Document:

Exhibit 10.1

 

 

CHEVYS HOLDINGS, INC.

 

CHEVYS, INC.

 

CHEVYS OF GREENBELT, INC.

 

CHEVYS NEW YORK, INC.

 

CHEVYS OF PARSIPPANY,
INC.

 

KATMANDU CREATIONS, INC.

 

RBA KANSAS, INC.

 

RIO BRAVO ACQUISITIONS,
INC.

 

J.W. CHILDS EQUITY
PARTNERS, L.P.

 

REAL MEX RESTAURANTS,
INC.

 

AND

 

CKR ACQUISITION CORP.

 

 

ASSET PURCHASE AGREEMENT

 

October 13, 2004

 

 

	
  ARTICLE I

  	
  PURCHASE AND SALE OF ASSETS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
   

  	
  Defined
  Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.2.

  	
   

  	
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.3.

  	
   

  	
  Excluded
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  PURCHASE PRICE OF ASSETS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
   

  	
  Purchase
  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.2.

  	
   

  	
  Assumed
  Liabilities; Excluded Liabilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.3.

  	
   

  	
  Allocation
  of Transfer Taxes; Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.4.

  	
   

  	
  Tax
  Treatment; Allocation of Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.5.

  	
   

  	
  Cure
  Costs

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.6.

  	
   

  	
  Deposit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.7.

  	
   

  	
  Replacement
  of Letters of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  CLOSING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
   

  	
  Date,
  Time and Place of Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.2.

  	
   

  	
  Deliveries
  by Sellers at Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.3.

  	
   

  	
  Deliveries
  by Buyer at Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.4.

  	
   

  	
  Liquor
  Licenses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.5.

  	
   

  	
  Deemed
  Consents and Cures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES OF SELLERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
   

  	
  Organization
  and Power

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.2.

  	
   

  	
  Authority

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.3.

  	
   

  	
  No
  Breach or Conflict

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.4.

  	
   

  	
  The
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.5.

  	
   

  	
  Financial
  Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.6.

  	
   

  	
  Condition
  of Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.7.

  	
   

  	
  Tangible
  Assets; Ownership of Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.8.

  	
   

  	
  Real
  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.9.

  	
   

  	
  Litigation;
  Compliance With Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.10.

  	
   

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.11.

  	
   

  	
  Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.12.

  	
   

  	
  Employment
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.13.

  	
   

  	
  Licenses
  and Permits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.14.

  	
   

  	
  Environmental
  Matters

  	
   

  

 

 

	
  Section 4.15.

  	
   

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.16.

  	
   

  	
  Franchising

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.17.

  	
   

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.18.

  	
   

  	
  Broker or Finder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.19.

  	
   

  	
  Disclaimer of Other Representations and
  Warranties; Schedules

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  COVENANTS OF SELLERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
   

  	
  Conduct of Business Before the Closing Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.2.

  	
   

  	
  Access to Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.3.

  	
   

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.4.

  	
   

  	
  Intellectual Property Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.5.

  	
   

  	
  Cooperation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.6.

  	
   

  	
  Assumed Contracts; Cure Amounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.7.

  	
   

  	
  Bankruptcy Court Approval and Related
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.8.

  	
   

  	
  Restricted Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.9.

  	
   

  	
  No Shop Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.10.

  	
   

  	
  Notice to Creditors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.11.

  	
   

  	
  Notice to Claimants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.12.

  	
   

  	
  Franchise Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
   

  	
  Organization and Power

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.2.

  	
   

  	
  Execution and Delivery Permitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.3.

  	
   

  	
  Binding Effect; Consents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.4.

  	
   

  	
  Capitalization

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.5.

  	
   

  	
  Financial Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.6.

  	
   

  	
  Legal Proceedings and Judgments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.7.

  	
   

  	
  Buyer’s Financing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.8.

  	
   

  	
  Assumed Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.9.

  	
   

  	
  Broker or Finder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
  COVENANTS
  OF BUYER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
   

  	
  Buyer Performance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.2.

  	
   

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.3.

  	
   

  	
  Sellers’ Employees

  	
   

  

 

2

 

	
  Section 7.4.

  	
   

  	
  Administration of Insurance Policies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.5.

  	
   

  	
  Cooperation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.6.

  	
   

  	
  Broker’s Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.7.

  	
   

  	
  Post-Closing Access to Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.8.

  	
   

  	
  Hart-Scott-Rodino

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.9.

  	
   

  	
  Bankruptcy Court Approval and Related
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.10.

  	
   

  	
  Joinder Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.11.

  	
   

  	
  Financing Efforts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
  CONDITIONS
  TO CLOSING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
   

  	
  Buyer’s Conditions to Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.2.

  	
   

  	
  Sellers’ Conditions to Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  	
  NO
  SURVIVAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
   

  	
  No Survival of Representations and
  Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  X

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
   

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.2.

  	
   

  	
  Applicable Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.3.

  	
   

  	
  Binding on Successors; Assignment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.4.

  	
   

  	
  Payment of Costs

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.5.

  	
   

  	
  Time is of the Essence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  10.6.

  	
   

  	
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  10.7.

  	
   

  	
  Entire
  Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.8.

  	
   

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.9.

  	
   

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.10.

  	
   

  	
  Public Announcements; Communications
  with Franchisees and Public

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.11.

  	
   

  	
  Jurisdiction; Disputes; Arbitration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.12.

  	
   

  	
  No Third Party Beneficiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.13.

  	
   

  	
  Compliance with Bulk Sales Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.14.

  	
   

  	
  Transition Services

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.15.

  	
   

  	
  Intercreditor Acknowledgements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XI

  	
  ALTERNATIVE
  STRUCTURE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  11.1.

  	
   

  	
  Stock Transaction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XII

  	
  DEFINITIONS

  	
   

  

 

3

 

ASSET
PURCHASE AGREEMENT

 

THIS ASSET PURCHASE
AGREEMENT (the “Agreement”) is made and entered into this 13th
day of October, 2004, by and among Chevys Holdings, Inc., a Delaware
corporation (the “Parent”), Chevys, Inc., a California corporation (the
“Company”), Chevys of Greenbelt, Inc., a Maryland corporation (which is
owned 99% by the Company and 1% by Brian Bennett) (“Sub One”), Chevys
New York, Inc., a California corporation and wholly owned subsidiary of the
Company (“Sub Two”), Chevys of Parsippany, Inc., a New Jersey
corporation and wholly owned subsidiary of the Company (“Sub Three”),
Katmandu Creations, Inc., a California corporation and wholly owned subsidiary
of the Company (“Sub Four”), RBA Kansas, Inc., a Kansas Corporation and
wholly owned subsidiary of the Company (“Sub Five”), and Rio Bravo
Acquisitions, Inc., a Delaware corporation and wholly owned subsidiary of the
Company (“Sub Six”, and, together with the Company, Sub One, Sub Two,
Sub Three, Sub Four and Sub Five, the “Sellers”), J.W. Childs Equity
Partners L.P., a Delaware limited partnership (“J.W. Childs”), Real Mex
Restaurants, Inc., a Delaware corporation (“Real Mex”) and CKR
Acquisition Corp., a Delaware corporation (“Buyer”).

 

WHEREAS, Sellers
collectively own various items of personal property and interests in real
property and contract rights (i) used in the operation or development of those
specific “Chevys Fresh Mex” restaurants, “Fuzio Universal Pasta” restaurants
and “Chevys Express Mex” restaurants, which are listed on Schedule 1 hereto (the “Restaurants”) and
(ii) used in the operation of the “Chevys Fresh Mex” franchise system, the “Fuzio
Universal Pasta” franchise system, and the “Chevys Express Mex” franchise
system;

 

WHEREAS, Sellers voluntarily
commenced cases before the United States Bankruptcy Court for the Northern
District of California (the “Bankruptcy Court”) under Chapter 11 of the
title 11 of the United States Code (the “Bankruptcy Code”), jointly
administered under docket No. 03-45879, et
seq., but expressly excluding the chapter 11 case of Parent
(collectively, the “Chapter 11 Cases”); and

 

WHEREAS, each of Sellers
wishes to sell, transfer, convey, assign and deliver to Buyer in accordance
with Sections 363 and 365 and all other applicable provisions of the Bankruptcy
Code, all of the Assets (as hereinafter defined), together with the Assumed
Liabilities (as hereinafter defined), of Sellers as set forth in this Agreement
according to certain terms and conditions, pursuant to a plan of reorganization
in the absence of an auction process involving the Assets or the Business (as
hereinafter defined), (the “Non-Auction Plan Sale”), or according to
alternative terms and conditions as set forth in this Agreement in the event
that the Assets or the Business are subject to an auction process (the “Auction
Sale”); and

 

WHEREAS, in connection
therewith, each of Sellers wishes to assume and assign to Buyer certain
executory contracts, unexpired leases and liabilities thereunder under Sections
363 and 365 of the Bankruptcy Code; and

 

WHEREAS, subject to the
Bankruptcy Court’s entry of an Approval Order (as hereinafter defined), inter alia, incorporating the terms
of this Agreement, including the assumption and assignment of certain executory
contracts and unexpired leases and liabilities

 

4

 

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

 

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

 

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

 

ARTICLE I

PURCHASE AND SALE OF ASSETS

 

Section
1.1.  Defined
Terms.  All capitalized terms
used in this Agreement and not otherwise defined herein shall have the meanings
set forth for such terms in Article XII.

 

Section
1.2.  Assets.  Subject to the terms and conditions set forth
in this Agreement, including the approval of the Bankruptcy Court pursuant to
the Approval Order, Sellers hereby agree that at the Closing they shall sell,
transfer, convey, and assign to Buyer, free and clear of all Liens (except for
the Permitted Encumbrances), and Buyer shall purchase, assume and acquire from
Sellers, all of Sellers’ right, title and interest in, to and under all of the
business, properties, assets, and goodwill of whatever kind and nature, real or
personal, tangible or intangible, actual or contingent, in electronic form or
otherwise, which are owned or held by Sellers and used or usable in the
Business (other than the Excluded Assets), wherever located, including without
limitation all of Sellers’ right, title and interest in and to the following
(the “Assets”):

 

(a)           The
Systems and the Concepts;

 

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

 

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

 

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

 

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

 

5

 

(f)            All
Licenses (to the extent transferable) and all rights to use existing Restaurant
telephone numbers and rights arising under Equipment warranties;

 

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

 

(h)           All
cash deposits related to the Business, including, without limitation, those
securing the Real Property Leases (other than Non-Assumed Contracts) and the
Assumed Liabilities;

 

(i)            All
bond collateral, collateral for letters of credit and the like, if any, and any
other collateral posted for the operation of the Business, including vendor
deposits;

 

(j)            All
Intellectual Property;

 

(k)           All
Inventory;

 

(l)            All
Accounts Receivable and notes receivable of the Business as of the Closing
Date, together with all unpaid accrued interest thereon and all rights of
collection with respect thereto;

 

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

 

(n)           All
Liquor Licenses (to the extent transferable);

 

(o)           All
insurance policies, all prepaid insurance premiums and all rights to the
benefits, coverages and proceeds under and from such insurance policies;

 

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

 

(q)           All
of Sellers’ books, records, files, documents and other written or electronic
materials relating to the Assets or the Business, except those related solely
to the Excluded Assets or the Excluded Liabilities.

 

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

 

6

 

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

 

ARTICLE II

PURCHASE PRICE OF ASSETS

 

Section
2.1.  Purchase Price.

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

(c)           Purchase Price in the Auction Sale.  In the event of the Auction Sale in which
Buyer agrees to act, and is approved by the Bankruptcy Court to act, as the
initial bidder, in addition to the assumption of the Assumed Liabilities set
forth in Section 2.2(a), the aggregate consideration for the Assets shall be an
amount equal to $76.4 million in cash (as may be adjusted pursuant to Section
2.1(f)) (the “Auction Cash Consideration”) and certain equity securities
of Real Mex as described in Section 2.1(d) (the “Auction Stock Consideration”).  Any plan of reorganization shall provide that
the cash shall be distributed as follows:

 

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

 

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

 

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

 

(d)           Subject
to Section 2.1(f), the Auction Stock Consideration shall consist of newly
issued equity securities of Real Mex, representing 10% of each class of Real
Mex’s equity securities (the “Auction Real Mex Equity Securities”)
including, but not limited to, warrants (or at Buyer’s option, in the case of
warrants exercisable for $.01 or less, the Auction Real Mex Equity Securities
issuable upon exercise of such warrants) and options (excluding unvested
management options and unvested restricted stock), calculated on a fully
diluted basis after consummation of the transactions contemplated by this
Agreement, to be issued to J.W. Childs pursuant to the terms and conditions set
forth in the plan of reorganization.  In
the event that the Auction Sale transaction is consummated pursuant to an asset
sale under Section 363 of the Bankruptcy Code, as opposed to a plan of
reorganization, the Auction Stock Consideration will be distributed to J.W.
Childs pursuant to an Order of the Bankruptcy Court or a liquidating plan of
reorganization or other distribution mechanism approved by the Bankruptcy
Court.

 

(e)           The
Cash Consideration shall be paid to the accounts designated pursuant to the
foregoing Sections 2.1(a)(i) to (iii) or 2.1(c)(i) to (iii), as applicable, at
Closing by wire transfer of immediately available funds.

 

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

 

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

 

(A)                              the consideration
paid to the General Unsecured Creditors pursuant to Sections 2.1(a)(ii) or
2.1(c)(ii), as applicable, shall be reduced

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

(h)           For
the avoidance of doubt, Buyer shall have no obligation to the Sellers under
this Section 2.1, including any obligation with respect to the funding of any
plan of reorganization, other than to provide the consideration as set forth
herein.

 

Section
2.2.  Assumed
Liabilities; Excluded Liabilities.

 

(a)           Effective
as of the close of business on the Closing Date, Buyer shall assume the
following liabilities and obligations of Sellers existing as of such time and
arising from the operation of the Business prior to or on the Closing Date (“Assumed
Liabilities”):

 

(i)                                     All
ordinary course post-petition current liabilities for trade, employee,
insurance, sales tax, gift certificates, real and personal property taxes and
accrued ordinary course post-petition current liabilities for general business
expenses of the type normally included in the line items titled “Accruals -
Auto Reverse”, “Accrued Utilities”, “Legal Accrued Expenses”, “Accounting and
Audit Accrued Expenses”, “Relocation Accrued Expenses”, “MIT Accrued Expenses”,
“Recruiting Accrued Expenses”, “Business Tax Payable”, “Percentage Rent
Payable”, “Gift Certificates Payable”, and “Income Taxes Payable - State” on
Sellers’ general ledger, including written but unpaid checks therefor, in each
case in the amount set forth on Schedule 1.2 hereto (which Schedule 1.2 will be
updated by Sellers as of the Closing) (provided that each time the Sellers
issue a check, the amount of the check is deposited into the applicable
Restricted Account), provided, that such assumed liabilities and accruals shall
not include any amounts for legal, accounting, financial advisory or other
expenses of Sellers in connection with the Chapter 11 Cases;

 

(ii)                                  All
liabilities, responsibilities and obligations under Assigned Contracts
(including any obligations to post letters of credit in lieu of security
deposits) and Sellers’ insurance policies, but excluding any obligation to
return any funds to Kemper Insurance Companies;

 

(iii)                               All
Severance Obligations and other liabilities to be assumed by Buyer pursuant to
Section 7.3;

 

10

 

(iv)                              All
Taxes arising from and after the Closing Date and otherwise assumed by Buyer pursuant
to Section 2.3 hereof;

 

(v)                                 All
liabilities, responsibilities, obligations, costs and expenses with respect to
claims arising in any way with respect to or as a result of the operation of
the Business or the ownership of the Assets on or after the Closing Date,
including, without limitation, any claim, action, suit, litigation, arbitration
or other proceeding or governmental investigation arising out of or
attributable to the operation of the Business or the ownership of the Assets on
or after the Closing Date; and

 

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

 

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

 

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

 

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

 

(d)           Except
for the Assumed Liabilities, Buyer shall not be subject to and shall not be
liable for, any liabilities or obligations of any kind or nature, whether
absolute, contingent, accrued, known or unknown, of Sellers, including without
limitation, the following (collectively, the “Excluded Liabilities”):

 

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

 

11

 

investigation involving
Sellers or any directors, officers, employees, agents or representatives
thereof, or any services provided on or prior to the Closing, regardless of
whether any such claim, action, suit, litigation, arbitration, proceeding or
investigation is made, brought or commenced prior to or after the Closing;

 

(ii)                                  Any
obligation or liability of Sellers for Taxes, except to the extent set forth in
Sections 2.2(a)(i) and (iv);

 

(iii)                               Any
legal, accounting, financial advisor or other expenses of Sellers in connection
with the Chapter 11 Cases, including the negotiation and consummation of the
transactions contemplated hereunder;

 

(iv)                              Any
obligations with respect to the Company Letters of Credit which are replaced
pursuant to Section 2.7;

 

(v)                                 Any
obligation or liability of Sellers to their respective shareholders or
Affiliates, including, without limitation, any liability or obligation to
Parent or J.W. Childs;

 

(vi)                              Any
obligation or liability arising from or related to the KERP other than pursuant
to the Severance Obligations;

 

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

 

(viii)                        Any
Non-Assumed Contracts; and

 

(ix)                                Any
obligation to return any funds to Kemper Insurance Companies.

 

Section
2.3.  Allocation
of Transfer Taxes; Fees.  To
the extent the transactions contemplated by this Agreement are not exempt under
Section 1146(c) of the Bankruptcy Code, Buyer, on the one hand, and Sellers, on
the other hand, shall each pay fifty (50) percent of all sales and transfer
taxes and all filing fees and documentary fees or taxes related to the recording
of all deeds and lease assignments, payable in connection with the purchase,
sale or transfer of the Assets to, and the assumption of the Assumed
Liabilities by, Buyer pursuant to this Agreement.  In addition, Buyer and Sellers shall each pay
fifty (50) percent of all filing fees in connection with any filing by the
parties required for the transactions contemplated by this Agreement under the
HSR Act.  Buyer and Sellers shall use
commercially reasonable efforts to minimize the amount of all the foregoing
taxes and shall cooperate in providing each other with any appropriate resale
exemption certifications, tax clearance certificates and other similar
documentation.  The party that is
required by applicable Law to make the filings, reports, or returns and to
handle any audits or controversies with respect to any of the foregoing taxes
shall do so, and the other party shall cooperate (and make reimbursement) with
respect thereto as necessary.

 

Section
2.4.  Tax
Treatment; Allocation of Purchase Price.  Buyer, Parent and Sellers acknowledge that
Buyer may elect to cause the transactions described herein to qualify as a
reorganization under Section 368(a)(1)(G) of the Code, and Parent and Sellers
will

 

12

 

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

 

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

 

Section
2.6.  Deposit.

 

(a)           In
the event of a Non-Auction Plan Sale, upon (i) the execution of this Agreement,
(ii) execution of an agreement among the Company, the Prepetition Lenders, the
Committee (subject to the Committee’s fiduciary duties) and J.W. Childs to
support, and use commercially reasonable efforts to pursue, confirmation of a
plan of reorganization incorporating the terms of this Agreement applicable to
the Non-Auction Plan Sale, and (iii) the filing of such plan of reorganization
and the accompanying disclosure statement consistent with the terms of this
Agreement and reasonably  acceptable to
Buyer, Buyer shall make an earnest money deposit (the “First Deposit”)
in the amount of Five Hundred Thousand Dollars ($500,000) into a segregated
account designated by Sellers (the “Segregated Account”), which account
and the contents thereof, including interest earned, shall not constitute
property of Sellers’ bankruptcy estates under Section 541 of the Bankruptcy
Code.  Buyer will deposit an additional
five hundred thousand dollars ($500,000) (the “Second Deposit” and
together with the First Deposit, the “Deposit”) into the Segregated
Account upon entry of an order of the Bankruptcy Court approving the disclosure
statement relating to such plan and the delivery of binding agreements to vote
in favor of and otherwise to support such plan signed by J.W. Childs, the
Prepetition Lenders, and the majority of the members of the Committee having voted
in favor of the plan of reorganization.

 

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

 

13

 

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

 

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

 

Section
2.7.  Replacement
of Letters of Credit.  Buyer
acknowledges and agrees that on or prior to the Closing that it shall replace
all Company Letters of Credit with replacement letters of credit of Buyer’s
financial institutions and, if required by the beneficiaries of such Company
Letters of Credit, bonds, indemnity agreements, cash collateral and similar
items (collectively, the “Replacement Letters of Credit”), which, in
each case, shall be acceptable to the beneficiaries of such Company Letters of
Credit and be effective to cause the release of Sellers and their financial
institutions from any and all liabilities related to such Company Letters of
Credit.

 

ARTICLE III

CLOSING

 

Section
3.1.  Date,
Time and Place of Closing. 
The consummation of the transactions contemplated hereby (the “Closing”)
shall take place at the offices of Kirkland & Ellis LLP in New York, New
York, commencing at 9:00 a.m. local time on the date as soon as practicable
following the satisfaction or waiver of all conditions to the obligations of
the parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective parties will take at the
Closing itself) as Buyer and Sellers shall mutually determine (the “Closing
Date”) in order that on the Closing Date the cash in the Restricted
Accounts together with vendor deposits and bond collateral approximates $4.7
million; provided, that if the Confirmation Order has not been entered on or
before December 21, 2004, then, subject to the terms and conditions hereof, the
Closing shall at Buyer’s request be held as early as possible during the week
of January 17, 2005.  The effective time
of the consummation of the transactions contemplated by this Agreement shall be
12:01 A.M. on the Closing Date.

 

14

 

Section
3.2.  Deliveries
by Sellers at Closing.  At the
Closing, and as provided by the Approval Order, Sellers shall convey, transfer,
assign, and deliver all of their right, title and interest in and to, and
possession of, the Assets to Buyer, and shall also deliver to Buyer the
following:

 

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

 

(b)           An
assumption agreement, in a form reasonably satisfactory to Buyer (the “Assumption
Agreement”), executed by the appropriate Sellers, pursuant to which Buyer
shall be assigned and shall assume the Assigned Contracts and the Assumed
Liabilities from Sellers;

 

(c)           limited
warranty deeds for transfer of all of the Owned Real Property in recordable
form, each in a form reasonably satisfactory to Buyer conveying insurable fee
simple title to all of the Owned Real Estate free and clear of all Liens except
Permitted Encumbrances;

 

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

 

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

 

(f)            Wire
transfer instructions regarding delivery of the Cash Consideration.

 

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

 

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

 

(b)           The
Real Mex Equity Securities;

 

(c)           The
Stockholders Agreement;

 

(d)           A
duly executed Assumption Agreement;

 

(e)           Certified
copies of the Certificate
of Incorporation  and  Bylaws
of Real Mex and Buyer, each as in effect as of the Closing Date;

 

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

 

15

 

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

 

Section
3.4.  Liquor
Licenses.  With respect to any
Liquor Licenses held by any of Sellers, liquor assets or liquor or other
alcoholic beverage inventory conveyed hereunder, Buyer and Sellers shall comply
with all applicable Laws.  As soon as
practicable (but in no event later than eighteen (18) days) after Buyer’s
receipt of an Order from the Bankruptcy Court approving Section 10.4 of this
Agreement, Buyer agrees to complete and file the liquor license transfer
applications with the applicable Governmental Entity.  The parties hereto shall cooperate in
executing and delivering any documentation necessary to effect the liquor
license transfer applications.  The
parties hereto acknowledge and agree that the Liquor Licenses for each
Restaurant shall be transferred upon the approval of the applicable
Governmental Entity (but no earlier than as of the Closing Date).  If, as of the Closing Date, Buyer has not
been able to obtain a liquor license from the applicable Governmental Entity
with respect to a Restaurant, subject to the terms and conditions of this
Agreement, the Closing shall occur with respect to such Restaurant and there
shall be no adjustment to the Purchase Price, and, to the extent permitted by
applicable Law, the parties shall enter into a mutually acceptable liquor
license management agreement or such other mutually acceptable agreement for
such Restaurant such that Buyer can legally sell alcoholic beverages at such
Restaurant and participate in the profits generated from such sales from and
after the Closing Date pursuant to such management agreement or such other
arrangement (a “Replacement Liquor License”).  Any such Replacement Liquor License shall be
for an initial period of three (3) months with one ninety (90) day extension so
long as Buyer is diligently attempting to obtain such liquor license as
reasonably determined by Sellers.  If the
applicable Governmental Entity fails to approve the transfer of any Liquor
Licenses before the expiration of such period of time, then, except as
otherwise agreed to by the parties hereto in writing, the failure shall not (i)
constitute a default by Sellers of this Agreement, (ii) affect or impair the
terms or conditions of this Agreement, or (iii) provide Buyer with any rights
or remedies to rescind, cancel or modify this Agreement or the transactions
contemplated hereby.

 

Section
3.5.  Deemed Consents and Cures.  For all purposes of this Agreement (including
all representations and warranties of Sellers contained herein), Sellers shall
be deemed to have obtained all required consents, as applicable, in respect of
the assignment of any Assumed Contract and all defaults thereunder shall be
deemed to have been cured if, and to the extent that, pursuant to the Approval
Order, Sellers are authorized to assume and assign any such Assumed Contract to
Buyer pursuant to Section 365 of the Bankruptcy Code, and Sellers have paid all
Cure Costs and have otherwise taken all actions required to cure such defaults
related thereto.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

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

 

Section
4.1.  Organization
and Power.  Each Seller (i) is
duly organized and validly existing under the Laws of its respective state of
incorporation; (ii) has the requisite

 

16

 

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

 

Section
4.2.  Authority.  Each Seller has all corporate power and
authority necessary to execute this Agreement and any ancillary agreements
hereto to which it is or will be a party (the “Ancillary Agreements”)
and, subject to the approval of the Bankruptcy Court, to perform its
obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby.  The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Sellers have been duly authorized by all
necessary corporate actions, and the execution and performance of the Ancillary
Agreements by Sellers will be authorized by all necessary corporate actions
prior to the Closing Date.  Subject to
Bankruptcy Court approval and entry of the Approval Order, this Agreement
constitutes, and upon execution of each of the Ancillary Agreements such
agreements will constitute, valid and binding obligations of Sellers,
enforceable against Sellers in accordance with their respective terms.  Notwithstanding anything to the contrary
contained herein, no provision of this Agreement is binding upon Sellers unless
and until this Agreement is approved by the Bankruptcy Court.

 

Section
4.3.  No Breach
or Conflict.  Except as set
forth on Schedule 4.3, neither the
execution, delivery nor performance of this Agreement and the Ancillary
Agreements, nor the consummation of the transactions contemplated hereby and
thereby, will (a) cause any Seller to breach in any material respect any
material Law or Order that is applicable to the Business, (b) conflict with or
result in a violation of Sellers’ Certificate of Incorporation or Bylaws, (c)
subject to the Approval Order, materially conflict with or result in a material
breach of or material default under any material Assigned Contract or give rise
to the termination of or acceleration of payment under any material Assigned
Contract, or (d) result in the creation of any material Lien (other than a
Permitted Encumbrance or any Lien incurred by Buyer as a result of the
transactions contemplated hereby).

 

Section
4.4.  The
Assets.

 

(a)           Attached
hereto as Schedule 4.4(a) is a complete and
accurate list of the Owned Real Property;

 

(b)           Attached
hereto as Schedule 4.4(b) is a complete and
accurate list of the Leased Real Property, the Real Property Leases and the
Subleases;

 

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

 

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

 

17

 

agreements or commitments identified on Schedule
5.6 as Rejected Contracts).  The
contracts listed on Schedules 4.4(b), 4.4(c) and 4.4(d)
hereto are the “Material Contracts”.

 

Section
4.5.  Financial
Information.

 

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

 

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

 

(c)           The
books and records of Parent and Sellers relating to the Business have been
maintained in accordance with applicable Laws, are complete and correct in all
material respects, and fairly and in reasonable detail reflect as of the dates
shown thereon all items of income and expense, and all assets, liabilities and
accruals of the Parent and Sellers in accordance with GAAP, and provide a fair
and accurate basis for the preparation of Seller Financial Statements.

 

Section
4.6.  Condition
of Assets.  The Equipment,
considered as a whole and not on an item by item basis, is in working
condition, commensurate with its age, taking into account reasonable wear and
tear.

 

Section
4.7.  Tangible
Assets; Ownership of Assets.

 

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

 

(b)           Except
as set forth on Schedule 4.7(b) hereto,
Sellers collectively have good title to, or valid leasehold interest in, the
tangible Assets.

 

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

 

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

 

18

 

Section
4.8.  Real
Property.

 

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

 

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

 

(c)           Except
as set forth on Schedule 4.8(c) hereto, no
proceedings are pending, or to Sellers’ knowledge, threatened, which would
reasonably be expected to cause any material change, redesignation,
redefinition or other modification of the zoning or use classification of, or
any building or environmental code requirement applicable to, any Real
Property.

 

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

 

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

 

19

 

of the Closing), or for which assessments relating to
any period prior to the Closing Date have been received.  Except as set forth on Schedule
4.10 hereto, to Sellers’ knowledge, there are no audits currently
pending with respect to any federal or state Tax returns of any Seller and no
Seller has received written notice of any claims by any governmental entity or
taxing authority with respect to the non-payment or underpayment of Taxes or
non-filing or incorrect filing of tax returns or reports.  No Seller has entered into any agreements
regarding Taxes with any Governmental Entity that have continuing effect, or is
subject to any ruling or other “determination” (as defined in section
1313(a) of the Code) that has continuing effect.

 

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

 

Section
4.12.  Employment
Matters.

 

(a)           No
employees of Sellers are on strike, nor to Sellers’ knowledge, are such
employees threatening to strike.  Sellers
have no knowledge that any labor union has recently attempted, or is presently
attempting, to organize Sellers’ employees into a collective bargaining unit,
and no group of Sellers’ employees is presently organized into a collective
bargaining unit. Sellers are not a party to any collective bargaining agreement
or a member of any multi-employer bargaining group.  Sellers are not engaged in any arbitration
pursuant to a labor agreement or in any Proceeding of any type before the
National Labor Relations Board (the “NLRB”).  To Sellers knowledge, there is  no threat of such arbitration or proceeding before the NLRB
and, to Sellers’ knowledge, no award or decision adverse to Sellers has been
issued by an arbitrator or the NLRB. 
Sellers are not a member of any pension, insurance or other employee
benefit plan that is subject to regulation under the Taft-Hartley Act.

 

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

 

(c)           Schedule
4.12(c) contains a list of all employee benefit plans (as such term is
defined in Section 3(3) of ERISA), and any other compensation or benefit plan,
arrangement, program or practice of Sellers providing benefits or compensation
to current or former employees, consultants, independent contractors or
contingent or leased workers (collectively, “Employee Benefit Arrangements”).  Sellers have established and operated all
Employee Benefit Arrangements in compliance in all material respects with all
material applicable Laws and the terms of each Employee Benefit
Arrangement.  Sellers do not maintain
and, in any period with respect to which any relevant statute of limitations
remains open, have not maintained, or incurred any liability, including without
limitation, any contingent liability, with respect to, an Employee Benefit
Arrangement that is subject to Title IV of ERISA or Section 412 of the Code,

 

20

 

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

 

Section
4.13.  Licenses
and Permits.

 

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

 

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

 

Section
4.14.  Environmental
Matters.  Except as set forth
on Schedule 4.14(a) hereto, to Sellers’
knowledge Sellers have not disposed of, released or caused the release of any
Hazardous Materials under or at the Real Property, which disposal or release
would constitute a violation of, or require notification to any governmental
agency pursuant to, any Environmental Law, except for such as would not have a
Material Adverse Effect on the business operated at the Real Property.  Except as set forth on Schedule
4.14(a) hereto, to Sellers’ knowledge, there are no underground
storage tanks for Hazardous Materials located on the Real Property.  Except as set forth on Schedule 4.14(b)
hereto, to Sellers’ knowledge, each Seller has at all times operated the Real
Property in material compliance with Environmental Laws.  To Sellers’ knowledge, none of Sellers has
received any written communication from any third party that alleges that any
Seller is not in compliance with any applicable Environmental Law.  To Sellers’ knowledge, except as set forth on
Schedule 4.14(c) hereto, Sellers have not
prepared or caused the preparation of any environmental reports, audits,
investigations or assessments of the Real Property (collectively, “Environmental
Reports”).

 

21

 

Section
4.15.  Intellectual
Property.

 

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

 

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

 

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

 

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

 

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

 

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

 

22

 

Section
4.16.  Franchising.

 

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

 

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

 

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

 

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

 

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

 

(f)            Except
as set forth on Schedule 4.16(f) hereto, to
Sellers’ knowledge, each Franchise Agreement and Development Agreement is in
full force and effect; and each constitutes the legal, valid, binding and enforceable
obligation of Sellers, and to Sellers’ knowledge, the other parties thereto.

 

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

 

23

 

Section
4.18.  Broker or
Finder.  Except as set forth
on Schedule 4.18 hereto, no person or entity assisted in or brought
about the negotiation of this Agreement, or the subject matter of the
transactions contemplated herein, in the capacity of broker, agent or finder or
in any similar capacity on behalf of Sellers or Parent.

 

Section
4.19.  Disclaimer
of Other Representations and Warranties; Schedules.

 

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

 

(b)           Any
information disclosed in one section of the schedules shall be deemed to be
disclosed in each other section of the schedules if the relevance of such
information to such other section of the schedules is reasonably apparent.  Certain information set forth in the
schedules hereto may be included solely for informational purposes and may not
be required to be disclosed pursuant to this Agreement.  The disclosure of such information shall not
be deemed to constitute an acknowledgment that such information is required to
be disclosed in connection

 

24

 

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

 

ARTICLE V

COVENANTS OF SELLERS

 

Parent and Sellers covenant
and agree as follows:

 

Section
5.1.  Conduct
of Business Before the Closing Date. 
Except as set forth on Schedule 5.1, without the prior written consent
of Buyer between the date hereof and the Closing Date, Parent and Sellers shall
not, except as required or expressly permitted pursuant to the terms hereof or
of any Ancillary Agreement, (i) take any action to alter the operation of or
make any payments out of the Professional Fees Account other than in the
ordinary course consistent with past practice, (ii) accelerate the payment of
any Administrative and Exit Costs in a manner that is inconsistent with past
practice, (iii) take any action to alter the operation of the asset sales
account or deposit proceeds of any assets sold after the date hereof in the
asset sales account (it being understood that Sellers shall segregate the
proceeds from asset sales after the date hereof in a separate account and such
proceeds shall be Assets), (iv) take any action to alter the operation of the
sales tax, payroll, and accounts payable restricted accounts (together, the “Restricted
Accounts”) or to recover deposits from vendors or cash collateral posted
against bonds, (v) make any material change in any of the Assets, the Material
Contracts or the Liquor Licenses, or (vi) enter into any transaction outside
the ordinary course of business consistent with past practice.  Without limiting the foregoing, Sellers shall
conduct the Business in substantially the same manner as conducted on the date
of this Agreement.

 

Section
5.2.  Access to
Information.

 

(a)           Sellers
shall afford Buyer, its counsel, financial advisors, auditors, lenders,
lenders’ counsel and other authorized representatives reasonable access for any
purpose consistent with this Agreement, including, without limitation, in
connection with obtaining the financing for the transactions contemplated
hereby, and including access to information regarding the payment of any cure
amounts under the Assumed Contracts, from the date hereof until the Closing and
for a reasonable period after the Closing, during normal business hours, to the
offices, properties, books, employees, advisors and records of Sellers with
respect to the Assets, the Business, the Assigned Contracts and the Assumed
Liabilities, subject to Buyer’s obligations regarding the confidentiality of
such information as set forth in Section 7.2 hereof; provided,
however, that such access shall be arranged
in advance by Buyer with Sellers and shall be scheduled in a manner and with a
frequency calculated to cause the minimum disruption of the business of
Sellers.

 

(b)           From
the date hereof until the Closing, Sellers will consult with Buyer and give
Buyer’s views reasonable consideration regarding Sellers’ management of the
Business and will cooperate, as appropriate and reasonable, with Buyer in
preparing for an efficient integration of the Business with the operations of
Real Mex.  Sellers will permit Buyer’s
representatives to meet with Sellers’ employees to discuss Buyer’s future plans
for the Business.

 

25

 

(c)           Sellers
shall at Buyer’s request and expense request its accountants to perform such
procedures on its financial statements as may be necessary in connection with
Buyer’s financing for the transaction (i.e., a review report or a comfort
letter).

 

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

 

Section
5.3.  Further
Assurances.  Subject to the
terms and conditions of this Agreement, Sellers will use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
the Ancillary Agreements and the other documents and instruments to be
delivered pursuant hereto.

 

Section
5.4.  Intellectual
Property Matters.  Prior to or
in connection with the Closing, Sellers shall cause its Affiliates to execute
and deliver such instruments and take such actions as necessary or reasonably
requested by Buyer to effect or consummate the transfer of any Intellectual
Property owned by such Affiliates which relate to the Concepts.

 

Section
5.5.  Cooperation.  Subject to the terms and conditions of this
Agreement, Sellers shall use their commercially reasonable efforts to cause, to
the extent within Sellers’ reasonable control, the conditions set forth in
Section 8.2 to be satisfied and to facilitate and cause the consummation of the
transactions contemplated hereby. 
Sellers shall use commercially reasonable efforts to file the disclosure
statement with respect to the plan of reorganization contemplated hereby by
October 20, 2004, shall request a shortened notice for the disclosure statement
hearing and shall otherwise use commercially reasonable efforts to ensure that
the confirmation hearing with respect to such plan is held on or before
December 21, 2004.

 

Section 5.6.  Assumed Contracts; Cure Amounts.

 

(a)           The
contracts and leases identified to be assumed on Schedule 5.6 hereto as
amended pursuant to the provisions of this Section 5.6 (which Schedule is based
upon Exhibit C to the Debtors’ Joint Plan of Reorganization dated as of July
22, 2004), shall be assumed by Sellers and assigned to Buyer in conjunction
with the plan of reorganization or Sale Motion, as applicable (collectively,
the “Assumed Contracts”).  The
contracts and leases identified to be rejected on Schedule 5.6 as
amended pursuant to the provisions of this Section 5.6, shall be rejected by
Sellers in conjunction with the plan of reorganization or Sale Motion, as
applicable (the “Rejected Contracts”).

 

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

 

26

 

(c)           Any
allowed unsecured claim (each an “Additional Claim”) arising as a result
of Buyer’s decision to designate additional Rejected Contracts after the date
hereof pursuant to this Section 5.6 that result in additional unsecured claims
against Sellers shall be paid on account of its Additional Claim from the payment
to be made to the General Unsecured Creditors under Section 2.1(a)(ii) or
2.1(c)(ii), as applicable, (the “General Unsecured Creditors’ Fund”),
and any holder of such Additional Claim, shall be a General Unsecured Creditor
to the extent of such Additional Claim. 
In the event that there are Additional Claims that result in additional
unsecured claims against Sellers, Buyer shall increase the amount payable
pursuant to Section 2.1(a)(ii) or 2.1(c)(ii), as applicable, to enable each
General Unsecured Creditor to receive the same percentage distribution (which
for purposes hereof shall be deemed to be 40%) that it would have received had
no Additional Claims arisen.

 

(d)           Buyer shall indemnify and hold
Sellers harmless from any and all costs, expenses and damages (including, but
not limited to, any working capital liabilities relating to a Leased Property
that is designated as a Rejected Contract pursuant to this Section 5.6) to the
extent they constitute allowed administrative expense claims not otherwise payable
or assumed by Buyer hereunder (the “Additional Rejection Costs”) arising
as a result of Buyer’s decision to designate additional Rejected Contracts
after the date hereof pursuant to this Section 5.6 and the amount payable
pursuant to Section 2.1(a)(iii) or 2.1(c)(iii), as applicable, shall be
increased by such amounts less the amount by which the Cure Costs payable by
Sellers are reduced, in each case as a result of Buyer’s decision to designate
additional Rejected Contracts pursuant to this Section 5.6.  Sellers shall use commercially reasonable
efforts to minimize the Additional Rejection Costs.

 

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

 

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

 

(g)           If
the Bankruptcy Court determines that adequate assurance of future performance
under any Assumed Contact has not been established,  such unexpired leases or contracts shall not be
assigned and Buyer shall indemnify Sellers and the General Unsecured Creditors
for any damages, costs or expenses arising in connection with the rejection
damage claim that results from rejection of such leases and/or contracts, in
accordance with the provisions of Section 5.6(c) and (d) above.

 

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

 

Section
5.7.  Bankruptcy
Court Approval and Related Matters.

 

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

 

27

 

authorizes a Non-Auction Plan Sale, within ten (10)
Business Days after such authorization, Sellers shall file a plan of reorganization
and accompanying disclosure statement incorporating the terms of, and otherwise
consistent with, this Agreement.  If the
Bankruptcy Court does not permit the Non-Auction Plan Sale to proceed, but
instead requires Sellers to proceed by an Auction Sale, Sellers shall use
commercially reasonable efforts to convince the Bankruptcy Court to approve
Buyer as the initial bidder in the Auction Sale.  If Buyer is approved as such initial bidder,
and if Sellers do not receive any offer for the Assets submitted in compliance
with such bidding procedures that is higher and better than that provided
herein pursuant to Sections 2.1(c) and (d) or if Buyer is otherwise the winning
bidder in the Auction Sale, then within three (3) Business Days after Buyer
notifies Sellers (such notice shall be given to Sellers within forty-eight (48)
hours of Buyer being deemed the winning bidder) whether it wishes Sellers to
seek approval of the sale of the Assets pursuant to a plan of reorganization or
a sale under Section 363 of the Bankruptcy Code, in either case incorporating
the terms of this Agreement, Sellers shall file, as requested, (i) a plan of
reorganization and accompanying disclosure statement or (ii) a Sale Motion, in
either case in form and substance reasonably  satisfactory
to Buyer and consistent with the terms of this Agreement.

 

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

 

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

 

(d)           Buyer
agrees to cooperate with Sellers in connection with furnishing information
pertaining to the satisfaction of the requirement of adequate assurance of
future performance including, but not limited to, as required under Section
365(f)(2)(B) of the Bankruptcy Code.

 

Section
5.8.  Restricted Accounts.  On the Closing Date, the amount of cash in
the Restricted Accounts together with vendor deposits and bond collateral shall
be no less than $4.7 million.

 

Section
5.9.  No Shop Provisions.  Immediately upon the execution and delivery
of this Agreement, Parent, Sellers and J. W. Childs will cease and cause their
officers, directors, advisors, agents and representatives to cease any and all
existing activities, discussions or negotiations with any parties with respect
to the sale of Sellers, the Assets or the Business.  Neither Parent, Sellers nor J.W Childs shall,
nor shall they permit any of their officers, directors, advisors, agents or
representatives to encourage, solicit or initiate any discussions with any
Person relating to any Acquisition Proposal, enter into any binding or
non-binding agreement or letter of intent with respect to an Acquisition
Proposal, or participate in any discussions or negotiations regarding any Acquisition
Proposal.  Parent, Sellers and J. W.
Childs shall notify Buyer in the event that they enter into negotiations
following the date of this Agreement with any bidder (without disclosing such
bidder’s name) or permit any potential

 

28

 

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

 

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

 

Section
5.11.  Notice  to  Claimants.  On or before the date that is
seven (7) days from the date hereof, the parties will negotiate in good faith
to agree to a list of parties to receive notice of any motion or pleading
seeking entry of the Approval Order in order to bar claims to the maximum
extent reasonably practicable taking into account the proposed timing of the
transaction, provided that if the parties are unable to agree, the matter will
be referred to the Bankruptcy Court for a final determination.

 

Section
5.12.  Franchise Agreement.  Sellers agree to use their commercially
reasonable efforts to enter into, prior to Closing, a written franchise
agreement between Sellers and CALMEX, Inc. regarding the Fuzio franchise in
Fresno, California.  Such agreement shall
be in substantially the same form as Sellers’ agreement with CALMEX, Inc. dated
January 30, 2002, regarding the Fuzio franchise in Modesto, California.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUYER

 

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

 

Section
6.1.  Organization
and Power.  Each of Real Mex
and Buyer (i) is duly organized and validly existing under the Laws of its
respective state of incorporation, (ii) has the requisite power and authority
to own its properties and assets, and to carry on the business in which it is
now engaged, and (iii) has the requisite power and authority to execute this
Agreement and any Ancillary Agreements to which it is a party and to consummate
the transactions contemplated hereby and thereby.

 

Section
6.2.  Execution
and Delivery Permitted.  Subject
to the expiration of the waiting period under the HSR Act and except as
provided in Schedule 6.3, the execution, delivery and performance of
this Agreement shall not: (i) violate or result in a breach of any term of Real
Mex’s or Buyer’s Certificate of Incorporation or Bylaws, result in a breach of,
or constitute a default under, any term in any agreement or other instrument to
which Real Mex or Buyer is a party, such default having not been previously
waived by the other party to any such agreement, or violate any Law or any
order, rule or regulation applicable to Real Mex or Buyer, of any court or of
any regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Real Mex or Buyer, or their respective
properties; or

 

29

 

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

 

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

 

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

 

30

 

and each class of debt securities held or guaranteed
(subject, in the case of guaranteed debt securities, to J.W. Childs
guaranteeing its pro-rata portion of such debt securities and such guarantee
being acceptable to the lenders) by BRS or its Affiliates or JCP (to the extent
such debt securities are issued to fund the transactions contemplated by this
Agreement) including, but not limited to, warrants (or at Buyer’s option, in
the case of warrants exercisable for $.01 or less, the Real Mex Equity Securities
issuable upon exercise of such warrants) and options (excluding unvested
management options and unvested restricted stock), calculated on a fully
diluted basis after consummation of the transactions contemplated by this
Agreement (as may be adjusted pursuant to Section 2.1(f)).

 

Section 6.5.  Financial Information.

 

(a)                                  Real
Mex has previously furnished to Sellers copies of (i) the audited consolidated
financial statements of Real Mex and its subsidiaries for the fiscal year ended
December 28, 2003 (the “Real Mex Audited Financial Statements”),
together with the reports thereon of Ernst & Young LLP, independent
certified public accountant and (ii) the unaudited consolidated financial
statements of Real Mex and its subsidiaries for the period from December 29,
2003 to June 27, 2004 (the “Real Mex Unaudited Financial Statements”
and, together with the Real Mex Audited Financial Statements, the “Real Mex
Financial Statements”).  These
financial statements, including in each case the notes thereto, have been
prepared in accordance with GAAP throughout the periods covered thereby and
fairly present the consolidated financial condition and results of operations
of Real Mex and its subsidiaries on the bases therein stated, as of the
respective dates thereof, and for the respective periods covered thereby,
subject in the case of the Real Mex Unaudited Financial Statements to normal
year-end adjustments and the absence of footnotes.

 

(b)                                 The
books and records of Real Mex and its Subsidiaries have been maintained in
accordance with applicable Laws, are complete and correct in all material
respects, and fairly and in reasonable detail reflect as of the dates shown
thereon all items of income and expense, and all assets, liabilities and
accruals of Real Mex and its Subsidiaries in accordance with GAAP, and provide
a fair and accurate basis for the preparation of the Real Mex Financial
Statements.

 

Section 6.6.  Legal Proceedings and Judgments.  There are no claims, actions, proceedings or
investigations pending or, to the knowledge of Real Mex or Buyer, threatened
against or relating to Real Mex or Buyer before any court or other governmental
entity acting in an adjudicative capacity, which individually or in the
aggregate would have a Material Adverse Effect on Buyer.

 

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

 

31

 

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

 

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

 

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

 

ARTICLE VII

COVENANTS OF BUYER

 

Section 7.1.  Buyer Performance.  Subject to the fulfillment of the conditions
set forth herein, Buyer hereby covenants and agrees to accept conveyance of the
Assets and the Business and assignment of the Assigned Contracts and to assume
and perform the Assumed Liabilities and to otherwise perform and fulfill all
other obligations with respect to the Assets and the Business as of and after
the Closing Date.

 

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

 

Section 7.3.  Sellers’ Employees.

 

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

 

32

 

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

 

(b)                                 Buyer
shall be responsible for all liabilities for severance payments to the
following persons (the “Severance Obligations”):

 

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

 

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

 

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

 

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

 

(v)                                 except
as set forth in Section 7.3(a) above, to any Employee (including, without
limitation, any Employee listed on Schedule 7.3(a) hereto)

 

33

 

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

 

(c)                                  Buyer
shall maintain employee records transferred to Buyer hereunder for a period of
not less than four (4) years and during that period shall afford Sellers
reasonable access to such records during Buyer’s normal business hours.  Buyer shall maintain the confidentiality of
such records and limit access thereto in a manner consistent with Buyer’s
treatment of its employee records.

 

(d)                                 Buyer
agrees with respect to Employees who accept Buyer’s offer of employment: (i) to
give such Employees credit under Buyer’s benefits plans, programs, and
arrangements, including credit for accrued vacation, for such Employees’ period
of service with Sellers to the extent that it would have been recognized under
Sellers’ plans as of the date hereof, provided that such credit shall only be
taken into account under any retirement plan, including without limitation any
tax-qualified plan maintained by Buyer, for purposes of determining such
Employees’ eligibility for participation and eligibility to satisfy any hours
of service requirement in order to receive an allocation of an employer
contribution for the plan year that includes the Closing Date; (ii) to use its
commercially reasonable efforts to provide coverage to such Employees under
Buyer’s health, medical, life insurance and other welfare plans (A) without the
need to undergo a physical examination or otherwise provide evidence of
insurability, (B) by taking into account the period of coverage under Sellers’
(or its Affiliates’) plans for purposes of applying any pre-existing condition
or similar limitations or exclusions, and (C) by applying and giving credit for
amounts paid for the plan year in which the Closing Date occurs as deductibles,
out of pocket expenses and similar amounts paid by individuals and their
beneficiaries.

 

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

 

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

 

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

 

34

 

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

 

Section 7.4.  Administration of Insurance Policies.

 

Except in the case of a
self-insured arrangement where such agreement is not required, contingent upon
the agreement of the issuing insurance company to accept instructions from
Buyer:

 

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

 

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

 

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

 

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

 

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

 

35

 

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

 

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

 

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

 

Section 7.9.   Bankruptcy Court
Approval and Related Matters.  Buyer
acknowledges and agrees to the covenants set forth in Section 5.7.

 

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

 

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

 

ARTICLE VIII

CONDITIONS TO CLOSING

 

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

 

(a)                                  All
representations and warranties of Sellers in this Agreement (i) that are not
qualified as to materiality shall be true in all material respects on and as of
the Closing as if made as of the Closing and (ii) that are qualified as to
materiality shall be true in all respects on and as of the Closing as if made
as of the Closing, (it being understood, however, that for purposes of this
sentence the accuracy of any representation or warranty that expressly speaks
as of the date of this Agreement or another date prior to this Agreement shall
be determined solely as of the date of this Agreement or such other date and
not as of the Closing), and Sellers shall have delivered to Buyer a certificate
to such effect dated as of the Closing Date;

 

36

 

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

 

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

 

(d)                                 Sellers
shall be willing and able to deliver all of the items required to be delivered
by them pursuant to Section 3.2 of this Agreement;

 

(e)                                  No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated herein
shall be in effect;

 

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

 

(g)                                 On
behalf of themselves and their bankruptcy estates, Sellers shall have
irrevocably waived and committed not to proceed with any preference, avoidance
or other actions pursuant to Chapter 5 of the Bankruptcy Code including, without
limitation, claims, causes or actions against any Seller or against the
officers or directors of Sellers (or any one of them) in their capacities as
such.

 

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

 

(i)                                     The Joinder
Agreement between J.W. Childs and Buyer and the other parties thereto shall
have been completed and duly executed by all the parties thereto;

 

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

 

37

 

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

 

(k)                                  The
amount of cash in the Restricted Accounts together with vendor deposits and
bond collateral shall be no less than $4.7 million;

 

(l)                                     The
sale of the Assets contemplated by this Agreement to Buyer shall be approved by
the Bankruptcy Court in the Approval Order and entered on the docket by the
Clerk of the Bankruptcy Court, which as to the transactions contemplated by
this Agreement, is in form and substance as provided in Section 8.1(m)
below shall have been entered by the Bankruptcy Court and become a Final Order
by the deadlines described in Section 10.9(vi) of this Agreement.  Notwithstanding anything in Section 8.1(m)
to the contrary, nothing in this Agreement shall preclude Buyer from
consummating the transactions contemplated herein if Buyer, in its sole and
absolute discretion, waives the requirement that the Approval Order, or any
other Order, shall become a Final Order. 
No notice of such waiver of this or any other condition to Closing need
be given except to Sellers, the Committee and the Prepetition Lenders, it being
the intention of the parties hereto that Buyer shall be entitled to and is not
waiving (without any limitations thereto), the protections of the Bankruptcy
Code, the mootness doctrine, or any other statute or body of Law.  Nothing contained in this Section 8.1(l)
shall be construed as an obligation that Buyer waive the requirement that the
Approval Order, or any other Order, become a Final Order; and

 

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

 

For
the avoidance of doubt, it is understood that the receipt by Buyer of the equity
and debt financing contemplated by Section 6.7 hereof is not a condition
to Buyer’s obligations hereunder.

 

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

 

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

 

38

 

and Buyer and Real
Mex shall have delivered to Sellers a certificate to such effect dated as of
the Closing Date;

 

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

 

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

 

(d)                                 No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated herein
shall be in effect;

 

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

 

(f)                                    The
amount of cash in the Restricted Accounts together with vendor deposits and
bond collateral shall be no more than $4.7 million;

 

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

 

(h)                                 The
Replacement Letters of Credit shall have been posted by Buyer and Buyer shall
have delivered to Sellers satisfactory evidence of its assumption or
replacement of the GECC Mortgage.

 

ARTICLE IX

NO SURVIVAL

 

Section 9.1.  No Survival of Representations and Warranties.  None of the representations and warranties of
Sellers or Buyer contained in this Agreement or made in any other documents or
instruments delivered pursuant to this Agreement shall survive the Closing
hereunder.

 

ARTICLE X

MISCELLANEOUS

 

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

 

39

 

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

 

	
  (a)

  	
  If to Buyer

  	
  CKR Acquisition
  Corp.

  
	
   

  	
  or to Real Mex:

  	
  c/o Real Mex
  Restaurants, Inc.

  
	
   

  	
   

  	
  4001 Via Oro
  Ave, Ste. 200

  
	
   

  	
   

  	
  Long Beach, CA
  90810

  
	
   

  	
   

  	
  Attention:

  	
  Frederick F. Wolfe

  
	
   

  	
   

  	
  FAX:

  	
  (310) 834-2762

  
	
   

  	
   

  	
  E-Mail:

  	
  fwolfe@eltorito.com

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy
  to:

  	
  Dechert LLP

  
	
   

  	
   

  	
  1717 Arch Street

  
	
   

  	
   

  	
  4000 Bell
  Atlantic Tower

  
	
   

  	
   

  	
  Philadelphia, PA
  19103

  
	
   

  	
   

  	
  Attention:

  	
  Carmen J. Romano

  
	
   

  	
   

  	
  FAX:

  	
  (215) 655-2971

  
	
   

  	
   

  	
  E-Mail:

  	
  carmen.romano@dechert.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy
  to:

  	
  Dechert LLP

  
	
   

  	
   

  	
  30 Rockefeller
  Plaza

  
	
   

  	
   

  	
  New York, NY
  10112

  
	
   

  	
   

  	
  Attention:

  	
  Joel H. Levitin

  
	
   

  	
   

  	
  FAX:

  	
  (212) 698-3599

  
	
   

  	
   

  	
  E-Mail: joel.levitin@dechert.com

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  If to Sellers:

  	
  Chevys, Inc.

  	
   

  
	
   

  	
   

  	
  2000 Powell
  Street, Suite 300

  
	
   

  	
   

  	
  Emeryville,
  CA  94608-1886

  
	
   

  	
   

  	
  Attention:

  	
  Ron Maccarone

  
	
   

  	
   

  	
  FAX:

  	
  (510) 768-1562

  
	
   

  	
   

  	
  E-Mail:

  	
  ron.maccarone@chevys.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy
  to:

  	
  Kirkland
  & Ellis LLP

  
	
   

  	
   

  	
  777 South
  Figueroa Street

  
	
   

  	
   

  	
  Los Angeles,
  California 90017

  
	
   

  	
   

  	
  Attention:

  	
  Michael I.
  Gottfried

  
	
   

  	
   

  	
  FAX:

  	
  (213) 680-8500

  
	
   

  	
   

  	
  E-Mail:

  	
  mgottfried@kirkland.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy
  to:

  	
  Committee

  
	
   

  	
   

  	
  c/o Irell and
  Manella LLP

  
	
   

  	
   

  	
  840 Newport
  Center Drive, Suite 400

  
	
   

  	
   

  	
  Newport Beach,
  California 92660-6324

  
	
   

  	
   

  	
  Attention:

  	
  Jeffrey Reisner

  
	
   

  	
   

  	
  Phone:

  	
  (949) 720-0991

  
	
   

  	
   

  	
  FAX:

  	
  (949) 760-5200

  
	
   

  	
   

  	
  E-Mail
  jreisner@irell.com

  

 

40

 

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

 

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

 

Section 10.3.  Binding on Successors; Assignment.  All of the terms, provisions and conditions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, assigns and legal
representatives.  Subject to Bankruptcy
Court approval, none of Sellers, Parent or J.W. Childs may assign this
Agreement without the express written consent of Buyer.  Subject to Bankruptcy Court approval, neither
Buyer nor Real Mex may assign this Agreement without the express written
consent of Sellers, provided that Buyer may assign its rights but not its
obligations to any entity in which either Buyer or Real Mex directly or
indirectly owns or controls a 100% equity interest, provided that such
assignment does not adversely affect or relieve Buyer’s obligation to provide
adequate assurance of future performance with respect to any of the Assumed
Contracts.

 

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

 

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

 

Section 10.6.  Interpretation. 
The title of the sections of this Agreement and the Schedules attached
hereto are for convenience of reference only, and are not to be considered in
construing this Agreement or such Schedules. 
Whenever required by the context of this Agreement or the Schedules, the
singular shall include the plural and the masculine shall include the feminine
and vice versa.

 

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

 

41

 

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

 

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

 

Section 10.9.  Termination.

 

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

 

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

 

(ii)                                  By
either Buyer or Sellers, at their sole election, if the Closing shall not have
occurred on or prior to the Drop-Dead Date; provided
that Buyer or Sellers, as the case may be, shall not be entitled to terminate
this Agreement pursuant to this Section 10.9(a)(ii) if the failure of the
Closing to occur on or prior to such date results primarily from such party
itself breaching any representation, warranty or covenant contained in this
Agreement;

 

(iii)                               By
Buyer in the event of a material breach of this Agreement by Sellers that has
not been cured, or if any representation or warranty of Sellers that is not
qualified as to materiality shall have become untrue in any material respect,
or if any representation or warranty of Sellers that is qualified as to
materiality shall have become untrue in any respect, in any case such that such
breach or untruth is incapable of being cured by the Drop-Dead Date or shall
prevent consummation of the transactions contemplated hereby by or beyond the
Drop-Dead Date;

 

(iv)                              By
Sellers, in the event of a material breach of this Agreement by Buyer that has
not been cured, or if any representation or warranty of Buyer that is not
qualified as to materiality shall have become untrue in any material respect,
or of any representation or warranty of Buyers that is qualified as to
materiality shall have become material in any respect, in any case such

 

42

 

that such breach or untruth is incapable of being
cured by the Drop-Dead Date or will prevent consummation of the transactions
contemplated hereby by or beyond the Drop-Dead Date;

 

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

 

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

 

43

 

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

 

Section 10.10.                                  Public Announcements; Communications with Franchisees and
Public.

 

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

 

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

 

Section 10.11.                                  Jurisdiction; Disputes; Arbitration.

 

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

 

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

 

44

 

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

 

(c)                                  The
Federal rules of evidence shall control the admission of evidence into the
arbitration proceeding.  Any applicable
discovery limitations under the Federal Rules of Civil Procedure (and the local
rules of the Federal District Court located in New York) shall control the form
and volume of written discovery and oral depositions that each side may conduct
in preparation for the arbitration proceeding; provided,
however, that the arbitration panel shall
specify all other matters regarding the conduct of such written discovery and
oral depositions.

 

(d)                                 Any
dispute submitted for arbitration shall be referred to a panel of three
arbitrators.  The party or parties
submitting (“Submitting Party”) the intention to arbitrate (the “Submission”)
shall nominate one arbitrator.  Within 10
days of receipt of the Submission, the party or parties receiving the
Submission (“Answering Party”) shall nominate one arbitrator.  If the Answering Party fails to timely
nominate an arbitrator, then the second arbitrator shall be appointed by the
AAA in accordance with the Rules.  If the
arbitrator chosen by the Submitting Party and the arbitrator chosen by or
selected for the Answering Party can agree upon a neutral arbitrator within 15
days of the choice or selection of the Answering Party’s arbitrator, then such
individual shall serve as the third arbitrator. 
If no such agreement is reached, a third neutral arbitrator shall be
appointed by the AAA in accordance with the Rules.  The parties agree that they shall consent in
writing to an expedited proceeding under the Rules, to the full extent the AAA
can accommodate such a request.

 

(e)                                  The
ruling of the arbitrators shall be binding and conclusive upon all parties
hereto any other Person with an interest in the matter.

 

(f)                                    The
arbitration provision set forth in this Agreement shall be the sole dispute
resolution process regarding any controversy, Claim or other claim (including,
without limitation, whether any controversy, Claim or other claim is subject to
arbitration) arising out of or relating to this Agreement, or the breach
thereof (whether, in any case, involving (x) a party hereto, (y) their
transferees or (z) such party’s or transferee’s officers, directors,
shareholders, employees, representatives or agents); provided,
however, that (i) any of the parties to the
arbitration may request the Federal District Court located in New York, New
York (or any applicable New York state court) to provide interim injunctive
relief in aid of arbitration hereunder or to prevent a violation of this
Agreement pending arbitration hereunder (and any such request shall not be
deemed a waiver of the obligations to arbitrate set forth in this Section 10.11),
(ii) any ruling on the award rendered by the arbitrators may be entered as a
final judgment in a Federal District Court or any New York state court (and
each of the parties hereto irrevocably submits to the jurisdiction of such
court solely for such purposes) and (iii) application may be made by a party to
any court of competent jurisdiction wherever situated for enforcement of any
such final judgment and the entry of whatever orders are necessary for such
enforcement.  In any proceeding with
respect hereto, all direct, reasonable costs and expenses (including, without
limitation, AAA administration fees and arbitrator fees) incurred by the
parties to the proceeding shall, at the conclusion of the proceeding, be paid
by the party incurring same.

 

45

 

Section 10.12.                                  No Third Party Beneficiaries.  This Agreement shall not confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns.

 

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

 

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

 

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

 

46

 

ARTICLE XI

ALTERNATIVE STRUCTURE

 

Section 11.1.  Stock Transaction.

 

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

 

ARTICLE XII

DEFINITIONS

 

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

 

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

 

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

 

“Additional Rejection Costs” shall have the meaning set
forth in Section 5.6.

 

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

 

“Adverse” or “Adversely”
when used alone or in conjunction with other terms in this Agreement (including
without limitation “affect,” “change” and “effect”) such words shall mean, with
respect to Sellers, the Assets or the Business, as the context requires, any
event or occurrence which will (i) adversely affect the validity or
enforceability of this Agreement or any collateral document executed or
required to be executed pursuant hereto or thereto, or (ii) adversely affect
the business, operations, properties, financial condition, or results of
operation of the Assets or the Business, as the case may be, taken in each case
as a whole, or (iii) impair the ability of Sellers to fulfill their obligations
under the terms of this Agreement or any

 

47

 

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

 

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

 

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

 

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

 

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

 

“Ancillary
Agreements” shall have the meaning set forth in Section 4.2.

 

“Answering
Party” shall have the meaning set forth in Section 10.11(d).

 

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

 

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

 

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

 

“Assumed
Contracts” shall have the meaning set forth in Section 5.6.

 

“Assumed
Liabilities” shall have the meaning set forth in Section 2.3(b).

 

“Assumption
Agreement” shall have the meaning set forth in Section 3.2(b).

 

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

 

“Auction Real Mex Equity
Securities” shall
have the meaning set forth in Section 2.1(d).

 

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

 

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

 

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

 

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

 

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

 

48

 

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

 

“Business Day”
means any day other than Saturday, Sunday, or a day on which banking institutions
in New York, New York are authorized or obligated by Law or executive order to
close.

 

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

 

“Buyer Fees
and Expenses” means the fees and expenses of Buyer and Real Mex
incurred in connection with its various efforts to acquire the Business up to a
maximum of $1.5 million, including the fees and expenses of their attorneys,
accountants, financial consultants, investment bankers, and lenders.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Company
Letters of Credit” shall mean all letters of credit relating to the
Assets and the Business.

 

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

 

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

 

“Confidential
Information” shall have the meaning set forth in Section 7.2.

 

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

 

“Confirmation
Order” shall mean an order of the Bankruptcy Court confirming
Sellers’ plan of reorganization authorizing the sale of the Assets (including
the assumption and assignment of the Assumed Contracts) to Buyer consistent with
this Agreement in a form satisfactory to Buyer.

 

49

 

“Corporate
Employees” shall mean all employees of any Sellers or Parent who are
not located at the Restaurants.

 

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

 

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

 

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

 

“Development
Agreements” shall have the meaning set forth in Section 4.16(c).

 

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

 

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

 

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

 

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

 

“Environmental
Laws” shall mean any federal, state or local Law, statute, ordinance
or regulation imposing standards of conduct or otherwise relating to pollution
or protection of the environment.

 

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

 

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

 

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

 

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

 

“Excess Administrative and Exit
Costs” shall have
the meaning set forth in Section 2.1(f).

 

“Excluded
Assets” shall have the meaning set forth in Section 1.3.

 

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

 

50

 

“Excluded
Liabilities” shall have the meaning set forth in Section 2.2(b).

 

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

 

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

 

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

 

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

 

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

 

“Franchise
Agreements” shall have the meaning set forth in Section 4.16(b).

 

“Franchise
Restaurant” shall have the meaning set forth in Section 4.16(b).

 

“GAAP”
shall mean United States generally accepted accounting principles consistently
applied.

 

“GECC
Mortgage” shall mean the mortgage relating to the building for the
Restaurant located in Reno, Nevada, in an amount outstanding on the date hereof
equal to $890,000  .

 

“General
Unsecured Creditors” shall mean the pre-petition, general unsecured
creditors other than J.W. Childs and its Affiliates in the Chapter 11 Cases (excluding
the Chapter 11 case of the Parent).

 

“General
Unsecured Creditors’ Fund” shall have the meaning set forth in Section 5.7.

 

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

 

“Hazardous
Materials” shall mean any substance defined as a “hazardous substance,” “hazardous material,”
“hazardous waste,” “toxic
substance,” or any similar term under any Environmental Law and
shall include, without limitation, petroleum and petroleum products, asbestos
and polychlorinated biphenyls.

 

“Hired
Employee” shall have the meaning set forth in Section 7.3(g).

 

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

 

“Indemnity
Agreement” means the Indemnity Agreement among Buyer and J.W. Childs
dated as of the Closing Date.

 

“Intellectual
Property” shall mean all patents, trademarks, trade names, service
marks, trade dress, copyrights, applications for registration of any of the
foregoing, and brand names,

 

51

 

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

 

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

 

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

 

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

 

“Key Employee”
shall mean the Tier I and Tier II  employees as
defined in the KERP.

 

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

 

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

 

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

 

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

 

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

 

“Liquor
Licenses” shall have the meaning set forth in Section 4.13(b).

 

“Material
Adverse Change” or “Material Adverse Effect”
means with respect to Sellers, the Assets or the Business, as the context
requires, any event or occurrence which will or would reasonably be expected to
materially and adversely affect the business, operations, properties, financial
condition, or results of operation of the Assets or the Business, as the case
may be, taken in each case as a whole.

 

“Material
Contracts” shall have the meaning set forth in Section 4.4(d).

 

“Minor
Contracts” shall mean such contracts, agreements or commitments
terminable on thirty (30) days’ notice or having annual payment obligations of
less than $25,000 per contract.

 

“Net Administrative and Exit
Costs” shall have
the meaning set forth in Section 2.1(f).

 

52

 

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

 

“Non-Assumed Contracts” means (i) Sellers’ contracts or leases
that are listed on Schedule 5.6 (as amended from time to time in
accordance with Section 5.6 hereof) to be rejected pursuant to the
Bankruptcy Code; (ii) any real estate lease of Sellers for a Restaurant that is
not operating (iii) any of Sellers’ employment or service agreements with their
individual current or former employees, including the Employment Agreement
dated March 13, 2002, as amended, with Ronald P. Maccarone, and (iv) any
management or services agreement between any Seller and J.W. Childs or its
Affiliates.

 

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

 

“Non-Auction Real Mex Equity
Securities” shall
have the meaning set forth in Section 2.1(b).

 

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

 

“Owned Real
Property” shall mean each parcel of real property owned by a Seller
on which a Restaurant is located or which is otherwise used in connection with
the Business as set forth on Schedule 4.4(a)
hereto.

 

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

 

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

 

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

 

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

 

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

 

53

 

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

 

“Purchase
Price” shall have the meaning set forth in Section 2.1.

 

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

 

“Real
Property” shall mean collectively, the Owned Real Property and the
Leased Real Property.

 

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

 

“Replacement
Letters of Credit” shall have the meaning set forth in Section 2.8.

 

“Replacement
Liquor License” shall have the meaning set forth in Section 3.4.

 

“Restaurant
Employees” shall mean all employees of any Seller or Parent who are
located at the Restaurants.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Senior
Credit Facility” means that certain Senior Credit Facility, dated as
of September 16, 1998, by and among the Company, the Parent, the
Prepetition Lenders (or their predecessors in interest), and certain other
parties thereto.

 

54

 

“Severance
Obligations” shall have the meaning set forth in Section 7.3.

 

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

 

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

 

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

 

“Submitting
Party” shall have the meaning set forth in Section 10.11(d).

 

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

 

“Tax”
and “Taxes” means (i) all taxes, charges,
fees, levies, penalties or other assessments of any kind whatsoever imposed by
any federal, state, local or foreign taxing authority, including, but not
limited to, income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner, including any
interest, penalties or additions attributable thereto or (ii) liability for the
payment of any amounts of the type described in clause (i) above as a result of
being party to any agreement or any express or implied obligation to indemnify
or otherwise succeed to the liability of any other Person.

 

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

 

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

 

*  *  *

 

55

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on the day, month, and year first
above written.

 

	
    BUYER:

  	
   

  	
    SELLERS:

  
	
    CKR ACQUISITION CORP.

  	
   

  	
    CHEVYS, INC.

  
	
   

  	
   

  	
   

  
	
    By:

  	
  /s/ Frederick F.
  Wolfe

  	
   

  	
    By:

  	
  /s/ Ronald P.
  Maccarone

  
	
    Name:

  	
  Frederick F.
  Wolfe

  	
   

  	
    Name:

  	
  Ronald P.
  Maccarone

  
	
    Title:

  	
  President and
  CEO

  	
   

  	
    Title:

  	
  President and
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
    OTHERS:

  	
   

  	
   

  
	
    CHEVYS HOLDINGS, INC.

  	
   

  	
    CHEVYS OF GREENBELT, INC.

  
	
   

  	
   

  	
   

  
	
    By:

  	
  /s/ Ronald P.
  Maccarone

  	
   

  	
    By:

  	
  /s/ Ronald P.
  Maccarone

  
	
    Name:

  	
  Ronald P.
  Maccarone

  	
   

  	
    Name:

  	
  Ronald P.
  Maccarone

  
	
    Title:

  	
  President and
  CEO

  	
   

  	
    Title:

  	
  President and
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
    REAL MEX RESTAURANTS, INC.

  	
   

  	
    CHEVYS OF NEW YORK, INC.

  
	
   

  	
   

  	
   

  
	
    By:

  	
  /s/ Frederick F.
  Wolfe

  	
   

  	
    By:

  	
  /s/ Ronald P.
  Maccarone

  
	
    Name:

  	
  Frederick F.
  Wolfe

  	
   

  	
    Name:

  	
  Ronald P.
  Maccarone

  
	
    Title:

  	
  President and
  CEO

  	
   

  	
    Title:

  	
  President and
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
    J. W. CHILDS EQUITY PARTNERS L. P.

  	
   

  	
    CHEVYS OF PARSIPPANY, INC.

  
	
   

  	
   

  	
   

  
	
    By:

  	
  /s/ Glenn A.
  Hopkins

  	
   

  	
    By:

  	
  /s/ Ronald P.
  Maccarone

  
	
    Name:

  	
  Glenn A. Hopkins

  	
   

  	
    Name:

  	
  Ronald P.
  Maccarone

  
	
    Title:

  	
  Vice President

  	
   

  	
    Title:

  	
  President and
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
    KATMANDU CREATIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    By:

  	
  /s/ Ronald P.
  Maccarone

  
	
   

  	
   

  	
    Name:

  	
  Ronald P.
  Maccarone

  
	
   

  	
   

  	
    Title:

  	
  President and
  CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
    RIO BRAVO ACQUISITIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    By:

  	
  /s/ Ronald P.
  Maccarone

  
	
   

  	
   

  	
    Name:

  	
  Ronald P.
  Maccarone

  
	
   

  	
   

  	
    Title:

  	
  President and
  CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
    RBA KANSAS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    By:

  	
  /s/ Ronald P.
  Maccarone

  
	
   

  	
   

  	
    Name:

  	
  Ronald P.
  Maccarone

  
	
   

  	
   

  	
    Title:

  	
  President and
  CEO

  
									

 

 

	
    Acknowledged
  and agreed with respect to

  the provisions relating to the Committee

  and/or the General Unsecured Creditors

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
    OFFICIAL COMMITTEE OF

  UNSECURED CREDITORS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
    By:

  	
  /s/ Clint Beaty

  	
   

  	
   

  	
   

  
	
    Name:

  	
  Clint Beaty

  	
   

  	
   

  	
   

  
	
    Title:

  	
  Chairman of
  Unsecured Committee

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
    Acknowledged
  and agreed with respect to

  the provisions relating to the Prepetition

  Lenders

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
    THE ROYAL
  BANK OF SCOTLAND,

  PLC, as agent for the Prepetition Lenders

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
    By:

  	
  /s/ Andrew S.
  Weinberg

  	
   

  	
   

  	
   

  
	
    Name:

  	
  Andrew S.
  Weinberg

  	
   

  	
   

  	
   

  
	
    Title:

  	
  Senior Vice
  President

  	
   

  	
   

  	
   

  
											

 

 

LIST OF SCHEDULES AND EXHIBITS

 

Schedules that Correspond
to Sections

 

	
  Schedule 1

  	
  Restaurants

  
	
   

  	
   

  
	
  Schedule 1.2

  	
  Other Acquired
  Assets/Assumed Liabilities

  
	
   

  	
   

  
	
  Schedule 2.4

  	
  Allocation of
  Final Purchase Price

  
	
   

  	
   

  
	
  Schedule 4.3

  	
  No Breach or
  Conflict

  
	
   

  	
   

  
	
  Schedule 4.4(a)

  	
  Owned Real
  Property

  
	
   

  	
   

  
	
  Schedule 4.4(b)

  	
  Leased Real
  Property; Real Property Leases and Subleases

  
	
   

  	
   

  
	
  Schedule 4.4(c)

  	
  Equipment Leases

  
	
   

  	
   

  
	
  Schedule 4.4(d)

  	
  Other Material
  Contracts

  
	
   

  	
   

  
	
  Schedule 4.5(b)

  	
  Unaudited Pro
  Forma Statements of Income

  
	
   

  	
   

  
	
  Schedule 4.7(b)

  	
  Exceptions to
  Good Title: Tangible Assets

  
	
   

  	
   

  
	
  Schedule 4.8(a)

  	
  Exception to
  Good Title: Owned Real Property

  
	
   

  	
   

  
	
  Schedule 4.8(b)

  	
  Real Property
  Leases - Current In All Material Respects

  
	
   

  	
   

  
	
  Schedule 4.8(c)

  	
  Real Property
  Leases - No Proceedings Pending

  
	
   

  	
   

  
	
  Schedule 4.8(d)

  	
  Exceptions to
  Real Property Leases

  
	
   

  	
   

  
	
  Schedule 4.8(e)

  	
  Exceptions to
  Material Change of Zoning to Real Property Leases

  
	
   

  	
   

  
	
  Schedule 4.9

  	
  Litigation

  
	
   

  	
   

  
	
  Schedule 4.10

  	
  Taxes

  
	
   

  	
   

  
	
  Schedule 4.11

  	
  Material
  Contract Breaches

  
	
   

  	
   

  
	
  Schedule 4.12(b)

  	
  Compliance with
  Laws

  
	
   

  	
   

  
	
  Schedule 4.12(c)

  	
  Employee Benefit
  Plans

  
	
   

  	
   

  
	
  Schedule 4.13(a)

  	
  Licenses and
  Permits

  
	
   

  	
   

  
	
  Schedule 4.13(b)

  	
  Liquor
  Licenses/Violations

  
	
   

  	
   

  
	
  Schedule 4.14(a)

  	
  Environmental
  Matters - Releases / Storage Tanks

  
	
   

  	
   

  
	
  Schedule 4.14(b)

  	
  Environmental
  Matters - Non-Compliance with Law

  
	
   

  	
   

  
	
  Schedule 4.14(c)

  	
  Environmental
  Matters - Environmental Reports

  
	
   

  	
   

  
	
  Schedule 4.15(a)

  	
  Intellectual
  Property

  
	
   

  	
   

  
	
  Schedule 4.15(b)

  	
  Exceptions to
  Right to Use Intellectual Property

  
	
   

  	
   

  
	
  Schedule 4.15(c)

  	
  Exceptions to
  Non-Infringement of Intellectual Property by or Against Chevys

  

 

i

 

	
  Schedule 4.15(d)

  	
  Exceptions to
  Ownership of Intellectual Property

  
	
   

  	
   

  
	
  Schedule 4.15(e)

  	
  Defaults of
  Agreements to Use Intellectual Property

  
	
   

  	
   

  
	
  Schedule 4.16(a)

  	
  Exceptions to
  Franchise System

  
	
   

  	
   

  
	
  Schedule 4.16(b)

  	
  Franchisees/Franchise
  Systems

  
	
   

  	
   

  
	
  Schedule 4.16(c)

  	
  Development
  Agreements and Amendments

  
	
   

  	
   

  
	
  Schedule 4.16(d)

  	
  Compliance with
  Franchise Laws

  
	
   

  	
   

  
	
  Schedule 4.16(e)

  	
  Disputes with
  Franchisees

  
	
   

  	
   

  
	
  Schedule 4.16(f)

  	
  Exceptions to
  Franchise Agreements and Development Agreements

  
	
   

  	
   

  
	
  Schedule 4.17

  	
  Insurance
  Policies

  
	
   

  	
   

  
	
  Schedule 4.18

  	
  Broker or Finder

  
	
   

  	
   

  
	
  Schedule 5.1

  	
  Conduct of
  Business

  
	
   

  	
   

  
	
  Schedule 5.6

  	
  Assumed
  Contracts/Rejected Contracts

  
	
   

  	
   

  
	
  Schedule 6.3

  	
  Buyer Consents

  
	
   

  	
   

  
	
  Schedule 6.4

  	
  Real Mex
  Capitalization

  
	
   

  	
   

  
	
  Schedule 7.3(a)

  	
  Employees Not
  Offered Employment

  
	
   

  	
   

  
	
  Schedule 7.3(b)(i)

  	
  Company’s
  Severance Policy

  
	
   

  	
   

  
	
  Exhibit A

  	
  Joinder
  Agreement

  

 

iiPrepared and filed by St Ives Burrups

Exhibit 10.11

 FINDWHAT.COM

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

     THIS EXECUTIVE EMPLOYMENT AGREEMENT is made this 8th day of November 2004, (this “Agreement”) between FindWhat.com, Inc. (“FindWhat.com” or the “Company”), a Delaware corporation, and Brenda M. Agius (“Executive”).

Recitals

     A.      Executive is currently employed by FindWhat.com as its Chief Financial Officer on terms and conditions stated in an Employment Agreement between FindWhat.com and Executive, dated March 1, 2002.

     B.      The Company wishes to continue to employ Executive on the terms and conditions set forth in this Amended and Restated Employment Agreement.

Statement of Agreement

     In consideration of the foregoing, and of Executive’s employment, the parties agree as follows:

     1.      Employment. Executive’s employment with FindWhat.com shall be upon the terms and conditions hereinafter set forth to become effective upon execution of this Agreement (the “Effective Time”).

     2.      Duties. 

          (a)      Executive shall be employed:  (i) as the Chief Financial Officer of the Company, and (ii) to perform such other or additional duties and responsibilities consistent with Executive’s title(s), status, and position as the Board of Directors of FindWhat.com may, from time to time, prescribe.

          (b)      So long as employed under this Agreement, Executive agrees to devote full time and efforts exclusively on behalf of the Company and to competently, diligently and effectively discharge all duties of Executive hereunder.  Executive shall not be prohibited from engaging in such personal, charitable, or other nonemployment activities as do not interfere with full time employment hereunder and which do not violate the other provisions of this Agreement.  Executive further agrees to comply fully with all reasonable policies of the Company as are from time to time in effect.

          (c)      The Executive shall be based out of the Company’s Ft. Myers, Florida office. If the Company decides to move its operations more than 35 miles from its current offices in Fort Myers, Florida, Executive shall not be required to relocate and, to the extent the Executive cannot perform her duties hereunder as a result of such a move, her non-performance will not constitute Cause (as defined below). 

 
3.      Compensation.  As full compensation for all services rendered to the Company pursuant to this Agreement, in whatever capacity rendered, the Company will pay to Executive during the term hereof a minimum base salary at the rate of $225,000 per year (the “Basic Salary”), payable in accordance with the usual payroll practices of the Company.  The Basic Salary thereafter may be increased, but not decreased, from time to time, by the Board of Directors in connection with reviews of Executive’s performance occurring no less frequently than annually.  Executive will be entitled to receive incentive compensation pursuant to the terms of plans adopted by the Board of Directors or its
Compensation Committee from time to time.  The Board of Directors or its Compensation Committee, as applicable, shall review Executive’s performance on an annual basis and pursuant to the same review process employed by the Board of Directors for the Company’s other executive officers.  In connection with such annual review, the Executive may be entitled to receive additional stock option grants.  Such options will be granted, if at all, in the sole discretion of the Board of Directors or its Compensation Committee on terms and conditions they determine. Notwithstanding the foregoing or any provisions to the contrary in any stock option agreements outstanding as of the date hereof, if there is a change in control of the Company (as that term is used in the governing documents of any
stock option agreement), any stock options granted to Executive shall immediately fully vest and remain exercisable during the term as if the Executive were still employed by the Company.  Additionally, for stock options granted after the Effective Time and notwithstanding any provisions to the contrary in any stock option agreements or plans, if the Executive’s employment with the Company is terminated by the Company without Cause (as defined below) or by Executive for Good Reason (as defined below), any stock options granted to Executive shall immediately fully vest and remain exercisable during the term as if the Executive were still employed by the Company.

     4.      Business Expenses.  The Company shall promptly pay directly, or reimburse Executive for, all business expenses to the extent such expenses are paid or incurred by Executive during the term of employment in accordance with Company policy in effect from time to time and to the extent such expenses are reasonable and necessary to the conduct by Executive of the Company’s business and properly substantiated.

     5.      Benefits.  During the term of this Agreement and Executive’s employment hereunder, the Company shall provide to Executive such insurance, vacation, sick leave and other like benefits as are provided to other executive officers of the Company from time to time.    Executive will use her reasonable best efforts to schedule vacation periods to minimize disruption of the Company’s business.

     6.      Term; Termination.

          (a)      The Company shall employ the Executive, and the Executive accepts such employment, for an initial term commencing on the date of this Agreement and ending on the first anniversary of the date of this Agreement.  Thereafter, this Agreement shall be extended automatically for additional twelve-month periods, unless terminated as described herein.  Executive’s employment may be terminated at any time as provided in this Section 6.  For purposes of this Section 6, “Termination Date”  shall mean the date on which any notice period required under this Section 6 expires or, if no notice period is specified in this Section 6, the effective date of the
termination referenced in the notice.

2

          (b)      The Company may terminate Executive’s employment without Cause (as defined below) upon giving
30 days’ advance written notice to Executive.  If Executive’s employment is terminated without Cause under this Section 6(b), the Executive shall be entitled to receive (A) the earned but unpaid portion of Executive’s Basic Salary and pro rata portion of Executive’s bonus, if any, through the Termination Date; (B) over a period of twelve (12) months following such Termination Date (the “Severance Period”) an amount equal to the sum of her (i) Basic Salary at the time of Termination, plus (ii) the Termination Bonus (as defined below); (C) any
other amounts or benefits owing to Executive under the then applicable employee benefit, long term incentive or equity plans and programs of the Company, which shall be paid or treated in accordance with Section 3 hereof and otherwise in accordance with the terms of such plans and programs; and (D) benefits, (including, without limitation health, life, disability and pension) as if Executive were an employee during the Severance Period.

          (c)      The Company may terminate Executive’s employment upon a determination by the Company that “Cause”  exists for Executive’s termination and the Company serves written notice of such termination upon Executive.  As used in this Agreement, the term Cause shall refer only to any one or more of the following grounds:

	 	
          (i)      commission of a material and substantive act of theft, including, but not limited to, misappropriation of funds or any property of the Company;

	 	 
	 	
          (ii)      intentional engagement in activities or conduct clearly injurious to the best interests or reputation of the Company which in fact result in material and substantial injury to the Company;

	 	 
	 	
          (iii)      refusal to perform her assigned duties and responsibilities (so long as the Company does not assign any duties or responsibilities which would give the Executive Good Reason to terminate her employment as described in Section 6(e)) after receipt by Executive of written detailed notice and reasonable opportunity to cure;

	 	 
	 	
          (iv)      gross insubordination by Executive, which shall consist only of a willful refusal to comply with a lawful written directive to Executive issued pursuant to a duly authorized resolution adopted by the Board of Directors (so long as the directive does not give the Executive Good Reason to terminate her employment as described in Section 6(e));

	 	 
	 	
          (v)      the clear violation of any of the material terms and conditions of this Agreement or any written agreement or agreements Executive may from time to time have with the Company (following 30 days’ written notice from the Company specifying the violation and Executive’s failure to cure such violation within such 30 day period); 

3

 
 

	 	
          (vi)      Executive’s substantial dependence, as determined by the Board of Directors of the Company, on alcohol or any narcotic drug or other controlled or illegal substance which materially and substantially prevents Executive from performing her duties hereunder; or 

	 	 
	 	
          (vii)      the final and unappealable conviction of Executive of a crime which is a felony or a misdemeanor involving an act of moral turpitude, or a misdemeanor committed in connection with her employment by the Company, which causes the Company a substantial detriment.

In the event of a termination under this Section 6(c), the Company will pay Executive the earned but unpaid portion of Executive’s Basic Salary through the Termination Date.  If any determination of substantial dependence under Section 6(c)(vi) is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians appointed in the manner as specified in Section 6(d) of this Agreement.  If any determination of “Cause” is made under items 6(c), (i), (ii), (iii), (iv), (v), or (vii) which Executive contests, Executive shall have the opportunity, within 30 days of such determination, to personally appear in front of the Board of Directors and present her case to the Board of Directors and have the
Board of Directors reconsider the determination of Cause.

          (d)      Executive’s employment shall terminate upon the death or permanent disability of Executive.  For purposes hereof, “permanent disability,”  shall mean the inability of the Executive, as determined by the Board of Directors of FindWhat.com, by reason of physical or mental illness to perform the duties required of her under this Agreement for more than 120 days in any 360 day period. Upon a determination by the Board of Directors of FindWhat.com that Executive’s employment shall be terminated under this Section 6(d), the Board of Directors shall give Executive 30
days’ prior written notice of the termination.  If Executive disputes a determination
of the Board of Directors under this Section 6(d), the parties agree to abide by the decision of a panel of three physicians.  FindWhat.com will select a physician, Executive will select a physician and the physicians selected by FindWhat.com and Executive will select a third physician.  Executive agrees to make herself available for and submit to examinations by such physicians as may be directed by the Company.  Failure to submit to any examination shall constitute a breach of a material part of this Agreement.   In the event of termination due to death or permanent disability, the Company will pay Executive, or her legal representative, the earned but unpaid portion of Executive’s Basic Salary through the Termination Date and the earned but unpaid portion of any vested incentive
compensation under and consistent with plans adopted by the Company prior to the Termination Date.

          (e)      The Executive may terminate her employment for Good Reason (as defined below) upon giving 30 days advance written notice to the Company.  If Executive’s employment is terminated with Good Reason under this Section 6(e), the Executive shall be entitled to receive (A) the earned but unpaid portion of Executive’s Basic Salary and pro rata portion of Executive’s bonus, if any, through the Termination Date; (B) over a period of twelve (12) months after the Termination Date an amount equal to the sum of her (i) Basic Salary at the time of the Termination Date, plus (ii) the Termination Bonus (as defined below); (C) any other amounts or benefits owing to
Executive under the then applicable employee benefit, long term incentive or equity plans and programs of the Company, which shall be paid or treated in accordance with Section 3 hereof and otherwise in accordance with the terms of such plans and programs; and (D) benefits, (including, without limitation health, life, disability and pension) as if Executive were an employee during the Severance Period.  As used in this Agreement, the term “Good Reason”  means any one or more of the following grounds:

4

			
(i)	
a change in Executive’s title(s), status, position or responsibilities without Executive’s written consent, which does not represent a promotion from her existing status, position or responsibilities, despite Executive’s written notice to the Company of her objection to such change and the Company’s failure to address such notice in a reasonable fashion within 30 days of such notice;

			 	 
			
(ii)	
the assignment to Executive of any duties or responsibilities which are inconsistent with her status, position or responsibilities as set forth in Section 2 hereof, despite Executive’s written notice to the Company of her objection to such change and the Company’s failure to address such notice in a reasonable fashion within 30 days of such notice; 

			 	 
			
(iii)	
if there is a reduction in Executive’s Basic Salary;

			 	 
			
(iv)	
if there is a Change in Control of the Company and Executive terminates her employment during the “Window Period” (as defined below);

			 	 
			
(v)	
a breach by the Company of any material term or provision of this Agreement; or

			 	 
			
(vi)	
a relocation of the Company’s offices in Fort Myers, Florida to a location more than 35 miles from the current location.

          (f)      The Executive may terminate her employment for any reason (other than Good Reason) upon giving 30 days’ advance written notice to the Company.  If Executive’s employment is so terminated under this Section 6(f), the Company will pay Executive the earned but unpaid portion of Executive’s Basic Salary through the Termination Date and the earned but unpaid portion of any vested incentive compensation under and consistent with plans adopted by the Company prior to the Termination Date.

          (g)      In the event of the Executive’s death during the Severance Period, payments of Basic Salary under this paragraph 6 and payments under the Company’s employee benefit plan(s) shall continue to be made in accordance with their terms during the remainder of the Severance Period to the beneficiary designated in writing for such purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive’s estate.

          (h)      As used in this Agreement, the term “Bonus” shall mean any bonus, incentive compensation or any other cash benefit paid or payable to the Executive under any incentive compensation grant or plan, excluding signing bonuses and the Company’s stock incentive plan.  For purposes of this Agreement, the Executive’s “Termination Bonus” shall be equal to the amount of the Executive’s Bonus for the four (4) fiscal quarters immediately preceding the Termination Date, provided, however, if there has been a Change in Control of the Company the Termination Bonus shall be an amount equal to the greater of (i) the preceding calculation or (ii)
Executive’s Bonus for the four (4) fiscal quarters immediately preceding the Change in Control of
the Company.

5

          (i)      As used in this Agreement, the term “Window Period” shall mean the period of time after a Change in Control in which Executive can terminate her employment with the Company for any reason and the termination shall be deemed a termination for Good Reason for purposes of this Agreement.  The Window Period begins 180 days after a Change in Control and lasts for thirty (30) days.

          (j)       As used in this Agreement, the term “Change in Control” as a capitalized term shall mean the occurrence of any one of the following events: 

               (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more, excluding in the calculation of Beneficial Ownership securities acquired directly from the Company, of the combined voting power of the Company’s then outstanding voting securities; 

               (ii) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifty-one percent (51%) or more of the combined voting power of the Company’s then outstanding voting securities;

               (iii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Time, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the
Company’s stockholders was approved or recommended by a vote of the at least two-thirds (2/3) of the directors then still in office who either were directors
on the Effective Time or whose appointment, election or nomination for election was previously so approved or recommended; 

               (iv) there is a consummated merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving or parent equity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no person, directly or indirectly, acquired twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); or 

               (v) the stock holders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior
to such sale. 

6

For purposes of this Section 6, the following terms shall have the following meanings: 

               (i) “Affiliate”  shall mean an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended from time to time (the “Exchange Act”); 

               (ii) “Beneficial Owner”  shall have the meaning set forth in Rule 13d-3 under the Exchange Act; 

               (iii) “Person”  shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (1) the Company, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (3) an underwriter temporarily holding securities pursuant to an offering of such securities or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of Common Stock of the Company.

     7.      Indemnity.  

          (a)      The Company agrees that if the Executive is made a party, is threatened to be made a party or reasonably anticipates being made a party, to any formal or informal action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that she is or was a director, officer, manager, trustee, representative, consultant or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee, manager, trustee, representative, consultant or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive’s alleged action in an official capacity while serving as a director, officer, member, employee, manager, trustee, representative, consultant or agent, the Executive shall be promptly indemnified and held harmless by the Company to the fullest extent permitted by law against all cost, expense, liability and loss (including, without limitation, attorney’s fees and other professional fees and charges, judgments, fines, interest, expenses of investigation, ERISA excise taxes or other liabilities or penalties and other amounts paid or to be paid in settlement if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) reasonably incurred or suffered
by the Executive in connection therewith, or in connection with seeking to enforce her rights under this Section 7 and such indemnification shall continue as to the Executive even if she has ceased to be a officer, director, member, employee, manager, trustee, representative, consultant or agent of the Company or other entity and shall inure to the benefit of the Executive’s heirs, executors
 and administrators.

 7

 

          (b)      The Company hereof shall not indemnify Executive pursuant to Section 7(a):

	 	
          (i)      except to the extent the aggregate losses to be indemnified hereunder exceed the amount of such losses for which Executive is indemnified pursuant to any directors and officers liability insurance purchased and maintained by the Company;

	 	 
	 	
          (ii)      in respect to remuneration paid to Executive if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law;

	 	 
	 	
          (iii)      on account of any suit in which judgment is rendered against Executive for an accounting of profits made from the purchase or sale by Executive of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

	 	 
	 	
          (iv)      on account of Executive’s material breach of any provision of this Agreement; 

	 	 
	 	
          (v)      on account of Executive’s act or omission being finally adjudged to involve intentional misconduct, a knowing violation of law, or grossly negligent conduct; or

	 	 
	 	
          (vi)      if a final decision by a Court having jurisdiction in the matter shall determine that such indemnification is not lawful.

          (c)      If the Executive is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the cost, expense, liability and loss reasonably incurred or suffered by the Executive in the investigation, defense, appeal or settlement of any Proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Executive for the portion of the cost, expense, liability and loss to which the Executive is entitled.

          (d)      The indemnification provided in this Agreement is in addition to, and not in derogation of, any rights to indemnification or advancement of expenses to which the Executive may otherwise be entitled under the Certificate of Incorporation or Bylaws of the Company, any resolutions of the Board of Directors, any indemnification contract or agreement. 

          (e)      The Company shall advance all expenses incurred by the Executive in connection with the investigation, defense, settlement or appeal of any Proceeding (including amounts actually paid in settlement of any such Proceeding).  The Executive hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company as authorized hereby.  Any advances made hereunder shall be paid by the Company to the Executive within twenty (20) days following delivery of a written request therefor by the Executive
to the Company.

8

          (f)      Neither the failure of the Company (including the Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any Proceeding concerning payment of amounts claimed by the Executive under Section 7(a) that indemnification of the Executive is proper because she has met the applicable standard of conduct, nor a determination by the Company (including the Board, independent legal counsel or stockholders) that the Executive has not met such applicable standard of conduct, shall create a presumption that the Executive has not met the applicable standard of conduct.

          (g)      During the Executive’s employment with the Company and thereafter, the Company agrees to continue and maintain a directors' and officers' liability insurance policy covering the Executive on terms and conditions no less favorable to her in any respect (including, but not limited to, with respect to the period of coverage, scope, exclusions, amounts and deductibles) than the coverage then being provided to any other present or former director or senior executive of the Company.

          (h)      Executive agrees that Executive will reimburse the Company for all customary and reasonable expenses paid by the Company in defending any civil or criminal action, suit or proceeding against Executive in the event and only to the extent that it shall be ultimately determined that Executive is not entitled to be indemnified by the Company for such expenses under the provisions of Delaware law (or the laws of the Company’s state of incorporation at the time), federal securities laws, the Company’s By-laws or this Agreement.

     8.     Certain Additional Payments by
the Company.

          (a)      Anything in this Agreement to the contrary  notwithstanding, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (the “Payments”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Company shall pay to Executive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive’s adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made.
For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Notwithstanding the foregoing provisions of this Section 8(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 5% of
the portion of the Payments that would be treated as “parachute payments”  under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to Executive. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payments under Section 8, unless an alternative method of reduction is elected by Executive. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall
be reduced.

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     If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.

          (b)      Subject to the provisions of Section 8(a), all determinations required to be made under this Section 8(b), including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the “Determination”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder. The Gross-up Payment under this Section 8 with respect to any Payments shall be made no later than thirty (30) days following such Payment. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive’s applicable federal income tax return will not result in the imposition of a negligence or similar penalty. In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect. The Determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-up Payments which will not have been made by the Company should have been made
(“Underpayment”) or Gross-up Payments are made by the Company which should not have been made (“Overpayment”), consistent with the calculations required to be made hereunder. In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of Executive. In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of  the Company. Executive shall cooperate, to the extent his expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with
the Excise Tax.

10

     9.      Assignment.  This Agreement is personal to Executive and Executive may not assign or delegate any of her rights or obligations hereunder.  Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, executors, administrators, successors and assigns.

     10.      Waiver.  Neither any failure nor any delay by any party in exercising any right, power or privilege under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege.  To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation
of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

     11.      Notices.  Any and all notices required or permitted to be given under this Agreement will be sufficient and deemed effective three (3) days following deposit in the United States mail if furnished in writing and sent by certified mail to Executive at:

Brenda M. Agius

14490 Old Hickory Boulevard

Fort Myers, Florida 33912

and to the Company at:  

FindWhat.com

5220 Summerlin Commons Boulevard

Suite 500

Ft. Myers, Florida 33907

Attention:  Chief Executive Officer

11

or such subsequent addresses as one party may designate in writing to the other parties.

     12.      Governing Law.  This Agreement shall be interpreted, construed and governed according to the laws of the State of Florida.

     13.      Amendment.  This Agreement may be amended in any and every respect only by agreement in writing executed by both parties hereto.

     14.      Section Headings.  Section headings contained in this Agreement are for convenience only and shall not be considered in construing any provision hereof.

     15.      Entire Agreement.  With the exception of the Confidentiality, Assignment and Noncompetition Agreement, dated March 1, 2002, and any stock option agreements between Executive and the Company, this Agreement terminates, cancels and supersedes all previous employment or other agreements relating to the employment of Executive with the Company or any predecessor, written or oral, and this Agreement contains the entire understanding of the parties with respect to the subject matter of this Agreement.  This Agreement was fully reviewed and negotiated on behalf of each party and shall not be construed against the interest of either party as the drafter of this Agreement.  EXECUTIVE
ACKNOWLEDGES THAT, BEFORE SIGNING THIS AGREEMENT, SHE HAS READ THE ENTIRE AGREEMENT AND HAS THIS DAY RECEIVED A COPY HEREOF.  

     16.      Severability.  The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement or parts thereof.

     17.      Survival.  The last sentence of Section 3, and Sections 6, 7 and 8 of this Agreement and this Section 17 shall survive any termination or expiration of this Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

EXECUTIVE:

/s/
Brenda M. Agius          

Brenda M. Agius

FINDWHAT.COM

By: /s/ Craig A. Pisaris-Henderson          

       Craig A. Pisaris-Henderson

Its: Chief Executive Officer

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