Document:

Exhibit
10(e)

MAINE & MARITIMES CORPORATION
2002 STOCK OPTION PLAN

STOCK OPTION AGREEMENT

AGREEMENT, made
this 1st day of June, 2002, between MAINE & MARITIMES CORPORATION, (“Company”)
and (“Employee”),

1. GRANT OF
OPTIONS. The company hereby grants Employee (a) an incentive stock option (ISO”)
to purchase shares of its common stock (“Shares”) under its 2002 Stock Option
Plan (“Plan”), a copy of which is attached hereto as Appendix A, and (b) a
nonqualified stock option (“NSO”) to purchase Sales under the Plan.

2. OPTION PRICE.
THE OPTION PRICE IS $ per share.

3.
NONTRANSFERABILITY. These options are subject to the transfer restrictions set
forth in Section 7(d) of the Plan.

4. EXERCISE OF
OPTION. Employee may exercise these options only by completing and delivering
to the Company a written notice, in such manner and on such form as the Company
may prescribe, and by tendering to the Company full payment for the Shares to
be acquired. Payment by transfer of stock shall be permitted only if
transferring previously acquired Shares will not, in the judgment of the
Company’s accountants, result in an expense being reflected in the financial
statements of the Company. The value of stock transferred to the Company in
payment of the option price shall be 100% of the fair market value of such
stock at the close of business on the date such transfer is recorded on the
books of the Company, following actual or constructive delivery of the stock to
the Company in a form suitable for transfer.

5. EXERCISE
RESTRICTIONS/ACCELERATION.

(a) HOLDING
PERIODS. Except as hereinafter provided, these options shall become exercisable
over a seven-year period beginning June 1, 2005, as set forth in the following
table:

 

	
  Total Number of

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Year Beginning

  	
   

  	
  Shares that May be Purchased

  	
   

  	
  ISO Shares

  	
   

  	
  NSO Shares

  	
   

  
	
  6/1/2005

  	
   

  	
  7,500

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/1/2006

  	
   

  	
  7,500

  	
  *

  	
  *

  	
   

  	
  *

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/1/2007

  	
   

  	
  7,500

  	
  *

  	
  *

  	
   

  	
  *

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/1/2008

  	
   

  	
  7,500

  	
  *

  	
  *

  	
   

  	
  *

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/1/2009

  	
   

  	
  7,500

  	
  *

  	
  *

  	
   

  	
  *

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/1/2010

  	
   

  	
  7,500

  	
  *

  	
  *

  	
   

  	
  *

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/1/2011

  	
   

  	
  7,500

  	
  *

  	
  *

  	
   

  	
  *

  	
   

  

 

*This number shall be increased by carrying forward the aggregate
number of shares not purchased from the prior year.

 

(b) ANNUAL DOLLAR
LIMIT ON EXERCISE. To the extent that the aggregate fair market value of stock
with respect to which incentive stock options are exercisable for the first
time by Employee during any calendar year (under all plans of the corporation
employing Employee and its parent and subsidiaries) exceeds $100,000, such
options shall not be treated as incentive stock options.

(c) MINIMUM
EXERCISE/WHOLE SHARES. Employee may not exercise an option to purchase fewer
than 50 Shares, unless by such exercise the Employee acquires all Shares that
may be purchased under the option on the exercise date, or to purchase fractional
Shares.

(d) ACCELERATION
OF EXERCISE. These options shall immediately become exercisable in full in the
event of a “change in control,” as defined in

Section 9 of the Plan.

6. SHAREHOLDER
RIGHTS/STOCK CERTIFICATES. Neither the Employee nor his or her personal
representative, heir or legatee shall be a shareholder of the Company or have
any rights or privileges of a shareholder by reason of this Agreement until the
date that Shares purchased under an option are issued, as recorded on the books
of the Company. In the event a stock certificate evidencing such Shares is to
be issued, the Company shall personally deliver or mail such certificate to the
Employee as soon as practicable after the exercise date.

7. TERM OF
OPTIONS. This Agreement shall terminate and these options, to the extent they
have not been exercised, shall expire May 30, 2012. In the event of Employee’s
earlier termination of employment, disability or death, the term of the option
will be determined in accordance with Section 7(f), (g) or (h) of the Plan,
whichever is applicable, and this Section 7. In the event of Employee’s
termination of employment for any reason other than death or disability, these
options shall expire on the earlier of (i) May 30, 2012, (ii) 3 months after
employment ceases. In the event of Employee’s termination of employment by
reason of death or disability, these options shall expire on the earlier of (i)
May 30, 2012, (ii) or one year after employment ceases.

8. ADJUSTMENTS TO
AWARD. The number of Shares subject to these options and the option price are
subject to adjustment pursuant to Section 4(b) of the Plan.

9. ADMINISTRATION.
The members of the Executive Compensation Committee of the Company’s Board of
Directors who are not employees of the Company or any of its subsidiaries (“Committee”)
shall have the responsibility of construing and interpreting this Agreement and
the Plan. The determinations and conclusions of the Committee shall be binding
on the parties hereto.

10. CHANGES IN
LAW. Employee shall be subject to any rules adopted by the Committee to comply
with changes in the laws and regulations relating to the Plan.

 

11. MISCELLANEOUS.

(a) EMPLOYMENT.
This Agreement does not give the Employee any right to be retained in the
employ of the Company or any of its subsidiaries.

(b) PLAN
PROVISIONS INCORPORATED BY REFERENCE. All of the applicable terms and
restrictions of the Plan are hereby incorporated by reference and shall have
the same force and effect as if they were separately restated herein.

(c) AMENDMENT.
This Agreement may be amended only in writing by mutual agreement of the
parties.

(d) GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with Maine law.

(e) SEVERABILITY.
In the event that any provision of this Agreement shall be held invalid, it
shall not affect the validity of the remainder of the Agreement.

(f) ENTIRE
AGREEMENT. This Agreement contains the entire understanding of the parties and
all prior representations, promises or statements are merged herein.

MAINE & MARITIMES CORPORATION

By

Its Executive Compensation committee Chairperson

Employee

Persons who have
received the above Stock Option Agreement:

	
  Individual

  	
   

  	
  Shares

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  J. Nicholas
  Bayne

  	
   

  	
  5,250

  	
   

  	
  6/1/2002

  	
   

  
	
  J. Nicholas
  Bayne

  	
   

  	
  5,250

  	
   

  	
  6/1/2003

  	
   

  
	
  J. Nicholas
  Bayne

  	
   

  	
  5,250

  	
   

  	
  6/1/2004

  	
   

  
	
  J. Nicholas
  Bayne

  	
   

  	
  5,250

  	
   

  	
  6/1/2005

  	
   

  
	
  J. Nicholas Bayne

  	
   

  	
  5,250

  	
   

  	
  6/1/2006Exhibit 10.1

ASSET PURCHASE AGREEMENT

AMONG

RED ROBIN INTERNATIONAL, INC.

(as Buyer),

 

AND

 

SOUTH
SOUND RED ROBIN, INC.

ZANNER-HUBERT, INC.

NORTHWEST ROBINS, LLC

AND

WASHINGTON ROBINS, LLC

(as Sellers)

July 1, 2006

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
  Page

  
	
  ARTICLE I

  	
  PURCHASE AND SALE OF ASSETS; ASSUMPTION OF
  LIABILITIES

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Purchased Assets

  	
  1

  
	
  1.2

  	
  Excluded Assets

  	
  2

  
	
  1.3

  	
  Assumed Liabilities

  	
  3

  
	
  1.4

  	
  Excluded Liabilities

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  CONSIDERATION; CLOSING

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Consideration

  	
  6

  
	
  2.2

  	
  The Closing

  	
  6

  
	
  2.3

  	
  Deliveries at the Closings

  	
  6

  
	
  2.4

  	
  Power of Attorney; Right of Endorsement, Etc

  	
  9

  
	
  2.5

  	
  Sales Taxes

  	
  9

  
	
  2.6

  	
  Allocation of Purchase Price

  	
  9

  
	
  2.7

  	
  Closing Date Purchase Price Adjustment

  	
  10

  
	
  2.8

  	
  Post-Closing Purchase Price Adjustment

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

  	
  11

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Organization and Capitalization of the Sellers

  	
  11

  
	
  3.2

  	
  Authorization of Transaction

  	
  11

  
	
  3.3

  	
  Non-contravention

  	
  12

  
	
  3.4

  	
  Subsidiaries

  	
  12

  
	
  3.5

  	
  Financial Statements

  	
  12

  
	
  3.6

  	
  Events Subsequent to December 25, 2005

  	
  13

  
	
  3.7

  	
  Absence of Undisclosed Liabilities

  	
  14

  
	
  3.8

  	
  Legal Compliance

  	
  14

  
	
  3.9

  	
  Title to Properties

  	
  14

  
	
  3.10

  	
  Inventory

  	
  16

  
	
  3.11

  	
  Royalty Payments and other Franchise Matters

  	
  16

  
	
  3.12

  	
  Tax Matters

  	
  16

  
	
  3.13

  	
  Intellectual Property

  	
  17

  
	
  3.14

  	
  Contracts and Capital Leases

  	
  18

  
	
  3.15

  	
  Insurance

  	
  19

  
	
  3.16

  	
  Litigation

  	
  19

  
	
  3.17

  	
  Employees

  	
  19

  
	
  3.18

  	
  Employee Benefits

  	
  21

  
	
  3.19

  	
  Environment and Safety

  	
  23

  
	
  3.20

  	
  Suppliers

  	
  24

  
	
  3.21

  	
  Accounts and Notes Payable

  	
  24

  
	
  3.22

  	
  Regulatory Compliance

  	
  24

  
	
  3.23

  	
  Insider Interests

  	
  24

  
	
  3.24

  	
  Improper Payments

  	
  24

  
	
  3.25

  	
  Brokers

  	
  24

  
	
  3.26

  	
  Restaurant Operations

  	
  25

  
	
  3.27

  	
  Gift Cards

  	
  25

  
	
  3.28

  	
  Membership Interests

  	
  25

  
	
  3.29

  	
  Disclosure

  	
  25

  

 

 i
 

 

 

	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
  25

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization

  	
  25

  
	
  4.2

  	
  Authorization of Transaction

  	
  25

  
	
  4.3

  	
  No Restrictions Against Purchase of Assets

  	
  26

  
	
  4.4

  	
  Disclosure

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  PRE-CLOSING COVENANTS

  	
  26

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Employees

  	
  26

  
	
  5.2

  	
  Cooperation and Best Efforts to Complete Transaction

  	
  26

  
	
  5.3

  	
  Conduct of Restaurants By Sellers Prior to the
  Closing Date

  	
  26

  
	
  5.4

  	
  Press Releases

  	
  28

  
	
  5.5

  	
  Access to Information and Employees

  	
  28

  
	
  5.6

  	
  Intentionally omitted

  	
  29

  
	
  5.7

  	
  Confidentiality

  	
  29

  
	
  5.8

  	
  Consultation and Reporting

  	
  29

  
	
  5.9

  	
  Update Schedules

  	
  29

  
	
  5.10

  	
  Compliance with Franchise Agreements

  	
  29

  
	
  5.11

  	
  Absence of Sellers’ Representative

  	
  29

  
	
  5.12

  	
  Transition Activities

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  CONDITIONS TO OBLIGATION OF BUYER

  	
  30

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Representations and Warranties

  	
  30

  
	
  6.2

  	
  Covenants and Obligations of the Seller

  	
  30

  
	
  6.3

  	
  Consents

  	
  30

  
	
  6.4

  	
  Absence of Material Adverse Change

  	
  31

  
	
  6.5

  	
  Absence of Litigation

  	
  31

  
	
  6.6

  	
  Funded Indebtedness

  	
  31

  
	
  6.7

  	
  Termination of Plans

  	
  31

  
	
  6.8

  	
  Franchise Agreements

  	
  31

  
	
  6.9

  	
  Certain Real Property Leases

  	
  31

  
	
  6.10

  	
  Permits and Liquor Licenses

  	
  31

  
	
  6.11

  	
  Documents

  	
  32

  
	
  6.12

  	
  Release of Liens

  	
  32

  
	
  6.13

  	
  Non-Solicitation Agreements

  	
  32

  
	
  6.14

  	
  Opinion of Counsel

  	
  32

  
	
  6.15

  	
  Title Policies

  	
  32

  
	
  6.16

  	
  First Closing

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  CONDITIONS TO OBLIGATIONS OF THE SELLERS

  	
  32

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Delivery of Consideration

  	
  32

  
	
  7.2

  	
  Representations and Warranties

  	
  32

  
	
  7.3

  	
  Absence of Litigation

  	
  32

  
	
  7.4

  	
  Governmental Filings

  	
  32

  
	
  7.5

  	
  Documents

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  TERMINATION

  	
  33

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Termination Prior to First Closing

  	
  33

  
	
  8.2

  	
  Termination Prior to Second Closing

  	
  33

  
	
  8.3

  	
  Effect of Termination

  	
  34

  

 

 ii
 

 

 

	
  ARTICLE IX

  	
  ADDITIONAL AGREEMENTS

  	
  34

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Survival

  	
  34

  
	
  9.2

  	
  Indemnification

  	
  34

  
	
  9.3

  	
  Indemnification Procedures

  	
  35

  
	
  9.4

  	
  Change of Name

  	
  36

  
	
  9.5

  	
  Transaction Expenses

  	
  37

  
	
  9.6

  	
  Appointment, Authority and Manner of Acting of
  Sellers’ Representative.

  	
  37

  
	
  9.7

  	
  Further Assurances; Transition Assistance

  	
  38

  
	
  9.8

  	
  Allocation Ad Valorem Taxes

  	
  39

  
	
  9.9

  	
  Conduct After Closing

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  DEFINITIONS

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  	
  46

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  No Third Party Beneficiaries

  	
  46

  
	
  11.2

  	
  Entire Agreement

  	
  46

  
	
  11.3

  	
  Successors and Assigns

  	
  46

  
	
  11.4

  	
  Counterparts

  	
  46

  
	
  11.5

  	
  Headings

  	
  47

  
	
  11.6

  	
  Notices

  	
  47

  
	
  11.7

  	
  Governing Law

  	
  48

  
	
  11.8

  	
  Amendments and Waivers

  	
  48

  
	
  11.9

  	
  Incorporation of Exhibits and Schedules

  	
  48

  
	
  11.10

  	
  Construction

  	
  48

  
	
  11.11

  	
  Independence of Covenants and Representations and
  Warranties

  	
  48

  
	
  11.12

  	
  Remedies

  	
  48

  
	
  11.13

  	
  Severability

  	
  48

  
	
  11.14

  	
  Jurisdiction and Venue

  	
  49

  

 

 iii

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of July 1,
2006, among RED ROBIN INTERNATIONAL, INC., a Nevada corporation (the “Buyer”), MARCUS L. ZANNER, a resident of
the State of Washington (the “Sellers’
Representative”) and SOUTH SOUND RED ROBIN, INC., a Washington
corporation (“South Sound”),
ZANNER-HUBERT, INC., a Washington corporation (“Zanner-Hubert”), NORTHWEST ROBINS, LLC, a Washington limited
liability company (“Northwest Robins”)
AND WASHINGTON ROBINS, LLC, a Washington limited liability company (“Washington Robins”).  South Sound, Zanner-Hubert, Northwest Robins
and Washington Robins are sometimes referred to herein as a “Seller” and collectively as the “Sellers”. 
The Sellers, the Sellers’ Representative and the Buyer are sometimes
referred to herein as a “Party”
and collectively as the “Parties”.

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

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

3.             The
Buyer and the Sellers desire to close the Transactions and take possession of
eleven of the Sellers’ thirteen Restaurants on the First Closing Date and to
close the Transactions with respect to the remaining two Restaurants on a
subsequent date, referred to as the Second Closing Date, provided, that,  during the interim period between the First
Closing Date and the Second Closing Date the Buyer shall takeover the day to
day operations of the remaining two Restaurants under the terms provided in the
Management Agreement to be executed by the Buyer and the Sellers on the First
Closing Date.

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

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

Article I

PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES

1.1           Purchased Assets.  On
and subject to the terms and conditions of this Agreement, at the applicable
Closing, the Buyer shall purchase from each Seller, and each Seller shall sell,
transfer, assign, convey and deliver to the Buyer, all right, title and
interest in and to all of the tangible and intangible assets, business,
goodwill and rights of such Seller used in the operation, maintenance or
ownership of the Restaurants, other than the Excluded Assets (all such assets,
business, goodwill and rights being purchased from the Sellers hereunder are collectively
referred to as the “Purchased Assets”),
as the same shall exist immediately prior to the First Closing or Second
Closing, as applicable, free and clear of all Liens (other than Permitted
Liens), including, but not limited to, the following:

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

 

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

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

(d)           all
motor vehicles;

(e)           all
interest and rights in and to the Contracts;

(f)            Permits,
registrations, certificates or similar rights relating to the operation of the
Restaurants, including those described on Schedule 3.8(a) that are transferable,
subject to the approval of Governmental Entities authorizing the transfer of
such Permits;

(g)           deposits
made and prepaid expenses incurred by the Sellers prior to Closing in the
ordinary course of business and consistent with Sellers’ past practice,
including, without limitation, deposits and prepaid utilities and amounts
deposited or prepaid with respect to Contracts, Capital Leases and Real
Property Leases, but not including those items described in Section 1.2(i) (“Prepaid Expenses”);

(h)           all
claims, choses in action, warranties, refunds, rights of recovery, rights to
set off and rights of recoupment of any kind arising on or after the Closing
Date with respect to any Purchased Asset, but not including those items
described in Section 1.2(k);

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

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

(k)           all
Till Cash;

(l)            subject
to Section 1.2, all books, records, ledgers, files, documents and
correspondence, vendor and customer lists, files and materials pertaining to
Sellers’ employees, operating manuals, studies, reports, creative materials,
advertising and promotional materials, training manuals, and other materials
and other printed or written materials relating to the Restaurants;

(m)          all of
the membership interests held by the Sellers in each of RR #1, LLC; RR #2, LLC;
RR #3, LLC; RR #4, LLC; RR #5, LLC; and RR #6, LLC, each a Delaware limited
liability company  (the “Membership Interests”); and

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

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

 2
 

 

(a)           the
telephone number of Sellers’ corporate office, the trade name “Great Western
Dining,” the registration of the domain name “gwdining.com,” the Internet
website currently accessible at the URL http://www.gwdining.com, and the fixed
assets, furniture and equipment located at Sellers’ corporate office;

(b)           the
membership units held by South Sound in Citation Aviation, LLC, a Washington
limited liability company;

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

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

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

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

(g)           all
cash and cash equivalents, in bank accounts or otherwise, other than Till Cash;

(h)           all
accounts and other receivables, including credit card receivables, credit card
receivables in transit or notes receivable;

(i)            prepaid
expenses not incurred in the ordinary course of business, including prepaid
expenses with respect to any of Sellers’ insurance policies and amounts set
forth in Schedule 1.2(i);

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

(k)           the
refunds set forth on Schedule 1.2(k).

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

(a)           all
accounts payable, accrued expenses, accrued utilities and accrued rent payable,
in each case as reflected on the Closing Date Balance Sheet incurred by the
Sellers prior to the First Closing in the ordinary course of business and
consistent with Sellers’ past practice for goods and services that are
delivered or performed after the First Closing for the direct benefit of the
operation of the Restaurants;

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

(c)           all
performance obligations arising after the First Closing or Second Closing, as
applicable, under the Real Property Leases, the Contracts (if set forth on Schedule
3.14(a)), the Capital Leases and the other contracts and agreements set
forth on Schedule 1.3(c), but not including any obligation or
Liability arising out of or in connection with any breach of any such Real
Property Lease, Contract or Capital Lease or other agreement occurring as of or
prior to the First Closing; and

 3
 

 

(d)           payment
of the Retention Bonuses.

1.4           Excluded
Liabilities.  Notwithstanding
anything to the contrary contained in this Agreement, other than the Assumed
Liabilities, the Buyer shall not assume or be liable for any of the Liabilities
of any Seller or relating to the operation of the Restaurants (the “Excluded Liabilities”), including, without
limitation, the following:

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

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

(c)           any
Liabilities of any Seller for any indebtedness, whether Funded Indebtedness or
otherwise;

(d)           any
Liability of any Seller under any agreement, contract, commitment, document,
license or lease arising out of events occurring prior to the First Closing
(for the Restaurants other than the Designated Restaurants) or the Second
Closing (for the Designated Restaurants), and any Liability of any Seller under
any Real Property Lease, Contract, Capital Lease or Permit arising out of a
breach or alleged breach thereof that occurred as of or prior to the applicable
Closing;

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

(f)            any
Liability of any Seller with respect to any Taxes (other than ad valorem
taxes), including payroll tax, business and occupancy tax and sales tax payable
with respect to periods ending on or before to the First Closing (for the Restaurants
other than the Designated Restaurants) or the Second Closing (for the
Designated Restaurants);

(g)           any Liability
for ad valorem taxes and assessments (including any special or supplemental
assessments) on the Purchased Assets allocable to Seller under Section 9.8 with
respect to periods ending on or before the Closing Date at which such Purchased
Assets are acquired (without regard to when such taxes are assessed or
payable);

(h)           any
Liability of any Seller (i) arising by reason of any violation or alleged
violation of any Liquor License, Permit or any Law or any requirement of any
Governmental Entity, (ii) arising under any Environmental and Safety
Requirements; including, without limitation, those with respect to the
ownership or operation of the Restaurants or the assets and properties of the
Restaurants by any Seller or any other Person at any time prior to the First
Closing (for the Restaurants other than the Designated Restaurants) or the
Second Closing (for the Designated Restaurants); (iii) arising by reason
of any violation of any Law or any requirement of any Governmental Entity
relating to or affecting the employment by Sellers of its employees, and
(iv) arising by reason of any breach or alleged breach by any Seller of
any agreement, contract, lease, license, commitment, instrument, judgment,
order or decree, in any such case to the extent such Liability results from or
arises out of events, facts or circumstances occurring or existing on or prior
to the First Closing (for the Restaurants other than the Designated
Restaurants) or the Second Closing (for the Designated Restaurants),
notwithstanding that the date on which any action or claim is commenced or made
is after such Closing;

 4
 

 

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

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

(k)           any
Liabilities of any Seller relating to any legal action or Proceeding arising
out of or in connection with any Seller’s conduct of the Business prior to the
First Closing (for the Restaurants other than the Designated Restaurants) or
the Second Closing (for the Designated Restaurants) or any other conduct of any
Seller or its managers, officers, directors, employees, members, stockholders,
consultants, agents or advisors, whether or not disclosed on the Schedules
hereto;

(l)            any
Liabilities of any Seller (i) for severance pay or the like with respect to any
employee of any Seller that is not offered, or that does not accept, employment
with the Buyer upon completion of the Transactions, (ii) for wages or
other compensation payable to any employee of any Seller for periods prior to
the applicable Closing; or, (iii) for COBRA continuation coverage for
M&A qualified beneficiaries, as defined in Section 6.7;

(m)          any
Liabilities of any Seller for bonuses or like payments to any manager,
director, officer or employee of such Seller for the period ending on or prior
to the applicable Closing (excluding the Retention Bonuses);

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

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

(p)           any
Liabilities of any Seller to any member, stockholder or Affiliate of such
Seller;

(q)           any
Liabilities arising or pertaining to activities conducted under the “Great
Western Dining” trade name after the First Closing Date;

(r)            any
Liabilities of any Seller for expenses, Taxes or fees incident to or arising
out of the negotiation, preparation and execution of any new or amended lease
with respect to any Leased Real Property, including all brokerage or finders’
fees incurred by or imposed upon any Seller; and

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

 5
 

 

Each
Seller hereby acknowledges that the Sellers are retaining the Excluded
Liabilities, and the Sellers shall pay, discharge and perform all such Excluded
Liabilities promptly when due.

Article II

CONSIDERATION; CLOSING

2.1           Consideration.  The aggregate consideration
to be paid by the Buyer (the “Consideration”)
for the Purchased Assets and the Non-Solicitation Agreements shall consist of a cash payment of $42,000,000, adjusted as
provided in Section 2.7 and payable in accordance with Section 2.3(b).  The Parties agree that the Buyer shall have
no responsibility for the allocation of the Consideration among the Sellers, or
the delivery of any such Consideration from the Seller’s Representative to the
Sellers.

2.2           The
Closing.  The closing of the transactions
contemplated by this Agreement shall occur in two stages (each, a “Closing”). 
Each Closing shall take place at the offices of Davis Graham &
Stubbs, 1550 17th Street, Denver, Colorado 80202 or such other
place as the Sellers and the Buyer shall agree in writing.

(a)           At the first Closing (the “First Closing”), the Parties shall
consummate the purchase of all Purchased Assets (other than the Designated
Purchased Assets) and assumption of all Assumed Liabilities (other than the
Designated Assumed Liabilities).  The First
Closing is expected to occur effective as of 12:01 A.M. on July 10, 2006, but
shall occur within (5) five days of the satisfaction or waiver of the
conditions set forth in Article VI and Article VII (disregarding for
this purpose any such conditions to be satisfied by actions to be taken at the
First Closing), or such other date as the Sellers and the Buyer shall agree in
writing.  Subject to Section 5.12
and the terms of the Management Agreement, Buyer shall be entitled to immediate
possession of, and to exercise all rights arising under, the Purchased Assets
from and after 12:01 A.M. on the First Closing Date, and the operation of
the Restaurants shall transfer at such time. 
The date on which the First Closing occurs shall be referred to as the “First Closing Date”.

(b)           At the second Closing (the “Second Closing”), the Parties shall
consummate the purchase of the Designated Purchased Assets and assumption of
the Designated Assumed Liabilities.  The
Second Closing shall occur within (5) five days of the satisfaction or waiver
of the conditions set forth in Article VI and Article VII
(disregarding for this purpose any such conditions to be satisfied by actions
to be taken at the Second Closing), or such other date as the Sellers and the
Buyer shall agree in writing.  The date
on which the Second Closing occurs shall be referred to as the “Second Closing Date”.  Buyer shall be entitled to exercise all
rights arising under the Designated Purchased Assets from and after 12:01 A.M.
on the Second Closing Date

2.3           Deliveries at the Closings.

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

(i)            such
deeds, bills of sale, assignment and assumption agreements, or other executed
instruments of sale, transfer conveyance and assignment, in form and substance
reasonably acceptable to the Buyer and its counsel, duly executed by each
applicable Seller, to effectuate the transfer of the Purchased Assets and the
Assumed Liabilities to the Buyer, including the membership interests in RR #1,
LLC; RR #2, LLC; RR #3, LLC; and RR #4, LLC (each such document, a “Bill of Sale”), other than the Designated
Purchased Assets and the Designated Assumed Liabilities;

 6
 

 

(ii)           the
Non-Solicitation Agreements duly executed by the parties thereto;

(iii)          the
Escrow Agreement, duly executed by each Seller and the Sellers’ Representative;

(iv)          the
Management Agreement, duly executed by South Sound and Northwest Robins;

(v)           copies
of all consents of third parties (including Governmental Entities) that are
(A) required for the consummation of the transactions contemplated hereby,
or (B) required in order to prevent a Seller’s breach of or default under
or a termination of any Contract, Capital Lease, Real Property Lease or Permit,
provided, however, that at the First Closing the Sellers shall
not be required to deliver consents from the landlords of either of the
Designated Restaurants;

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

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

(viii)        an
estoppel certificate from each landlord of a Real Property Lease (other than
the leases for the Designated Restaurants), certifying that the Real Property
Lease is in full force and effect with no defaults, the date to which rent
under the Real Property Lease has been paid, and such other information as
reasonably requested by Buyer, in form and substance satisfactory to Buyer;

(ix)           documentation
satisfactory to the Buyer evidencing the payoff amount with respect to Sellers’
Funded Indebtedness, other than the payoff amount in connection with the
Puyallup Loan;

(x)            documentation
satisfactory to the Buyer evidencing satisfaction of all Liens (other than
Permitted Liens) on the Purchased Assets, other than Liens created in
connection with the Puyallup Loan;

(xi)           a
certificate, signed by an officer or manager of such Seller, to the effect that
each of the conditions to the consummation of the First Closing specified in
Section 6.1 through 6.8 have been satisfied;

(xii)          a
legal opinion from Graham & Dunn PC dated the First Closing Date
substantially in the form attached hereto as Exhibit D;

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

(xiv)        any closing
documents reasonably requested by Fidelity National Title (the “Title Company”) in connection with
the issuance of the Title Policies (as defined in Section 6.15).

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

 7
 

 

(i)            such
Bills of Sale reasonably acceptable to the Buyer and its counsel, duly executed
by each applicable Seller, to effectuate the transfer of the Designated
Purchased Assets, including the membership interests in RR #5, LLC and RR #6,
LLC, and the Designated Assumed Liabilities to the Buyer;

(ii)           copies
of consents of the landlords for each of the Real Property Leases for the
Designated Restaurants;

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

(iv)          a
certificate, signed by an officer or manager of such Seller, to the effect that
each of the conditions to the consummation of the Second Closing specified in
Section 6.1 through 6.8 and 6.16 have been satisfied;

(v)           a
legal opinion from Graham & Dunn PC dated the Second Closing Date
substantially in the form attached hereto as Exhibit D, provided  that
the opinion delivered at the Second Closing need only address the Designated
Restaurants, South Sound and Northwest Robins.;

(vi)          documentation
satisfactory to the Buyer evidencing the payoff amount with respect to Sellers’
Funded Indebtedness, including the payoff amount in connection with the
Puyallup Loan;

(vii)         documentation
satisfactory to the Buyer evidencing satisfaction of all Liens (other than
Permitted Liens) created pursuant to the Puyallup Loan; and

(viii)        any
closing documents reasonably requested by the Title Company in connection with
the issuance of the Title Policies (as defined in Section 6.15).

(c)           At
the First Closing, the Buyer shall deliver:

(i)            to
the Sellers’ Representative, $32,718,000, less the adjustment, if any, pursuant
to Section 2.7, payable by wire transfer of immediately available U.S. funds in
accordance with the written payment instructions furnished by the Sellers’
Representative prior to the First Closing Date;

(ii)           to
the Escrow Agent, $798,000, to be held in accordance with the terms of the
Escrow Agreement and this Agreement;

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

(iv)          to
each Seller, a duly executed copy of the Management Agreement;

(v)           to
each Seller, a counterpart of each Bill of Sale for the transfer of the
Purchased Assets (other than the Designated Purchased Assets), duly executed by
the Buyer;

(vi)          to
each Seller, such instruments of assumption as the Sellers may reasonably
request, in form reasonably satisfactory to the Buyer and its counsel, in order
to effectuate the assumption of the Assumed Liabilities (other than the
Designated Assumed Liabilities) by the Buyer; and

 8
 

 

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

(d)           At the Second Closing (or earlier, if
required pursuant to paragraph (iii)), the Buyer shall deliver:

(i)            to the Sellers’ Representative,
$8,282,000, subject to any adjustment mutually agreed upon by the Buyer and the
Seller’s Representative, payable by wire transfer of immediately available U.S.
funds to the account previously identified to the Buyer unless contrary written
instructions are furnished by the Sellers’ Representative prior to the Second
Closing Date;

(ii)           to the Escrow Agent, $202,000, to be
held in accordance with the terms of the Escrow Agreement and this Agreement;

(iii)          to the Sellers’ Representative, $39,048 for each 4-week period
(prorated for any partial period) from the First Closing Date until the earlier
of the Second Closing or the termination of this Agreement under Section 8.2,
with the first such 4-week period ending on August 6, 2006; provided  that, in
the event the Buyer at any time ceases for any reason to manage a Designated
Restaurant under the Management Agreement, the amount payable to Sellers’
Representative shall cease as to such Designated Restaurant on the effective
date of termination of the Management Agreement as to such Designated
Restaurant.  In such case, the amount
payable to Sellers’ Representative shall be adjusted based on an allocation
between the Designated Restaurants of $23,777 per 4-week period (prorated for
any partial period) for the Puyallup Restaurant and $15,271 for the Federal Way
Restaurant. Such amount shall be paid to Sellers’ Representative on the
earliest to occur of the Second Closing, the termination of the Management
Agreement, or the first business day following each 4-week period.

(iv)          to each Seller, a counterpart of each
Bill of Sale for the transfer of the Designated Purchased Assets; and

(v)           to
each Seller, such instruments of assumption as the Sellers may reasonably
request, in form reasonably satisfactory to the Buyer and its counsel, in order
to effectuate the assumption of the Designated Assumed Liabilities by the
Buyer.

2.4           Power
of Attorney; Right of Endorsement, Etc. 
Effective as of the First Closing, each of the Sellers
hereby constitutes and appoints the Buyer and its successors and assigns the
true and lawful attorney of such Seller with full power of substitution, in the
name of the Buyer or the name of such Seller, on behalf of and for the benefit
of the Buyer, (a) to collect all Purchased Assets, (b) to endorse,
without recourse, checks, notes and other instruments in connection with the
operation of the Restaurants and attributable to the Purchased Assets,
(c) to institute and prosecute all proceedings which the Buyer may deem
proper in order to collect, assert or enforce any claim, right or title in or
to the Purchased Assets, (d) to defend and compromise all actions, suits
or proceedings with respect to any of the Purchased Assets and (e) to do
all such reasonable acts and things with respect to the Purchased Assets as the
Buyer may deem advisable; provided, however, that the power of
attorney granted hereby shall not be effective with respect to the Designated
Purchased Assets until the Second Closing. 
The Sellers agree that the foregoing powers are coupled with an interest
and shall be irrevocable by the Sellers directly or indirectly by the
dissolution of any of the Sellers or in any other manner.  The Buyer shall retain for its own account
any amounts collected pursuant to the foregoing powers, and the Sellers shall
promptly pay to the Buyer any amounts received by the Sellers after the
applicable Closing with respect to the Purchased Assets.

 9
 

 

2.5           Sales Taxes.  The Buyer shall bear and pay, and shall
reimburse the Sellers if the Sellers are held responsible for, any Taxes,
documentary charges, recording fees or charges, fees or expenses that may
become payable in connection with the sale or transfer of the Purchased Assets
to the Buyer.

2.6           Allocation
of Purchase Price.  At or prior to the First Closing, the
Buyer and the Sellers’ Representative shall mutually agree upon a statement
setting forth the determination of the manner in which the Consideration is to
be allocated among the Purchased Assets and Non-Solicitation Agreements. The
allocation prescribed by such statement shall be conclusive and binding upon
the Parties for all purposes. The Parties shall not file any Tax Return or
other document with, or make any statement or declaration to, any Governmental
Entity that is inconsistent with such allocation.

2.7           Closing Date Purchase Price Adjustment.

(a)           At least 3
Business Days prior to the anticipated First Closing Date, the Sellers’
Representative shall deliver to Buyer an estimated Closing Date Balance Sheet
of each of the Sellers and an estimate of the Adjustment Amount as of the
anticipated First Closing Date (the “Estimated
Adjustment Amount”), together with such supporting documentation and
other data as is reasonably necessary to substantiate such estimate.  All
accounting calculations and terms shall be in accordance with GAAP and, to the
extent not in violation of GAAP, consistently applied with the Year End Balance
Sheet.  Each Seller will provide
Buyer and its representatives with prompt access to such books, records,
employees and auditors of such Seller as Buyer may reasonably request in order
to verify the determination of the Estimated Adjustment Amount.

(b)           The “Adjustment Amount” may be a positive or
negative number and shall mean the amount by which the Aggregate Net Working
Capital transferred to the Buyer at the First Closing is more (i.e. less
negative) or less (i.e. more negative) than ($1,362,476), which is a negative
number.  “Aggregate Net Working Capital”
shall mean the sum of the amount of Net Working Capital for each of the
Sellers.  “Net Working Capital” shall mean, with respect to each
Seller, (i) the amount of the Inventory, Till Cash and Prepaid Expenses
shown on the Closing Date Balance Sheet and included in the Purchased Assets, less
(ii) the amount of the accounts payable, accrued expenses, accrued
utilities, accrued rent payable, gift certificates and gift cards included in
the Assumed Liabilities.

(c)           If
the Estimated Adjustment Amount is negative (that is, the Aggregate Net Working
Capital transferred to the Buyer at the First Closing is less (i.e. more
negative) than ($1,362,476)), the Consideration shall be decreased dollar for
dollar by the absolute value of the Estimated Adjustment Amount.  If the Estimated Adjustment Amount is positive
(that is, the Aggregate Net Working Capital transferred to the Buyer at the
First Closing is more (i.e. less negative) than ($1,362,476)), there shall be
no adjustment to the Consideration.

(d)           All
calculations pursuant to Section 2.7 and 2.8 shall be determined assuming that
all Purchased Assets (including the Designated Purchased Assets) and all
Assumed Liabilities (including the Designated Assumed Liabilities) are
transferred as of the First Closing Date.

2.8           Post-Closing Purchase Price Adjustment.

(a)           As
soon as practicable following the First Closing Date (but not later than 30
days after the First Closing Date), the Sellers’ Representative shall deliver
to the Buyer the final Closing Date Balance Sheet for each Seller, a
determination of the actual Adjustment Amount (the “Actual Adjustment Amount”) and a determination of the
Post-Closing True-Up (as defined below), together with such supporting
documentation and other data as is reasonably necessary to substantiate such
determinations.  All accounting
calculations and terms shall be in accordance with GAAP and, to the extent not
in 

 10
 

 

violation
of GAAP, consistently applied with the Year End Balance Sheet.  For purposes of this Section 2.8, the
Buyer shall be entitled to have reasonable access to the books and records and
work papers of each of the Sellers and their representatives used in
preparation of the Closing Date Balance Sheets and shall be entitled to discuss
such books and records and work papers with each of the Sellers, their
representatives and those persons responsible for the preparation thereof.

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

(c)           If
the Post-Closing True-Up is positive, then the Buyer shall deliver an amount of
cash equal to the amount of the Post-Closing True-Up to the Sellers’
Representative, payable by wire transfer of immediately available U.S. funds in
accordance with the written payment instructions furnished by the Sellers’
Representative prior to the First Closing Date, provided, however
that no amounts shall be paid by the Buyer pursuant to this provision if the
Estimated Adjustment Amount is positive and provided  further,
that the amount paid by the Buyer pursuant to this provision shall not exceed
the absolute value of the Estimated Adjustment Amount.  If the Post-Closing True-Up is negative, then the Sellers shall deliver
an amount of cash equal to the absolute value of the Post-Closing True-Up to
the Buyer, payable by wire transfer of immediately available U.S. funds in
accordance with the written payment instructions furnished by the Buyer to the
Sellers, provided  however, that if the Estimated Adjustment
Amount is positive, no amounts shall be paid by the Sellers pursuant to this
provision except to the extent the absolute value of the Post-Closing True-Up
exceeds the Estimated Adjustment Amount. 
Any such payment of cash required pursuant to this Section 2.8
shall be deemed to be an adjustment to the Purchase Price and shall be made by
acknowledgment of the Parties within two business days after the Closing Date
Balance Sheet is deemed final and conclusive pursuant hereto.

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

Article III

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

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

3.1           Organization and
Capitalization of the Sellers.  Such Seller is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, and is qualified to do business in every
jurisdiction in which the failure to so qualify could have a Material Adverse
Effect.

 

 11

 

 

 Schedule 3.1 sets forth, with
respect to such Seller, the type of entity, its jurisdiction of incorporation
or organization, and a list of all states in which such Seller is qualified to
do business.  Also set forth on Schedule
3.1 is a list of the members or stockholders of such Seller and the current
ownership percentages of each such member or stockholder.  Except as set forth on Schedule 3.1,
no other Person has any right to or interest in the outstanding membership
interests or capital stock of such Seller or has any right, contingent or
otherwise, to purchase, acquire or own, directly or indirectly, any membership
interest, stock or any other equity interest in such Seller.

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

3.3           Non-contravention.  Except
as set forth on Schedule 3.3(a), neither the execution, delivery
and performance of the Documents nor the consummation of the transactions
contemplated by the Documents by such Seller, shall (a) violate any Law to
which such Seller, its Restaurants or the Purchased Assets being transferred by
such Seller is subject, (b) violate any provision of the Fundamental
Documents of such Seller, (c) violate any provision of any Permit, including
any Liquor License, (d) result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under, any of the Contracts
or any contract, agreement, instrument or other document to which such Seller
is a party or (e) result in the imposition of any Lien upon any of the
Purchased Assets.  Except as set forth on
Schedule 3.3(b), such Seller is not required to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
Governmental Entity or any consent or approval of any other Person in order for
such Seller to consummate the transactions contemplated by the Documents.

3.4           Subsidiaries.  Such
Seller does not own, directly or indirectly, any stock, partnership or joint
venture interest in, or any security or ownership interest issued by, any other
Person, except, in the case of South Sound, the membership units in Citation
Aviation, LLC.

3.5           Financial Statements.

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

(i)            the
reviewed balance sheets of such Seller at December 26, 2004 and
December 25, 2005 (the December 25, 2005 balance sheet being referred to
herein as the “Year End Balance Sheet”)
and the related reviewed consolidated statements of operations, members’ or
stockholders’ equity and cash flows, for the fiscal years ended December 26,
2004 and December 25, 2005 (the latter, referred to as the “Most Recent Fiscal Year”); and

(ii)           the
unaudited Balance Sheet of such Seller as of June 11, 2006 (the “Latest Balance Sheet”) and the related
unaudited statements of operations, members’ or stockholders’ equity and 

 12
 

 

cash
flows, for the 24 week period ended June 11, 2006 (together with the Latest
Balance Sheet, the “Latest Financial
Statements”).

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

3.6           Events
Subsequent to December 25, 2005.  Except as set forth on Schedule 3.6,
since December 25, 2005, (i) such Seller has operated its
Restaurants in the ordinary course consistent with past practice,
(ii) such Seller and its Restaurants, individually or in the aggregate,
have not suffered any Material Adverse Change, and:

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

(b)           such
Seller has not experienced any damage, destruction or loss (whether or not
covered by insurance) material to any of its assets or property;

(c)           such
Seller has not declared, set aside, increased or paid any dividend, or declared
or made any distribution on, or directly or indirectly redeemed, purchased or
otherwise acquired, any of its capital stock or membership interests;

(d)           such
Seller has not entered into or amended any employment or severance contract
with any Person employed by its Restaurants or increased the rate of
compensation for or paid any bonuses to any of any its officers or employees;

(e)           such
Seller has not paid any fee, interest, royalty or any other payment of any kind
to any Affiliate thereof;

(f)            such
Seller has not incurred any indebtedness for borrowed money, or guaranteed any
such indebtedness of another Person, entered into any agreement to maintain any
financial condition of another Person or entered into any arrangement having
the economic effect of any of the foregoing, or made any loans, advances or
capital contributions to, or investments in, any other Person;

(g)           such
Seller has not mortgaged, pledged or otherwise encumbered any Purchased Asset;

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

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

 13
 

 

(j)            such
Seller has not made any acquisition of assets other than acquisitions of
inventory, supplies and equipment in the ordinary course of business;

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

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

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

(n)           such
Seller has not made or pledged to make any charitable contribution, capital
contribution or loan outside the ordinary course of business;

(o)           none
of such Seller’s Restaurants have suffered the termination, suspension or
revocation of any Liquor License or Permit necessary for the operations of such
Restaurant;

(p)           such
Seller has not materially decreased the weekly average inventory of its
Restaurants or Till Cash in its Restaurants; and

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

3.7           Absence
of Undisclosed Liabilities.  Such Seller has no Liabilities,
except for (a) Liabilities reflected on the face of the liabilities
section of such Seller’s Latest Balance Sheet, (b) Liabilities under
agreements, contracts, commitments, licenses or leases which have arisen since
December 25, 2005 in the ordinary course of business, or (c) Liabilities set
forth on Schedule 3.7.

3.8           Legal
Compliance.

(a)           In connection with the operation of
the Business, such Seller has materially complied and is in material compliance
with, and each of its Restaurants has materially complied and is in material
compliance with, all applicable Laws, Environmental and Safety Requirements,
Orders and Permits, and no Proceeding is pending or, to the Knowledge of such
Seller, threatened, alleging any failure to so comply.  Schedule 3.8(a) sets forth a list
of all Permits, including Liquor Licenses, under which such Seller is operating
or bound.  Such Permits
(i) constitute all Permits used or required in the conduct of the Business
as presently conducted, (ii) are in full force and effect and
(iii) are not subject to any pending or, to the Knowledge of such Seller,
threatened Proceeding seeking their revocation or limitation.

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

 14
 

 

3.9           Title
to Properties.

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

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

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

(d)           Such Seller does not own any fee
interest in real property.

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

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

(ii)           the security deposit for each of such
Seller’s Real Property Leases is in the form of cash and, to such Seller’s
Knowledge, being held, without deduction, by the landlord under such Real
Property Lease;

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

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

 15
 

 

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

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

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

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

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

(x)            there are no current obligations of
such Seller to repair or improve any of its Leased Real Property and no
obligations of such Seller that may require any repair or improvement to any of
its Leased Real Property upon transfer, assignment or sale of its Restaurant or
any interest in its Leased Real Property.

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

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

(ii)           no notice of any increase in the
assessed valuation of such Leased Real Property and no notice of any
contemplated special assessment has been received by such Seller and, to the
Knowledge of such Seller, there is no threatened increase in the assessed
valuation or special assessment pertaining to such Leased Real Property;

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

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

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

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

3.10         Inventory.  Such Seller’s Inventory is saleable or
usable in the ordinary course of business for its intended use by such Seller
and, subject to any reserves set forth on such Seller’s Latest Balance Sheet,
none of such Inventory is obsolete, damaged, or defective.

 16
 

 

3.11         Royalty Payments and
other Franchise Matters.  Such
Seller has performed in all material respects all obligations required to be
performed by such Seller pursuant to its Franchise Agreements and is not in
default under or in breach of any such Franchise Agreement.  No event has occurred which with the passage
of time or the giving of notice or both would result in such Seller’s material
default of or breach under any such Franchise Agreement.

3.12         Tax Matters.  Except as set forth on Schedule 3.12,
such Seller (A) has timely paid all Taxes required to be paid by it
through the date hereof (including any Taxes shown due on any Tax Return) and
(B) has filed or caused to be filed in a timely manner (within any
applicable extension periods) all Tax Returns required to be filed by it with
the appropriate Governmental Entities in all jurisdictions in which such Tax
Returns are required to be filed, and all such Tax Returns are true and
complete.  Except as set forth in Schedule 3.12,
(i) there are no Liens for Taxes on such Seller’s Purchased Assets other
than Permitted Liens, and such Seller has not been notified by the Internal
Revenue Service or any other taxing authority that any issues have been raised
(and are currently pending) by the Internal Revenue Service or any other taxing
authority in connection with any Tax Return of such Seller, and no waivers of
statutes of limitations have been given or requested with respect to such
Seller; (ii) there are no pending Tax audits of any Tax Returns of such
Seller; (iii) to such Seller’s Knowledge, no unresolved deficiencies or
additions to Taxes have been proposed, asserted or assessed against such
Seller; (iv) such Seller has made full and adequate provision (x) on
its Latest Balance Sheet for all Taxes payable by it for all periods prior to
the date of the Latest Balance Sheet and (y) on its books for all Taxes
payable by it for all periods beginning on or after the date of its Latest
Balance Sheet; (v) such Seller has not and will not incur any Tax
Liability from and after the date of its Latest Balance Sheet other than Taxes
incurred in the ordinary course of business and consistent with previous years;
(vi) such Seller has complied in all material respects with all applicable
Laws relating to the collection or withholding of Taxes (such as sales Taxes or
withholding of Taxes from the wages of employees), and such Seller is not
liable for any Taxes for failure to comply with such Laws; (vii) such
Seller is not now and has not been a party to any Tax sharing agreement;
(viii) none of such Seller’s Assumed Liabilities includes an obligation to
make (or possibly make) any payments that will be non-deductible under, or
would otherwise constitute a “parachute payment” within the meaning of,
Section 280G of the Code (or any corresponding provision of state, local
or foreign income Tax law); (ix) such Seller has not agreed to and is not
required to make any adjustments pursuant to Section 481 of the Code, and
the Internal Revenue Service has not proposed to such Seller any such
adjustments or changes in such Seller’s accounting methods; (x) such
Seller does not have any liability for the Taxes of any other Person under any
provision of applicable law or regulation, by contract, as transferee or
successor, or otherwise; (xi) upon consummation of the transactions
contemplated by the Documents, none of such Seller’s Purchased Assets will be
subject to the “anti-churning” rules of Code Section 197(f)(9); and
(xii) such Seller is not a “foreign person” for purposes of Code Section
1445.

3.13         Intellectual
Property.

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

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

(i)            Neither such Seller nor, to such
Seller’s Knowledge, any of its Affiliates has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual 

 17
 

 

Property rights of third
parties or committed any acts of unfair competition, and neither such Seller
nor, to such Seller’s Knowledge, any of its Affiliates has received any charge,
complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation, conflict or act of unfair competition;

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

(iii)          there are no royalties, honoraria,
fees or other payments payable by such Seller or its Affiliates to any Person
by reason of the ownership, use, license, sale or disposition of such
Intellectual Property;

(iv)          no activity, service or procedure
currently conducted by such Seller or its Affiliates violates any agreement
governing the use of Licensed Intellectual Property;

(v)           such Seller has taken reasonable and
practicable steps (including, without limitation, entering into confidentiality
and nondisclosure agreements with its officers, managers, directors, employees,
and consultants with access to or knowledge of the Intellectual Property)
designed to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all Intellectual Property;

(vi)          neither such Seller nor any of its
Affiliates has sent to any third party in the past five years or otherwise
communicated to another Person any charge, complaint, claim, demand or notice
asserting infringement or misappropriation of, or other conflict with, any
Intellectual Property right of such Seller by such other Person or any acts of
unfair competition by such other Person, nor, to the Knowledge of such Seller,
is any such infringement, misappropriation, conflict or act of unfair
competition occurring or threatened; and

(vii)         to the Knowledge of such Seller, its
consummation of the transactions contemplated by the Documents will not adversely
impact any of the Intellectual Property utilized in the operation of the
Restaurants.

3.14         Contracts
and Capital Leases.

(a)           Schedule 3.14(a) is a complete
and accurate list of all written and oral contracts, agreements, commitments,
understandings or arrangements naming such Seller or “Great Western Dining” as
a party, other than the Franchise Agreement, involving the payment or receipt
of $25,000 or more in any twelve-month period (the “Contracts”).  Each
Contract to which such Seller is a party is valid and enforceable against such
Seller and, to the Knowledge of such Seller, the other parties thereto.  Except as specifically disclosed in Schedule 3.14,
such Seller has performed in all material respects all obligations required to
be performed by it and is not in default under or in breach of nor in receipt
of any claim of default or breach under any such Contract; and no event has
occurred which with the passage of time or the giving of notice or both would
result in such Seller’s default or breach under any such Contract.  To the Knowledge of such Seller, no other
party to any such Contract is in default under or in breach of such
document.  Such Seller has supplied the
Buyer with a true, correct and complete copy of each of the Contracts and other
agreements listed on Schedule 3.14(a) or (c) to which such Seller
is a 

 18
 

 

party,
together with all amendments, waivers or other changes thereto, and a complete
description of all oral agreements to which such Seller is a party.

(b)           Schedule 3.14(b) is a
complete and accurate list of all leases of capital equipment that, in
accordance with GAAP, are required to be capitalized on the Financial
Statements (the “Capital Leases”).

(c)           Except as set forth on Schedule
3.14(a) and (b), such Seller is not a party to any written or oral:

(i)            contract for the employment of any
officer, employee, or other Person providing services to such Seller’s
Restaurant on a full-time, part-time, consulting or other basis;

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

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

(iv)          agreement with respect to the lending
or investing of funds by such Seller;

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

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

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

(viii)        contract or group of related contracts
with the same party for the purchase or sale of products or services for use in
such Seller’s Restaurants;

(ix)           contract containing bonding,
insurance or other similar requirements relating to the operation of such
Seller’s Restaurants;  or

(x)            contract with any Affiliate of such
Seller relating to the operation of such Seller’s Restaurants.

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

 19
 

 

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

3.17         Employees.

(a)           Schedule 3.17(a) lists
all current employees at such Seller’s Restaurants whose annual compensation
for 2005 exceeded or whose annual compensation for 2006 is expected to exceed
$100,000, their permanent classifications (if applicable), their current hourly
rates of compensation or base salaries (as applicable), their total 2005
compensation and 2006 compensation through June 11, 2006, the commencement date
of their employment, and accrued bonus, accrued sick leave and accrued vacation
benefits as of such Seller’s Latest 
Balance Sheet Date.  In addition,
to the extent any current employees of such Seller are on leaves of absence, Schedule 3.17(a)
indicates the nature of such leave of absence and each such employee’s
anticipated date of return to active employment.  No executive, key employee or group of
employees of such Seller listed on Schedule 3.17(a) has indicated
any plans to (i) terminate employment (other than immediately after the
First Closing in order to accept employment with the Buyer) or (ii) not
accept employment with the Buyer immediately after the First Closing.  To such Seller’s Knowledge, such Seller has
complied with all Laws relating to the hiring of employees and the employment
of labor, including provisions thereof relating to immigration and citizenship
(including proper completion and processing of Forms I-9 for all employees),
wages, hours, equal opportunity, work safety, working conditions, employment of
minors, collective bargaining and the payment of social security and other
Taxes.  Such Seller has confirmed with
the Social Security Administration that each current employee possesses a valid
social security number and that the name, gender and birth date associated with
such social security number match the information provided by the
employee.  To the Knowledge of such
Seller, there are no material labor relations problems with respect to its
Restaurants (including, without limitation, any union organization activities,
threatened or actual strikes or work stoppages or material grievances).  To the Knowledge of such Seller, there has
been no criminal activity or the prior conviction, indictment, guilty plea or
plea of nolo contendere on the
part of any of its Restaurants’ employees or any other actual or alleged
activity or actions of any such employees that could reasonably be expected to
disqualify any such employee or such Seller from providing services to any
current or potential customers.

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

 20
 

 

organizing the employees of
its Restaurants, and (vii) neither any grievance that might result in a
Material Adverse Effect nor any arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claim thereto has been
asserted against such Seller.  Such
Seller is not a party to or bound by any collective bargaining agreement, union
contract or similar agreement.

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

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

3.18         Employee
Benefits.

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

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

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

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

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

 21
 

 

was made or will be made
(whether under Section 162, Section 280G, Section 404, Section 419, Section
419A of the Code or otherwise);

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

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

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

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

(viii)        such Seller has classified all
individuals (including but not limited to independent contractors and leased
employees) appropriately under its Plan; if any individuals have not been
appropriately classified under such Plan or if such Seller’s classification is
later determined to be erroneous or is retroactively revised, such error in
classification will not cause such Seller or the affected Plan to incur any
liability, loss or damage;

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

(x)            if the Plan is a “nonqualified
deferred compensation plan” (as defined in Section 409A(d)(1) of the Code): (A)
it has been operated since January 1, 2005 in good faith compliance with
Section 409A of the Code, IRS Notice 2005-1, and the proposed regulations under
Section 409A of the Code; (B) it has not been materially modified (as
determined under the proposed regulations) after October 3, 2004, if it was in
effect prior to January 1, 2005; (C) no event has occurred in relation to such
Plan that would be treated by Section 409A(b) of the Code as a transfer of
property for purposes of Section 83 of the Code; and (D) no stock option,
equity unit option, or stock appreciation right granted under the Plan has an
exercise price or measurement floor that has been or may be less than the fair
market value of the underlying stock or equity units (as the case may be) as of
the date such option or 

 22
 

 

stock appreciation right was
granted or has any feature for the deferral of compensation other than the
deferral of recognition of income until the later of exercise or disposition of
such option or stock appreciation right;

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

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

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

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

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

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

3.19         Environment
and Safety.

(a)           Except as set forth in Schedule 3.19,
such Seller has complied and is in compliance with all Environmental and Safety
Requirements (including without limitation all permits, licenses and other
authorizations that may be required thereunder) for the occupation of its
Leased Real Property and the operation of its Restaurants or otherwise related
to its Leased Real Property or the operations of its Restaurants.  Such Seller has accurately prepared and
timely filed with the appropriate Governmental Entities all reports,
notifications and filings required pursuant to Environmental and Safety
Requirements affecting its Leased Real Property or Restaurants.  With respect to such Leased Real Property and
Restaurants, such Seller has not received any notice of any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
against it alleging any violation of, any liability (contingent or otherwise)
or any corrective or remedial obligation under any Environmental and Safety
Requirements or involving any of its current or past operations or any Leased
Real Property used by such Seller.  With
respect to such Leased Real Property and Restaurants, such Seller has not
expressly or, to such Seller’s Knowledge, by operation of law, assumed,
undertaken or become subject to any Liability of any other Person under any
Environmental and Safety Requirements. 
To such Seller’s Knowledge, none of the 

 23
 

 

following currently exists,
has existed during such Seller’s occupancy of, or has ever existed at the
Leased Real Property: 
(i) underground storage tanks, (ii) asbestos-containing
material in any form or condition, (iii) materials or equipment containing
polychlorinated biphenyls or (iv) landfills, surface impoundments or
disposal areas.  No Environmental Lien
has attached to any Leased Real Property. 
Such Seller has not been notified that it is potentially responsible or
liable under or received any requests for information or other correspondence
concerning its Leased Real Property or Restaurants under CERCLA or any similar
law.  Regarding the Leased Real Property
or the Restaurants, such Seller has not entered into or received any Orders
pursuant to Environmental and Safety Requirements and under which there are
continuing obligations.

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

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

3.20         Suppliers.  Schedule 3.20 lists the ten
largest suppliers of materials, products or services to the Sellers, taken as a
whole, during the 12-month period ended December 25, 2005.  Except as set forth on Schedule 3.20,
no such supplier has terminated or significantly reduced its business such
Seller in the last 12 months.  Such
Seller has not received any notice and does not otherwise have any reason to
believe that any of the suppliers listed in Schedule 3.20 intends
to terminate or reduce its business with such Seller.

3.21         Accounts and Notes
Payable.  There are no
accounts or notes payable in connection with the operation of such Seller’s
Restaurants that have not been paid within 30 days of the invoice date.

3.22         Regulatory Compliance.  Except as set forth on Schedule 3.22,
since the commencement of operation of such Seller’s Restaurants, no
Governmental Entity regulating such Restaurants has commenced, or to the
Knowledge of such Seller, threatened to commence, any investigation or
proceeding relating to the operation of such Restaurants, and such Seller has
not been responsible for, subject to, become aware or otherwise been notified
of, and does not now have any Liability (and to the Knowledge of such Seller
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against it giving rise to any
Liability), arising out of any injury to individuals, animals or property as a
result of or in connection with any of the services performed by such Seller or
any food or beverage sold at such Restaurants.

 

 24

 

 

3.23         Insider Interests.  Except as set forth on Schedule 3.23,
and except for compensation to regular employees of such Seller’s Restaurants,
no current or former Affiliate of such Seller, is now, or has been during the
last five fiscal years, (i) a party to any transaction or contract
involving such Restaurants, (ii) indebted in respect of any such
Restaurant, or (iii) the direct or indirect owner of an interest in any
Person which is a present or potential competitor, supplier or lessor to such
Restaurant (other than non-affiliated holdings in publicly held companies), nor
does any such Person receive income from any source which should properly
accrue to such Seller.  Except as set
forth on Schedule 3.23, neither such Seller nor any Affiliate of
such Seller is a guarantor or otherwise liable for any Liability (including
indebtedness) of such Seller or related to the operations of its Restaurants.

3.24         Improper Payments.  Neither such Seller nor any manager, officer,
employee, agent or any other Person acting on its behalf, has directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or supplier, or
official or employee of any Governmental Entity or other Person who was, is, or
may be in a position to help or hinder the operations of such Seller’s
Restaurants (or assist in connection with any actual or proposed transaction)
that might subject such Seller or its Affiliates to any damage or penalty in
any Proceeding.

3.25         Brokers.  Schedule 3.25 sets forth a true and
complete list of each agent, broker, investment banker, Person or firm who or
which has acted on behalf, or under the authority, of such Seller or will be
entitled to any fee or commission directly or indirectly from the Buyer or such
Seller in connection with any of the transactions contemplated hereby.

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

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

3.28         Membership
Interests.  The Sellers
have good an marketable title to all of the Membership Interests, free and
clear of all Liens.  There are no equity
interests or securities convertible or exchangeable for equity interests in RR #1, LLC; RR #2, LLC; RR #3, LLC; RR #4, LLC;
RR #5, LLC; and RR #6, LLC other than the Membership Interests.

3.29         Disclosure.

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

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

 25
 

 

Article IV

REPRESENTATIONS AND WARRANTIES OF BUYER

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

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

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

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

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

Article V

PRE-CLOSING COVENANTS

5.1           Employees.  Within five (5) days of the date hereof,
Buyer shall notify Sellers in writing of the employees that it does not believe
will be offered employment by Buyer following the Transaction.  Any severance amounts to be paid to such
employees shall be determined and paid by Sellers.  Notwithstanding anything in this Agreement to
the contrary, Buyer shall be solely responsible for and shall pay the Retention
Bonuses.

5.2           Cooperation
and Best Efforts to Complete Transaction.

(a)           Each Party shall cooperate with the
other and use its reasonable commercial efforts to (i) obtain all
necessary and appropriate consents and authorizations of third parties and
Government 

 26
 

 

Entities to the Transactions
contemplated hereunder, (ii) satisfy all requirements prescribed by law,
and all conditions set forth in this Agreement for the consummation of the
Transactions contemplated herein, and (iii) effect the Transactions
contemplated herein in accordance with this Agreement at the earliest practicable
date.

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

5.3           Conduct of
Restaurants By Sellers Prior to the Closing Date.  During the period from the date of this
Agreement to the First Closing Date, the Sellers shall operate the Restaurants
as they are currently being operated and only in the ordinary course.

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

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

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

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

(iv)          repair and replace the Purchase Assets
in accordance with each Restaurant’s normal maintenance schedule;

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

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

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

(i)            enter into, terminate or materially
modify or amend any agreement, contract, document, lease or license (or series
of related agreements, contracts, leases or licenses) involving the payment of
$25,000 or more, or waive, release, compromise or assign any material rights or
claims except for (i) the purchase of inventory in the ordinary course of
business under existing contracts without alteration or amendment, (ii)
individual purchase order for one-time, spot purchases and
(iii) amendments to the Real Property Leases that the Buyer requests
pursuant to Section 5.6;

(ii)           except as set forth on Schedule
5.3(b)(ii), declare, set aside, increase or pay any dividend, or declare or
make any distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any capital stock or membership interests;

(iii)          enter
into or amend any employment or severance contract with any Person employed by
the Restaurants or increase the rate of compensation or pay any bonuses to its
officers or employees;

 27
 

 

(iv)          pay any fee, interest, royalty or any other
payment of any kind to any Affiliate thereof;

(v)           incur any indebtedness for borrowed
money, or guarantee any such indebtedness of another Person, enter into any
agreement to maintain the financial condition of another Person or enter into
any arrangement having the economic effect of any of the foregoing, or make any
loans, advances or capital contributions to, or investments in, any other
Person;

(vi)          mortgage, pledge or otherwise encumber
any of the Purchased Assets or suffer to exist any Lien on any of the Purchased
Assets, except for Permitted Liens;

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

(viii)        make or agree to make any new capital
expenditures, other than those made in the ordinary course of business and
consistent with past practices out of available cash;

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

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

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

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

(xiii)         commit any material violation of
applicable Law;

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

(xv)         fail to pay, or to make adequate
provision for the payment of, all Taxes, interest payments and penalties due
and payable to any city, state, the United States, or any other taxing
authority, except those being contested in good faith by appropriate
proceedings and for which sufficient reserves have been established, or make
any elections with respect to Taxes;

(xvi)        decrease the inventory, supplies or Till
Cash in any Restaurant in a manner not consistent with past practice;

(xvii)       acquire, enter into letters of intent, or
agree to acquire (i) any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or
(ii) any assets that are material, individually or in the aggregate, to
Sellers, except purchases of inventory in the ordinary course of business
consistent with past practice, or (iii) any restaurant or fee or leasehold
interest upon which a restaurant is, or will be, operated;

 28
 

 

(xviii)      adopt any new employee benefit plan or
terminate or withdraw from, or make any material change in or to, any existing
employee benefit plans;

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

5.4           Press Releases.  Buyer shall prepare the press releases
announcing the execution and closing of this Agreement and shall consult with
the Sellers’ Representative prior to issuance. 
The Parties shall not issue any other press release or make any other
public statement without first consulting with each other, provided, however,
that no such prior consultation shall be required with respect to those
disclosures made by Buyer in filings with the Securities and Exchange Commission,
or if disclosure is required by applicable Law or court process (in which case
the Party issuing such release or making such public statement shall use its
best efforts to provide prior notice thereof to the other Parties).

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

5.6           Intentionally omitted.

5.7           Confidentiality.  The Parties agree that the
Confidentiality Agreement executed by the Parties on February 24, 2006 shall
continue in full force and effect through the Second Closing Date or the
termination of this Agreement in accordance with Article VIII.

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

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

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

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

5.9           Update Schedules.  Each Party hereto will promptly disclose
to the others any information contained in its representations and warranties
and on the related Schedules that, because of an event occurring after the date
hereof, is incomplete or no longer correct, provided,
however that none of such 

 29
 

 

disclosures will be deemed
to modify, amend or supplement the representations and warranties of such
Party, unless the other Party consents to such modification, amendment or
supplement in writing.

5.10         Compliance with
Franchise Agreements.  Until
the First Closing Date (with respect to Restaurants other than the Designated
Restaurants) or the Second Closing Date (with respect to the Designated
Restaurants), Sellers shall continue to be bound by and shall comply with all
provisions of the Franchise Agreements in a manner reasonably designed to
maintain the current operations of the Restaurants.

5.11         Absence
of Sellers’ Representative.

(a)           If at any time where the provisions
of this Agreement require or permit an action by, or delivery to, the Sellers’
Representative and there is no Sellers’ Representative and the Sellers fail to
designate a successor Sellers’ Representative in accordance with Section 9.6,
then Buyer may appoint an individual who is independent of Buyer and Buyer’s
Affiliates and who is not affiliated with any legal, accounting or other
financial advisor to Buyer or any of Buyer’s Affiliates, as Sellers’
Representative to serve until the Sellers have designated a successor Sellers’
Representative in accordance with Section 9.6.

(b)           The Parties agree that any technical
breach of this Agreement by the Buyer, or a technical failure of the Buyer, to
exercise a right or remedy hereunder within the time periods herein provided
resulting solely and exclusively from the failure of a Sellers’ Representative
to be appointed at any time shall not be deemed to be a breach of this
Agreement or a waiver of such right.

5.12         Transition Activities.

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

(b)           In the event the Buyer reasonably
determines that it will be unable during the period of time provided in Section
5.12(a) to install any necessary equipment or other property or otherwise
prepare any Restaurant for the commencement of operations at the start of
business on the First Closing Date, the Sellers shall provide reasonable access
to such Restaurant during normal business hours on each day prior to the First
Closing Date and allow Buyer to take all necessary actions in order to prepare
the Restaurant for commencement of operations by the Buyer on the First Closing
Date, including, without limitation, to install at such Restaurant any
additional fixtures, furniture, equipment or other property of the Buyer, provided
however, that the pre-Closing activities of the Buyer pursuant to this
Section 5.12(b) shall not materially interfere with the ordinary course
operations of the Restaurant by the Seller prior to the First Closing Date.

Article VI

CONDITIONS TO OBLIGATION OF BUYER

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

6.1           Representations
and Warranties.

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(a)           With
respect to the First Closing, the representations and warranties of the
Sellers set forth in Article III that are qualified as to
materiality or Material Adverse Effect or Material Adverse Change shall be true
and correct on and as of such Closing Date as if made on such Closing Date, and
those that are not so qualified shall be true and correct in all material
respects on and as of such Closing Date as if made on such Closing Date.

(b)           With
respect to the Second Closing, the representations and warranties of the
Sellers set forth in Article III that are qualified as to
materiality or Material Adverse Effect or Material Adverse Change shall be true
and correct on and as of such Closing Date as if made on such Closing Date, and
those that are not so qualified shall be true and correct in all material
respects on and as of such Closing Date as if made on such Closing Date; provided
that the representations and warranties shall be true and correct only
with respect to the Designated Restaurants.

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

6.3           Consents.

(a)           With respect to the First Closing,
other than consents from the landlords for either of the Designated
Restaurants, all consents by third parties (including Governmental Entities)
shall have been obtained that are (a) required for the consummation of the
transactions contemplated hereby, or (b) that are required in order to
prevent a Seller’s breach of or a default under or a termination of any
Contract, Capital Lease, Real Property Lease or Permit, including, without
limitation, duly executed consents in form and substance satisfactory to the
Buyer and its counsel, to the assignment and assumption thereof, to the extent
such consents are required under applicable Law or the terms thereof; and

(b)           With respect to the Second Closing,
all consents by third parties (including consents from the landlords for the
Designated Restaurants and consents from Governmental Entities) shall have been
obtained that are (a) required for the consummation of the transactions
contemplated hereby, or (b) that are required in order to prevent a Seller’s
breach of or a default under or a termination of any Contract, Capital Lease,
Real Property Lease or Permit, including, without limitation, duly executed
consents in form and substance satisfactory to the Buyer and its counsel, to
the assignment and assumption thereof, to the extent such consents are required
under applicable Law or the terms thereof.

6.4           Absence
of Material Adverse Change.

(a)           With
respect to the First Closing since December 25, 2005, there shall have
been no Material Adverse Change suffered by the Sellers or the Restaurants,
individually or in the aggregate.

(b)           With
respect to the Second Closing since the First Closing, there shall have
been no Material Adverse Change suffered by South Sound, Northwest Robins, or
the Designated Restaurants, individually or in the aggregate.

6.5           Absence of Litigation.  With
respect to the First Closing and the Second Closing, as of such Closing,
there shall not be (a) any Order of any nature issued by a Governmental
Entity with competent jurisdiction directing that the transactions to be
consummated at such Closing as provided for herein or any material aspect of
them not be consummated as herein provided or (b) any Proceeding before
any Governmental Entity pending wherein an unfavorable Order would prevent the
performance of this Agreement or the other Documents or the consummation of any
material aspect of the transactions or 

 31
 

 

events contemplated hereby,
declare unlawful any material aspect of the transactions or events contemplated
by this Agreement or the other Documents, cause any material aspect of the
transaction contemplated by this Agreement or the other Documents to be
rescinded or materially affect the right of the Buyer to own, operate or control
the Purchased Assets or the Restaurants.

6.6           Funded Indebtedness.  With respect to the First Closing, all Funded
Indebtedness of the Sellers (other than with respect to the Puyallup Loan)
shall have been satisfied in full.  With
respect to the Second Closing, all Funded Indebtedness of South Sound and
Northwest Robins, including the Puyallup Loan, shall have been satisfied in
full.

6.7           Termination of Plans.  With
respect to the First Closing only, all Plans covering employees of the
Restaurants will be terminated on or before the First Closing Date.  All obligations of Sellers to employees as of
the First Closing Date (not including unused vacation and other paid time off
that is recorded as a liability on the Latest Balance Sheet) shall have been
paid by the Sellers on or before the First Closing Date.  The Sellers shall provide COBRA continuation
coverage (within the meaning of Section 4980B of the Code and the Treasury
regulations thereunder) to all individuals who are M & A qualified
beneficiaries (within the meaning assigned to such term under Q&A-4 of
Treasury Regulation Section 54.4980B-9) with respect to the sale of the
Purchased Assets to the Buyer for the duration of the period to which such
individuals are entitled to such coverage. 
The Sellers shall take any and all necessary actions to ensure that
neither the Buyer nor any of its Affiliates are required to provide such
continuation coverage to any such individual at any time.

6.8           Franchise Agreements.  With
respect to the First Closing, Sellers shall have paid any and all
royalties, advertising fees, finance charges and other payments required to be
paid under the Franchise Agreements for all periods up to and including the
First Closing Date.

6.9           Certain
Real Property Leases.  With respect to the Second Closing only, the Parties shall have
received the required consents and entered into amended or modified leases with
regard to the Leased Real Property set forth on Schedule 6.9 (the “Specified Leases”) in a form acceptable to
the Buyer in its sole discretion.

6.10         Permits and Liquor
Licenses.  With respect to
the First Closing and the Second Closing, Buyer shall have obtained from the
issuing Governmental Entity, all final permits, licenses, including Liquor
Licenses, and approvals of all Governmental Entities necessary for Buyer’s
operation of all of the Restaurants that are the subject of such Closing
immediately after such Closing Date.

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

6.12         Release of Liens.

(a)           With
respect to the First Closing, the Buyer shall have received
documentation satisfactory to the Buyer evidencing the satisfaction of all
Liens (other than Permitted Liens) on the Purchased Assets, other than Liens
arising under the Puyallup Loan.

(b)           With respect to the Second Closing, the Buyer shall have received
documentation satisfactory to the Buyer evidencing the satisfaction of all
Liens (other than Permitted Liens), including Liens arising in connection with
the Puyallup Loan.

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6.13         Non-Solicitation
Agreements.  With respect to the First Closing only,
the Buyer shall have entered into a Non-Solicitation Agreement substantially in
the form of Exhibit C attached hereto with the Sellers and the individuals
listed on Schedule 6.13 (the “Non-Solicitation
Agreements”).

6.14         Opinion of Counsel.  With
respect to the First Closing and the Second Closing, the Buyer shall
have received a legal opinion from Graham
& Dunn PC substantially in the form attached hereto as Exhibit D, provided
that that opinion delivered at the Second Closing need only address the
Designated Restaurants, South Sound and Northwest Robins.

6.15         Title Policies.  With
respect to the First Closing and the Second Closing, the Title Company
shall issue to Buyer an ALTA Leasehold Policy of Title Insurance with respect
to the Leased Real Property that is the subject of such Closing in the form
acceptable to Buyer, and in the amounts, as the proforma policies
previously delivered to Buyer by Title Company and concurrently
delivered to Seller (the “Title Policies”).

6.16         First Closing.
With respect to the Second Closing only, all conditions to the First Closing
contained in this Article VI shall have been satisfied or waived at the First
Closing.

Article VII

CONDITIONS TO OBLIGATIONS OF THE SELLERS

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

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

7.2           Representations and
Warranties.  The
representations and warranties of the Buyer set forth in Article IV
shall be true and correct in all material respects on and as of such Closing
Date as if made on such Closing Date.

7.3           Absence of Litigation.  As of the applicable Closing, there shall not
be any Order of any nature issued by a Governmental Entity with competent
jurisdiction directing that the transactions provided for herein or any
material aspect of them not be consummated as herein provided.

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

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

Article VIII

TERMINATION

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

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

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(b)           Material
Breach.  By either Buyer or
Sellers if there has been a material breach or inaccuracy by the other Party
with respect to any representation or warranty contained in this Agreement or
of any covenant contained in this Agreement and such breach is not waived by
the non-breaching Party;

(c)           Abandonment.  By either Buyer or Sellers if (i) all
conditions to First Closing required hereby have not been met or waived on or
before August 6, 2006 or (ii) the First Closing has not occurred on or
before such date; provided, however, that (x) the date in
(i) and (ii) shall be extended to September 3, 2006 if the only condition to
Closing that has not been satisfied is the approval by liquor licensing
authorities of issuance of Liquor License and Permits required for Buyer to
sell alcoholic beverages and (y) neither Sellers nor Buyer shall be
entitled to terminate this Agreement pursuant to this subparagraph (c) if such
Party (A) has been in material violation of any of its representations,
warranties, or covenants in this Agreement and such violation has been a
material factor in delaying the Closing, or (B) is in willful and material
violation of any of its representations, warranties or covenants in this
Agreement;

(d)           Government
Action.  By either Buyer or
Sellers, if any Governmental Entity shall have (i) issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions and such order, decree, ruling or other
action shall have become final and nonappealable or (ii) failed to approve
the issuance to Buyer of one or more of the Liquor Licenses required for the
Buyer to operate the Restaurants in the manner in which they are currently
being operated.

8.2           Termination Prior to
Second Closing.  This Agreement may be terminated
and the Transaction contemplated herein abandoned (with respect only to the
Designated Restaurants) at any time after the First Closing Date but before the
Second Closing Date as follows:

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

(b)           Material
Breach.  By either Buyer or
Sellers if there has been a material breach or inaccuracy by the other Party
with respect to any representation or warranty contained in this Agreement or
of any covenant contained in this Agreement, including any representation or
warranty that was made as of the First Closing Date, and such breach is not
waived by the non-breaching Party;

(c)           Abandonment.  (i) By the Buyer at any time upon 30 days
written notice to the Sellers, or (ii) by the Sellers, upon 30 days written
notice to the Buyer but not before October 31, 2006;

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

8.3           Effect of Termination.

(a)           Upon termination of this Agreement
pursuant to this Article VIII prior to the First Closing, this Agreement
shall be void and of no effect, and shall result in no obligation of or
liability to any Party or their respective directors, officers, employees,
agents or shareholders, unless such termination was the result of breach of any
representation, warranty, covenant or agreement in this Agreement in which case
the Party who so breached the representation, warranty, covenant or agreement
shall be liable to the other Party for appropriate damages.

 

 34

 

(b)           Upon termination of this Agreement
pursuant to this Article VIII after the First Closing but prior to the
Second Closing, the provisions of this Agreement pertaining solely to the
Second Closing shall be void and of no effect and no Party shall have any
obligation or liability with respect to the Second Closing, unless such
termination was the result of breach of any representation, warranty, covenant
or agreement in this Agreement in which case the Party who so breached the
representation, warranty, covenant or agreement shall be liable to the other
Party for appropriate damages. 
Termination of this Agreement after the First Closing but prior to the
Second Closing shall not affect either Party’s rights, obligations and
liabilities under this Agreement with respect to the First Closing.

Article IX

ADDITIONAL AGREEMENTS

9.1           Survival.  The representations, warranties,
covenants and other agreements set forth in this Agreement or in any
certificate or other writing delivered in connection with this Agreement shall
survive the Closings and the consummation of the transactions contemplated
hereby; provided, however, that any
indemnification claim under Section 9.2 for Adverse Consequences arising out of
or with respect to the inaccuracy of any such representation or the breach of
any such warranty must be asserted in writing by notice given to the other
Party on or before the date that is eighteen (18) months following the First
Closing Date (with respect to indemnification claims pertaining to the
Restaurants other than the Designated Restaurants) or the Second Closing Date
(with respect to indemnification claims pertaining to the Designated
Restaurants), failing which any such claim shall be waived and extinguished,
excluding, however, claims for Adverse Consequences with respect to the
inaccuracy of representations and breach of warranties contained in Section 3.1
(Organization and Capitalization of the
Sellers), 3.2 (Authorization of
Transaction), 3.12 (Tax Matters),
3.18 (Employee Benefits), 3.19 (Environment and Safety), or 3.28 (Membership Interests) which may be
asserted until the expiration of the applicable statute of limitations (giving
effect to any waivers or extensions thereof) for which any third party claims
may be asserted.  No right of any of the
Buyer Group for indemnification hereunder shall be affected by any examination
made for or on behalf of the Buyer or the acceptance by the Buyer of any
certificate or opinion.

9.2           Indemnification.

(a)           Each Seller agrees, severally and to
the extent of such Seller’s Allocated Percentage, to indemnify, defend and hold
harmless the Buyer and its Affiliates, successors, assigns, officers,
directors, stockholders and employees (collectively, the “Buyer Group”) against any Adverse
Consequences that any member of the Buyer Group may suffer, sustain or become
subject to as the result of, or arising from or in connection with:

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

(ii)           any Liability, other than Assumed
Liabilities, relating to the ownership or operation of such Seller’s Restaurants
and/or such Seller’s Purchased Assets at any time prior to the applicable
Closing;

(iii)          any Excluded Liability of such Seller;
and

(iv)          any Taxes of such Seller (other than
ad valorem taxes imposed on the Purchased Assets for periods after the
applicable Closing);

 35
 

 

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

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

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

(iii)          any Assumed Liability relating to the
ownership or operation of the Restaurants or the Purchased Assets at any time
after the applicable Closing.

(c)           Notwithstanding the foregoing, (i) no
Seller shall be required to indemnify the Buyer Group for Adverse Consequences
based on Section 9.2(a)(i) (or a proceeding related thereto) until the
aggregate amount of all Adverse Consequences sustained by the Buyer Group
exceeds $350,000 (“Threshold”), provided that,
in the event the aggregate amount of Adverse Consequences exceeds
the Threshold, the Sellers shall be liable to indemnify the Buyer Group for all
Adverse Consequences incurred in excess of $100,000, not merely the amount in
excess of the Threshold; and (ii) the Sellers’ obligations to indemnify the
Buyer Group based on Section 9.2(a)(i), in the aggregate, shall not exceed
$8,500,000 (“Cap”).  For avoidance of doubt, neither the Threshold
nor the Cap shall apply to the Sellers’ indemnification obligations for Adverse
Consequences based on Section 9.2(a)(ii), (iii) or (iv). 
The Buyer’s right to seek payment of any indemnification claim from the
Escrow Fund shall be governed by this Agreement and the Escrow Agreement.

(d)           In no event shall any Seller’s
liability to indemnify the Buyer Group as provided in Section 9.2 exceed an
amount equal to such Seller’s Allocated Percentage of the Cap.

9.3           Indemnification
Procedures.

(a)           If any third party shall notify any
Party to this Agreement (the “Indemnified
Party”) with respect to any matter which may give rise to a claim
for indemnification against any other Party to this Agreement (the “Indemnifying Party”) under
Section 9.2, then the Indemnified Party shall notify each Indemnifying
Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced by the
delay.  Any Indemnifying Party will have
the right to defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party so long
as (A) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party is electing to defend the Indemnified Party
in respect of the Adverse Consequences the Indemnified Party suffers resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder, and
(C) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.  The Indemnified
Party may participate in the defense of such claim with co-counsel of its
choice; provided, however, that the fees and expenses of the
Indemnified Party’s counsel shall be at the expense of the Indemnified Party
unless (A) the Indemnifying Party has agreed in writing to pay such fees
and expenses, (B) the Indemnifying Party has failed to assume the defense
and 

 36
 

 

employ counsel as provided
herein or (C) a claim shall have been brought or asserted against the
Indemnifying Party as well as the Indemnified Party, and there may be one or
more factual or legal defenses available to the Indemnified Party that are in
conflict with those available to the Indemnifying Party, in which case such
co-counsel shall be at the expense of the Indemnifying Party; provided, however,
that the Indemnifying Party will not be required to pay the fees and expenses of
more than one separate principal counsel (and any appropriate local counsel)
for all Indemnified Parties.  If, within
such 15-day period, the Indemnifying Party does not assume the defense of such
matter or fails to defend the matter in the manner set forth above, the
Indemnified Party may defend against the matter in any manner that it
reasonably may deem appropriate and may consent to the entry of any judgment
with respect to the matter or enter into any settlement with respect to such
matter, with the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. The Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the costs of defending against such claim
(including reasonable attorneys’ fees and expenses) and the Indemnifying Party
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the claim to the fullest extent provided herein.

(b)           If an Indemnified Party’s notice of
indemnification does not relate to a claim or the commencement of an action or
proceeding by a third party, the Indemnifying Party shall have 15 days after
receipt of such notice to object to the subject matter and the amount of the
claim for indemnification set forth in such notice by delivering written notice
thereof to the Indemnified Party.  If the
Indemnifying Party does not so object within such 15-day period, it shall be
conclusively deemed to have agreed to the matters set forth in such notice of
indemnification.  If the Indemnifying
Party sends notice to the Indemnified Party objecting to the matters set forth
in such notice of indemnification, the Parties shall use their best efforts to
settle such claim for indemnification. 
If the Parties are unable to settle such dispute, then the Indemnified
Party shall seek resolution of the dispute by initiating litigation in any
jurisdiction in which litigation arising under this Agreement may be commenced
by the Parties hereto.

(c)           The Parties recognize and acknowledge
that a breach by any Seller of this Section 9.3 will cause irreparable and
material loss and damage to the Buyer as to which the Buyer will not have an
adequate remedy at law or in damages. 
Accordingly, each such Party acknowledges and agrees that the issuance
of an injunction or other equitable remedy is an appropriate remedy for any
such breach.

(d)           Non-exclusivity.  The Parties hereby agree that the foregoing
provisions of this Article IX shall not be the sole and exclusive means of
recovery of a Party hereto or any other Person entitled to indemnification
under this Article IX, and shall not preclude the exercise of any other rights
or remedies available to a Party hereto or any other Person hereunder at law or
in equity, and shall be in addition to any other rights or remedies to which a
Party hereto or any other Person entitled to indemnification under this Article
IX and his, her or its assigns, as the case may be, may be entitled at law or
in equity.

9.4           Change of Name.  Within thirty (30) days after the First
Closing Date (with respect to Washington Robins) and within thirty (30) days
after the Second Closing Date, or as soon as practicable, if the Second Closing
Date does not occur, (with respect to South Sound and Northwest Robins), such
Seller shall change its name to delete the use of the name “Robin”, “Red Robin”
and similar or derivative names. 
Immediately upon the First Closing (with respect to Washington Robins)
or the Second Closing, or as soon as practicable, if the Second Closing Date
does not occur, (with respect to South Sound and Northwest Robins), the Sellers
shall cease using the name “Robin”, “Red Robin” and similar or derivative names
in all of their activities and thereafter, the Sellers agree not to use “Robin”
or “Red Robin” in connection with any business or commercial activity.  In the event the Second Closing does not
occur, South Sound and Northwest Robins may continue to use the name “Robin”, “Red
Robin” and similar or derivative names only in connection with the ownership
and operation of its Designated Restaurant.

 37
 

 

9.5           Transaction
Expenses.

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

(b)           In no event shall the Buyer be liable
for any income, capital gain, franchise or other similar Tax arising or imposed
as a result of the transactions contemplated herein, and the Sellers shall pay
all transfer, stamp (including documentary stamp taxes, if any) and other
similar Taxes or governmental charges with respect to the Transactions herein
contemplated.  Notwithstanding anything
in this Agreement to the contrary, any sales, use or similar taxes imposed on
the sale of the Purchased Assets at either Closing shall be borne by the Buyer.

9.6           Appointment,
Authority and Manner of Acting of Sellers’ Representative.

(a)           By the execution and delivery of this
Agreement, including counterparts hereof, each Seller hereby irrevocably
constitutes and appoints the Sellers’ Representative as the authorized
representative of the Sellers on the terms set forth in this Section 9.6.  Each Seller acknowledges and agrees that the
Sellers’ Representative is the true and lawful agent and attorney-in-fact of
such Seller with full powers of substitution to act in the name, place and
stead of such Seller with respect to the performance on behalf of such Seller
under the terms and provisions hereof and to do or refrain from doing all such
further acts and things, and to execute all such documents, as the Sellers’
Representative shall deem necessary or appropriate in connection with any
transaction contemplated hereunder, including, without limitation, the power
to:

(i)            amend or waive any provision hereof
(including any condition to Closing) in any manner that does not differentiate
in any material respect among any of the Sellers;

(ii)           employ, obtain and rely upon the
advice of legal counsel, accountants and other professional advisors as the
Sellers’ Representative, in the sole discretion thereof, deems necessary or
advisable in the performance of the duties of the Sellers’ Representative;

(iii)          receive and receipt for any portion of
the Purchase Price or any other payment due from Buyer to such Seller pursuant
to this Agreement and act for such Seller with respect to all Purchase Price
matters and all Purchase Price adjustment matters referred to herein,
including, without limitation, taking all actions contemplated by Section 2.7
and 2.8 with respect to the Net Working Capital, and disbursing to each Seller
his, her or its share of such amounts in accordance with this Agreement;

(iv)          incur any expenses, liquidate and
withhold assets received on behalf of such Seller prior to their distribution
to such Seller to the extent of any amount that the Sellers’ Representative
deems necessary for payment of or as a reserve against expenses, and pay such
expenses or deposit the same in an interest-bearing bank account established
for such purpose;

(v)           give and receive all notices, communications
and deliveries under this Agreement and make any objections permitted to be
made under this Agreement on behalf of such Seller; and

 38
 

 

(vi)          do or refrain from doing any further
act or deed on behalf of such Seller that the Sellers’ Representative deems
necessary or appropriate, in the sole discretion of the Seller Representative,
relating to the subject matter hereof as fully and completely as such Seller
could do if personally present and acting and as though any reference to such
Seller herein was a reference to the Sellers’ Representative.

(b)           The appointment of the Sellers’
Representative shall be deemed coupled with an interest and shall be
irrevocable, and any other Person may conclusively and absolutely rely, without
inquiry, upon any action of the Sellers’ Representative as the act of each
Seller in all matters referred to herein. 
Each Seller hereby ratifies and confirms all that the Sellers’
Representative shall do or cause to be done by virtue of the Seller
Representatives’ appointment as Sellers’ Representative of such Seller.  The Sellers’ Representative shall act for
each Seller on all of the matters set forth herein in the manner the Sellers’
Representative believes to be in the best interest of such Seller, but the
Sellers’ Representative shall not be responsible to any Seller for any loss or
damage such Seller may suffer by reason of the performance by the Sellers’
Representative of the Seller Representative’s duties hereunder, other than loss
or damage arising from willful misconduct or gross negligence in the
performance of the Seller Representative’s duties hereunder.

(c)           Each Seller hereby expressly
acknowledges and agrees that the Sellers’ Representative is authorized to act
on behalf of such Seller notwithstanding any dispute or disagreement, and that
any Person shall be entitled to rely on any and all action taken by the Sellers’
Representative hereunder without liability to, or obligation to inquire of, any
Seller.  In the event the Sellers’
Representative resigns or ceases to function in such capacity for any reason
whatsoever, within fifteen (15) days thereafter, the Sellers shall appoint
a successor sellers’ representative.  The
Sellers shall indemnify and hold the Sellers’ Representative harmless from and
against any and all liabilities, losses, costs, damages and expenses (including
attorneys’ fees) reasonably incurred or suffered as a result of the performance
of the Seller Representative’s duties hereunder, except for willful misconduct
or gross negligence.

9.7           Further Assurances;
Transition Assistance. 
Each of the Parties agrees that it will from time to time on or after
each Closing promptly do, execute, acknowledge and deliver and will cause to be
done, executed, acknowledged and delivered, all such further acts, deeds, certificates,
bills of sale, assignments, transfers, conveyances, powers of attorney,
assurances and other documents as may be reasonably requested by any of the
other Parties for better assigning, transferring, granting, conveying, assuring
and conferring right, title and interest to the Buyer of the Purchased Assets
and for the better assumption by the Buyer of the Assumed Liabilities.  Without limiting the generality of the
foregoing, the Parties agree to cooperate with each other and to provide each
other with all information and documentation reasonably necessary to permit the
preparation and filing of all federal, state, local, and other Tax returns and
Tax elections with respect to the Restaurants. 
For a period of seven years following the First Closing Date, the
Sellers will maintain all books and records used or compiled in connection with
the operation of the Restaurants, including, without limitation, all records of
electronic communication, and shall provide Buyer or its representatives with
prompt access to such books and records as Buyer may reasonably request in
order to operate the Restaurants in the ordinary course of business.

9.8           Allocation Ad Valorem
Taxes.  The Sellers shall
pay any Liability for ad valorem taxes and assess­ments (including any special
or supplemental assessments) on the Purchased Assets allocable to  periods ending on or before the applicable
Closing Date (without regard to when such taxes are assessed or payable).  For purposes of this Section 9.8, in the case
of any ad valorem taxes that are imposed on a periodic basis and are payable
for a tax period that includes (but does not end on) the applicable Closing
Date, the portion of such tax related to the tax period ending on the
applicable Closing Date will be deemed to be the amount of such tax for the
entire tax period multiplied by a fraction, the numerator of which is the
number of days in the tax period ending on the applicable Closing Date and the
denominator 

 39
 

 

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

9.9           Conduct After Closing.

(a)           For a period of 18 months after the
Second Closing Date (or the First Closing Date, if the Second Closing Date does
not occur) (the “Post-Closing Period”),
each Seller shall continue in good standing under its jurisdiction of formation
and shall maintain at all times a Net Worth equal to or greater than the
Minimum Aggregate Net Worth multiplied by such Seller’s Allocated Percentage.  “Net Worth”
for each Seller shall be (i) the amount of such Seller’s cash, cash
equivalents and Permitted Investments (as defined in the Escrow Agreement), in
each case only to the extent such assets are free and clear of all Liens, minus
(ii) the amount of such Seller’s Liabilities. 
“Minimum Aggregate Net Worth”
shall mean (x) $2,000,000, for the period beginning on the Second Closing Date
and ending on the one-year anniversary of the Second Closing Date, or (y)
$1,000,000, plus the amount of any pending claims or demands by the Buyer
pursuant to this Agreement or the Escrow Agreement, but in any event no more
than $2,000,000, for the period beginning on the day immediately following the
one-year anniversary of the Second Closing Date; provided  that if
this Agreement is terminated between the First Closing and the Second Closing,
the amounts above shall be reduced from $2,000,000 to $1,596,000 and from
$1,000,000 to $798,000, and the periods of time set forth in clause (x) and (y)
above shall instead accrue from the First Closing Date.

(b)           No later than 5 business days after
the end of each calendar month during the Post-Closing Period, each Seller
shall deliver to the Buyer a certificate signed by an officer of such Seller,
certifying the amount of such Seller’s Net Worth as of the last day of the
preceding calendar month.  The
certificate shall be accompanied by such Seller’s balance sheet and other
supporting documentation as Buyer may reasonably request in order to confirm
such Seller’s determination of its Net Worth. 
If any Seller (i) fails to deliver the officer’s certificate and
supporting documentation required pursuant to this Section 9.9(b) and such
failure continues uncured for 5 business days after receiving notice from the
Buyer or (ii) fails at any time to maintain the amount of Net Worth prescribed
in Section 9.9(a), then such Seller shall immediately transfer to the Escrow
Agent by wire transfer of immediately available funds an amount equal to the
Minimum Aggregate Net Worth multiplied by such Seller’s Allocated
Percentage.  Amounts deposited with the
Escrow Agent pursuant to this Section 9.9(b) shall constitute “Escrow Funds,”
as defined in the Escrow Agreement and shall be paid to the Buyer or reimbursed
to the Seller in accordance with the Escrow Agreement.

(c)           The Sellers shall not conduct any
business activities following the First Closing other than activities in
connection with the performance of its
obligations pursuant to this Agreement and the other Documents or as necessary
in connection with the prompt payment, discharge and performance of all
Excluded Liabilities.

Article X

DEFINITIONS

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

“Actual Adjustment Amount” has the meaning
set forth in Section 2.8(a)

“Adjustment Amount” has the meaning set forth
in Section 2.7(b).

 40
 

 

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

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

“Allocated Percentage” is the percentage
amount shown next to a Seller’s name on Exhibit A.

“Assumed Liabilities” has the meaning
assigned to such term in Section 1.3.

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

“Bill of Sale” has the meaning assigned to
such term in Section 2.3(a)(i).

“Business” means the operation of the
Restaurants.

“Buyer” has the meaning assigned to such term
in the preamble of this Agreement.

“Buyer Group” has the meaning assigned to
such term in Section 9.2(a).

“Capital Lease” has the meaning assigned to
such term in Section 3.14(b).

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

“Closing” has the meaning assigned to such
term in Section 2.2.

“Closing Date” has the meaning assigned to
such term in Section 2.2.

“Closing Date Balance Sheet” means the
balance sheet of each of the Sellers as of the First Closing Date (immediately
prior to the First Closing and without taking into account the Transactions)
prepared in accordance with GAAP and on a basis consistent with the Year End
Balance Sheet.

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

“Consideration” has the meaning assigned to
such term in Section 2.1.

“Contracts” has the meaning assigned to such
term in Section 3.14.

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

 41
 

 

“Designated Persons” has the meaning set
forth in Section 3.12(d).

“Designated Restaurants” means (i) the
Restaurant located at 2233 South 320th Street,
Federal Way, WA 98003, and (ii) the Restaurant located at 3609 9th Street SW, Puyallup, WA 98373.

“Designated Purchased Assets” means those
Purchased Assets which are used or held for use by the Sellers in the operation
of either of the Designated Restaurants.

“Designated Assumed Liabilities” means those
Assumed Liabilities of the Sellers which are related to or arose in connection
with the operation of either of the Designated Restaurants.

 “Documents”
means this Agreement, the Escrow Agreement, the Management Agreement, the Bills
of Sale, the Non-Solicitation Agreements and any other agreement entered into
to consummate the Transactions.

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

“Employee Pension Benefit Plan” shall have
the meaning set forth in Section 3(2) of ERISA.

“Employee Welfare Benefit Plan” shall have
the meaning set forth in Section 3(1) of ERISA.

“Environmental and Safety Requirements” means
all Laws, Orders, contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, including, but not limited to, the Solid Waste
Disposal Act, as amended, 42 U.S.C. § 6901, et  seq., the Clean
Air Act, as amended, 42 U.S.C. §§ 7401 et  seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C. §§ 1251 et  seq., the
Emergency Planning and Community Right-to-Know Act, as amended, 42 U.S.C. §§
11001 et  seq., the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. §§ 9601 et  seq.,
the Hazardous Materials Transportation Uniform Safety Act, as amended, 49
U.S.C. §§ 1804 et  seq., the Occupational Safety and Health Act of
1970, as amended, and the rules and regulations promulgated thereunder.

 42
 

 

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

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

“Escrow Agent” shall mean Fidelity National
Title.

“Escrow Agreement” means that certain escrow
agreement, by and among the Buyer, the Sellers, the Sellers’ Representative and
the Escrow Agent, in the form attached hereto as Exhibit E.

“Estimated Adjustment Amount” has the meaning
set forth in Section 2.7.

“Excluded Assets” has the meaning assigned to
such term in Section 1.2.

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

“Franchise Agreements” means the Franchise
Agreements set forth on Exhibit B.

“Financial Statements” has the meaning
assigned to such term in Section 3.5(a).

“First Closing” has the meaning set forth in
Section 2.1(a).

“First Closing Date” has the meaning set
forth in Section 2.1(a).

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

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

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

 43
 

 

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

“Indemnified Party” has the meaning assigned
to such term in Section 9.3(a).

“Indemnifying Party” has the meaning assigned
to such term in Section 9.3(a).

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

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

“Knowledge” means a Person’s actual
knowledge.  For the purposes of this
Agreement, the “Sellers Knowledge” or the “Knowledge of the Sellers” shall mean
the knowledge of Marcus L. Zanner, Richard R. Radloff, Edward Taliaferro, Kevin
Sonneborn, Gregory A. Hubert, and the general manager of each Restaurant.

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

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

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

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

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

“Licensed Intellectual Property” has the
meaning assigned to such term in Section 5.13(a).

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

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

 

 44

 

“Management Agreement” means that certain
management services agreement, by and among the Buyer, the Sellers and the
Sellers’ Representative, in the form attached hereto as Exhibit F.

“Material Adverse Change” means, with respect
to any Person, (i) any material adverse change in the business,
operations, assets (including levels of working capital and components
thereof), condition (financial or otherwise), operating results, liabilities or
supplier or employee relations of such Person or (ii) any material casualty
loss or damage to the assets of such Person, whether or not covered by
insurance, or (iii) to the extent such change has a reasonable likelihood
of materially adversely affecting operating results of the Restaurants
following the acquisition, a material adverse change in customer relations at
the Restaurants.

“Material Adverse Effect” means, with respect
to any Person, (i) a material adverse effect on the business, operations,
assets (including levels of working capital and components thereof), condition
(financial or otherwise), operating results, liabilities or supplier or
employee relations of such Person, or (ii) to the extent such change has a
reasonable likelihood of materially adversely affecting operating results of
the Restaurants following the Transaction, a material adverse change in
customer relations at the Restaurants.

“Membership Interests” shall have the meaning
set forth in Section 1.1(m).

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

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

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

“Net Working Capital” has the meaning set
forth in Section 2.7(b).

“Non-Solicitation Agreements” has the meaning
set forth in Section 6.13.

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

“Parties” means the Buyer and the Sellers.

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

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

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

 45
 

 

“Plans” has the meaning assigned to such term
in Section 3.18(a).

“Post-Closing True-Up” has the meaning set forth
in Section 2.8(b).

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

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

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

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

“Puyallup Loan” means that certain loan
agreement by and between Northwest Robins LLC and Key Bank.

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

“Restaurants” means the restaurants set forth
on Exhibit A.

“Retention Bonus” means each of the $5,000
bonus payments to be made to six office managers of the Restaurants.

“Second Closing” has the meaning set forth in
Section 2.1(b).

“Second Closing Date” has the meaning set
forth in Section 2.1(b).

“Seller” and “Sellers” have the
meanings assigned to such terms in the preamble of this Agreement.

“Seller Group” has the meaning assigned to
such term in Section 9.2(b).

“Sellers’ Representative” has the meaning set
forth in the Preamble to this Agreement.

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

“Subsidiary” means any Person (other than a
natural person) with respect to which a specified Person (or a Subsidiary
thereof) has the power to vote or direct the voting of sufficient securities to
elect a majority of the directors.

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

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

 46
 

 

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

“Termination Date” means the date on which
this Agreement or a portion of this Agreement is terminated in accordance with
the provisions of Article VIII.

“Till Cash” means the register cash and
backup change maintained at each Restaurant.

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

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

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

Article XI

MISCELLANEOUS

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

11.2         Entire Agreement.  This Agreement, the other Documents referred
to herein and the Confidentiality Agreement executed by the Parties on February
24, 2006 constitute the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter of any
Document including, without limitation, the Letter of Intent dated March 3,
2006, between Buyer and the Sellers.

11.3         Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns.  No Party may assign
either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Parties; provided, however,
that the Buyer may assign any of its rights under any of the Documents to any
Affiliate of the Buyer and/or make a collateral assignment of its rights for
the benefit of its lenders; provided, however, that no assignment
prior to the Second Closing (or the First Closing, if the Second Closing does
not occur) shall relieve Buyer of its obligations hereunder, and Buyer shall
guarantee the performance of all such obligations by its assignee.

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

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

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

 47
 

 

If to any of the Sellers or Sellers’ Representative:

Great Western Dining

6840 Fort Dent Way

Suite 350

Seattle, WA  98188-2555

Telephone: 206-835-8100

Facsimile: 206-242-0427

Attention: Marcus L. Zanner

with a copy to:

Graham & Dunn, PC

Pier 70

2801 Alaskan Way, Suite 300

Seattle, WA 98121

Telephone:  206-624-8300

Facsimile:  206-340-9599

Attention:  Jack G. Strother

If to the Buyer:

Red Robin International, Inc.

6312 S. Fiddler’s Green Circle, #200N

Greenwood Village, CO  80111

Telephone: 303-846-6060

Facsimile: 303-846-6013

Attention: Dennis B. Mullen

with a copy to:

Davis Graham & Stubbs LLP

1550 17th Street, Suite 500

Denver, CO 80202

Telephone:  (303) 892-9400

Facsimile:  (303) 892-7400

Attention:  Ronald R. Levine II

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

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

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

 48
 

 

be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.

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

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

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

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

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

11.14       Jurisdiction
and Venue.

(i)            Each of the Parties hereby
irrevocably and unconditionally submits, for itself or and its property, to the
nonexclusive jurisdiction of any Washington State court or federal court of the
United States of America sitting in Washington, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or for recognition or enforcement of any judgment, and each of the
Parties hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any
such Washington State court or, to the 

 49
 

 

extent permitted by law, in
such federal court.  Each of the Parties
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.

(ii)           Each of the Parties irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to the Agreement in
any Washington State court or federal court. 
Each of the Parties irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.

* * * * *

 

 50

 

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

	
  Buyer:

  	
   

  	
  RED ROBIN INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Eric Houseman

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Eric
  Houseman

  
	
   

  	
   

  	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Sellers:

  	
   

  	
  SOUTH SOUND RED ROBIN, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Marcus L. Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Marcus L.
  Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZANNER-HUBERT, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Marcus L. Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Marcus L. Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NORTHWEST ROBINS, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Marcus L. Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Marcus L.
  Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WASHINGTON ROBINS, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Marcus L. Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Marcus L.
  Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sellers’
  Representative

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  /s/ Marcus L. Zanner

  
	
   

  	
   

  	
   

  	
   

  	
  Marcus L. Zanner

  

 

 D-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}]]