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Purchase Agreement

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Sectors: Retail
Governing Law: Delaware, View Delaware State Laws
Effective Date: April 23, 2008
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STOCK PURCHASE AGREEMENT



This STOCK PURCHASE AGREEMENT (this " Agreement ") is entered into as of April 23, 2008 by and among ROASTERS ASIA PACIFIC (CAYMAN) LIMITED, a Cayman Island corporation (" Purchaser "), NF ROASTERS CORP. , a Delaware corporation (the " Company "), and NATHAN'S FAMOUS, INC. , a Delaware corporation (" Seller "). Purchaser and Seller are referred to collectively as the " Parties " and each individually as a " Party. "



RECITALS



WHEREAS, Seller owns all of the issued and outstanding common stock of the Company; and



WHEREAS, Seller wishes to sell the Company, and Purchaser wishes to purchase from Seller, all of the shares of common stock of the Company on the terms and conditions hereinafter set forth.



NOW THEREFORE, in consideration of the mutual promises, covenants, representations, warranties, conditions and agreements contained herein, the Parties agree as follows:





ARTICLE I

PURCHASE AND SALE OF SHARES



1.1 Purchase and Sale of Shares.



(a) Purchase of Shares. Subject to the terms and conditions hereinafter set forth, on the Closing Date, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, all of the issued and outstanding shares (consisting of 100 shares of common stock, $0.01 par value) of the Company (the " Shares "), for an aggregate price of Four Million Dollars ($4,000,000), plus the amount calculated in accordance with Section 1(b)(i)(y), below (the " Purchase Price) .



(b) Purchase Price. (i) As payment in full for the Shares, Purchaser shall, against delivery of a certificate or certificates evidencing the Shares, deliver to Seller a cash payment of (x) Three Million Seven Hundred Thousand Dollars ($3,700,000) plus (y) Three Hundred Ninety-Six and 44/100 Dollars ($396.44) for each day in the period commencing January 1, 2008, and ending on the Closing Date, which aggregate amount shall be paid by wire transfer of immediately available funds to such account as Seller has designated on Schedule 1.1(b) and (ii) Purchaser and Seller shall jointly instruct Farrell Fritz, P.C., in its capacity as escrow agent under the Escrow Agreement among Seller, Berjaya Group Berhad and Farrell Fritz, P.C. dated November 26, 2007, as amended to date, to deliver to Seller the Escrow Fund (as such term is defined therein).






1.2 Closing.



The closing (the " Closing ") of the transactions contemplated herein shall be held simultaneously with the execution and delivery of this Agreement at the offices of Farrell Fritz, P.C., 1320 RexCorp Plaza, Uniondale, NY 11556, or such other time and/or place as the Parties otherwise agree (the " Closing Date ").



ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER



Seller represents and warrants to Purchaser as follows:



2.1 Organization; Qualification; Subsidiaries.



(a) The Company. The Company is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties and assets. The Company is duly qualified or licensed to do business and is in good standing in every jurisdiction in which the conduct of its business or the ownership or lease of its properties, require it to be so qualified or licensed except where the failure to be so qualified or licensed would not have a Material Adverse Effect.



(b) Subsidiaries. Set forth on Schedule 2.1(b) is a list of all Subsidiaries of the Company, including its jurisdiction of incorporation and any jurisdictions in which such Subsidiary is qualified to do business. Each such Subsidiary is a corporation, duly organized, validly existing and in good standing under the laws of its jurisdiction of formation with full corporate power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties and assets. Each Subsidiary is duly qualified or licensed to do business and is in good standing in every jurisdiction in which the conduct of its business or the ownership or lease of its properties, require it to be so qualified or licensed, except where the failure be so qualified or licensed would not have a Material Adverse Effect.



2.2 Authorization of Transaction . The Seller has full corporate power and authority to execute and deliver this Agreement, the other Transaction Documents and to perform its obligations hereunder and thereunder. This Agreement and each other document, instrument or agreement executed and delivered by Seller in connection with the transactions contemplated hereunder has been duly executed and delivered by Seller and constitutes the valid and legally binding obligation of Seller, enforceable against it in accordance with its terms and conditions, except as the enforceability thereof may be limited by bankruptcy, insolvency or other laws relating to or affecting creditors ? rights.



2.3 No Conflict or Violation . Except as set forth on Schedule 2.3 , neither the execution and delivery of this Agreement and any of the other Transaction Documents, nor the consummation of the transactions contemplated hereby and thereby, will:



(a) result in a violation of or a conflict with any provision of the organizational documents of Seller, the Company or any of its Subsidiaries;





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(b) result in a breach of, a default under, or give any third party the right to modify, terminate or accelerate any obligation under, any term or provision of any Contract to which Seller, the Company or any of its Subsidiaries is a party or by which any of their assets are bound; or



(c) result in a violation by Seller, the Company or any of its Subsidiaries of, or require any authorization, consent, approval, exemption, notice, filing or other action due to or required from, or filing with, any Authority pursuant to any Regulation or Order except, in the case of clauses (b) and (c), where the occurrence of such event or failure to obtain such authorization, consent, or similar approval will not result in a Material Adverse Effect.



2.4 Consents and Approvals . No consent, approval or authorization of, or declaration, filing or registration with, any Authority is required to be made or obtained by Seller, the Company or any of its Subsidiaries in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, except where the failure to obtain such consents, approvals or authorizations, or make such declarations, filings or registrations, would not in the aggregate impair the ability of Seller to perform its obligations hereunder or result in a Material Adverse Effect.



2.5 Capitalization. There are 100 Shares of the Company issued and outstanding on a fully diluted basis and all such Shares are owned beneficially and of record by Seller. All of the Shares are duly authorized, validly issued, fully paid and non-assessable, and have been issued in compliance with all applicable securities Regulations. Neither Seller nor the Company has any Contracts containing any profit participation features, stock appreciation rights or phantom stock options, or similar Contracts that allow any Person to participate in the equity or profits of the Company. No Shares of the Company are reserved for issuance and there are no outstanding preemptive rights, Options, Claims, Contracts, convertible or exchangeable securities or other commitments, contingent or otherwise, relating to the Shares of the Company or pursuant to which the Company is or may become obligated to issue or exchange any of its Shares. There are no Contracts between or among the Company's equity holder and any other Persons that are binding upon Seller or the Company with respect to the voting, transfer, encumbrance of any Shares of the Company or Options or with respect to any aspect of the Company's governance or dividends or distributions.



2.6 Title to Personal Property . The Company has no personal property except for those properties and assets listed on Schedule 2.6 , all of which are owned by the Company free and clear of all Encumbrances.



2.7 Real Property. The Company does not currently own or lease any real property. Schedule 2.7 contains a true and complete list of all real property with respect to which the Company or any Subsidiary was a lessee, sublessee, licensee or other occupant or user (the " Real Property ") since the Purchase Date. Any lease, sublease or other occupancy agreement (including any amendments and renewal letters) relating to the Real Property (collectively, the " Real Property Leases ") has expired or been terminated and the Company has no obligations under the Real Property Leases.





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2.8 Financial Statements; No Undisclosed Liabilities.



(a) Financial Statements. Attached hereto as Schedule 2.8(a) to the Disclosure Schedule are the following financial statements (collectively the " Financial Statements "): Balance Sheets and Statements of Income, Cash Flows and Stockholders Equity for the Company for each of the fiscal years ended March 30, 2008 (" Most Recent Fiscal Year End ") and March 25, 2007 (collectively, the " Most Recent Financial Statements "). The Financial Statements are unaudited, have been prepared from the books and records of the Company, have been prepared using GAAP applied on a consistent basis throughout the periods covered thereby and present fairly the assets and liabilities of the Company as of such dates and the results of operations of the Company for such periods.



(b) Absence of Undisclosed Liabilities. To the Knowledge of Seller, the Company has no material obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due arising out of any transaction entered at or prior to the date hereof, or any action or inaction at or prior to the date hereof, or any state of facts existing at or prior to the date hereof, other than: (a) liabilities reflected on the Most Recent Financial Statements; (b) liabilities and obligations which have arisen after the date of the Most Recent Financial Statements in the Ordinary Course of Business which would not result, individually or in the aggregate, in a Material Adverse Effect; (c) obligations under Contracts described on Schedule 2.14 or under Contracts entered into in the Ordinary Course of Business consistent with past practice which are not required to be disclosed on such Section (but not liabilities for any breach of any such Contract occurring on or prior to the Closing Date); and (d) other liabilities and obligations expressly disclosed in the Disclosure Schedule.



2.9 Subsequent Events . Except as listed on Schedule 2.9 , since March 30, 2008, there has not been any change in the business or financial condition of the Company which has or is reasonably likely to result in a Material Adverse Effect with respect to the Company. Without limiting the generality of the foregoing and except as listed on Schedule 2.9 , since March 30, 2008 the Company has not:



(a) sold, leased, transferred, licensed, or assigned any material assets, tangible or intangible, outside the Ordinary Course of Business;



(b) entered into any Contracts (or series of related Contracts) involving expenditures of more than $50,000 per annum, nor modified any such existing Contracts, outside the Ordinary Course of Business;



(c) accelerated, terminated, made material modifications to, or canceled any material Contract to which the Company is a party or by which it is bound (nor has any other party thereto done the same);



(d) imposed any Encumbrance upon any of its assets, tangible or intangible;



(e) made or authorized any change in the organizational documents of the Company;





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(f) experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property;



(g) made or been subject to any change in its accounting practices, procedures or methods;



(h) discharged or satisfied any Lien or paid any obligation or liability, other than current liabilities paid in the Ordinary Course of Business;



(i) declared, set aside or made any payment or distribution of cash or other property to its equity holder or its other Affiliates with respect to such equity holder's equity securities or otherwise, or purchased, redeemed or otherwise acquired any equity securities (including any Options to acquire its equity securities);



(j) made capital expenditures or commitments therefor that amount in the aggregate to more than $50,000 (other than capital expenditures that are fully funded prior to the Closing);



(k) except as otherwise contemplated by this Agreement, delayed or postponed the payment of any accounts payable or commissions or any other liability or obligation or agreed or negotiated with any party to extend the payment date of any accounts payable or commissions or any other material liability or obligation or accelerated the collection of (or discounted) any accounts or notes receivable outside the Ordinary Course of Business;



(l) made any charitable pledges exceeding in the aggregate $5,000;



(m) entered into any synthetic lease or similar arrangement or any off-balance sheet financing arrangement;



(n) lost any franchisee or received written notice from any franchisee that it intends to (i) amend the material terms of any agreement between such franchisee and the Company or any Subsidiary, or (ii) terminate or not renew any agreement it may have with the Company or any Subsidiary;



(o) lost any supplier or received written notice from any material supplier that it intends to (i) reduce the level of business that it does with the Company or any Subsidiary, (ii) amend the material terms of any agreement between such supplier and the Company or any Subsidiary, or (iii) terminate or not renew any agreement it may have with the Company or any Subsidiary;



(p) taken any action or failed to take any action that has had or would reasonably have been expected to have the effect of accelerating to the Pre-Closing Period royalties or other revenues that would otherwise be expected to be paid or incurred after the Closing; or



(q) committed to do any of the foregoing (except to the extent that any such actions relate to the transfer of assets or liabilities to Seller as disclosed in the Disclosure Schedules).





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2.10 Legal Compliance.



(a) To the Knowledge of Seller, the Company is and has been for the two years preceding the date hereof in material compliance with all Regulations and Orders of any Authority applicable to it. To the Knowledge of Seller, for the two years preceding the date hereof no written notice has been received by and no written claims have been filed against the Company or any of its Subsidiaries alleging a material violation of any Regulation or Order.



(b) To the Knowledge of Seller, the Company holds, and is in material compliance with, all Permits of any Authority required for the conduct of its business and the ownership of its properties except where the failure to so comply would not have a Material Adverse Effect. To the Knowledge of Seller, no written notices have been received by the Company or any of its Subsidiaries alleging the failure to hold any of the foregoing. To the Knowledge of Seller, all of such Permits will be available for use by the Company or such Subsidiary immediately after the Closing.



2.11 Tax Matters.



(a) The Affiliated Group has filed all Tax Returns that it was required to file for each tax-period during which the Company was a member of the group, complete in all material respects, and has either paid all income Taxes shown thereon as owing or provided a reserve for such amounts on its Most Recent Financial Statement, except where the failure to file such Tax Returns or to pay such Taxes would not have a Material Adverse Effect.



(b) No federal income Tax Return that includes the Company is currently the subject of audit. The Seller has delivered or made available to Purchaser correct and complete copies of all federal income Tax Returns that include the Company, examination reports, and statements of deficiencies assessed against, or agreed to affecting the Company since December 31, 2005. The Seller has not waived any statute of limitations in respect of federal income Taxes or agreed to any extension of time with respect to any federal income Tax assessment or deficiency. The Company currently recognizes no sales and is therefore not currently required to file any sales Tax Returns.



(c) The Company has no liability for the income Taxes of any Person other than the Company under Treasury Regulation Section 1.1502-6 (or similar provision of state, local or foreign law).



(d) The Company has not been a member of an Affiliated Group filing a consolidated federal income tax return other than a group the common parent of which is the Seller.



2.12 Intellectual Property.



(a) The Company's registered Intellectual Property Rights are set forth on Schedule 2.12(a) . All of the Company ?s Intellectual Property Rights are subject to the Bankruptcy Plan and Bankruptcy Assignment and Assumption and the terms and limitations of any agreements assumed thereunder. Except as disclosed on Schedule 2.12(a) , all registrations of the trademarks that comprise the Company's Intellectual Property Rights are owned of record by the Company, have been duly maintained and are in full force and effect. No filing or payment of any kind was or is required to be made with respect to any of the filings for any of the Company's Intellectual Property Rights at any time prior to the Closing Date which has not been made or paid in a timely manner or will not be made or paid in a timely manner, as applicable.





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(b) Subject to the Bankruptcy Plan, the Bankruptcy Assignment and Assumption and the terms of any agreement assumed thereunder, to the Knowledge of Seller, (i) except as disclosed on Schedule 2.12(b) , no other Person has any rights to any of the Intellectual Property Rights owned or used by the Company that is material to the operation of the Company as it is presently operated in the United States except pursuant to Contracts or licenses or as otherwise specified on Schedule 2.12(b) , (ii) no other Person is infringing, misappropriating or otherwise violating any such material Intellectual Property Rights in the United States that the Company owns or uses, (iii) no material Intellectual Property Rights of the Company are subject to any outstanding Order or Claim, and (iv) neither the Company nor any of its licensees is infringing, misappropriating or otherwise violating any third party Intellectual Property, nor has any such Claim been made against any of them in writing.



(c) Reasonable precautions have been taken to protect the secrecy and value of all trade secrets forming a material part of the Company's Intellectual Property Rights, including, without limitation, all material proprietary and confidential business methods, techniques and practices, such precautions including, without limitation, implementation and enforcement of confidentiality policies and practices and requiring all employees and contractors having access to any confidential and proprietary information used in the business to execute and deliver written confidentiality agreements obligating them to maintain the confidentiality of same.



(d) Notwithstanding anything in this Agreement to the contrary, the Company makes no representation or warranty regarding the rights, if any, of Mr. Kenny Rogers with respect to the image, persona, endorsement, name and likeness of Mr. Rogers or any intellectual property rights, rights of publicity or rights of privacy he may have.



2.13 Franchise Operations and Co-Branding.



(a) Domestic Franchise Agreements. Schedule 2.13(a) accurately identifies all Franchise Agreements (collectively " Domestic Franchise Agreements ") which the Company is or has been party to which grant or purport to grant to a third party the right to operate or to develop "Kenny Rogers Roasters" restaurants within the United States, by location, the name of Franchisee, and the date of agreement. Except for the Domestic Franchise Agreement between Company and Host International Inc. concerning the restaurant located at the Ontario Mills Mall in Ontario, California (the " Existing Domestic Franchise Agreement " and the " Existing Domestic Franchised Restaurant ? (as applicable)), all of the restaurant locations covered by the Domestic Franchise Agreements have ceased operations and all related Domestic Franchise Agreements have expired or been terminated.





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(i) There are no existing defaults by the Company, and no event has occurred which, with notice or lapse of time, or both, would constitute a default by the Company under any such Domestic Franchisee Agreement, which default could reasonably be expected to have a Material Adverse Effect upon the business of the Company when taken as a whole.



(ii) To the Knowledge of Seller, the material terms of the Existing Domestic Franchise Agreement is enforceable, except as enforcement may be limited by applicable laws, including but not limited to franchise relationship laws and bankruptcy, insolvency, reorganization, moratorium and other laws and case precedents affecting franchisor-franchisee relations and/or creditors rights generally, and except insofar as the availability of equitable remedies may be limited by applicable law.



(iii) To the Knowledge of Seller, the Franchisee of the Existing Domestic Franchised Restaurant is in compliance with the material terms of the Existing Domestic Franchise Agreement.



(iv) The Company has not granted a waiver, forbearance or consent with respect to any provision of the Existing Domestic Franchise Agreement regarding the Franchisee ?s obligation to make payments of royalty fees, it being expressly acknowledged by Purchaser that no advertising or other marketing fund contributions were ever required to be paid by Host International Inc. pursuant to the Existing Domestic Franchise Agreement.



(b) International Franchise Agreements . Schedule 2.13(b) accurately identifies all Franchise Agreements (collectively " International Franchise Agreements ") which the Company is or has been party which grant or purports to grant to a third party the right to operate or to develop "Kenny Rogers Roasters" restaurants outside of the United States, by territory, the name of the Franchisee and the date of the Agreement.



(i) To the Knowledge of Seller, there are no existing defaults by the Company, and no event has occurred which, with notice or lapse of time, or both, would constitute a default by the Company under any such International Franchise Agreement, which default could reasonably be expected to have a Material Adverse Effect upon the business of the Company when taken as a whole.



(ii) To the Knowledge of Seller, the material terms of the International Franchise Agreements are enforceable, except as enforcement may be limited by applicable laws, including but not limited to franchise relationship laws and bankruptcy, insolvency, reorganization, moratorium and other laws and case precedents affecting franchisor-franchisee relations and/or creditors rights generally, and except insofar as the availability of equitable remedies may be limited by applicable law.





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(iii) Notwithstanding the foregoing, except as provided in the last clause of this Section 2.13 (b)(iii), no representations are made with respect to (A) the Master Development Agreement dated July 22, 1993 between the Company, on the one hand, and Roasters Asia Pacific (Cayman) Limited and Roasters Asia Pacific (HK) Limited (individually and collectively "Developer"), as heretofore amended, including without limitation, by the Third Amendment to the Master Development Agreement dated July 15, 1999 and by the Fourth Amendment to the Master Development Agreement dated September 2003 (the "Existing RAP Agreement ? ), as well as any and all subfranchise and/or sublicense agreements entered into by Developer or its Affiliates pursuant to the Existing RAP Agreement or (B) the Master Development Agreement between the Company and Toronto Foods International ("TFI") dated March 2003 (the "TFI Agreement"); provided that Seller hereby represents and warrants to Purchaser that the TFI Agreement represents the entire agreement of the parties with respect to the subject matter thereof.



(iv) Except as provided in Sections 2.13(b)(i) and (ii) above, Company makes no warranties or representations concerning the International Franchise Agreements, including, without limitation, any representation or warranty regarding the current status of the term of any International Franchise Agreement, the current status of any restaurants developed pursuant to any International Franchise Agreement, and/or whether or not any Franchisee is currently in compliance with its obligations pursuant to any International Franchise Agreement.



(c) Co-Branding . Schedule 2.13(c) accurately identifies all Co-Branding Agreements (collectively, " Co-Branding Agreements ") which grant or purport to grant to a third party the right to sell "Kenny Rogers Roasters" menu items within a Nathan's Famous or Miami Subs restaurant that are currently in effect, by location of restaurant(s) (the " Existing Co-Branded Locations "). The Co-Branding agreements will be assigned by Purchaser to Seller (or its affiliate) pursuant to the KRR Co-Brand License Agreement described in Section 4.4 below.



(d) Pending Sales. There are no offers by the Company of Franchise Agreements and/or International Franchise Agreement which are pending or in progress as of the date of this Agreement and which, to the Knowledge of Seller, are likely to mature into opportunities to sign a Franchise Agreement and/or an International Franchise Agreement.



(e) Pending Franchisee Claims. There are no arbitrations, mediations or civil actions pending between the Company and any of the Franchisees as of the date of this Agreement and the Company is not engaged in any formal written dispute with any Franchisee (or other party claiming to be a Franchisee of the Company) or any party related thereto as of the date of this Agreement which could reasonably be expected to have a Material Adverse Effect.





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(f) Notices of Breach, Default or Termination. There are no unresolved written assertions or claims by the Company against any current Franchisee for any breach of any of the Domestic Franchise Agreements that remain uncured.



2.14 Contracts . Except for the Contracts disclosed pursuant to Section 2.13, Schedule 2.14 lists the following Contracts to which the Company is currently a party or is subject to and which have not, as of the date hereof, been fully performed:



(a) any agreement (or group of related agreements) for the purchase of inventory, products, machinery, equipment or other personal property or real property, or for the furnishing or receipt of services requiring payments in excess of $50,000 per year;



(b) any Contract (or group of related Contracts) for the consignment or lease of machinery, equipment or other personal property or real property to or from any Person requiring payments in excess of $50,0
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