EXHIBIT 10.31


 


 


SECURITIES PURCHASE AGREEMENT


 


BY AND BETWEEN


 


MAIN STREET RESTAURANT GROUP, INC.


 


AND


 


CIC MSRG LP


 


APRIL 27, 2005


 


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE 1

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  PURCHASE AND SALE OF SHARES

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Purchase of Securities

  	
   

  
	
  2.2

  	
  Purchase Price and Form of Payment

  	
   

  
	
  2.3

  	
  Closing
  Date

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  BUYER’S REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Organization and Qualification

  	
   

  
	
  3.2

  	
  Authorization; Enforcement

  	
   

  
	
  3.3

  	
  Securities Matters

  	
   

  
	
  3.4

  	
  Information

  	
   

  
	
  3.5

  	
  Restrictions on Transfer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  REPRESENTATIONS AND WARRANTIES OF THE
  COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization and Qualification

  	
   

  
	
  4.2

  	
  Authorization; Enforcement

  	
   

  
	
  4.3

  	
  Capitalization; Valid Issuance of
  Securities

  	
   

  
	
  4.4

  	
  No
  Conflicts

  	
   

  
	
  4.5

  	
  SEC Documents; Financial Statements

  	
   

  
	
  4.6

  	
  Absence of Certain Changes

  	
   

  
	
  4.7

  	
  Absence of Litigation

  	
   

  
	
  4.8

  	
  Patents, Copyrights

  	
   

  
	
  4.9

  	
  Tax
  Status

  	
   

  
	
  4.10

  	
  No Material Adverse Contracts

  	
   

  
	
  4.11

  	
  Certain Transactions

  	
   

  
	
  4.12

  	
  Permits; Compliance

  	
   

  
	
  4.13

  	
  Environmental Matters

  	
   

  
	
  4.14

  	
  Title to Property

  	
   

  
	
  4.15

  	
  No Investment Company

  	
   

  
	
  4.16

  	
  No
  Brokers

  	
   

  
	
  4.17

  	
  Registration Rights

  	
   

  
	
  4.18

  	
  1934 Act Registration

  	
   

  
	
  4.19

  	
  Labor Relations

  	
   

  
	
  4.20

  	
  Insurance

  	
   

  
	
  4.21

  	
  ERISA

  	
   

  
	
  4.22

  	
  Disclosure

  	
   

  
	
  4.23

  	
  Disclosure Controls

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Form D; Blue Sky Laws

  	
   

  
	
  5.2

  	
  Use of Proceeds

  	
   

  
	
  5.3

  	
  Expenses

  	
   

  
	
  5.4

  	
  Listing

  	
   

  



 


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  5.5

  	
  No Integration

  	
   

  
	
  5.6

  	
  Appointment of Directors

  	
   

  
	
  5.7

  	
  Restriction on Trading

  	
   

  
	
  5.8

  	
  Insurance

  	
   

  
	
  5.9

  	
  Right of First Offer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  CONDITIONS TO THE COMPANY’S OBLIGATION

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Delivery of Transaction Documents

  	
   

  
	
  6.2

  	
  Payment of Purchase Price

  	
   

  
	
  6.3

  	
  Representations and Warranties

  	
   

  
	
  6.4

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  CONDITIONS TO BUYER’S OBLIGATION

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Delivery of Transaction Documents

  	
   

  
	
  7.2

  	
  Representations and Warranties

  	
   

  
	
  7.3

  	
  Litigation

  	
   

  
	
  7.4

  	
  No Material Adverse Change

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Indemnification by the Company

  	
   

  
	
  8.2

  	
  Notification

  	
   

  
	
  8.3

  	
  Contribution

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  GOVERNING LAW; MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Governing Law

  	
   

  
	
  9.2

  	
  Counterparts; Signatures by Facsimile

  	
   

  
	
  9.3

  	
  Headings

  	
   

  
	
  9.4

  	
  Severability

  	
   

  
	
  9.5

  	
  Entire Agreement; Amendments

  	
   

  
	
  9.6

  	
  Notices

  	
   

  
	
  9.7

  	
  Successors and Assigns

  	
   

  
	
  9.8

  	
  Third Party Beneficiaries

  	
   

  
	
  9.9

  	
  Publicity

  	
   

  
	
  9.10

  	
  Further Assurances

  	
   

  
	
  9.11

  	
  No Strict Construction

  	
   

  
	
  9.12

  	
  Remedies

  	
   

  
	
  9.13

  	
  Survival

  	
   

  
	
  9.14

  	
  Waiver of Jury

  	
   

  



 


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SECURITIES PURCHASE AGREEMENT


 


This SECURITIES PURCHASE AGREEMENT, dated as of April 27, 2005, is
entered into by and between MAIN STREET RESTAURANT GROUP, INC., a Delaware
corporation, and CIC MSRG LP, a Delaware limited partnership.


 


RECITALS


 


A.            The Company and
the Buyer are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Rule 506;


 


B.            Buyer desires to
purchase and the Company desires to issue and sell, upon the terms and
conditions set forth in this Agreement, (i) 2,325,581 shares of Common
Stock, and (ii) Warrants to purchase up to 581,395 shares of Common
Stock;


 


C.            Contemporaneous
with the Closing of this Agreement, the parties hereto have agreed to execute
and deliver the Registration Rights Agreement.


 


AGREEMENT


 


NOW THEREFORE, the Company and the Buyer hereby agree as follows:


 


ARTICLE 1


DEFINITIONS


 


“Accredited Investor”
has the meaning set
forth in Section 3.3.


 


“Agreement” means this Securities Purchase Agreement.


 


“Buyer” means CIC MSRG LP, a Delaware limited partnership.


 


“Buyer Nominee” means an individual selected by the Buyer to
serve as a director of the Company.


 


“Buyer Representative” means an individual selected by the Buyer to
serve as an observer at all meetings of the Board of Directors of the Company
and to receive all correspondence and other materials distributed to directors
of the Company in their capacity as directors.


 


“Common Stock” means the Company’s Common Stock, par value
$0.001 per share.


 


“Company”  means
Main Street Restaurant Group, Inc., a Delaware corporation.


 


“Company Disclosure Schedule” has the meaning set forth in Article 4.


 


“Copyrights” has the meaning set forth in Section 4.8.


 


“Closing” has the meaning set forth in Section 2.3.


 


“Closing Date” means April 27, 2005 or such other time as
may be mutually agreed upon by the parties to this Agreement.


 





















 


“Current Filings” means the Company’s Annual Report on Form
10-K for the year ended December 31, 2004 and its Proxy Statement on Schedule
14A for its 2005 Annual Meeting.


 


“Environmental Laws” has the meaning set forth in Section
4.13.


 


“Equity Offering” has the meaning set
forth in Section 5.8.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended.


 


“Hazardous Materials” has the meaning set forth in Section
4.13.


 


“Indemnified Party”
has the meaning set forth in Section 8.1.


 


“Intellectual Property”
has the meaning set forth in Section 4.8.


 


“Investment Company” has the
meaning set forth in Section 4.15.


 


“Losses”
has the meaning set forth in Section 8.1.


 


“Material Adverse Effect” means any material adverse effect on the
business, operations, assets, financial condition or prospects of the Company
or its Subsidiaries, if any, or on the transactions contemplated hereby or by
the agreements or instruments to be entered into in connection herewith.


 


“1933 Act” means the Securities Act of 1933, as amended.


 


“1934 Act” means the Securities Exchange Act of 1934, as
amended.


 


“Patents” has the meaning
set forth in Section 4.8.


 


“Permits” has the meaning
set forth in Section 4.12.


 


“Purchase Price”
has the meaning set
forth in Section 2.2.


 


“Registration Rights Agreement” means the Registration Rights Agreement,
substantially in the form attached as Exhibit
B, executed and delivered on the Closing Date, pursuant to which the Company agrees to
register the resale of the Shares and Warrant Shares under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.


 


“Regulation S”
means Regulation S
promulgated under the 1933 Act.


 


“Rule 144” means Rule 144 promulgated under the 1933
Act.


 


“Rule 506” means Rule 506 of Regulation D promulgated under
the 1933 Act.


 


“Securities” means the
Shares and the Warrants being issued and sold under the Agreement.


 


“SEC” means the United States Securities and
Exchange Commission.


 


“SEC Documents”
has the meaning set
forth in Section 4.5.


 


2





















 


“Shares” means the 2,325,581 shares of Common
Stock being issued and sold under this Agreement.


 


“Subsidiaries” means any corporation or other organization,
whether incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.


 


“Trademarks”
has the meaning set forth in Section 4.8.


 


“Transaction
Documents” means this Agreement, the
Registrations Rights Agreement, the warrant agreement representing the Warrants
and any other documents contemplated by the Agreement.


 


“Transfer
Instructions” means instructions delivered to the transfer agent for the Company’s Common
Stock to issue certificates representing the Shares registered in the name of
the Buyer and to delver such certificates to the Buyer, and further providing
that such instructions cannot be revoked or amended without the written consent
of the Buyer.


 


“Warrant Shares”
means the shares of Common Stock issuable upon exercise of the Warrants.


 


“Warrants”
means warrants to purchase up to 581,395 shares of Common Stock represented by
a warrant agreement substantially in the form of Exhibit A.


 


ARTICLE 2


PURCHASE AND SALE OF SECURITIES


 


2.1           Purchase of Securities. 
Subject to the terms and conditions of this Agreement, on the Closing
Date, the Company shall issue and sell the Securities to the Buyer, and the
Buyer shall purchase from the Company the Securities.


 


2.2           Purchase
Price and Form of Payment.  At
the Closing, Buyer shall pay a total of $5,000,000 (the “Purchase Price”) for the Shares.  In exchange for payment of the Purchase
Price, Buyer shall also be issued the Warrants. 
The Purchase Price shall be paid by wire transfer of immediately available
funds in accordance with the Company’s written instructions.  At the Closing, upon payment of the Purchase
Price by Buyer, the Company will (a) deliver Transfer Instructions to the
transfer agent for the Company’s Common Stock, and (b) will deliver an executed
warrant agreement, substantially in the Form of Exhibit A, representing the Warrants to the Buyer.


 


2.3           Closing Date. 
Subject to the satisfaction (or written waiver) of the conditions set
forth in Article 6 and Article 7 below, the closing of the
transactions contemplated by this Agreement shall be held on the Closing Date
at the offices of Haynes and Boone, LLP, 1221 McKinney Street, Suite 2100,
Houston, Texas 77010, or at such other location as may be mutually agreed upon
by the parties to this Agreement (the “Closing”).


 


ARTICLE 3


BUYER’S REPRESENTATIONS AND WARRANTIES


 


The Buyer represents and warrants to the
Company that:


 


3.1           Organization
and Qualification.  The Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with full power and authority to
purchase the Securities.


 


3





















 


3.2           Authorization;
Enforcement. This
Agreement has been duly and validly authorized by, and duly executed and
delivered on behalf of, the Buyer, and this Agreement constitutes the valid and
binding agreement of the Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by: (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws in effect that
limit creditors’ rights generally; (ii) equitable limitations on the
availability of specific remedies; and (iii) principles of equity.


 


3.3           Securities Matters.  In connection with the Company’s
compliance with applicable securities laws:


 


a.             The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States and state securities laws and that
the Company is relying upon the truth and accuracy of, and the Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemption and the eligibility of the Buyer to acquire the
Securities.


 


b.             The Buyer is purchasing the Securities for
its own account, not as a nominee or agent, for investment purposes and not
with a present view towards distribution, except pursuant to sales exempted
from registration under the 1933 Act, or registered under the 1933 Act as
contemplated by the Registration Rights Agreement.


 


c.             The Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D promulgated under the 1933 Act
(an “Accredited Investor”), and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Securities. 
The Buyer understands that its investment in the Securities involves a
significant degree of risk. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities.


 


3.4           Information.  The
Buyer and its advisors, if any, have been furnished with all information
relating to the business, finances and operations of the Company and
information relating to the offer and sale of the Securities which have been
requested by the Buyer or its advisors. 
Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify,
amend or affect Buyer’s right to rely on the Company’s representations and
warranties contained in Article 4 below. 
The Buyer understands that its investment in the Securities involves a
significant degree of risk.


 


3.5           Restrictions
on Transfer.  The
Buyer understands that, except as provided in the Registration Rights
Agreement, the Securities and the Warrant Shares have not been and are not
being registered under the 1933 Act or any applicable state securities laws.
The Buyer may be required to hold the Securities and the Warrant Shares
indefinitely and the Securities and the Warrant Shares may not be transferred
unless (i) the Securities and the Warrant Shares are sold pursuant to an
effective registration statement under the 1933 Act, (ii) the Buyer shall have
delivered to the Company an opinion of counsel to the effect that the
Securities or the Warrant Shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration, which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions, (iii) the Securities or the Warrant Shares are sold or
transferred to an “affiliate” (as defined in Rule 144 (or a successor rule)) of
the Buyer who agrees to sell or otherwise transfer the Securities only in
accordance with this Section 3.5 and who is an Accredited Investor, (iv)
the Securities or the Warrant Shares are sold pursuant to Rule 144, or (v) the 


 


4





















 


Securities or the Warrant Shares are sold
pursuant to Regulation S (or a successor rule), and the Buyer shall have
delivered to the Company an opinion of counsel that shall be in form, substance
and scope customary for opinions of counsel in comparable transactions.  Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities and the Warrant Shares
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement.


 


The Buyer understands that until such time as
the Securities and Warrant Shares have been resold pursuant to a registration
statement filed under the 1933 Act as contemplated by the Registration Rights
Agreement, are eligible for resale pursuant to Rule 144(k) under the 1933 Act
or are sold pursuant to Rule 144 or another similar exemption from
registration, certificates evidencing the Securities and Warrant Shares may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates
evidencing such Securities and Warrant Shares):


 


“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND HAVE BEEN ISSUED
IN RELIANCE UPON EXEMPTIONS AFFORDED UNDER APPLICABLE LAWS.  THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED, SOLD, HYPOTHECATED, TRANSFERRED OR OTHERWISE
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH LAWS.”


 


ARTICLE 4


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


Except as set forth in the Company’s
Disclosure Schedule attached hereto (“Company Disclosure Schedule”), the Company represents and warrants to the
Buyer that:


 


4.1           Organization
and Qualification.  Each
of the Company and its Subsidiaries, if any, is a corporation or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, with full power and
authority as a corporation or other entity to own, lease, use and operate its
properties and to carry on its business as now operated and conducted.  Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation or other entity to do business and is
in good standing in each jurisdiction in which its ownership or use of property
or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect.


 


4.2           Authorization;
Enforcement.  The Company has all requisite corporate power
and authority to enter into and perform this Agreement and the Transaction
Documents and to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with the terms hereof and thereof.  The execution and delivery of this Agreement
and the other Transaction Documents by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Securities and the Warrant Shares) have been
duly authorized by the Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its shareholders is
required.  This Agreement and the
Transaction Documents have been duly executed and delivered by the
Company.  This Agreement constitutes, and
each of the Transaction Documents will constitute, upon execution and delivery
by the Company, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by: (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws in effect that limit creditors’
rights generally; (ii) equitable limitations on the availability of specific
remedies; and (iii) principles of equity.


 


5





















 


4.3           Capitalization;
Valid Issuance of Securities.  As of the date hereof, the
authorized capital stock of the Company consists of 25,000,000 shares of Common
Stock, of which 14,641,929 shares
are issued and outstanding, and 2,000,000 shares of preferred stock, $0.001 par
value per share, none of which are outstanding. 
All of such outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable. 
The Shares and Warrant Shares have been duly authorized and upon
issuance pursuant to the terms of this Agreement or upon exercise of the
Warrants will be validly issued, fully paid and nonassessable.  No shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the shareholders of
the Company or any liens or encumbrances imposed through the actions or failure
to act of the Company.  Except as
disclosed in the Current Filings, as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for any shares of capital stock of the
Company or any of its Subsidiaries, or arrangements by which the Company or any
of its Subsidiaries is or may become bound to issue additional shares of
capital stock, (ii) there are no agreements or arrangements under which
the Company or any of its Subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the
Securities or the Warrant Shares.  The
Company is not a party to, and to the Company’s knowledge, none of its
shareholders are a party to, any agreements with respect to the voting or
transfer of the Company’s capital stock or with respect to any other aspect of
the Company’s affairs.


 


4.4           No Conflicts.  The execution, delivery and
performance by the Company of this Agreement and the Transaction Documents and
the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Securities) will
not (i) conflict with or result in a violation of any provision of the
Certificate of Incorporation or the By-laws, each as amended, of the Company,
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
patent, patent license or instrument to which the Company or any of its Subsidiaries
is a party, or (iii) result in a material violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect).  Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its
Subsidiaries is in default (and no event has occurred which with notice or
lapse of time would result in a default) under, and neither the Company nor any
of its Subsidiaries has taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or
any of its Subsidiaries is bound, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.  Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self regulatory organization or stock
market or any third party in order for it to execute, deliver or perform any of
its obligations under this Agreement or the Transaction Documents.  All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof.  The 


 


6





















 


Company is not in violation of the listing
requirements of the NASDAQ National Market and does not reasonably anticipate
that the Common Stock will be delisted by the NASDAQ National Market in the
foreseeable future.  The Company and its
Subsidiaries are unaware of any facts or circumstances that might give rise to
any of the foregoing.


 


4.5           SEC Documents; Financial
Statements.  Since December 30, 2002, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits
to such documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC
Documents”).  As of their respective dates, the SEC
Documents complied as to form in all material respects with the requirements of
the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. 
None of the statements made in any such SEC Documents is, or has been,
required to be amended or updated under applicable law (except for such
statements as have been amended or updated in any subsequent filing prior to
the date hereof.)  As of their respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form and substance in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes, year end adjustments or may be
condensed or summary statements) and fairly present in all material respects
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).  Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to December 27, 2004 and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.


 


4.6           Absence
of Certain Changes.  Since
December 27, 2004, the Company has conducted its business only in the ordinary
course, consistent with past practice, and since that date there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results of
operations or prospects of the Company or any of its Subsidiaries.


 


4.7           Absence of Litigation.  There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against the
Company or any of its Subsidiaries, or their officers or directors in their
capacities as such, that could have a Material Adverse Effect.  The Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing.


 


4.8           Patents, Copyrights.  Each of the Company and its
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names,
trade names and 


 


7





















 


copyrights (“Intellectual Property”) necessary to enable it to conduct its
business as now operated (and, to the Company’s knowledge, as presently
contemplated to be operated in the future); there is no claim or action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge
threatened, which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, to the Company’s knowledge, as presently
contemplated to be operated in the future); to the Company’s knowledge, the
Company’s or its Subsidiaries’ current and intended products, services and
processes do not infringe on any Intellectual Property or other rights held by
any person; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. 
Neither the Company nor any of its Subsidiaries owns or possesses any
copyrights, patents, or trademarks.


 


4.9           Tax Status.  Each of the Company and its Subsidiaries has
made or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject (unless
and only to the extent that the Company and each of its Subsidiaries has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply.  There are
no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  The Company has not
executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax.  None of the Company’s tax returns is
presently being audited by any taxing authority.


 


4.10         No
Materially Adverse Contracts. 
Neither the Company nor any of its Subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company’s officers has or is
expected in the future to have a Material Adverse Effect.  Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company’s officers has or is expected to have a Material Adverse Effect.


 


4.11         Certain
Transactions. 
Except for arm’s length transactions pursuant to which the Company or
any of its Subsidiaries makes payments in the ordinary course of business upon
terms no less favorable than the Company or any of its Subsidiaries could
obtain from third parties, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.


 


4.12         Permits; Compliance.  Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the “Permits”), and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of
any of the Permits.  Neither the Company
nor any of its Subsidiaries is in conflict with, or in default or violation of,
any of the Permits, except for any such conflicts, defaults or violations
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.  Since
December 27, 2004, neither the Company nor any of its Subsidiaries has received
any notification with respect to possible conflicts, 


 


8





















 


defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or violations,
which conflicts, defaults or violations would not have a Material Adverse
Effect.


 


4.13         Environmental
Matters.  There
are, with respect to the Company or any of its Subsidiaries, no past or present
violations of Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company’s knowledge, threatened in connection with any of
the foregoing.  The term “Environmental Laws” means all federal, state, local or foreign
laws relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.  Other than those that are or were stored,
used or disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or used by
the Company or any of its Subsidiaries, and no Hazardous Materials were
released on or about any real property previously owned, leased or used by the
Company or any of its Subsidiaries during the period the property was owned,
leased or used by the Company or any of its Subsidiaries, except in the normal
course of the Company’s or any of its Subsidiaries’ business.  There are no underground storage tanks on or
under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.


 


4.14         Title to Property.  The Company and its Subsidiaries
have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them material to the
business of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects, except such as would not have a Material
Adverse Effect.  Any real property and
facilities held under lease by the Company and its Subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as
would not have a Material Adverse Effect. 
The liability of the Company and its Subsidiaries under leases that have
been subleased or assigned to third parties does not, and will not, exceed
$1,500,000 in the aggregate.


 


4.15         No
Investment Company.  The
Company is not, and upon the issuance and sale of the Securities as
contemplated by this Agreement will not be an “investment company” as defined
under the Investment Company Act of 1940 (an “Investment Company”).  The Company is not controlled
by an Investment Company.


 


4.16         No Brokers.  The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, transaction
fees or similar payments relating to this Agreement or the transactions
contemplated hereby.


 


4.17         Registration Rights.  Except pursuant to the Registration
Rights Agreement or as set forth in the SEC Documents, effective upon the
Closing, neither Company nor any Subsidiary is currently subject to any
agreement providing any person or entity any rights (including piggyback
registration rights) to have any securities of the Company or any Subsidiary
registered with the SEC or registered or qualified with any other governmental
authority.


 


9





















 


4.18         1934
Act Registration.  The
Common Stock is registered pursuant to Section 12(g) of the 1934 Act, and the
Company has taken no action designed to, or which, to the knowledge of the
Company, is likely to have the effect of, terminating the registration of the
Common Stock under the 1934 Act.


 


4.19         Labor
Relations.  No labor or employment dispute exists or, to
the knowledge of the Company, is imminent or threatened, with respect to any of
the employees or consultants of the Company that has, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.


 


4.20         Insurance.  The Company and its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are reasonable and customary for companies in the
Company’s line of business.  The Company
has no reason to believe that it will not be able to renew existing insurance
coverage for itself and its Subsidiaries as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary or appropriate
to continue business.


 


4.21         ERISA.  Except as disclosed in the Current Filings,
the Company does not have any employee benefit plan as defined in Section 3(3)
of ERISA or any other executive or employee compensation program, and the
Company has substantially performed all material obligations, whether arising
by operation of law or by contract, respecting the plans and programs disclosed
in the Company Disclosure Schedule, has no knowledge respecting defaults or
violations respecting such plans and programs and has timely made all
contributions required to be made to such plans and programs.  As to each employee benefit plan disclosed in
the Company Disclosure Schedule that is intended to be “qualified” under
Section 401 of the Code, such plan has received a favorable determination
letter from the Internal Revenue Service regarding such qualified status and
remains so qualified.  Neither the
Company, nor any trade or business (whether) or not incorporated which together
with the Company would be deemed to be a “single employer” within the meaning
of Section 4001(b) of ERISA, sponsors, maintains or contributes to, or has at
any time in the six-year period preceding the date of this Agreement sponsored,
maintained or contributed to any employee pension benefit plan, as defined in
Section 3(2) of ERISA.  The consummation
of the transactions contemplated by this Agreement will not require the Company
to make a larger contribution to, pay greater benefits or provide any other
rights under any plan or program disclosed in the Company Disclosure Schedule
or otherwise.


 


4.22         Disclosure.  The Company understands and confirms that
each Buyer will rely on the representations and covenants contained herein in
effecting the transactions contemplated by this Agreement and the Transaction
Documents.  All disclosure provided to
the Buyers regarding the Company, its businesses and the transactions
contemplated hereby, including the disclosures in the Company Disclosure
Schedule attached hereto furnished by or on behalf of the Company, taken as a
whole is true and correct in all material respects and does not contain any
untrue statement of material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. 
No event or circumstance has occurred or information exists with respect
to the Company or its Subsidiaries or its or their businesses, properties,
prospects, operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by the Company
but which has not been so publicly announced or disclosed.


 


4.23         Disclosure
Controls.  Each
of the Company and its Subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted 


 


10





















 


accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.  The disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) and 15d-15(e) under the 1934 Act of the
Company and each of its Subsidiaries provide reasonable assurance that material
information relating to the Company and its Subsidiaries is made known to the
Company’s Chief Executive Officer and Chief Financial Officer and, based on an
evaluation conducted as of March 31, 2005; there are no significant
deficiencies or weaknesses in the design or operations of internal controls
that could adversely affect the Company’s ability to record, process and report
financial data and other information required to be disclosed in the reports
filed or furnished by the Company pursuant to the 1934 Act.


 


ARTICLE 5


COVENANTS


 


5.1           Form D; Blue Sky Laws.  Upon completion of the Closing,
the Company shall file with the SEC a Form D with respect to the Securities as
required under Regulation D and each applicable state securities commission and
will provide a copy thereof to the Buyer promptly after such filing.


 


5.2           Use of Proceeds.  The Company shall use the
proceeds from the sale of the Securities for general corporate purposes;
provided, however, that none of such proceeds shall be used to repay
indebtedness of the Company other than revolving credit facility indebtedness
that could be redrawn by the Company following such repayment.


 


5.3           Expenses.  At the Closing, the Company shall reimburse
the Buyer for expenses in the amount of up to $65,000 incurred by Buyer in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Transaction Documents, including, without
limitation, legal, accounting, and other business due diligence expenses as
well as out of pocket costs incurred by the Buyer.


 


5.4           Listing.  The Company will obtain and, for so long as
the Buyer owns any of the Shares or Warrant Shares, use its best efforts to
maintain the listing and trading of its Common Stock on the NASDAQ National
Market or any equivalent replacement exchange and will comply in all respects
with the Company’s reporting, filing and other obligations under the bylaws or
rules of the National Association of Securities Dealers and such exchanges, as
applicable.


 


5.5           No Integration.  The Company shall not make any
offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of the Securities to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.


 


5.6           Appointment
of Directors.  For so
long as Buyer beneficially owns (as defined in Rule 13d-3 promulgated under the
1934 Act) at least 20% of the Shares, the Company agrees to (i), unless
otherwise instructed by Buyer, nominate the Buyer Nominee as a director,
include the Buyer Nominee as a director nominee of the Company in its annual
proxy statement and use its best efforts to ensure that the Buyer Nominee is
elected by the Company’s stockholders, and (ii) permit the Buyer Representative
to attend all meetings of the Company’s Board of Directors and to distribute all correspondence and other materials
distributed to directors of the Company in their capacity as directors to the Buyer Representative.  Upon the request of Buyer, the Company agrees
to appoint Michael S. Rawlings to its Board of Directors as the Buyer
Nominee.  As of the Closing Date, the
Company agrees to appoint


 


11





















 


Fouad Z. Bashour as the Buyer Representative.  Until Buyer requests Michael S. Rawlings’
appointment to the Board of Directors as contemplated above, Michael S.
Rawlings will be entitled to all the rights and privileges of a Buyer
Representative as set forth herein.  The
Buyer Nominee shall be entitled to the same compensation and reimbursement of
expenses, and to participate in Company stock option and similar equity
incentive plans, as other members of the Company’s Board of Directors.  The Buyer Representative shall be entitled to
the same reimbursement of out-of-pocket expenses as members of the Board of
Directors.


 


5.7           Restriction
on Trading.  The Company shall not, and shall cause John
F. Antioco, William G. Shrader, and Michael Garnreiter to refrain from, trading
in any shares of Common Stock (other than issuances by the Company and
acquisitions by directors and executive officers upon exercise of outstanding
stock options granted to directors and officers) until the earlier of (i) the
effectiveness of the registration statement contemplated by the Registration
Rights Agreement, or (ii) the date on which the Shares and Warrant Shares are
freely tradable by the Buyer without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act.


 


5.8           Insurance.  For so long as Buyer beneficially owns (as
defined in Rule 13d-3 promulgated under the 1934 Act) at least 20% of the
Shares, the Company shall use its best efforts and, where applicable, shall
cause each Subsidiary to maintain or cause to be maintained with financially
sound and reputable insurers that have a rating of “A-” or better as
established by Best’s Rating Guide (or an equivalent rating with such other
publication of a similar nature as shall be in current use), directors’
liability insurance providing at least the same coverage and amounts and
containing terms and conditions which are not less advantageous in any material
respect than the directors’ liability insurance maintained by the Company as of
the Closing Date.


 


5.9           Right of First Offer.  For a period of one year from the Closing
Date, Buyer will be given the first right to purchase any Common Stock,
preferred stock, securities exercisable for or convertible into the Company’s
equity securities, or other equity securities proposed to be offered by the
Company, other than issuances to employees of the Company pursuant to Company
stock option, 401(k), or stock purchase plans (“Equity Offering”).  If (a) Buyer fails to exercise such right to
acquire the securities being offered pursuant to an Equity Offering within 30
days of being informed of such offering or (b) if the price, terms and
conditions proposed by the Buyer for the securities in the Equity Offering are
not acceptable to the Company, then the Company shall have 90 days to complete
the Equity Offering and, in the case of clause (b) above, at a price and upon
terms more favorable to the Company than those proposed by the Buyer.  If the Company does not consummate the Equity
Offering within such 90-day period, then the Company shall not thereafter issue
or sell any securities pursuant to an Equity Offering without providing Buyer a
right of first offer in the manner provided above.  Notwithstanding the foregoing, Buyer’s rights
under this Section 5.9 are limited to acquiring such shares of Common
Stock, preferred stock, securities exercisable for or convertible into the
Company’s equity securities, or other equity securities proposed to be offered
by the Company, that the Company could issue to Buyer without prior shareholder
approval under Rule 4350(i)(1)(D) of the NASD Manual; provided, however,
that the foregoing limitation shall not apply if the Equity Offering to a third
party would also require the approval of the Company’s shareholders under Rule
4350(i)(1)(D).


 


ARTICLE 6


CONDITIONS TO THE COMPANY’S OBLIGATION


 


The obligation of the Company hereunder to
issue and sell the Securities to a Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following
conditions, provided that these conditions are for the Company’s sole benefit and
may be waived by the Company at any time in its sole discretion:


 


12





















 


6.1           Delivery
of Transaction Documents.  The
Buyer shall have executed and delivered the Transaction Documents to the
Company.


 


6.2           Payment
of Purchase Price.  The
Buyer shall have delivered the Purchase Price in accordance with Section 2.2
above.


 


6.3           Representations
and Warranties.  The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date), and the applicable Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
applicable Buyer at or prior to the Closing Date.


 


6.4           Litigation.  No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters herein that prohibits consummation of any of the transactions
contemplated by this Agreement.


 


ARTICLE 7


CONDITIONS TO BUYER’S OBLIGATION


 


The obligation of the Buyer hereunder to
purchase the Securities at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for Buyer’s sole benefit and may be waived by Buyer at any
time in its sole discretion:


 


7.1           Delivery
of Transaction Documents.  The
Company shall have executed and delivered the Transaction Documents to the
Buyer and shall have delivered the Transfer Instructions to the Company’s
transfer agent for its Common Stock.


 


7.2           Representations
and Warranties.  The
representations and warranties of the Company shall be true and correct in all
material respects (provided, however, that such qualification shall only apply
to representations or warranties not otherwise qualified by materiality) as of
the date when made and as of the Closing Date as though made at such time
(except for representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date.


 


7.3           Litigation.  No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.


 


7.4           No
Material Adverse Change.  There
shall have been no material adverse change in the assets, liabilities
(contingent or otherwise), affairs, business, operations, prospects or
conditions (financial or otherwise) of the Company or its Subsidiaries prior to
the Closing Date.


 


13





















 


ARTICLE 8


INDEMNIFICATION


 


8.1           Indemnification
by the Company. Except as otherwise provided in this Article
8, the Company agrees to indemnify, defend and hold harmless the Buyer and
its affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, an “Indemnified Party”) to the
fullest extent permitted by law from and against any and all losses, claims, or
written threats thereof, damages, expenses (including reasonable fees,
disbursements and other charges of counsel incurred by the Indemnified Party)
or other liabilities (collectively, “Losses”)
resulting from or arising out of any breach of any representation or warranty,
covenant or agreement by the Company to such Indemnified Party set forth in
this Agreement or any of the Transaction Documents, other than Losses incurred
by an Indemnified Person relating to a claim or action by the Company against
any Indemnified Person for the breach (or alleged breach) of this Agreement or
any documents contemplated by this Agreement by such Indemnified Person.


 


8.2           Notification. Each Indemnified Party under this Article 8 shall, promptly after
the receipt of notice of the commencement of any claim against such Indemnified
Party in respect of which indemnity may be sought from the Company under this Article
8, notify the Company in writing of the commencement thereof.  The omission of any Indemnified Party to so
notify the Company of any such action shall not relieve the Company from any
liability which it may have to such Indemnified Party except and only to the
extent that such omission results in the Company’s forfeiture of substantive
rights or defenses and such forfeiture results in more damages than would
otherwise have resulted.  In case any
such claim shall be brought against any Indemnified Party, and it shall notify
the Company of the commencement thereof, the Company shall be entitled to
assume the defense thereof at its own expense, with counsel satisfactory to
such Indemnified Party in its reasonable judgment; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. 
Notwithstanding the foregoing, such Indemnified Party shall have the right
to employ separate counsel and to control its own defense of such claim if, in
the reasonable opinion of counsel to such Indemnified Party, either (x) one or
more defenses are available to the Indemnified Party that are not available to
the Company or (y) a conflict or potential conflict exists between the Company,
on the one hand, and such Indemnified Party, on the other hand, that would make
such separate representation advisable; provided, however, that the Company (i)
shall not be liable for the fees and expenses of more than one counsel to all
Indemnified Parties and (ii) shall reimburse the Indemnified Parties for all of
such fees and expenses of such counsel incurred in any action between the
Company and the Indemnified Parties or between the Indemnified Parties and any
third party, as such expenses are incurred. 
The Company agrees that it will not, without the prior written consent
of the Indemnified Party, settle, compromise or consent to the entry of any judgment
in any pending or threatened claim relating to the matters contemplated hereby
(if any Indemnified Party is a party thereto or has been actually threatened to
be made a party thereto) unless such settlement, compromise or consent includes
an unconditional release of each Indemnified Party from all liability arising,
or that may arise, out of such claim, including any injunctive relief against
any Indemnified Party.  The Company shall
not be liable for any settlement of any claim effected against an Indemnified
Party without its written consent, which consent shall not be unreasonably
withheld.  The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
contrary contained in this Agreement, nothing in this Article 8 shall
restrict or limit any rights that any Indemnified Party may have to seek
equitable relief.


 


8.3           Contribution. If the indemnification provided for in this Article 8 from
the Company is unavailable to an Indemnified Party hereunder in respect of any
Losses referred to herein, then the Company, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or 


 


14





















 


payable by such Indemnified Party as a result of such Losses in such
proportion as is appropriate to reflect the relative fault of the Company and
Indemnified Party in connection with the actions which resulted in such Losses,
as well as any other relevant equitable considerations.  The relative faults of such Company and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
Company or Indemnified Party, and the parties relative intent, knowledge,
access to information and opportunity to correct or prevent such action.  The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Sections 8.1 and 8.2, any legal or
other fees, charges or expenses reasonably incurred by such party in connection
with any investigation or proceeding.


 


ARTICLE 9


GOVERNING LAW; MISCELLANEOUS


 


9.1           Governing Law.  This Agreement shall be enforced,
governed by and construed in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed entirely within such state,
without regard to the principles of conflict of laws.  All parties agree that service of process
upon a party mailed by first class mail shall be deemed in every respect effective
service of process upon the party in any such suit or proceeding.  Nothing herein shall affect any party’s right
to serve process in any other manner permitted by law.  The party which does not prevail in any
dispute arising under this Agreement shall be responsible for all fees and
expenses, including attorneys’ fees, incurred by the prevailing party in
connection with such dispute.


 


9.2           Counterparts;
Signatures by Facsimile.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party.  This
Agreement, once executed by a party, may be delivered to the other party hereto
by facsimile transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.


 


9.3           Headings.  The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.


 


9.4           Severability.  In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform to such
statute or rule of law.  Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.


 


9.5           Entire
Agreement; Amendments.  This
Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and supersedes all prior written and oral agreement and understandings
relating to the matters covered herein, including, without limitation, any
confidentiality agreements.  No provision
of this Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.


 


9.6           Notices.  Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally 


 


15





















 


or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a
party.  The addresses for such
communications shall be:


 


If to the Company:


 


Main Street Restaurant Group, Inc.


5050 North 40th Street, Suite 200


Phoenix, Arizona 85018


Attention: 
Michael Garnreiter


Telephone:  (602) 852-9000


Facsimile:  (602) 852-9076


 


With a copy to:


 


Greenberg Traurig


2375 East Camelback


Phoenix, Arizona 85016


Attention:  Robert Kant


Telephone:  (602) 445-8302


Facsimile:  (602) 445-8100


 


If to a Buyer:


 


To the address set forth immediately below such Buyer’s name on the
signature pages hereto.


 


With a copy to:


 


Haynes and Boone, LLP


1221 McKinney Street, Suite 2100


Houston, Texas  77010


Attention:  Edward Rhyne


Telephone: (713) 547-2226


Facsimile: (713) 236-5504


 


Each party shall provide notice to the other party of any change in
address in accordance with this section.


 


9.7           Successors
and Assigns.  This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.  Neither
the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.  Notwithstanding the foregoing, the Buyer may
assign its rights hereunder to any person who purchases the Securities in a
private transaction from the Buyer or to any of its “affiliates,” as that term
is defined under the 1934 Act, without the consent of the Company.


 


9.8           Third
Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.


 


9.9           Publicity.  The
Buyer shall have a reasonable advance period of time to review and approve any
press releases or any other public statements with respect to the transactions
contemplated 


 


16





















 


hereby; provided, however, that the Company
shall be entitled, without the prior approval of the Buyer, to make any press
release with respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company in connection
with any such press release prior to its release and shall be provided with a
copy thereof and be given an opportunity to comment thereon).  Notwithstanding the foregoing, the Company
shall file with the SEC a Form 8-K disclosing the transactions herein and
attaching the relevant agreements and instruments within four business days of
the Closing Date.


 


9.10         Further Assurances.  Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.


 


9.11         No
Strict Construction.  The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction
will be applied against any party.


 


9.12         Remedies.  The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall be entitled,
in addition to all other available remedies at law or in equity, and in
addition to the penalties assessable herein, to an injunction or injunctions
restraining, preventing or curing any breach of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.


 


9.13         Survival.  The representations and warranties of the
Company and the agreements and covenants set forth in Sections 4.5, 4.9,
4.13, 4.14 and 4.21 shall survive the Closing,
notwithstanding any due diligence investigation conducted by or on behalf of
the Buyer, for the greater of (a) 30 months from the Closing Date and (b) the
applicable statute of limitations period. 
The other representations and warranties of the Company in Articles 4
and the Buyer in Article 3 shall survive for a period of 30 months
from the Closing Date, notwithstanding any due diligence investigation
conducted by or on behalf of the Buyer.


 


9.14         Waiver of Jury Trial.  The Company and the Buyer hereby
(i) irrevocably and unconditionally waive, to the fullest extent permitted by
law, trial by jury in any legal action or proceeding relating to this Agreement
or any Transaction Documents and for any counterclaim therein; (ii) certify
that no party hereto nor any representative or administrative agent of counsel
for any party hereto has represented, expressly or otherwise, or implied that
such party would not, in the event of litigation, seek to enforce the foregoing
waiver, and (iii) acknowledge that such party has been induced to enter into
this Agreement or any of the Transaction Documents and the transactions
contemplated hereby and thereby by, among other things, the mutual waivers and
certifications contained in this Section 9.14.


 


[Remainder of page
intentionally left blank]


 


[Signature page
follows]


 


17





















 


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


 


	
   

  	
  MAIN STREET RESTAURANT GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William G. Shrader

  	
   

  
	
   

  	
  Title: 

  	
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  CIC MSRG LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marshall B. Payne

  	
   

  
	
   

  	
  Title:

  	
  President of CIC Partners GP LLC,

  	
   

  
	
   

  	
   

  	
  General Partner of CIC MSRG LP

  	
   

  
	
   

  	
   

  
	
   

  	
  JURISDICTION: Delaware

  
	
   

  	
  ADDRESS: 500 Crescent Court, Suite 250

  
	
   

  	
  Dallas, TX 75201

  
	
   

  	
  Telephone: (214) 880-4489

  
	
   

  	
  Facsimile: (214) 880-4491

  
										



 


 


SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT