ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

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CUSTOM RESTAURANT & HOSPITALITY GROUP, INC. | American Restaurant Concepts, Inc | Custom Restaurant & Hospitality Group | Four Venture | Millie's, Inc

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Title: ASSET PURCHASE AGREEMENT
Governing Law: California Date: 9/25/2009
Industry: Misc. Financial Services Law Firm: Allen Matkins Sector: Financial

Exhibit 99.1

ASSET PURCHASE AGREEMENT

BY AND BETWEEN

AMERICAN RESTAURANT CONCEPTS, INC .

AND

MILLIE’S, INC.

DATED AS OF SEPTEMBER 16, 2009

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	1

Section 1.1.	Definitions	1

ARTICLE II	SALE AND PURCHASE OF ASSETS	7

Section 2.1.	Purchased Assets	7

Section 2.2.	Excluded Assets	8

Section 2.3.	Alcoholic Beverage License Assets	9

ARTICLE III	CONSIDERATION	9

Section 3.1.	Consideration	9

Section 3.2.	Payment of Purchase Price	9

Section 3.3.	Allocation of Purchase Price	9

Section 3.4.	Intentionally Omitted	10

Section 3.5.	Assumed Obligations	10

Section 3.6.	Liabilities Not Being Assumed	10

Section 3.7.	Transfer Fees	10

ARTICLE IV	CONDITIONS TO CLOSING	11

Section 4.1.	Closing	11

Section 4.2.	Third Party Consents	11

Section 4.3.	Conditions to the Purchaser’s Obligations	11

Section 4.4.	Conditions to the Seller’s Obligations	13

ARTICLE V	COVENANTS BEFORE CLOSING	14

Section 5.1.	Affirmative Covenants of the Seller	14

Section 5.2.	Negative Covenants of the Seller	15

Section 5.3.	Affirmative Covenants of the Purchaser	16

ARTICLE VI	REPRESENTATIONS AND WARRANTIES OF THE SELLER	16

Section 6.1.	Organization and Corporate Power	16

(i)

		Page
Section 6.2.	Authorization of Transactions	17

Section 6.3.	Absence of Conflicts	17

Section 6.4.	Financial Statements	17

Section 6.5.	Absence of Undisclosed Liabilities	17

Section 6.6.	Absence of Certain Developments	18

Section 6.7.	Real Property	19

Section 6.8.	Purchased Assets	19

Section 6.9.	Taxes	20

Section 6.10.	Inventories	21

Section 6.11.	Contracts and Commitments	21

Section 6.12.	Proprietary Rights	22

Section 6.13.	Litigation; Proceedings	22

Section 6.14.	Brokerage	23

Section 6.15.	Licenses and Permits	23

Section 6.16.	Employees	23

Section 6.17.	Employee Benefit Plans	23

Section 6.18.	Insurance	23

Section 6.19.	Affiliate Transactions	23

Section 6.20.	Compliance with Laws	23

Section 6.21.	Environmental Matters	24

Section 6.22.	Illegal Payments	25

Section 6.23.	Suppliers	25

Section 6.24.	Limited Warranty	25

ARTICLE VII	REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER	25

Section 7.1.	Organization	25

(ii)

		Page
Section 7.2.	Authorization of Transactions	25

Section 7.3.	Absence of Conflicts	25

Section 7.4.	Litigation	26

Section 7.5.	Brokerage	26

Section 7.6.	Financial Ability	26

ARTICLE VIII	TERMINATION	26

Section 8.1.	Termination	26

Section 8.2.	Effect of Termination	26

Section 8.3.	Execution Fee	26

ARTICLE IX	INDEMNIFICATION AND RELATED MATTERS	27

Section 9.1.	Survival	27

Section 9.2.	Limitations	27

Section 9.3.	Indemnification	27

Section 9.4.	Certain Tax Matters	29

Section 9.5.	Straddle Periods	30

Section 9.6.	Cooperation	30

ARTICLE X	ADDITIONAL AGREEMENTS	30

Section 10.1.	Press Releases and Announcements	30

Section 10.2.	Further Transfers	30

Section 10.3.	Expenses	30

Section 10.4.	Exclusivity	30

Section 10.5.	Bulk Sales Laws	31

Section 10.6.	Confidentiality	31

Section 10.7.	Employee Matters	32

Section 10.8.	Responsibility of Parent and Purchaser	32

(iii)

		Page
ARTICLE XI	MISCELLANEOUS	32

Section 11.1.	Amendment and Waiver	32

Section 11.2.	Notices	32

Section 11.3.	Binding Agreement; Assignment	33

Section 11.4.	Severability	33

Section 11.5.	No Strict Construction	33

Section 11.6.	Captions	34

Section 11.7.	Entire Agreement	34

Section 11.8.	Counterparts and Facsimile Signatures	34

Section 11.9.	Dispute Resolution	34

Section 11.10.	Governing Law	34

Section 11.11.	Consent to Service	34

Section 11.12.	Parties in Interest	34

Section 11.13.	Expenses	35

Section 11.14.	Further Assurances	35

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]		35

(iv)

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT, dated as of September 16, 2009, is made by and among American Restaurant Concepts, Inc., a Nevada corporation (the “ Purchaser ”), The Custom Restaurant & Hospitality Group, a Nevada corporation (“ Parent ”), and Millie’s, Inc., a California corporation (the “ Seller ”). The Seller and the Purchaser are referred to herein collectively as the “ Parties ” and individually as a “ Party .” In addition, the Purchaser Guarantors are each a party to this Agreement solely with respect to their obligations under Section 9.3(d). Certain capitalized terms used herein are defined in Article I below.

RECITALS

WHEREAS, the Seller owns and operates certain casual dining restaurants known individually as Millie’s Restaurant;

WHEREAS, Purchaser is a newly formed wholly owned subsidiary of Parent; and

WHEREAS, subject to the terms and conditions of this Agreement, the Purchaser desires to acquire from the Seller, and the Seller desires to sell to the Purchaser, all of the assets, operations and business that constitute and which are exclusively related to and used in connection with the restaurants set forth on Exhibit A (the “ Restaurants ”) and in conjunction therewith, Purchaser desires to assume all obligations and liabilities associated with the assets so purchased.

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties, and covenants which are to be made and performed by the respective Parties, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions . When used in this Agreement, the following terms have the meanings set forth below:

“ Active Employees ” has the meaning set forth in Section 10.7(a).

“ Acquisition Proposal ” has the meaning as set forth in Section 10.4.

“ Affiliate ” of any particular Person means any other Person controlling, controlled by, or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract, or otherwise.

“ After Tax Basis ” has the meaning as set forth in Section 9.3(f).

“ Agreement ” means this Asset Purchase Agreement, including all Exhibits and Schedules hereto, as it may be amended from time to time in accordance with its terms.

“ Applicable Limitation Date ” has the meaning as set forth in Section 9.1.

“ Arbitration Notice ” has the meaning as set forth in Section 11.9.

“ Assigned Contracts ” has the meaning as set forth in Section 2.1(a).

“ Assumed Obligations ” has the meaning as set forth in Section 3.5.

“ Bill of Sale ” has the meaning as set forth in Section 4.3(f).

“ Cash On Hand Value ” has the meaning as set forth in Section 3.1.

“ Capital Stock ” means (i) in the case of a corporation, any and all shares of capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership or limited liability company, any and all partnership or membership interests (whether general or limited), (iv) in any case, any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, and (v) in any case, any right to acquire any of the foregoing.

“ CERCLA ” has the meaning as set forth in Section 6.21(e).

“ Closing ” has the meaning as set forth in Section 4.1.

“ Closing Date ” has the meaning as set forth in Section 4.1.

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

“ COBRA ” has the meaning as set forth in Section 6.17.

“ Code ” means the Internal Revenue Code of 1986, as amended, and any reference to any particular Code section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified.

“ Confidential Information ” has the meaning as set forth in Section 10.6.

“ Disclosure Schedule ” means a document, dated of even date with this Agreement and delivered by the Seller to the Purchaser on the date hereof, which refers to the representations and warranties of the Seller in Article VI of this Agreement and which contains the information contemplated to be set forth in the Disclosure Schedule by this Agreement and certain exceptions to the representations and warranties of the Parent and Purchaser in Article VII and otherwise under this Agreement. The Disclosure Schedule shall be arranged, for convenience purposes only, in sections which correspond to the numbered and lettered paragraphs contained in Article VI, Article VII and otherwise in this Agreement (as applicable); provided, however, that any disclosure made on any individual section of the Disclosure Schedule shall suffice for disclosure on all other sections of the Disclosure Schedule. Notwithstanding anything to the contrary in this Agreement, the Disclosure Schedule may be updated from time to time, in the sole discretion of the Seller, between the date of this Agreement and the Closing.

“ Environmental and Safety Requirements ” means all federal, state, local and foreign statutes, regulations, ordinances and similar provisions having the force or effect of law, all judicial and administrative orders and determinations and all common law concerning public health and safety, worker health and safety and pollution or protection of the environment, including all such standards of conduct and bases of obligations relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.

“ ERISA ” has the meaning as set forth in Section 6.17.

“ Escrow Agreement ” means those certain Escrow Instructions to Allison-McCloskey Escrow Company by and between the Purchaser and the Seller dated as of July 9, 2009 and finally delivered in fully executed form Allison-McCloskey Escrow Company on July 23, 2009.

“ Excluded Assets ” has the meaning as set forth in Section 2.2.

“ Execution Fee ” has the meaning as set forth in Section 8.3.

“ Financial Statements ” has the meaning as set forth in Section 6.4.

“ GE ” means CEF Funding II, L.L.C., a Delaware limited liability company and successor to GE Capital Franchise Finance Corporation.

“ GE Modified Loan Arrangement ” means an amendment, restatement or replacement of that certain Equipment Loan by and among GE, the Seller and the Seller Guarantors dated as of September 14, 2000, whereby, in order to finance the transactions contemplated by this Agreement, a portion of the debt and obligations of the Seller under such Equipment Loan will be transferred to the Purchaser with no recourse to Seller or the Seller Guarantors.

“ Inactive Employees ” has the meaning as set forth in Section 10.7(a).

“ Indebtedness ” of any Person means: (a) indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other obligations incurred in the Ordinary Course of Business), including accrued interest and prepayment penalties and any commitment by which such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit; (b) indebtedness guaranteed in any manner by such Person, including a guarantee in the form of an agreement to repurchase or reimburse; and (c) obligations under capitalized leases in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss.

“ Indemnified Party ” has the meaning as set forth in Section 9.3(e).

“ Indemnifying Party ” has the meaning as set forth in Section 9.3(e).

“ Insider ” means any officer, director, executive employee, stockholder, partner or Affiliate, as applicable, of the Seller or any spouse or descendant (whether natural or adopted) of any such individual or any entity in which any of the foregoing persons owns a 5% or greater direct or indirect beneficial interest.

“ Insurance Code ” has the meaning as set forth in Section 9.4(c).

“ Inventory ” means all inventories of the Seller, wherever located, used in connection with the operation of the Restaurants, including, without limitation, foodstuffs, beverages, paper products, and cleaning materials.

“ Inventory Value ” has the meaning as set forth in Section 3.1.

“ JAMS ” has the meaning as set forth in Section 11.9.

“ JAMS Rules ” has the meaning as set forth in Section 11.9.

“ knowledge ” and “ aware ” and terms of similar import mean, with respect to a Person, (i) the actual knowledge of such Person without further duty to inquire or investigate (and with respect to the Seller, this means the actual knowledge of the following individuals only: John R. Bifone, John Bifone, Jr. and Debbie Cowles).

“ Latest Balance Sheet ” has the meaning as set forth in Section 6.4.

“ Leased Real Property ” means all land, building, fixtures or other real property in which the Seller has a leasehold, subleasehold, license, concession or other real property right or interest under the Real Property Leases.

“ Leasehold Improvements ” means all buildings, fixtures and other improvements located on each Leased Real Property which are owned by the Seller, regardless of whether such improvements are subject to reversion to the landlord or other third party upon the expiration or termination of the Real Property Lease for such Leased Real Property and used directly in connection with the operation of the Restaurants and unrelated in anyway to the Excluded Assets.

“ Licenses ” means all permits, licenses, certificates, approvals, accreditations, consents and other authorizations of third parties or foreign, federal, state, or local governments or other similar rights, excluding, liquor and/or beer and wine alcoholic beverage licenses.

“ Liens ” means any mortgage, pledge, security interest, encumbrance, lien, claim, community property interest, option, right of first refusal, deed of trust, or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against the Seller, any financing statement filed by or on behalf of Seller as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to the Seller under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the Ordinary Course of Business).

“ Alcoholic Beverage License Assets ” means the Alcoholic Beverage Licenses, all alcoholic beverages, including any inventory of alcoholic beverages, and any equipment exclusively related to the sale and provision of alcoholic beverages.

“ Loss ” means, with respect to any Person, any damage, liability, demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense, whether or not arising out of a third party claim, including all interest, penalties incurred in connection with any action, demand, proceeding, investigation or claim by any third party (including any governmental entity or any department, agency or political subdivision thereof) against or affecting such Person or which, if determined adversely to such Person, would give rise to, evidence the existence of, or relate to, any other Loss and the reasonable outside legal professional fees incurred in the defense or settlement of any of the foregoing.

“ Material Adverse Effect ” means any material adverse effect on the business, liabilities, financial condition, operations and results of operations of the Seller taken as a whole, but excluding: (i) any effect resulting from this Agreement or the transactions contemplated hereby, (ii) changes in the general economic conditions and any occurrence or condition affecting the restaurant industry generally or (iii) actions taken in connection with this Agreement or otherwise approved or consented to by the Purchaser.

“ Ordinary Course of Business ” means actions taken in the ordinary course of the Seller’s business that are consistent with past practice (including, without limitation, with respect to collection of accounts receivable, purchases of supplies, repairs and maintenance, payment of accounts payable and accrued expenses, terms of sale, levels of capital expenditures, and operation of cash management practices generally) of the normal day-to-day operation of the Seller.

“ Party ” and “ Parties ” have the meanings as set forth in the first paragraph of this Agreement.

“ Permitted Liens ” means (a) taxes, assessments and other governmental fees or other charges not yet due and payable as of the Closing Date or the amounts of which are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established; (b) mechanics and similar statutory liens and other Liens arising or incurred in the Ordinary Course of Business for amounts which are not delinquent or the amounts of which are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established and which could not reasonably be expected to, individually, have a Material Adverse Effect; (c) zoning, entitlement, building and other land use and similar laws or regulations imposed by any governmental authority having jurisdiction over such parcel which are not violated by the current use and operation thereof; (d) easements, covenants, conditions, restrictions and other similar matters of record affecting title to such Real Property Leases which would not materially impair the use or occupancy of such parcel in the operation of the Restaurants; (e) liens or encumbrances placed by a landlord or other third party with respect to any Leased Real Property and (f) deposits or pledges made in connection with, or to secure payment of, worker’s compensation, unemployment insurance or old age pension programs mandated under applicable law or other social security programs.

“ Person ” means and includes an individual, a partnership, a joint venture, a limited liability company, a corporation or trust, an unincorporated organization, a group, or a government or other department or agency thereof, or any other entity.

“ Plans ” has the meaning as set forth in Section 6.17.

“ Preparing Party ” has the meaning as set forth in Section 9.5.

“ Proprietary Rights ” means all registered and unregistered intellectual property rights, including, without limitation, all of the following items along with all income, royalties, damages, equitable relief and payments due or payable prior to or at the Closing or thereafter (including, without limitation, damages, equitable relief and payments for past, present or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world): (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissue, continuation, continuation-in-part, division, revision, extension or reexamination thereof; (ii) trademarks, service marks, industrial designs, trade dress, trade names and corporate names, together with all goodwill associated therewith; (iii) registered and unregistered copyrights and copyrightable works (iv) mask works; (v) all registrations, applications and renewals for any of the foregoing; (vi) trade secrets and confidential information (including, without limitation, ideas, formulae, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, financial, business and marketing plans, and customer and supplier lists and related information); (vii) computer software and software systems (including, without limitation, data, databases and related documentation) owned and/or used by the Seller; (viii) registrations of internet domain names, (ix) other proprietary rights; (x) licenses or other agreements to or from third parties regarding the foregoing; (xi) all copies and tangible embodiments of the foregoing (in whatever form or medium) and (xii) any web sites incorporating or using any of the above.

“ Purchase Price ” has the meaning as set forth in Section 3.1.

“ Purchased Assets ” has the meaning as set forth in Section 2.1.

“ Purchaser ” has the meaning as set forth in the first paragraph of this Agreement.

“ Purchaser Guarantors ” means Robert Jennings and John Watters.

“ Purchaser Parties ” has the meaning as set forth in Section 9.3(a).

“ Real Property ” has the meaning as set forth in Section 6.7(d).

“ Real Property Leases ” means all written leases, subleases, licenses, concessions and other agreements, including, without limitation, all amendments, extensions, renewals, guaranties and other agreements with respect thereto, held by the Seller for the use and occupancy of any real property.

“ Retained Liabilities ” has the meaning as set forth in Section 3.6.

“ Seller ” has the meaning as set forth in the first paragraph of this Agreement.

“ Seller Guarantors ” means Calabee’s, Inc., John R. Bifone and John Bifone, Jr..

“ Seller Parties ” has the meaning as set forth in Section 9.3(c).

“ Straddle Periods ” has the meaning as set forth in Section 9.5.

“ Tax ” or “ Taxes ” means federal, state, county, local, foreign, or other income, gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, real or personal property, license, payroll, wage or other withholding, employment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated, and other taxes of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner (including, without limitation, deficiencies, penalties, additions to tax, and interest attributable thereto, and also including, without limitation, any Tax or Taxes of another Person for which the Seller is liable as a successor or as a transferee or by contract).

“ Tax Return ” means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements, or information) filed in connection with the determination, assessment, or collection of Taxes of any party or the administration of any laws, regulations, or administrative requirements relating to any Taxes.

“ Textron ” means Textron Financial Corporation, a Delaware corporation.

“ Textron Modified Loan Arrangement ” means an amendment, restatement or replacement of that certain Loan Agreement by and among Textron and the Seller dated as of September 24, 2002, whereby, in order to finance the transactions contemplated by this Agreement, a portion of the debt and obligations of the Seller under such Loan Agreement may be transferred to the Purchaser with no recourse to Seller or the Seller Guarantors.

“ Transaction Documents ” means this Agreement, and all other agreements, instruments, certificates, and other documents to be entered into or delivered by any Party in connection with the transactions contemplated to be consummated pursuant to this Agreement.

“ Transfer Fees ” means any taxes, fees, charges, assessments, registration fees, and expenses or other amounts due or payable in connection with the transfer of the Purchased Assets from the Seller to the Purchaser (other than the Seller’s income taxes).

“ Transfer Taxes ” has the meaning as set forth in Section 9.4(a).

“ Treasury Regulations ” means the United States Treasury Regulations promulgated pursuant to the Code.

ARTICLE II

SALE AND PURCHASE OF ASSETS

Section 2.1. Purchased Assets . Subject to the terms and conditions of this Agreement, the Purchaser hereby agrees to purchase from the Seller, and the Seller hereby agrees to sell, transfer and assign to the Purchaser, on the Closing Date (as hereinafter defined), all of the Seller’s assets directly related to and used in connection with the operation of the Restaurants (collectively referred to herein as the “ Purchased Assets ”), free and clear of any and all Liens, other than the Excluded Assets (as hereinafter defined). The Purchased Assets shall include, but not be limited to, the following:

(a) All of the Seller’s rights and obligations in and under all of the agreements of the Seller relating to the Restaurants, all of which are identified on Schedule 2.1(a) attached hereto (collectively, the “ Assigned Contracts ”); Assigned Contracts includes, but is not limited to, certain agreements listed on Schedule 2.1(a) with respect to the lease of certain Leased Real Property;

(b) All of the Seller’s accounts or notes receivable directly related to the Restaurants, all of which are identified on Schedule 2.1(b) attached hereto and which, as of the Closing Date, shall be identified in an update to Schedule 2.1(b) at least five days prior to the Closing Date;

(c) All of the tangible personal property owned by the Seller and used exclusively in connection with the operation of the Restaurants, including, without limitation, furniture, machinery, equipment, tables, chairs, cash registers, ovens, refrigerators, display cases, utensils, tools, pans, lights, uniforms, curtains, signs, shelves, menus, tablecloths, glasses, plates, dishes, silverware, pitchers, books, cabinets, racks, towels, ornaments, artifacts, décor, computers, computer software programs, computer peripherals, collectibles, bars and bar equipment;

(d) All of the Seller’s records directly related to or used exclusively in connection with the operation of the Restaurants or directly pertaining to the Purchased Assets;

(e) To the extent transferable, and only to such extent, the Licenses required under all laws, rules and regulations applicable to or affecting the Restaurants, all of which are set forth on Schedule 2.1(e) attached hereto;

(f) All Leasehold Improvements, all of which are identified in Schedule 2.1(f) attached hereto;

(g) All Inventory owned by Seller and used exclusively in connection with the operation of the Restaurants, all of which are identified on Schedule 2.1(g) attached hereto and which, as of the Closing Date, shall be identified in an update to Schedule 2.1(g) at least five days prior to the Closing Date;

(h) All cash amounts normally used to operate the Restaurants;

(i) The Proprietary Rights of the Sellers to the extent they directly relate to the Restaurants and not to any Excluded Assets, and only to such extent, all of which are identified on Schedule 2.1(i) attached hereto; and

(j) The goodwill associated with the Purchased Assets and the Restaurants.

Section 2.2. Excluded Assets . Notwithstanding any other provision of this Agreement to the contrary, (i) any asset relating to or used in connection with the Seller’s restaurants that are not the Restaurants, (ii) any and all subsidiaries of the Seller and (iii) Millie’s, Inc. and any asset relating to or used in connection with its restaurants shall be deemed “ Excluded Assets ” and shall be retained by the Seller. In addition, the Purchased Assets shall not include the following (collectively, the “ Excluded Assets ”).

(a) each of the Seller’s corporate records, such as its articles of incorporation, seal, minute books, stock or equity ledgers and any other records having exclusively to do with the organization and the continued existence and status of the Seller or any of its Affiliates;

(b) the Seller’s rights under this Agreement, including, without limitation, the consideration paid to the Seller pursuant to this Agreement;

(d) The Seller’s Tax records;

(e) all Licenses that are not assignable or transferable, a list of which is set forth on Schedule 2.2(e);

(f) all records, documents, lists and files, whether in hard copy, electronic form or otherwise, relating to any of the foregoing Excluded Assets; and

(g) The other assets listed on Schedule 2.2(g) hereof.

Section 2.3. Alcoholic Beverage License Assets . The Seller and the Purchaser acknowledge and agree that the transfer of the Alcoholic Beverage License Assets is conditioned on the approval of the Alcoholic Beverage Control (“ ABC ”). The Seller and the Purchaser shall, prior to Closing, work in good faith to transfer the alcoholic beverage licenses (“ Alcoholic Beverage Licenses ”) to the Purchaser upon Closing. Purchaser shall engage a alcoholic beverage license consultant (at the expense of Purchaser) to assist in the transfer of the Alcoholic Beverage Licenses. The Purchaser will be responsible for the payment of all fees, costs and expenses associated with the transfer of the Alcoholic Beverage Licenses. In order to facilitate the transfer of the Alcoholic Beverage Licenses, the Seller and the Purchaser will establish an escrow account in which the Purchaser will deposit the cash portion of the Purchase Price, which will be released to the Seller at the Closing (the “ Closing Escrow Account ”). The Closing Escrow Account will be established within 15 days after the date of this Agreement. The fees and costs directly associated with the Closing Escrow Account will be shared equally by the Seller and the Purchaser. Upon approval or disapproval of the transfer of the Alcoholic Beverage Licenses to the Purchaser by the relevant Alcoholic Beverage License authorities, and upon the satisfaction of the other Closing conditions set forth in Sections 4.3 and 4.4 the amounts in the Closing Escrow Account will be released to the Seller.

ARTICLE III

CONSIDERATION

Section 3.1. Consideration . As consideration for the sale to the Purchaser of the Purchased Assets, the Purchaser shall pay to the Seller an amount in equal to the sum of (a) $2,900,000.00; (b) the value of the Seller’s Inventory on hand at each Restaurant at 11:59 p.m. on the date immediately prior to the Closing Date (“ Inventory Value ”); provided, that such value shall be calculated consistent with the prior practices of Seller and that the value of any obsolete Inventory, as determined by the Seller in its reasonable discretion, will not be included in the calculation of the Inventory value; and (c) the amount of petty cash on hand at each Restaurant not to exceed One Thousand Dollars at each Restaurant (“ Cash On Hand Value ”) (collectively, the “ Purchase Price ”). The Purchase Price shall be payable by (i) the assumption of debt of the Seller and (ii) the payment of cash to the Seller, as set forth in Section 3.2 below.

Section 3.2. Payment of Purchase Price . At Closing, the Purchaser shall authorize the release of the amounts in the Closing Escrow Account to the Seller, which will be equal to $600,000.00 plus (a) one half of the Inventory Value and (b) the total Cash On Hand Value, in each case of immediately available funds, into an account designated by the Seller. In addition, at the Closing and in satisfaction of the remainder of the Purchase Price, Purchaser will assume $2,300,000.00 in debt pursuant to the GE Modified Loan Arrangement and the Textron Modified Loan Arrangement; provided, however, that Purchaser may assume all such debt under the GE Modified Loan Arrangement, and the parties may not enter into the Textron Modified Loan Arrangement. Within seven days after the Closing, the Purchaser shall wire the remaining one half of the Inventory Value, in immediately available funds, into an account designated by the Seller.

Section 3.3. Allocation of Purchase Price . The Purchaser and the Seller shall prepare jointly an allocation of the Purchase Price (and all other capitalized costs) among the Purchased Assets in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder (and any similar provisions of state, local or foreign law, as appropriate) within 60 days after the Closing Date. The Purchaser and the Seller and their respective Affiliates shall report and file Tax Returns (including, but not limited to Internal Revenue Service Form 8594) in all respects and for all purposes consistent with such allocation jointly prepared by the Purchaser and the Seller. Each party shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as the other party may reasonably request to prepare such allocation. Neither the Purchaser nor the Seller shall take any position (whether in audits, tax returns or otherwise) that is inconsistent with such allocation unless required to do so by applicable law.

Section 3.4. Intentionally Omitted .

Section 3.5. Assumed Obligations . The Purchaser hereby agrees to assume only: (a) the Purchaser’s obligations under the GE Modified Loan Arrangement and, if applicable, the Textron Modified Loan Arrangement, (b) those liabilities and executory obligations set forth in the Assigned Contracts that exist at the time of Closing; and (c) all liabilities and obligations (fixed, contingent or otherwise) incurred in or relating to, the operation of the Restaurants or the ownership or use of the Purchased Assets on or after the Closing Date (collectively, the “ Assumed Obligations ”).

Section 3.6. Liabilities Not Being Assumed . Except for the Assumed Obligations, Seller agrees that the Purchaser shall not be obligated to assume or perform and is not assuming or performing any liabilities or obligations of the Seller, whether known or unknown, fixed or contingent, certain or uncertain (the “ Retained Liabilities ”), and Seller shall remain responsible for and shall indemnify, defend and hold harmless Purchaser from and against all Retained Liabilities, which shall include, but not be limited to, the following obligations or liabilities of the Seller:

(a) Any compensation or benefits payable to present or past employees of the Restaurants incurred prior to the Closing Date, including without limitation, any liabilities arising under any employee pension or profit sharing plan or other employee benefit plan and any of the Seller’s obligations for vacation, holiday or sick pay;

(b) All federal, state, local, foreign or other Taxes related to the operation of the Restaurants or the ownership or use of the Purchased Assets prior to the Closing Date and any Tax liability of the Seller which is not related to the Restaurants;

(c) Any Liens, except for Permitted Liens, on any of the Purchased Assets and all obligations and liabilities secured thereby that are not set forth on Schedule 3.6 hereto;

(d) All obligations of the Seller, either for borrowed money or incurred in connection with the purchase, lease or acquisition of any assets, that are not set forth on Schedule 3.6 hereto;

(e) Any accounts or notes payable of the Seller that are not set forth on Schedule 3.6 hereto; and

(f) Any claims, demands, actions, suits or legal proceedings that have been asserted or threatened in writing prior to the Closing Date against the Seller, the Restaurants or the Purchased Assets, but only to the extent related to (i) the Seller’s operation of the Restaurants or the ownership or use of the Purchased Assets prior to the Closing Date, or (ii) any other business or non-business activities of the Seller not related to the Restaurants and conducted prior hereto or hereafter.

Section 3.7. Transfer Fees . Purchaser shall be solely responsible for the payment of all Transfer Fees due or payable in connection with the transactions contemplated by this Agreement and shall indemnify the Seller and hold the Seller harmless for all liabilities related thereto.

ARTICLE IV

CONDITIONS TO CLOSING

Section 4.1. Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Allen Matkins Leck Gamble Mallory & Natsis LLP, 12348 High Bluff Drive, Suite 210, San Diego, California 92130, commencing at 10:00 a.m. local time within two business days following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties shall take at the Closing itself), or at such other place or on such other date as may be mutually agreeable to the Purchaser and the Seller. The date and time of the Closing are herein referred to as the “ Closing Date .”

Section 4.2. Third Party Consents . The Parties shall cooperate to obtain all required third party consents on terms reasonably satisfactory to the Purchaser, provided, however, that obtaining a third party consent, the failure of which would not have Material Adverse Effect, will not be considered a condition to the Purchaser’s obligation to consummate the transactions contemplated by this Agreement. In the event that the Purchaser requires material modifications to any agreement that would delay the receipt of any consent, the Purchaser hereby agrees it will waive the requirement of such consent for the purposes of consummating the transactions contemplated by this Agreement. The Seller is solely responsible for all fees and costs associated with obtaining any and all consents and assignments. With regard to any leases or contracts related to the Leased Real Property, regardless of the Parties’ inability to obtain some or all third-party consents and/or the ineffectiveness of the assignment of the leases or contracts to the Purchaser, and notwithstanding anything to the contrary in this Agreement, the Purchaser will assume, agree to discharge, be responsible for and indemnify, defend, protect and hold the Seller and its affiliates harmless from and against all rents, percentage rents, operating costs, losses, liabilities, claims, demands, costs, damages, obligations and other amounts whatsoever payable under such leases or contracts, including reasonable attorneys’ fees, that (A) arise or accrue from and after the Closing, or (B) result from or are payable as a result of or in connection with the transactions contemplated by this Agreement.

Section 4.3. Conditions to the Purchaser’s Obligations . The obligation of the Purchaser to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions as of the Closing Date:

(a) The representations and warranties set forth in Article VI hereof shall be true and correct in all material respects (except that the representations and warranties which are qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) at and as of the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties;

(b) The Seller shall have performed and complied in all material respects with all of the covenants and agreements required to be performed by the Seller under this Agreement on or before the Closing;

(d) The Seller shall have completed and approved an inspection by the managers of each of the Restaurants; such inspections will be completed within 15 days of the date hereof; provided, however, that the Seller will provide the Purchaser with reasonable notice of the date and time of each inspection and will allow the Purchase to attend each such inspection;

(e) All governmental filings, authorizations and approvals that are required for the consummation of the transactions contemplated hereby shall have been duly made and obtained on terms reasonably satisfactory to the Purchaser;

(f) No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable judgment, decree, injunction, order, or ruling would prevent the performance of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement, cause such transactions to be rescinded, or materially and adversely affect the right of the Purchaser to own, operate, or control the Restaurants, and no judgment, decree, injunction, order, or ruling shall have been entered which has or is reasonably likely to have any of the foregoing effects;

(g) Since the date hereof, there shall be no fact or circumstance which has had a Material Adverse Effect;

(h) The Purchaser and the Seller shall have entered into a Bill of Sale and Assumption Agreement in a form to be mutually agreed by the Seller and the Purchaser.

(i) The Seller shall deliver to the Purchaser all information relating to the Seller which may be required to be reported by the Purchaser or its paying agent to any taxing authority pursuant to Section 6043A of the Code or any similar provision of law, in connection with the transactions contemplated by this Agreement;

(j) The Purchaser, the Seller, the Seller Guarantors, the Purchaser Guarantors and GE will have concurrently with the Closing executed all documents and taken all actions necessary to enter into the GE Modified Loan Arrangement in a form satisfactory to Purchaser;

(k) If the parties enter into the Textron Modified Loan Arrangement in order to satisfy the payment of the Purchase Price pursuant to Section 3.2, the Purchaser, the Seller, the Seller Guarantors, the Purchaser Guarantors and Textron will have concurrently with the Closing executed all documents and taken all actions necessary to enter into the Textron Modified Loan Arrangement in a form satisfactory to Purchaser;

(l) All Liens, other than Permitted Liens Purchased Assets, shall have been terminated and be of no further force and effect; and

(m) The Seller shall have delivered to Purchaser all of the following:

(i) a certificate from the President or Chief Executive Officer of the Seller in a form reasonably satisfactory to the Purchaser, dated the Closing Date, stating that the preconditions specified in this Section 4.3 have been satisfied;

(ii) a copy of (A) the resolutions of the board of directors and shareholders of the Seller approving the transaction and (B) a copy of the Articles of Incorporation for the Seller, each as certified by the Secretary of the Seller;

(iii) certificates from appropriate authorities, dated as of or within ten business days prior to the Closing Date, as to the good standing and qualification to do business of the Seller in the State of California;

(iv) copies of the consents, filings, authorizations and approvals described in Sections 4.2(c) and (d) to the extent applicable to the Seller;

(v) an executed copy of the Bill of Sale;

(vi) proof that all real and personal property taxes upon the Purchased Assets which are due and payable as of the Closing have been paid or adequate reserves have be established therefor;

(vii) a policy of title insurance regarding each Restaurant insuring leasehold title to such properties and containing only such exceptions and exclusions as could not, in the Purchaser’s reasonable discretion, substantially adversely affect the operation of the location as a Restaurant and the transfer of title to the Purchaser; and

(viii) such other documents or instruments as the Purchaser may reasonably request to effect the transactions contemplated hereby.

(n) The Alcoholic Beverage License Assets will have been approved for transfer to the Purchaser by the ABC; provided, however, that if the ABC fails to approve the transfer of the Alcoholic Beverage License Assets it shall not (i) constitute a default under this Agreement, (ii) effect or impair the terms or conditions of this Agreement and (iii) provide Purchaser with any right to rescind, cancel or modify the Agreement, and the condition set forth in this Section 4.3(n) will be automatically waived by the Purchaser and will have no further force and effect and the Closing will occur absent the transfer of the Alcoholic Beverage Licenses and without any reduction in the Purchase Price and there shall be no transfer of the Alcoholic Beverage License Assets.

Any condition specified in this Section 4.3 may be waived by the Purchaser in its sole discretion; provided that no such waiver shall be effective unless it is set forth in a writing executed by the Purchaser.

Section 4.4. Conditions to the Seller’s Obligations . The obligation of the Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions as of the Closing Date:

(a) The representations and warranties set forth in Article VII hereof shall be true and correct in all material respects (except that the representations and warranties which are qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) at and as of the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties;

(b) The Purchaser shall have performed and complied in all material respects with all of the covenants and agreements required to be performed by it under this Agreement on or before the Closing; and

(c) The Purchaser, the Seller, the Purchaser Guarantors, the Seller Guarantors and GE will have concurrently with the Closing executed all documents and taken all actions necessary to enter into the GE Modified Loan Arrangement in a form satisfactory to Seller;

(d) If the parties enter into the Textron Modified Loan Arrangement in order to satisfy the payment of the Purchase Price pursuant to Section 3.2, the Purchaser, the Seller, the Seller Guarantors, the Purchaser Guarantors and Textron will have concurrently with the Closing executed all documents and taken all actions necessary to enter into the Textron Modified Loan Arrangement in a form satisfactory to Seller;

(e) On or before the Closing Date, the Purchaser shall have delivered to the Seller all of the following:

(i) payment of the Purchase Price set forth in Section 3.1; and

(ii) a certificate from the President or Chief Executive Officer of the Purchaser in a form reasonably satisfactory to the Seller, dated the Closing Date, stating that the preconditions specified in this Section 4.4 have been satisfied;

(iii) a copy of (A) the resolutions of the board of directors and shareholders of the Purchaser approving the transaction and (B) a copy of the Articles of Incorporation for the Purchaser, each as certified by the Secretary of the Purchaser;

(iv) an executed copy of the Bill of Sale; and

(v) such other documents or instruments as the Seller may reasonably request to effect the transactions contemplated hereby.

(f) The Purchaser will have deposited the cash portion of the Purchase Price into the Closing Escrow Account within 15 days of establishment of the Closing Escrow Account and will have executed all documentation necessary for the amounts in the Closing Escrow Account to be transferred to the Seller upon the Closing. In addition, immediately prior to the Closing, the Seller will recalculate the Inventory Value and the Cash On Hand Value and (i) if the amounts in the Closing Escrow Account are insufficient to satisfy the Purchase Price upon Closing, the Purchaser will deposit the amount of the shortfall into the Closing Escrow Account and (ii) if the amounts in the Closing Escrow Account exceed the amounts necessary to satisfy the Purchase Price upon Closing, the amount of the overage will be transferred to the Purchaser.

Any condition specified in this Section 4.4 may be waived by the Seller in its sole discretion; provided that no such waiver shall be effective unless it is set forth in a writing executed by the Seller.

ARTICLE V

COVENANTS BEFORE CLOSING

Section 5.1. Affirmative Covenants of the Seller . Except as otherwise contemplated by this Agreement, between the date hereof and the Closing, unless the Purchaser otherwise agrees in writing, the Seller shall:

(a) conduct and operate the Restaurants only in the Ordinary Course of Business; except to the extent that failure to do so would not constitute a Material Adverse Effect;

(b) keep in full force and effect the Seller’s corporate existence and all material contracts, rights, and Proprietary Rights relating or pertaining to the Restaurants and use its reasonable efforts to cause its current insurance (or reinsurance) policies not to be canceled or terminated or any of the coverage thereunder to lapse; except to the extent that failure to do so would not constitute a Material Adverse Effect;

(c) carry on the conduct and operation of the Restaurants in the same manner as presently conducted and operated and keep the Restaurants’ business organizations and properties intact, including their present business operations, physical facilities, working conditions, and employees and including the Restaurants’ present relationships with lessors, licensors, suppliers, customers, and others having business relations with the Restaurants; except to the extent that failure to do so would not constitute a Material Adverse Effect;

(d) maintain the Purchased Assets in good repair, order, and condition (normal wear and tear excepted) consistent with past practices, replace in accordance with past practices the Seller’s inoperable, worn out, or obsolete assets with assets of reasonably good quality consistent with past practices and, in the event of a material casualty, loss, or damage to any such Purchased Assets before the Closing Date, whether or not the Sel

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