Document:

ex101.htm

  

Exhibit 10.1

 

CUSTOM PROCESSING AGREEMENT

This PROCESSING AGREEMENT (“Agreement”), is made and entered into this 17 day of October, 2011 (“Effective Date”) by and between Z Trim Holdings, Inc., an Illinois company (“Customer”), with its’ principal office at 1011 Campus Drive, Mundelein, IL 60060  and AVEKA Nutra Processing, LLC, a Minnesota limited liability company (“ANP”) with its’ principal processing facilities at 830 Allamakee Street,  Waukon, IA 52172.

	
1.  

	
BACKGROUND

	
1.1.  

	
Customer is a multifunctional food ingredients company, which intends to sell its products beyond the food industry, including but not limited to industrial, pharmaceutical and cosmetic industries.

	
1.2.  

	
ANP, part of the AVEKA Group, is a toll particle processing company that specializes in the production and research and development of value added food ingredients.  As ANP is a start up business with no previous operating history, all financial commitments related to the Line of Credit made by, and obligations of, ANP under this Agreement are specifically guaranteed by its parent company or companies (as comprised of AVEKA Inc).  Aveka Inc. will execute the Guarantee attached here as Appendix A.

	
2.  

	
ENGAGEMENT

	
2.1.  

	
Customer hereby engages ANP to provide custom product processing services as further set forth herein and mutually agreed by the parties, subject to all of the terms and conditions of this Agreement.  ANP hereby accepts such engagement and agrees to make itself available and to render the services and delivery of the Product requested by Customer under this Agreement in a professional, confidential, high-quality and timely manner.

	
2.2.  

	
Immediately following the execution of this Agreement, Customer agrees to make available to ANP an interest (5.5%) bearing Line of Credit of $500,000 (inclusive of $10,000 that Customer lent to ANP as part of a good faith payment on the purchase of the Waukon facility) that ANP can draw upon to provide operating capital during the two year period following the date of this Agreement.  ANP will pay back the loan by providing discounts on production pricing as set forth in Section 2.2.3 below.

2.2.1. The Line of Credit will be made available to ANP as and for operating costs, and not for Capital Expenditures. The Line of Credit will be made available upon execution of this Agreement; provided, however, ANP may not draw down more than $75,000 in any given thirty (30) day period.  For the purposes of this Section 2.2.1, “Capital Expenditures” are defined as expenditures for equipment in excess of $5,000.00.

2.2.2. The pay back of the loan will begin upon the first to occur of the following:  (a) two years after the first draw by ANP (other than the $10,000 that was lent in May of 2011) or (b) the first month following Customer having ordered an amount of Product in excess of 80,000 lbs per month for three consecutive months.

2.2.3.  The pay back of the loan will take the form of a reduction in the purchase price of the Product.  For all Product ordered by Customer, Customer shall get a price reduction of $[*] per lb until the loan is repaid in full.

	
3.  

	
SERVICES TO BE PERFORMED BY ANP

	
3.1.  

	
Product Processing Specifications. ANP agrees to process the following material according to the following terms:

*Confidential treatment has been requested with respect to certain portions of this Exhibit.  Omitted portions have been filed separately with the SEC.

  

  

  

	
3.1.1.  

	
Material:   Initially manufacture Corn Z Trim and Oat Z Trim, and thereafter manufacture other products developed out of the raw materials used for manufacture of Corn Z Trim and Oat Z Trim as agreed by the parties; all such materials are collectively deemed “Product”.

	
3.1.2.  

	
Process:Multi-Step - The manufacture of Product will follow procedures that have been agreed to by both parties in writing.

	
3.1.3.  

	
Volumes:                      Monthly Average Volume: __100,000___lbs.

	
3.1.3.1.  

	
Minimum volumes: 40,000 lbs/month

	
3.1.3.2.  

	
Subject to a minimum payment of [*] (40,000_ lbs. of  Z Trim @ $[*]/lb.) once production has commenced and is capable of 40,000 lbs per month.  Such amount shall be invoiced by ANP to Customer regardless of whether Customer has ordered the minimum volume of Product to support such invoice.

	
3.1.3.3.  

	
Maximum volume: 1,000,000 lbs/month.

	
3.1.3.4.  

	
Production Start-up Phase:  Customer agrees to purchase all Product that meets specification during the production start-up phase up to 40,000 lbs per month.  The Start-up Phase is expected to be no more than a three month period of time beginning the date on which the first Product that meets the agreed upon product specifications (the “Specifications”) is produced at ANP’s plant.

	
3.1.4.  

	
Production Start Date:  Production is anticipated to start no later than June 30, 2012.

	
3.1.5.  

	
Shipment Date: Upon order receipt and release of product from quality assurance.  Customer will tell its customers that it has a 15 day lead time for the fulfillment of all orders.  ANP will use its commercially reasonable efforts to fulfill all of Customer’s requests, even if such requests for Product are shorter than the customary 15 day lead time.

	
3.1.6.  

	
Certification: Product will be processed in accordance with all the highest food Good Manufacturing Practices and will maintain good standing with respect to all applicable FDA Certifications. Where applicable, Products will be processed in accordance with Kosher OU and other certification standards, as reasonably requested by Customer.

 

 

	
3.1.7.  

	
Production Scheduling: Following the Start-up Phase, Customer will work with ANP to coordinate the product schedule to insure supply of Product in accordance with monthly volume requirements, not to be below 40,000 lbs per month.

	
3.1.8.  

	
Customer Forecasting:  Customer will supply a rolling 3 month non-binding forecast of product demand.  This forecast may be revised to allow for a 30 day lead time for ANP to adjust for demand change.  Customer shall place orders on a Purchase Order basis with a minimum commitment of 40,000 lbs per month.

	
3.1.9.  

	
Audits and Inspections: Customer will be given reasonable access during normal business hours to ANP’s facility for the purposes of manufacturing or financial audits and inspections relating to the Product with one day advance notice for inspections and five days advance notice for financial audits.

*Confidential treatment has been requested with respect to certain portions of this Exhibit.  Omitted portions have been filed separately with the SEC.

  

  

  

	
3.1.9.1.  

	
Should Customer initiate an independent financial audit to determine the costs of production of Product on a per lb. basis, Customer shall bear the reasonable up-front costs of such audit.  However, if the independent audit reveals that the costs of production of Product are greater than 10% less than what ANP is charging Customer, then ANP shall not only reimburse Customer for the difference in what was charged, but also for the reasonable costs of the independent audit. If the results of the audit show that the costs of production of Product are between 5 and 10% less than what ANP is charging Customer, then ANP shall only reimburse Customer for the difference in what was charged.  If the results of the audit show that the costs of production of Product are between 5 and 10% greater than what ANP is charging Customer, than ANP shall be entitled to be reimbursed by Customer for the difference in what was charged.

	
3.2.  

	
Rate. Customer shall pay ANP at the following rates for processing the Product:

	
3.2.1.  

	
Processing price per pound (lb.): See Appendix B for pricing details.

	
3.2.2.  

	
Packaging:  Customer will explicitly define the packaging requirements.  These requirements are shown in Appendix D.

	
3.2.3.  

	
Pallets: Pallets as specified by Customer.

	
3.2.4.  

	
Product Storage / Warehousing: ANP will provide up to 3 months warehousing for finished Product (that has passed QA specifications) requested by Customer pursuant to its rolling 3 month forecast at no charge.  Thereafter, ANP will charge Customer $4.50 per month per pallet as and for a warehousing fee for requested Product.

	
3.3.  

	
Term of Contract. The length of this contract is three (3) years, starting at the Effective Date.  Pricing will be reviewed after the first year of production and may be revised as mutually agreed upon by the parties.  At a minimum, pricing will be reviewed on an annual basis. The contract will automatically renew at the end of the above term for a two (2) year term unless there is a written notice given at least twenty-four months prior to the expiration date by either ANP or Customer.  Thereafter, the contract will automatically renew every year unless or until either party provides written notice at least six months prior to the new expiration date.  Either party may terminate this Agreement for cause, as set forth in paragraph 4.1 and Section 9 herein.

	
3.4.  

	
Expansion of Production:  In the event that the monthly market demand for Product exceeds the initial production capacity of 100,000 lbs of the ANP facility, then expansion of production will be considered and discussed.  This expansion may be discussed and planned at any time between Customer and ANP, and the expansion may be initiated by ANP in its own discretion or by agreement between Customer and ANP.  The financial and certification responsibility for the expansion of the facility will rest with ANP only.  In the event expansion of the facility is agreed upon, ANP must use its commercially reasonable efforts to obtain capital necessary to fund such expansion so as to increase production capacity up to 1,000,000 lbs of Product per month; provided, that ANP shall be under no obligation to incur any debt obligation in connection with the expansion.

	
3.4.1.  

	
First Right of Refusal for Expansion.  Customer agrees to provide ANP with the first right of refusal to build and operate further manufacturing plants for Customer up to a total capacity of 1,000,000 lbs of Product per month, under the same terms and conditions as set forth in this Agreement.

	
3.4.2.  

	
In the event Customer requires additional product beyond 100,000 lbs per month up to 1,000,000 lbs per month, Customer shall be required to provide ANP with written notice.  The written notice (the “Notice”) shall specify forecast and product requirements.

ANP shall have a period of seventy-five (75) days, from receipt of the Notice, within which to exercise its first right of refusal on the plant specified in the Notice.  Exercise of the option shall be made by written notice delivered to Customer.

Absent exercise of the option by ANP, Customer may then find manufacturing capacity elsewhere.

	
3.4.3.  

	
ANP will require Customer to sign a mutually agreed upon amendment to this contract to support any increased volumes as a result of the above described expansions.

 

	
3.5.  

	
Customer will furnish the following items to the ANP production facility by the agreed production starting time:

	
3.5.1.  

	
A Letter of Guarantee, in form and substance reasonably acceptable to ANP, for all incoming raw materials.

	
3.5.2.  

	
All raw food materials necessary for the manufacturing of the Product in volumes appropriate for production, or, in the alternative as set forth in 3.6 below, specifications for such raw materials to be procured by ANP.

	
3.5.3.  

	
A Certificate of Analysis, in form and substance reasonably acceptable to ANP, for the finished product to be used for release testing and Quality Assurance/Quality Control.

	
3.5.4.  

	
Copies of all special certification documents required for the Products, such as “Kosher”, “Organic”...etc.

	
3.5.5.  

	
Any Customer specific labels and batch or date code information to be printed on all packages in accordance with the Customer’s standard practice in addition to standard ANP labeling practices.  See Appendix C for product code specifications.

	
3.6.  

	
ANP Provision of Materials:

	
3.6.1.  

	
Customer may decide to have ANP procure raw materials and supplies for the production of Product.  When this is the case, ANP will procure raw materials and supplies from Customer approved sources.

	
3.6.2.  

	
ANP will provide a Letter of Guarantee, in form and substance reasonably acceptable to Customer, for all incoming raw materials.

	
3.6.3.  

	
All raw food materials necessary for the manufacturing of the Product in volumes appropriate for production.  Customer shall provide COA standards for all such raw materials and finished Product.

	
3.6.4.  

	
ANP will supply a Certificate of Analysis, in form and substance reasonably acceptable to Customer, for the finished product to be used for release testing and Quality Assurance/Quality Control.

	
3.6.5.  

	
Customer will supply any Customer specific labels and batch or date code information to be printed on all packages in accordance with the Customer’s standard practice in addition to standard ANP labeling practices.  See Appendix C for product code specifications.

	
3.7.  

	
Release of the product must meet the following conditions:

	
3.7.1.  

	
Product must pass all release specifications provided in section 3.5.3 or 3.6.4 before being shipped.

	
3.7.2.  

	
If Customer wishes ANP to ship Product before passing the release specifications, Customer must provide a written request for the release of any and all such Product.  The letter must specify the Product lot number and quantity.  The letter must also state that Customer is assuming full responsibility for shipping the Product before it passes the release specifications and releases ANP of any and all liabilities for the Product.

	
3.8.  

	
Product Records and Retains

	
3.8.1.  

	
Retention of records:  Batch records will be kept for a minimum of 3 years at the ANP facility.

	
3.8.1.1.  

	
If Customer would like to review specific run sheet records, a request may be made in writing or verbally.  ANP will provide requested records, electronically, within one business day of any such request.

	
3.8.2.  

	
Product retains:  Product retains will be kept for a minimum of 3 years at the ANP facility.

	
3.8.2.1.  

	
If Customer would like to review specific product retains, a request may be made in writing or verbally.  ANP will provide requested retains within five business days of any such request.

3.9 Change Control Process

3.9.1. The Parties agree that it will be mutually beneficial to continue to seek and implement ways to make the production process more efficient and less costly. To the extent that either Party, whether working individually or with the Other Party, believes that it has developed more efficient processes for the production of Products, the following Change Control Process shall be followed:

 

	
a.  

	
Customer is the final decision maker (approver) of Change Control Process, however, any approval after validation shall not be unreasonably withheld.

 

 

	
b.  

	
Change Control Process applies to, but not limited to, changes in Manufacturing Procedures, Process Equipment, Intermediate and Finished Products, Product Specifications, Material Sourcing, Packaging and Labeling, Processing Aids, Quality Assurance Requirements, Test Methods, Storage Requirements, and Shipping Requirements; or defining of such for new products and processes covered under this agreement.

 

	
4.  

	
PAYMENT TERMS

	
4.1.  

	
Invoices. ANP shall submit invoices to Customer after QA has approved Product for release up to 40,000 lbs per month.  Customer shall pay such invoices within 30 days following its receipt of the invoice.  Once Customer begins to order an amount of Product in excess of 40,000 lbs per month, ANP shall submit invoices as of the date in which Product is shipped and Customer shall pay such invoices within 30 days following its receipt of the invoice.  All such invoices shall reflect discounted pricing for loan repayment when applicable.  ANP reserves the right to require payments prior to shipment if, in ANP’s opinion the Customer’s financial condition or other circumstances do not warrant delivery on terms initially specified in the Agreement; however, this right shall not be enforceable until after such time as the Line of Credit (as set forth hereinabove) is repaid in full. All late payments shall accrue interest at the rate of one and one-half percent (1 1⁄2 %) per month until paid, or the maximum amount provided by law, whichever is less.  Customer shall pay any and all costs of collection including, without limitation, reasonable attorney’s fees, whether or not suit is instituted, incurred by ANP in the event collection of a delinquent balance is required.  ANP may terminate this Agreement upon thirty (30) days written notice in the event of a late payment which is not cured during the notice period.

	
5.  

	
DELIVERY

	
5.1.  

	
Delivery Terms: FOB Waukon, Iowa. All Product will be taken by Customer at ANP’s place of business at 830 Allamakee Street, Waukon, IA 52172.  The Customer assumes all risk of loss upon shipment of Product, and ANP shall have no further responsibility for the Products.  ANP shall have the right to withhold shipment of all Product pending receipt of any outstanding balance on Customer’s account.

	
5.2.  

	
Delivery to Final Customer:  Customer may request ANP to ship directly to their customers.

	
5.3.  

	
Title and Risk.  Title and risk for Product will pass upon shipment from ANP facility (FOB Waukon).

	
6.  

	
ACCEPTANCE AND INSPECTION

	
6.1.  

	
Acceptance of Product.  Customer shall have the right to inspect the Product in a reasonable manner within fifteen (15) days after delivery to final destination.  Customer shall promptly give ANP written notice of any material nonconformances within fifteen (15) days of delivery.  If Customer fails to provide written notice of any material nonconformance as provided hereunder, the Product shall be deemed to have been accepted, subject to any warranty covering the Product and shall pay for the goods in accordance with the terms of this Agreement.

	
6.1.1.  

	
Customer shall be responsible for and shall pay or reimburse ANP for all taxes, duties, assessments and other governmental charges, however designated, associated only with the purchase of the Product hereunder.

	
7.  

	
CONFIDENTIALITY

7.1  ANP and Customer recognize the secret and proprietary nature of certain information shared with each other, including without limitation product formulas, specifications, procedures, product volume, cost information, product destinations, customers, processing, research and manufacturing information (“Confidential Information”).  The disclosing party shall endeavor to mark all written disclosures of its own confidential information as “CONFIDENTIAL” and the receiving party shall mark as “CONFIDENTIAL” any writings made by it that contain any of the disclosing party’s confidential information; provided, that the failure of any such written disclosure or writing to be so marked shall not affect the confidentiality of such information.

Both parties shall keep Confidential Information received from the other party (or from any third party engaged by Customer, including the USDA) strictly confidential and shall not use, except as expressly provided for in this Agreement, or disclose to others such Confidential Information.  It is understood by this Agreement that ANP and the Customer’s involvement are also confidential and subject to the secrecy obligations contained herein.  Disclosure to employees shall be on a need-to-know basis only, and employees shall be advised of the secrecy obligations herein.

The secrecy obligations herein shall cease to apply to Confidential Information after the earliest date on which the receiving party provides the disclosing party with written evidence clearly establishing that such Confidential Information:  (a) has become generally known to the public. through no fault of the receiving party; or (b) was known to the receiving party and its value appreciated before it was obtained from the disclosing party; or (c) has been disclosed to the receiving party free of any obligation of confidentiality by a third party who has the right to disclose the same and who did not derive the information from the disclosing party.  The secrecy obligations contained herein shall survive the expiration or termination of this Agreement.

The parties each acknowledge that the Confidential Information which they receive from the other is the property of the disclosing party, and the receiving party has no claim of ownership to the Confidential Information of the other party.  At the written request of the disclosing party, the receiving party shall promptly return to the disclosing party any documents provided by the disclosing party containing any Confidential Information, and the receiving party shall segregate in a separate file or destroy any documents generated by the receiving party which contain Confidential Information of the disclosing party.

	
8.  

	
EXCLUSIVITY and INTELLECTUAL PROPERTY

	
8.1.  

	
Definitions:

Z-TRIM PROCESS:  This is defined as the process primarily described in the Inglett Patent (5,766,662) licensed to Customer and also includes any additional Customer owned or licensed patents or applications applicable to fiber processing existing prior to or developed during the term of this Agreement, improvements made at the Mundelein, IL facility as described in attached SOPs and work instructions, and any verbal or written description of the process provided by Customer personnel to ANP personnel.

Z-TRIM MATERIALS:  Z-TRIM MATERALS are defined as those materials produced by the Z-TRIM PROCESS.

FIELD:  This is defined as the use of any Z-TRIM MATERIAL for use in any manufacturing or application area including, but not limited to, the food, nutraceutical, pharmaceutical, industrial, or personal care industries.

	
8.2.  

	
ANP and Customer agree to exclusively work with each other on the manufacturing of Z-TRIM MATERIALS.  However, if ANP declines to expand its manufacturing plant by not exercising its right of first refusal as set forth in Section 3.4 above, this Section shall no longer apply.

	
8.3.  

	
In no event, during the life of this agreement and no less than 3 years after the termination of this agreement, shall ANP, its affiliates, parents, subsidiaries, assigns or the like, engage in any business venture that competes with Customer in the FIELD.

	
8.4.  

	
Intellectual Property.  The Parties recognize and agree that Customer is providing ANP with trade secrets owned by Customer and the right to practice patented technology to which Customer has the exclusive license.  Any improvements in, or new discoveries related to, Customer’s processes or products shall be the sole, exclusive property of Customer, irrespective of who conceived of such improvements or new discoveries. ANP, its affiliates, parents, and subsidiaries will have a royalty free license to use, outside the FIELD, any technology developed by ANP for the Customer project.

	
9.  

	
TERMINATION

	
9.1.  

	
Termination For Cause. A party may terminate this Agreement upon written notice to the other party if the other party has materially breached this Agreement and such breach has not been cured within thirty (30) days after actual receipt by the other party of a written notice specifying the particulars of the alleged material breach.

	
9.2.  

	
Termination for Bankruptcy. A party may terminate this Agreement upon written notice to the other in the event the other (1) becomes insolvent or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; (2) files a petition under any foreign, state, or United States bankruptcy act, receivership statute, or the like, as they now exist, or as they may be amended; (3) any third party files against it such a petition, or an application for a receiver of either party is made by anyone and such petition or application is not resolved favorably within sixty (60) days; or (4) discontinues its business.  In the event that ANP or its parent files for bankruptcy, Customer shall have the first right of refusal to purchase the assets of ANP at fair market value.

	
9.3.  

	
Termination due to Change in Control of Customer/Buy-Out Provision.  In the event that Customer experiences a Change of Control (as defined below), Customer may terminate this Agreement under the following conditions:

	
9.3.1.  

	
Customer must provide at least 60 days’ notice, or such notice that may be reasonably afforded under the circumstances, of any such anticipated Change of Control.

	
9.3.2.  

	
Customer shall pay ANP a one time buy-out fee (the “Buy-Out Fee”) upon the Change of Control equal to either: (a) an amount equal to the monthly profit expected to be made by ANP (20% above the cost to produce Z Trim Products) based on the best historical consecutive three month average of production by ANP, multiplied by 12 months, discounted to present value at 5%; or (b) the amount remaining to be paid on the SBA loan secured by ANP in order to purchase the Waukon property and production equipment placed therein, whichever is greater.

	
9.3.3.  

	
As soon as practicable, but not later than ten (10) days following the closing of the Change of Control, ANP shall prepare and deliver to Customer a statement (the “Proposed Buy-Out Statement”) setting forth ANP’s proposed calculation of the Buy-Out Fee.

	
9.3.4.  

	
ANP shall permit Customer to review all accounting records and all work papers and computations used by ANP in the preparation of the Proposed Buy-Out Statement.  If Customer does not give notice of dispute to ANP within ten (10) days of receiving the Proposed Buy-Out Statement prepared by ANP, the Proposed Buy-Out Statement prepared by ANP shall be deemed accepted by Customer and ANP and shall become the “Final Buy-Out Statement” and the Buy-Out Fee set forth on the Proposed Buy-Out Statement shall be conclusive and binding upon ANP and Customer for purposes of this Agreement.  If Customer gives notice of dispute to ANP within such 10-day period, Customer shall specify in its notice in reasonable detail the specific items that are in dispute (the “Disputed Items”), and Customer and ANP shall negotiate in good faith to resolve the Disputed Items.  Any items not in dispute at the end of such 10-day period shall be deemed to be final and binding on Customer and ANP.  If, after ten (10) days from the date notice of a dispute is given hereunder, Customer and ANP cannot agree on the resolution of the Disputed Items, the Disputed Items shall be referred to an independent public accounting firm acceptable to both ANP and Customer (the “Unrelated Accounting Firm”) to resolve the Disputed Items, whose decision as to such Disputed Items shall be conclusive and binding upon ANP and Customer for purposes of this Agreement.  The Proposed Buy-Out Statement shall be revised consistent with the resolution of the Disputed Items pursuant to this Section 9.3.4 and, as so revised, shall become the “Final Buy-Out Statement”.  The fees and expenses of the Unrelated Accounting Firm shall be shared one half by ANP and one half by Customer.

	
9.3.5.  

	
Customer shall pay to ANP by wire transfer of immediately available funds, the Buy-Out Fee within three (3) business days of the Customer’s acceptance (or deemed acceptance) of the Proposed Buy-Out Statement prepared by ANP or, if applicable, within three (3) business days of receipt of a determination of a resolution of all Disputed Items as provided for in Section 9.3.4.

	
9.3.6.  

	
"Change of Control" means: (i) a dissolution or liquidation of the Company; (ii) a sale of all or substantially all the assets of the Company; (iii) a merger or consolidation in which the Company is not the surviving corporation and in which beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors has changed; (iv) a reverse merger in which the Company is the surviving corporation but the shares of the common stock of the Company outstanding immediately before the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, and in which beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors has changed; or (v) an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or subsidiary of the Company or other entity controlled by the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors; .

	
9.4.  

	
Payments Immediately due. In the event of any termination of this Agreement, Customer shall immediately pay ANP for all services performed, all storage fees and reimburse ANP for all reimbursable expenses.  Further, ANP shall pay, within 60 days, to Customer any outstanding amounts owed on the operating Line of Credit as set forth in paragraph 2.2.  The day after termination of this Agreement, interest on any unpaid amounts (other than the operating Line of Credit) shall begin accruing interest at a rate of one and one-half percent (1 1⁄2 %) per month until paid, or the maximum amount provided by law, whichever is less.

	
9.5.  

	
Post-Termination. Upon termination of this Agreement for any reason, ANP shall immediately cease production of Customer’s Product, and ANP shall promptly ship to the Customer, at the Customer’s expense, all unused Customer-owned Product, materials, records and all Customer-owned equipment.  Customer agrees to pay for all processing charges and special materials purchased for said processing which ANP has provided in accordance with Customer orders and specifications, at prices set forth herein, and similarly all authorized work then in process upon its completion.  ANP hereby agrees that upon termination of this Agreement, it shall immediately discontinue any and all uses of Customer trade secrets, trademarks, trade names and artwork and shall promptly return any and all items upon which Customer trademarks or trade names appear to Customer.

	
9.6.  

	
Termination due to Breach by ANP.  In the event that ANP breaches this Agreement and fails to cure any such breach within 90 days after notice, Customer shall have the following remedies, as well as all other remedies available under applicable law:

	
a.  

	
The Parties acknowledge that Customer’s Proprietary Information and Intellectual Property is commercially and competitively valuable, and each party agrees that the Customer party would be irreparably injured by a breach of this Agreement by ANP and that Customer be entitled to equitable relief, including injunctive relief and specific performance, in the event of any breach of the provisions of this Agreement.  Such remedies shall not be deemed to be the exclusive remedies for a breach of this Agreement, but shall be in addition to all other remedies available at law or in equity.

	
b.  

	
The parties agree that any ANP breach of this agreement relating to a failure to supply product to Customer at levels equal to 25% less than the most recent three month trailing average of production could potentially cause damages to Customer that would be extremely difficult to quantify.  In the event that ANP breaches this Agreement by failing to supply product to Customer at levels equal to 25% less than the most recent three month trailing average of production, Customer shall have the following specific remedies:

	
i.  

	
Customer shall have the right to purchase the Waukon facility (and any equipment and improvements contained therein) at a price not to exceed the lesser of purchase price or fair market value for such equipment and property.

Customer shall be entitled to emergency injunctive relief so as to be able to assume control and operations of the plant so as not to put its entire business at risk.

	
10.  

	
REPRESENTATIONS AND WARRANTIES

	
10.1.  

	
General Representations and Warranties. Each party represents and warrants that (1) it has the power and authority to enter into and perform this Agreement; and (2) it will not breach any obligation to any third party in the entry into or performance of this Agreement.

	
10.2.  

	
Production and Quality Control. ANP shall produce all Products manufactured pursuant to this Agreement according to the Specifications and in material compliance with all federal, state and local laws.  ANP shall notify Customer of any process deviations or ingredients or finished products of questionable wholesomeness prior to distribution.  ANP shall also notify Customer in advance of any Products or raw materials ANP has reason to believe contain suspect foreign material, or are otherwise not in compliance with the Specifications.  Customer reserves the right to reject or direct further disposition of any such ingredients or Products at ANP’s sole cost.

	
10.3.  

	
Contamination & Guarantee. ANP warrants and guarantees that all Products produced or delivered to Customer are of the best quality, pure and free from material defects and at the time of shipment are (a) produced and packaged in accordance with the Specification; (b) in compliance with the laws, rules, regulations, requirements and various programs administered pursuant to the Federal Food, Drug and Cosmetic Act, as applicable, and any other applicable federal, state or local food and drug law then in effect; and (c) wholesome, not adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as applicable, and otherwise in compliance with all applicable federal, state and local laws.

	
10.4.  

	
Insurance. ANP shall maintain and keep in force adequate fire and extended coverage insurance covering the selling of all finished product, and the replacement value of all equipment, packaging materials and ingredients supplied by Customer.  This insurance shall include “all risk” coverage for Customer’s packaging materials and finished product.  ANP further agrees to carry Workers Compensation insurance as required by the laws of the State where ANP’s production plant(s) is/are located.  ANP also agrees to carry commercial general liability insurance with minimum limits of $5,000,000 for each occurrence, including coverage for products liability and operations liability with a $5,000,000 umbrella as supplementary protection.  Such policy or policies shall name Customer as an additional insured.  The policy or policies shall provide for thirty (30) days advance written notice to Customer of cancellation.  Certificates evidencing such insurance policies shall be provided to Customer upon request.

	
10.5.  

	
Product Recall. In the event that it is deemed necessary or appropriate by Customer, either in response to government action or otherwise, to recall any Products produced by ANP pursuant to this Agreement due to ANP’s negligence or other failure to comply with the terms hereof, ANP agrees to be responsible for all costs of such recall and recovery, including loss of Products, transportation of Products, and notices and communications necessary or appropriate to effecting such recall.

	
10.6.  

	
THE WARRANTIES SET FORTH ABOVE ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY ANP, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.    THE SOLE AND EXCLUSIVE REMEDIES FOR BREACH OF ANY AND ALL WARRANTIES AND THE SOLE REMEDIES FOR ANP’S LIABILITY OF ANY KIND (INCLUDING LIABILITY FOR NEGLIGENCE) ARE SET FORTH IN SECTION 9  IN NO EVENT SHALL ANP’S LIABILITY OF ANY KIND INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGE, EVEN IF ANP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE.

	
11.  

	
LIMITATIONS

	
11.1.  

	
Force Majeure. ANP shall not be liable to Customer for any failure or delay caused by events beyond ANP’s control, including without limitation, acts of God, war, revolution, disaster, civil riot, blockade or embargo, sabotage,  or any other act whatsoever, whether similar or dissimilar to those referred to herein.

	
11.2.  

	
This Agreement shall not imply any bailment relationship between the parties and shall not confer any rights upon either of the parties as a bailor or bailee. Customer shall assume all risk of loss related to the Product for events beyond ANP’s control as described in Paragraph 11.1.

	
12.  

	
GENERAL PROVISIONS

	
12.1.  

	
Notices. Any notices to be given hereunder by either party to the other may be affected by personal delivery in writing, by mail, or by overnight delivery, registered or certified, postage prepaid with return receipt requested, facsimile and/or e-mail.  Mailed and overnight delivery notices shall be addressed to the parties at the addresses appearing in the introductory paragraph of this Agreement, but each party may change such address by written notice in accordance with this Section 10.  Notices delivered personally will be deemed communicated as of actual receipt.  Mailed notices will be deemed communicated as of three days after mailing, and notices sent by overnight delivery will be deemed communicated as of the first business day after sending.

	
12.2.  

	
Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions.

	
12.3.  

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

	
12.4.  

	
Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions will nevertheless continue in full force without being impaired or invalidated in any way.

	
12.5.  

	
Parties in Interest.  This Agreement is enforceable only by ANP and Customer.  The terms of the Agreement are not a contract or assurance regarding compensation, continued employment, or benefit of any kind to any of ANP’s personnel assigned to Customer’s work or any beneficiary of any such personnel, and no such personnel, or any beneficiary thereof, shall be a third-party beneficiary under or pursuant to the terms of this Agreement.

	
12.6.  

	
Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, ANP and Customer, their successors and assigns.

	
12.7.  

	
Waiver. The failure of a party to exercise the rights granted to it upon the occurrence of any default of breach shall not constitute a waiver of any such right by such party upon a reoccurrence of the same or a similar breach or default or the occurrence of any other default or breach.

	
12.8.  

	
Governing Law.    Any suits brought hereunder shall be brought solely in the federal or state courts located in the county of the defending Party to any such suit (Hennepin County, Minnesota for ANP and Lake County, Illinois for Customer), and both parties expressly consent to the venue and jurisdiction of such courts.  This Agreement shall be governed by, subject to, and construed in accordance with the laws of the State in which the suit is filed, without regard to conflict of law principles.  In the event of litigation or arbitration, the prevailing party will be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.

	
12.9.  

	
 Assignment. Neither party may assign any of its rights and obligations herein to anyone without receiving the prior written permission of the other; such permission is not to be unreasonably withheld.

	
12.10.  

	
 Amendment. This Agreement may be amended provided that any such amendment will be binding upon the parties only if set forth in a writing executed by ANP and Customer.

	
12.11.  

	
 Entire Agreement of the Parties. This Agreement supersedes any and all agreements, either oral or written, between the parties hereto with respect to the rendering of services by ANP for Customer and contains all the covenants and agreements between the parties with respect to the rendering of such services in any manner whatsoever.  Each party to this agreement acknowledges that no representations, inducements, promised, or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, that are not embodied herein, and that no other agreement, statement, or promise not contained in this agreement shall be valid or binding.  Any modification of this Agreement or to a Work Order will be effective only if it is in writing signed by the party to be charged.

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

ANP:                                                                        CUSTOMER:

AVEKA Nutra Processing, LLC                                                                                   Z Trim Holdings, Inc.

By:____________________________                                                              By:_____________________________

Its: CEO                                                                Its:

Date:__________________________                                                              Date:___________________________

 

 

 

 

 

  

  

  

Appendix A: LETTER OF GUARANTEE BY AVEKA, INC.

 

 

 

 

FOR VALUE RECEIVED, the undersigned hereby absolutely and unconditionally guarantees prompt payment of the within Line of Credit up to $500,000.00 and agree to pay all reasonable cost of collection, legal expenses and solicitor fees, actually incurred or paid by the Z Trim Holdings, Inc. in the collection and/or enforcement of said amounts and the enforcement of this Guaranty.

 

 

No renewal or extension of said Line of Credit, no release or surrender of any security for said Line of Credit or this Guaranty, no release of any person primarily or secondarily liable on said Line of Credit (including ANP or guarantor), no delay in the enforcement of payment of said Line of Credit or this Guaranty and no delay or omission in exercising any right or power under said Line of Credit on this Guaranty shall affect the liability of the undersigned. The undersigned expressly waives presentment, protest, demand, notice of dishonour or default, notice of acceptance of this Guaranty and notice of any kind with respect to said Line of Credit or this Guaranty or the performance of the obligation under said Line of Credit or Guaranty.

 

 

________________________(SEAL)

 

 

Aveka, Inc.

 

 

By:___________________

 

 

Its:____________________

 

 

 

 

 

  

  

  

Appendix B: PRICING SCHEDULE

Initial Pricing for Product

	  	
(1)

	
Z Trim Fiber:

	  	
$[*] /lb.

	  	
(2)

	
Nano-Fiber (hemi-cellulose product):

	
$[t/b/d]/lb.

After one year of full production or after the quantity of production purchased by Customer is equal or greater to 80,000 lbs of product in any given three consecutive months (whichever comes first), pricing will be analyzed and adjusted to a cost plus 20% before tax profit model.  Pricing will be analyzed and adjusted (if necessary) thereafter upon the achievement of volumes in excess of 19,999 lbs for a period of three consecutive months over the previous point in which pricing was reviewed, or as otherwise agreed by the parties.  Customer reserves the right to audit ANP financial statements to verify cost structure.  In order to incentivize ANP to find ways to further reduce costs of production, Customer agrees to pay on a cost plus basis according to the following table:

	
ANP manuf of Z Trim

Cost/ lb.

	
Cost plus Percentage

	
Price/ lb. charged to Customer

	  
	  	  	  	  
	
 $       [*]

	
0%

	
 $       [*]

	  
	
 $       [*]

	
20%

	
 $       [*]

	  
	
 $       [*]

	
21%

	
 $       [*]

	  
	
 $       [*]

	
22%

	
 $       [*]

	  
	
 $       [*]

	
23%

	
 $       [*]

	  
	
 $       [*]

	
24%

	
 $       [*]

	  
	
 $       [*]

	
25%

	
 $       [*]

	  
	
 $       [*]

	
26%

	
 $       [*]

	  
	
 $       [*]

	
27%

	
 $       [*]

	  
	
 $       [*]

	
28%

	
 $       [*]

	  
	
 $       [*]

	
29%

	
 $       [*]

	  
	
 $       [*]

	
30%

	
 $       [*]

	  
	  	  	  	  

**This is a draft table and may need to be amended in order to reflect true costs.

The parties agree that, upon completion of a processing model for Nano-Fiber, they will review the cost inputs for such and negotiate a cost plus model similar to the Z Trim model above.

Engineering Services

At Customer’s request, process engineering services may be provided for up to 3 days per month and will be charged at a rate of $1500/day per engineer.  This fee includes travel expenses and will be charged to Customer on a 50% cash/50% Z Trim stock payment for the first year of this Agreement.  The stock would be valued based on a 10-day trailing average of the closing price of Z Trim stock as set forth on the Yahoo Financial website, at the bill date, which shall be the 30th day of the month after the month in which the services are provided.

*Confidential treatment has been requested with respect to certain portions of this Exhibit.  Omitted portions have been filed separately with the SEC.

 

 

 

 

  

  

  

Appendix C: Product Documentation Specifications

The following information will be provided by the Customer and will be attached to the contract:

Certificate of Analysis

	  	
Certification Documents

	  	
Product Code Specifications – Lot number method

 

 

 

 

  

  

  

	  Appendix D: Product Packaging Specifications

	  	
Box and bag requirements

	  	
Box Dimension specifications

	  	
Box weight tolerances

	  	
Accepted suppliers of container

	  	
Use stretch wrap with corner posts on plastic pallets

	  	
No double stacking of pallets

	  	
Different lots of Z Trim product may be included on same pallet, but a slip sheet needs to be placed between boxes of different lot origins.

	  	
With the exception of the above, no other slip sheets are usedExhibit 10.1

 

NATIONAL HARBOR RESTAURANT

 

ASSET PURCHASE AGREEMENT

 

by and among

 

GRANITE CITY RESTAURANT OPERATIONS, INC.

 

and

 

CR NH, LLC

 

and

 

RESTAURANT ENTERTAINMENT GROUP, LLC

 

and

 

ERIC SCHILDER

 

 

December 30, 2011

 

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (“Agreement”) is dated December 30, 2011, by and among Granite City Restaurant Operations, Inc., a Minnesota corporation (“Buyer”), CR NH, LLC, an Ohio limited liability company (“Seller”), Restaurant Entertainment Group, LLC, an Ohio limited liability company (“REG”), and Eric Schilder, resident of Marion County, Ohio (“Owner”).

 

INTRODUCTION

 

A.                                   Seller (CR NH, LLC), REG, Owner and Buyer have entered into a Master Asset Purchase Agreement dated November 4, 2011, as amended by that certain Amendment No. 1 dated December 21, 2011, and that certain Amendment No. 2 dated December 27, 2011 (as amended, the “Master Agreement”), pursuant to which Seller, REG, and Owner jointly with other parties agree to sell the assets of various Cadillac Ranch restaurants located in the U.S. to Buyer.

 

B.                                     Seller owns and operates the Cadillac Ranch located at 186 Fleet St., Oxon Hill, Maryland 20745 (the “National Harbor Restaurant”).

 

C.                                     Buyer desires to acquire substantially all of the assets used in the operation of the National Harbor Restaurant from Seller and to operate the National Harbor Restaurant.

 

D.                                    Seller desires to sell and Buyer desires to purchase the “Assets” hereinafter described, on the terms, conditions, covenants, negative covenants, exclusions and limitations set forth in this Agreement.

 

AGREEMENT

 

The parties, intending to be legally bound, agree as follows:

 

1.                                       Incorporation by Reference

 

1.1                                 INCORPORATION BY REFERENCE TO MASTER AGREEMENT

 

Except as otherwise provided in this Agreement, the parties hereto incorporate by reference as if fully set forth herein, and adopt, the Definitions and each of the Sections of the Master Agreement including the Schedules and applicable Exhibits thereto. Capitalized terms used herein and not otherwise defined shall have the meanings assigned them in the Master Agreement.

 

1.2                                 APPLICABILITY TO NATIONAL HARBOR RESTAURANT

 

For purposes of incorporation by reference to the Master Agreement, all references to Assets, Assumed Liabilities, Encumbrances, Excluded Assets, Permitted Encumbrances, and Liabilities in the Master Agreement shall refer to those Assets, Assumed Liabilities, Encumbrances, Excluded Assets, Permitted Encumbrances, and Liabilities of the National Harbor Restaurant and not of any other Restaurant.

 

1

 

2.                                       Sale and Transfer of Assets; Closing

 

2.1           ASSETS TO BE SOLD

 

Upon the terms and subject to the conditions set forth in this Agreement and the Master Agreement, at the Closing, but effective as of the Effective Time, Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of any Encumbrances other than Permitted Encumbrances, all of Seller’s right, title and interest in and to all of Seller’s Assets as described in Section 2.1 of the Master Agreement and used in the operation of the National Harbor Restaurant, including but not limited to Seller’s right to transfer the Seller’s Alcoholic Beverage License, license no. 17BLX 683, and Alcoholic Beverage Special Sunday “On Sale” License, license no. 17SL 683, both licenses issued by Prince George’s County Board of License Commissioners in the State of Maryland on June 1, 2011 (collectively, the “NH License”).

 

Notwithstanding the foregoing, the transfer of the Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Assets unless Buyer expressly assumes that Liability pursuant to Section 2.4(a) of the Master Agreement.

 

2.2           EXCLUDED ASSETS

 

Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere in this Agreement, the Excluded Assets as described in Section 2.2 of the Master Agreement are not part of the sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the property of Seller after the Closing.

 

2.3           CONSIDERATION

 

The consideration for the Assets will be (a) One Million One Hundred Seventy-Four Thousand Five Hundred Ninety-Nine Dollars and 53/100 Cents ($1,174,599.53) (the “Purchase Price”), (b) the value of the Inventories and petty cash purchased as set forth in Section 2.3(e) of the Master Agreement, and (c) plus or minus the Adjustment Amount described in Section 2.3(d) of the Master Agreement and the assumption of the Assumed Liabilities.  Upon the Closing, the Purchase Price plus the dollar amount of the Inventories and petty cash of Seller, as set forth and determined pursuant to Section 2.3(e) of the Master Agreement, will be disbursed by the Escrow Agent or Buyer’s lender, Fifth Third Bank, as set forth in the Second Amended and Restated Escrow Agreement between Buyer, Seller, REG, Owner, and the other parties named therein (the “Escrow Agreement”).

 

(a)                                  If upon the Closing, the Assets can be conveyed free of all Liabilities and Encumbrances, Nine Hundred Fifty-Eight Thousand Seven Hundred Ninety-Four Dollars and 37/100 Cents ($958,794.37) of the Purchase Price plus the dollar amount of the Inventories and petty cash of Seller, as set forth and determined pursuant to Section 2.3(e) of the Master Agreement (the “Initial Disbursement”) shall be released to Seller, subject to adjustment and reduction by the Adjustment Amount for disbursements to creditors of CR NH, LLC, as provided in Section 2.3(d) of the Master Agreement, and any other amounts reasonably determined by Buyer as necessary to discharge other liabilities of Seller.

 

2

 

(b)                                 After deduction for the Initial Disbursement, as reduced by the Adjustment Amount and any other payment by Buyer in respect to Liabilities and Encumbrances against the Assets, the remaining balance of the Purchase Price (the “Holdback Amount”), which shall be Two Hundred Fifteen Thousand Eight Hundred Five Dollars and 16/100 Cents ($215,805.16), shall be held in a separate escrow account with the Escrow Agent, and disbursements therefrom shall be made pursuant to the terms of the Escrow Agreement.

 

2.4           CLOSING

 

Section 2.6 of the Master Agreement is incorporated by reference herein with respect to the Closing.

 

2.5           CLOSING OBLIGATIONS

 

Section 2.7 and Section 7 of the Master Agreement is incorporated by reference herein.  In addition to Seller’s and REG’s obligations set forth in Section 2.7(a) of the Master Agreement, at the Closing under this Agreement, Seller and REG, as applicable, will be further obliged to execute and deliver the following:

 

(a)           a Management Agreement (the “Management Agreement”), in a form approved by the parties hereto and the Board of License Commissioners for Prince George’s County, in order to operate the National Harbor Restaurant pending receipt by Buyer of a new liquor license for the National Harbor Restaurant;

 

(b)           an Assignment, Assumption and Amendment of Lease, in a form approved by the parties hereto, for the Lease dated January 17, 2008, between NH-P Retail L.L.C. and Seller for the National Harbor Restaurant located at 186 Fleet St., Oxon Hill, Maryland 20745, which shall include amendments to the Lease for the National Harbor Restaurant satisfactory to Buyer and its counsel;

 

(c)           an agreement between Seller and REG terminating the Management Agreement between Seller and REG dated June 9, 2010;

 

(d)           an irrevocable assignment assigning all of REG’s interests in the Intellectual Property Assets to Buyer;

 

(e)           a bill of sale substantially in the form of Exhibit 2.5(e) for all of the Assets that are tangible personal property and used in the operation of the National Harbor Restaurant;

 

(f)            evidence that Seller (i) has added Buyer as an additional insured under Seller’s liquor liability insurance and (ii) holds worker’s compensation run off insurance;

 

(g)           evidence that REG and Seller have caused the following parties to cease and desist from using the Marks, Copyrights, Trade Secrets and Net Names: CR Sparks Ranch West, LLC; CR Las Vegas, LLC; Nashville Midnight Oil, LLC; Cincinnati F.S., LLC; and CR Cleveland, LLC, together with an assignment to Buyer from such parties of

 

3

 

all of their right, title and interest, including goodwill, in and to the Marks, Copyrights, Trade Secrets and Net Names in the form reasonably acceptable in form and substance to Buyer within sixty (60) days after Closing;

 

(h)                                 separate noncompetition agreements substantially in the form of Exhibit 2.5(h) executed by Seller, Owner, REG, Jon H. Field and Joel A. Field;

 

(i)                                     evidence of the Consents relating to the operation of the National Harbor Restaurant identified in Exhibit 7.3 of the Master Agreement, or the delivery of such Consents has been waived in whole or in part by Buyer;

 

(j)                                     an assignment by REG to Buyer of the Tempe trademark license agreement and notice from both to Tempe of the assignment;

 

(k)                                  delivery of an assignment substantially in the form of Exhibit 2.5(k) from Owner to REG of all his right, title and interest in an to any works of authorship created by him for use in or by the National Harbor Restaurant;

 

(l)                                     the financial statements required to be delivered pursuant to section 3.2 of this Agreement (previously delivered);

 

(m)                               if not previously delivered, a list of all licensed images on the walls, on menus or otherwise used in the National Harbor Restaurant and the source of the license/identity of the licensee;

 

(n)                                 a certificate executed by an officer of Seller and Owner as to the accuracy of their representations and warranties as of the date of this Agreement and as of the Closing in accordance with section 7.1 of the Master Agreement as to their compliance with and performance of their covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 7.2 of the Master Agreement;

 

(o)                                 a certificate of an officer of Seller and Owner certifying, as complete and accurate as of the Closing, attached copies of the Governing Documents of Seller, certifying and attaching all requisite resolutions or actions of Seller’s Owner approving the execution and delivery of this Agreement and the consummation of the Contemplated Transactions and certifying to the incumbency and signatures of the officers of Seller executing this Agreement and any other document relating to the Contemplated Transactions;

 

(p)                                 Seller’s sales tax return for sales taxes incurred through the Closing Date;

 

(q)                                 Releases of all Encumbrances on the Assets, other than Permitted Encumbrances, including releases of any liens on the NH License; and

 

(r)                                    Certificates dated as of a date not earlier than the tenth business day prior to the Closing as to the good standing of Seller executed by appropriate officials of the State of Ohio and each jurisdiction in which Seller is licensed or qualified to do business as a foreign limited liability company.

 

4

 

3.                                       Representations and Warranties of Seller, REG And Owner related to National Harbor Restaurant

 

Seller, Owner and REG represent and warrant, jointly and severally, to Buyer as follows:

 

3.1                                 LIQUOR LICENSE REPRESENTATIONS

 

(a)                                  The NH License is in good standing with the Prince George’s County Board of License Commissioners (“PG County Board”), in full force and effect, and can be used in Prince George’s County, Maryland.

 

(b)                                 The NH License authorizes and permits the retail sale of packaged liquor, wine, and beer and the consumption on premises of liquors, wines and beer.

 

(c)                                  The NH License has not been revoked or suspended, nor are there any threatened or pending revocations or suspensions by the PG County Board or other Governmental Body.  There are no pending administrative charges filed against the NH License by the PG County Board and there are no citations, contracts, lawsuits, delinquent surcharges or fees pending or affecting the NH License.  No event or circumstance exists that may constitute or result in a violation by Seller of any Legal Requirement that could impair the transferability of the NH License and Seller is in compliance with all Legal Requirements of the PG County Board or any other Governmental Body.

 

(d)                                 The NH License is free and clear of all Liens and Encumbrances, except as set forth on Schedule 3.1(d).

 

(e)                                  There are no unpaid liquor, wine or beer vendors, and no unpaid sales or surcharge taxes, except as set forth on Schedule 3.1(e).  All required sales tax reports and surcharge reports have been, or will be submitted to the appropriate agencies by time of Closing.

 

3.2                                 FINANCIAL STATEMENTS

 

(a)                                  Attached hereto as Schedule 3.2 are the following for each of Seller and REG: (i) an unaudited balance sheet as at June 30, 2011, and the related unaudited statement of income for the six-month period then ended, (ii) an unaudited balance sheet for the year December 31, 2010, and the related unaudited statement of income for the year then ended, (iii) an unaudited balance sheet as of September 30, 2011, and the related unaudited statement of income for the nine-month period then ended, and (iv) monthly unaudited financial statements through the Closing Date.  All of the financial statements of Seller delivered pursuant to this Section 3.2 and Section 3.4(a) of the Master Agreement are certified to by Seller’s chief financial officer and Owner, and all financial statements of REG delivered pursuant to this Section 3.2 and Section 3.4(a) of the Master Agreement are certified to by REG’s chief financial officer and Clint Field.  All of such financial statements fairly present the financial condition and the results of operations, changes in owner’s equity and cash flows of Seller and REG as at the respective dates of and for the periods referred to in such financial statements, all in

 

5

 

accordance with GAAP.  The financial statements referred to in this Section 3.2 reflect the consistent application of such accounting principles throughout the periods involved, except as otherwise disclosed in such financial statements.  The unaudited financial statements have been prepared from and are in accordance with the accounting Records of Seller and REG.

 

3.3                                 BULK TRANSFERS NOTICES

 

(a)                                  Schedule 3.3 represents the property to be transferred by Seller to Buyer, as required by the Bulk Transfers law, Section 6-101 et  seq. of the Maryland Uniform Commercial Code (“Bulk Transfers Law”).  Schedule 3.3 contains a list of the names and addresses of all of Seller’s creditors, along with the amounts owed to such creditors, and the names and addresses of any persons known to assert claims against Seller, even though such claims are disputed.  Schedule 3.3 contains the necessary information for Buyer to comply with the Bulk Transfers Law.

 

(b)                                 Seller has fully and accurately disclosed Seller’s creditors and the amounts due them as of December 26, 2011.

 

4.                                       Covenants of Seller Prior to Issuance to Buyer of Liquor License for National Harbor Restaurant

 

4.1                                 COOPERATION OF SELLER

 

Between the date of this Agreement and the approval of the PG County Board of the Management Agreement, Seller shall (and Owner shall cause Seller to) continue to employ all of National Harbor’s personnel subject to normal attrition, at which time such employees will be terminated and Buyer’s employees shall operate the National Harbor Restaurant.

 

Between the date of this Agreement and the issuance to Buyer of a liquor license for the National Harbor Restaurant, Seller shall (and Owner shall cause Seller to):

 

(a)                                  maintain Seller’s good standing and status as a limited liability company;

 

(b)                                 cooperate with Buyer and use its Best Efforts to assist Buyer in obtaining all necessary licenses that are required to operate the National Harbor Restaurant;

 

(c)                                  maintain all liquor and business licenses for the National Harbor Restaurant until issuance to Buyer of all necessary licenses that are required to operate the National Harbor Restaurant;

 

(d)                                 agree to any modifications to the Management Agreement as requested by the PG County Board; and

 

(e)                                  pay the flat rate management fee owed to Buyer under the Management Agreement from the profits of the National Harbor Restaurant.

 

6

 

5.                                       Owner’s Obligations and Guaranty

 

5.1                                 OWNER OBLIGATIONS

 

The liability of Owner hereunder shall be joint and several with Seller.  Where in this Agreement provision is made for any action to be taken or not taken by Seller, Owner jointly and severally undertakes to cause Seller to take or not take such action, as the case may be.  Without limiting the generality of the foregoing, Owner shall be jointly and severally liable with Seller for the indemnities set forth in Article 11 of the Master Agreement.

 

5.2                                 GUARANTY

 

(a)                                  Owner hereby absolutely, unconditionally and irrevocably guarantees (the “Guaranty”) full and prompt payment and performance when due of all of the obligations of Seller under this Agreement in accordance with the respective terms and conditions set forth herein (collectively, the “Obligations”).  This Guaranty is continuing and absolute, shall remain in full force and effect, and shall not be released, diminished, impaired or terminated until all of the Obligations have been indefeasibly paid, performed or otherwise satisfied, as applicable (including Buyer’s costs of collection, satisfaction or performance in connection with the enforcement of this Guaranty) finally and fully, notwithstanding, without limitation, the bankruptcy, insolvency or dissolution of Seller or the death or disability of Owner or his permitted assigns.  Owner waives any defenses to enforcement of this Guaranty.

 

(b)                                 This Guaranty is one of performance and payment and not of collection and Owner is liable as the primary obligor.  There are no conditions precedent to the enforcement of this Guaranty, and it shall not be necessary for Buyer, in order to enforce payment by Owner under this Guaranty, to initiate or exhaust Buyer’s remedies against Seller or any other Person liable for the payment or performance of the Obligations, or to enforce any other means of obtaining payment or performance of the Obligations.  Owner waives any rights under applicable law related to the foregoing.  Buyer shall not be required to mitigate damages or take any other action to reduce, collect, or enforce the Obligations.

 

6.                                       General Provisions

 

6.1                                 NOTICES

 

All notices, Consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when: (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the other parties).  Any notice by means which affords the sender evidence of delivery, attempted delivery, or rejected delivery will be deemed to have been given and received at the date and

 

7

 

time of receipt, attempted delivery, or rejected delivery; provided, however, any notice by fax or email must have evidence of delivery.

 

To Seller, Owner and REG:

c/o: Restaurant Entertainment Group

Address: 6728 Hyland Croy Rd

Dublin, OH 43016

Attention:  Clinton R. Field

Fax no.: 614-760-9793

E-mail address:clint.field37@gmail.com

 

with a copy to: Kephart & Fisher

Attention: David Fisher

207 N Fourth St.

Columbus, Ohio 43215

Fax no.: 614-469-1887

E-mail address: davidfisher@kephartfisher.com

 

Buyer: Granite City Restaurant Operations, Inc.

Attention: Robert J. Doran, Chief Executive Officer

5402 Parkdale Drive, Suite 101

Minneapolis, MN 55416

Fax no.: (952) 215-0671

E-mail address: rjdoran@gmail.com

 

with a copy to: Briggs and Morgan, P.A.

Attention: Avron Gordon

2200 IDS Center

80 S 8th Street

Minneapolis, MN 55402

Fax no.: (612) 977-8650

E-mail address: agordon@briggs.com

 

6.2           JURISDICTION; SERVICE OF PROCESS

 

Any Proceeding arising out of or relating to this Agreement or the transaction contemplated by this Agreement may be brought in the courts of the State of Minnesota, County of Hennepin, or, if it has or can acquire jurisdiction, in the United States District Court for the District of Minnesota, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such Proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the Proceeding shall be heard and determined only in any such court and agrees not to bring any Proceeding arising out of or relating to this Agreement or the transaction contemplated by this Agreement in any other court.  The parties agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement between the parties irrevocably to waive any objections to venue or to convenience of forum.  Process in any

 

8

 

Proceeding referred to in the first sentence of this section may be served on any party anywhere in the world.

 

6.3                                 SUPPLEMENT TO MASTER AGREEMENT AND MODIFICATION

 

This Agreement supplements the Master Agreement and in no way limits the Master Agreement.  This Agreement may not be amended, supplemented, or otherwise modified except by a written agreement executed by the party to be charged with the amendment.

 

6.4                                 GOVERNING LAW

 

This Agreement will be governed by and construed under the laws of the State of Minnesota without regard to conflicts-of-laws principles that would require the application of any other law.

 

6.5                                 EXECUTION OF AGREEMENT

 

This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.  The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes.  Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

 

6.6                                 REPRESENTATIVE OF SELLER AND REG

 

(a)                                  Seller and REG hereby constitute and appoint Clinton R. Field as their representative (“Selling Parties Representative”) and their true and lawful attorney in fact, with full power and authority in each of their names and to act on behalf of each of them with respect to the provisions set forth in Section 13.16(a) of the Master Agreement as incorporated by reference to this Agreement.

 

(b)                                 This appointment and grant of power and authority is coupled with an interest and is in consideration of the mutual covenants made herein and is irrevocable and shall not be terminated by any act of either of Seller or REG or by operation of law, whether by the occurrence of any other event.  Each of Seller and REG hereby consents to the taking of any and all actions and the making of any decisions required or permitted to be taken or made by the Selling Parties Representative pursuant to this Section 6.6.  Each of Seller and REG agree that the Selling Parties Representative shall have no obligation or liability to any Person for any action or omission taken or omitted by the Selling Parties Representative in good faith hereunder.

 

(c)                                  Buyer and Escrow Agent shall be entitled to rely upon any document or other paper delivered by the Selling Parties Representative as (i) genuine and correct and (ii) having been duly signed or sent by the Selling Parties Representative, and neither Buyer nor Escrow Agent shall be liable to either of Seller, REG or Owner for any action taken or omitted to be taken by Buyer or Escrow Agent in such reliance.

 

9

 

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

 

	
Buyer:
    	
 
    	
Owner:
    
	
GRANITE CITY RESTAURANT OPERATIONS, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James G. Gilbertson
    	
 
    	
/s/ Eric Schilder
    
	
Name: James G. Gilbertson
    	
 
    	
Eric Schilder
    
	
Its: Chief Financial Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Seller:
    
	
 
    	
 
    	
 CR   NH, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Eric Schilder
    
	
 
    	
 
    	
 Eric   Schilder, Sole Member and Owner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Clinton R. Field
    
	
 
    	
 
    	
 Clinton   R. Field, Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
RESTAURANT ENTERTAINMENT GROUP, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Clinton R. Field
    
	
 
    	
 
    	
Clinton R. Field, Sole Member, Manager and Owner
    
					

 

ACCEPTANCE AND AGREEMENT OF SELLING PARTIES REPRESENTATIVE

 

The undersigned, being the Selling Parties Representative designated in Section 6.6 of the foregoing Asset Purchase Agreement, agrees to serve as the Selling Parties Representative and to be bound by the terms of such Asset Purchase Agreement pertaining thereto.

 

	
 
    	
Dated: December 30, 2011
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Clinton R. Field
    
	
 
    	
Clinton R. Field
    

 

[Signature Page to National Harbor Asset Purchase Agreement]

 

 

EXHIBIT 2.5(e)

 

BILL OF SALE

 

THIS BILL OF SALE (“Bill of Sale”) made effective as of 11:59 p.m. (time) on                               , 2011 (the “Effective Time”), by CR NH, LLC, an Ohio limited liability company (“Seller”), in favor of Granite City Restaurant Operations, Inc., a Minnesota corporation (“Buyer”), and is delivered pursuant and subject to, the terms of, that certain Asset Purchase Agreement, dated as of December 30, 2011 (the “Purchase Agreement”), by and among Buyer, Seller, Restaurant Entertainment Group, LLC, and Eric Schilder.  All capitalized terms used but not otherwise defined in this Bill of Sale shall have the respective meanings given to them in the Purchase Agreement

 

1.                                       Sale and Transfer of Assets. For good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, and as contemplated by Section 2.1 of the Purchase Agreement, Seller hereby sells, transfers, assigns, conveys, grants and delivers to Buyer, all of Seller’s right, title and interest in and to all of the Assets, including without limitation the Seller’s right to transfer the Seller’s Alcoholic Beverage License, license no. 17BLX 683, and Alcoholic Beverage Special Sunday “On Sale” License, license no. 17SL 683, both licenses issued by the Prince George’s County Board of License Commissioners in the State of Maryland on June 1, 2011, and the Assets set forth in Annex 1 attached hereto.

 

2.                                       Further Actions. Seller covenants and agrees to warrant and defend the sale, transfer, assignment, conveyance, grant and delivery of the Assets hereby made against all persons whomsoever, to take all steps reasonably necessary to establish the record of Buyer’s title to the Assets and, at the request of Buyer, to execute and deliver further instruments of transfer and assignment and take such other action as Buyer may reasonably request to more effectively transfer and assign to and vest in Buyer each of the Assets, all at the sole cost and expense of Seller.

 

3.                                       Power of Attorney. Without limiting Section 2 hereof, Seller hereby constitutes and appoints Buyer the true and lawful agent and attorney in fact of Seller, with full power of substitution and resubstitution, in whole or in part, in the name and stead of Seller but on behalf and for the benefit of Buyer and its successors and assigns, from time to time:

 

(a)                                  to demand, receive and collect any and all of the Assets and to give receipts and releases for and with respect to the same, or any part thereof;

 

(b)                                 to institute and prosecute, in the name of Seller or otherwise, any and all proceedings at law, in equity or otherwise, that Buyer or its successors and assigns may deem proper in order to collect or reduce to possession any of the Assets and in order to collect or enforce any claim or right of any kind hereby assigned or transferred, or intended so to be; and

 

(c)                                  to do all things legally permissible, required or reasonably deemed by Buyer to be required to recover and collect the Assets and to use Seller’s name in such manner as Buyer may reasonably deem necessary for the collection and recovery of same,

 

 

Seller hereby declaring that the foregoing powers are coupled with an interest and are and shall be irrevocable by Seller.

 

4.                                       Terms of the Purchase Agreement. The terms of the Purchase Agreement, including but not limited to Seller’s representations, warranties, covenants, agreements and indemnities relating to the Assets in the Master Asset Purchase Agreement dated November 4, 2011, by and among Buyer, Seller and the other parties named therein, as amended by that certain Amendment No. 1 dated December       , 2011 (as amended, the “MAPA”), are incorporated herein by this reference. Seller acknowledges and agrees that the representations, warranties, covenants, agreements and indemnities contained in the Purchase Agreement and the MAPA shall not be superseded hereby but shall survive and remain in full force and effect to the full extent provided therein. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern.

 

5.                                       Governing Law.  This Bill of Sale will be governed by and construed and interpreted under the laws of the State of Minnesota, without regard to conflicts of laws principles that would require the application of any other law.

 

IN WITNESS WHEREOF, Seller has executed this Bill of Sale to be effective as of the Effective Time.

 

	
 
    	
CR NH, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: Eric Schilder
    
	
 
    	
Its: Sole Member and Owner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: Clinton R. Field
    
	
 
    	
Its: Manager
    

 

3

 

ANNEX 1

 

See attached

 

 

EXHIBIT 2.5(h)

 

NONCOMPETITION AGREEMENT

 

NONCOMPETITION, NONDISCLOSURE,
 AND NONINTERFERENCE AGREEMENT

 

This Noncompetition, Nondisclosure, and Noninterference Agreement (this “Agreement”) is made as of                               , 20    , by and among Granite City Restaurant Operations, Inc., a Minnesota corporation (“Buyer”), and CR NH, LLC, LLC (“Seller”).

 

RECITALS

 

A.            Buyer has entered into a Master Asset Purchase Agreement dated November 4, 2011, as amended by that certain Amendment dated December 21, 2011 (the “Master Purchase Agreement”), relating to the purchase of substantially all of the Assets and the goodwill of seven (7) restaurants (the “Restaurants”) operated by the Seller Entities described in the Master Purchaser Agreement under the service mark, CADILLAC RANCH ALL-AMERICAN BAR & GRILL, or variants thereof.  Section 2.7(a)(viii) of the Master Purchase Agreement requires that noncompetition agreements be executed and delivered by Seller, each Seller Entity, each Owner, Jon H. Field, and Joel A. Field at the Closing.

 

B.            Seller operates the Restaurant located at 186 Fleet St., Oxon Hill, Maryland 20745 (the “National Harbor Restaurant”).

 

C.            Buyer has entered into an Asset Purchase Agreement (the “Purchase Agreement”) relating to the purchase of substantially all of the Assets and goodwill of the National Harbor Restaurant.

 

AGREEMENT

 

The parties, in consideration of Buyer’s agreement to purchase the Assets of the National Harbor Restaurant and the consideration received by Seller under the Purchase Agreement, agree as follows:

 

1.             DEFINITIONS

 

“Confidential Information” is defined in Section 2.

 

Capitalized terms not expressly defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement and the Master Purchase Agreement.

 

 

2.             ACKNOWLEDGMENTS BY SELLER

 

Seller acknowledges that Seller has had access to and has become familiar with the following, any and all of which constitute confidential information of Seller (collectively the “Confidential Information”): (a) any and all trade secrets concerning the business and affairs of Seller, methods, recipes and ingredient lists, menus, techniques, product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, market studies, business plans, computer software and programs (including object code and source code), database technologies, systems, devices, know-how, discoveries, and concepts of Seller and any other information, however documented, of Seller that is a trade secret within the meaning of the Uniform Trade Secrets Act or under other applicable law; (b) any and all information concerning the business of the Restaurants (which includes without limitation historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, contractors, agents, suppliers and potential suppliers, personnel training and techniques and materials, purchasing methods and techniques and manuals); and (c) any and all notes, analyses, compilations, studies, summaries and other material prepared by or for Seller containing or based, in whole or in part, upon any information included in the foregoing.

 

Seller acknowledges that (a) Buyer has required that Seller make the covenants set forth in Sections 3 and 4 of this Agreement as a condition to Buyer’s purchase of the Assets of the National Harbor Restaurant; (b) the provisions of Sections 3 and 4 of this Agreement are reasonable and necessary to protect and preserve Buyer’s interests in and right to the use and operation of the Assets of the National Harbor Restaurant from and after Closing of the purchase of the Assets of the National Harbor Restaurant; and (c) Buyer would be irreparably damaged if Seller were to breach the covenants set forth in Sections 3 and 4 of this Agreement.

 

3.             CONFIDENTIAL INFORMATION

 

Seller acknowledges and agrees that the protection of the Confidential Information is necessary to protect and preserve the value of the Assets. Therefore, Seller hereby agrees not to disclose to any unauthorized Persons or use for its own account or for the benefit of any third party any Confidential Information relating to the National Harbor Restaurant, whether or not such information is embodied in writing or other physical form or is retained in the memory Seller’s members, managers, officers, employees or agents, without Buyer’s written consent, unless and to the extent that such Confidential Information is or becomes generally known to and available for use by the public other than as a result of Seller’s fault or the fault of any other Person bound by a duty of confidentiality to Buyer, Seller or REG.  Seller agrees to deliver to Buyer at the time of execution of this Agreement, and at any other time Buyer may request, all documents, memoranda, notes, plans, records, reports and other documentation, models, components, devices or computer software, whether embodied in a disk or in other form (and all copies of all of the foregoing), that contain Confidential Information relating to the National Harbor Restaurant and any other Confidential Information relating to the National Harbor Restaurant that Seller may then possess or have under its control.

 

2

 

4.             NONCOMPETITION AND NONINTERFERENCE

 

As an inducement to Buyer to enter into the Purchase Agreement and as additional consideration for the consideration to be paid to Seller under the Purchase Agreement, Seller agrees that:

 

(a)                                  For a period of twenty-four (24) months after the Closing of the purchase of the Assets of the National Harbor Restaurant:

 

(i)                                     Seller will not, directly or indirectly, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of, be employed by, associated with or in any manner connected with, or render services or advice or other aid to, or guarantee any obligation of, any Person engaged in or planning to become engaged in the operation of a restaurant business whose products or activities compete in whole or in part with the business in which the Assets were used prior to the Closing or may be used thereafter, within a ten (10) mile radius of the National Harbor Restaurant location (the “Noncompetition Area”).  Notwithstanding the foregoing, if Seller shall operate a Competing Restaurant Business at the time of Seller’s execution of this Agreement, Seller shall notify Buyer, and Seller shall cause such Competing Restaurant Business to be materially differentiated from the style of the Cadillac Ranch restaurants currently operated by Seller and Owners.  Seller agrees that this covenant is reasonable with respect to its duration, geographical area and scope.

 

(ii)                                  Seller agrees not to, directly or indirectly, (A) induce or attempt to induce any employee of Seller who becomes an employee of Buyer in connection with the purchase of the Assets to leave the employ of Buyer; (B) in any way interfere with the relationship between Buyer and any such employee of Buyer; or (C) employ or otherwise engage as an employee, independent contractor or otherwise any such employee of Buyer.

 

(iii)                               Seller agrees not to, directly or indirectly, cause, induce or attempt to cause or induce any supplier, licensee, licensor, franchisee, consultant, Person or other business relation of Buyer to cease doing business with Buyer, or in any way interfere with its relationship with Buyer;

 

(b)                                 In the event of a breach by Seller of any covenant set forth in Subsection 4(a) of this Agreement, the term of such covenant will be extended by the period of the duration of such breach;

 

3

 

(c)                                  Seller will not, at any time during or after the twenty-four month period, disparage Buyer, the Assets, the business formerly conducted by Seller, the business conducted by Buyer using the Assets or any shareholder, director, officer, employee or agent of Buyer;

 

(d)                                 Buyer will not, at any time during or after the twenty-four month period, disparage Seller, the Assets, the business formerly conducted by Seller, or any member, manager, officer, employee or agent of Seller;

 

(e)                                  Seller will, for a period of twenty-four months after the Closing of the purchase of the Assets of the National Harbor Restaurant, within ten days after accepting any employment, consulting engagement, engagement as an independent contractor, partnership or other association, advise Buyer of the identity of the new employer, client, partner or other Person with whom Seller has become associated. Buyer may serve notice upon each such Person that Seller is bound by this Agreement and furnish each such Person with a copy of this Agreement or relevant portions thereof;

 

(f)                                    Seller may establish restaurants outside of the Noncompetition Area that have a casual dining environment and trade dress similar to the Restaurants so long as such restaurants do not have signage, trademarks or names that are the same or similar to the Restaurants;

 

(g)                                 The continued ownership and operation of the Steelhouse restaurant by Jon H. Field, who is a Related Person to the owner of certain Seller Entities, in Pittsburgh, Pennsylvania, shall not be deemed to be a Competing Restaurant Business for purposes of this Agreement, and shall be excluded from the noncompetition provisions set forth in Section 4(a) above, so long as such restaurant continues to be operated under the name “Steelhouse” or any other name that does not include the words “Cadillac,” “Ranch” or any variations thereof;

 

(h)                                 Seller’s ownership or operation of any Nightclub shall not be deemed to be a Competing Restaurant Business for purposes of this Agreement, and shall be excluded from the noncompetition provisions set forth in Section 4(a) above, so long as the Nightclub is not located within a 10 mile radius of the Indianapolis, Indiana metropolitan area.  For purposes of this Agreement, the term “Nightclub” shall be defined as any establishment that (A) generates at least 80% of its gross revenues from the sale of beer, wine and alcohol, (B) provides music and space for dancing, and (C) requires its customers to pay a cover charge; and

 

4

 

(i)                                     Seller can continue to own and operate any restaurants that use the Marks or Trade Dress of the Restaurants until such time as Buyer has closed on the purchase of the Assets of at least five of the Restaurants, provided that within 60 days after the closing of the purchase of such five or more Restaurants, the undersigned will cause the name of any restaurants it owns or operates to be changed to include names and marks that do not include the words “Cadillac,” “Ranch” or any variations thereof.

 

5.                                       REMEDIES

 

If Seller breaches the covenants set forth in Sections 3 or 4 of this Agreement, Buyer will be entitled to the following remedies:

 

(a)                                  Damages from Seller, as the case may be;

 

(b)                                 To offset against any and all amounts owing to Seller under the Purchase Agreement and any and all amounts that Buyer claims under Subsection 5(a) of this Agreement; and

 

(c)                                  In addition to its right to damages and any other rights it may have, to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of Sections 3 and 4 of this Agreement, it being agreed that money damages alone would be inadequate to compensate Buyer and would be an inadequate remedy for such breach.

 

(d)                                 The rights and remedies of the parties to this Agreement are cumulative and not alternative.

 

6.             SUCCESSORS AND ASSIGNS

 

This Agreement will be binding upon Buyer and Seller and will inure to the benefit of Buyer and its affiliates, successors and assigns.

 

7.             WAIVER

 

The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power or privilege under 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 can be discharged, in whole or in part, by a waiver or renunciation of the claim or right except in writing; (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 such party, or of the

 

5

 

right of the party giving such notice or demand to require the other party, to take further action without notice or demand as provided in this Agreement.

 

8.             GOVERNING LAW

 

This Agreement will be governed by the laws applied by courts of the State of Minnesota to contracts entered into within that state by parties residing within that state and having no connection to any other state.

 

9.             JURISDICTION; SERVICE OF PROCESS

 

Any action or proceeding seeking to enforce any provision of, or based upon any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Minnesota, County of Hennepin or, if it has or can acquire jurisdiction, in the United States District Court for the District of Minnesota, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world.

 

10.           SEVERABILITY

 

Whenever possible, each provision and term of this Agreement will be interpreted in a manner to be effective and valid, but if any provision or term of this Agreement is held to be prohibited or invalid, then such provision or term will be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement. If any of the covenants set forth in Section 4 of this Agreement are held to be unreasonable, arbitrary or against public policy, such covenants will be considered divisible with respect to scope, time and geographic area, and in such lesser scope, time and geographic area, will be effective, binding and enforceable against Seller to the greatest extent permissible.

 

11.           COUNTERPARTS

 

This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

 

12.           SECTION HEADINGS, CONSTRUCTION

 

The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “Including” does not limit the preceding words or terms.

 

6

 

13.           NOTICES

 

All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt); (b) sent by facsimile (with written confirmation of receipt), provided that a copy is also promptly mailed by registered mail, return receipt requested; or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):

 

To Seller:

c/o: Restaurant Entertainment Group

Address: 6728 Hyland Croy Rd

Dublin, OH 43016

Attention: Clint Field

Fax no.: 614-760-9793

E-mail address: clint.field37@gmail.com

 

with a copy to: Kephart Fisher LLC

Attention: David Fisher

207 N Fourth St.

Columbus, Ohio 43215

Fax no.: 614-469-1887

E-mail address: davidfisher@kephartfisher.com

 

Buyer: Granite City Restaurant Operations, Inc.

Attention: Robert J. Doran, Chief Executive Officer

5402 Parkdale Drive, Suite 101

Minneapolis, MN 55416

Fax no.: (952) 215-0671

E-mail address: rjdoran@gmail.com

 

with a copy to: Briggs and Morgan, P.A.

Attention: Avron Gordon

2200 IDS Center

80 S 8th Street

Minneapolis, MN 55402

Fax no.: (612) 977-8560

E-mail address: agordon@briggs.com

 

14.           ENTIRE AGREEMENT

 

This Agreement, the Purchase Agreement and the Master Purchase Agreement constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior written and oral agreements and understandings between the parties with respect to the subject matter of this Agreement. This Agreement

 

7

 

may not be amended except by a written agreement executed by the party to be charged with the amendment.

 

[SIGNATURE PAGE FOLLOWS]

 

8

 

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.

 

	
BUYER:
    	
SELLER:
    
	
 
    	
 
    
	
Granite City Restaurant   Operations, Inc.
    	
CR NH, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    	
Eric Schilder, Sole Member and Owner
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
Clinton R. Field, Manager
    
							

 

9

 

EXHIBIT 2.5(k)

 

ASSIGNMENT OF WORKS OF AUTHORSHIP

 

Assignment of Intellectual Property
 (“Owners”)

 

This Assignment is made this 4th day of November, 2011 by Eric Schilder and Clinton R. Field (each, an “Assignor” and collectively, the “Assignors”) in favor of Restaurant Entertainment Group, LLC (“REG”).

 

RECITALS

 

Concurrently with the execution and delivery of this Agreement, Assignors and Assignee have entered into a Master Asset Purchase Agreement dated November 4, 2011 (the “Purchase Agreement”) among Granite City Restaurant Operations, Inc. (“Buyer”), REG, Assignors,  and Seller.  All capitalized terms used and not otherwise defined in this Assignment have the meanings given them in the Purchase Agreement.

 

Pursuant to the terms of the Purchase Agreement, Buyer has agreed to purchase substantially all of the Assets and the goodwill of seven (7) restaurants (the “Restaurants”) operated by Seller under the service mark CADILLAC RANCH ALL-AMERICAN BAR & GRILL, or variants thereof.

 

Assignors own all the issued and outstanding equity interests of certain Seller Entities described in the Purchase Agreement and have been engaged in the design, development, operation and management of one or more of the Restaurants.  In that capacity, Assignors have created artwork and other works of authorship, logos, and Trade Dress and other materials used in the operation of one or more of the Restaurants (the “Intellectual Property”).

 

It is a condition to Buyer’s execution, delivery and performance of the Purchase Agreement that Assignors execute this Assignment.

 

ASSIGNMENT

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby assigns to REG all of his right, title and interest, if any, in and to the Intellectual Property, including any and all copyrights.

 

Each Assignor represents and warrants that he has the right to enter into this Assignment and that this Assignment does not and will not violate any contract to which he is party.  Each Assignor agrees to execute such instruments as REG, its successors and assigns, including Buyer, may reasonably request in order more effectively to assign Assignor’s interest in the Intellectual Property.

 

 

	
/s/ Eric Schilder
    	
 
    	
/s/ Clinton R. Field
    
	
Eric Schilder
    	
 
    	
Clinton R. Field
    

 

	
Accepted this          day of November, 2011
    	
 
    	
 
    
	
Restaurant Entertainment Group, LLC
    	
 
    	
 
    
	
By 
    	
/s/ Clinton R. Field
    	
 
    	
 
    
	
Its
    	
Member
    	
 
    	
 
    

 

2

 

Schedules to this Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and are listed as follows:

 

Schedule 3.1(d) Liens and Encumbrances on NH License

 

Schedule 3.1(e) Unpaid Vendors and Taxes

 

Schedule 3.2 Financial Statements

 

Schedule 3.3 Property to be Transferred; Creditors’ Names, Addresses, and Amounts Owed

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