**Exhibit 10.17**

 

**THIS INDEMNIFICATION AGREEMENT**(the “Agreement”) is made and enteredinto as of this 13th day of October, 2004, by and among J.W. ChildsEquity Partners, L.P. (“J.W. Childs”), Real Mex Restaurants, Inc. (“RealMex”), and CKR Acquisition Corp. (“Buyer”).

 

**WHEREAS,**J.W. Childs, Real Mex, and Buyer have entered into an Asset PurchaseAgreement, dated as of the date hereof by and among J.W. Childs, Buyer, RealMex and the other parties thereto (as the same may be amended and modified fromtime to time, the “Asset Purchase Agreement”);

 

**WHEREAS,**Buyer’s agreement to enter into the Asset Purchase Agreement isconditioned upon the execution and delivery by J.W. Childs, simultaneously withthe execution and delivery of the Asset Purchase Agreement, of this Agreement;and

 

**WHEREAS,**all capital terms used herein and not otherwise defined herein shallhave the meanings ascribed to such terms in the Asset Purchase Agreement;

 

**NOW, THEREFORE,**in consideration of the foregoing and the mutual agreements, covenants,representations, warranties and promises set forth herein, and in order toprescribe the terms and conditions of such purchase and sale, the partieshereto agree as follows:

 

1.             Issuance of Real Mex Securities.  RealMex covenants to issue and deliver to J.W. Childs on the Closing Date thenumber of stock certificates, options and warrants representing the StockConsideration to be issued and delivered to J.W. Childs pursuant to Section 6.4of the Asset Purchase Agreement.  RealMex covenants that upon such issuance and delivery, the securities representingthe Stock Consideration shall be duly authorized, validly issued, fully paidand non-assessable.

 

2.             Representations and Warranties.

 

(a)           Real Mex and Buyer Representations.  RealMex and Buyer jointly and severally represent and warrant to J.W. Childs on thedate hereof as follows:

 

(i)            Organization and Power.  RealMex and Buyer (i) arc duly organized and validly existing under the laws oftheir respective states of incorporation, (ii) have the requisite power andauthority to own their properties and assets, and to carry on the business inwhich they are now engaged, and (iii) have the requisite power and authority toexecute this Agreement and to consummate the transactions contemplated hereby andthereby.

 

(ii)           Authority.  This Agreement constitutes 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).  Theexecution, delivery and performance of this Agreement, and the

 

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consummation by Real Mex and Buyer of thetransactions contemplated hereby do not require any filing with, notice to, orconsent, waiver or approval of, any third party, including but not limited to,any governmental body or entity.

 

(iii)          No Breach or Conflict.  Theexecution, delivery and performance of this Agreement shall not: (I) violate orresult in a breach of any term of Real Mex’s or Buyer’s Certificate ofIncorporation or Bylaws, result in a breach of, or constitute a default under,any term in any agreement or other instrument to which Real Mex or Buyer is aparty, such default having not been previously waived by the other party to anysuch agreement, or violate any Law or any order, rule or regulation applicableto Buyer, of any court or of any regulatory body, administrative agency orother governmental instrumentality having jurisdiction over Real Mex or Buyer.  The execution, delivery and performance ofthis Agreement by Real Mex and Buyer have been duly authorized by all necessarycorporate action.

 

(iv)          Capitalization.  Therepresentations and warranties of Real Mex and Buyer contained in Section 6.4of the Asset Purchase Agreement shall be true and correct as of the ClosingDate.

 

(v)           Financial Statements.  Therepresentations and warranties of Real Mex and Buyer contained in Section 6.5of the Asset Purchase Agreement are true and correct.

 

(b)           J.W. Childs Representations.  J.W. Childs represents andwarrants to Real Mex and Buyer on the date hereof as follows:

 

(i)            Organization and Power.  J.W.Childs (i) is duly organized and validly existing under the laws of Us state offormation, (ii) has the requisite power and authority to own its properties andassets, and to carry on its business in which it is now engaged, and (iii) hasthe requisite power and authority to execute this Agreement and to consummatethe transactions contemplated hereby and thereby.

 

(ii)           Authority.  This Agreement constitutes thelegal, valid and binding obligation of J.W. Childs, enforceable against it inaccordance with its terms, except as enforceability may be limited by in anycase (i) applicable bankruptcy, reorganization, insolvency, moratorium andsimilar Laws affecting the enforcement of creditors’ rights generally, and (ii)general equitable principles (regardless of whether enforceability isconsidered in a proceeding in equity or at Law).  The execution, delivery and performance ofthis Agreement, and the consummation by J.W. Childs of the transactionscontemplated hereby does not require any filing with, notice to, or consent,waiver or approval of, any third party, including but not limited to, anygovernmental body or entity.

 

(iii)          No Breach or Conflict.  Theexecution, delivery and performance of this Agreement shall not: (i) violate orresult in a breach of any term of J.W. Childs’s Certificate of Formation (orsimilar organizational document) or partnership agreement, result in a breachof, or constitute a default under, any term in any

 

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agreement or otherinstrument to which J.W. Childs is a party, such default having not beenpreviously waived by the other party to any such agreement, or violate any Lawor any order, rule or regulation applicable to J.W. Childs, of any court or ofany regulatory body, administrative agency or other governmentalinstrumentality having jurisdiction over J.W. Childs. The execution, deliveryand performance of this Agreement by J.W. Childs has been duly authorized byall necessary partnership action.

 

(iv)          Investment Representation.  J.W.Childs acknowledges that the Real Mex Securities have not been, and will not beas of the Closing Date, registered under the Securities Act of 1933, asamended, or the securities Laws of an state or other regulatory body and suchshares are being offered and sold in reliance upon federal and stateexemptions.  J.W. Childs is acquiring theReal Mex Securities for its own account with the present intention of holding suchsecurities for investment purposes and not with a view to or for sale inconnection with any public distribution of such securities in violation of anyfederal or state securities Laws.  J.W.Childs is a sophisticated investor, familiar with the business of Real Mex sothat it is capable of evaluating the merits and risks of its investment in theReal Mex Securities.

 

3.             No Survival of Representations and Warranties.  Noneof the representations and warranties of the parties hereto contained inSection 2 of this Agreement or made in any other documents or instrumentsdelivered pursuant to this Agreement shall survive past the Closing Date.

 

4.             Indemnification.  Onand after the Closing Date, J.W. Childs shall indemnify Buyer and Real Mex andtheir Affiliates and their respective partners, members, officers, directors,employees, agents and representatives (each, a “BuyerIndemnifiedParty”) and hold each such Buyer Indemnified Party harmless from and againstany and all Damages (as defined below) arising out of, resulting from orrelating to (A) any misrepresentation or breach of any representation,warranty, covenant or agreement made by Sellers in the Asset Purchase Agreementor in any schedule, statement, document or certificate furnished or required tobe furnished to Buyer pursuant thereto and (B) the Excluded Assets or theExcluded Liabilities.  For purposes ofthis Agreement, “Damages” shall mean any and all losses, liabilities,damages (including any governmental penalty), obligations, awards, fines,deficiencies, interest, actions, demands, claims, proceedings, judgments,costs, expenses and fees (including attorneys’ fees, court costs and all otherreasonable expenses incurred in investigating, preparing or defending anylitigation or proceeding, commenced or threatened) resulting from, arising outof or incident to (a) any of the foregoing indemnifiable items or (b) incidentto the enforcement of this Agreement; provided, that Damages shall notinclude (i) punitive damages other than punitive damages payable to a thirdparty, and (ii) Damages from breaches disclosed on the certificates to bedelivered to Buyer in accordance with Sections 8.1(a), 8.l(b), and 8.1(c) ofthe Asset Purchase Agreement; and provided, further, that Damagesshall be calculated net of any insurance proceeds actually received by Buyerwith respect to the occurrence that is the basis for such Damages.

 

5.             Limitations.  J.W. Childs will not be liablefor any Damages unless (i) Real Mex or Buyer asserts a written claim for such damagesprior to the end of the one-year

 

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period from the Closing Date(and J.W. Childs agrees that any claim so filed shall survive until its finalresolution), (ii) the Damages with respect to the particular act, event, fact,occurrence or omission causing Damages exceeds $10,000, and (iii) the aggregateof all Damages exceeds $600,000 (and then only to the extent of such excess).  The maximum liability of J.W. Childs hereundershall in no event exceed $6,000,000.  Forpurposes of calculating the amount of Damages and for determining if any breachof any representation or warranty in the Asset Purchase Agreement has occurred,all references to a “Material Adverse Effect” or materiality (or othercorrelative terms) in such representation or warranty shall be disregarded.  Notwithstanding anything to the contrarycontained in Section 9.1 of the Asset Purchase Agreement, for purposes of thisAgreement, the representations and warranties of the Sellers contained in theAsset Purchase Agreement shall survive for a period of 12 months after theClosing Date.

 

6.             Payment.  In the event that J.W. Childsowes Damages pursuant to this Agreement, at its option J.W. Childs may pay allor portion of such Damages in cash or by remitting Real Mex Securities to RealMex with a value equal to such amount of such Damages.  If J.W. Childs makes payment on or before theone-year period from the Closing Date, the Real Mex Securities shall be deemedto have a value equal to $1,000,000 for each 1% of the Real Mex Securitiesissued to J.W. Childs at the Closing.  IfJ.W. Childs makes payment after the one-year period from the Closing Date, theReal Mex Securities shall have a value equal to the fair market value asmutually agreed by the parties.  If theparties can not mutually agree on the fair market value, the fair market valueshall be determined by an appraiser, investment bank or similar valuationprofessional of national standing in the restaurant industry mutually agreeableto the parties, which agreement shall not be unreasonably withheld or delayedby either party.

 

7.             Third Party Claims.

 

(a)           If a Buyer Indemnified Party is seekingindemnification pursuant to this Agreement on account of a Third Party Claim(as defined below), Buyer shall give prompt notice to J.W. Childs of theassertion of any claim, or the commencement of any action, suit or proceeding,in respect of which indemnity may be sought hereunder and will give J.W. Childssuch information with respect thereto as J.W. Childs may reasonably request,but failure to give such notice shall not relieve J. W. Childs of any liabilityhereunder (except to the extent that J.W. Childs has suffered actual prejudicethereby).  J.W. Childs shall have theright (but not the obligation), exercisable by written notice to Buyer within15 days of receipt of notice from Buyer of the commencement of or assertion ofany claim or action, suit or proceeding by a third party in respect of whichindemnity may be sought hereunder (a “Third Party Claim”), to assume thedefense and control the settlement of such Third Party Claim which involves(and continues to involve) solely monetary damages; provided, however,that (i) J.W. Childs expressly agrees in such notice that, as between J.W.Childs and the Buyer Indemnified Party, J.W. Childs shall be solely obligatedto satisfy and discharge the Third Party Claim; (ii) the defense of such ThirdParty Claim by J.W. Childs will not, in the reasonable judgment of Buyer, haveany continuing material adverse effect on the Buyer Indemnified Party’sbusiness or financial condition; and (iii) J.W. Childs provides Buyer withreasonable assurances that it has the financial ability to satisfy the fullamount of any adverse

 

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monetary judgment that may result (theconditions set forth in clauses (i), (ii) and (iii) are collectively referredto as the “Litigation Conditions”).

 

(b)           J.W. Childs or Buyer, as the case may be, shallhave the right to participate in (but not control), at its own expense, thedefense of any Third Party Claim which the other is defending as provided inthis Agreement.  J.W. Childs, if it shallhave assumed the defense of any Third Party Claim as provided in thisAgreement, shall not consent to a settlement of, or the entry of any judgmentarising from, any such Third Party Claim without the prior written consent ofBuyer (which consent shall not be unreasonably withheld or delayed).  J.W. Childs shall not, without the priorwritten consent of Buyer, enter into any compromise or settlement which commitsBuyer or any Buyer Indemnified Party to take, or to forbear to take, any actionor which does not provide for a complete release by such third party of theBuyer Indemnified Party.  Buyer shallhave the sole and exclusive right to settle any Third Party Claim, on suchterms and conditions as it deems reasonably appropriate, to the extent suchThird Party Claim involves equitable or other non-monetary relief, and shallhave the right to settle any Third Party Claim involving monetary damages withthe written consent of J.W. Childs, which consent shall not be unreasonablywithheld or delayed.

 

(c)           Whether or not Buyer chooses to defend orprosecute any Third Party Claim, the parties hereto shall cooperate in thedefense or prosecution thereof and shall furnish such records, information andtestimony, and attend such conferences, discovery proceedings, hearings, trialsand appeals, as may be reasonably requested in connection therewith.  No right to indemnification under thisAgreement shall be limited by reason of any investigation or audit conductedbefore or after the Closing by any Buyer Indemnified Party or the knowledge anyof such party of any breach of any representation, warranty, agreement orcovenant by any party to the Asset Purchase Agreement at any time, or thedecision by any Buyer Indemnified Party to complete the Closing.

 

8.             Miscellaneous.

 

(a)           Governing Law.  ThisAgreement shall be construed and enforced in accordance with, and the rights ofthe parties hereunder shall be governed by, the Laws of the State of New Yorkexcluding choice-of-law principles of the law of such State that would requirethe application of the laws of a jurisdiction other than such State

 

(b)           Jurisdiction; Disputes; Arbitration.  Theprovisions of Section 10.11 of the Asset Purchase Agreement relating tojurisdiction, disputes and arbitration shall apply to this Agreement and theprovisions of such Section 10.11 are hereby incorporated by reference herein.

 

(c)           Effectiveness.  ThisAgreement shall become effective against any party hereto only uponconsummation of the transactions contemplated by the Asset Purchase Agreement.  In the event that the Asset PurchaseAgreement is terminated, this Agreement shall be null and void and of nofurther force and effect.

 

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(d)           Counterparts.  ThisAgreement may be executed in one or more counterparts which in the aggregateshall comprise one Agreement.

 

(e)           Real Mex Indemnification.  Onand after the Closing Date, Real Mex shall indemnify J.W. Childs and hold J.W.Childs harmless from and against any and all Damages arising out of, resultingfrom or relating to a breach of the covenants set forth in Section 1 hereof.

 

**[signature page follows]**

 

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**IN WHITNESS WHEREOF**,the parties hereto have executed this Agreement on the day, month and yearfirst above written.

 

 
| ** ** | **CKR ACQUISITION CORP.**             |
|------------|---------------------------------------|
|       |                                  |
|       |                                  |
|       | By:                                   | /s/ |  Frederick F.  Wolfe |   |
|       |                                  | Name: |  Frederick F.  Wolfe |   |
|       |                                  | Title: |  President |   |
|       |                                  |
|       |                                  |
| ** ** | **REAL MEX RESTAURANTS, INC.**        |
|       |                                  |
|       |                                  |
|       | By:                                   | /s/ |  Frederick F.  Wolfe |   |
|       |                                  | Name: |  Frederick F.  Wolfe |   |
|       |                                  | Title: |  President |   |
|       |                                  |
|       |                                  |
| ** ** | **J.W. CHILDS EQUITY PARTNERS, L.P.** |
|       |                                  |
|       |                                  |
|       | By:                                   | /s/ |  Jeffrey J.  Teschke |   |
|       |                                  | Name: |  Jeffrey J.  Teschke |   |
|       |                                  | Title: | Vice-President |   |

 

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