1

  	
  Consideration

  	
  6

  
	
  2.2

  	
  The Closing

  	
  6

  
	
  2.3

  	
  Deliveries at the Closings

  	
  6

  
	
  2.4

  	
  Closing Date Purchase Price Adjustment

  	
  8

  
	
  2.5

  	
  Post-Closing Purchase Price Adjustment

  	
  8

  
	
  2.6

  	
  Allocation of Purchase Price

  	
  9

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

  	
  9

  
	
  3.1

  	
  Organization and Capitalization of the Sellers

  	
  9

  
	
  3.2

  	
  Authorization of Transaction

  	
  10

  
	
  3.3

  	
  Non-contravention

  	
  10

  
	
  3.4

  	
  Subsidiaries

  	
  10

  
	
  3.5

  	
  Financial Statements

  	
  10

  
	
  3.6

  	
  Events Subsequent to December 31, 2007

  	
  11

  
	
  3.7

  	
  Absence of Undisclosed Liabilities

  	
  12

  
	
  3.8

  	
  Legal Compliance

  	
  12

  
	
  3.9

  	
  Title to Properties

  	
  13

  
	
  3.10

  	
  Inventory

  	
  15

  
	
  3.11

  	
  Franchise Agreements

  	
  15

  
	
  3.12

  	
  Tax Matters

  	
  15

  
	
  3.13

  	
  Intellectual Property

  	
  16

  
	
  3.14

  	
  Contracts

  	
  17

  
	
  3.15

  	
  Insurance

  	
  18

  
	
  3.16

  	
  Litigation

  	
  18

  
	
  3.17

  	
  Employees

  	
  18

  
	
  3.18

  	
  Employee Benefits

  	
  19

  
	
  3.19

  	
  Environment and Safety

  	
  21

  
	
  3.20

  	
  Suppliers

  	
  22

  
	
  3.21

  	
  Regulatory Compliance

  	
  22

  
	
  3.22

  	
  Insider Interests

  	
  23

  
	
  3.23

  	
  Improper Payments

  	
  23

  
	
  3.24

  	
  Brokers

  	
  23

  
	
  3.25

  	
  Restaurant Operations

  	
  23

  
	
  3.26

  	
  Gift Cards

  	
  23

  
	
  3.27

  	
  Disclosure

  	
  23

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES OF THE BUYER

  	
  24

  
	
  4.1

  	
  Organization

  	
  24

  
	
  4.2

  	
  Authorization of Transaction

  	
  24

  
	
  4.3

  	
  No Restrictions Against Purchase of Assets

  	
  24

  
	
  4.4

  	
  Disclosure

  	
  24

  
	
  ARTICLE V

  	
  PRE-CLOSING COVENANTS

  	
  24

  
	
  5.1

  	
  Employees

  	
  24

  



 


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  5.2

  	
  Cooperation and Best Efforts to Complete Transaction

  	
  25

  
	
  5.3

  	
  Conduct of Restaurant By The Sellers Prior to the Closing Date

  	
  25

  
	
  5.4

  	
  Press Releases

  	
  27

  
	
  5.5

  	
  Access to Information and Employees

  	
  27

  
	
  5.6

  	
  Confidentiality

  	
  27

  
	
  5.7

  	
  Consultation and Reporting

  	
  27

  
	
  5.8

  	
  Update Schedules

  	
  28

  
	
  5.9

  	
  Franchise Agreements

  	
  28

  
	
  5.10

  	
  Transition Activities

  	
  28

  
	
  ARTICLE VI

  	
  CONDITIONS TO OBLIGATION OF THE BUYER

  	
  29

  
	
  6.1

  	
  Representations and Warranties

  	
  29

  
	
  6.2

  	
  Covenants and Obligations of the Sellers

  	
  29

  
	
  6.3

  	
  Consents

  	
  29

  
	
  6.4

  	
  Absence of Material Adverse Change

  	
  29

  
	
  6.5

  	
  Absence of Litigation

  	
  29

  
	
  6.6

  	
  Termination of Plans

  	
  30

  
	
  6.7

  	
  Franchise Agreements

  	
  30

  
	
  6.8

  	
  Funded Indebtedness

  	
  30

  
	
  6.9

  	
  New Real Property Leases

  	
  30

  
	
  6.10

  	
  Permits and Liquor Licenses

  	
  30

  
	
  6.11

  	
  Documents

  	
  30

  
	
  6.12

  	
  Non-Solicitation Agreements

  	
  30

  
	
  6.13

  	
  Opinion of Counsel

  	
  30

  
	
  6.14

  	
  Title Policies

  	
  30

  
	
  ARTICLE VII

  	
  CONDITIONS TO OBLIGATIONS OF THE SELLERS

  	
  31

  
	
  7.1

  	
  Delivery of Consideration

  	
  31

  
	
  7.2

  	
  Representations and Warranties

  	
  31

  
	
  7.3

  	
  Covenants and Obligations of the Buyer

  	
  31

  
	
  7.4

  	
  Absence of Litigation

  	
  31

  
	
  7.5

  	
  Governmental Filings

  	
  31

  
	
  7.6

  	
  Documents

  	
  31

  
	
  ARTICLE VIII

  	
  TERMINATION

  	
  31

  
	
  8.1

  	
  Termination Prior to Closing

  	
  31

  
	
  8.2

  	
  Effect of Termination

  	
  32

  
	
  ARTICLE IX

  	
  ADDITIONAL AGREEMENTS

  	
  32

  
	
  9.1

  	
  Survival

  	
  32

  
	
  9.2

  	
  Indemnification

  	
  32

  
	
  9.3

  	
  Indemnification Procedures

  	
  33

  
	
  9.4

  	
  Transaction Expenses

  	
  35

  
	
  9.5

  	
  Transaction Taxes

  	
  35

  
	
  9.6

  	
  Further Assurances; Transition Assistance

  	
  35

  
	
  9.7

  	
  Allocation Ad Valorem Taxes

  	
  35

  
	
  9.8

  	
  Termination of Franchise Agreement and Area Development Agreement

  	
  36

  
	
  ARTICLE X

  	
  DEFINITIONS

  	
  36

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  	
  43

  
	
  11.1

  	
  No Third Party Beneficiaries

  	
  43

  
	
  11.2

  	
  Entire Agreement

  	
  43

  
	
  11.3

  	
  Successors and Assigns

  	
  43

  
	
  11.4

  	
  Counterparts

  	
  43

  
	
  11.5

  	
  Headings

  	
  43

  
	
  11.6

  	
  Notices

  	
  43

  



 


ii

















 


	
  11.7

  	
  Governing Law

  	
  44

  
	
  11.8

  	
  Amendments and Waivers

  	
  44

  
	
  11.9

  	
  Incorporation of Exhibits and Schedules

  	
  45

  
	
  11.10

  	
  Independence of Covenants and Representations and Warranties

  	
  45

  
	
  11.11

  	
  Remedies

  	
  45

  
	
  11.12

  	
  Severability

  	
  45

  
	
  11.13

  	
  Construction

  	
  45

  



 


iii

















 


THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of April 15,
2008, among RED ROBIN INTERNATIONAL, INC., a Nevada corporation (the “Buyer”) and Dane County Robins, Inc., a Wisconsin corporation (“Dane County Robins”), Minnesota Robins, Inc., a Wisconsin corporation (“Minnesota Robins”) and Hennepin County Robins, Inc.
a Wisconsin corporation (“Hennepin County Robins”).  Dane County Robins, Minnesota Robins and Hennepin County Robins are sometimes referred to herein as a “Seller” and collectively as the “Sellers”. 
The Sellers and the Buyer are sometimes referred to herein as a “Party” and collectively as the “Parties”.


 


RECITALS


 


1.            Dane County Robins
and Minnesota Robins and the Buyer are parties to those certain Area
Development Agreements, dated October 10, 2005 (as amended, collectively,
the “Area Development Agreement”)
pursuant to which Dane County Robins and Minnesota Robins were granted the
right and undertook the obligation to develop, own and operate “Red Robin
Gourmet Burgers” restaurants in the geographic area specified in the Area
Development Agreement.


 


2.            Each Seller owns
personal property and interests in real property used in the operation of the “Red
Robin Gourmet Burgers” restaurants listed under such Seller’s name on Exhibit A
(the “Restaurants”) pursuant to
the Franchise Agreements listed under such Seller’s name on Exhibit B
(the “Franchise Agreements”).


 


3.            The Buyer desires to
purchase from the Sellers substantially all of the assets owned by the Sellers
that are used by the Sellers in the operation of the Restaurants, and to assume
certain liabilities of the Sellers specified herein, and the Sellers desire to
sell such assets in exchange for cash and the assumption of such specified
liabilities by the Buyer.


 


4.            In connection with
the consummation of the transactions contemplated herein, and pursuant to the
terms of that certain Stock Purchase Agreement of even date herewith (the “Stock Purchase Agreement”) between the
Buyer and North Central Wisconsin Robins, Inc., a Wisconsin corporation (“NCW Robins”), an Affiliate of the Sellers,
Buyer desires to purchase all of the common stock of NCW Robins and continue
the development and construction of the Eau Claire Restaurant.


 


5.            Capitalized terms
not otherwise defined shall have the meanings set forth in Article X.


 


AGREEMENT


 


NOW,
THEREFORE, in consideration of these premises, the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows:


 


ARTICLE I

PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES


 


1.1           Purchased Assets.  On and subject to the terms and
conditions of this Agreement, at the Closing, the Buyer shall purchase from the
Sellers, and each Seller shall sell, transfer, assign, convey and deliver to
the Buyer, all of each Seller’s right, title and interest in and to all the
tangible and intangible assets, business, goodwill and rights of such Seller
used in the operation, maintenance or ownership of the Restaurants, other than
the Excluded Assets, as the same shall exist immediately prior to the Closing
(all such assets, business, goodwill and rights being purchased from the
Sellers hereunder are collectively referred to as the “Purchased Assets”), free and clear of all
Liens (other than Permitted Liens).  By
way of 


 

















 


illustration and not limitation and except as otherwise included within
the definition of Excluded Assets, the Purchased Assets shall include:


 


(a)           The
Sellers’ interests in and to the Assumed Real Property Leases, including all of
the Sellers’ interests in tenant improvements, fixtures and fittings and
easements, rights of way and other appurtenances related to such Assumed Real
Property Leases;


 


(b)           all the Sellers’ tangible personal property used
in the normal and customary operations of the Restaurants (whether or not
located or installed in a Restaurant), including, but not limited to, all
appliances, machinery, kitchen equipment, office equipment, furniture,
fixtures, computer equipment, artwork, pots and pans, cooking utensils,
silverware, flatware, glassware and dishes;


 


(c)           all the Sellers’ supplies and inventories of
foodstuffs, beverages (including alcoholic beverages), raw materials and
ingredients, paper products, cleaning supplies and other supplies (the “Inventory”);


 


(d)           the register cash and backup change
maintained at the Restaurants, to the
extent reflected on the Closing Date Balance Sheet and in the Actual Adjustment
Amount (“Till Cash”);


 


(e)           all the Sellers’ interest and rights in and to the
contracts, purchase orders and other agreements or arrangements of the Sellers
identified on Schedule 1.1(e) (the “Assumed Contracts”);


 


(f)            deposits made by the Sellers to vendors and lessors and
prepaid expenses paid by the Sellers prior to Closing in the ordinary course of
business and consistent with the Sellers’ past practice and that are in
existence, including, without limitation, prepaid utilities, prepaid real
estate or personal property taxes associated with the Purchased Assets, amounts
deposited or prepaid with respect to Assumed Contracts and the Assumed Real
Property Leases, and prepaid rent and prepaid taxes, but not including those
items described in Section 1.2(h), to the extent reflected on the Closing
Date Balance Sheet and in the Actual Adjustment Amount (“Prepaid Expenses”);


 


(g)           the Sellers’ Permits, registrations, certificates or
similar rights relating to the operation of the Restaurants, subject to the
approval of Governmental Entities authorizing the transfer of such Permits;


 


(h)           all the Sellers’ claims, choses-in-action, warranties,
refunds, rights of recovery, rights to set-off and rights of recoupment of any
kind arising on or after the Closing Date with respect to any Purchased Asset;


 


(i)            all the Sellers’ claims under insurance policies
providing coverage relating to the Restaurants;


 


(j)            all the Sellers’ rights to Intellectual Property,
telephone and facsimile numbers, e-mail addresses, websites, domain names and
listings used in the operation of the Restaurants, as well as all rights,
subject to Section 1.2(c), to receive mail and other communications
addressed to any Seller and specifically relating to the operation of the
Restaurants (including mail and communications from customers, suppliers,
distributors, agents and others and payments with respect to the Purchased
Assets);


 


(k)           a copy of all the Sellers’ books, records, ledgers, files,
documents and correspondence, and all vendor and customer lists, files and
materials pertaining to the Sellers’ current employees, operating manuals,
studies, reports, creative materials, advertising and promotional materials,
training manuals, and other materials and other printed or written materials
relating to the Restaurants; and


 


2

















 


(l)            all other assets of any nature whatsoever owned by the
Sellers relating to the Restaurants or the Purchased Assets, other than the
Excluded Assets.


 


1.2          Excluded Assets.  Notwithstanding anything contained in Section 1.1,
the Purchased Assets shall not include the following assets and rights of the
Sellers (collectively, the “Excluded Assets”):


 


(a)           the telephone number of the Sellers’ corporate offices
located at 6592 Lake Road, Suite D, Windsor, Wisconsin 53598, and the
fixed assets, furniture and equipment located at each office;


 


(b)           all interests and rights in and to any contracts, purchase orders and
other agreements or arrangements of the Sellers which are not identified on Schedule
1.1(e);


 


(c)           all rights to receive mail and other communications addressed
to any Seller relating to any of the Excluded Assets or the Excluded
Liabilities;


 


(d)           all assets relating to or owned by, and all rights in and
to, any Plan;


 


(e)           the Fundamental Documents, qualifications to conduct
business as a foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification numbers, seals,
minute books, transfer books, certificates, if any, in respect of shares, and
other similar documents relating to the organization, maintenance and existence
of each Seller as a corporation;


 


(f)            all bank accounts and amounts on deposit therein;


 


(g)           all accounts and other receivables, including credit card receivables, credit
card receivables in transit or notes receivable and all rebates to the extent
such rebates relate to periods prior to the Closing Date;


 


(h)           prepaid expenses not incurred in the ordinary course of
business and all prepaid taxes other than prepaid real estate or personal
property taxes associated with the Purchased Assets;


 


(i)            any assets located at the Restaurants which are owned by
the Buyer or other Person not a Seller, including without limitation all
automated teller machines;


 


(j)            the Owned Real Property;


 


(k)           all the Sellers’ books, records, ledgers, files, documents
and correspondence and a copy of all employee, customer, and vendor files and
contracts;


 


(l)            the Affiliate Leases;


 


(m)          all of the rights of each Seller under this Agreement and
the other Documents; and


 


(n)           the domain name dcrobins.com and the email address
tgotzion@dcrobins.com.


 


1.3          Assumed Liabilities.  On and subject to the terms and
conditions of this Agreement, each Seller shall transfer to the Buyer, and the
Buyer shall assume and discharge or perform when due in accordance with the terms
thereof, each of, but only, the following Liabilities of such Seller
(collectively, the “Assumed Liabilities”):


 


(a)           all accounts payable, accrued expenses, accrued utilities
and accrued rent payable (other than amounts payable with respect to the Affiliate
Leases), in each case only to the extent (i) reflected on 


 


3

















 


the Closing Date Balance Sheet, or (ii) incurred
by the Sellers prior to the Closing Date in the ordinary course of business and
consistent with the Sellers’ past practice for the direct benefit of the
operation of the Restaurants for goods and services that are to be delivered or
performed after the Closing Date to the extent (A) such amounts are set
forth on the certificate delivered by the Sellers pursuant to Section 6.1(a)(xi),
or (B) do not exceed $16,500 in the aggregate;


 


(b)           all liabilities related to gift cards as reflected on the
Closing Date Balance Sheet;


 


(c)           all obligations arising after the Closing Date under the
Assumed Real Property Leases or the Assumed Contracts (other than any
obligation or Liability arising out of or in connection with any breach of any
Assumed Real Property Lease or any Assumed Contract occurring as of or prior to
the Closing Date); and


 


(d)           Training Costs not otherwise paid to or credited the
Sellers pursuant to Sections 2.4 and 2.5.


 


1.4          Excluded Liabilities.  Notwithstanding
anything to the contrary contained in this Agreement, other than the Assumed
Liabilities, the Buyer shall not assume or be liable for any of the Liabilities
of any Seller or relating to the operation of the Restaurants prior to the
Closing (the “Excluded Liabilities”).  Each
Seller hereby acknowledges that the Sellers are retaining the Excluded
Liabilities, and the Sellers shall pay, discharge and perform all such Excluded
Liabilities promptly when due.  The
Excluded Liabilities shall include, by way of illustration and not limitation:


 


(a)           any of the Liabilities of any Seller under this Agreement
and the other Documents;


 


(b)           any of the Liabilities of any Seller for expenses or fees
incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement, the other Documents or the consummation (or
preparation for the consummation) of the transactions contemplated hereby or
thereby (including all attorneys’ and accountants’ fees, and brokerage or
finders’ fees incurred by or imposed upon any Seller);


 


(c)           any Liabilities of any Seller for Funded Indebtedness;


 


(d)           any Liability of any Seller under any agreement, contract,
commitment, document, license, lease or Permit arising out of events occurring
prior to the Closing Date or a breach or alleged breach thereof that occurred
as of or prior to the Closing;


 


(e)           any Liabilities arising in connection with the Excluded
Assets;


 


(f)            any Liability of any Seller with respect to any Taxes
with respect to periods ending before the
Closing Date (without regard to when such taxes are assessed or payable);


 


(g)           any Liability of any Seller (i) arising by reason of
any violation or alleged violation of any Permit (including any Liquor License)
or any Law or any requirement of any Governmental Entity, (ii) arising
under any Environmental and Safety Requirements (except to the extent
specifically required or endorsed by Buyer in writing prior to the Closing);
including, without limitation, those with respect to the ownership or operation
of the Restaurants or the assets and properties of the Restaurants by any
Seller or any other Person at any time prior to the Closing Date; (iii) arising
by reason of any violation of any Law or any requirement of any Governmental
Entity relating to or affecting the employment by any Seller of its employees,
or (iv) arising by reason of any breach or alleged breach by any Seller of
any agreement, contract, lease, license, commitment, instrument, judgment,
order or decree, in any such case to the extent 


 


4

















 


such Liability results from or arises out of
events, facts or circumstances occurring or existing on or prior to the Closing
Date, notwithstanding that the date on which any action or claim is commenced
or made is after such Closing;


 


(h)           any Liabilities of any Seller for which the Buyer may
become liable as a result of or in connection with the failure by the Sellers
to fully and properly comply with any bulk sales or transfers laws;


 


(i)            any Liabilities of any Seller arising out of the injury
to or death of any Person or animal or damage to or destruction of any
property, whether based on negligence, breach of warranty, strict liability,
enterprise liability or any other legal or equitable theory arising from or
related to products (or parts of components thereof), sold, or for services
performed by any Seller, to the extent any of such Liabilities result from or
arise out of events, facts or circumstances occurring or existing on or prior
to the Closing Date, notwithstanding that the date on which any action or claim
is commenced or made is after the Closing Date;


 


(j)            any Liabilities of any Seller relating to any legal
action or Proceeding arising out of or in connection with any Seller’s
operation of its Restaurants prior to the Closing or any other conduct of any
Seller or its officers, directors, employees, stockholders, consultants, agents
or advisors, whether or not disclosed on the Schedules hereto;


 


(k)           any Liabilities of any Seller (i) for severance pay
or the like with respect to any employee of any Seller that is not offered, or
that does not accept, employment with the Buyer upon completion of the
Transactions, (ii) for wages or other compensation payable to any employee
of any Seller for periods prior to the Closing Date; (iii) for COBRA
continuation coverage for M&A qualified beneficiaries, as defined in Section 6.6;
or (iv) for accrued but unpaid vacation pay owed to the Sellers’
employees;


 


(l)            any Liabilities of any Seller for bonuses or like
payments to any director, officer or employee of such Seller for the period
ending on or prior to the Closing;


 


(m)          any Liabilities relating to any Plan of any Seller;


 


(n)           any Liability of any Seller for worker’s compensation or
unemployment compensation, based on an event occurring prior to the Closing
Date;


 


(o)           any Liabilities of any Seller to any stockholder or
Affiliate of such Seller;


 


(p)           any Liabilities arising or pertaining to the Affiliate
Leases;


 


(q)           any Liabilities associated with the Owned Real Property,
other than under the New Leases;


 


(r)            any Liabilities arising or pertaining to activities
conducted by the Sellers after the Closing Date; and


 


(s)           any other Liability of any Seller not expressly assumed by
the Buyer under Section 1.3 including any Liabilities not appearing on the
face of the Closing Date Balance Sheet (excluding the notes thereto), any
contingent Liabilities, any damage, accident, injury or death occurring, or the
facts giving rise to which occurred, prior to the Closing Date or any state of
facts existing at or prior to the Closing Date, regardless of when asserted,
which are not expressly assumed in Section 1.3.


 


5






 












 


ARTICLE
II

CONSIDERATION, CLOSING AND POST-CLOSING ADJUSTMENTS


 


2.1           Consideration.  The aggregate consideration
to be paid by the Buyer (the “Consideration”)
for the Purchased Assets and the Non-Solicitation Agreements shall consist of (a) $20,900,000
adjusted as provided in Section 2.4
(the “Cash Consideration”), and (b) the
assumption of the Assumed Liabilities.


 


2.2           The
Closing.  The closing of the transactions
contemplated by this Agreement (the “Closing”)  shall occur at the offices of Davis Graham & Stubbs, 1550 17th
Street, Denver, Colorado 80202 or such other place as the Sellers and
the Buyer shall agree.  The Closing is
expected to occur on May 19, 2008, but shall occur within (5) five
days of the satisfaction or waiver of the conditions set forth in Article VI
and Article VII (disregarding for this purpose any such conditions to be
satisfied by actions to be taken at the Closing), or such other date as the
Sellers and the Buyer shall agree. 
Subject to Section 5.10, the Buyer
shall be entitled to immediate possession of, and to exercise all rights
arising under, the Purchased Assets and shall assume all Assumed Liabilities
from and after 12:01 A.M. Central time on the Closing Date, and the
operation of the Restaurants shall transfer at such time.  The date on which the Closing occurs shall be
referred to as the “Closing Date”.


 


2.3          Deliveries at the Closings.


 


(a)           At
the Closing, and thereafter as may be reasonably requested by the Buyer, the
Sellers shall convey, transfer, assign, and deliver all of their right, title
and interest in the Purchased Assets to the Buyer, and shall also deliver to
the Buyer the following:


 


(i)            one
or more bills of sale, substantially in the form attached hereto as Exhibit C
(each, a “Bill of Sale”), duly
executed by each applicable Seller, to effectuate the transfer of the Purchased
Assets to the Buyer;


 


(ii)           one
or more assignment and assumption agreements, substantially in the form
attached hereto as Exhibit D (each, an “Assignment Agreement”), duly executed by each applicable
Seller, to effectuate the assignment of the Assumed Liabilities other than the
Excluded Liabilities to the Buyer;


 


(iii)          a
leasehold assignment and assumption agreement for the Assumed Real Property
Leases, in form and substance reasonably acceptable to the Parties and the
landlords for such Assumed Real Property Leases (each a “Lease Assignment Agreement”);


 


(iv)          a
non-solicitation agreement, substantially in the form attached hereto as Exhibit E
(each, a “Non-Solicitation Agreement”)
duly executed by the parties set forth on Schedule 2.3(a)(iv);


 


(v)           the
escrow agreement, in form and substance reasonably acceptable to the Parties
and the Escrow Agent (the “Indemnification
Escrow Agreement”), duly executed by each Seller, to govern the
terms by which the Escrow Agent will hold the escrowed funds as security for
the Sellers’ indemnification obligations pursuant to Article IX;


 


(vi)          copies
of all consents that are required from Governmental Entities for the
consummation of the transactions contemplated hereby;


 


(vii)         copies
of all consents of third parties that are required in order to prevent a Seller’s
breach of or default under or a termination of any Assumed Contract, the
Assumed Real Property Leases or any Permit;


 


6

















 


(viii)        all
operating manuals, proprietary information and similar documents and
information held by the Sellers in connection with the Sellers’ status as a
franchisee of the Buyer and all copies and extracts therefrom;


 


(ix)           all
plans and specifications, building permits, certificates of occupancy, surveys,
environmental and engineering reports, and similar materials related to the
Leased Real Property in the Sellers’ possession or control;


 


(x)            an
estoppel certificate from the landlord of the Assumed Real Property Leases,
certifying that such lease is in full force and effect with no defaults, the
date to which rent under the Assumed Real Property Lease has been paid, and
such other information as reasonably requested by the Buyer, in form and
substance satisfactory to the Buyer;


 


(xi)           a
certificate, signed by Timothy Gotzion as President of each of the Sellers, to
the effect that each of the conditions specified in Section 6.1 through
6.8 have been satisfied and setting forth the amounts described in Section 1.3(a);


 


(xii)          a
legal opinion from Michael Best & Friedrich LLP dated the Closing Date
in form and substance reasonably acceptable to the Buyer;


 


(xiii)         certified
copies of the Fundamental Documents of each Seller and the authorizing
resolutions of each Seller for this Agreement and the other Documents;


 


(xiv)        any closing
documents reasonably requested by Fidelity National Title (the “Title Company”) in connection with the
issuance of the Title Policies;


 


(xv)         the New Leases
duly executed by 2020 Investments, LLC, a Wisconsin limited liability company,
or another Affiliate of the Sellers; and


 


(xvi)        documentation
reasonably satisfactory to the Buyer evidencing the payoff amount with respect
to Sellers’ Funded Indebtedness.


 


(b)          At
the Closing, the Buyer shall deliver:


 


(i)            to
the Escrow Agent (for immediate wire delivery to the Sellers in relative
amounts as directed by the Sellers), by wire transfer of immediately available
U.S. funds the sum of $20,400,000 and the Estimated Adjustment Amount;


 


(ii)           to
the Escrow Agent, $500,000 (the “Escrow”) to be
held in accordance with the terms of the Indemnification Escrow Agreement and
this Agreement;


 


(iii)          to
each Seller, a duly executed copy of the Indemnification Escrow Agreement;


 


(iv)          to
each Seller, a duly executed copy of the Assignment Agreement in order to
effectuate the assumption of the Assumed Liabilities by the Buyer;


 


(v)           to each Seller, a duly executed copy of a Lease
Assignment Agreement for each of the Assumed Real Property Leases;


 


7

















 


(vi)          to each Seller, certified copies of the
Fundamental Documents of the Buyer, and the authorizing resolutions and
incumbency certificates of the Buyer for this Agreement and the other
Documents;


 


(vii)         a certificate, signed by the Buyer, to the effect
that each of the conditions specified in Sections 7.2 through 7.5 have been
satisfied; and


 


(viii)        the New Leases duly executed by the Buyer.


 


2.4          Closing Date Purchase Price Adjustment.


 


(a)           At least 3 days
prior to the anticipated Closing Date, the Sellers shall deliver to the Buyer an estimated balance sheet of
each of the Sellers as of the Closing Date (immediately prior to the Closing
and without taking into account the Transactions) (each a “Closing Date Balance Sheet”) and an
estimate of the Adjustment Amount as of the anticipated Closing Date (the “Estimated Adjustment Amount”), together
with such supporting documentation and other data as is reasonably necessary to
substantiate such estimate.  The Closing
Date Balance Sheets and all accounting
calculations and terms shall be in accordance with GAAP and, to the extent not
in violation of GAAP, consistently applied with the Year End Balance Sheet.  Each Seller will provide the Buyer and its
representatives with prompt access to such books, records, employees and
auditors of such Seller as the Buyer may reasonably request in order to verify
the determination of the Estimated Adjustment Amount.


 


(b)           The “Adjustment Amount” may be a positive or
negative number and shall mean the amount by which the Aggregate Net Working
Capital reflected on the Closing Date Balance Sheets exceeds $0.  “Aggregate
Net Working Capital” shall mean the sum of the amount of Net Working
Capital for each of the Sellers.  “Net Working
Capital” shall mean, with respect to each Seller, (i) the
amount of the Inventory, Till Cash and Prepaid Expenses, shown on such Seller’s
Closing Date Balance Sheet and included in the Purchased Assets, plus (ii) amounts
spent by Sellers in connection with the construction and development of the Eau
Claire Restaurant and on usual and customary pre-opening costs for the Eau
Claire Restaurant, including costs associated with hiring and training the
initial workforce, which amounts spent are not otherwise reimbursed by NCW
Robins plus (iii) payments made by Sellers under the Area
Development Agreements with respect to restaurants not developed by the Sellers
in the amount of $50,000, plus (iv) Training Costs paid by Sellers
pursuant to Section 5.10(c), less (v) the amount of accounts
payable, accrued expenses, accrued utilities, accrued rent payable, and gift
cards included in the Assumed Liabilities (but not including any accrued
amounts with respect to the construction and development of the Eau Claire Restaurant,
usual and customary pre-opening costs for the Eau Claire Restaurant or Training
Costs).


 


(c)           If
the Estimated Adjustment Amount is positive, then the Cash Consideration shall
be increased dollar for dollar by the amount of such excess.  If the Estimated Adjustment Amount is
negative, then the Cash Consideration shall be decreased dollar for dollar by
the absolute value of such deficiency.


 


2.5          Post-Closing Purchase Price Adjustment.


 


(a)           As
soon as practicable following the Closing Date (but not later than 60 days after the Closing Date), each
Seller shall deliver to the Buyer the final Closing Date Balance Sheet for such
Seller, accompanied by a determination of the actual Adjustment Amount (the “Actual Adjustment Amount”) and a
determination of the Post-Closing True-Up (as defined below), together with
such supporting documentation and other data as is reasonably necessary to
substantiate such determinations.  All
accounting calculations and terms shall be in accordance with GAAP and, to the
extent not in violation of 


 


8

















 


GAAP, consistently applied with the accounting
principles used in connection with the Year End Balance Sheet.  For purposes of this Section 2.5, the
Buyer shall be entitled to have reasonable access to the books and records and
work papers of each of the Sellers and their representatives used in
preparation of the Closing Date Balance Sheets and shall be entitled to discuss
such books and records and work papers with each of the Sellers, their
representatives and those persons responsible for the preparation thereof.


 


(b)           The
“Post-Closing True-Up” may be a
positive or negative number and shall be an amount equal to the Actual
Adjustment Amount less the Estimated Adjustment Amount.


 


(c)           If the Post-Closing True-Up is positive, then the
Buyer shall deliver an amount of cash equal to the amount of the Post-Closing
True-Up to such Seller, payable by wire transfer of immediately available U.S.
funds in accordance with the written payment instructions furnished by such
Seller prior to the Closing Date.  If
the Post-Closing True-Up is
negative, then such Seller shall deliver an amount of cash equal to the
absolute value of the Post-Closing True-Up to the Buyer, payable by wire
transfer of immediately available U.S. funds in accordance with the written
payment instructions furnished by the Buyer to the Sellers.  Any such payment of cash required pursuant to
this Section 2.5 shall be deemed to be an adjustment to the Purchase Price
and shall be made by acknowledgment of the Parties within two Business Days
after the Closing Date Balance Sheet is deemed final and conclusive pursuant
hereto.


 


(d)           In
the event that the Buyer reasonably disagrees with any amounts reflected on the
final Closing Date Balance Sheet or the determination of the Post-Closing
True-Up, the Buyer shall so inform the applicable Seller in writing within 15
days of the Buyer’s receipt thereof, such writing to set forth the objections
of the Buyer in reasonable detail.  If
such Seller and the Buyer cannot reach agreement as to any disputed matter
relating to the Post-Closing True-Up within 15 days after notification by the
Buyer to the Sellers of a dispute, they shall forthwith refer the dispute to an
independent accounting firm to be agreed upon by the Buyer and the Sellers (the
“Independent Accountant”) for
resolution, with the understanding that such Independent Accountant shall
resolve all disputed items within 20 days after such disputed items are
referred to it.  All costs of the review
by the Independent Accountant shall be shared equally by the Buyer on the one
hand, and the applicable Seller or Sellers on the other.  The decision of the Independent Accountant
with respect to all disputed matters relating to the Post-Closing True-Up shall
be deemed final and conclusive and shall be binding upon the Sellers and the
Buyer.  If the Buyer does not object to
the Closing Date Balance Sheets (and the amount of Post-Closing True-Up
calculated thereby) within the 15-day period referred to above, the amount of
the Post-Closing True-Up, as determined by the Closing Date Balance Sheets as
so prepared, shall be deemed final and conclusive and binding upon the Buyer
and the Sellers.


 


2.6          Allocation
of Purchase Price.  The Consideration shall be allocated
among the Purchased Assets and the Non-Solicitation Agreements as mutually
agreed among the Parties prior to the Closing Date.  Such allocation shall be conclusive and
binding upon the Parties for all purposes. The Parties shall not file any Tax
Return or other document with, or make any statement or declaration to, any
Governmental Entity that is inconsistent with such allocation.


 


ARTICLE
III


REPRESENTATIONS
AND WARRANTIES OF THE SELLERS


 


As a material inducement to
the Buyer to enter into and perform its obligations under this Agreement, each
Seller jointly and severally represents and warrants to the Buyer as set forth
below.


 


3.1          Organization and
Capitalization of the Sellers.  Such Seller is duly organized and
validly existing under the laws of its jurisdiction of incorporation, has filed
with the Wisconsin Department of Financial Institutions the most recent annual
report required to be filed by it and is qualified to do business in every 


 


9

















 


jurisdiction
in which the failure to so qualify would reasonably be expected to have a
Material Adverse Effect.  Schedule 3.1
sets forth, with respect to such Seller, its jurisdiction of incorporation and
a list of all states in which such Seller is qualified to do business.  Also set forth in Schedule 3.1 is a
list of the stockholders of such Seller and the current ownership percentages
of each such stockholder.  No other
Person has any right to or interest in the outstanding capital stock of such
Seller or has any right, contingent or otherwise, to purchase, acquire or own,
directly or indirectly, any stock or any other equity interest in such Seller.


 


3.2          Authorization of
Transaction.  Such Seller has all requisite
power and authority to own and operate its Restaurants and to carry on the
operation of its Restaurants as now conducted. 
Such Seller has all requisite power and authority to execute and deliver
each Document to which it is a party and any and all instruments necessary or
appropriate in order to effectuate fully the Transactions and to perform its
obligations under each such Document. 
Each Document to which such Seller is a party has been duly and validly
authorized by all necessary action (corporate or otherwise) on the part of such
Seller, and each Document to which such Seller is a party has been duly
executed and delivered by such Seller, and constitutes the valid and legally
binding obligation of such Seller, enforceable against such Seller in
accordance with its terms and conditions, subject to applicable bankruptcy,
insolvency and similar Laws affecting the enforceability of creditors’ rights
generally, general equitable principles, the discretion of courts in granting
equitable remedies and matters of public policy.


 


3.3          Non-contravention.


 


(a)           Except as set forth
on Schedule 3.3(a), neither the execution, delivery and performance
of the Documents nor the consummation of the transactions contemplated by the
Documents by such Seller, shall (i) violate any Law to which such Seller,
its Restaurants or the Purchased Assets being transferred by such Seller is
subject, (ii) violate any provision of the Fundamental Documents of such
Seller, (iii) violate any provision of any Permit, including any Liquor
License, (iv) result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under, any contract, agreement,
instrument or other document to which such Seller is a party or (v) result
in the imposition of any Lien upon any of the Purchased Assets.


 


(b)           Except as set forth
on Schedule 3.3(b), such Seller is not required to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any Governmental Entity or any consent or approval of any other Person in order
for such Seller to consummate the transactions contemplated by the Documents.


 


3.4          Subsidiaries.  Such
Seller does not own, directly or indirectly, any stock, partnership or joint
venture interest in, or any security or ownership interest issued by, any other
Person.


 


3.5          Financial Statements.


 


(a)           Schedule 3.5(a) contains
the following financial statements (collectively, the “Financial Statements”):


 


(i)            the
unaudited balance sheets of such
Seller at January 2, 2007 and January 1, 2008 (the January 1,
2008 balance sheet being referred to herein as the “Year End Balance Sheet”) and the related consolidated
statements of operations, stockholders’ equity and cash flows, for the fiscal
years ended January 2, 2007 and January 1, 2008 (the latter, referred
to as the “Most Recent Fiscal Year”);
and


 


10

















 


(ii)           the
unaudited Balance Sheet of such Seller as of February 26, 2008 (the “Latest
Balance Sheet”) and the related unaudited statements of operations,
stockholders’ equity and cash flows, for the interim period ended February 26, 2008 (together with
the Latest Balance Sheet, the “Latest
Financial Statements”).


 


(b)          Except as set forth
in detail on Schedule 3.5(b), the Financial Statements of such Seller
fairly present in all material respects such Seller’s financial condition,
results of operations, retained earnings and changes in cash flow as of the
dates thereof and for the periods indicated thereon and have been prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby, subject, in the case of the Latest Financial Statements, to the lack
of footnotes.  Such Seller has never received an independent audit opinion with respect
to the Financial Statements.


 


3.6          Events
Subsequent to December 31, 2007.  Except as set forth on Schedule 3.6,
since December 31, 2007, (i) such Seller has operated its
Restaurants in the ordinary course consistent with past practice, (ii) such
Seller and its Restaurants, individually or in the aggregate, have not suffered
any Material Adverse Change, and:


 


(a)           except
in connection with the development of the Eau Claire Restaurant, such Seller
has not accelerated, terminated, modified or amended any agreement, contract,
document, lease, or license (or series of related agreements, contracts,
leases, and licenses) involving the payment of $25,000 or more or which is
otherwise material to such Seller or its Restaurants and, to the Knowledge of
such Seller, no party to the foregoing has or intends to take any such action;


 


(b)           such
Seller has not entered into or amended any employment or severance contract
with any Person employed by its Restaurants or increased the rate of
compensation for or paid any bonuses to any of any its officers or employees,
except for hiring and awarding raises (in amounts that are not material) to
non-officer Restaurant employees in the ordinary course of business consistent
with past practice;


 


(c)           except
in connection with the development of the Eau Claire Restaurant, such Seller
has not incurred outside of the ordinary course any indebtedness for borrowed
money, or guaranteed any such indebtedness of another Person, entered into any
agreement to maintain any financial condition of another Person or entered into
any arrangement having the economic effect of any of the foregoing, or made any
loans, advances or capital contributions to, or investments in, any other
Person;


 


(d)           such
Seller has not mortgaged, pledged or otherwise encumbered any Purchased Asset,
except for Permitted Liens;


 


(e)           except
in connection with the development of the Eau Claire Restaurant, such Seller
has not sold, leased, licensed, transferred, assigned or otherwise disposed of
any of its assets, tangible or intangible, other than in the ordinary course of
business to a Person who is not an Affiliate of such Seller;


 


(f)            such
Seller has not made or agreed to make any capital expenditure, other than those
in the ordinary course of business and consistent with past practices out of
available cash, and except in connection with the development of the Eau Claire
Restaurant;


 


(g)           except
in connection with the development of the Eau Claire Restaurant, such Seller
has not made any acquisition of assets other than acquisitions of inventory,
supplies, equipment or other property in the ordinary course of business;


 


11

















 


(h)           such
Seller has not delayed or postponed the payment of accounts payable or other
Liabilities outside the ordinary course of business;


 


(i)            such
Seller has not commenced, cancelled, compromised, waived, released or settled
any right, claim or Proceeding (or series of related rights, claims or
Proceedings);


 


(j)            such
Seller has not granted any license or sublicense of any rights under or with
respect to any of such Seller’s Intellectual Property;


 


(k)           such
Seller has not made or pledged to make any charitable contribution or loan
(except in connection with the Eau Claire Restaurant) outside the ordinary course
of business greater than $5,000;


 


(l)            such
Seller has not materially decreased the average Inventory of its Restaurants or
amount of Till Cash;


 


(m)          there
has been no damage, destruction or loss in excess of $25,000 (whether or not
covered by insurance);


 


(n)           none
of the Restaurants have suffered the termination, suspension or revocation of
any Liquor License or other Permit necessary for the operations of such
Restaurant;


 


(o)           to such Seller’s Knowledge, except in connection
with the development of the Eau Claire Restaurant, there has been no other
incident or transaction outside the ordinary course of business involving any
Seller or any of the Restaurants; and


 


(p)           such Seller has not committed to do any of the
foregoing, and, to such Seller’s Knowledge, no Affiliate of such Seller has
done or committed to any of the foregoing with respect to such Seller or its
Restaurants.


 


3.7          Absence
of Undisclosed Liabilities.  Such
Seller has no Liabilities, except for (a) Liabilities reflected on the
face of the liabilities section of such Seller’s Latest Balance Sheet, (b) Liabilities
under agreements, contracts, commitments, licenses or leases which are not
required to be reflected on financial statements prepared in accordance with
GAAP, (c) Liabilities which have arisen since the date of the Latest
Balance Sheet in the ordinary course of business, and (d) Liabilities set
forth on Schedule 3.7.


 


3.8          Legal Compliance.


 


(a)           In connection with
the operation of the Restaurants since December 31, 2001, such Seller has
materially complied and is in material compliance with, and each of its
Restaurants has materially complied and is in material compliance with, all
applicable Laws, Environmental and Safety Requirements, Orders and Permits, and
no Proceeding is pending or, to the Knowledge of such Seller, threatened,
alleging any failure to so comply.  There
are no pending disciplinary actions against any Liquor License and there have
been no investigations of such Seller or such Liquor Licenses during the time
in which the Liquor License was held by such Seller.  Each Liquor License set forth on Schedule 3.8(b) is
currently active and in good standing, and has not been revoked or invalidated,
and is not currently suspended or to be suspended at any time in the future, and
no special conditions or limitations have been placed on any Liquor Licenses.


 


(b)           Schedule 3.8(b) sets
forth a list of all Permits, including the Liquor Licenses, under which such
Seller is operating or bound.  Such
Permits (i) constitute all Permits used or required in the operation of
the Restaurants as presently conducted, (ii) are in full force and effect,
(iii) are held by the 


 


12

















 


lawfully
required party, and (iv) are not subject to any pending or, to the
Knowledge of such Seller, threatened Proceeding seeking their revocation or
limitation.


 


(c)           Except as set forth
on Schedule 3.8(b), during such Seller’s operation of its Restaurants
since December 31, 2005, no such Restaurant has received a citation,
warning, or reprimand for, or otherwise been notified of, any violation of any
Law governing alcoholic beverages or any Environmental and Safety Requirements
or similar municipal, state or federal Law. 
To the Knowledge of such Seller, during its operation of its
Restaurants, such Seller has not served any food or foodstuff which is claimed
to have caused any illness or injury to the consumer thereof which would
reasonably be expected to have a Material Adverse Effect.


 


3.9          Title to Properties.


 


(a)           Except as set forth
on Schedule 3.9(a), (i) such Seller owns good and marketable
title, free and clear of all Liens (other than Permitted Liens), to all of its
Purchased Assets, and (ii) with the exception of the Excluded Assets, such
Purchased Assets include all assets presently used by such Seller for the
operation of its Restaurants in the ordinary course.


 


(b)           The facilities,
equipment and other tangible assets included in such Seller’s Purchased Assets
are in good condition and repair (subject to routine maintenance and repair for
similar assets of like age), fit for their particular purpose, and are usable
in the ordinary course of such Seller’s business.  Such Seller owns or leases under valid leases
all equipment and other tangible assets necessary for the operation of its
Restaurants as conducted as of the date hereof and as of the date of the Latest
Balance Sheet.


 


(c)           Except as set forth
on Schedule 3.9(c), the fixed assets included in the Purchased Assets
are in normal operating condition (subject to routine maintenance and repair
for similar assets of like age), to such Seller’s Knowledge no major repairs
are necessary concerning the fixed assets, and the fixed assets comply in all
material respects with applicable Laws and Environmental and Safety Requirements.


 


(d)           Such Seller does not
own any fee interest in real property, except for the Owned Real Property.


 


(e)           Schedule 3.9(e) contains
a complete and accurate list of all real property leased by such Seller (the “Leased Real Property”), separated by
Restaurant location, listing the street address of such property, as well as
all buildings and other structures and material improvements located on such
Leased Real Property, the name and address of the landlord and any requirement
of consent of the landlord to assignment, if any, and a description of uses of
and facilities on such Leased Real Property. 
Schedule 3.9(e) identifies the parcels of real property
owned by such Seller or its Affiliate related to the Restaurants (the “Owned Real Property”) and the leases
related to the Restaurants in which such Seller or its Affiliate is the
landlord (“Affiliate Leases”).  The Leased Real Property constitutes all real
properties used or occupied by such Seller in connection with the operation of
the Restaurants.  With respect to the
Leased Real Property, such Seller is the owner and holder of all of the
leasehold estates purported to be granted by such lease, and each lease is in
full force and effect and constitutes a valid and binding obligation of such
Seller.  Such Seller has delivered to the
Buyer true and complete copies of all leases to which it is a party and
referred to in Schedule 3.9(e) (such leases excluding the
Affiliate Leases are referred to herein as the “Real Property Leases”). 
In addition, except as set forth in Schedule 3.9(e):


 


(i)            such Seller has not
entered into any subleases with respect to the Real Property Leases;


 


13

















 


(ii)           the security
deposit for each of such Seller’s Real Property Leases is in the form of cash
and such Seller has not received notice from the landlord of any deduction
against such security deposit;


 


(iii)          rent under each of
such Seller’s Real Property Leases has been paid through the most current month
due, and no rent is being held by the landlord thereunder more than one month
in advance;


 


(iv)          no default, or
events which with the passage of time or giving of notice would constitute a
default, exists under any of such Seller’s Real Property Leases;


 


(v)           all improvements required
to be made by the landlord under such Seller’s Real Property Leases have been
made, and such Seller has accepted possession of the Leased Real Property;


 


(vi)          no brokerage fees or
commissions are outstanding with respect to such Seller’s Leased Real Property;


 


(vii)         such Seller has
received no written notice of a violation of law with respect to its Leased
Real Property, including, without limitation, the Americans with Disabilities
Act;


 


(viii)        such Seller has
received no written notice from any party objecting to the current use of the
Leased Real Property;


 


(ix)           such Seller has not
waived, orally or in writing, any provisions of the Real Property Leases; and


 


(x)            there are no
current obligations of such Seller to repair or improve any of its Leased Real
Property outside the ordinary course or as part of scheduled maintenance and no
obligations of such Seller that may require any repair or improvement to any of
its Leased Real Property upon transfer, assignment or sale of its Restaurants
or any interest in its Leased Real Property.


 


(f)           With respect to such
Seller’s Leased Real Property, except as set forth in Schedule 3.9(f):


 


(i)            such Seller has not
received written notice that any portion thereof is subject to any pending
condemnation Proceeding by any public or quasi-public authority and, to the
Knowledge of the such Seller, there is no threatened condemnation Proceeding
with respect thereto;


 


(ii)           no notice of any
increase in the assessed valuation of such Leased Real Property and no notice
of any contemplated special assessment has been received by such Seller and, to
the Knowledge of such Seller, there is no threatened increase in the assessed
valuation or special assessment pertaining to such Leased Real Property other
than annual assessments in the ordinary course of business which may result in
increases;


 


(iii)          there are no leases
or other agreements, written or oral, to which such Seller is a party, granting
to any party or parties (other than a Seller) the right of use or occupancy of
any portion of any parcel of such Leased Real Property;


 


(iv)          other than such
Seller, there are no parties in possession of any of such Leased Real Property;


 


14

















 


(v)           since January 1,
2008 there have been no discussions or correspondence with the respective
landlords of such Leased Real Property concerning renewal terms therefor of
which the Buyer has not been notified; and


 


(vi)          the physical
condition of such Leased Real Property is sufficient to permit the continued
operation of such Seller’s Restaurants as presently conducted subject to the
provision of usual and customary maintenance and repair performed in the
ordinary course with respect to similar properties of like age and
construction.


 


3.10        Inventory.  Such Seller’s Inventory is saleable or
usable in the ordinary course of business for its intended use and, subject to
any reserves set forth on such Seller’s Latest Balance Sheet, there are no
material amounts of obsolete, damaged or defective Inventory.


 


3.11        Franchise
Agreements.  Such Seller
has performed in all material respects its obligation to pay royalties to the
Buyer as required pursuant to its Franchise Agreements and has performed in all
material respects its obligations under its Franchise Agreements to expend the
required amount for media advertising from January 1, 2007 through the
Closing Date.


 


3.12        Tax Matters.
Except as set forth on Schedule 3.12:


 


(a)           Such Seller has
timely paid all Taxes required to be paid by it through the date hereof;


 


(b)           Such Seller has
filed or caused to be filed in a timely manner (within any applicable extension
periods) all Tax Returns required to be filed by it with the appropriate
Governmental Entities in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns are true and complete. Such
Seller is not currently the beneficiary of any extension of time within which
to file any Tax Return;


 


(c)           Sellers have
delivered to Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by Seller in the past three years;


 


(d)           There are no Liens
for Taxes on such Seller’s Purchased Assets other than Permitted Liens, and
such Seller has not been notified by the Internal Revenue Service or any other
taxing authority that any issues have been raised (and are currently pending)
by the Internal Revenue Service or any other taxing authority in connection
with any Tax Return of such Seller, and no waivers of statutes of limitations
have been given or requested with respect to such Seller;


 


(e)           There are no pending
Tax audits of any Tax Returns of such Seller;


 


(f)            To such Seller’s
Knowledge, no unresolved deficiencies or additions to Taxes have been proposed,
asserted or assessed against such Seller by a Governmental Entity;


 


(g)           Such Seller has made
full and adequate provision (x) on its Latest Balance Sheet for all Taxes
payable by it for all periods prior to the date of the Latest Balance Sheet,
and (y) on its books for all Taxes payable by it for all periods beginning
on or after the date of its Latest Balance Sheet;


 


(h)           Such Seller has not
distributed stock of another person, nor had its stock distributed by another
person, in a transaction that was purported or intended to be governed in whole
or in part by Code §355 or §361;


 


15

















 


(i)            Such Seller has not
incurred and will not incur any Tax Liability from and after the date of its
Latest Balance Sheet other than Taxes incurred in the ordinary course of
business or pursuant to this Agreement;


 


(j)            Such Seller has
complied in all material respects with all applicable Laws relating to the
collection or withholding of Taxes (such as sales Taxes or withholding of Taxes
from the wages of employees), and such Taxes have been collected or withheld,
and either paid to the respective Governmental Entity, set aside in accounts
for such purpose, or accrued, reserved against and entered upon the books of
such Seller;


 


(k)           Such Seller is not
now and has not been a party to any Tax sharing agreement;


 


(l)            None of such Seller’s
Assumed Liabilities includes an obligation to make (or possibly make) any
payments that will constitute an “excess parachute payment” within the meaning of,
Section 280G of the Code;


 


(m)          Such Seller does not
have any liability for the Taxes of any other Person under any provision of
applicable law or regulation, by contract, as transferee or successor, or
otherwise; and


 


(n)           Such Seller is not a
“foreign person” for purposes of Code Section 1445.


 


3.13        Intellectual Property.


 


(a)           Other than
Intellectual Property owned or otherwise licensed by the Buyer or one or more
of its Affiliates, Schedule 3.13(a) identifies (i) all
Intellectual Property used by such Seller in connection with the operation of
the Restaurants (other than Excluded Assets), (ii) each license, agreement
or other permission which such Seller or any of its Affiliates has granted to
any third party with respect to such Intellectual Property, and (iii) each
item of Intellectual Property that any third party owns and that such Seller
uses in connection with the operation of its Restaurants pursuant to license,
sublicense, agreement or permission (clauses (ii) and (iii) are
collectively referred to as “Licensed
Intellectual Property”).


 


(b)          Except as set forth
on Schedule 3.13(b),


 


(i)            To such Seller’s
Knowledge, neither such Seller nor any of its Affiliates has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of third parties or committed any acts of unfair
competition, and neither such Seller nor, to such Seller’s Knowledge, any of
its Affiliates has received any charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation, conflict or act
of unfair competition;


 


(ii)           Such Seller owns,
has the right to use, sell, license and dispose of, and has the right to bring
actions for the infringement of, and, where necessary, has made timely and
proper application for, all Intellectual Property (other than the Licensed
Intellectual Property or the Intellectual Property owned or licensed by the
Buyer or one or more of its Affiliates) necessary or required for the operation
of such Seller’s Restaurants as currently conducted and, to the Knowledge of
such Seller, such rights to use, sell, license, dispose of and bring actions
are exclusive with respect to such Intellectual Property (other than the
Licensed Intellectual Property); and


 


(iii)          to the Knowledge of
such Seller, its consummation of the transactions contemplated by the Documents
will not adversely impact any of the Intellectual Property necessary or
required for the operation of the Restaurants.


 


16






 


 












 


3.14         Contracts.


 


(a)           Except for
those with the Buyer or one or more Affiliates of the Buyer, Schedule 3.14(a) is
a complete and accurate list of each written or oral:


 


(i)            contract,
agreement, commitment, understanding or arrangement to which any Seller is a
party involving the payment or receipt of $25,000 or more in any twelve-month
period;


 


(ii)           contract for
the employment of any officer, employee, or other Person providing services to
any Seller’s Restaurant on a full-time, part-time, consulting or other basis
that cannot be terminated immediately upon notice;


 


(iii)          instrument,
agreement or indenture relating to Funded Indebtedness or to mortgaging,
pledging or otherwise subjecting any Seller’s assets to a Lien;


 


(iv)          guarantee of
any obligation of a Seller for borrowed money or otherwise;


 


(v)           agreement with
respect to the lending of funds by any Seller;


 


(vi)          lease or
agreement (other than the Real Property Leases) under which any Seller is the
lessee of or the holder or operator of any real or personal property owned by
any other party;


 


(vii)         lease or
agreement under which any Seller is the lessor of or permits any third party to
hold or operate any real or personal property owned or controlled by such
Seller;


 


(viii)        assignment,
license or agreement with respect to any form of intangible property of any
Seller, including, without limitation, any Intellectual Property or
confidential information;


 


(ix)           contract or
group of related contracts with the same party for the purchase or sale of
products or services for use in the Restaurants which provide for payments by
such Seller in an aggregate amount in excess of $5,000;


 


(x)            contract
containing bonding, insurance or other similar requirements relating to the
operation of the Restaurants which provide for payments by such Seller in an
aggregate amount in excess of $5,000;


 


(xi)           contract with
any Affiliate of such Seller relating to the operation of the Restaurants; or


 


(xii)          contract for
the lease of equipment that, in accordance with GAAP, is required to be
capitalized on the Financial Statements.


 


(b)           Each item
listed on Schedule 3.14(a) (each, a “Contract”) and each Assumed Contract is valid and
enforceable against such Seller and, to the Knowledge of such Seller, the other
parties thereto.  Except as disclosed on Schedule
3.14(a), such Seller has performed in all material respects all obligations
required to be performed by it and is not in material default under or in
material breach of nor in receipt of any claim of material default or material
breach under any such Contract or Assumed Contract.  No event has occurred which, with the passage
of time or the giving of notice or both, would result in such Seller’s material
default or material breach under any such Contract or Assumed Contract, and no
other Party to any such Contract or Assumed Contract is in default under or in
breach of such document.  Such Seller has
supplied the Buyer with a true, correct and complete copy of each of the
Contracts or Assumed 


 


17

















 


Contracts
that are written, together with all amendments, waivers or other changes
thereto, and a complete description of all the Contracts or Assumed Contracts
that are oral.


 


3.15         Insurance.  Schedule 3.15 lists and briefly
describes each insurance policy, self insurance arrangement and bonding
arrangement maintained by such Seller with respect to the properties, assets
and business of its Restaurants (including, without limitation, any bonding
arrangement required under any contract or applicable Law), and all currently
pending claims thereunder.  All of such
Seller’s insurance policies and bonding arrangements are in full force and
effect, and such Seller is not in default with respect to its obligations under
any of such insurance policies or bonding arrangements.  Such Seller has not received any notification
of cancellation or modification of any of such insurance policies or bonding
arrangements and does not have any claim outstanding which could be expected to
cause a material increase in such Seller’s insurance rates.  To the Knowledge of such Seller, there are no
facts or circumstances which exist that might relieve any insurer under such
insurance policies or bonding arrangements of its obligations to satisfy in
full all claims thereunder (except for applicable deductibles and caps).  Such Seller maintains insurance coverage of a
type and amount customary for entities of similar size engaged in similar lines
of business.


 


3.16         Litigation.  Except as set forth on Schedule 3.16,
there are no Proceedings pending or, to the Knowledge of such Seller,
threatened against such Seller which relate to or could affect the operations
or financial results of its Restaurants and, to the Knowledge of such Seller,
there is no Basis for any of the foregoing. 
Schedule 3.16 also sets forth all Proceedings (or threatened
Proceedings known to Seller) involving such Seller during the last five years
which (i) alleged serious criminal conduct by such Seller, (ii) resulted
in such Seller paying or receiving an amount in excess of $15,000 in connection
with the adjudication or compromise of any Proceeding related to the operation
of a Restaurants or (iii) had a Material Adverse Effect on such Seller.


 


3.17         Employees.


 


(a)           Schedule 3.17(a) lists all
current employees at such Seller’s Restaurants whose annual compensation for
2007 exceeded or whose annual compensation for 2008 is expected to exceed $65,000, their permanent
classifications (if applicable), their current hourly rates of compensation or
base salaries (as applicable), their total 2007 compensation and 2008
compensation through February  26,
2008, the commencement date of their employment, and accrued bonus, accrued
sick leave and accrued vacation benefits as of such Seller’s Latest  Balance Sheet Date.  In addition, to the extent any current
employees of such Seller are on leaves of absence, Schedule 3.17(a) indicates
the nature of such leave of absence and each such employee’s anticipated date
of return to active employment.  No
executive, key employee or group of employees of such Seller listed on Schedule 3.17(a) has
indicated any plans to (i) terminate employment (other than immediately
after the Closing in order to accept employment with the Buyer) or (ii) not
accept employment with the Buyer immediately after the Closing.


 


(b)           To such Seller’s
Knowledge, such Seller has complied with all Laws relating to the hiring of
employees and the employment of labor, including provisions thereof relating to
immigration and citizenship (including proper completion and processing of
Forms I-9 for all employees), wages, hours, equal opportunity, work safety,
working conditions, employment of minors, collective bargaining and the payment
of social security and other Taxes.  To the
Knowledge of such Seller, there are no material labor relations problems with
respect to its Restaurants (including, without limitation, any union
organization activities, threatened or actual strikes or work stoppages or
material grievances).  To the Knowledge
of such Seller, there has been no criminal activity or the prior conviction,
indictment, guilty plea or plea of nolo
contendere on the part of any of its Restaurants’ employees or any
other actual or alleged activity or actions of any such employees that could
reasonably be expected to disqualify any such employee or such Seller from
providing services to any current or potential customers.


 


18

















 


(c)           Except as set
forth on Schedule 3.17(c), (i) such Seller is not delinquent
in payments to any of the employees at its Restaurants for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to date or amounts required to be reimbursed to such employees, and upon
termination of the employment of any such employees, neither the Buyer nor such
Seller will by reason of anything done prior to the Closing be liable to any of
such employees for severance pay or any other payments, (ii) there is no
employment or wage and hour claim pending or, to the Knowledge of such Seller,
threatened against or involving its Restaurants, (iii) there is no claim
with the U.S. Equal Employment Opportunity Commission or similar Governmental
Entity pending or, to the Knowledge of such Seller, threatened against or
involving its Restaurants, (iv) there is no unfair labor practice
complaint against such Seller pending before the National Labor Relations Board
or any other Governmental Entity relating to labor practices at its
Restaurants, (v) there is no labor strike, material dispute, slowdown or
stoppage actually pending or, to the Knowledge of such Seller, threatened
against or involving its Restaurants, (vi) no labor union currently
represents the employees of such Seller’s Restaurants, (vii) to the
Knowledge of such Seller, no labor union has taken any action with respect to
organizing the employees of its Restaurants, and (vii) neither any
grievance that might result in a Material Adverse Effect nor any arbitration
proceeding arising out of or under collective bargaining agreements is pending
and no claim thereto has been asserted against such Seller.  Such Seller is not a arty to or bound by any
collective bargaining agreement, union contract or similar agreement.


 


(d)           Except as set
forth on Schedule 3.17(d), neither the execution and delivery of this
Agreement by such Seller, nor such Seller’s consummation of the Transactions
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director, officer or employee of such Seller, under any
Plan or otherwise; (ii) increase any benefits otherwise payable under any
Plan or otherwise; or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.


 


(e)           To such Seller’s
Knowledge, no valid claim may be asserted by any third party against such
Seller or any of the Designated Persons (as hereinafter defined) with respect
to (i) the employment by, or association with such Seller’s Restaurants of
any of the present officers or employees of or consultants to such Seller (said
officers, employees and/or consultants being hereinafter collectively referred
to as the “Designated Persons”)
or (ii) the use, in connection with the Restaurants, by any of the
Designated Persons of any information which such Seller or any of the
Designated Persons is prohibited from using, in each case under any prior
agreements, arrangements or other preexisting set of facts, including, without
limitation, any such agreement or arrangement between any of the Designated
Persons, or any legal or equitable considerations applicable to, among other
things, unfair competition, trade secrets or proprietary information.


 


3.18         Employee Benefits.


 


(a)           Employee
Benefit Plans.  Schedule 3.18(a) sets
forth a true and complete list of all of such Seller’s Employee Benefit Plans
(as used in this Section 3.18, the “Plans”)
(i) that cover any present or former employees of its Restaurants (A) that
are or ever were maintained, sponsored or contributed to by such Seller or (B) with
respect to which such Seller is, could be or was, obligated to contribute or
has any Liability or potential Liability, whether direct or indirect or (ii) with
respect to which such Seller has any Liability or potential Liability on
account of the maintenance or sponsorship thereof or contribution thereto by
any present or former ERISA Affiliate of such Seller.


 


(b)           Administration
and Compliance of the Plans.  Except as set forth on Schedule 3.18(b),
with respect to each Plan of such Seller:


 


19

















 


(i)            all required,
declared or discretionary (in accordance with historical practices) payments,
premiums, contributions, reimbursements or accruals for all periods ending prior
to or as of the Closing Date have been made or properly accrued on such Seller’s
Latest Balance Sheet or, with respect to accruals properly made after the date
of its Latest Balance Sheet, on the books and records of such Seller;


 


(ii)           there is no
unfunded Liability relating to such Plan which is not reflected on the Latest
Balance Sheet of such Seller or, with respect to accruals properly made after
the date of the Latest Balance Sheet, on the books and records of such Seller;


 


(iii)          such Seller has
timely deposited all amounts withheld from employees for pension, welfare or
other benefits into the appropriate trusts or accounts, and no contribution,
premium payment or other payment has been or will be made in support of the
Plan that is in excess of the allowable deduction for federal income Tax
purposes for the year with respect to which the contribution was made or will
be made (whether under Section 162, Section 280G, Section 404, Section 419,
Section 419A of the Code or otherwise);


 


(iv)          there have been
no material violations of ERISA or other applicable Law, including, but not
limited to, rules and regulations promulgated by the Department of Labor,
the Pension Benefit Guaranty Corporation, and the Department of Treasury, in
the Plan’s administration;


 


(v)           there have been
no transactions prohibited by Section 406 of ERISA or Section 4975 of
the Code; no fiduciary (as defined in Section 3(21) of ERISA) has any
Liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration of the Plan or investment of Plan assets;


 


(vi)          no claim,
action, suit, proceeding, hearing or investigation with respect to the
administration of the Plan or the investment of Plan assets (other than routine
claims for benefits) is pending or, to the Knowledge of such Seller,
threatened; and to the Knowledge of such Seller, there is no Basis for any such
action, suit, proceeding, hearing, or investigation;


 


(vii)         such Plan is
not currently under examination or audit by the Department of Labor, the
Internal Revenue Service, or any other Governmental Entity, no matter is
pending before the Internal Revenue Service with respect to such Plan under the
Internal Revenue Service Employee Plans Compliance Resolution System Voluntary
Correction Program or Audit Closing Agreement Program, and with respect to such
Plan, such Seller has no liability (either directly or as a result of
indemnification) for (and the transactions contemplated by this Agreement will
not cause any liability for):  (A) any
excise Taxes under Section 4971 through Section 4980B, Section 4999,
Section 5000 or any other Section of the Code, (B) any penalty
under Section 502(i), Section 502(l), Part 6 of Title I or any
other provision of ERISA or (C) any excise Taxes, penalties, damages or
equitable relief as a result of any prohibited transaction, breach of fiduciary
duty or other violation under ERISA or any other applicable Law;


 


(viii)        such Seller has
classified all individuals (including but not limited to independent contractors
and leased employees) appropriately under its Plan;


 


(ix)           if the Plan is
intended to be “qualified,”
within the meaning of Section 401(a) of the Code, the Plan is either (A) a
prototype plan entitled to rely on the opinion letter issued by the Internal
Revenue Service as to the qualified status of such Plan under Section 401(a) of
the Code to the extent provided in Revenue Procedure 2005-16 or (B) has
been determined by the Internal Revenue Service to be so qualified and the
related trusts are exempt from Tax under Section 501(a) of the Code,
and nothing 


 


20

















 


has
occurred that has or could reasonably be expected to adversely affect such
reliance, qualification or exemption;


 


(x)            if the Plan is
a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of
the Code): (A) it has been operated since January 1,
2005 in good faith material compliance with Section 409A of the Code and
the Treasury Regulations promulgated pursuant to Section 409A of the Code,
and (B) no service provider (as defined in such Treasury Regulations) is
subject to additional Tax under Code Section 409A as a result of
participation in any such Plan;


 


(xi)           if the Plan is
a “group health plan” within the
meaning of Section 5000 of the Code, the Plan has been maintained in
material compliance with Section 4980B of the Code and Title I, Part 6
of ERISA (collectively, “COBRA”)
and no tax payable on account of Section 4980B of the Code has been or is
expected to be incurred;


 


(xii)          except as may
be required under Laws of general application (including but not limited to
COBRA), the Plan does not obligate such Seller to provide any employee or
former employee, or their spouses, family members or beneficiaries, any
post-employment or post-retirement health or life insurance, accident or other “welfare-type”
benefits;


 


(xiii)         such Seller has
provided the Buyer with true and complete copies, to the extent applicable, of
all documents pursuant to which the Plan is maintained and administered, the
most recent summary plan description, the four most recent annual reports (Form 5500
and attachments) and financial statements attached thereto, and all
governmental rulings, determinations, and opinions (and pending requests
therefor) issued to the Plan or on which the Plan relies; and


 


(xiv)        all reports and
filings with Governmental Entities (including the Department of Labor, the IRS
and the SEC) required in connection with the Plan have been timely made, and
all disclosures and notices required by Law or Plan provisions to be given to
participants and beneficiaries in connection with each Plan have been properly
and timely made.


 


(c)           Multiemployer
Plans, Etc.  Neither
such Seller nor any of its ERISA Affiliates are or have ever maintained or been
obligated to contribute to a Multiple Employer Plan, a Multiemployer Plan, a
Defined Benefit Pension Plan or a Plan subject to the minimum funding standards
under Section 302 of ERISA or Section 412 of the Code.


 


(d)           Effect of the
Agreement.  Except as
provided under the terms of such Plan, the consummation of the transactions
contemplated by this Agreement will not (i) cause such Plan to increase
benefits payable to any participant or beneficiary, (ii) entitle any
current or former employee of such Seller to severance pay, unemployment
compensation or any other payment, benefit or award or (iii) accelerate or
modify the time of payment or vesting.


 


3.19         Environment and Safety.


 


(a)           Except as set
forth on Schedule 3.19(a), such Seller has complied and is in compliance
with all Environmental and Safety Requirements (including without limitation
all permits, licenses and other authorizations that may be required thereunder)
for the occupation of the Leased Real Property and the operation of its Restaurants.  Such Seller has accurately prepared and
timely filed with the appropriate Governmental Entities all reports,
notifications and filings required pursuant to Environmental and Safety
Requirements affecting its real property or Restaurants.  With respect to the Leased Real Property and
Restaurants, such Seller has not received any notice of any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
against it alleging any violation of, any Liability (contingent 


 


21

















 


or
otherwise) or any corrective or Remediation obligation under any Environmental
and Safety Requirements or involving any of its current or past operations or
any real property used by such Seller. 
With respect to the Leased Real Property and Restaurants, such Seller
has not expressly or, to such Seller’s Knowledge, by operation of law, assumed,
undertaken or become subject to any Liability of any other Person under any
Environmental and Safety Requirements. 
None of the following has been installed or maintained at the Leased
Real Property during Seller’s occupancy of the Leased Real Property or, to
Seller’s Knowledge, currently exists, has existed during such Seller’s
occupancy or has ever existed at any Leased Real Property:  (i) underground storage tanks, (ii) asbestos-containing
material in any form or condition, (iii) materials or equipment containing
polychlorinated biphenyls or (iv) landfills, surface impoundments or
disposal areas.  No Environmental Lien
has attached to any Leased Real Property. 
Such Seller has not been notified that it is potentially responsible or
liable under or received any requests for information or other correspondence
concerning its Leased Real Property or Restaurants under any Environmental and
Safety Requirements.  Regarding the
Leased Real Property or the Restaurants, such Seller has not entered into or
received any Orders pursuant to Environmental and Safety Requirements under
which there are continuing obligations.


 


(b)           Neither such
Seller nor, to its Knowledge, any previous owner or operator of the real
property associated with each Restaurant, has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or Released any
substance, including without limitation any Hazardous Material, or owned or
operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would give
rise to Liability pursuant to any Environmental and Safety Requirement,
including any Liability for response costs, corrective action costs, personal
injury, contribution, property damage, natural resources damage or attorney
fees, or any investigative, corrective action or Remediation.  To such Seller’s Knowledge, the transactions
contemplated by this Agreement do not impose upon such Seller any obligations
under any Environmental and Safety Requirements for site investigation or
Remediation, or notification to any Governmental Entities or third parties.  To such Seller’s Knowledge, no known past or
present facts, events or conditions relating to the Leased Real Property or the
Restaurants of such Seller would prevent compliance by such Seller or the Buyer
with, or give rise to any Liability or investigatory, corrective or Remediation
obligation of the Buyer with respect to Environmental and Safety Requirements,
including without limitation, any Liability related to environmental
contamination or violations of health and safety requirements.


 


(c)           Such Seller has
provided the Buyer with true, correct, and complete copies of all environmental
reports and studies in the possession, custody or control of such Seller with
respect to the operation of its Restaurants or any of its real property, and,
to the Knowledge of such Seller, there are no other environmental reports or
studies with respect thereto.


 


3.20         Suppliers.  Schedule 3.20 lists the ten
largest suppliers of materials, products or services to the Sellers, taken as a
whole, during the 12-month period ended December 31, 2007.  Except as set forth on Schedule 3.20,
no such supplier has terminated or significantly reduced its business with such
Seller in the last 12 months.  Such
Seller has not received any notice and does not otherwise have any reason to
believe that any of the suppliers listed in Schedule 3.20 intends
to terminate or reduce its business with such Seller.


 


3.21         Regulatory Compliance.  Except as set forth on Schedule 3.21,
since December 31, 2001, no Governmental Entity regulating such Seller’s
Restaurant has commenced, or to the Knowledge of such Seller, threatened to
commence, any investigation or proceeding relating to the operation of such
Restaurant, and such Seller has not been responsible for, subject to, become
aware or otherwise been notified of, and does not now have any Liability (and
to the Knowledge of such Seller there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or 


 


22

















 


demand
against it giving rise to any Liability), arising out of any injury to
individuals, animals or property as a result of or in connection with any of
the services performed by such Seller or any food or beverage sold at such
Restaurant.


 


3.22         Insider Interests.  Except as set forth on Schedule 3.22,
and except for compensation to regular employees employed at the Restaurants,
no Affiliate of such Seller is currently (i) a Party to any transaction or
contract involving the Restaurants, or (ii) the direct or indirect owner
of an interest in any Person which is a competitor or supplier of the
Restaurants (other than non-affiliated holdings in publicly held
companies).  Except as set forth on Schedule 3.22,
neither such Seller nor any Affiliate of such Seller is a guarantor or
otherwise liable for any Liability (including indebtedness) of such Seller or
related to the operations of the Restaurants.


 


3.23         Improper Payments.  Neither such Seller nor to such Seller’s
Knowledge any manager, officer, employee, agent or any other Person acting on
its behalf, has directly or indirectly, given or agreed to illegally give any
money, gift or similar benefit to any customer, supplier, employee or agent of
a customer or supplier, or official or employee of any Governmental Entity or
other Person who was or is in a position to materially help or hinder the
operations of the Restaurants (or illegally assist in connection with any
actual or proposed transaction).


 


3.24         Brokers.  Such Seller has not engaged an agent, broker,
investment banker, Person or firm (other than such Seller’s attorneys and
accountants) to act on behalf, or under the authority, of such Seller.  To the Knowledge of such Seller, no Person
will be entitled to any transaction-related fee or commission from the Buyer or
such Seller in connection with any of the transactions contemplated hereby.


 


3.25         Restaurant Operations.  There is no pending, or to
the Knowledge of such Seller, threatened or proposed proceeding or governmental
action to modify the zoning classification of, or to condemn or take by the
power of eminent domain (or to purchase in lieu thereof), or to impose special
assessments on, or otherwise to take or restrict in any way the right to use,
alter or occupy all or any part of any of the Restaurants in any material
respect.


 


3.26         Gift Cards.   Such Seller’s Latest Balance
Sheet reflects all liabilities of such Seller with respect to gift cards,
except for liabilities with respect to gift cards sold in the ordinary course
of business after the date of the Latest Balance Sheet.  Since January 1,
2005, such Seller has not recorded any revenue with respect to sales of
gift cards other than amounts recorded upon redemption of the gift card.


 


3.27         Disclosure.


 


(a)           No
representation or warranty of such Seller in this Agreement (including the
Schedules attached hereto) omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.


 


(b)           There is no
fact known to such Seller that has specific application to such Seller or the
Restaurants (other than general economic or industry conditions or those
specific to Red Robin restaurants generally) that materially adversely affects
or, as far as such Seller can reasonably foresee, materially threatens, the
Purchased Assets, business, prospects, financial condition, or results of
operations of such Seller or the Restaurants that has not been set forth in
this Agreement including the Schedules.


 


23

















 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE BUYER


 


As a material inducement to
the Sellers to enter into and perform their obligations under this Agreement,
the Buyer represents and warrants to the Sellers as follows:


 


4.1           Organization.  The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.


 


4.2           Authorization of Transaction.  The Buyer has full power and authority to
execute and deliver each Document to which it is a party and any and all
instruments necessary or appropriate in order to effectuate fully the terms and
conditions of the Documents and all related transactions and to perform its
obligations under the Documents.  Each
Document to which the Buyer is a party has been duly authorized by all
necessary corporate action on the part of the Buyer and has been duly executed
and delivered by the Buyer and constitutes the valid and legally binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms and conditions, subject to applicable bankruptcy, insolvency and similar
Laws affecting the enforceability of creditors’ rights generally, general
equitable principles, the discretion of courts in granting equitable remedies
and matters of public policy.


 


4.3           No Restrictions Against Purchase
of Assets.  Neither the
execution, delivery and performance of the Documents nor the consummation of
the transactions contemplated thereby, nor compliance by the Buyer with any of
the provisions thereof, will (i) violate, conflict with, or result in a
material breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
any of the terms, conditions or provisions of the Fundamental Documents of the
Buyer, or under any note, bond, mortgage, indenture, deed of trust, or other
agreement to which the Buyer is bound, or by which the Buyer or any of its
properties or assets may be bound or affected, which in either case would prevent
the consummation by the Buyer of the transactions contemplated hereby or by the
Documents, or (ii) violate any Law applicable to the Buyer or any of its
properties or assets which would prevent the Buyer’s consummation of the
transactions contemplated hereby or by the Documents.  No consent or approval by, notice to, or
registration with, any Governmental Entity is required on the part of the Buyer
in connection with the execution and delivery of this Agreement or the
consummation by the Buyer of the transactions contemplated hereby which would
prevent the Buyer’s consummation of the transactions contemplated hereby.


 


4.4           Disclosure.  No representation or warranty of the Buyer in
this Agreement (including the Schedules attached hereto) omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.


 


ARTICLE V

PRE-CLOSING COVENANTS


 


5.1           Employees.  Immediately after the Closing, Buyer will
offer to hire substantially all of the Sellers’ employees.  Buyer will provide written notice to the
Sellers within five (5) business days after the date hereof of the names
of the employees that it does not intend to hire.  It is understood and agreed that (a) Buyer’s
expressed intention to extend offers of employment as set forth in this Section shall
not constitute any commitment, contract or understanding (expressed or implied)
of any obligation on the part of Buyer to a post-Closing Date employment
relationship of any fixed term or duration or upon any terms or conditions
other than those that Buyer may establish pursuant to individual offers of
employment, and (b) the employment to be offered by Buyer will be “at will”
and may be terminated by Buyer or by an employee at any time for any reason
(subject to any written commitments to the contrary made by Buyer or an
employee).  Nothing in this Agreement
shall be deemed to prevent or restrict in any way the right of 


 


24

















 


Buyer
to terminate, reassign, promote or demote any of the hired employees after the
Closing Date or to change adversely or favorably the title, powers, duties,
responsibilities, functions, locations, salaries, other compensation or terms
or conditions of employment of such employees.


 


5.2           Cooperation and Best Efforts to
Complete Transaction.


 


(a)           Each Party
shall cooperate with the other and use its reasonable best efforts to (i) obtain
all necessary and appropriate consents and authorizations of third parties and
Government Entities to the Transactions contemplated hereunder, (ii) satisfy
all requirements prescribed by law, and all conditions set forth in this
Agreement for the consummation of the Transactions contemplated herein, and (iii) effect
the Transactions contemplated herein in accordance with this Agreement at the
earliest practicable date.


 


(b)           The Sellers
shall not interfere with the Buyer’s efforts to cause key employees of the
Restaurants (defined as employees performing the functions of general manager,
assistant manager, and kitchen manager) to remain as employees of the Buyer
following the Transaction; provided such efforts do not interfere with the
ongoing operations of the Restaurants.


 


5.3           Conduct of
Restaurant By The Sellers Prior to the Closing Date.  During the period from the date of this
Agreement to the Closing Date, the Sellers shall operate the Restaurants only
in the ordinary course.


 


(a)           Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Closing Date, the Sellers shall:


 


(i)            use
commercially reasonable efforts to preserve and maintain the services of their
employees, their relationships with suppliers and customers;


 


(ii)           use
commercially reasonable efforts to preserve their current level of sales
volume;


 


(iii)          maintain their
existing policies of insurance at current levels;


 


(iv)          maintain the
Purchased Assets in accordance with each Restaurant’s normal maintenance
schedule;


 


(v)           purchase and
maintain Inventory for each Restaurant in such quantities and quality as
necessary to operate the Restaurants in accordance with historical practice;


 


(vi)          make all
payments for rent or other amounts due under the Assumed Real Property Leases
when such payments become due; and


 


(vii)         repair the items
set forth on Schedule 5.3(a)(vii).


 


(b)           Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Closing Date, without the prior written consent of the
Buyer, the Sellers shall not:


 


(i)            enter into or
commit to enter into any contract, agreement or commitment that would be
required to be set forth on Schedule 3.14, other than in the ordinary
course of business;


 


(ii)           accelerate, terminate, materially modify or amend any agreement,
contract, document, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving the 


 


25

















 


payment of $25,000 or more or which is otherwise
material, individually or in the aggregate, to the Sellers or the Restaurants;


 


(iii)          declare, set aside, increase or pay any dividend, or declare or make any
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any of its capital stock, other than amounts that will
not in the aggregate, adversely affect the Sellers’ ability to operate the
Restaurants in the ordinary course prior to the Closing Date;


 


(iv)          enter into or amend any employment or severance contract with any Person
employed by any Seller or increase the rate of compensation for or pay any
bonuses to any of any its officers or employees, except for hiring and awarding
raises (in amounts that are not material) to non-officer Restaurant employees
in the ordinary course of business consistent with past practice;


 


(v)           pay any fee, interest, royalty or any other payment of any kind to any
Affiliate thereof that would adversely affect the Sellers’ ability to
operate the Restaurants in the ordinary course prior to the Closing Date;


 


(vi)          except in connection with a refinancing of existing Funded Indebtedness
in order to facilitate the full payment of such indebtedness at Closing, incur
any indebtedness for borrowed money that uses any of the Purchased Assets as
security, or guarantee any such indebtedness of another Person not an Affiliate,
enter into any agreement to maintain any financial condition of another Person
not an Affiliate or enter into any arrangement having the economic effect of
any of the foregoing, or make any loans, advances or capital contributions to,
or investments in, any other Person not an Affiliate;


 


(vii)         except in connection with a refinancing of existing Funded Indebtedness
in order to facilitate the full payment of such indebtedness at Closing, mortgage,
pledge or otherwise encumber any of the Purchased Assets or suffer to exist any
Lien on any of the Purchased Assets, except for Permitted Liens;


 


(viii)        sell, lease,
license, transfer, assign or otherwise dispose of any Purchased Assets, except
for supplies, equipment and inventory disposed of in the ordinary course of
business;


 


(ix)           make or agree
to make any new capital expenditures in connection with the Restaurants outside
the ordinary course;


 


(x)            make any acquisition of assets other than acquisitions of inventory,
supplies and equipment related to the Restaurants in the ordinary course of
business;


 


(xi)           delay or postpone the payment of accounts payable or other Liabilities
outside the ordinary course of business;


 


(xii)          commence, cancel, compromise, waive, release or settle any material
right, claim or Proceeding (or series of related rights, claims or
Proceedings);


 


(xiii)         grant any license or sublicense of any rights under or with respect to
any of such Seller’s Intellectual Property;


 


(xiv)        make or pledge to make any loan (other than among the Sellers) or any
charitable contribution greater than $5,000;


 


26

















 


(xv)         intentionally materially decrease the weekly average inventory or
supplies of the Restaurants or amount of Till Cash;


 


(xvi)        commit or omit
to do any act that would cause a breach of any covenant contained in this
Agreement or would cause any representation or warranty contained in this
Agreement to become untrue in any material respect;


 


(xvii)       commit any
material violation of applicable Law;


 


(xviii)      fail to
maintain its books, accounts and records in the usual manner on a basis
consistent with that heretofore employed or change any accounting method,
policy, practice or application previously employed;


 


(xix)         fail to pay
when due, or to make adequate provision for the payment of consistent with past
practices, all Taxes, interest payments and penalties due and payable to any
Governmental Entity, or any other taxing authority, except those being
contested in good faith by appropriate proceedings and for which sufficient
reserves have been established;


 


(xx)          adopt any new
employee benefit plan or terminate or withdraw from, or make any material
change in or to, any existing employee benefit plans (except for the
termination of such plans in connection with Closing); or


 


(xxi)         authorize any
of, or agree or commit to do any of, the foregoing actions.


 


5.4           Press
Releases.  Prior to
the Closing of the Transactions, and except as may otherwise be required by law
or stock market requirements, the timing and content of all press releases and
other public announcements and all announcements to each Seller’s customers,
suppliers, landlords or employees relating to the transactions will be
determined jointly by the Buyer and the Sellers.


 


5.5           Access to
Information and Employees.  Prior to the Closing Date and upon advance
notice, the Sellers shall afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of the Buyer, reasonable
access during normal business hours to the premises, books and records, and all
financial and legal information with respect to the Restaurants as the Buyer shall reasonably request,
including access to accountants and attorneys knowledgeable with respect to the
Restaurants.


 


5.6           Confidentiality.  The Parties agree that the
Confidentiality Agreement executed by the Parties on January 17, 2008 (the
“Confidentiality Agreement”)
shall continue in full force and effect through the Closing Date at which time
it shall terminate.  If this Agreement is
terminated pursuant to Article VIII, the Confidentiality Agreement shall
survive in accordance with its terms.


 


5.7           Consultation
and Reporting.  During the
period from the date of this Agreement to the earlier of the termination of
this Agreement pursuant to Article VIII or the Closing Date, the Sellers
will confer on a regular and frequent basis with the Buyer to report material
operational matters and to report on the general status of ongoing operations
including profits margins, cost increases and adverse trends.  The Sellers will notify the Buyer of any
unexpected emergency or other change in the normal operation of the Restaurants
and of any governmental complaints, investigations, adjudicatory proceedings,
or hearings (or communications indicating that the same may be contemplated)
and will keep the Buyer fully informed of such events and permit the Buyer
prompt access to all materials in connection therewith.  The Parties shall, upon obtaining knowledge
of any of the following, promptly notify each other of:


 


27

















 


(a)           Any notice or
other communication from any Person alleging that the consent of such Person is
or may be required in connection with the Transaction contemplated herein;


 


(b)           Any notice or
other communication from any Governmental Entity in connection with the
Transaction contemplated herein; and


 


(c)           Any material
actions, suits, claims, investigations or other judicial proceeding commenced
or threatened against any such Party.


 


5.8           Update
Schedules. 
Each Party hereto will promptly disclose to the others any information
contained in its representations and warranties and on the related Schedules
that, because of an event occurring after the date hereof, is incomplete or no
longer correct, provided,  however that none of such disclosures will be
deemed to modify, amend or supplement the representations and warranties of
such Party, unless the other Parties consent to such modification, amendment or
supplement in writing.


 


5.9           Franchise
Agreements.   Until the
Closing Date, the Sellers shall continue to be bound by and shall comply with
all provisions of the Franchise Agreements in a manner reasonably designed to
maintain the current operations of the Restaurants.  If there is any conflict between this
Agreement and the Franchise Agreements, this Agreement shall control.


 


5.10         Transition Activities.


 


(a)           Beginning at
the close of business on the day immediately preceding the Closing Date, the
Sellers shall provide unlimited access to each of the Restaurants to the Buyer
and its representatives.  At such time,
the Buyer shall be entitled to take all actions necessary, at the Buyer’s
expense, to prepare such Restaurant for operations at the start of business on
the Closing Date, including, without limitation, to remove and/or install at
such Restaurant any additional fixtures, furniture, equipment or other property
of the Buyer.


 


(b)           In the event
the Buyer reasonably determines that it will be unable during the period of
time provided in Section 5.10(a) to install any necessary equipment
or other property or otherwise prepare any Restaurant for the commencement of
operations at the start of business on the Closing Date, the Sellers shall
provide reasonable access to such Restaurant during normal business hours on
each day prior to the Closing Date and allow the Buyer to take all necessary actions, at the Buyer’s expense,
in order to prepare such Restaurant for commencement of operations by the Buyer
on the Closing Date, including, without limitation, to install at such
Restaurant any additional fixtures, furniture, equipment or other property of
the Buyer; provided, however, that the pre-Closing activities of
the Buyer pursuant to this Section 5.10(b) shall not materially
interfere with the ordinary course operations of the Restaurant by the Sellers
prior to the Closing Date.


 


(c)           At such time
and locations as shall be mutually agreed by such Seller and the Buyer, the
Sellers shall make available its employees, including its regional managers and
general managers, to participate in training sessions with the Buyer’s
representatives.  As provided in Section 2.4,
at Closing, the Buyer shall pay such Seller (i) all reasonable
out-of-pocket costs incurred by such Seller or its employees in connection with
the training sessions or other meetings requested by the Buyer or its
Affiliates, and (ii) compensation costs paid by such Seller at such
employee’s normal rate for the period of time during which such employee was
unable to fulfill his or her normal employment functions as a direct result of
such training sessions or other meetings requested by the Buyer or its
Affiliates (together, “Training Costs”).


 


28
















 


(d)           If this Agreement is terminated pursuant to Article VIII,
(i) the Buyer shall remove any fixtures, furniture, equipment or other
property installed by the Buyer and repair any damage caused by such
installation and/or removal, and (ii) the Buyer shall promptly pay to
Sellers any unreimbursed Training Costs incurred pursuant to Section 5.10(c).


 


ARTICLE VI

CONDITIONS TO OBLIGATION OF THE BUYER


 


The obligation of the Buyer
to consummate the transactions to be performed by it in connection with Closing
is subject to satisfaction or waiver of the following conditions as of Closing:


 


6.1           Representations and Warranties.  The representations and
warranties of the Sellers set forth in Article III that are qualified as
to materiality, Material Adverse Effect or Material Adverse Change, shall be
true and correct on and as of the Closing Date as if made on the Closing Date
and those that are not so qualified shall be true and correct in all material
respects on and as of the Closing Date as if made on the Closing Date (except
for any such representations and warranties that, by their terms, speak only as
of a specific date), except in cases in which the failure of the
representations and warranties to be true and correct would not have a Material
Adverse Effect on the Sellers.


 


6.2           Covenants
and Obligations of the Sellers.  Each Seller shall have
performed and complied in all material respects with all of its covenants and
obligations under this Agreement which are to be performed or complied with by
such Seller prior to the Closing Date.


 


6.3           Consents.  All consents by third parties (including
Governmental Entities) shall have been obtained that are required for the
consummation of the Transactions contemplated hereby, including under any
Assumed Contract, Assumed Real Property Lease or any Permit, including any
Liquor License.


 


6.4           Absence of Material Adverse Change.  Since December 31, 2007,
there shall have been no Material Adverse Change suffered with respect to the
Sellers or the Restaurants in the aggregate and there shall have been no
material casualty loss or damage to any Restaurant, whether or not covered by
insurance.  Notwithstanding the
foregoing, if any single Restaurant (but not more than one) has suffered such a
material casualty loss or damage (the “Damaged
Restaurant”), and provided that the other conditions set forth in Article VI
and VII are met (other than Section 6.1, solely with respect to a
representation or warranty that is not true and correct at Closing as a result
of such material casualty loss or damage), the Parties agree to enter into such
amendments or supplements to this Agreement as may be necessary to close the
Transaction with respect to all Restaurants other than the Damaged
Restaurant.  Such amended Agreement shall
provide that the Buyer shall (a) deduct the amount of consideration
allocable to the Damaged Restaurant, (b) deduct a proportionate amount of
the funds to be deposited with the Indemnification Escrow Agent, and (c) not
be obligated to purchase any Purchased Assets or assume any Assumed Liabilities
relating to the Damaged Restaurant.


 


6.5           Absence of
Litigation.  As of the
Closing, there shall not be (a) any Order of any nature issued by a
Governmental Entity with competent jurisdiction directing that the Transactions
as provided for herein or any material aspect of them not be consummated as
herein provided or (b) any Proceeding before any Governmental Entity
pending wherein an unfavorable Order would prevent the performance of this
Agreement or the other Documents or the consummation of any material aspect of
the Transactions, declare unlawful any material aspect of the Transactions,
cause any material aspect of the Transactions to be rescinded or materially and
adversely affect the right of the Buyer to own, operate or control the
Purchased Assets or the Restaurants.


 


29

















 


6.6           Termination
of Plans.  The Sellers
shall control the timing of the termination of the Plans.  All obligations of the Sellers under the
Plans to employees as of the Closing Date (including unused vacation) shall
have been paid by the Sellers on or before the Closing Date to the extent the
same have become due.  To the extent
required by applicable law, the Sellers shall provide COBRA continuation
coverage (within the meaning of Section 4980B of the Code and the Treasury
regulations thereunder) to all individuals who are “M & A qualified beneficiaries” (within the meaning
assigned to such term under Q&A-4 of Treasury Regulation Section 54.4980B-9)
with respect to the sale of the Purchased Assets to the Buyer for the duration
of the period to which such individuals are entitled to such coverage.  The Buyer shall take any and all necessary
actions to ensure that such coverage is communicated to M&A qualified beneficiaries
(to the extent required by applicable law) and that such coverage is provided
in accordance with applicable law.


 


6.7           Franchise
Agreements.  The Sellers shall have paid any
and all payments required to be paid under the Franchise Agreements for all
periods up to but excluding the Closing Date, provided that any amounts due
with respect to the Sellers’ operation of the Restaurants during the period in
which the Closing Date occurs shall be paid by the Sellers to the Buyer in the
ordinary course following the Closing Date.


 


6.8           Funded
Indebtedness.  All Funded
Indebtedness of the Sellers shall have been paid in full and all Liens in
connection therewith terminated and released.


 


6.9           New Real
Property Leases.  The Buyer shall have
received sufficient documentation evidencing the termination of the Affiliate
Leases.  The Buyer shall have entered
into a real property lease with 2020 Investments, LLC, a Wisconsin limited
liability company or one of its Affiliates for each Restaurant located on the
Owned Real Property in a form mutually agreeable between the Buyer and 2020
Investments, LLC (the “New Leases”).


 


6.10         Permits and Liquor Licenses.  The Buyer shall have obtained from the
issuing Governmental Entity, all Permits, including Liquor Licenses, necessary
for the Buyer’s operation of the Restaurants.


 


6.11         Documents.  All of the Documents to be executed and
delivered in connection with such Closing shall have been duly executed and
delivered, as applicable, by the Sellers and shall be in full force and effect.


 


6.12         Non-Solicitation
Agreements.  The Buyer shall have entered into a
Non-Solicitation Agreement with each of the parties set forth on Schedule 2.3(a)(iv).


 


6.13         Opinion of
Counsel.  The Buyer shall have received a legal opinion from Michael Best &
Friedrich LLP in form and substance reasonably acceptable to the Buyer.


 


6.14         Title
Policies.  The Title Company shall issue to the Buyer an ALTA Leasehold Policy of
Title Insurance with respect to the Leased Real Property, with exceptions
reasonably acceptable to the Buyer, and in the amounts, as the pro forma
policies previously delivered to the Buyer by Title Company and
concurrently delivered to the Sellers (the “Title
Policies”).  The Buyer  shall pay for the cost of a standard coverage
leasehold policy with respect to the Assumed Real Property Leases and New
Leases, as applicable, and the Buyer shall pay for the cost of any
extended coverage and endorsements requested by the Buyer. 
Prior to the Closing Date, the Parties shall mutually agree on the
insured value for each of the Title Policies.


 


6.15         Stock Purchase Agreement.  The transactions contemplated by the Stock
Purchase Agreement shall have been consummated.


 


30

















 


ARTICLE VII

CONDITIONS TO OBLIGATIONS OF THE SELLERS


 


The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing Date is subject to satisfaction or waiver of the following
conditions as of the Closing:


 


7.1           Delivery of Consideration.  The Buyer shall have delivered the
Consideration in accordance with the provisions of Section 2.3.


 


7.2           Representations and Warranties.  The representations and warranties of the
Buyer set forth in Article IV, that are qualified as to materiality shall
be true and correct on and as of the Closing Date as if made on the Closing
Date and those that are not so qualified shall be true and correct in all
material respects on and as of the Closing Date as if made on the Closing Date,
except for any such representations and warranties that, by their terms, speak
only as of a specific date, and except where the failure of representations and
warranties to be true and correct would not reasonably be expected to have a
Material Adverse Effect on Buyer.


 


7.3           Covenants
and Obligations of the Buyer.  The  Buyer shall have
performed and complied in all material respects with all of its covenants and
obligations under this Agreement which are to be performed or complied with by the Buyer prior to the Closing Date.


 


7.4           Absence of Litigation.  As of the Closing, there shall not be (a) any
Order of any nature issued by a Governmental Entity with competent jurisdiction
directing that the transactions provided for herein or any material aspect of
them not be consummated as herein provided, or (b) any Proceeding before
any Governmental Entity pending wherein an unfavorable Order would prevent the
performance of this Agreement or the other Documents or the consummation of any
material aspect of the transactions or events contemplated hereby, declare
unlawful any material aspect of the transactions or events contemplated by this
Agreement or the other Documents or cause any material aspect of the
transaction contemplated by this Agreement or the other Documents to be
rescinded.


 


7.5           Governmental Filings.  All filings or registrations with any
Governmental Entities which are required for or in connection with the
execution and delivery by the Buyer of the Documents or the consummation of the
transactions contemplated thereby shall have been obtained or made.


 


7.6           Documents.  All of the Documents shall have been duly
executed and delivered by the Buyer and shall be in full force and effect.


 


7.7           Stock Purchase Agreement.  The transactions
contemplated by the Stock Purchase Agreement shall have been consummated.


 


ARTICLE VIII

TERMINATION


 


8.1           Termination Prior to Closing.  This Agreement may
be terminated and the Transactions abandoned at any time before the Closing
Date as follows:


 


(a)           Mutual Consent.  By the mutual consent of the Sellers and the
Buyer;


 


31

















 


(b)           Material
Breach.  By either the Buyer or the Sellers if there has been
a material breach by the other Party with respect to any representation or
warranty contained in this Agreement or of any covenant contained in this
Agreement, which breach or inaccuracy:


 


(i)            if a breach by any Seller, (1) is not
cured by such Seller within thirty (30) days after receiving written notice
thereof from the Buyer to the extent
that such breach or inaccuracy is capable of being cured; and (2) results
in the failure of the Buyer’s
conditions in Section 6.1 or 6.2 of this Agreement to be satisfied, and
such condition is not waived by the Buyer;
or


 


(ii)           if a breach by the Buyer, (1) is not
cured by the Buyer within thirty
(30) days after receiving written notice thereof from the Sellers to the extent
that such breach or inaccuracy is capable of being cured; and (2) results
in the failure of the Sellers’ conditions in Section 7.2 or 7.3 of this
Agreement to be satisfied, and such condition is not waived by the Sellers.


 


(c)           Abandonment.  By either the Buyer or the Sellers if (i) all
conditions to the Closing required hereby have not been met or waived on or
before June 16, 2008, or (ii) the Closing has not occurred on or
before such date; provided, however, that neither the Sellers nor
the Buyer shall be entitled to terminate this Agreement pursuant to this
subparagraph (c) if such Party has been in material violation of any of
its representations, warranties, or covenants in this Agreement and such
violation has been a material factor in delaying the Closing;


 


(d)           Government Action.  By either the Buyer or the Sellers, if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
transactions and such order, decree, ruling or other action shall have become
final and nonappealable.


 


8.2           Effect of Termination.  Upon termination of this Agreement pursuant
to this Article VIII prior to the Closing, and except for the Buyer’s
obligation to pay amounts pursuant to Section 5.10(d), this Agreement
shall be void and of no effect, and shall result in no obligation of or
liability to any Party or their respective directors, officers, employees,
agents or shareholders, unless such termination was the result of breach of any
representation, warranty, covenant or agreement in this Agreement in which case
the Party who so breached the representation, warranty, covenant or agreement
shall be liable to the other Party for appropriate damages.


 


ARTICLE IX

ADDITIONAL AGREEMENTS


 


9.1           Survival.  The representations,
warranties and covenants set forth in this Agreement and in any certificate or
other writing delivered in connection with this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby, until the
earlier of 5:00 p.m. Colorado time on the date that is twelve (12) months
following the Closing Date, following which time and date no claim for
indemnification or otherwise may be made hereunder; provided, however,
that indemnification claims for Adverse Consequences with respect to either the
inaccuracy of representations and breach of warranties contained in Section 3.1
(Organization and Capitalization of the
Sellers), 3.2 (Authorization of
Transaction), 3.12 (Tax
Matters), 3.18 (Employee Benefits)
or 3.19 (Environment and Safety)
may be asserted until the expiration of the applicable statute of limitations.


 


9.2           Indemnification.


 


(a)           Each Seller agrees, jointly and severally,
to indemnify, defend and hold harmless the Buyer and its Affiliates,
successors, assigns, officers, directors, stockholders and employees
(collectively, 


 


32

















 


the “Buyer Group”)
against any Adverse Consequences that any member of the Buyer Group may suffer,
sustain or become subject to as the result of, or arising from or caused by:


 


(i)            the breach by any Seller of any of its
representations, warranties or covenants contained in this Agreement, any other
Document or in any exhibit, schedule or attachment hereto or thereto or in any
certificate delivered by such Seller in connection herewith or therewith; and


 


(ii)           any Excluded Liability of any Seller.


 


(b)           The Buyer shall indemnify and hold harmless
the Sellers and their respective successors, assigns, managers, officers,
directors, stockholders, members and employees (collectively, the “Seller Group”) against any Adverse
Consequences that any member of the Seller Group may suffer, sustain or become
subject to as the result of, arising from or caused by:


 


(i)            a breach of any representation, warranty,
covenant or agreement by the Buyer contained in this Agreement, any other
Document or in any exhibit, schedule or attachment hereto or thereto or in any
certificate delivered by the Buyer in connection herewith or therewith;


 


(ii)           the Buyer’s ownership of the Purchased
Assets or operation of the Restaurants on or after the Closing Date;


 


(iii)          any Assumed Liability; and


 


(iv)          Training Costs not previously reimbursed or
credited to the Sellers.


 


(c)           Notwithstanding
the foregoing, (i) no Seller shall be required to indemnify the Buyer
Group for Adverse Consequences based on Section 9.2(a) (or a
proceeding related thereto) until the aggregate amount of all Adverse
Consequences sustained by the Buyer Group exceeds $200,000 as it relates to
9.2(a)(i) and $100,000 as it relates to 9.2(a)(ii) (“Threshold”), provided  that, in the event the aggregate amount of
Adverse Consequences exceeds the Threshold, the Sellers shall be liable to
indemnify the Buyer Group for only the amount of Adverse Consequences in excess
of the Threshold; and (ii) the Sellers’ obligations to indemnify the Buyer
Group based on Section 9.2(a)(i) hereunder, in the aggregate, shall
not exceed $3,000,000 (“Cap”).  For the avoidance of doubt, the Cap shall not
apply to the Sellers’ indemnification obligations for Adverse Consequences
based on Section 9.2(a)(ii) or an intentional or willful breach of
the representations made in this Agreement by one or more of the Sellers.  The Buyer’s right to seek payment of any
indemnification claim from the Escrow Agent shall be governed by this Agreement
and the Indemnification Escrow Agreement.


 


9.3           Indemnification Procedures.


 


(a)           If any third party shall notify any Party to
this Agreement (the “Indemnified Party”)
with respect to any matter which may give rise to a claim (a “Third Party Claim”) for indemnification against any other
Party to this Agreement (the “Indemnifying
Party”) under Section 9.2, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided,  however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any liability or
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced by the delay. 
Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 30 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party is electing to defend the Indemnified Party in respect of the
Adverse Consequences the Indemnified Party suffers resulting from the Third
Party Claim, (B) the 


 


33

















 


Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, and (C) the
Indemnifying Party conducts the defense of the Third Party Claim actively and diligently.  The Indemnified Party may participate in the
defense of such claim with co-counsel of its choice; provided, however,
that the fees and expenses of the Indemnified Party’s counsel shall be at the
expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed in writing to pay such fees and expenses, (ii) the Indemnifying
Party has failed to assume the defense and employ counsel as provided herein or
(iii) a claim shall have been brought or asserted against the Indemnified
Party that by its terms would likely exceed the Cap, and there may be one or
more factual or legal defenses available to the Indemnified Party that are in
conflict with those available to the Indemnifying Party, in which case such
co-counsel shall be equitably split between the parties taking into account the
amount of damages and the Cap; and provided, however, that the
Indemnifying Party will not be required to pay the fees and expenses of more
than one separate principal counsel (and any appropriate local counsel) for all
Indemnified Parties.  If the Indemnifying
Party has assumed the defense of the Third Party Claim, the Indemnified Party
shall not consent to the entry of any judgment or enter into any settlement
with respect to such Third Party Claim without the prior written consent of the
Indemnifying Party.  If, within such
30-day period, the Indemnifying Party does not assume the defense of such
matter or fails to defend the matter in the manner set forth above, the Indemnified
Party may defend against the matter in any manner that it reasonably may deem
appropriate and may consent to the entry of any judgment with respect to the
matter or enter into any settlement with respect to such matter with the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. Subject to the Cap and the Threshold, (1) the Indemnifying Party
will reimburse the Indemnified Party promptly and periodically for the costs of
defending against such claim (including reasonable attorneys’ fees and
expenses) and (2) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of or caused by the Third Party Claim to the fullest extent provided
herein.


 


(b)           If an Indemnified Party’s notice of
indemnification does not relate to a claim or the commencement of an action or
proceeding by a third party, the Indemnifying Party shall have 30 days after
receipt of such notice to object to the subject matter and the amount of the
claim for indemnification set forth in such notice by delivering written notice
thereof to the Indemnified Party.  If the
Indemnifying Party does not so object within such 30-day period, it shall be
conclusively deemed to have agreed to the matters set forth in such notice of
indemnification, and the amount of the
claim for indemnification, subject to the Cap and the Threshold, if applicable,
shall be promptly paid to the Indemnified Party as follows: (i) if the
Sellers are the Indemnifying Party, from the Escrow (to the extent of all funds
in the Escrow) by the Escrow Agent, without the necessity of further action as
provided in the Indemnification Escrow Agreement; and (ii) if subsection (i) is
inapplicable or to the extent the funds in the Escrow are inadequate, the
Indemnifying Party shall thereupon pay the Indemnified Party for the amount
claimed for indemnification, on demand, in cash.  If the Indemnifying Party sends notice to the
Indemnified Party objecting to the matters set forth in such notice of
indemnification, the Parties shall use their best efforts to settle such claim
for indemnification.  If the Parties are
unable to settle such dispute, then the Indemnified Party shall seek resolution
of the dispute by initiating litigation in any jurisdiction in which litigation
arising under this Agreement may be commenced by the Parties hereto.


 


(c)           Any payment of a claim for indemnification
shall be reduced by any insurance proceeds paid or payable to such Indemnified
Party or otherwise incurring to the benefit of such Indemnified Party in
connection with such claim.


 


(d)           Exclusive
Remedy.  Notwithstanding
any other provision of this Agreement the Parties acknowledge and agree that
the indemnification obligations under this Article IX shall be the
exclusive remedy of the Parties with respect to the Documents and the Parties
hereby waive all statutory, equitable 


 


34

















 


or common law rights and remedies that they may otherwise have with
respect to the Documents, provided  however, that (i) the
Parties may seek injunctive relief, including specific performance, (ii) in
the event this Agreement is terminated pursuant to Section 8.1(b), the
Threshold shall not apply, but out of pocket costs and expenses incurred prior
to the date of breach (capped at $200,000) shall be the maximum monetary remedy
therefor, and (iii) nothing contained in this Section 9.3(d) shall
be interpreted or construed to attempt to waive or limit what cannot be waived
or limited by contract under Delaware law.


 


9.4           Transaction
Expenses.  The Buyer
shall pay all of its expenses incurred in connection with the Transactions
contemplated hereby.  The Sellers shall
pay all of their expenses incurred in connection with the Transactions
contemplated hereby.  This provision shall
not limit any Party’s right to include expenses in any claim for damages
against any other Party who breaches a legally binding provision of the
Documents.


 


9.5           Transaction
Taxes.  The Sellers
shall bear and pay, and shall reimburse the Buyer if the Buyer is held
responsible for, any sales, use, transfer, stamp, registration, value added or
similar taxes imposed on the sale, conveyance or transfer of the Purchase
Assets.


 


9.6           Further Assurances; Transition
Assistance.


 


(a)           Each of the Parties agrees that it will from
time to time on or after each Closing promptly do, execute, acknowledge and
deliver and will cause to be done, executed, acknowledged and delivered, all
such further acts, deeds, certificates, bills of sale, assignments, transfers,
conveyances, powers of attorney, assurances and other documents as may be
reasonably requested by any of the other Parties for better assigning,
transferring, granting, conveying, assuring and conferring right, title and
interest to the Buyer of the Purchased Assets and for the better assumption by
the Buyer of the Assumed Liabilities or otherwise fulfill the obligations
related to the transactions contemplated by the Documents.  Without limiting the generality of the
foregoing, the Parties agree to cooperate with each other and to provide each
other with all information and documentation reasonably necessary to permit the
preparation and filing of all federal, state, local, and other Tax returns and
Tax elections with respect to the Restaurants.


 


(b)           For a period of five years following the
Closing Date, the Sellers will maintain all books,
records and other materials used or compiled in connection with the
operation of the Restaurants, including, without limitation, all records of
electronic communication, and shall provide the
Buyer or its representatives with prompt access to such books and
records as the Buyer may reasonably
request upon five (5) Business Days’ advance notice in order to operate
the Restaurants in the ordinary course of business.


 


(c)           Except for Funded Indebtedness and related
agreements, the Buyer shall be responsible for and pay, and shall reimburse the
Sellers if the Sellers pay, all fees, penalties or liquidated damages related
to the termination of Contracts that are not Assumed Contracts.


 


9.7           Allocation
Ad Valorem Taxes.  The Sellers shall pay any Liability for ad
valorem taxes and assessments (including any special or supplemental
assessments) on the Purchased Assets allocable to periods ending before the
Closing Date (without regard to when such taxes are assessed or payable).   The Buyer shall pay any Liability for ad
valorem taxes and assessments (including any special or supplemental
assessments) on the Purchased Assets allocable to periods ending on or after
the Closing Date (without regard to when such taxes are assessed or
payable).  For purposes of this Section 9.8,
in the case of any ad valorem taxes that are imposed on a periodic basis and
are payable for a tax period that includes the Closing Date, the portion of
such tax related to the tax period ending the day prior to the Closing Date
will be deemed to be the amount of such tax for the entire tax period
multiplied by a 


 


35

















 


fraction,
the numerator of which is the number of days in the tax period ending the day
prior to the Closing Date and the denominator of which is the number of days in
the entire tax period.  If the Parties
are unable to determine the exact amount of taxes for proration at the Closing,
or if the taxes or assessments for periods ending on or before the Closing Date
are reassessed subsequent to the Closing, the Parties will make the appropriate
financial adjustments at the time the assessment is determined.


 


9.8           Termination of Franchise
Agreement and Area Development Agreement.


 


(a)           The Buyer
and the Sellers, on behalf of themselves and their Affiliates, hereby agree
that, except as provided in this Section 9.9(a), the Franchise Agreements
shall terminate and have no further force or effect as of the Closing
Date.  The Parties hereby waive any
notice period for such termination that may be provided for in the Franchise
Agreements.  All amounts due with respect
to the Sellers’ operation of the Restaurants during the period in which the
Closing Date occurs shall be paid by the Sellers in the ordinary course
following the Closing Date and nothing in this Section 9.8 shall be deemed
to be a waiver of the Buyer’s right to receive such amounts.  Notwithstanding the foregoing, Section 18C
(Confidential  Information) and Section 18E (Post-Term Covenant Not to Compete) of the
Franchise Agreements shall remain valid and enforceable pursuant to their terms
following the date hereof.


 


(b)           The Buyer
and the Sellers, on behalf of themselves and their Affiliates, hereby agree
that the Area Development Agreement shall terminate and have no further force
or effect as of the Closing Date.  The
Parties hereby waive any notice period for such termination that may be
provided for in the Area Development Agreement.


 


ARTICLE X

DEFINITIONS


 


In addition to the words and
terms defined elsewhere in this Agreement, the following words and terms shall
have the following meanings, respectively, unless the context clearly requires
otherwise:


 


“Actual
Adjustment Amount” has the meaning set forth in Section 2.5(a).


 


“Adjustment
Amount” has the meaning set forth in Section 2.4(b).


 


“Adverse
Consequences” means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, expenses, and fees,
including court costs and reasonable attorneys’ fees and expenses (whether such
attorneys’ fees and expenses arise out of a dispute or claim between the
Parties or out of a dispute involving third parties).


 


“Affiliate”
means, with respect to any Person, any of (a) a director, officer or
stockholder of such Person and (b) any other Person that, directly or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, another Person.  The term “control” includes, without
limitation, the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.


 


“Affiliate
Leases” has the meaning set forth in Section 3.9(e).


 


“Aggregate
Net Working Capital” has the meaning set forth in Section 2.4(b).


 


“Agreement”
has the meaning set forth in the preamble of this Agreement.


 


36

















 


“Area
Development Agreement” has the meaning set forth in the Recitals.


 


“Assignment
Agreement” has the meaning set forth in Section 2.3(a)(ii) and
as shown in the form attached hereto as Exhibit D.


 


“Assumed
Contracts” has the meaning set forth in Section 1.1(e).


 


“Assumed
Liabilities” has the meaning set forth in Section 1.3.


 


“Assumed Real
Property Leases” means all Real Property Leases, other than the
Affiliate Leases.


 


“Basis”
means any past or present fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction that forms or could form the basis for any specified
consequence.


 


“Bill of Sale”
has the meaning set forth in Section 2.3(a)(i).


 


“Business Day”
means a day that is not a Saturday, a Sunday or a day when a Restaurant is
normally closed in observance of a state or federal holiday.


 


“Buyer”
has the meaning set forth in the preamble of this Agreement.


 


“Buyer Group”
has the meaning set forth in Section 9.2(a).


 


“Cap”
has the meaning set forth in Section 9.2(c).


 


“Cash
Consideration” has the meaning set forth in Section 2.1.


 


“CERCLA”
means the Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, and the rules and regulations promulgated thereunder.


 


“Closing”
has the meaning set forth in Section 2.2.


 


“Closing Date”
has the meaning set forth in Section 2.2


 


“Closing Date
Balance Sheet” has the meaning set forth in Section 2.4(a).


 


“Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated thereunder.


 


“Confidentiality
Agreement” has the meaning set forth in Section 5.6.


 


“Consideration”
has the meaning set forth in Section 2.1.


 


“Contract”
has the meaning set forth in Section 3.14(b).


 


“Dane County
Robins” has the meaning set forth in the preamble of this Agreement.


 


“Defined
Benefit Pension Plan” shall have the meaning set forth in Section 3(35)
of ERISA.


 


“Designated
Persons” has the meaning set forth in Section 3.17(e).


 


37

















 


“Documents”
means this Agreement and each Bill of Sale, Assignment Agreement, Lease
Assignment Agreement, the Non-Solicitation Agreements, the Indemnification
Escrow Agreement and any other agreement entered into to consummate the
Transactions.


 


“Eau Claire Restaurant” means the restaurant currently being
constructed by NCW Robins at 3005 Golf Road, Eau Claire, Wisconsin.


 


“Employee Benefit
Plan” means every plan, fund, contract, program, agreement and
arrangement (whether written or not) for the benefit of present or former
employees, including those intended to provide medical, surgical, health care,
hospitalization, dental, vision, life insurance, death, disability, legal
services, severance, sickness or accident benefits (whether or not defined in Section 3(1)
of ERISA); pension, profit sharing, stock bonus, retirement, supplemental
retirement or deferred compensation benefits (whether or not tax qualified and
whether or not defined in Section 3(2) of ERISA); or salary
continuation, unemployment, supplemental unemployment, severance, termination
pay, change-in-control, vacation or holiday benefits (whether or not defined in
Section 3(3) of ERISA), that is (a) maintained or contributed to
by any Seller, (b) that any Seller has committed to implement, establish,
adopt or contribute to in the future,  (c) for
which any Seller is or may be financially liable as a result of the direct sponsor’s
affiliation with any Seller, or any Seller’s shareholders (whether or not such
affiliation exists at the date of this Agreement and notwithstanding that the
Plan is not maintained by any Seller for the benefit of its employees or former
employees) or (d) for or with respect to which any Seller is or may become
liable under any common law successor doctrine, express successor liability
provisions of Law, provisions of a collective bargaining agreement, labor or
employment Law or agreement with a predecessor employer.


 


“Environmental
and Safety Requirements” means all Laws, Orders, contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including,
without limitation, all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control, or Remediation of any Hazardous Material, including, but not
limited to, the Solid Waste Disposal Act, as amended, 42 U.S.C. § 6901, et
seq., the Clean Air Act, as amended, 42 U.S.C. §§ 7401 et  seq.,
the Federal Water Pollution Control Act, as amended, 33 U.S.C. §§ 1251 et
seq., the Emergency Planning and Community Right-to-Know Act, as
amended, 42 U.S.C. §§ 11001 et  seq., the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C.
§§ 9601 et  seq., the Hazardous Materials Transportation Uniform
Safety Act, as amended, 49 U.S.C. §§ 1804 et  seq., the Safe
Drinking Water Act, 42 U.S.C. §§ 300f, et seq., as amended, the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. §§ 136, et seq., as amended, the Occupational Safety and
Health Act of 1970, 29 U.S.C. §§ 651, as amended, and the rules and
regulations promulgated thereunder, as well as all analogous state, federal and
local Laws.


 


“ERISA
Affiliate” means, with respect to any Person, any other Person that
is a member of a “controlled group of corporations”
with, or is under “common control”
with, or is a member of the same “affiliated service group”
with such Person as defined in Section 414(b), 414(c), or 414(m) or
414(o) of the Code.


 


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


 


“Escrow”
has the meaning set forth in Section 2.3(b)(ii).


 


“Escrow Agent”
means Fidelity National Title.


 


38
















 


 “Estimated Adjustment
Amount” has the meaning set forth in Section 2.4(a).


 


“Excluded Assets” has the meaning set forth in Section 1.2.


 


“Excluded Liabilities” has the meaning set forth in Section 1.4.


 


“Franchise Agreements” has the meaning set forth in the
Recitals and means the License Agreements set forth on Exhibit B.


 


“Financial Statements” has the meaning set forth in Section 3.5(a).


 


“Fundamental Documents” means the documents by which any
Person (other than an individual) establishes its legal existence or which
govern its internal affairs.  For
example, the Fundamental Documents of a corporation would include its charter
and bylaws.


 


“Funded Indebtedness” means the aggregate amount (including
the current portions thereof) of all (i) indebtedness of any Seller for
money borrowed from others and purchase money indebtedness (other than accounts
payable in the ordinary course of business); (ii) indebtedness of the type
described in clause (i) above guaranteed, directly or indirectly, in any
manner by any Seller, or in effect guaranteed, directly or indirectly, in any
manner by any Seller, through an agreement, contingent or otherwise, to supply
funds to, or in any other manner invest in, the debtor, or to purchase
indebtedness, or to purchase and pay for property if not delivered or pay for
services if not performed, primarily for the purpose of enabling the debtor to
make payment of the indebtedness or to assure the owners of the indebtedness
against loss, but excluding endorsements of checks and other instruments in the
ordinary course; (iii) indebtedness of the type described in clause (i) above
secured by any Lien upon property owned by any Seller, even though such Seller
has not in any manner become liable for the payment of such indebtedness; and (iv) interest
expense accrued but unpaid, and all prepayment premiums, on or relating to any
of such indebtedness.


 


“GAAP” means United States generally accepted accounting
principles, applied on a consistent basis.


 


“Governmental Entity” means any court, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, Federal, state, county or local.


 


“Hazardous Material” means any waste,
substance, product, or other material (whether solid, liquid, gas or mixed): (a) which
is hazardous, toxic, infectious, explosive, corrosive, reactive, ignitable,
radioactive, carcinogenic or mutagenic; (b) which is defined, or referred
to, as a “pollutant”, “contaminant,” “hazardous material,” “hazardous waste,” “hazardous
substance,” “toxic substance,” “radioactive material,” “solid waste” or other
similar designation in, or otherwise subject to regulation or restriction
under, any Environmental and Safety Requirements; or (c) without
limitation, which contains polychlorinated biphenyls (PCBs), asbestos and
asbestos-containing materials, radioactive materials, lead-based paint,
ureaformaldehyde foam insulation, or petroleum or petroleum products (including
crude oil or any fraction thereof or any substance derived therefrom).


 


 “Hennepin County Robins”
has the meaning set forth in the preamble of this Agreement.


 


“Indemnification Escrow Agreement” has the meaning set forth
in Section 2.3(a)(v).


 


“Indemnified Party” has the meaning set forth in Section 9.3(a).


 


“Indemnifying Party” has the meaning set forth in Section 9.3(a).


 


39

















 


“Independent Accountant” has the meaning set forth in Section 2.5(d).


 


“Intellectual Property” means (a) all inventions, all
improvements thereto and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all
registered and unregistered trademarks, service marks, trade dress, logos,
trade names, domain names, url’s, and corporate and limited liability company
names, including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith, (d) all trade secrets, customer lists, supplier
lists, pricing and cost information, business and marketing plans and other
confidential business information, (e) all computer programs and related
software, (f) all other proprietary rights and (g) all copies and
tangible embodiments thereof.


 


“Inventory” has the meaning set forth in Section 1.1(c).


 


“Knowledge” means a Person’s actual knowledge.  For the purposes of this Agreement, the “Sellers
Knowledge,” the “Knowledge of the Sellers,” and the like shall mean the actual
knowledge of Timothy W. Gotzion and each of the general managers of the
Restaurants.


 


“Latest Balance Sheet” has the meaning set forth in Section 3.5(a)(ii).


 


“Latest Financial Statements” has the meaning set forth in Section 3.5(a)(ii).


 


“Law” means any constitution, law, statute, treaty, rule,
directive, requirement or regulation or Order of any Governmental Entity.


 


“Lease Assignment Agreement” has the meaning set forth in Section 2.3(a)(iii).


 


“Leased Real Property” has the meaning set forth in Section 3.9(e).


 


“Liability” means any liability or obligation, whether known
or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due,
regardless of when asserted.


 


“Licensed Intellectual Property” has the meaning set forth in
Section 3.13(a).


 


“Lien” means any security interest, pledge, bailment (in the
nature of a pledge or for purposes of security), mortgage, deed of trust, the
grant of a power to confess judgment, conditional sales and title retention
agreement (including any lease in the nature thereof), claim, liability,
charge, encumbrance, easements, reservations, restrictions, clouds, rights of
first refusal or first offer, options, or other similar arrangement or interest
in real or personal property.


 


“Liquor Licenses” means all permanent, definitive Permits
issued by any Governmental Entities related to, or regulating, the manufacture
and sale of alcoholic beverages at the Restaurants, including those listed on Schedule
3.8(b).


 


“Material Adverse Change” or “Material
Adverse Effect” means, with respect to any Person or Persons, (i) any
change or effect that is materially adverse to the business, operations,
assets, financial condition, liabilities or number of employees of such Person
or Persons, taken as a whole, and (ii) to the extent such change has a
reasonable likelihood of materially adversely affecting operating results of
the Restaurants following the Transaction, a material adverse change in
customer relations at the Restaurants.  


 


40

















 


A Material Adverse Change or
Material Adverse Effect shall not be deemed to have occurred if the change or
effect is caused by any one or more of the following: (a) any adverse
change, effect, event, or development arising from or relating to (i) general
business or economic conditions or specific conditions related to Red Robin
restaurants generally, (ii) national or international political, terrorist
or military related events, or (iii) changes in any Law after December 31,
2007; or (b) any event, occurrence, or circumstance with respect to which
the Buyer had knowledge as of the date of this Agreement; provided however,
solely for purposes of Section 6.4, “changes in any Law” in subsection (a)(iii) above
shall be omitted.  A Material Adverse
Change or Material Adverse Effect also will not have been deemed to have
occurred in the event the same is cured or otherwise remedied on or before the
Closing Date.


 


“Minnesota Robins” has the meaning set forth in the preamble
of this Agreement.


 


“Most Recent Fiscal Year” shall have the meaning set forth in
Section 3.5(a)(i)


 


“Multiemployer Plan” shall have the meaning set forth in Section 3(37)
of ERISA.


 


“Multiple Employer Plan” shall have the meaning set forth in Section 413(c) of
the Code.


 


“NCW Robins” has the meaning set forth in
the Recitals.


 


“Net Working Capital” has the meaning set forth in Section 2.4(b).


 


“New Leases” has the meaning set forth in Section 6.9.


 


“Non-Solicitation Agreement” has the meaning set forth in Section 2.3(a)(iv).


 


“Orders” means judgments, writs, decrees, compliance
agreements, injunctions or orders of and Governmental Entity or arbitrator.


 


“Owned Real Property” has the meaning set forth in Section 3.9(e).


 


“Party” and “Parties” means
the Buyer and the Sellers.


 


“Permits” means all permits, licenses, authorizations,
registrations, franchises, approvals, certificates, variances and similar
rights obtained, or required to be obtained, from Governmental Entities.


 


“Permitted Liens” means (i) Liens for Taxes not yet due
and payable or being contested in good faith by appropriate proceedings and for
which there are adequate reserves on the books, (ii) workers or
unemployment compensation Liens arising in the ordinary course of business; (iii) mechanic’s,
materialman’s, supplier’s, vendor’s or similar Liens arising in the ordinary
course of business securing amounts that are not delinquent, and (iv) zoning
ordinances, easements and other restrictions of legal record affecting real
property which would be revealed by a survey and would not, individually or in
the aggregate, materially interfere with the usefulness of such real property
to the operation of the Restaurants.


 


“Person” shall be construed broadly and shall include an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a Governmental Entity (or any department, agency, or political
subdivision thereof).


 


“Plans” has the meaning set forth in Section 3.18(a).


 


41

















 


“Post-Closing True-Up” has the meaning set forth in Section 2.5(b).


 


“Prepaid Expenses” has the meaning set forth in Section 1.1(f).


 


“Proceeding” means any action, suit, proceeding, complaint,
charge, hearing, inquiry or investigation before or by a Governmental Entity or
arbitrator.


 


“Prohibited Transaction” has the meaning set forth in Section 406
of ERISA and Section 4975 of the Code.


 


“Purchased Assets” has the meaning set forth in Section 1.1.


 


“Real Property Leases” has the meaning set forth in Section 3.9(e).


 


“Release” means any emission, release, spill,
leak, disposal, discharge, escape, leaching, seepage, injection, pumping,
pouring, emptying, emitting or other migration or release, whether intentional
or unintentional, from any source at, on, into, under, over, from or upon the
environment, including the air, soil, land surface, surface water, groundwater,
subsurface strata, drain, facility, tank, impoundment, fixture, structure,
improvement, sewer or septic system, storm drain, publicly owned treatment
works, or waste treatment, storage, or disposal system.


 


“Remediation” means investigation,
assessment, characterization, delineation, monitoring, sampling, analysis,
removal action, remedial action, response action, corrective action,
mitigation, treatment or cleanup of Hazardous Materials or other similar
actions as required by any applicable Environmental Laws from soil, land
surface, groundwater, sediment, surface water, or subsurface strata or
otherwise for the general protection of human health and the environment.


 


 “Restaurants”
has the meaning set forth in the Recitals.


 


“Seller” and “Sellers” have
the meanings set forth in the preamble of this Agreement.


 


“Seller Group” has the meaning set forth in Section 9.2(b).


 


“Stock Purchase Agreement” has the meaning
set forth in the Recitals.


 


“SWDA” means the Solid Waste Disposal Act, as amended, and
the rules and regulations promulgated thereunder.


 


“Tax” means any of the Taxes, and “Taxes”
means, with respect to any Person, all income taxes (including any tax on or
based upon net income, gross income, income, earnings, profits or selected
items of income, earnings or profits) and all gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties and other taxes,
fees, assessments or charges of any kind whatsoever, together with all interest
and penalties, additions to tax and other additional amounts imposed by any
taxing authority (domestic or foreign) on such Person (if any).


 


“Tax Return” means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.


 


“Third Party Claim” has the meaning set forth in Section 9.3(a).


 


42

















 


“Threshold” has the meaning set forth in Section 9.2(c).


 


“Till Cash” has the meaning set forth in Section 1.1(d).


 


“Title Company” has the meaning set forth in Section 2.3(a)(xiv).


 


“Title Policies” has the meaning set forth in Section 6.14.


 


“Training Costs” has the meaning set forth
in Section 5.10(c).


 


“Transactions” means the acquisition by the Buyer of the Restaurants pursuant to
the terms of this Agreement.


 


“Year End Balance Sheet” has the meaning set forth in Section 3.5(a)(i).


 


ARTICLE XI

MISCELLANEOUS


 


11.1         No Third
Party Beneficiaries. 
Except as expressly set forth in Section 9.2, this Agreement shall
not confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.


 


11.2         Entire
Agreement.  This
Agreement, the other Documents referred to herein and the Confidentiality
Agreement constitute the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter of any
Document including, without limitation, the letter of intent and term sheet dated
January 28, 2008 between the Buyer and the Sellers.


 


11.3         Successors
and Assigns.  This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns.  No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of the other Parties; provided, however, that
the Buyer may assign any of its rights under any of the Documents to any
Affiliate of the Buyer and/or make a collateral assignment of its rights for
the benefit of its lenders; provided, however, that no assignment
prior to the Closing shall relieve the Buyer
of its obligations hereunder, and the Buyer
shall guarantee the performance of all such obligations by its assignee.


 


11.4         Counterparts.  This Agreement may be executed in two or more
counterparts, including by facsimile, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument.


 


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


 


11.6         Notices.  All notices, requests, demands, claims, and
other communications hereunder shall be in writing.  Any notice, request, demand, claim or other
communication hereunder shall be deemed duly given when delivered personally to
the recipient, the next Business Day following the date of receipt of facsimile
confirmation to the intended recipient at the facsimile number set forth
therefor below (with hard copy to follow), or the next Business Day following
date of confirmation of receipt (or refusal thereof) if sent to the recipient
by reputable express courier service (charges prepaid) and addressed to the
intended recipient as set forth below:


 


43

















 


	
  If to any of the Sellers:

  
	
   

  	
   

  
	
   

  	
  Timothy W. Gotzion

  
	
   

  	
  Dane County Robins, Inc.

  
	
   

  	
  6592 Lake Road, Suite D

  
	
   

  	
  Windsor, WI 53598

  
	
   

  	
  Telephone: (608) 846-1531

  
	
   

  	
  Facsimile: (608) 846-1879

  
	
   

  	
   

  
	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Michael Best & Friedrich, LLP

  
	
   

  	
  One South Pinckney Street, Suite 700

  
	
   

  	
  Madison, WI 53703

  
	
   

  	
  Telephone: (608) 257-3501

  
	
   

  	
  Facsimile: (608) 283-2275

  
	
   

  	
  Attention: Matthew L. Storms

  
	
   

  	
   

  
	
  If to the Buyer:

  
	
   

  	
   

  
	
   

  	
  Red Robin International, Inc.

  
	
   

  	
  6312 South
  Fiddler’s Green Circle, #200N

  
	
   

  	
  Greenwood
  Village, CO 80111

  
	
   

  	
  Telephone:
  303-846-6060

  
	
   

  	
  Facsimile:
  303-846-6013

  
	
   

  	
  Attention:
  Dennis B. Mullen

  
	
   

  	
   

  
	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Davis Graham & Stubbs LLP

  
	
   

  	
  1550 17th Street, Suite 500

  
	
   

  	
  Denver, CO 80202

  
	
   

  	
  Telephone: (303) 892-9400

  
	
   

  	
  Facsimile: (303) 892-7400

  
	
   

  	
  Attention: Ronald R. Levine II

  



 


Any Party may
send any notice, request, demand, claim or other communication hereunder to the
intended recipient at the address set forth above using any other means, but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient.  Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the manner
herein set forth.


 


11.7         Governing
Law.  This Agreement will
be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to its conflicts of laws provisions.


 


11.8         Amendments
and Waivers.  No amendment
of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by all of the Parties. 
No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or 


 


44

















 


covenant hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.


 


11.9         Incorporation
of Exhibits and Schedules. 
The Exhibits, Schedules and other attachments identified in this
Agreement are part of this Agreement as if set forth in full herein.


 


11.10       Independence
of Covenants and Representations and Warranties.  All covenants hereunder shall be given
independent effect so that if a certain action or condition constitutes a
default under a certain covenant, the fact that such action or condition is
permitted by another covenant shall not affect the occurrence of such default,
unless expressly permitted under an exception to such initial covenant.  In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject
matter is correct or is not breached will not affect the incorrectness of or a
breach of a representation and warranty hereunder.


 


11.11       Remedies.  Subject to Section 9.4, the Parties
shall each have and retain all other rights and remedies existing in their
favor at Law or equity, including, without limitation, any actions for specific
performance and/or injunctive or other equitable relief to enforce or prevent
any violations of the provisions of this Agreement.  Without limiting the generality of the
foregoing, the Sellers hereby agree that in the event any Seller fails to
convey any Purchased Assets to the Buyer in accordance with the provisions of
this Agreement, the Buyer’s remedy at law may be inadequate.  In such event, the Buyer shall have the
right, in addition to all other rights and remedies it may have, to specific
performance of the obligations of such Seller to convey such Purchased Assets.


 


11.12       Severability.  It is the desire and intent of the Parties
that the provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought.  Accordingly, if
any particular provision of this Agreement shall be adjudicated by a court of
competent jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.  Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.


 


11.13       Construction.  The Parties have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent arises, this Agreement
shall be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.  The word “including” shall mean including
without limitation.


 


* * * * *


 


45

















 


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


 


	
  Buyer:

  	
  RED ROBIN INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Sellers:

  	
  DANE COUNTY ROBINS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
     Timothy W. Gotzion, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MINNESOTA ROBINS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
     Timothy W. Gotzion, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HENNEPIN COUNTY ROBINS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
     Timothy W. Gotzion, President

  
						



 


[Asset Purchase Agreement Signature Page]