**Exhibit 10.1**

 

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CHEVYS HOLDINGS, INC.

 

CHEVYS, INC.

 

CHEVYS OF GREENBELT, INC.

 

CHEVYS NEW YORK, INC.

 

CHEVYS OF PARSIPPANY,INC.

 

KATMANDU CREATIONS, INC.

 

RBA KANSAS, INC.

 

RIO BRAVO ACQUISITIONS,INC.

 

J.W. CHILDS EQUITYPARTNERS, L.P.

 

REAL MEX RESTAURANTS,INC.

 

****AND****

 

CKR ACQUISITION CORP.

 

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ASSET PURCHASE AGREEMENT

 

October 13, 2004

 

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| ARTICLE I     | PURCHASE AND SALE OF ASSETS               |                                         |
|---------------|-------------------------------------------|----------------------------------------------|
|          |                                      |                                         |   |
| Section 1.1.  |                                      | Defined  Terms                               |   |
|          |                                      |                                         |   |
| Section 1.2.  |                                      | Assets                                       |   |
|          |                                      |                                         |   |
| Section 1.3.  |                                      | Excluded  Assets                             |   |
|          |                                      |                                         |   |
| ARTICLE II    | PURCHASE PRICE OF ASSETS                  |                                         |
|          |                                      |                                         |   |
| Section 2.1.  |                                      | Purchase  Price                              |   |
|          |                                      |                                         |   |
| Section 2.2.  |                                      | Assumed  Liabilities; Excluded Liabilities   |   |
|          |                                      |                                         |   |
| Section 2.3.  |                                      | Allocation  of Transfer Taxes; Fees          |   |
|          |                                      |                                         |   |
| Section 2.4.  |                                      | Tax  Treatment; Allocation of Purchase Price |   |
|          |                                      |                                         |   |
| Section 2.5.  |                                      | Cure  Costs                                  |   |
|          |                                      |                                         |   |
| Section 2.6.  |                                      | Deposit                                      |   |
|          |                                      |                                         |   |
| Section 2.7.  |                                      | Replacement  of Letters of Credit            |   |
|          |                                      |                                         |   |
| ARTICLE III   | CLOSING                                   |                                         |
|          |                                      |                                         |   |
| Section 3.1.  |                                      | Date,  Time and Place of Closing             |   |
|          |                                      |                                         |   |
| Section 3.2.  |                                      | Deliveries  by Sellers at Closing            |   |
|          |                                      |                                         |   |
| Section 3.3.  |                                      | Deliveries  by Buyer at Closing              |   |
|          |                                      |                                         |   |
| Section 3.4.  |                                      | Liquor  Licenses                             |   |
|          |                                      |                                         |   |
| Section 3.5.  |                                      | Deemed  Consents and Cures                   |   |
|          |                                      |                                         |   |
| ARTICLE IV    | REPRESENTATIONS AND WARRANTIES OF SELLERS |                                         |
|          |                                      |                                         |   |
| Section 4.1.  |                                      | Organization  and Power                      |   |
|          |                                      |                                         |   |
| Section 4.2.  |                                      | Authority                                    |   |
|          |                                      |                                         |   |
| Section 4.3.  |                                      | No  Breach or Conflict                       |   |
|          |                                      |                                         |   |
| Section 4.4.  |                                      | The  Assets                                  |   |
|          |                                      |                                         |   |
| Section 4.5.  |                                      | Financial  Information                       |   |
|          |                                      |                                         |   |
| Section 4.6.  |                                      | Condition  of Assets                         |   |
|          |                                      |                                         |   |
| Section 4.7.  |                                      | Tangible  Assets; Ownership of Assets        |   |
|          |                                      |                                         |   |
| Section 4.8.  |                                      | Real  Property                               |   |
|          |                                      |                                         |   |
| Section 4.9.  |                                      | Litigation;  Compliance With Law             |   |
|          |                                      |                                         |   |
| Section 4.10. |                                      | Taxes                                        |   |
|          |                                      |                                         |   |
| Section 4.11. |                                      | Contracts                                    |   |
|          |                                      |                                         |   |
| Section 4.12. |                                      | Employment  Matters                          |   |
|          |                                      |                                         |   |
| Section 4.13. |                                      | Licenses  and Permits                        |   |
|          |                                      |                                         |   |
| Section 4.14. |                                      | Environmental  Matters                       |   |

 

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| Section 4.15. |                                    | Intellectual Property                                          |   |
|---------------|-----------------------------------------|----------------------------------------------------------------|--------|
|          |                                    |                                                           |   |
| Section 4.16. |                                    | Franchising                                                    |   |
|          |                                    |                                                           |   |
| Section 4.17. |                                    | Insurance                                                      |   |
|          |                                    |                                                           |   |
| Section 4.18. |                                    | Broker or Finder                                               |   |
|          |                                    |                                                           |   |
| Section 4.19. |                                    | Disclaimer of Other Representations and  Warranties; Schedules |   |
|          |                                    |                                                           |   |
| ARTICLE V     | COVENANTS OF SELLERS                    |                                                           |
|          |                                    |                                                           |   |
| Section 5.1.  |                                    | Conduct of Business Before the Closing Date                    |   |
|          |                                    |                                                           |   |
| Section 5.2.  |                                    | Access to Information                                          |   |
|          |                                    |                                                           |   |
| Section 5.3.  |                                    | Further Assurances                                             |   |
|          |                                    |                                                           |   |
| Section 5.4.  |                                    | Intellectual Property Matters                                  |   |
|          |                                    |                                                           |   |
| Section 5.5.  |                                    | Cooperation                                                    |   |
|          |                                    |                                                           |   |
| Section 5.6.  |                                    | Assumed Contracts; Cure Amounts                                |   |
|          |                                    |                                                           |   |
| Section 5.7.  |                                    | Bankruptcy Court Approval and Related  Matters                 |   |
|          |                                    |                                                           |   |
| Section 5.8.  |                                    | Restricted Accounts                                            |   |
|          |                                    |                                                           |   |
| Section 5.9.  |                                    | No Shop Provisions                                             |   |
|          |                                    |                                                           |   |
| Section 5.10. |                                    | Notice to Creditors                                            |   |
|          |                                    |                                                           |   |
| Section 5.11. |                                    | Notice to Claimants                                            |   |
|          |                                    |                                                           |   |
| Section 5.12. |                                    | Franchise Agreement                                            |   |
|          |                                    |                                                           |   |
| ARTICLE VI    | REPRESENTATIONS AND WARRANTIES OF BUYER |                                                           |
|          |                                    |                                                           |   |
| Section 6.1.  |                                    | Organization and Power                                         |   |
|          |                                    |                                                           |   |
| Section 6.2.  |                                    | Execution and Delivery Permitted                               |   |
|          |                                    |                                                           |   |
| Section 6.3.  |                                    | Binding Effect; Consents                                       |   |
|          |                                    |                                                           |   |
| Section 6.4.  |                                    | Capitalization                                                 |   |
|          |                                    |                                                           |   |
| Section 6.5.  |                                    | Financial Information                                          |   |
|          |                                    |                                                           |   |
| Section 6.6.  |                                    | Legal Proceedings and Judgments                                |   |
|          |                                    |                                                           |   |
| Section 6.7.  |                                    | Buyer’s Financing                                         |   |
|          |                                    |                                                           |   |
| Section 6.8.  |                                    | Assumed Contracts                                              |   |
|          |                                    |                                                           |   |
| Section 6.9.  |                                    | Broker or Finder                                               |   |
|          |                                    |                                                           |   |
| ARTICLE  VII  | COVENANTS  OF BUYER                     |                                                           |
|          |                                    |                                                           |   |
| Section 7.1.  |                                    | Buyer Performance                                              |   |
|          |                                    |                                                           |   |
| Section 7.2.  |                                    | Confidentiality                                                |   |
|          |                                    |                                                           |   |
| Section 7.3.  |                                    | Sellers’ Employees                                        |   |

 

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| Section 7.4.   |                   | Administration of Insurance Policies                              |   |
|----------------|------------------------|-------------------------------------------------------------------|--------|
|           |                   |                                                              |   |
| Section 7.5.   |                   | Cooperation                                                       |   |
|           |                   |                                                              |   |
| Section 7.6.   |                   | Broker’s Fees                                                |   |
|           |                   |                                                              |   |
| Section 7.7.   |                   | Post-Closing Access to Information                                |   |
|           |                   |                                                              |   |
| Section 7.8.   |                   | Hart-Scott-Rodino                                                 |   |
|           |                   |                                                              |   |
| Section 7.9.   |                   | Bankruptcy Court Approval and Related  Matters                    |   |
|           |                   |                                                              |   |
| Section 7.10.  |                   | Joinder Agreement                                                 |   |
|           |                   |                                                              |   |
| Section 7.11.  |                   | Financing Efforts                                                 |   |
|           |                   |                                                              |   |
| ARTICLE  VIII  | CONDITIONS  TO CLOSING |                                                              |
|           |                   |                                                              |   |
| Section 8.1.   |                   | Buyer’s Conditions to Closing                                |   |
|           |                   |                                                              |   |
| Section 8.2.   |                   | Sellers’ Conditions to Closing                               |   |
|           |                   |                                                              |   |
| ARTICLE  IX    | NO  SURVIVAL           |                                                              |
|           |                   |                                                              |   |
| Section 9.1.   |                   | No Survival of Representations and  Warranties                    |   |
|           |                   |                                                              |   |
| ARTICLE  X     | MISCELLANEOUS          |                                                              |
|           |                   |                                                              |   |
| Section 10.1.  |                   | Notices                                                           |   |
|           |                   |                                                              |   |
| Section 10.2.  |                   | Applicable Law                                                    |   |
|           |                   |                                                              |   |
| Section 10.3.  |                   | Binding on Successors; Assignment                                 |   |
|           |                   |                                                              |   |
| Section 10.4.  |                   | Payment of Costs                                                  |   |
|           |                   |                                                              |   |
| Section 10.5.  |                   | Time is of the Essence                                            |   |
|           |                   |                                                              |   |
| Section  10.6. |                   | Interpretation                                                    |   |
|           |                   |                                                              |   |
| Section  10.7. |                   | Entire  Agreement                                                 |   |
|           |                   |                                                              |   |
| Section 10.8.  |                   | Counterparts                                                      |   |
|           |                   |                                                              |   |
| Section 10.9.  |                   | Termination                                                       |   |
|           |                   |                                                              |   |
| Section 10.10. |                   | Public Announcements; Communications  with Franchisees and Public |   |
|           |                   |                                                              |   |
| Section 10.11. |                   | Jurisdiction; Disputes; Arbitration                               |   |
|           |                   |                                                              |   |
| Section 10.12. |                   | No Third Party Beneficiaries                                      |   |
|           |                   |                                                              |   |
| Section 10.13. |                   | Compliance with Bulk Sales Laws                                   |   |
|           |                   |                                                              |   |
| Section 10.14. |                   | Transition Services                                               |   |
|           |                   |                                                              |   |
| Section 10.15. |                   | Intercreditor Acknowledgements                                    |   |
|           |                   |                                                              |   |
| ARTICLE  XI    | ALTERNATIVE  STRUCTURE |                                                              |
|           |                   |                                                              |   |
| Section  11.1. |                   | Stock Transaction                                                 |   |
|           |                   |                                                              |   |
| ARTICLE  XII   | DEFINITIONS            |                                                              |

 

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**ASSETPURCHASE AGREEMENT**

 

THIS ASSET PURCHASEAGREEMENT (the “Agreement”) is made and entered into this 13thday of October, 2004, by and among Chevys Holdings, Inc., a Delawarecorporation (the “Parent”), Chevys, Inc., a California corporation (the“Company”), Chevys of Greenbelt, Inc., a Maryland corporation (which isowned 99% by the Company and 1% by Brian Bennett) (“Sub One”), ChevysNew York, Inc., a California corporation and wholly owned subsidiary of theCompany (“Sub Two”), Chevys of Parsippany, Inc., a New Jerseycorporation and wholly owned subsidiary of the Company (“Sub Three”),Katmandu Creations, Inc., a California corporation and wholly owned subsidiaryof the Company (“Sub Four”), RBA Kansas, Inc., a Kansas Corporation andwholly owned subsidiary of the Company (“Sub Five”), and Rio BravoAcquisitions, Inc., a Delaware corporation and wholly owned subsidiary of theCompany (“Sub Six”, and, together with the Company, Sub One, Sub Two,Sub Three, Sub Four and Sub Five, the “Sellers”), J.W. Childs EquityPartners L.P., a Delaware limited partnership (“J.W. Childs”), Real MexRestaurants, Inc., a Delaware corporation (“Real Mex”) and CKRAcquisition Corp., a Delaware corporation (“Buyer”).

 

WHEREAS, Sellerscollectively own various items of personal property and interests in realproperty and contract rights (i) used in the operation or development of thosespecific “Chevys Fresh Mex” restaurants, “Fuzio Universal Pasta” restaurantsand “Chevys Express Mex” restaurants, which are listed on Schedule 1 hereto (the “Restaurants”) and(ii) used in the operation of the “Chevys Fresh Mex” franchise system, the “FuzioUniversal Pasta” franchise system, and the “Chevys Express Mex” franchisesystem;

 

WHEREAS, Sellers voluntarilycommenced cases before the United States Bankruptcy Court for the NorthernDistrict of California (the “Bankruptcy Court”) under Chapter 11 of thetitle 11 of the United States Code (the “Bankruptcy Code”), jointlyadministered under docket No. 03-45879, **etseq**., but expressly excluding the chapter 11 case of Parent(collectively, the “Chapter 11 Cases”); and

 

WHEREAS, each of Sellerswishes to sell, transfer, convey, assign and deliver to Buyer in accordancewith Sections 363 and 365 and all other applicable provisions of the BankruptcyCode, all of the Assets (as hereinafter defined), together with the AssumedLiabilities (as hereinafter defined), of Sellers as set forth in this Agreementaccording to certain terms and conditions, pursuant to a plan of reorganizationin the absence of an auction process involving the Assets or the Business (ashereinafter defined), (the “Non-Auction Plan Sale”), or according toalternative terms and conditions as set forth in this Agreement in the eventthat the Assets or the Business are subject to an auction process (the “AuctionSale”); and

 

WHEREAS, in connectiontherewith, each of Sellers wishes to assume and assign to Buyer certainexecutory contracts, unexpired leases and liabilities thereunder under Sections363 and 365 of the Bankruptcy Code; and

 

WHEREAS, subject to theBankruptcy Court’s entry of an Approval Order (as hereinafter defined), **inter alia**, incorporating the termsof this Agreement, including the assumption and assignment of certain executorycontracts and unexpired leases and liabilities

 

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thereunder under Section 365of the Bankruptcy Code, Buyer will purchase from Sellers, and Sellers will sellto Buyer, all of the Assets together with the Assumed Liabilities of Sellersupon the terms and the conditions set forth in this Agreement; and

 

WHEREAS, Buyer wishes topurchase and take delivery of such Assets and Assumed Liabilities upon suchterms and subject to such conditions; and

 

NOW, THEREFORE, inconsideration of the foregoing and the mutual agreements, covenants,representations, warranties and promises set forth herein, and in order to prescribethe terms and conditions of such purchase and sale, the parties hereto agree asfollows:

 

**ARTICLE I**

PURCHASE AND SALE OF ASSETS

 

**Section1.1****. **DefinedTerms.  All capitalized termsused in this Agreement and not otherwise defined herein shall have the meaningsset forth for such terms in Article XII.

 

**Section1.2****. **Assets.  Subject to the terms and conditions set forthin this Agreement, including the approval of the Bankruptcy Court pursuant tothe Approval Order, Sellers hereby agree that at the Closing they shall sell,transfer, convey, and assign to Buyer, free and clear of all Liens (except forthe Permitted Encumbrances), and Buyer shall purchase, assume and acquire fromSellers, all of Sellers’ right, title and interest in, to and under all of thebusiness, properties, assets, and goodwill of whatever kind and nature, real orpersonal, tangible or intangible, actual or contingent, in electronic form orotherwise, which are owned or held by Sellers and used or usable in theBusiness (other than the Excluded Assets), wherever located, including withoutlimitation all of Sellers’ right, title and interest in and to the following(the “Assets”):

 

(a)           TheSystems and the Concepts;

 

(b)           Allof Sellers’ interest in and to the Real Property Leases and the Subleases(other than Non-Assumed Contracts), including all of Sellers’ interest undersuch Real Property Leases and Subleases in the buildings, fixtures, signs,parking facilities, trash facilities, fences, other leasehold improvements,appurtenances and hereditaments subject to such Real Property Leases andSubleases;

 

(c)           AllOwned Real Property, including all of Sellers’ interest in the buildings,fixtures, signs, parking facilities, trash facilities, fences, otherimprovements, appurtenances and hereditaments related to the Owned RealProperty;

 

(d)           AllMinor Contracts, Material Contracts, Development Agreements and FranchiseAgreements (in each case, except for Non-Assumed Contracts) (collectively, the“Assigned Contracts”);

 

(e)           Allequipment and leasehold improvements installed in the Leased Real Property(other than equipment and leasehold improvements installed in the Leased RealProperty that is the subject of a Non-Assumed Contract), and all of theEquipment;

 

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(f)            AllLicenses (to the extent transferable) and all rights to use existing Restauranttelephone numbers and rights arising under Equipment warranties;

 

(g)           Allcash and cash equivalents other than Excluded Cash;

 

(h)           Allcash deposits related to the Business, including, without limitation, thosesecuring the Real Property Leases (other than Non-Assumed Contracts) and theAssumed Liabilities;

 

(i)            Allbond collateral, collateral for letters of credit and the like, if any, and anyother collateral posted for the operation of the Business, including vendordeposits;

 

(j)            AllIntellectual Property;

 

(k)           AllInventory;

 

(l)            AllAccounts Receivable and notes receivable of the Business as of the ClosingDate, together with all unpaid accrued interest thereon and all rights ofcollection with respect thereto;

 

(m)          Allof the assets set forth in Schedule 1.2hereto;

 

(n)           AllLiquor Licenses (to the extent transferable);

 

(o)           Allinsurance policies, all prepaid insurance premiums and all rights to thebenefits, coverages and proceeds under and from such insurance policies;

 

(p)           Allgoodwill associated with the Business as a going concern; and

 

(q)           Allof Sellers’ books, records, files, documents and other written or electronicmaterials relating to the Assets or the Business, except those related solelyto the Excluded Assets or the Excluded Liabilities.

 

**Section1.3****. **ExcludedAssets.  Notwithstandinganything to the contrary contained herein, the following are excluded from saleunder this Agreement (and excluded from the definition of “Assets”hereunder) (a) all claims (including, without limitation, any litigation orarbitration claims), rights, rights of offset or causes of action that Sellersor their Affiliates may have against any person or entity arising under andrelating to (i) Chapter 5 of the Bankruptcy Code, and (ii) any other ExcludedAssets or the Excluded Liabilities, (b) all claims (including, withoutlimitation, any litigation or arbitration claims), rights, rights of offset orcauses of action that Sellers or their Affiliates may have against theCommittee and its members (acting in such capacity), against the PrepetitionLenders and the officers, directors, shareholders, agents, employees,representatives and professionals (acting in such capacity) of the Committee,the Prepetition Lenders, J.W. Childs and Sellers, (c) in the event that theBuyer elects to cause the transaction to be treated as a taxable sale of assetsfor income Tax purposes (such election to be made not later than 75 days afterthe Closing Date), all refunds, net operating losses and claims relating tofederal, state or municipal income Taxes of Sellers for periods prior to theClosing Date, (d) Sellers’ corporate charters, corporate minutes and stock

 

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books and records, and other documents and instrumentsrelating solely to the organization, maintenance and existence of Sellers ascorporations and, in the event that Buyer elects to cause the transaction to betreated as a taxable sale of assets for income tax purposes, the Taxes ofSellers (provided that Buyer may make copies of all books and records relatedto Taxes and, prior to disposing of such books and records, Sellers shall offersuch books and records to Buyer), (e) the capital stock of Sellers and each oftheir subsidiaries, (f) the Excluded Cash, (g) the Non-Assumed Contracts, (h)all causes of action and claims that may be asserted against Buyer and/or anyof its Affiliates and all rights of Sellers under this Agreement or any otheragreements or instruments otherwise delivered in connection with thisAgreement, and (i) all insurance proceeds intended to reimburse Sellers withrespect to Excluded Assets or Excluded Liabilities (all of the foregoing,collectively, the “Excluded Assets”).

 

**ARTICLE II**

PURCHASE PRICE OF ASSETS

 

**Section2.1****. **Purchase Price.

 

(a)           PurchasePrice in the Non-Auction Plan Sale. In the event of a Non-Auction Plan Sale, in addition to the assumptionof the Assumed Liabilities set forth in Section 2.2(a), the aggregateconsideration for the Assets shall be an amount equal to $77.9 million in cash(as may be adjusted pursuant to Section 2.1(f)) (the “Non-Auction CashConsideration”) and certain equity securities of Real Mex as described in Section2.1(b) (the “Non-Auction Stock Consideration”).  Any plan of reorganization shall provide thatthe cash shall be distributed as follows:

 

(i)                                     $43.9million in cash to an account designated by the Agent on behalf of thePrepetition Lenders;

 

(ii)                                  $11.0million in cash to an account designated by the Committee in trust for theGeneral Unsecured Creditors; and

 

(iii)                               Subjectto Section 2.1(f), $23.0 million in cash in trust for the bankruptcy estates ofSellers to an account designated by Sellers for the purposes of dischargingSellers’ administrative, priority and reclamation claims relating to theChapter 11 Cases and the resolution thereof, to repay the DIP Facility and topay Sellers’ fees and expenses incurred in connection with or relating to the Chapter11 Cases, including the confirmation of any plan of reorganization and theemergence of Sellers from bankruptcy (collectively, the “Administrative and Exit Costs”).

 

(b)           Subjectto Section 2.1(f), the Non-Auction Stock Consideration shall consist of newlyissued equity securities of Real Mex, representing 11.5% of each class of RealMex’s equity securities (the “Non-Auction Real Mex Equity Securities”)including, but not limited to, warrants (or at Buyer’s option, in the case ofwarrants exercisable for $.01 or less, the Non-Auction Real Mex EquitySecurities issuable upon exercise of such warrants) and options (excludingunvested management options and unvested restricted stock), calculated on afully

 

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diluted basis after consummation of the transactionscontemplated by this Agreement, to be issued to J.W. Childs pursuant to theterms and conditions set forth in the plan of reorganization.

 

(c)           Purchase Price in the Auction Sale.  In the event of the Auction Sale in whichBuyer agrees to act, and is approved by the Bankruptcy Court to act, as theinitial bidder, in addition to the assumption of the Assumed Liabilities setforth in Section 2.2(a), the aggregate consideration for the Assets shall be anamount equal to $76.4 million in cash (as may be adjusted pursuant to Section2.1(f)) (the “Auction Cash Consideration”) and certain equity securitiesof Real Mex as described in Section 2.1(d) (the “Auction Stock Consideration”).  Any plan of reorganization shall provide thatthe cash shall be distributed as follows:

 

(i)                                     $43.9million in cash to an account designated by the Agent on behalf of thePrepetition Lenders;

 

(ii)                                  $9.5million in cash to an account designated by the Committee in trust for the GeneralUnsecured Creditors; and

 

(iii)                               Subjectto Section 2.1(f), $23.0 million in cash in trust for the bankruptcy estates ofSellers to an account designated by Sellers for the purposes of discharging theAdministrative and Exit Costs.

 

(d)           Subjectto Section 2.1(f), the Auction Stock Consideration shall consist of newlyissued equity securities of Real Mex, representing 10% of each class of RealMex’s equity securities (the “Auction Real Mex Equity Securities”)including, but not limited to, warrants (or at Buyer’s option, in the case ofwarrants exercisable for $.01 or less, the Auction Real Mex Equity Securitiesissuable upon exercise of such warrants) and options (excluding unvestedmanagement options and unvested restricted stock), calculated on a fullydiluted basis after consummation of the transactions contemplated by thisAgreement, to be issued to J.W. Childs pursuant to the terms and conditions setforth in the plan of reorganization.  Inthe event that the Auction Sale transaction is consummated pursuant to an assetsale under Section 363 of the Bankruptcy Code, as opposed to a plan ofreorganization, the Auction Stock Consideration will be distributed to J.W.Childs pursuant to an Order of the Bankruptcy Court or a liquidating plan ofreorganization or other distribution mechanism approved by the BankruptcyCourt.

 

(e)           TheCash Consideration shall be paid to the accounts designated pursuant to theforegoing Sections 2.1(a)(i) to (iii) or 2.1(c)(i) to (iii), as applicable, atClosing by wire transfer of immediately available funds.

 

(f)            (i)  Inthe event that the Administrative and Exit Costs, after applying the ExcludedCash (the “Net Administrative and Exit Costs”) are less than $23.0million, J. W. Childs will receive the amount of such difference in cash fromSellers.

 

(ii)                                  Inthe event that the Net Administrative and Exit Costs are greater than $23.0million (such difference, the “Excess Administrative and Exit Costs”):

 

(A)                              the considerationpaid to the General Unsecured Creditors pursuant to Sections 2.1(a)(ii) or2.1(c)(ii), as applicable, shall be reduced

 

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by the lesser of (y) thirty-three percent (33%) of the amount of theExcess Administrative and Exit Costs, and (z) $375,000 and such amount shallinstead be paid to Sellers to pay the Excess Administrative and Exit Costs;

 

(B)                                the consideration paidto the Pre-Petition Lenders pursuant to Sections 2.1(a)(i) or 2.1(c)(i), asapplicable, shall be reduced by the lesser of (y) thirty-three percent (33%) ofthe amount of the Excess Administrative and Exit Costs, and (z) $375,000 andsuch amount shall instead be paid to Sellers to pay the Excess Administrativeand Exit Costs;

 

(C)                                subject to Section2.1(f)(ii)(A) and (B), the Stock Consideration to be received by J. W. Childsshall be reduced, on a dollar for dollar basis, at the rate of 1% for each $1million of Excess Administrative and Exit Costs;

 

(D)                               the amount payable incash by Buyer pursuant to Section 2.1(a)(iii) or 2.1(c)(iii) to pay the ExcessAdministrative and Exit Costs, as applicable, will be increased by the amountof the Excess Administrative and Exit Costs borne by J. W. Childs pursuant toSection 2.1(f)(ii)(C) up to a maximum of $11.5 million in a Non-Auction PlanSale and $10.0 million in an Auction Sale.

 

For example, if in theNon-Auction Plan Sale transaction, the Net Administrative and Exit Costs areequal to $24,750,000, (w) the consideration payable to the General UnsecuredCreditors pursuant to Section 2.1(a)(ii) would be reduced by $375,000 and suchamount would instead be payable to Sellers, (x) the consideration payable tothe Pre-Petition Lenders pursuant to Section 2.1(a)(ii) would be reduced by$375,000 and such amount would instead be payable to Sellers, (y) J. W. Childswould receive 10.5% of Buyer Equity Securities as opposed to 11.5% pursuant toSection 2.1(b), and (z) Buyer would pay $78.9 million as opposed to $77.9million in cash to Sellers pursuant to Section 2.1(a).

 

This Section 2.1(f)(ii)shall not apply to the extent that the Excess Administrative and Exit Costs arein excess of $12.25 million in a Non-Auction Plan Sale and $10.75 million in anAuction Sale.

 

(iii)                               Inthe event that Excess Administrative and Exit Costs are incurred afterJ. W. Childs has received the Stock Consideration, J. W. Childs agrees toreturn the amount of Stock Consideration as calculated in accordance withSection 2.1(f)(ii)(C) to Buyer and, upon receipt of such returned StockConsideration, Buyer shall pay the additional Cash Consideration to Sellers, ineach case promptly after the amount of such Excess Administrative and ExitCosts is determined.

 

(iv)                              Inthe event that the Net Administrative and Exit Costs are greater than $35.25million in the Non-Auction Plan Sale or $33.750 million in the

 

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Auction Sale (the amountby which the Net Administrative and Exit Costs exceed such amounts, being the “ExtraExit Costs”), the consideration paid to the General Unsecured Creditors pursuantto Sections 2.1(a)(ii) or 2.1(c)(ii), as applicable, shall be reduced by theamount of the Extra Exit Costs up to a maximum of $1.5 million and such amountshall instead be paid to Sellers to pay the amount of such Extra Exit Costs.

 

(g)           Inthe event of any dispute relating to or arising from the calculation of (i) theAdministrative and Exit Costs and/or (ii) the Net Administrative and ExitCosts, the matter shall be referred to the Bankruptcy Court for a finaldetermination.  The parties hereto agreeand acknowledge that any such dispute shall not delay or affect the Closing.

 

(h)           Forthe avoidance of doubt, Buyer shall have no obligation to the Sellers underthis Section 2.1, including any obligation with respect to the funding of anyplan of reorganization, other than to provide the consideration as set forthherein.

 

**Section2.2****. **AssumedLiabilities; Excluded Liabilities.

 

(a)           Effectiveas of the close of business on the Closing Date, Buyer shall assume thefollowing liabilities and obligations of Sellers existing as of such time andarising from the operation of the Business prior to or on the Closing Date (“AssumedLiabilities”):

 

(i)                                     Allordinary course post-petition current liabilities for trade, employee,insurance, sales tax, gift certificates, real and personal property taxes andaccrued ordinary course post-petition current liabilities for general businessexpenses of the type normally included in the line items titled “Accruals -Auto Reverse”, “Accrued Utilities”, “Legal Accrued Expenses”, “Accounting andAudit Accrued Expenses”, “Relocation Accrued Expenses”, “MIT Accrued Expenses”,“Recruiting Accrued Expenses”, “Business Tax Payable”, “Percentage RentPayable”, “Gift Certificates Payable”, and “Income Taxes Payable - State” onSellers’ general ledger, including written but unpaid checks therefor, in eachcase in the amount set forth on Schedule 1.2 hereto (which Schedule 1.2 will beupdated by Sellers as of the Closing) (provided that each time the Sellersissue a check, the amount of the check is deposited into the applicableRestricted Account), provided, that such assumed liabilities and accruals shallnot include any amounts for legal, accounting, financial advisory or otherexpenses of Sellers in connection with the Chapter 11 Cases;

 

(ii)                                  Allliabilities, responsibilities and obligations under Assigned Contracts(including any obligations to post letters of credit in lieu of securitydeposits) and Sellers’ insurance policies, but excluding any obligation toreturn any funds to Kemper Insurance Companies;

 

(iii)                               AllSeverance Obligations and other liabilities to be assumed by Buyer pursuant toSection 7.3;

 

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(iv)                              AllTaxes arising from and after the Closing Date and otherwise assumed by Buyer pursuantto Section 2.3 hereof;

 

(v)                                 Allliabilities, responsibilities, obligations, costs and expenses with respect toclaims arising in any way with respect to or as a result of the operation ofthe Business or the ownership of the Assets on or after the Closing Date,including, without limitation, any claim, action, suit, litigation, arbitrationor other proceeding or governmental investigation arising out of orattributable to the operation of the Business or the ownership of the Assets onor after the Closing Date; and

 

(vi)                              Allliabilities, responsibilities and obligations under the GECC Mortgage.

 

For the avoidance of doubt,none of the liabilities or obligations of Parent are being assumed by Buyer orSellers or being paid in any manner whatsoever hereunder.

 

(b)           Ifany asset is by its terms or by applicable Law non-assignable ornon-transferable, Sellers shall use their commercially reasonable efforts toobtain, or cause to be obtained, on or prior to the Closing, any approvals orconsents necessary to convey to Buyer the benefits thereof.  Buyer shall cooperate with Sellers in suchmanner as may be reasonably requested in connection therewith.  In the event any consent or approval to anassignment contemplated hereby is not obtained on or prior to the Closing Date,such asset will not be an “Asset” for purposes of this Agreement until suchconsent is obtained, and Sellers shall continue to use commercially reasonableefforts to obtain any such approval or consent after the Closing Date, andSellers agree to enter into any appropriate and economically feasiblearrangement to provide that Buyer shall receive Sellers’ interest in thebenefits under any such Asset, provided that Buyer shall undertake to pay orsatisfy the corresponding liabilities for the enjoyment of such benefit to theextent Buyer would have been responsible therefor if such consent or approvalhad been obtained.  This Section 2.2(b)does not apply to Liquor Licenses which are non-assignable or non-transferable,which are the subject of Section 3.4.

 

(c)           Ifany liabilities of the type described in Section 2.2(a) above cannot be assumedand discharged by Buyer as a result of any legal or practical impediment (e.g.,Buyer cannot assume and properly pay Sellers’ final payroll in accordance withapplicable legal requirements or Sellers’ outstanding checks), Buyer shallpromptly pay the amount of such liability to Sellers and Sellers shall retainand satisfy such non-transferable liabilities. Payment made by Buyer pursuant to this Section 2.2(c) shall be made bywire transfer of immediately available funds to an account designated inwriting by Sellers.

 

(d)           Exceptfor the Assumed Liabilities, Buyer shall not be subject to and shall not beliable for, any liabilities or obligations of any kind or nature, whetherabsolute, contingent, accrued, known or unknown, of Sellers, including withoutlimitation, the following (collectively, the “Excluded Liabilities”):

 

(i)                                     Exceptas provided in Section 2.2(a)(i), any liability, obligation or related expensearising out of, pursuant to or in connection with any claim, action, suit,litigation, arbitration or other proceeding or governmental

 

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investigation involvingSellers or any directors, officers, employees, agents or representativesthereof, or any services provided on or prior to the Closing, regardless ofwhether any such claim, action, suit, litigation, arbitration, proceeding orinvestigation is made, brought or commenced prior to or after the Closing;

 

(ii)                                  Anyobligation or liability of Sellers for Taxes, except to the extent set forth inSections 2.2(a)(i) and (iv);

 

(iii)                               Anylegal, accounting, financial advisor or other expenses of Sellers in connectionwith the Chapter 11 Cases, including the negotiation and consummation of thetransactions contemplated hereunder;

 

(iv)                              Anyobligations with respect to the Company Letters of Credit which are replacedpursuant to Section 2.7;

 

(v)                                 Anyobligation or liability of Sellers to their respective shareholders orAffiliates, including, without limitation, any liability or obligation toParent or J.W. Childs;

 

(vi)                              Anyobligation or liability arising from or related to the KERP other than pursuantto the Severance Obligations;

 

(vii)                           Exceptfor the GECC Mortgage, any pre-petition liabilities;

 

(viii)                        AnyNon-Assumed Contracts; and

 

(ix)                                Anyobligation to return any funds to Kemper Insurance Companies.

 

**Section2.3****. **Allocationof Transfer Taxes; Fees.  Tothe extent the transactions contemplated by this Agreement are not exempt underSection 1146(c) of the Bankruptcy Code, Buyer, on the one hand, and Sellers, onthe other hand, shall each pay fifty (50) percent of all sales and transfertaxes and all filing fees and documentary fees or taxes related to the recordingof all deeds and lease assignments, payable in connection with the purchase,sale or transfer of the Assets to, and the assumption of the AssumedLiabilities by, Buyer pursuant to this Agreement.  In addition, Buyer and Sellers shall each payfifty (50) percent of all filing fees in connection with any filing by theparties required for the transactions contemplated by this Agreement under theHSR Act.  Buyer and Sellers shall usecommercially reasonable efforts to minimize the amount of all the foregoingtaxes and shall cooperate in providing each other with any appropriate resaleexemption certifications, tax clearance certificates and other similardocumentation.  The party that isrequired by applicable Law to make the filings, reports, or returns and tohandle any audits or controversies with respect to any of the foregoing taxesshall do so, and the other party shall cooperate (and make reimbursement) withrespect thereto as necessary.

 

**Section2.4****. **TaxTreatment; Allocation of Purchase Price.  Buyer, Parent and Sellers acknowledge thatBuyer may elect to cause the transactions described herein to qualify as areorganization under Section 368(a)(1)(G) of the Code, and Parent and Sellerswill

 

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reasonably cooperate with Buyer to effect the desiredtax treatment.  If Buyer elects not tocause the transactions to qualify as a reorganization, but instead as a sale ofassets, Buyer and Sellers agree to prepare an allocation of the Purchase Price,applicable Assumed Liabilities and other relevant items among the Assets inaccordance with Section 1060 of the Code and the regulations thereunder, anycomparable provisions of state or local Law, as appropriate and as set forth onSchedule 2.4 hereof (such Schedule 2.4 to be determined jointly and in goodfaith by Buyer and Sellers prior to Closing); provided, however, that if Buyerand Sellers are unable to jointly determine an allocation, the allocation willbe referred to the Bankruptcy Court for a final determination.  Buyer and Sellers each agree to provide theother promptly with any other information required to complete Schedule 2.4. Such allocation shall be binding on Buyer and Sellers for all purposesincluding, without limitation, the reporting of gain or loss and determinationof basis for income tax purposes, and each of the parties hereto agrees that itor they will file a statement (on IRS Form 8594 or other applicable form)setting forth such allocation with its or their federal and applicable stateincome tax returns and shall also file such further information or take suchfurther actions as may be necessary to comply with the Treasury Regulationsthat have been promulgated pursuant to Section 1060 of the Code and similarapplicable state Laws and regulations. No party shall take a position inconsistent with the allocations setforth on Schedule 2.4 unless required to doso pursuant to a “determination,” as defined in section 1313(a) of the Code.

 

**Section2.5****. **CureCosts.  To the extent that anyAssumed Contracts are subject to a cure (pursuant to Section 365 of theBankruptcy Code and described in any Order of the Bankruptcy Court relating tosuch cure liability), Sellers shall be responsible for any such cure  (in the aggregate, the “Cure Costs”),and Sellers agree to pay such Cure Costs at the Closing.

 

**Section2.6****. **Deposit.

 

(a)           Inthe event of a Non-Auction Plan Sale, upon (i) the execution of this Agreement,(ii) execution of an agreement among the Company, the Prepetition Lenders, theCommittee (subject to the Committee’s fiduciary duties) and J.W. Childs tosupport, and use commercially reasonable efforts to pursue, confirmation of aplan of reorganization incorporating the terms of this Agreement applicable tothe Non-Auction Plan Sale, and (iii) the filing of such plan of reorganizationand the accompanying disclosure statement consistent with the terms of thisAgreement and reasonably****acceptable toBuyer, Buyer shall make an earnest money deposit (the “First Deposit”)in the amount of Five Hundred Thousand Dollars ($500,000) into a segregatedaccount designated by Sellers (the “Segregated Account”), which accountand the contents thereof, including interest earned, shall not constituteproperty of Sellers’ bankruptcy estates under Section 541 of the BankruptcyCode.  Buyer will deposit an additionalfive hundred thousand dollars ($500,000) (the “Second Deposit” andtogether with the First Deposit, the “Deposit”) into the SegregatedAccount upon entry of an order of the Bankruptcy Court approving the disclosurestatement relating to such plan and the delivery of binding agreements to votein favor of and otherwise to support such plan signed by J.W. Childs, thePrepetition Lenders, and the majority of the members of the Committee having votedin favor of the plan of reorganization.

 

(b)           Inthe event of an Auction Sale pursuant to the terms hereof, if Buyer is approvedby the Bankruptcy Court as the initial bidder in connection with such AuctionSale, or in the

 

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event that the approved bid procedures allow for suchdesignation absent specific Bankruptcy Court approval and Buyer is sodesignated, Buyer shall make the First Deposit into the SegregatedAccount.  Buyer shall make the SecondDeposit into the Segregated Account following (i) the delivery of a bindingagreement to pursue and support confirmation of a plan of reorganization orapproval of the Sale Motion consistent with the terms hereof, as applicable,signed by Sellers, J.W. Childs, the Prepetition Lenders, and the Committee(subject to the Committee’s fiduciary obligations), (ii) the filing of suchplan of reorganization or Sale Motion and (iii) in the event of a sale pursuantto a plan of reorganization, the majority of the members of the Committeehaving voted in favor of such plan of reorganization.

 

(c)           Inthe event of either a Non-Auction Plan Sale or an Auction Sale, the Depositshall be applied to the Cash Consideration payable by Buyer on the ClosingDate.  If this Agreement shall beterminated by any party hereto pursuant to either Section 10.9(a)(i), (ii),(iii), (v) or (vi) hereof, then Sellers shall return the Deposit to Buyer.  If the Closing shall not have occurred on orbefore the Drop-Dead Date, by reason of the failure of any condition precedentunder Section 8.2 hereof resulting primarily from Buyer materially breachingany representation, warranty or covenant contained in this Agreement or if thisAgreement shall be terminated by Sellers pursuant to Section 10.9(a)(iv), thenSellers shall retain the Deposit.  Suchretained Deposit shall be deemed to be liquidated damages, and shall be theexclusive remedy of Sellers against Buyer and Real Mex hereunder.

 

**Section2.7****. **Replacementof Letters of Credit.  Buyeracknowledges and agrees that on or prior to the Closing that it shall replaceall Company Letters of Credit with replacement letters of credit of Buyer’sfinancial institutions and, if required by the beneficiaries of such CompanyLetters of Credit, bonds, indemnity agreements, cash collateral and similaritems (collectively, the “Replacement Letters of Credit”), which, ineach case, shall be acceptable to the beneficiaries of such Company Letters ofCredit and be effective to cause the release of Sellers and their financialinstitutions from any and all liabilities related to such Company Letters ofCredit.

 

**ARTICLE III**

CLOSING

 

**Section3.1****. **Date,Time and Place of Closing. The consummation of the transactions contemplated hereby (the “Closing”)shall take place at the offices of Kirkland & Ellis LLP in New York, NewYork, commencing at 9:00 a.m. local time on the date as soon as practicablefollowing the satisfaction or waiver of all conditions to the obligations ofthe parties to consummate the transactions contemplated hereby (other thanconditions with respect to actions the respective parties will take at theClosing itself) as Buyer and Sellers shall mutually determine (the “ClosingDate”) in order that on the Closing Date the cash in the RestrictedAccounts together with vendor deposits and bond collateral approximates $4.7million; provided, that if the Confirmation Order has not been entered on orbefore December 21, 2004, then, subject to the terms and conditions hereof, theClosing shall at Buyer’s request be held as early as possible during the weekof January 17, 2005.  The effective timeof the consummation of the transactions contemplated by this Agreement shall be12:01 A.M. on the Closing Date.

 

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**Section3.2****. **Deliveriesby Sellers at Closing.  At theClosing, and as provided by the Approval Order, Sellers shall convey, transfer,assign, and deliver all of their right, title and interest in and to, andpossession of, the Assets to Buyer, and shall also deliver to Buyer thefollowing:

 

(a)           Ageneral bill of sale and assignment, in a form reasonably satisfactory to Buyer(“Bill of Sale”), with respect to the Assets;

 

(b)           Anassumption agreement, in a form reasonably satisfactory to Buyer (the “AssumptionAgreement”), executed by the appropriate Sellers, pursuant to which Buyershall be assigned and shall assume the Assigned Contracts and the AssumedLiabilities from Sellers;

 

(c)           limitedwarranty deeds for transfer of all of the Owned Real Property in recordableform, each in a form reasonably satisfactory to Buyer conveying insurable feesimple title to all of the Owned Real Estate free and clear of all Liens exceptPermitted Encumbrances;

 

(d)           AFIRPTA affidavit in a form reasonably satisfactory to Buyer;

 

(e)           Anassignment and assumption agreement, in a form reasonably satisfactory toBuyer, executed by Sellers, pursuant to which Buyer shall be assigned and shallassume all of the Liquor Licenses; and

 

(f)            Wiretransfer instructions regarding delivery of the Cash Consideration.

 

**Section3.3****. **Deliveriesby Buyer at Closing.  Buyeror, in the case of the deliveries pursuant to Section 3.3(b) and (c), Real Mex,shall deliver to Sellers or J.W. Childs, as applicable, at Closing:

 

(a)           TheCash Consideration (including the Deposit which shall be applied to the CashConsideration as provided in Section 2.6), by wire transfer of immediatelyavailable funds of the Cash Consideration to such account or accounts specifiedpursuant to Sections 2.1(a)(i)-(iii) or 2.1(c)(i)-(iii) above, as applicable;

 

(b)           TheReal Mex Equity Securities;

 

(c)           TheStockholders Agreement;

 

(d)           Aduly executed Assumption Agreement;

 

(e)           Certifiedcopies of the ****Certificateof Incorporation********and********Bylaws****of Real Mex and Buyer, each as in effect as of the Closing Date;

 

(f)            Certifiedcopies of duly adopted resolutions of Real Mex’s and Buyer’s ****Board of Directors****authorizing, approving, and consenting to the execution and delivery of thisAgreement, to the consummation of the transactions contemplated herein, and tothe performance of the agreements set forth herein; and

 

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(g)           Certificatesof good standing for Real Mex and Buyer dated within a reasonably current timeperiod prior to the Closing Date from their respective states of incorporation.

 

**Section3.4****. **LiquorLicenses.  With respect to anyLiquor Licenses held by any of Sellers, liquor assets or liquor or otheralcoholic beverage inventory conveyed hereunder, Buyer and Sellers shall complywith all applicable Laws.  As soon aspracticable (but in no event later than eighteen (18) days) after Buyer’sreceipt of an Order from the Bankruptcy Court approving Section 10.4 of thisAgreement, Buyer agrees to complete and file the liquor license transferapplications with the applicable Governmental Entity.  The parties hereto shall cooperate inexecuting and delivering any documentation necessary to effect the liquorlicense transfer applications.  Theparties hereto acknowledge and agree that the Liquor Licenses for eachRestaurant shall be transferred upon the approval of the applicableGovernmental Entity (but no earlier than as of the Closing Date).  If, as of the Closing Date, Buyer has notbeen able to obtain a liquor license from the applicable Governmental Entitywith respect to a Restaurant, subject to the terms and conditions of thisAgreement, the Closing shall occur with respect to such Restaurant and thereshall be no adjustment to the Purchase Price, and, to the extent permitted byapplicable Law, the parties shall enter into a mutually acceptable liquorlicense management agreement or such other mutually acceptable agreement forsuch Restaurant such that Buyer can legally sell alcoholic beverages at suchRestaurant and participate in the profits generated from such sales from andafter the Closing Date pursuant to such management agreement or such otherarrangement (a “Replacement Liquor License”).  Any such Replacement Liquor License shall befor an initial period of three (3) months with one ninety (90) day extension solong as Buyer is diligently attempting to obtain such liquor license asreasonably determined by Sellers.  If theapplicable Governmental Entity fails to approve the transfer of any LiquorLicenses before the expiration of such period of time, then, except asotherwise agreed to by the parties hereto in writing, the failure shall not (i)constitute a default by Sellers of this Agreement, (ii) affect or impair theterms or conditions of this Agreement, or (iii) provide Buyer with any rightsor remedies to rescind, cancel or modify this Agreement or the transactionscontemplated hereby.

 

**Section3.5****. **Deemed Consents and Cures.  For all purposes of this Agreement (includingall representations and warranties of Sellers contained herein), Sellers shallbe deemed to have obtained all required consents, as applicable, in respect ofthe assignment of any Assumed Contract and all defaults thereunder shall bedeemed to have been cured if, and to the extent that, pursuant to the ApprovalOrder, Sellers are authorized to assume and assign any such Assumed Contract toBuyer pursuant to Section 365 of the Bankruptcy Code, and Sellers have paid allCure Costs and have otherwise taken all actions required to cure such defaultsrelated thereto.

 

**ARTICLE IV**

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

As an inducement to Buyer toenter this Agreement and to consummate the transactions contemplated hereby,Sellers jointly and severally represent and warrant to Buyer as follows:

 

**Section4.1****. **Organizationand Power.  Each Seller (i) isduly organized and validly existing under the Laws of its respective state ofincorporation; (ii) has the requisite

 

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power and authority to conduct its Business as currentlyconducted; and (iii) has the requisite power and authority to own, lease,operate or hold the Assets owned, leased, operated or held by it.

 

**Section4.2****. **Authority.  Each Seller has all corporate power andauthority necessary to execute this Agreement and any ancillary agreementshereto to which it is or will be a party (the “Ancillary Agreements”)and, subject to the approval of the Bankruptcy Court, to perform itsobligations hereunder and thereunder and consummate the transactionscontemplated hereby and thereby.  Theexecution and delivery of this Agreement and the consummation of thetransactions contemplated hereby by Sellers have been duly authorized by allnecessary corporate actions, and the execution and performance of the AncillaryAgreements by Sellers will be authorized by all necessary corporate actionsprior to the Closing Date.  Subject toBankruptcy Court approval and entry of the Approval Order, this Agreementconstitutes, and upon execution of each of the Ancillary Agreements suchagreements will constitute, valid and binding obligations of Sellers,enforceable against Sellers in accordance with their respective terms.  Notwithstanding anything to the contrarycontained herein, no provision of this Agreement is binding upon Sellers unlessand until this Agreement is approved by the Bankruptcy Court.

 

**Section4.3****. **No Breachor Conflict.  Except as setforth on Schedule 4.3, neither theexecution, delivery nor performance of this Agreement and the AncillaryAgreements, nor the consummation of the transactions contemplated hereby andthereby, will (a) cause any Seller to breach in any material respect anymaterial Law or Order that is applicable to the Business, (b) conflict with orresult in a violation of Sellers’ Certificate of Incorporation or Bylaws, (c)subject to the Approval Order, materially conflict with or result in a materialbreach of or material default under any material Assigned Contract or give riseto the termination of or acceleration of payment under any material AssignedContract, or (d) result in the creation of any material Lien (other than aPermitted Encumbrance or any Lien incurred by Buyer as a result of thetransactions contemplated hereby).

 

**Section4.4****. **TheAssets.

 

(a)           Attachedhereto as Schedule 4.4(a) is a complete andaccurate list of the Owned Real Property;

 

(b)           Attachedhereto as Schedule 4.4(b) is a complete andaccurate list of the Leased Real Property, the Real Property Leases and theSubleases;

 

(c)           Attachedhereto as Schedule 4.4(c) is a complete andaccurate list of the Equipment Leases, identified by parcel of Owned RealProperty or Leased Real Property where the leased equipment is located;

 

(d)           Attachedhereto as Schedule 4.4(d) is a complete andaccurate list of all other contracts, agreements, commitments or otherunderstandings or arrangements to which any Seller is a party that relate tothe Business or by which any of the Assets are bound or affected (other than(i) the Equipment Leases, (ii) the Development Agreements and Franchise Agreements,(iii) the Minor Contracts, (iv) the Real Property Leases, and (v) thecontracts,

 

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agreements or commitments identified on Schedule5.6 as Rejected Contracts).  Thecontracts listed on Schedules 4.4(b), 4.4(c) and 4.4(d)hereto are the “Material Contracts”.

 

**Section4.5****. **FinancialInformation.

 

(a)           Sellershave previously furnished to Buyer copies of the audited consolidated financialstatements of Parent and its subsidiaries (including Sellers) for the fiscalyear ended December 30, 2003, (the “Seller Audited Financial Statements”)together with the reports thereon of KPMG LLP, independent certified publicaccountants.  These financial statements,including in each case the notes thereto, have been prepared in accordance withGAAP throughout the periods covered thereby and fairly present the consolidatedfinancial condition and results of operations of Parent and its subsidiaries(including Sellers) on the bases therein stated, as of the respective datesthereof, and for the respective periods covered thereby.

 

(b)           Theunaudited pro forma statements of income for the Business of Sellers for thefiscal years ended December 26, 2000, December 25, 2001, December 31, 2002,December 30, 2003 and for the 52 week period ended September 7, 2004 (the “SellerPro Forma Income Statements” and, together with the Audited FinancialStatements, the “Seller Financial Statements”) are set forth on Schedule 4.5(b) and were prepared in accordancewith the Parent’s and its subsidiaries (including Sellers) historicalpractices.  These Pro Forma IncomeStatements fairly present in all material respects the operating results of theBusiness for the periods presented and the adjustments to the financialstatements presented therein are reasonable.

 

(c)           Thebooks and records of Parent and Sellers relating to the Business have beenmaintained in accordance with applicable Laws, are complete and correct in allmaterial respects, and fairly and in reasonable detail reflect as of the datesshown thereon all items of income and expense, and all assets, liabilities andaccruals of the Parent and Sellers in accordance with GAAP, and provide a fairand accurate basis for the preparation of Seller Financial Statements.

 

**Section4.6****. **Conditionof Assets.  The Equipment,considered as a whole and not on an item by item basis, is in workingcondition, commensurate with its age, taking into account reasonable wear andtear.

 

**Section4.7****. **TangibleAssets; Ownership of Assets.

 

(a)           Notwithstandinganything in this Agreement to the contrary, all tangible Assets used in theoperation of the Business, whether owned or leased, are being transferred toBuyer “as is”, “where is” and “with all faults”.

 

(b)           Exceptas set forth on Schedule 4.7(b) hereto,Sellers collectively have good title to, or valid leasehold interest in, thetangible Assets.

 

(c)           TheAssets and the Excluded Assets together constitute all of the assets used inthe conduct of the Business as conducted on the date hereof.

 

(d)           TheParent holds no assets other than the capital stock of the Company.

 

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**Section4.8****. **RealProperty.

 

(a)           Exceptas set forth on Schedule 4.8(a) hereto,Sellers collectively have good and marketable title to all of the Owned RealProperty free and clear of all restrictions, pledges, liens, mortgages,hypothecations, collateral assignments, encumbrances or easements, other thanPermitted Encumbrances.  Sellers’ soleparcel of Owned Real Property is used as a parking lot.

 

(b)           Subjectto the Chapter 11 Cases, each Real Property Lease is in full force and effect;and each constitutes the legal, valid, binding and enforceable obligation ofSellers, and to Sellers’ knowledge, the lessor thereof.  Except as set forth on Schedule 4.8(b)hereto and the Cure Costs, Sellers are current in all material obligationsunder each Real Property Lease.  Exceptas may otherwise be set forth in any Bankruptcy Court Order, the consummationof the transactions contemplated by this Agreement will not (and to Sellers’knowledge, will not give any person a right to) terminate or modify any rightsof, or accelerate or, except as set forth on Schedule4.8(b), increase any obligation of Sellers under any Real PropertyLease.  Except as set forth on Schedule 4.8(b) hereto and except for theWarehouse and the Corporate Office, each Seller (as applicable) has the rightto use each of the Leased Real Properties as a Restaurant.

 

(c)           Exceptas set forth on Schedule 4.8(c) hereto, noproceedings are pending, or to Sellers’ knowledge, threatened, which wouldreasonably be expected to cause any material change, redesignation,redefinition or other modification of the zoning or use classification of, orany building or environmental code requirement applicable to, any RealProperty.

 

**Section4.9****. **Litigation;Compliance With Law.  Except(a) as set forth on Schedule 4.9, and (b)relating to the Chapter 11 Cases, there are no claims, litigation, actions orlegal proceedings by or before a Governmental Entity or, to Sellers’ knowledge,threatened against Sellers which, if determined adversely against Sellers,would individually or in the aggregate, (i) materially affect any Seller’sability to perform its obligations hereunder, (ii) materially affect any Seller’srights granted under the Material Contracts, or (iii) have a Material AdverseEffect on the Business, the Assets and the Restaurants.  Except as set forth on Schedule4.9 hereto, each Seller has complied in all material respects withall material Laws (other than Environmental Laws, as to which Sellers makerepresentations and warranties in Section 4.14).

 

**Section4.10****. **Taxes.  All material ad valorem and other propertyTaxes relating to the Assets have been fully paid to the extent due for allprior tax years and there are no material delinquent property Tax Liens orassessments other than Liens or assessments listed on Schedule 4.10hereto that are for Taxes being contested in good faith for which appropriatereserves have been set aside, as reflected in Seller Financial Statements, orSellers’ general ledger.  There are noother Liens on any of the assets that arose in connection with any failure (oralleged failure) to pay any Tax.  Exceptas set forth on Schedule 4.10 hereto, eachSeller has filed (or shall file when due if not yet due) all material federal,state, local and other Tax returns and reports of whatever kind pertaining tothe Business and required to be filed by Sellers for all periods up to andincluding the Closing Date, and all such returns are (or shall be when filed)correct and complete in all material respects. Except as set forth on Schedule 4.10hereto, Sellers have paid (or shall pay) all material Taxes, which are due andpayable prior to the Closing Date (other than Taxes being contested in goodfaith for which appropriate reserves have been set aside, as reflected onSellers’ Financial Statements, or Sellers’ general ledger in the amount setforth on Schedule 1.2 hereto (which Schedule 1.2 will be updatedby Sellers as

 

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of the Closing), or for which assessments relating toany period prior to the Closing Date have been received.  Except as set forth on Schedule4.10 hereto, to Sellers’ knowledge, there are no audits currentlypending with respect to any federal or state Tax returns of any Seller and noSeller has received written notice of any claims by any governmental entity ortaxing authority with respect to the non-payment or underpayment of Taxes ornon-filing or incorrect filing of tax returns or reports.  No Seller has entered into any agreementsregarding Taxes with any Governmental Entity that have continuing effect, or issubject to any ruling or other “determination” (as defined in section1313(a) of the Code) that has continuing effect.

 

**Section4.11****. **Contracts.  Exceptas set forth in Schedule 4.11, (i) eachMaterial Contract is valid, binding upon Sellers and in full force and effect,and (ii) except for any breach or default in connection with or as a result ofthe Chapter 11 Cases, to Sellers’ knowledge, no party to any Material Contractis in material breach thereof or material default thereunder.  As of the date hereof, no Sellers havereceived any written notice of the intention of any party to terminate anyMaterial Contract.  There are no materialoral contracts relating to the Assets or the Business to which any Seller is aparty and as to which Buyer would be obligated after the Closing.

 

**Section4.12****. **EmploymentMatters.

 

(a)           Noemployees of Sellers are on strike, nor to Sellers’ knowledge, are suchemployees threatening to strike.  Sellershave no knowledge that any labor union has recently attempted, or is presentlyattempting, to organize Sellers’ employees into a collective bargaining unit,and no group of Sellers’ employees is presently organized into a collectivebargaining unit. Sellers are not a party to any collective bargaining agreementor a member of any multi-employer bargaining group.  Sellers are not engaged in any arbitrationpursuant to a labor agreement or in any Proceeding of any type before theNational Labor Relations Board (the “NLRB”).  To Sellers knowledge, there is****no threat of such arbitration or proceeding before the NLRBand, to Sellers’ knowledge, no award or decision adverse to Sellers has beenissued by an arbitrator or the NLRB. Sellers are not a member of any pension, insurance or other employeebenefit plan that is subject to regulation under the Taft-Hartley Act.

 

(b)           Exceptas set forth on Schedule 4.12(b) hereto,Sellers have operated all Restaurants and the Business in material compliancewith all material local, state and federal Laws and regulations related toemployment matters including, but not limited to, payment of wages andbenefits, employee discrimination and the Americans with Disabilities Act.

 

(c)           Schedule4.12(c) contains a list of all employee benefit plans (as such term isdefined in Section 3(3) of ERISA), and any other compensation or benefit plan,arrangement, program or practice of Sellers providing benefits or compensationto current or former employees, consultants, independent contractors orcontingent or leased workers (collectively, “Employee Benefit Arrangements”).  Sellers have established and operated allEmployee Benefit Arrangements in compliance in all material respects with allmaterial applicable Laws and the terms of each Employee BenefitArrangement.  Sellers do not maintainand, in any period with respect to which any relevant statute of limitationsremains open, have not maintained, or incurred any liability, including withoutlimitation, any contingent liability, with respect to, an Employee BenefitArrangement that is subject to Title IV of ERISA or Section 412 of the Code,

 

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including a “multiemployer pension plan” as defined inSection 3(37) of ERISA, or that provides medical or health benefits beyond thedate of any current or former employee’s, consultant’s, independentcontractor’s or contingent or leased worker’s termination of service, except asrequired by the continuation coverage provisions of Section 4980B of the Codeor Sections 601 et. seq. of ERISA..

 

**Section4.13****. **Licensesand Permits.

 

(a)           Setforth on Schedule 4.13(a) hereto is acomplete and accurate list of each business license, health permit andoccupancy permit held by each Seller and related to the Business (the “Licenses”),which are the material governmental permits and licenses (other than the LiquorLicenses) necessary to operate the Restaurants. Except as set forth on Schedule 4.13(a)hereto, all such Licenses are current and in full force and effect and Sellersare in material compliance with all requirements and limitations set forth insuch Licenses.

 

(b)           Schedule 4.13(b) contains a list of eachRestaurant owned by Sellers showing the state, county, city, or otherjurisdiction in which such Restaurant is located and a list of all liquorlicenses held by Sellers in connection with the operation of each suchRestaurant (the “Liquor Licenses”). To the extent required by applicable Law or regulation, each Restaurantpossesses a Liquor License.  Each of theLiquor Licenses is in full force and effect and adequate for the currentconduct of operations at the Restaurant for which it is issued, and, subject tothe matters disclosed in the following sentence, has been validly issued.  Except as set forth in Schedule4.13(b), none of the Restaurants has received any written notice ofany pending or threatened modification, suspension or cancellation of a LiquorLicense, or any proceeding relating thereto. Except as disclosed in Schedule 4.13(b),there are no (i) pending disciplinary actions or (ii) past disciplinary actionsthat could have any material adverse impact on current operations or the natureor level of discipline imposed on account of future violations of the Lawsrelated to sales and service of alcoholic beverages.

 

**Section4.14****. **EnvironmentalMatters.  Except as set forthon Schedule 4.14(a) hereto, to Sellers’knowledge Sellers have not disposed of, released or caused the release of anyHazardous Materials under or at the Real Property, which disposal or releasewould constitute a violation of, or require notification to any governmentalagency pursuant to, any Environmental Law, except for such as would not have aMaterial Adverse Effect on the business operated at the Real Property.  Except as set forth on Schedule4.14(a) hereto, to Sellers’ knowledge, there are no undergroundstorage tanks for Hazardous Materials located on the Real Property.  Except as set forth on Schedule 4.14(b)hereto, to Sellers’ knowledge, each Seller has at all times operated the RealProperty in material compliance with Environmental Laws.  To Sellers’ knowledge, none of Sellers hasreceived any written communication from any third party that alleges that anySeller is not in compliance with any applicable Environmental Law.  To Sellers’ knowledge, except as set forth onSchedule 4.14(c) hereto, Sellers have notprepared or caused the preparation of any environmental reports, audits,investigations or assessments of the Real Property (collectively, “EnvironmentalReports”).

 

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**Section4.15****. **IntellectualProperty.

 

(a)           Schedule 4.15(a) hereto sets forth a list of all(i) patented or registered Intellectual Property, (ii) pending patentapplications and applications for registration of other Intellectual Property;(iii) material unregistered trademarks, service marks, trade dress or otherindicators of origin used in the Business; and (iv) all material unregisteredcopyrights used in the Business in each case whether owned by any Seller orlicensed for use in connection with the Concepts or the Business, and settingforth as to each, as applicable, the owner of such item, the date ofapplication, registration or issuance of such item, and the jurisdiction inwhich such item is registered or issued or the subject of an application forregistration or issuance.

 

(b)           Exceptas set forth on Schedule 4.15(b) hereto,Sellers collectively own, or have the right to use pursuant to license,sublicense, agreement, or permission, all material Intellectual Propertynecessary for the operation of the assets and the Business as currentlyconducted.  Sellers have taken allcommercially reasonable action to protect, defend and enforce each item ofmaterial Intellectual Property that they own or use.

 

(c)           Exceptas set forth on Schedule 4.15(c) hereto, toSellers’ knowledge, the Intellectual Property has not infringed, and does notinfringe, upon any intellectual property rights of third parties, and no Sellerhas in the last three (3) years received any written charge, complaint, claim,or notice alleging any such infringement. Except as set forth on Schedule 4.15(c) hereto, to Sellers’knowledge, no third party has infringed upon any material Intellectual Propertyof Sellers.

 

(d)           Exceptas set forth on Schedule 4.15(d) hereto,with respect to each item of material Intellectual Property that Sellers own:the item is not subject to any outstanding judgment, order, decree,stipulation, injunction, or charge; and no charge, complaint, action, suit,proceeding, hearing, investigation, claim, or demand is pending or, to Sellers’knowledge, is threatened, which challenges the legality, validity, enforceability,use, or ownership of the item.

 

(e)           Exceptas set forth on Schedule 4.15(e) hereto,Sellers are not in default in any material respect under any material writtenlicense, sublicense or agreement to use Intellectual Property and, to Sellers’knowledge, no other party to any such license, sublicense, agreement orpermission is in default thereunder in any material respect.  To Sellers’ knowledge, each such license,sublicense or agreement is valid and in full force and effect.

 

(f)            Exceptas set forth on Schedule 4.15(f) hereto,the information technology systems owned, licensed, leased, operated on behalfof, or otherwise held for use in the Business, including all computer hardware,software, firmware, process automation and telecommunications systems used inthe Business, perform reliably and in material conformance with the appropriatespecifications or documentation for such systems, except as would not have aMaterial Adverse Effect on the Business. Sellers have taken commercially reasonable steps to provide for thearchival, back-up, recovery and restoration of the critical business data ofthe Business, including the provision of hot fail-over server capacity for datarelated to payroll and general ledger accounts in the event of a systemsfailure or disaster.

 

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**Section4.16****. **Franchising.

 

(a)           Sellerspurchased, developed and have used the trademarks, tradenames, trade dress,menus, signage, decor, operating processes and procedures, food preparation andingredients lists and all other unique Intellectual Property, know how andmanner and method of operation related to the “Chevys Fresh Mex” restaurantconcept, the “Fuzio Universal Pasta” restaurant concept, the “Chevys ExpressMex” restaurant concept (each a “Concept” and collectively, the “Concepts”)and, except as set forth on Schedule 4.16(a)hereto, have created and operated a franchise system for each of the Concepts(each a “System” and collectively, the “Systems”) consisting ofdevelopment agreements, franchise agreements and the other agreements andbusiness relationships related thereto.

 

(b)           Schedule 4.16(b) hereto is a complete andaccurate list of each franchisee of the Systems (the “Franchisees”),showing the date of each franchise agreement (the “Franchise Agreements”)and the street address of the restaurant (the “Franchise Restaurant”) towhich each such agreement relates.

 

(c)           Schedule 4.16(c) hereto is a complete andaccurate list of each Franchisee development agreement and amendments, if any,showing the territory to which each such agreement relates and the remainingFranchise Restaurant development schedule under each such agreement (the “DevelopmentAgreements”).

 

(d)           Exceptas set forth on Schedule 4.16(d), theSystems have been operated in all material respects with all material state andfederal Laws related to the offer and sale of franchises, and no charge,complaint, action, suit, proceeding, hearing, investigation, claim, demand, ornotice is pending.

 

(e)           Exceptas set forth on Schedule 4.16(e) hereto,there are no material disputes between any Seller and any Franchisee which areunresolved, and no Seller has received or delivered a written notice seeking toterminate or modify in any material respect any of its relationships with anyFranchisees which is still pending.

 

(f)            Exceptas set forth on Schedule 4.16(f) hereto, toSellers’ knowledge, each Franchise Agreement and Development Agreement is infull force and effect; and each constitutes the legal, valid, binding and enforceableobligation of Sellers, and to Sellers’ knowledge, the other parties thereto.

 

**Section4.17****. **Insurance.  Schedule 4.17contains a list of all policies of liability, theft, fidelity, life, fire,product liability, workmen’s compensation, health and other forms of insuranceheld by the Parent or Sellers for the benefit of the Business (specifying theinsurer, the insured amount of coverage, type of insurance, policy number, andany pending claims thereunder) providing coverage for any post-petition periods.  With respect to such policies, (i) all ofsuch policies are in full force and effect, (ii) neither the Parent nor anySeller is in default in any material respect with respect to its obligationsunder any such policy, and (iii) neither Parent nor any Seller has receivedwritten notice that such policy shall be cancelled or not be renewed onsubstantially the same terms as are now in effect.

 

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**Section4.18****. **Broker orFinder.  Except as set forthon Schedule 4.18 hereto, no person or entity assisted in or broughtabout the negotiation of this Agreement, or the subject matter of thetransactions contemplated herein, in the capacity of broker, agent or finder orin any similar capacity on behalf of Sellers or Parent.

 

**Section4.19****. **Disclaimerof Other Representations and Warranties; Schedules.

 

(a)           NEITHERSELLERS, NOR PARENT NOR ANY EMPLOYEES, DIRECTORS, OFFICERS, SHAREHOLDERS ORREPRESENTATIVES OF SELLERS OR PARENT HAVE MADE ANY REPRESENTATIONS OR WARRANTIES,WHETHER EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, RELATING TO SELLERS OR THEIRBUSINESS, OPERATIONS OR PROSPECTS OR OTHERWISE, INCLUDING, WITHOUT LIMITATION,WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, INCONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OTHER THANTHOSE EXPRESSLY MADE IN THIS AGREEMENT OR ANY SCHEDULE HERETO OR CERTIFICATEDELIVERED HEREUNDER. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THEEXTENT OF THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT,BUYER IS PURCHASING THE ASSETS ON AN “AS-IS, WHERE-IS” BASIS.  WITHOUT LIMITING THE GENERALITY OF THEFOREGOING, SELLERS MAKE NO REPRESENTATION OR WARRANTY REGARDING ANY ASSETS OTHERTHAN THE “ASSETS”, AND NONE SHALL BE IMPLIED AT LAW OR IN EQUITY.  WITHOUT LIMITING THE GENERALITY OF THEFOREGOING, NEITHER SELLERS NOR PARENT, NOR ANY SHAREHOLDERS, EMPLOYEES,DIRECTORS, OFFICERS OR REPRESENTATIVES OF SELLERS OR PARENT HAVE MADE, ANDSHALL NOT BE DEEMED TO HAVE MADE, ANY REPRESENTATIONS OR WARRANTIES IN THE PPMOR IN ANY PRESENTATION OF THE BUSINESS OF SELLERS IN CONNECTION WITH THETRANSACTIONS CONTEMPLATED HEREIN EXCEPT THAT SUCH REPRESENTATIONS OR WARRANTIESOR PRESENTATIONS, AS APPLICABLE, WERE PREPARED AND/OR PRESENTED IN GOOD FAITH,AND NO STATEMENT CONTAINED IN THE PPM OR MADE IN ANY SUCH PRESENTATION SHALL BEDEEMED A REPRESENTATION OR WARRANTY HEREUNDER OR OTHERWISE.  IT IS EXPRESSLY UNDERSTOOD THAT ANY COSTESTIMATES, PROJECTIONS, PREDICTIONS OR FORWARD-LOOKING STATEMENTS CONTAINED INANY DATA, FINANCIAL INFORMATION, MEMORANDA OR OFFERING MATERIALS ORPRESENTATIONS, INCLUDING BUT NOT LIMITED TO THE PPM, ARE NOT AND SHALL NOT BEDEEMED TO BE OR INCLUDE REPRESENTATIONS OR WARRANTIES OF SELLERS OR PARENT OROF ANY SHAREHOLDER, EMPLOYEE, DIRECTOR, OFFICER OR REPRESENTATIVE OF SELLERS ORPARENT.

 

(b)           Anyinformation disclosed in one section of the schedules shall be deemed to bedisclosed in each other section of the schedules if the relevance of suchinformation to such other section of the schedules is reasonably apparent.  Certain information set forth in theschedules hereto may be included solely for informational purposes and may notbe required to be disclosed pursuant to this Agreement.  The disclosure of such information shall notbe deemed to constitute an acknowledgment that such information is required tobe disclosed in connection

 

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with the representations and warranties made bySellers in this Agreement or that it is material, nor shall such information bedeemed to establish a standard of materiality.

 

**ARTICLE V**

COVENANTS OF SELLERS

 

Parent and Sellers covenantand agree as follows:

 

**Section5.1****. **Conductof Business Before the Closing Date. Except as set forth on Schedule 5.1, without the prior written consentof Buyer between the date hereof and the Closing Date, Parent and Sellers shallnot, except as required or expressly permitted pursuant to the terms hereof orof any Ancillary Agreement, (i) take any action to alter the operation of ormake any payments out of the Professional Fees Account other than in theordinary course consistent with past practice, (ii) accelerate the payment ofany Administrative and Exit Costs in a manner that is inconsistent with pastpractice, (iii) take any action to alter the operation of the asset salesaccount or deposit proceeds of any assets sold after the date hereof in theasset sales account (it being understood that Sellers shall segregate theproceeds from asset sales after the date hereof in a separate account and suchproceeds shall be Assets), (iv) take any action to alter the operation of thesales tax, payroll, and accounts payable restricted accounts (together, the “RestrictedAccounts”) or to recover deposits from vendors or cash collateral postedagainst bonds, (v) make any material change in any of the Assets, the MaterialContracts or the Liquor Licenses, or (vi) enter into any transaction outsidethe ordinary course of business consistent with past practice.  Without limiting the foregoing, Sellers shallconduct the Business in substantially the same manner as conducted on the dateof this Agreement.

 

**Section5.2****. **Access toInformation.

 

(a)           Sellersshall afford Buyer, its counsel, financial advisors, auditors, lenders,lenders’ counsel and other authorized representatives reasonable access for anypurpose consistent with this Agreement, including, without limitation, inconnection with obtaining the financing for the transactions contemplatedhereby, and including access to information regarding the payment of any cureamounts under the Assumed Contracts, from the date hereof until the Closing andfor a reasonable period after the Closing, during normal business hours, to theoffices, properties, books, employees, advisors and records of Sellers withrespect to the Assets, the Business, the Assigned Contracts and the AssumedLiabilities, subject to Buyer’s obligations regarding the confidentiality ofsuch information as set forth in Section 7.2 hereof; provided,however, that such access shall be arrangedin advance by Buyer with Sellers and shall be scheduled in a manner and with afrequency calculated to cause the minimum disruption of the business ofSellers.

 

(b)           Fromthe date hereof until the Closing, Sellers will consult with Buyer and giveBuyer’s views reasonable consideration regarding Sellers’ management of theBusiness and will cooperate, as appropriate and reasonable, with Buyer inpreparing for an efficient integration of the Business with the operations ofReal Mex.  Sellers will permit Buyer’srepresentatives to meet with Sellers’ employees to discuss Buyer’s future plansfor the Business.

 

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(c)           Sellersshall at Buyer’s request and expense request its accountants to perform suchprocedures on its financial statements as may be necessary in connection withBuyer’s financing for the transaction (i.e., a review report or a comfortletter).

 

(d)           Fromtime to time as requested by Buyer, Sellers will provide Buyer with a currentestimate of the projected Administrative and Exit Costs.

 

**Section5.3****. **FurtherAssurances.  Subject to theterms and conditions of this Agreement, Sellers will use all reasonable effortsto take, or cause to be taken, all actions, and to do, or cause to be done, allthings necessary, proper or advisable under applicable Laws and regulations toconsummate and make effective the transactions contemplated by this Agreement,the Ancillary Agreements and the other documents and instruments to bedelivered pursuant hereto.

 

**Section5.4****. **IntellectualProperty Matters.  Prior to orin connection with the Closing, Sellers shall cause its Affiliates to executeand deliver such instruments and take such actions as necessary or reasonablyrequested by Buyer to effect or consummate the transfer of any IntellectualProperty owned by such Affiliates which relate to the Concepts.

 

**Section5.5****. **Cooperation.  Subject to the terms and conditions of thisAgreement, Sellers shall use their commercially reasonable efforts to cause, tothe extent within Sellers’ reasonable control, the conditions set forth inSection 8.2 to be satisfied and to facilitate and cause the consummation of thetransactions contemplated hereby. Sellers shall use commercially reasonable efforts to file the disclosurestatement with respect to the plan of reorganization contemplated hereby byOctober 20, 2004, shall request a shortened notice for the disclosure statementhearing and shall otherwise use commercially reasonable efforts to ensure thatthe confirmation hearing with respect to such plan is held on or beforeDecember 21, 2004.

 

**Section 5.6****. **Assumed Contracts; Cure Amounts.

 

(a)           Thecontracts and leases identified to be assumed on Schedule 5.6 hereto asamended pursuant to the provisions of this Section 5.6 (which Schedule is basedupon Exhibit C to the Debtors’ Joint Plan of Reorganization dated as of July22, 2004), shall be assumed by Sellers and assigned to Buyer in conjunctionwith the plan of reorganization or Sale Motion, as applicable (collectively,the “Assumed Contracts”).  Thecontracts and leases identified to be rejected on Schedule 5.6 asamended pursuant to the provisions of this Section 5.6, shall be rejected bySellers in conjunction with the plan of reorganization or Sale Motion, asapplicable (the “Rejected Contracts”).

 

(b)           Buyermay, at any time until October 18,2004, amend Schedule 5.6 to (i) designate one or more RejectedContracts be added to the list of Assumed Contracts, in which case such additionalcontracts or leases shall be assumed and assigned to Buyer at the Closing, and(ii) designate that one or more Assumed Contracts shall be added to the list ofRejected Contracts, in which case such contracts or leases shall not be assumedand assigned to Buyer, shall not be part of the Assets and shall be treated ascontracts and leases rejected pursuant to Section 365 of the Bankruptcy Code.

 

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(c)           Anyallowed unsecured claim (each an “Additional Claim”) arising as a resultof Buyer’s decision to designate additional Rejected Contracts after the datehereof pursuant to this Section 5.6 that result in additional unsecured claimsagainst Sellers shall be paid on account of its Additional Claim from the paymentto be made to the General Unsecured Creditors under Section 2.1(a)(ii) or2.1(c)(ii), as applicable, (the “General Unsecured Creditors’ Fund”),and any holder of such Additional Claim, shall be a General Unsecured Creditorto the extent of such Additional Claim. In the event that there are Additional Claims that result in additionalunsecured claims against Sellers, Buyer shall increase the amount payablepursuant to Section 2.1(a)(ii) or 2.1(c)(ii), as applicable, to enable eachGeneral Unsecured Creditor to receive the same percentage distribution (whichfor purposes hereof shall be deemed to be 40%) that it would have received hadno Additional Claims arisen.

 

(d)           Buyer shall indemnify and holdSellers harmless from any and all costs, expenses and damages (including, butnot limited to, any working capital liabilities relating to a Leased Propertythat is designated as a Rejected Contract pursuant to this Section 5.6) to theextent they constitute allowed administrative expense claims not otherwise payableor assumed by Buyer hereunder (the “Additional Rejection Costs”) arisingas a result of Buyer’s decision to designate additional Rejected Contractsafter the date hereof pursuant to this Section 5.6 and the amount payablepursuant to Section 2.1(a)(iii) or 2.1(c)(iii), as applicable, shall beincreased by such amounts less the amount by which the Cure Costs payable bySellers are reduced, in each case as a result of Buyer’s decision to designateadditional Rejected Contracts pursuant to this Section 5.6.  Sellers shall use commercially reasonableefforts to minimize the Additional Rejection Costs.

 

(e)           IfBuyer designates additional Assumed Contracts pursuant to this Section 5.6,Buyer shall be responsible for any Cure Costs associated with such AssumedContracts.

 

(f)            PendingClosing, Sellers shall not assume or reject any contracts in the Chapter 11Cases without the prior written consent of Buyer.

 

(g)           Ifthe Bankruptcy Court determines that adequate assurance of future performanceunder any Assumed Contact has not been established,such unexpired leases or contracts shall not beassigned and Buyer shall indemnify Sellers and the General Unsecured Creditorsfor any damages, costs or expenses arising in connection with the rejectiondamage claim that results from rejection of such leases and/or contracts, inaccordance with the provisions of Section 5.6(c) and (d) above.

 

(h)           Sellersentered into or expect to enter into an agreement to sell the lease related toSellers’ real property in Goleta, California. Sellers will use commercially reasonable efforts to consummate such salebefore Closing and an amount equal to the amount of the net proceeds of suchsale (i.e., net of cure costs and other costs of sale) shall be transferred toBuyer.  Whether or not such sale isconsummated before Closing, the Goleta lease will not be an Assumed Contract.

 

**Section5.7****. **BankruptcyCourt Approval and Related Matters.

 

(a)           Sellersshall use commercially reasonable efforts to convince the Bankruptcy Court topermit the Non-Auction Plan Sale to proceed. In the event that the Bankruptcy Court

 

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authorizes a Non-Auction Plan Sale, within ten (10)Business Days after such authorization, Sellers shall file a plan of reorganizationand accompanying disclosure statement incorporating the terms of, and otherwiseconsistent with, this Agreement.  If theBankruptcy Court does not permit the Non-Auction Plan Sale to proceed, butinstead requires Sellers to proceed by an Auction Sale, Sellers shall usecommercially reasonable efforts to convince the Bankruptcy Court to approveBuyer as the initial bidder in the Auction Sale.  If Buyer is approved as such initial bidder,and if Sellers do not receive any offer for the Assets submitted in compliancewith such bidding procedures that is higher and better than that providedherein pursuant to Sections 2.1(c) and (d) or if Buyer is otherwise the winningbidder in the Auction Sale, then within three (3) Business Days after Buyernotifies Sellers (such notice shall be given to Sellers within forty-eight (48)hours of Buyer being deemed the winning bidder) whether it wishes Sellers toseek approval of the sale of the Assets pursuant to a plan of reorganization ora sale under Section 363 of the Bankruptcy Code, in either case incorporatingthe terms of this Agreement, Sellers shall file, as requested, (i) a plan ofreorganization and accompanying disclosure statement or (ii) a Sale Motion, ineither case in form and substance reasonably****satisfactoryto Buyer and consistent with the terms of this Agreement.

 

(b)           Sellers,on the one hand, and Buyer, on the other hand, shall cooperate with the otherand its representatives in connection with the Approval Order and thebankruptcy proceedings in connection therewith.

 

(c)           If,following the Closing, the Approval Order or any other Order of the BankruptcyCourt relating to this Agreement shall be appealed by any Person (or a petitionfor certiorari or motion for rehearing or reargument shall be filed withrespect thereto), Sellers shall take all steps as may be commerciallyreasonable and appropriate to defend against such appeal, petition or motion,and Buyer agrees to cooperate in such efforts, and each party hereto shallendeavor to obtain an expedited resolution of such appeal.

 

(d)           Buyeragrees to cooperate with Sellers in connection with furnishing informationpertaining to the satisfaction of the requirement of adequate assurance offuture performance including, but not limited to, as required under Section365(f)(2)(B) of the Bankruptcy Code.

 

**Section5.8****. **Restricted Accounts.  On the Closing Date, the amount of cash inthe Restricted Accounts together with vendor deposits and bond collateral shallbe no less than $4.7 million.

 

**Section5.9****. **No Shop Provisions.  Immediately upon the execution and deliveryof this Agreement, Parent, Sellers and J. W. Childs will cease and cause theirofficers, directors, advisors, agents and representatives to cease any and allexisting activities, discussions or negotiations with any parties with respectto the sale of Sellers, the Assets or the Business.  Neither Parent, Sellers nor J.W Childs shall,nor shall they permit any of their officers, directors, advisors, agents orrepresentatives to encourage, solicit or initiate any discussions with anyPerson relating to any Acquisition Proposal, enter into any binding ornon-binding agreement or letter of intent with respect to an AcquisitionProposal, or participate in any discussions or negotiations regarding any AcquisitionProposal.  Parent, Sellers and J. W.Childs shall notify Buyer in the event that they enter into negotiationsfollowing the date of this Agreement with any bidder (without disclosing suchbidder’s name) or permit any potential

 

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bidder other than Buyer to have access to anyinformation following the date of this Agreement concerning the Sellers, theAssets or the Business.  For theavoidance of doubt, this provision shall cease to have any effect following anyOrder of the Bankruptcy Court prohibiting such provision, or any BankruptcyCourt Order requiring an Auction Plan Sale.

 

**Section5.10****. **Notice to Creditors.  Sellers shall file with the BankruptcyCourt and serve on creditors as appropriate, a motion for an Order approvingthe provisions of Section 10.4 herein no later than the earlier of (a) five (5)days after Buyer gives Sellers permission to attach this Agreement to suchmotion, or (b) ten (10) Business Days after the execution of this Agreement.

 

**Section5.11****. **Notice****to****Claimants**. **On or before the date that isseven (7) days from the date hereof, the parties will negotiate in good faithto agree to a list of parties to receive notice of any motion or pleadingseeking entry of the Approval Order in order to bar claims to the maximumextent reasonably practicable taking into account the proposed timing of thetransaction, provided that if the parties are unable to agree, the matter willbe referred to the Bankruptcy Court for a final determination.

 

**Section5.12****. **Franchise Agreement.  Sellers agree to use their commerciallyreasonable efforts to enter into, prior to Closing, a written franchiseagreement between Sellers and CALMEX, Inc. regarding the Fuzio franchise inFresno, California.  Such agreement shallbe in substantially the same form as Sellers’ agreement with CALMEX, Inc. datedJanuary 30, 2002, regarding the Fuzio franchise in Modesto, California.

 

**ARTICLE VI**

REPRESENTATIONS AND WARRANTIES OF BUYER

 

As an inducement to Parent,Sellers and J.W. Childs to enter into this Agreement and to consummate thetransactions contemplated hereby, Buyer and Real Mex, jointly and severallyrepresent and warrant to Parent, Sellers and J.W. Childs as follows:

 

**Section6.1****. **Organizationand Power.  Each of Real Mexand Buyer (i) is duly organized and validly existing under the Laws of itsrespective state of incorporation, (ii) has the requisite power and authorityto own its properties and assets, and to carry on the business in which it isnow engaged, and (iii) has the requisite power and authority to execute thisAgreement and any Ancillary Agreements to which it is a party and to consummatethe transactions contemplated hereby and thereby.

 

**Section6.2****. **Executionand Delivery Permitted.  Subjectto the expiration of the waiting period under the HSR Act and except asprovided in Schedule 6.3, the execution, delivery and performance ofthis Agreement shall not: (i) violate or result in a breach of any term of RealMex’s or Buyer’s Certificate of Incorporation or Bylaws, result in a breach of,or constitute a default under, any term in any agreement or other instrument towhich Real Mex or Buyer is a party, such default having not been previouslywaived by the other party to any such agreement, or violate any Law or anyorder, rule or regulation applicable to Real Mex or Buyer, of any court or ofany regulatory body, administrative agency or other governmentalinstrumentality having jurisdiction over Real Mex or Buyer, or their respectiveproperties; or

 

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(ii) result otherwise in the creation or imposition ofany lien, charge, or encumbrance of any nature whatsoever upon any of theAssets purchased by Buyer hereunder. Real Mex’s and Buyer’s Board of Directors, or an authorized committeethereof, has taken all action required by Law, and by Real Mex’s or Buyer’sCertificate of Incorporation, Bylaws, and otherwise to authorize the executionand delivery of this Agreement and the purchase of the Assets in accordancewith this Agreement.

 

**Section 6.3.**** **Binding Effect; Consents.  This Agreement has been duly authorized byall requisite corporate actions on the part of Real Mex and Buyer, has beenduly executed and delivered by Real Mex and Buyer and is the legal, valid andbinding obligation of Real Mex and Buyer, and each other agreement required tobe executed and delivered by Real Mex and Buyer in connection herewith, whenexecuted and delivered, shall have been duly authorized by all requisitecorporate actions on the part of Real Mex and Buyer, as the case may be, shallhave been duly executed and delivered by Real Mex or Buyer and shall be thelegal, valid and binding obligation of Real Mex and Buyer, as the case may be,enforceable against it in accordance with its terms, except as enforceabilitymay be limited by in any case (i) applicable bankruptcy, reorganization,insolvency, moratorium and similar Laws affecting the enforcement of creditors’rights generally, and (ii) general equitable principles (regardless of whetherenforceability is considered in a proceeding in equity or at Law).  Except as set forth on Schedule 6.3hereto, the execution, delivery and performance of this Agreement and the otheragreements executed in connection herewith, and the consummation by Real Mexand Buyer of the transactions contemplated hereby and thereby do not requireany filing with, notice to, or consent, waiver or approval of, any third party,including but not limited to, any governmental body or entity other than anyfiling required under the HSR Act, and the expiration of any applicable waitingperiod thereunder.

 

**Section 6.4.**** **Capitalization. On the date hereof, the authorized, issued and outstanding capital stockof Real Mex is as set forth on Schedule 6.4.  Except as set forth on Schedule 6.4,as of the date hereof, there are no outstanding or authorized options,warrants, rights, contracts, calls, puts, rights to subscribe, conversionrights or other agreements or commitments to which Real Mex is a party or whichare binding upon Real Mex providing for the issuance, disposition oracquisition of any of its capital stock (other than this Agreement and theother transactions contemplated hereby). Except as set forth on Schedule 6.4,as of the date hereof there are no outstanding or authorized stockappreciation, phantom stock or similar rights with respect to Real Mex.  In the event of the Closing of a Non-AuctionPlan Sale, the Non-Auction Stock Consideration shall represent 11.5% of eachclass of Real Mex Equity Securities and each class of debt securities held or guaranteed(subject, in the case of guaranteed debt securities, to J.W. Childsguaranteeing its pro-rata portion of such debt securities and such guaranteebeing acceptable to the lenders) by Bruckmann, Rosser, Sherrill & Co. L.P.(“BRS”) or its Affiliates or Jefferies Capital Partners (“JCP”) (tothe extent such debt securities are issued to fund the transactionscontemplated by this Agreement) including, but not limited to, warrants (or atBuyer’s option, in the case of warrants exercisable for $.01 or less, the RealMex Equity Securities issuable upon exercise of such warrants) and options(excluding unvested management options and unvested restricted stock),calculated on a fully diluted basis after consummation of the transactionscontemplated by this Agreement (as may be adjusted pursuant to Section 2.1(f)).  In the event of the closing of an AuctionSale, the Auction Stock Consideration shall represent 10% of each class of RealMex Equity Securities

 

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and each class of debt securities held or guaranteed(subject, in the case of guaranteed debt securities, to J.W. Childsguaranteeing its pro-rata portion of such debt securities and such guaranteebeing acceptable to the lenders) by BRS or its Affiliates or JCP (to the extentsuch debt securities are issued to fund the transactions contemplated by thisAgreement) including, but not limited to, warrants (or at Buyer’s option, inthe case of warrants exercisable for $.01 or less, the Real Mex Equity Securitiesissuable upon exercise of such warrants) and options (excluding unvestedmanagement options and unvested restricted stock), calculated on a fullydiluted basis after consummation of the transactions contemplated by thisAgreement (as may be adjusted pursuant to Section 2.1(f)).

 

**Section 6.5.**** **Financial Information.

 

(a)                                  RealMex has previously furnished to Sellers copies of (i) the audited consolidatedfinancial statements of Real Mex and its subsidiaries for the fiscal year endedDecember 28, 2003 (the “Real Mex Audited Financial Statements”),together with the reports thereon of Ernst & Young LLP, independentcertified public accountant and (ii) the unaudited consolidated financialstatements of Real Mex and its subsidiaries for the period from December 29,2003 to June 27, 2004 (the “Real Mex Unaudited Financial Statements”and, together with the Real Mex Audited Financial Statements, the “Real MexFinancial Statements”).  Thesefinancial statements, including in each case the notes thereto, have beenprepared in accordance with GAAP throughout the periods covered thereby andfairly present the consolidated financial condition and results of operationsof Real Mex and its subsidiaries on the bases therein stated, as of therespective dates thereof, and for the respective periods covered thereby,subject in the case of the Real Mex Unaudited Financial Statements to normalyear-end adjustments and the absence of footnotes.

 

(b)                                 Thebooks and records of Real Mex and its Subsidiaries have been maintained inaccordance with applicable Laws, are complete and correct in all materialrespects, and fairly and in reasonable detail reflect as of the dates shownthereon all items of income and expense, and all assets, liabilities andaccruals of Real Mex and its Subsidiaries in accordance with GAAP, and providea fair and accurate basis for the preparation of the Real Mex FinancialStatements.

 

**Section 6.6.**** **Legal Proceedings and Judgments.  There are no claims, actions, proceedings orinvestigations pending or, to the knowledge of Real Mex or Buyer, threatenedagainst or relating to Real Mex or Buyer before any court or other governmentalentity acting in an adjudicative capacity, which individually or in theaggregate would have a Material Adverse Effect on Buyer.

 

**Section 6.7.**** **Buyer’s Financing.  Buyer has delivered to Sellers true andcomplete copies of an equity commitment letter from each of BRS, JCP and RealMex which are in full force and effect.  Subjectto the receipt of the funding contemplated by the equity commitment letter aswell as anticipated debt financing, Buyer will have at Closing sufficient cash,available lines of credit or other sources of immediately available funds toenable it to purchase the Assets and pay any other amounts to be paid by ithereunder.  As provided in Section 8.1,it is understood that the receipt by Buyer of the equity and debt financing contemplatedby this Section 6.7 is not a condition to Buyer’s obligations hereunderand if

 

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Buyer fails to proceed to Closing because of a failureto obtain such financing, such failure will constitute a default under thisAgreement for the purposes of Section 10.9(a)(iv).

 

**Section 6.8.**** **Assumed Contracts.  Buyer is and will be capable of satisfyingthe conditions contained in Sections 365(b)(1)(C) and 365(f)(2) of theBankruptcy Code with respect to the Assumed Contracts to be assumed by Buyers.

 

**Section 6.9.**** **Broker or Finder. No person or entity assisted in or brought about the negotiation of thisAgreement, or the subject matter of the transactions contemplated herein, inthe capacity of broker, agent or finder or in any similar capacity on behalf ofBuyer.

 

**ARTICLE VII**COVENANTS OF BUYER

 

**Section 7.1.**** **Buyer Performance.  Subject to the fulfillment of the conditionsset forth herein, Buyer hereby covenants and agrees to accept conveyance of theAssets and the Business and assignment of the Assigned Contracts and to assumeand perform the Assumed Liabilities and to otherwise perform and fulfill allother obligations with respect to the Assets and the Business as of and afterthe Closing Date.

 

**Section 7.2.**** **Confidentiality. Buyer acknowledges that it remains subject to the terms of theConfidentiality Agreement.  Buyer shallmaintain all information gained from any Seller in connection with itsevaluation of the transactions contemplated by this Agreement (the “ConfidentialInformation”) in strict confidence, and shall use its best efforts toprevent disclosure, access to, or transmission of the Confidential Information,or any part thereof, to any third party, except for disclosure to those personsidentified in the Confidentiality Agreement for the exclusive purpose ofevaluating the Assets and the Business. In the event the Closing does not occur for any reason, Buyer shall,immediately upon Sellers’ request, return to Sellers all copies and recordingsof the Confidential Information in its possession or under its control anddelete all records thereof in any data storage system maintained by or forBuyer.

 

**Section 7.3.**** **Sellers’ Employees.

 

(a)                                  Asof the Closing, Buyer shall offer at will employment to all RestaurantEmployees and Corporate Employees who are employed by Sellers on the ClosingDate (collectively, the “Employees”) except for the Employees set forthon Schedule 7.3(a) hereof (which Schedule 7.3(a) shallbe delivered by Buyer to Sellers no later than 5 days prior to the hearing toapprove the disclosure statement in the case of a Non-Auction Plan Sale, or 10days after Buyer is declared the winning bidder in the case of an Auction Sale),for the same or substantially the same position as the Employee held at thedate hereof and for the same compensation as received by the Employees as ofthe date hereof and with the same benefits (other than severance benefits tothe extent that such Employee’s severance is specified below) available tosimilarly situated employees of Buyer and shall hire such Employees who acceptBuyer’s offer.  Within three (3) days of delivery by Buyer of Schedule 7.3(a)to Sellers, Sellers shall deliver any notices that are required to comply withthe WARN Act or any similar Law.  Buyerwill indemnify and hold Sellers harmless from all liabilities under the WARNAct or any similar Laws, including liabilities caused by the time periodbetween the date Sellers are required

 

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to deliver the notices pursuant to the previous sentence and theClosing Date being insufficient to comply with the requisite period of noticeunder the WARN Act or similar Laws (including attorneys fees and all otherrelated legal costs), arising from Buyer’s implementation of its hiring plansin connection with the transactions contemplated by this Agreement, other thanliabilities that could have been avoided had Sellers delivered such notices withinthe time period set forth in the previous sentence.  Buyer shall have no obligation for anyseverance payments due to any Employee who does not accept Buyer’s offer ofemployment, provided that such offer of employment is made consistent with theprovisions in this Section 7.3(a), or who accepts Buyer’s offer ofemployment and is subsequently terminated other than as set forth in Section 7.3(b)below.

 

(b)                                 Buyershall be responsible for all liabilities for severance payments to thefollowing persons (the “Severance Obligations”):

 

(i)                                     anyRestaurant Employee (including, without limitation, any Employee listed on Schedule 7.3(a)hereto) who is not offered employment by Buyer consistent with the terms ofthis Section 7.3, with such severance payments to be made pursuant to theterms and subject to the conditions of the Company’s severance policy as setforth in Schedule 7.3(b)(i) (the “Company’s Severance Policy”);

 

(ii)                                  anyKey Employees (including, without limitation, any Employee listed on Schedule 7.3(a)hereto) (A) to whom Buyer fails to make an offer of employment consistentwith the terms of the KERP, or (B) whom Buyer hires and then subsequentlyterminates at a time when the KERP has not expired with respect to such KeyEmployee in accordance with its terms, with such severance payments to be madein accordance with and to the extent payable under the KERP (regardless ofwhether the Key Employees at the time of the “consummation of the plan ofreorganization” (as defined in the KERP) are employees of Sellers);

 

(iii)                               anyCorporate Employee (including, without limitation, any Employee listed on Schedule 7.3(a)hereto) (other than the Key Employees) who is not offered employment by Buyerconsistent with the terms of this Section 7.3, with such severancepayments to be made pursuant to the terms and subject to the conditions of theCompany’s Severance Policy;

 

(iv)                              anyCorporate Employee (other than a Key Employee) who is hired by Buyer and is thensubsequently terminated prior to the first anniversary of the Closing, withsuch severance payments to be made in accordance with and subject to theconditions of the Company’s Severance Policy (but only to the extent that suchCorporate Employee would be eligible for severance under the Company’sSeverance Policy in connection with such termination); and

 

(v)                                 exceptas set forth in Section 7.3(a) above, to any Employee (including, withoutlimitation, any Employee listed on Schedule 7.3(a) hereto)

 

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payable as a consequence of any non-compliance underthe WARN Act and anysimilar Law in connection with the transactions contemplated by this Agreement.

 

(c)                                  Buyershall maintain employee records transferred to Buyer hereunder for a period ofnot less than four (4) years and during that period shall afford Sellersreasonable access to such records during Buyer’s normal business hours.  Buyer shall maintain the confidentiality ofsuch records and limit access thereto in a manner consistent with Buyer’streatment of its employee records.

 

(d)                                 Buyeragrees with respect to Employees who accept Buyer’s offer of employment: (i) togive such Employees credit under Buyer’s benefits plans, programs, andarrangements, including credit for accrued vacation, for such Employees’ periodof service with Sellers to the extent that it would have been recognized underSellers’ plans as of the date hereof, provided that such credit shall only betaken into account under any retirement plan, including without limitation anytax-qualified plan maintained by Buyer, for purposes of determining suchEmployees’ eligibility for participation and eligibility to satisfy any hoursof service requirement in order to receive an allocation of an employercontribution for the plan year that includes the Closing Date; (ii) to use itscommercially reasonable efforts to provide coverage to such Employees underBuyer’s health, medical, life insurance and other welfare plans (A) without theneed to undergo a physical examination or otherwise provide evidence ofinsurability, (B) by taking into account the period of coverage under Sellers’(or its Affiliates’) plans for purposes of applying any pre-existing conditionor similar limitations or exclusions, and (C) by applying and giving credit foramounts paid for the plan year in which the Closing Date occurs as deductibles,out of pocket expenses and similar amounts paid by individuals and theirbeneficiaries.

 

(e)                                  Buyerand Sellers shall cooperate and use their commercially reasonable efforts toapply the successor employer provisions of Treasury Regulation Section 31.3121(a)(1)-1(b)(2),if applicable, with respect to each Employee hired by Buyer for the year of theClosing, and comply with the alternate procedure requirements set forth inRevenue Procedure 2004-53.

 

(f)                                    Buyeragrees to defend, indemnify and hold harmless Sellers and all of theirrespective Affiliates against and in respect of any and all loss, liability,lien, damage, cost and expense, including the cost of investigation andattorneys’ fees, incurred or resulting from Buyer’s non-compliance under theWorker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”),as amended, and any similar foreign, state or local law, regulation orordinance.

 

(g)                                 401(k)Account Rollovers.  As soon as isreasonably practicable after the Closing Date, Buyer will establish, ordesignate, a profit sharing plan qualified under Section 401(a) of theCode that includes a cash or deferred election feature that satisfies therequirements of Section 401(k) of the Code (“Buyer’s 401(k) Plan”).  Upon such establishment or designation, Buyerwill, and will cause the Buyer’s 401(k) Plan to, accept with respect to anyEmployee who accepts Buyer’s offer of employment (a “Hired Employee”) therollover, by direct or indirect rollover, as selected by each Hired Employee,of that portion of the Hired Employee’s accounts in Sellers’ 401(k) Plan (“Sellers’401(k) Plan”) that constitutes an “eligible rollover distribution” as thatterm is defined in Section 402(c)(4) of the Code, provided that at thetime a Hired

 

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Employee electssuch a rollover that Hired Employee remains employed by Buyer.  Any such rollover will be effected in cashand, as applicable, any notes evidencing loans from Sellers’ 401(k) Plan to theHired Employee electing such rollover. Buyer and Sellers will, and will cause the trustees of their respective401(k) plans to, cooperate with each other with respect to the rollover of theeligible rollover distribution portions of the Hired Employees’ accountbalances from Sellers’ 401(k) Plan to the Buyer’s 401(k) Plan.

 

**Section 7.4.**** **Administration of Insurance Policies.

 

Except in the case of aself-insured arrangement where such agreement is not required, contingent uponthe agreement of the issuing insurance company to accept instructions fromBuyer:

 

(a)                                  Buyershall be responsible for the administration (and, in the case of Sellers’self-insured health and vision benefit policies, the payment) of any incurredas of the Closing Date, but unpaid, claims, under any of Sellers’insurance-related policies, including employee-benefit-related insurancepolicies (and including, for the avoidance of doubt, Sellers’ self-insuredhealth and vision benefit policies), whether or not such insurance policies are“Assets” for the purposes of this Agreement, provided that, with respect toSellers’ self-insured health and vision benefit policies, such claims areordinary course, post-petition current liabilities assumed pursuant to Section 2.2(a)(i)hereof;

 

(b)                                 Buyershall assume all duties and responsibilities with respect to Sellers’ grouphealth insurance agreements and contracts that arise with respect to Sellers’employees on or after the Closing Date.

 

(c)                                  Buyershall perform its obligations under Treasury Regulation Section 54.4980B-9(the “M&A regs.”) issued under the Consolidated Omnibus BudgetReconciliation Act of 1985, as amended (“COBRA”), with respect to currentor former employees of Sellers or covered dependents thereof, who are M&Aqualified beneficiaries with respect to the transactions contemplated herebywithin the meaning of the M&A regs. For the avoidance of doubt, such obligations shall be construed by Buyerto include the obligation to provide notices and (i) COBRA coverage to formeremployees of Sellers (and covered dependents thereof) who are receiving COBRAcoverage from Sellers on the Closing Date, (ii) the opportunity to elect COBRAcoverage to employees or former employees of Sellers (and covered dependentsthereof) who on the Closing Date are entitled to elect to receive COBRAcoverage from Sellers, and (iii) the opportunity to elect COBRA coverage toemployees of Sellers whose employment is terminated on the Closing Date orwhose employment is terminated in connection with the transactions contemplatedhereby (and to covered dependents thereof).

 

**Section 7.5.**** **Cooperation.  Subject to the terms and conditions of thisAgreement, Buyer shall use its commercially reasonable efforts to cause, to theextent within Buyer’s reasonable control, the conditions set forth in Section 8.1to be satisfied and to facilitate and cause the consummation of thetransactions contemplated hereby.

 

**Section 7.6.**** **Broker’s Fees. Buyer shall indemnify and hold Sellers harmless in respect to any claimfor broker, agent or finder’s fees or commissions (or similar fees or

 

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commissions) with respect to the transactions contemplatedherein by anyone acting on behalf of Buyer or Real Mex, as the case may be.

 

**Section 7.7.**** **Post-Closing Access to Information.  Following the Closing, upon reasonable noticeto Buyer, Buyer shall afford or cause to be afforded to Sellers and its Affiliatesreasonable access to the personnel, properties, books, contracts, commitmentsand records relating to the Business (including, without limitation, copies ofthe books and records that relate to the Business and do not constitute Assets)for any reasonable business purpose, including in respect of litigation, taxes,insurance matters and financial reporting of Sellers and their Affiliates.

 

**Section 7.8.**** **Hart-Scott-Rodino.  With respect to the transactions contemplatedby this Agreement, as soon as practicable (but in no event later than five (5)Business Days) after Buyer’s receipt of an Order from the Bankruptcy Courtapproving Section 10.4 of this Agreement, each party hereto shall file orcause to be filed (a) any notifications required to be filed under the HSR Actwith the United States Federal Trade Commission and the Department of Justice,and request early termination of the waiting period under the HSR Act and (b)any pre-acquisition filings required by any foreign jurisdictions.

 

**Section 7.9.****  **Bankruptcy CourtApproval and Related Matters.  Buyeracknowledges and agrees to the covenants set forth in Section 5.7.

 

**Section 7.10****. **JoinderAgreement.  Buyer, Real Mex and J.W.Childs each agree to enter into and validly execute the Joinder Agreement suchthat it will be in full force and effect with respect to each of Buyer, RealMex and J.W. Childs, respectively, on the Closing Date.

 

**Section 7.11****. **Financing Efforts. Buyer shall use commercially reasonable efforts to obtain the debtfinancing for the transactions contemplated hereby, including commerciallyreasonable efforts to obtain conventional bank financing to allow thetransactions to close on the dates set forth herein if acceptable high yieldfinancing is not available.

 

**ARTICLE VIII**CONDITIONS TO CLOSING

 

**Section 8.1.**** **Buyer’s Conditions to Closing.  The obligations of Buyer hereunder aresubject to satisfaction of each of the following conditions at or beforeClosing, the occurrence of which may, at the option of Buyer, be waived:

 

(a)                                  Allrepresentations and warranties of Sellers in this Agreement (i) that are notqualified as to materiality shall be true in all material respects on and as ofthe Closing as if made as of the Closing and (ii) that are qualified as tomateriality shall be true in all respects on and as of the Closing as if madeas of the Closing, (it being understood, however, that for purposes of thissentence the accuracy of any representation or warranty that expressly speaksas of the date of this Agreement or another date prior to this Agreement shallbe determined solely as of the date of this Agreement or such other date andnot as of the Closing), and Sellers shall have delivered to Buyer a certificateto such effect dated as of the Closing Date;

 

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(b)                                 Exceptas contemplated by this Agreement, since September 9, 2004, through theClosing Date, there shall not have been any changes, occurrences orcircumstances that have had, or would reasonably be expected to have, eitherindividually or in the aggregate, a Material Adverse Effect; provided, however,for purposes of this Section 8.1(b), there shall be disregarded anyadverse effects resulting from or attributable to (i) general economicconditions or general conditions in the industry in which Sellers do business(other than such conditions which affect Sellers’ Business in a materiallydisproportionate manner in comparison to similarly situated businesses withinthe industry), (ii) the public announcement of the transactions contemplated bythis Agreement (including, without limitation, adverse effects on the businessrelationships held by Sellers, or loss of employees or other serviceproviders), or (iii) changes, occurrences or circumstances which are caused bythe performance of Sellers’ pre-closing covenants set forth in this Agreement,and Sellers shall have delivered to Buyer a certificate to such effect dated asof the Closing Date

 

(c)                                  Sellersshall have performed and complied in all material respects with all of theirobligations under this Agreement which are to be performed or complied with bySellers prior to or on the Closing Date, and Sellers shall have delivered toBuyer a certificate to such effect dated as of the Closing Date;

 

(d)                                 Sellersshall be willing and able to deliver all of the items required to be deliveredby them pursuant to Section 3.2 of this Agreement;

 

(e)                                  Notemporary restraining order, preliminary or permanent injunction or other orderissued by any court of competent jurisdiction or other legal restraint orprohibition preventing the consummation of the transactions contemplated hereinshall be in effect;

 

(f)                                    Thewaiting period under the HSR Act shall have expired or a notification of earlytermination of the waiting period shall have been received by Buyer;

 

(g)                                 Onbehalf of themselves and their bankruptcy estates, Sellers shall haveirrevocably waived and committed not to proceed with any preference, avoidanceor other actions pursuant to Chapter 5 of the Bankruptcy Code including, withoutlimitation, claims, causes or actions against any Seller or against theofficers or directors of Sellers (or any one of them) in their capacities assuch.

 

(h)                                 TheIndemnification Agreement between J.W. Childs, Real Mex and Buyer dated as ofthe date hereof shall be duly executed and in full force and effect;

 

(i)                                     The JoinderAgreement between J.W. Childs and Buyer and the other parties thereto shallhave been completed and duly executed by all the parties thereto;

 

(j)                                     (1) With respect to the Liquor Licenses,either (a) the appropriate Governmental Authority shall have approved thetransfer of the Liquor Licenses to Buyer, or (b) Replacement Liquor Licenseswith respect to the non-transferred Liquor Licenses shall be in effect, exceptwhere the failure of the conditions set forth in subsections (a) or (b) above,either individually or in the aggregate, would not have a Material AdverseEffect on the Business and the Assets, and (2) with respect to the LiquorLicense relating to the Restaurant #011 in Sacramento, California,

 

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such Liquor License shall be in full force and effect and not subjectto modification, suspension, cancellation or revocation;

 

(k)                                  Theamount of cash in the Restricted Accounts together with vendor deposits andbond collateral shall be no less than $4.7 million;

 

(l)                                     Thesale of the Assets contemplated by this Agreement to Buyer shall be approved bythe Bankruptcy Court in the Approval Order and entered on the docket by theClerk of the Bankruptcy Court, which as to the transactions contemplated bythis Agreement, is in form and substance as provided in Section 8.1(m)below shall have been entered by the Bankruptcy Court and become a Final Orderby the deadlines described in Section 10.9(vi) of this Agreement.  Notwithstanding anything in Section 8.1(m)to the contrary, nothing in this Agreement shall preclude Buyer fromconsummating the transactions contemplated herein if Buyer, in its sole andabsolute discretion, waives the requirement that the Approval Order, or anyother Order, shall become a Final Order. No notice of such waiver of this or any other condition to Closing needbe given except to Sellers, the Committee and the Prepetition Lenders, it beingthe intention of the parties hereto that Buyer shall be entitled to and is notwaiving (without any limitations thereto), the protections of the BankruptcyCode, the mootness doctrine, or any other statute or body of Law.  Nothing contained in this Section 8.1(l)shall be construed as an obligation that Buyer waive the requirement that theApproval Order, or any other Order, become a Final Order; and

 

(m)                               TheApproval Order shall be in form and substance satisfactory to Buyer in its sole,reasonable discretion, and shall provide the broadest protection for Buyerpermitted by applicable Law, and include factual and legal findings and rulingsat least as protective of Buyer as those provided to the buyer of the debtor’sassets in the sale order entered by the Bankruptcy Court in In re DNASciences, Inc., Chapter 11 Case No. 03-41843 N11 (Bankr. N.D. Cal. May 12,2003) (Newsome, J.).

 

Forthe avoidance of doubt, it is understood that the receipt by Buyer of the equityand debt financing contemplated by Section 6.7 hereof is not a conditionto Buyer’s obligations hereunder.

 

**Section 8.2.**** **Sellers’ Conditions to Closing.  The obligations of Sellers hereunder aresubject to satisfaction of each of the following conditions at or beforeClosing, the occurrence of which may, at the option of Sellers, be waived(provided, however, that any waiver by Sellers of Section 8.2(a) or 8.2(f)shall be subject to the consent of J.W. Childs, which consent shall not beunreasonably withheld or delayed):

 

(a)                                  Allrepresentations and warranties of Buyer and Real Mex in this Agreement (i) thatare not qualified as to materiality shall be true in all material respects onand as of the Closing as if made as of the Closing and (ii) that are qualifiedas to materiality shall be true in all respects on and as of the Closing as ifmade as of the Closing, (it being understood, however, that for purposes ofthis sentence the accuracy of any representation or warranty that expresslyspeaks as of the date of this Agreement or another date prior to this Agreementshall be determined solely as of the date of this Agreement or such other dateand not as of the Closing),

 

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and Buyer and RealMex shall have delivered to Sellers a certificate to such effect dated as ofthe Closing Date;

 

(b)                                 Buyerand Real Mex shall have performed and complied in all material respects withall of their respective obligations under this Agreement which are to beperformed or complied with by Buyer or Real Mex, as applicable, prior to or onthe Closing Date, and Buyer and Real Mex shall have delivered to Sellers acertificate to such effect dated as of the Closing Date;

 

(c)                                  Buyerand Real Mex shall be willing and able to deliver all of the documents requiredto be delivered by each of them under Section 3.3 of this Agreement;

 

(d)                                 Notemporary restraining order, preliminary or permanent injunction or other orderissued by any court of competent jurisdiction or other legal restraint orprohibition preventing the consummation of the transactions contemplated hereinshall be in effect;

 

(e)                                  Thewaiting period under the HSR Act shall have expired or a notification of earlytermination of the waiting period shall have been received by Sellers;

 

(f)                                    Theamount of cash in the Restricted Accounts together with vendor deposits andbond collateral shall be no more than $4.7 million;

 

(g)                                 TheApproval Order shall have been entered by the Bankruptcy Court and such Ordershall not be stayed; and

 

(h)                                 TheReplacement Letters of Credit shall have been posted by Buyer and Buyer shallhave delivered to Sellers satisfactory evidence of its assumption orreplacement of the GECC Mortgage.

 

**ARTICLE IX**NO SURVIVAL

 

**Section 9.1.**** **No Survival of Representations and Warranties.  None of the representations and warranties ofSellers or Buyer contained in this Agreement or made in any other documents orinstruments delivered pursuant to this Agreement shall survive the Closinghereunder.

 

**ARTICLE X**MISCELLANEOUS

 

**Section 10.1****. **Notices.  Exceptas otherwise expressly provided, all notices, consents, requests, demands,claims and other communications hereunder shall be in writing and shall bedeemed to have been duly given (i) on the day when delivered via personaldelivery, (ii) on the day when delivered via facsimile transmission withconfirmation of receipt if such day is a Business Day and, if such day is not aBusiness Day, on the first Business Day thereafter, (iii) on the day whenacknowledgement by the recipient thereof is received by the sender if deliveredvia e-mail; (iv) on the first Business Day after delivery when delivered via acommercial overnight delivery service with confirmed receipt, or (v) three (3)Business Days

 

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after delivery via the U.S. mail of notice sent bycertified U.S. mail, return receipt requested, with first class postageprepaid, and in all cases, addressed as follows:

 
| (a)    | If to Buyer      | CKR Acquisition  Corp.                |
|--------|------------------|---------------------------------------|
|   | or to Real Mex:  | c/o Real Mex  Restaurants, Inc.       |
|   |             | 4001 Via Oro  Ave, Ste. 200           |
|   |             | Long Beach, CA  90810                 |
|   |             | Attention:                            | Frederick F. Wolfe |
|   |             | FAX:                                  | (310) 834-2762 |
|   |             | E-Mail:                               | fwolfe@eltorito.com |
|   |             |                                  |
|   | With a copy  to: | Dechert LLP                           |
|   |             | 1717 Arch Street                      |
|   |             | 4000 Bell  Atlantic Tower             |
|   |             | Philadelphia, PA  19103               |
|   |             | Attention:                            | Carmen J. Romano |
|   |             | FAX:                                  | (215) 655-2971 |
|   |             | E-Mail:                               | carmen.romano@dechert.com |
|   |             |                                  |   |
|   | With a copy  to: | Dechert LLP                           |
|   |             | 30 Rockefeller  Plaza                 |
|   |             | New York, NY  10112                   |
|   |             | Attention:                            | Joel H. Levitin |
|   |             | FAX:                                  | (212) 698-3599 |
|   |             | E-Mail: joel.levitin@dechert.com      |
|   |             |                                  |   |
| (b)    | If to Sellers:   | Chevys, Inc.                          |   |
|   |             | 2000 Powell  Street, Suite 300        |
|   |             | Emeryville,  CA  94608-1886      |
|   |             | Attention:                            | Ron Maccarone |
|   |             | FAX:                                  | (510) 768-1562 |
|   |             | E-Mail:                               | ron.maccarone@chevys.com |
|   |             |                                  |   |
|   | With a copy  to: | Kirkland  & Ellis LLP             |
|   |             | 777 South  Figueroa Street            |
|   |             | Los Angeles,  California 90017        |
|   |             | Attention:                            | Michael I.  Gottfried |
|   |             | FAX:                                  | (213) 680-8500 |
|   |             | E-Mail:                               | mgottfried@kirkland.com |
|   |             |                                  |   |
|   | With a copy  to: | Committee                             |
|   |             | c/o Irell and  Manella LLP            |
|   |             | 840 Newport  Center Drive, Suite 400  |
|   |             | Newport Beach,  California 92660-6324 |
|   |             | Attention:                            | Jeffrey Reisner |
|   |             | Phone:                                | (949) 720-0991 |
|   |             | FAX:                                  | (949) 760-5200 |
|   |             | E-Mail  jreisner@irell.com            |

 

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or to such other address as Buyer or Sellers shall have last designatedby notice to the other party.

 

**Section 10.2.**** **Applicable Law. This Agreement shall be governed by, and construed and enforced inaccordance with, the internal Laws of the State of New York.

 

**Section 10.3.**** **Binding on Successors; Assignment.  All of the terms, provisions and conditionsof this Agreement shall be binding upon and shall inure to the benefit of theparties hereto and their respective successors, assigns and legalrepresentatives.  Subject to BankruptcyCourt approval, none of Sellers, Parent or J.W. Childs may assign thisAgreement without the express written consent of Buyer.  Subject to Bankruptcy Court approval, neitherBuyer nor Real Mex may assign this Agreement without the express writtenconsent of Sellers, provided that Buyer may assign its rights but not itsobligations to any entity in which either Buyer or Real Mex directly orindirectly owns or controls a 100% equity interest, provided that suchassignment does not adversely affect or relieve Buyer’s obligation to provideadequate assurance of future performance with respect to any of the AssumedContracts.

 

**Section 10.4.**** **Payment of Costs. In the event that this Agreement is terminated or abandoned for anyreason other than pursuant to Sections 10.9(a)(i), (iv) or (v) hereof, Sellersshall pay all of the Buyer Fees and Expenses up to a maximum amount of OneMillion Five Hundred Thousand Dollars ($1,500,000.00).  Sellers’ obligations under this Section 10.4shall constitute an administrative claim against Sellers in the Chapter 11Cases in accordance with 11 U.S.C. § 503(b), with priority over all otheradministrative claims against such entities other than any administrativeclaims of the Prepetition Lenders and of any secured postpetition lenders tothe Debtors.

 

**Section 10.5.**** **Time is of the Essence.  Time is of the essence in the performance ofthe obligations of the parties hereunder.

 

**Section 10.6.**** **Interpretation. The title of the sections of this Agreement and the Schedules attachedhereto are for convenience of reference only, and are not to be considered inconstruing this Agreement or such Schedules. Whenever required by the context of this Agreement or the Schedules, thesingular shall include the plural and the masculine shall include the feminineand vice versa.

 

**Section 10.7.**** **Entire Agreement. This Agreement and the Schedules attached hereto and the otheragreements contemplated herein or entered into concurrently herewith containthe entire Agreement of the parties hereto with respect to the transactionscontemplated hereby and supersede any and all prior agreements, arrangements,and understandings between the parties. No inducements contrary to the terms of this Agreement exist.  No waiver of any term, provision, orcondition of this Agreement, whether by conduct or otherwise, in any one ormore instances shall be deemed to be construed as a further or continuingwaiver of any such term, provision or condition or any other term, provision orcondition of this Agreement.  Inconnection with the execution and delivery of this Agreement, neither party hasrelied on any promise, inducement, representation or warranty of the otherparty not set forth in this

 

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Agreement and its Schedules.  This Agreement may not be modified orally andmay only be amended in a writing executed by all parties hereto.  Sellers and Buyer agree that any amendmentextending the Closing Date beyond the Drop-Dead Date, is subject to J.W. Childs’prior consent if J.W. Childs reasonably expects that such extension will causethe Administrative and Exit Costs to exceed both (i) $23.0 million and (ii) theamount of the Administrative and Exit Costs absent such extension.  Sellers agree that the Committee and thePrepetition Lenders shall have the right to object to any amendments or waiversto this Agreement and any disputes between Sellers, on the one hand, and theCommittee and/or the Prepetition Lenders, on the other hand, relating to thisprovision shall be referred to the Bankruptcy Court for a final determination.

 

**Section 10.8.**** **Counterparts.  This Agreement may be executed in one or morecounterparts which in the aggregate shall comprise one Agreement.

 

**Section 10.9.**** **Termination.

 

(a)                                  ThisAgreement may be terminated prior to the Closing (subject, in the case of anytermination by Sellers, to Sellers giving prior notice to the Committee and thePrepetition Lenders who shall have the right to object to any such terminationand any disputes between Sellers, on the one hand, and the Committee and/or thePrepetition Lenders, on the other hand, relating to this provision shall bereferred to the Bankruptcy Court for a final determination) as follows:

 

(i)                                     Atany time by the mutual written agreement of Sellers and Buyer;

 

(ii)                                  Byeither Buyer or Sellers, at their sole election, if the Closing shall not haveoccurred on or prior to the Drop-Dead Date; providedthat Buyer or Sellers, as the case may be, shall not be entitled to terminatethis Agreement pursuant to this Section 10.9(a)(ii) if the failure of theClosing to occur on or prior to such date results primarily from such partyitself breaching any representation, warranty or covenant contained in thisAgreement;

 

(iii)                               ByBuyer in the event of a material breach of this Agreement by Sellers that hasnot been cured, or if any representation or warranty of Sellers that is notqualified as to materiality shall have become untrue in any material respect,or if any representation or warranty of Sellers that is qualified as tomateriality shall have become untrue in any respect, in any case such that suchbreach or untruth is incapable of being cured by the Drop-Dead Date or shallprevent consummation of the transactions contemplated hereby by or beyond theDrop-Dead Date;

 

(iv)                              BySellers, in the event of a material breach of this Agreement by Buyer that hasnot been cured, or if any representation or warranty of Buyer that is notqualified as to materiality shall have become untrue in any material respect,or of any representation or warranty of Buyers that is qualified as tomateriality shall have become material in any respect, in any case such

 

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that such breach or untruth is incapable of beingcured by the Drop-Dead Date or will prevent consummation of the transactionscontemplated hereby by or beyond the Drop-Dead Date;

 

(v)                                 (A)by Buyer, if Sellers do not file the motion referred to in Section 5.10within the applicable time period set forth therein in accordance with theprovisions thereof, (B) by Buyer or Sellers if, by November 3, 2004, theBankruptcy Court requires an auction and has not approved Buyer as the initialbidder in the Auction Sale in accordance with the terms hereof (provided thatany such termination must be communicated in writing on or prior to 5:00 P.M.Pacific Time on November 4, 2004), (C) by Buyer if, on or before the daythat is thirty (30) days after the date the motion referred to in Section 5.10is filed, the Bankruptcy Court has failed to enter an Order approving theprovisions of Section 10.4 hereof (provided that any such termination mustbe communicated in writing on or prior to 5:00 P.M. Pacific Time on the daythat is thirty-three (33) days after the date such motion is filed), (D) byBuyer if the Bankruptcy Court denies the motion referred to in Section 5.10hereof (provided any such termination must be communicated in writing on orprior to 5:00 P.M. Pacific Time on the third day after the Bankruptcy Courtdenies such motion);

 

(vi)                              ByBuyer if (A) in the event of a Non-Auction Plan Sale, a Confirmation Order inform and substance consistent with Section 8.1(m) hereof is not entered bythe Bankruptcy Court on or prior to 5:00 p.m. California Time on January 6,2005; (B) in the event of an Auction Sale, if effectuated pursuant to a plan ofreorganization, any Confirmation Order in form and substance consistent with Section 8.1(m)hereof, is not entered by the Bankruptcy Court on or prior to 5:00 p.m.California Time on January 6, 2005; and (C) in the event of an AuctionSale, if effectuated as an asset sale under Section 363 of the BankruptcyCode, any Sale Order in form and substance consistent with Section 8.1(m)hereof is not entered by the Bankruptcy Court on or prior to 5:00 p.m.California Time on December 23, 2004; provided,however, that Buyer, in its sole and absolutediscretion, may (but is in no way obligated to) waive any of the requirementsof this Section 10.9(vi), although the waiver of the requirements of aparticular subsection of this Section 10.9(vi) shall not be construedto constitute a waiver of any other subsection thereof.  No notice of such waiver need be given exceptto Sellers and the Committee, it being the intention of the parties hereto thatBuyer shall be entitled to and is not waiving (without any limitationsthereto), the protections of the Bankruptcy Code, the mootness doctrine, andany other statute or body of Law.  In theevent that Buyer chooses to terminate the Agreement pursuant to this Section 10.9(vi),in addition to the return of the Deposit to Buyer as provided in Section 2.6,within five (5) Business Days of Sellers’ receipt of a demand by Buyer, Sellersshall reimburse Buyer for all Buyer Fees and Expenses.

 

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(b)                                 Effect of Termination.  Except as provided in Section 10.9(a)(vi),upon the termination of this Agreement in accordance with this Section 10.9,the parties hereto shall be relieved of any further obligations or liabilityunder this Agreement other than (i) confidentiality obligations contained in Section 7.2,(ii) confidentiality obligations under the Confidentiality Agreement, (iii) theexpense allocation provisions under Section 10.4, (iv) the jurisdictionprovisions of Section 10.11, and (v) obligations for willful breaches ofthis Agreement occurring prior to such termination.  Notwithstanding anything in this Agreement tothe contrary, the Deposit shall be the sole and exclusive remedy of Sellersagainst Buyer and Real Mex under and in respect of any termination of thisAgreement for any default or breach by Buyer or Real Mex hereunder.

 

**Section 10.10****.****                                 **Public Announcements; Communications with Franchisees andPublic.

 

(a)                                  Priorto Closing, Buyer and Sellers shall coordinate with each other on all pressreleases and announcements, including all communications to Sellers’ employees,Franchisees, Sellers’ suppliers, customers and landlords relating to thetransactions contemplated by this Agreement and, except to the extent requiredby Law, refrain from issuing any press release or announcement relating to thisAgreement or the transactions contemplated hereby without providing the otherparty reasonable opportunity to review, comment thereon and approve such pressrelease.

 

(b)                                 Priorto Closing, Buyer and Sellers shall cooperate with each other regardingcommunications with Franchisees concerning this Agreement.  Without limiting the foregoing, prior toClosing Buyer shall not contact any Franchisee regarding this Agreement or anymatter related hereto without giving Sellers prior notice.

 

**Section 10.11****.****                                 **Jurisdiction; Disputes; Arbitration.

 

(a)                                  Untilthe Chapter 11 Cases are closed with the Bankruptcy Court, Buyer and Sellersirrevocably submit to the exclusive jurisdiction of the Bankruptcy Court forthe purposes of any suit, action or other proceeding arising out of this Agreementor any of the Ancillary Agreements or any transaction contemplated hereby orthereby.  Buyer and Sellers irrevocablyand unconditionally waive any objection to the laying of venue of any action,suit or proceeding arising out of this Agreement or any of the AncillaryAgreements or the transactions contemplated hereby or thereby in the BankruptcyCourt and hereby further irrevocably and unconditionally waive and agree not toplead or claim in any such court that any such action, suit or proceeding broughtin any such court has been brought in an inconvenient forum.  Further, the parties agree to and herebywaive the right to a jury trial for any action, cause of action or claimarising under or in any way related to this Agreement.

 

(b)                                 OnceSellers’ Chapter 11 Cases are closed with the Bankruptcy Court, anycontroversy, claim for the recovery of any Losses or other claim (including,without limitation, whether any controversy, claim for the recovery of anyLosses or other claim is subject to arbitration) arising out of this Agreement,or the breach thereof (whether, in any case, involving (x) a party hereto, (y)their transferees or (z) such party’s or transferee’s directors, officers,shareholders, employees, representatives or agents), shall be settled bybinding arbitration

 

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administered bythe American Arbitration Association (the “AAA”) under its CommercialArbitration Rules (“Rules”), and shall be held in New York, New York.

 

(c)                                  TheFederal rules of evidence shall control the admission of evidence into thearbitration proceeding.  Any applicablediscovery limitations under the Federal Rules of Civil Procedure (and the localrules of the Federal District Court located in New York) shall control the formand volume of written discovery and oral depositions that each side may conductin preparation for the arbitration proceeding; provided,however, that the arbitration panel shallspecify all other matters regarding the conduct of such written discovery andoral depositions.

 

(d)                                 Anydispute submitted for arbitration shall be referred to a panel of threearbitrators.  The party or partiessubmitting (“Submitting Party”) the intention to arbitrate (the “Submission”)shall nominate one arbitrator.  Within 10days of receipt of the Submission, the party or parties receiving theSubmission (“Answering Party”) shall nominate one arbitrator.  If the Answering Party fails to timelynominate an arbitrator, then the second arbitrator shall be appointed by theAAA in accordance with the Rules.  If thearbitrator chosen by the Submitting Party and the arbitrator chosen by orselected for the Answering Party can agree upon a neutral arbitrator within 15days of the choice or selection of the Answering Party’s arbitrator, then suchindividual shall serve as the third arbitrator. If no such agreement is reached, a third neutral arbitrator shall beappointed by the AAA in accordance with the Rules.  The parties agree that they shall consent inwriting to an expedited proceeding under the Rules, to the full extent the AAAcan accommodate such a request.

 

(e)                                  Theruling of the arbitrators shall be binding and conclusive upon all partieshereto any other Person with an interest in the matter.

 

(f)                                    Thearbitration provision set forth in this Agreement shall be the sole disputeresolution process regarding any controversy, Claim or other claim (including,without limitation, whether any controversy, Claim or other claim is subject toarbitration) arising out of or relating to this Agreement, or the breachthereof (whether, in any case, involving (x) a party hereto, (y) theirtransferees or (z) such party’s or transferee’s officers, directors,shareholders, employees, representatives or agents); provided,however, that (i) any of the parties to thearbitration may request the Federal District Court located in New York, NewYork (or any applicable New York state court) to provide interim injunctiverelief in aid of arbitration hereunder or to prevent a violation of thisAgreement pending arbitration hereunder (and any such request shall not bedeemed a waiver of the obligations to arbitrate set forth in this Section 10.11),(ii) any ruling on the award rendered by the arbitrators may be entered as afinal judgment in a Federal District Court or any New York state court (andeach of the parties hereto irrevocably submits to the jurisdiction of suchcourt solely for such purposes) and (iii) application may be made by a party toany court of competent jurisdiction wherever situated for enforcement of anysuch final judgment and the entry of whatever orders are necessary for suchenforcement.  In any proceeding withrespect hereto, all direct, reasonable costs and expenses (including, withoutlimitation, AAA administration fees and arbitrator fees) incurred by theparties to the proceeding shall, at the conclusion of the proceeding, be paidby the party incurring same.

 

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**Section 10.12****.****                                 **No Third Party Beneficiaries.  This Agreement shall not confer any rights orremedies upon any person other than the parties hereto and their respectivesuccessors and permitted assigns.

 

**Section 10.13****.****                                 **Compliance with Bulk Sales Laws.  Each party hereto hereby waives compliance bythe parties with “bulk sales,” “bulk transfers” and all other similar Laws inall applicable jurisdictions in respect of the transactions contemplated bythis Agreement.

 

**Section 10.14****.****                                 **TransitionServices.  In the event that eitherSellers, on the one hand, or Buyer, on the other hand, reasonably determinesthat it requires the services of the other party in connection with the windingdown of Sellers’ estate or other matters contemplated in this Agreement, theparties agree to meet in good faith to negotiate a Transition Services Agreement(the “Transition Services Agreement”) for the provision of suchservices, provided that (i) the period of such Transition Services Agreementshall be for no longer than a reasonable period not to exceed one year****from the Closing Date, and (ii) the charges for anyservices provided pursuant to such agreement shall be the fully-loaded coststhe service provider incurs in the provision of such services; provided,however, that if Buyer and Sellers are unable to jointly agree upon aTransition Services Agreement, the matter will be referred to the BankruptcyCourt for a determination consistent with the terms of this Section 10.14.

 

**Section 10.15****.****                                 **IntercreditorAcknowledgements.  In considerationfor the mutual agreements and undertakings among Sellers, the Committee, J.W.Childs, and the Prepetition Lenders set forth herein, including withoutlimitation, (i) the allocation of the Cash Purchase Price and the consensualdebt/equity conversion set forth in Section 2.1, (ii) the execution anddelivery of the Indemnification Agreement by J. W. Childs, and (iii) thesharing of the Net Administrative and Exit Costs as set forth in Section 2.1(f),the plan of reorganization as originally filed shall provide that uponconfirmation of such plan and the payment of the Purchase Price described inthis Agreement, Sellers (on behalf of themselves and their bankruptcy estates),the Committee, the Prepetition Lenders and J. W. Childs shall approve andexecute acknowledgments, waivers, covenants and/or releases (including withrespect to their respective members, professionals, officers and advisors intheir capacity as such) with respect to claims, objections to claims, causes,actions and/or rights by and between them to the extent reasonably necessary togive full effect to the economic consideration to be paid or delivered toSellers, the Prepetition Lenders, the General Unsecured Creditors and J. W.Childs pursuant to this Agreement, including, without limitation,acknowledgments that the consideration to be paid under this Agreement shall bein payment of all allowed claims of the General Unsecured Creditors, all claimsof the Prepetition Lenders and all claims and administrative expenses of J.W.Childs and its Affiliates.  Nothing inthis Section 10.15 is intended to impact any administrative claims of anyGeneral Unsecured Creditors or to affect any rights whatsoever of the GeneralUnsecured Creditors in their individual capacities except with respect toSellers’ bankruptcy estates.

 

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**ARTICLE XI**ALTERNATIVE STRUCTURE

 

**Section 11.1.**** **Stock Transaction.

 

At Buyer’s option(provided Buyer gives notice pursuant to this Section 11.1 to Sellers, thePrepetition Lenders and the Committee (i) in the case of a Non-Auction Plan Sale,at least ten (10) Business Days prior to the hearing for the Bankruptcy Courtto approve the disclosure statement relating to the plan of reorganization, or(ii) in the event of an Auction Sale, within three (3) Business Days of Buyerbeing declared the winning bidder), the transactions contemplated herein may bestructured as the purchase of all of the equity securities of Sellers fromParent if such change in structure does not have an adverse affect, eithereconomically or otherwise, upon Parent, Sellers, J. W. Childs the PrepetitionLenders or the General Unsecured Creditors. Sellers agree that the Committee or the Prepetition Lenders shall beprovided with the terms of such stock purchase transaction (including a copy ofthe Stock Purchase Agreement and other documents in connection therewith) atleast thirty (30) days prior to Closing and have the right, within five (5)Business Days of being provided with such terms, to object to the restructuringset forth in this Section 11.1 on the sole basis that such restructuringwill have an adverse economic effect on them or materially reduces theprobability that the plan of reorganization will be approved within thedeadlines as set forth in this Agreement, and any timely-raised disputesbetween Buyer and/or Sellers, on the one hand, and the Committee and/or thePrepetition Lenders, on the other hand, relating to this matter shall bereferred to the Bankruptcy Court for a final determination.  The parties to this Agreement will negotiatein good faith the terms of a Stock Purchase Agreement consistent with the termsof this Agreement; provided, however that if Buyer and Sellers are unable tojointly agree upon the terms of a Stock Purchase Agreement, at its discretionBuyer may either revert to structuring the transaction as a purchase of theassets of Sellers as set forth herein or refer the matter to the BankruptcyCourt for a determination consistent with the terms of this Agreement.

 

**ARTICLE XII**DEFINITIONS

 

“**AAA**” shall have the meaning set forth in Section 10.11(b).

 

“**Accounts Receivable**” shall mean all accounts receivable ofSellers relating to the Assets and the Business, other than any accountreceivable that is an Excluded Asset.

 

*“Acquisition Proposal”* means a proposal to enter into atransaction involving a sale of all or substantially all of the Business or theAssets or the Sellers.

 

*“Additional Rejection Costs”*shall have the meaning setforth in Section 5.6.

 

*“Administrativeand Exit Costs”*shall have the meaning set forth in Section 2.1(a)(iii).

 

“**Adverse**” or “**Adversely**”when used alone or in conjunction with other terms in this Agreement (includingwithout limitation “affect,” “change” and “effect”) such words shall mean, withrespect to Sellers, the Assets or the Business, as the context requires, anyevent or occurrence which will (i) adversely affect the validity orenforceability of this Agreement or any collateral document executed orrequired to be executed pursuant hereto or thereto, or (ii) adversely affectthe business, operations, properties, financial condition, or results ofoperation of the Assets or the Business, as the case may be, taken in each caseas a whole, or (iii) impair the ability of Sellers to fulfill their obligationsunder the terms of this Agreement or any

 

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collateraldocument executed or required to be executed pursuant hereto or thereto, or(iv) adversely affect the aggregate rights and remedies of Buyer under thisAgreement or any collateral document executed or required to be executedpursuant hereto or thereto, in all cases, unless otherwise specifically setforth, in a material respect or manner or to a material degree.

 

“*Affiliate*”means, with respect to any Person, or any other Person that, directly orindirectly through one or more intermediaries, controls or is controlled by, oris under common control with, such person and the term “*control*”(including the terms “*controlled by*”and “*under common control with*”) means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of such Person, whether throughownership of voting securities, by contract or otherwise.

 

“*Agent*”shall mean The Royal Bank of Scotland, PLC, as agent for the PrepetitionLenders.

 

“*Agreement*”shall have the meaning set forth in the Preamble.

 

*“Amendment Deadline”*shall have the meaning set forth in Section 5.6.

 

“*AncillaryAgreements*” shall have the meaning set forth in Section 4.2.

 

“*AnsweringParty*” shall have the meaning set forth in Section 10.11(d).

 

“*ApprovalOrder”*means a Confirmation Order or a Sale Order, as applicable,consistent with the terms of this Agreement.

 

“*Assets*”shall have the meaning set forth in Section 1.2.

 

*“Assigned Contracts”*shall have the meaning set forth in Section 1.2(d).

 

“*AssumedContracts*” shall have the meaning set forth in Section 5.6.

 

“*AssumedLiabilities*” shall have the meaning set forth in Section 2.3(b).

 

“*AssumptionAgreement*” shall have the meaning set forth in Section 3.2(b).

 

*“Auction Cash Consideration”* shall have the meaning set forth in Section 2.1(c).

 

*“Auction Real Mex EquitySecurities”* shallhave the meaning set forth in Section 2.1(d).

 

*“Auction Sale”* shall have the meaning set forth in therecitals.

 

*“Auction Stock Consideration”* shall have the meaning set forth in Section 2.1(c).

 

 “*Bankruptcy Code*”shall have the meaning set forth in the recitals.

 

“*BankruptcyCourt*” shall have the meaning set forth in the recitals.

 

“*Bill of Sale*”shall have the meaning set forth in Section 3.2(a).

 

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“*Business*”shall mean the business of operating and developing the Restaurants, theSystems and the Concepts.

 

“*Business Day*”means any day other than Saturday, Sunday, or a day on which banking institutionsin New York, New York are authorized or obligated by Law or executive order toclose.

 

“*Buyer*”shall have the meaning set forth in the Preamble.

 

“*Buyer Feesand Expenses*” means the fees and expenses of Buyer and Real Mexincurred in connection with its various efforts to acquire the Business up to amaximum of $1.5 million, including the fees and expenses of their attorneys,accountants, financial consultants, investment bankers, and lenders.

 

“*Buyer’s401(k) Plan*” shall have the meaning set forth in Section 7.3(g).

 

*“Cash Consideration”* shall mean the Non-Auction CashConsideration or the Auction Cash Consideration, as applicable.

 

“*Chapter 11Cases*” shall have the meaning set forth in the recitals.

 

“*Closing*”shall have the meaning set forth in Section 3.1.

 

“*Closing Date*”shall have the meaning set forth in Section 3.1.

 

“*Code*”shall mean the Internal Revenue Code of 1986, as amended.

 

“*Committee*”means the Official Committee of Unsecured Creditors appointed in the Chapter 11Cases.

 

“*Company*”shall have the meaning set forth in the Preamble.

 

“*CompanyLetters of Credit*” shall mean all letters of credit relating to theAssets and the Business.

 

“*Company’s Severance Policy*” shall have themeaning set forth in Section 7.3(b)(i).

 

“*Concept*”or “*Concepts*” shall have the meaning setforth in Section 4.16(a).

 

“*ConfidentialInformation*” shall have the meaning set forth in Section 7.2.

 

“*ConfidentialityAgreement*” shall mean that certain Confidentiality Agreement datedas of October 7, 2004, by and between BRS and the Company.

 

“*ConfirmationOrder*” shall mean an order of the Bankruptcy Court confirmingSellers’ plan of reorganization authorizing the sale of the Assets (includingthe assumption and assignment of the Assumed Contracts) to Buyer consistent withthis Agreement in a form satisfactory to Buyer.

 

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“*CorporateEmployees*” shall mean all employees of any Sellers or Parent who arenot located at the Restaurants.

 

“*CorporateOffice*” shall mean such parcel of real estate leased by the Companyin Emeryville, California, in which Company’s corporate offices are located.

 

“*Cure Costs*”shall have the meaning set forth in Section 2.5.

 

“*Deposit*”shall have the meaning set forth in Section 2.5.

 

“*DevelopmentAgreements*” shall have the meaning set forth in Section 4.16(c).

 

“*DIP Facility*”shall mean the Loan and Security Agreement, dated as of December 17, 2003,by and among Sellers, Wells Fargo Foothill, Inc. and Abelco Finance, LLC.

 

*“Drop-Dead Date”* shall mean January 21, 2005.

 

“*EmployeeBenefit Arrangements*” shall have the meaning set forth in Section 4.12(c).

 

“*Employees*”shall have the meaning set forth in Section 7.3(a).

 

“*EnvironmentalLaws*” shall mean any federal, state or local Law, statute, ordinanceor regulation imposing standards of conduct or otherwise relating to pollutionor protection of the environment.

 

“*Equipment*”shall mean the motor vehicles, furniture, machinery, equipment, tables, chairs,cash registers, computer equipment and licenses of related software (subject toSellers’ ability to assign or transfer such licenses), ovens, refrigerators,display cases, shelves, utensils, tools, pans, lights, uniforms, signs, menus,glasses, plates, dishes, silverware, pitchers, books, cabinets, racks, towels,ornaments, bars, bar equipment and office and other supply items used or usablein the Business wherever located.

 

“*EquipmentLeases*” shall mean all leases of personal property used in theoperation of the Restaurants and the Business having annual payment obligationsof more than $25,000, as listed on Schedule 4.4(c) hereto.

 

“*ERISA*”shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

“*Escrow Agent*”shall have the meaning set forth in Section 2.6.

 

*“Excess Administrative and ExitCosts”* shall havethe meaning set forth in Section 2.1(f).

 

“*ExcludedAssets*” shall have the meaning set forth in Section 1.3.

 

“*ExcludedCash*” means the aggregate amount of cash in (i) the ACH CollateralAccount in an amount not to exceed $200,000, (ii) the Asset Sales Account in anamount not to exceed $180,000, and (iii) the Professional Fees Account.

 

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“*ExcludedLiabilities*” shall have the meaning set forth in Section 2.2(b).

 

*“Extra Exit Costs”*shall have the meaning set forth in Section 2.1(f)(iv).

 

“*Filing Date*”shall have the meaning set forth in Section 5.10.

 

“*Final Order*”shall mean an Order, the operation or effect of which is not stayed, and as towhich Order (or any revision, modification or amendment thereof), the time toappeal or seek review or rehearing has expired, and as to which no appeal orpetition for review or motion for reargument has been taken or been made and ispending for argument.

 

*“First Deposit”* shall have the meaning set forth in Section 2.6(a).

 

“*Franchisees*”shall have the meaning set forth in Section 4.16(b).

 

“*FranchiseAgreements*” shall have the meaning set forth in Section 4.16(b).

 

“*FranchiseRestaurant*” shall have the meaning set forth in Section 4.16(b).

 

“*GAAP*”shall mean United States generally accepted accounting principles consistentlyapplied.

 

“*GECCMortgage*” shall mean the mortgage relating to the building for theRestaurant located in Reno, Nevada, in an amount outstanding on the date hereofequal to $890,000****.

 

“*GeneralUnsecured Creditors*” shall mean the pre-petition, general unsecuredcreditors other than J.W. Childs and its Affiliates in the Chapter 11 Cases (excludingthe Chapter 11 case of the Parent).

 

*“GeneralUnsecured Creditors’ Fund”*shall have the meaning set forth in Section 5.7.

 

“*GovernmentalEntity*” means any court, administrative agency or commission orother governmental authority or instrumentality, domestic or foreign.

 

“*HazardousMaterials*” shall mean any substance defined as a “*hazardous substance,*” “*hazardous material,*”“*hazardous waste,*” “*toxicsubstance,*” or any similar term under any Environmental Law andshall include, without limitation, petroleum and petroleum products, asbestosand polychlorinated biphenyls.

 

“*HiredEmployee*” shall have the meaning set forth in Section 7.3(g).

 

“*HSR Act*”shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, asamended.

 

“*IndemnityAgreement*” means the Indemnity Agreement among Buyer and J.W. Childsdated as of the Closing Date.

 

“*IntellectualProperty*” shall mean all patents, trademarks, trade names, servicemarks, trade dress, copyrights, applications for registration of any of theforegoing, and brand names,

 

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inventions, processes,know how, trade secrets, all databases, data collections, source code, alldomain names, any moral and economic rights of authors and inventors, howeverdenominated, throughout the world, and any similar or equivalent rights to anyof the foregoing anywhere in the world which relate to the Restaurants, theBusiness or the Concepts.

 

“*Inventory*”shall mean all inventories of smallwares, cleaning supplies, paper goods andfood and beverage at the Restaurants, in the Warehouse or at the CorporateOffice related to the Business as of the Closing Date.

 

“*JoinderAgreement*” means the Joinder Agreement among J.W. Childs, Real Mex,and the other parties thereto to be dated as of the Closing Date in the formattached hereto as Exhibit A.

 

“*KERP*”shall mean that certain Chevys, Inc. et al. Amended and Restated Key EmployeeRetention Program approved by the Bankruptcy Court.

 

“*Key Employee*”shall mean the Tier I and Tier II****employees asdefined in the KERP.

 

“*knowledge*”or any variation thereof with respect to Sellers shall mean the actualknowledge of Ron Maccarone, Terrie Robinson, Claude Perasso, Brian Bennett andStacy Mald.

 

“*Laws*”means any applicable statutes, laws, ordinances, rules, regulations, orders,judgments or decrees enacted, adopted, issued or promulgated by any legislativebody or Governmental Entity.

 

“*Leased RealProperty*” shall mean each parcel of real estate leased by anySeller, or in which any Seller has a leasehold or other interest, including (i)those on which a Restaurant is located or which is being held for developmentof a Restaurant and (ii) the Warehouse, all as listed on Schedule 4.4(b)hereto.

 

“*Licenses*”shall have the meaning set forth in Section 4.13(a).

 

“*Lien*”shall mean any mortgage, lien, security interest, pledge or encumbrance.

 

“*LiquorLicenses*” shall have the meaning set forth in Section 4.13(b).

 

“*MaterialAdverse Change*” or “*Material Adverse Effect*”means with respect to Sellers, the Assets or the Business, as the contextrequires, any event or occurrence which will or would reasonably be expected tomaterially and adversely affect the business, operations, properties, financialcondition, or results of operation of the Assets or the Business, as the casemay be, taken in each case as a whole.

 

“*MaterialContracts*” shall have the meaning set forth in Section 4.4(d).

 

“*MinorContracts*” shall mean such contracts, agreements or commitmentsterminable on thirty (30) days’ notice or having annual payment obligations ofless than $25,000 per contract.

 

*“Net Administrative and ExitCosts”* shall havethe meaning set forth in Section 2.1(f).

 

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“*NLRB*”shall have the meaning set forth in Section 4.12(a).

 

*“Non-Assumed Contracts”* means (i) Sellers’ contracts or leasesthat are listed on Schedule 5.6 (as amended from time to time inaccordance with Section 5.6 hereof) to be rejected pursuant to theBankruptcy Code; (ii) any real estate lease of Sellers for a Restaurant that isnot operating (iii) any of Sellers’ employment or service agreements with theirindividual current or former employees, including the Employment Agreementdated March 13, 2002, as amended, with Ronald P. Maccarone, and (iv) anymanagement or services agreement between any Seller and J.W. Childs or itsAffiliates.

 

*“Non-Auction Plan Sale”* shall have the meaning set forth in therecitals.

 

*“Non-Auction Real Mex EquitySecurities”* shallhave the meaning set forth in Section 2.1(b).

 

“*Order*”shall mean any writ, judgment, decree, injunction or similar order, writ,ruling, directive or other requirement of any Governmental Entity (in each casewhether preliminary or final).

 

“*Owned RealProperty*” shall mean each parcel of real property owned by a Selleron which a Restaurant is located or which is otherwise used in connection withthe Business as set forth on Schedule 4.4(a)hereto.

 

“*Parent*”shall have the meaning set forth in the recitals hereto.

 

“*PermittedEncumbrances*” shall mean with respect to each parcel of Owned RealProperty: (a) real estate taxes, assessments and other governmental levies,fees, or charges imposed with respect to such Owned Real Property that are (i)not due and payable as of the Closing Date or (ii) being contested byappropriate proceedings; (b) mechanics liens and similar liens for labor, materials,or supplies provided with respect to such Owned Real Property incurred in theordinary course of business for amounts that are (i) not delinquent or (ii)being contested by appropriate proceedings; (c) zoning, building codes, andother land use Laws regulating the use or occupancy of such Owned Real Propertyor the activities conducted thereon that are imposed by any governmentalauthority having jurisdiction over such Owned Real Property; (d) such mattersas disclosed by any survey of the subject Real Property made available to Buyerin accordance with Section 5.9; and (e) easements, covenants, conditions,restrictions, and other similar matters affecting title to such Owned RealProperty and other title defects, none of which materially impairs the use oroccupancy of such Owned Real Property in the operation of the Business.

 

“*Person*”shall mean any individual, corporation, partnership, joint venture, trust,limited liability company, business association or other entity or aGovernmental Entity.

 

“*PPM*”shall mean a certain confidential memorandum relating to the Business dated September 2004,together with all revisions thereof or supplements thereto.

 

“*PrepetitionLenders*” shall mean those certain banks (or their successors orassigns) which are lenders under the Senior Credit Facility, including UBS, AG,Finova Capital

 

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Corporation, FleetNational Bank, Sunrise Partners Limited Partnership (as successor to Union Bankof California, N.A.), and The Royal Bank of Scotland PLC.

 

“*PurchasePrice*” shall have the meaning set forth in Section 2.1.

 

*“Real Mex Equity Securities”* shall mean the Non-Auction Real MexEquity Securities or the Auction Real Mex Equity Securities, as applicable.

 

“*RealProperty*” shall mean collectively, the Owned Real Property and theLeased Real Property.

 

“*RealProperty Leases*” shall mean all agreements or documents under whichany Seller claims or holds a leasehold or other interest or right to the use ofthe Leased Real Property as set forth on Schedule 4.4(b)hereto.

 

“*ReplacementLetters of Credit*” shall have the meaning set forth in Section 2.8.

 

“*ReplacementLiquor License*” shall have the meaning set forth in Section 3.4.

 

“*RestaurantEmployees*” shall mean all employees of any Seller or Parent who arelocated at the Restaurants.

 

“*Restaurants*”shall have the meaning set forth in the recitals.

 

*“Restricted Accounts”*shall have the meaning set forth in Section 5.1.

 

“*Rules*”shall have the meaning set forth in Section 10.11(b).

 

“*Sale Motion*”shall mean a motion to approve a sale of the Assets to Buyer pursuant to Section 363of the Bankruptcy Code as requested by Buyer in connection with an AuctionSale.

 

“*Sale Order*”shall mean an order of the Bankruptcy Court authorizing the sale of the Assets(including the assumption and assignment of the Assumed Contracts) to Buyer andthe consummation of the transactions contemplated herein in a form satisfactoryto Buyer.

 

*“Second Deposit”* shall have the meaning set forth in Section 2.6(a).

 

*“Segregated Account”*shall have the meaning set forth in Section 2.6.

 

*“Seller Balance Sheet”* shall have the meaning set forth in Section 4.5(a).

 

“*Sellers*”shall have the meaning set forth in the Preamble.

 

“*Sellers’401(k) Plan*” shall have the meaning set forth in Section 7.3(g)

 

“*SeniorCredit Facility*” means that certain Senior Credit Facility, dated asof September 16, 1998, by and among the Company, the Parent, thePrepetition Lenders (or their predecessors in interest), and certain otherparties thereto.

 

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“*SeveranceObligations*” shall have the meaning set forth in Section 7.3.

 

*“Stock Consideration”* shall mean the Non-Auction StockConsideration or the Auction Stock Consideration, as applicable.

 

“*Subleases*”means the subleases set forth on Schedule 4.4(b).

 

“*Submission*”shall have the meaning set forth in Section 10.11(d).

 

“*SubmittingParty*” shall have the meaning set forth in Section 10.11(d).

 

“*System*”or “*Systems*” shall have the meaning set forthin Section 4.16(a).

 

“*Tax*”and “*Taxes*” means (i) all taxes, charges,fees, levies, penalties or other assessments of any kind whatsoever imposed byany federal, state, local or foreign taxing authority, including, but notlimited to, income, excise, property, sales, transfer, franchise, payroll,withholding, social security or other taxes, whether computed on a separate orconsolidated, unitary or combined basis or in any other manner, including anyinterest, penalties or additions attributable thereto or (ii) liability for thepayment of any amounts of the type described in clause (i) above as a result ofbeing party to any agreement or any express or implied obligation to indemnifyor otherwise succeed to the liability of any other Person.

 

“*Treasury Regulations*”shall mean the federal income tax regulations promulgated under the Code, asamended, including any temporary and proposed regulations.

 

“*Warehouse*”shall mean that certain parcel of real estate leased by a Seller located inOakland, California and used by Sellers are a warehouse for personal property.

 

*  *  *

 

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IN WITNESS WHEREOF, theparties hereto have executed this Agreement on the day, month, and year firstabove written.

 
|   ****BUYER********:****             | **** ****           |   ****SELLERS:****             |
|-------------------------------------------|--------------------------|-------------------------------------|
|   CKR ACQUISITION CORP.              |                     |   CHEVYS, INC.                 |
|                                      |                     |                                |
|   By:                                | /s/ Frederick F.  Wolfe  |                                |   By: | /s/ Ronald P.  Maccarone |
|   Name:                              | Frederick F.  Wolfe      |                                |   Name: | Ronald P.  Maccarone |
|   Title:                             | President and  CEO       |                                |   Title: | President and  CEO |
|                                      |                     |                                |   |   |
|   ****OTHERS********:****            |                     |                                |
|   CHEVYS HOLDINGS, INC.              |                     |   CHEVYS OF GREENBELT, INC.    |
|                                      |                     |                                |
|   By:                                | /s/ Ronald P.  Maccarone |                                |   By: | /s/ Ronald P.  Maccarone |
|   Name:                              | Ronald P.  Maccarone     |                                |   Name: | Ronald P.  Maccarone |
|   Title:                             | President and  CEO       |                                |   Title: | President and  CEO |
|                                      |                     |                                |   |   |
|   REAL MEX RESTAURANTS, INC.         |                     |   CHEVYS OF NEW YORK, INC.     |
|                                      |                     |                                |
|   By:                                | /s/ Frederick F.  Wolfe  |                                |   By: | /s/ Ronald P.  Maccarone |
|   Name:                              | Frederick F.  Wolfe      |                                |   Name: | Ronald P.  Maccarone |
|   Title:                             | President and  CEO       |                                |   Title: | President and  CEO |
|                                      |                     |                                |   |   |
|                                      |                     |                                |
|   J. W. CHILDS EQUITY PARTNERS L. P. |                     |   CHEVYS OF PARSIPPANY, INC.   |
|                                      |                     |                                |
|   By:                                | /s/ Glenn A.  Hopkins    |                                |   By: | /s/ Ronald P.  Maccarone |
|   Name:                              | Glenn A. Hopkins         |                                |   Name: | Ronald P.  Maccarone |
|   Title:                             | Vice President           |                                |   Title: | President and  CEO |
|                                      |                     |                                |   |   |
|                                      |                     |   KATMANDU CREATIONS, INC.     |
|                                      |                     |                                |
|                                      |                     |   By:                          | /s/ Ronald P.  Maccarone |
|                                      |                     |   Name:                        | Ronald P.  Maccarone |
|                                      |                     |   Title:                       | President and  CEO |
|                                      |                     |                                |   |
|                                      |                     |   RIO BRAVO ACQUISITIONS, INC. |
|                                      |                     |                                |
|                                      |                     |   By:                          | /s/ Ronald P.  Maccarone |
|                                      |                     |   Name:                        | Ronald P.  Maccarone |
|                                      |                     |   Title:                       | President and  CEO |
|                                      |                     |                                |   |
|                                      |                     |   RBA KANSAS, INC.             |
|                                      |                     |                                |
|                                      |                     |   By:                          | /s/ Ronald P.  Maccarone |
|                                      |                     |   Name:                        | Ronald P.  Maccarone |
|                                      |                     |   Title:                       | President and  CEO |
|                                           |                          |                                     |  |  |  |  |  |  |

 

----

 
|   Acknowledged  and agreed with respect to  the provisions relating to the Committee  and/or the General Unsecured Creditors |                             |   |
|-----------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------|
|                                                                                                                              |                             |   |
|   OFFICIAL COMMITTEE OF  UNSECURED CREDITORS                                                                            |                             |   |
|                                                                                                                              |                             |   |
|   By:                                                                                                                        | /s/ Clint Beaty                  |   |   |   |
|   Name:                                                                                                                      | Clint Beaty                      |   |   |   |
|   Title:                                                                                                                     | Chairman of  Unsecured Committee |   |   |   |
|                                                                                                                              |                             |   |   |   |
|   Acknowledged  and agreed with respect to  the provisions relating to the Prepetition  Lenders                              |                             |   |
|                                                                                                                              |                             |   |
|   THE ROYAL  BANK OF SCOTLAND,  PLC, as agent for the Prepetition Lenders                                                    |                             |   |
|                                                                                                                              |                             |   |
|   By:                                                                                                                        | /s/ Andrew S.  Weinberg          |   |   |   |
|   Name:                                                                                                                      | Andrew S.  Weinberg              |   |   |   |
|   Title:                                                                                                                     | Senior Vice  President           |   |   |   |
|                                                                                                                                   |                                  |        |  |  |  |  |  |  |  |  |

 

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LIST OF SCHEDULES AND EXHIBITS

 

Schedules that Correspondto Sections

 
| Schedule 1       | Restaurants                                                                   |
|-----------------------|-------------------------------------------------------------------------------|
|                  |                                                                          |
| Schedule 1.2     | Other Acquired  Assets/Assumed Liabilities                                    |
|                  |                                                                          |
| Schedule 2.4     | Allocation of  Final Purchase Price                                           |
|                  |                                                                          |
| Schedule 4.3     | No Breach or  Conflict                                                        |
|                  |                                                                          |
| Schedule 4.4(a)  | Owned Real  Property                                                          |
|                  |                                                                          |
| Schedule 4.4(b)  | Leased Real  Property; Real Property Leases and Subleases                     |
|                  |                                                                          |
| Schedule 4.4(c)  | Equipment Leases                                                              |
|                  |                                                                          |
| Schedule 4.4(d)  | Other Material  Contracts                                                     |
|                  |                                                                          |
| Schedule 4.5(b)  | Unaudited Pro  Forma Statements of Income                                     |
|                  |                                                                          |
| Schedule 4.7(b)  | Exceptions to  Good Title: Tangible Assets                                    |
|                  |                                                                          |
| Schedule 4.8(a)  | Exception to  Good Title: Owned Real Property                                 |
|                  |                                                                          |
| Schedule 4.8(b)  | Real Property  Leases - Current In All Material Respects                      |
|                  |                                                                          |
| Schedule 4.8(c)  | Real Property  Leases - No Proceedings Pending                                |
|                  |                                                                          |
| Schedule 4.8(d)  | Exceptions to  Real Property Leases                                           |
|                  |                                                                          |
| Schedule 4.8(e)  | Exceptions to  Material Change of Zoning to Real Property Leases              |
|                  |                                                                          |
| Schedule 4.9     | Litigation                                                                    |
|                  |                                                                          |
| Schedule 4.10    | Taxes                                                                         |
|                  |                                                                          |
| Schedule 4.11    | Material  Contract Breaches                                                   |
|                  |                                                                          |
| Schedule 4.12(b) | Compliance with  Laws                                                         |
|                  |                                                                          |
| Schedule 4.12(c) | Employee Benefit  Plans                                                       |
|                  |                                                                          |
| Schedule 4.13(a) | Licenses and  Permits                                                         |
|                  |                                                                          |
| Schedule 4.13(b) | Liquor  Licenses/Violations                                                   |
|                  |                                                                          |
| Schedule 4.14(a) | Environmental  Matters - Releases / Storage Tanks                             |
|                  |                                                                          |
| Schedule 4.14(b) | Environmental  Matters - Non-Compliance with Law                              |
|                  |                                                                          |
| Schedule 4.14(c) | Environmental  Matters - Environmental Reports                                |
|                  |                                                                          |
| Schedule 4.15(a) | Intellectual  Property                                                        |
|                  |                                                                          |
| Schedule 4.15(b) | Exceptions to  Right to Use Intellectual Property                             |
|                  |                                                                          |
| Schedule 4.15(c) | Exceptions to  Non-Infringement of Intellectual Property by or Against Chevys |

 

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| Schedule 4.15(d)   | Exceptions to  Ownership of Intellectual Property              |
|-------------------------|----------------------------------------------------------------|
|                    |                                                           |
| Schedule 4.15(e)   | Defaults of  Agreements to Use Intellectual Property           |
|                    |                                                           |
| Schedule 4.16(a)   | Exceptions to  Franchise System                                |
|                    |                                                           |
| Schedule 4.16(b)   | Franchisees/Franchise  Systems                                 |
|                    |                                                           |
| Schedule 4.16(c)   | Development  Agreements and Amendments                         |
|                    |                                                           |
| Schedule 4.16(d)   | Compliance with  Franchise Laws                                |
|                    |                                                           |
| Schedule 4.16(e)   | Disputes with  Franchisees                                     |
|                    |                                                           |
| Schedule 4.16(f)   | Exceptions to  Franchise Agreements and Development Agreements |
|                    |                                                           |
| Schedule 4.17      | Insurance  Policies                                            |
|                    |                                                           |
| Schedule 4.18      | Broker or Finder                                               |
|                    |                                                           |
| Schedule 5.1       | Conduct of  Business                                           |
|                    |                                                           |
| Schedule 5.6       | Assumed  Contracts/Rejected Contracts                          |
|                    |                                                           |
| Schedule 6.3       | Buyer Consents                                                 |
|                    |                                                           |
| Schedule 6.4       | Real Mex  Capitalization                                       |
|                    |                                                           |
| Schedule 7.3(a)    | Employees Not  Offered Employment                              |
|                    |                                                           |
| Schedule 7.3(b)(i) | Company’s  Severance Policy                               |
|                    |                                                           |
| Exhibit A               | Joinder  Agreement                                             |

 

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