Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

Dated as of

 

February 5, 2008,

 

By and among

 

Barnhill’s Buffet, Inc.

as Seller

 

And

 

Starlite Holdings, Inc.,

as

Buyer

 

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ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of February 5, 2008, is by
and among BARNHILL’S BUFFET, INC., a Tennessee corporation (the “Seller or the
Company”) and STARLITE HOLDINGS, INC., a wholly owned subsidiary of Star
Buffet, Inc., a Delaware corporation, (together with any successor and assigns,
the “Buyer”).

 

RECITALS

 

A.                                   The Seller is engaged in the business of
operating a chain of restaurants known as Barnhill’s Buffet that specialize in
Southern-style buffet dining and catering.

 

B.                                     On the terms and subject to the
conditions set forth in this Agreement, the Seller desires to sell, and the
Buyer desires to acquire certain assets and assume certain liabilities of
Seller’s restaurants listed on Exhibit A attached hereto (collectively, the
“Restaurants”), and to assume certain real property and personal property leases
as well as certain contracts related thereto necessary for the operation of the
Restaurants.

 

C.                                     On or about December 3, 2007, the Seller
commenced a proceeding (the “Bankruptcy Case”) in the United States Bankruptcy
Court for the Middle District of Tennessee (the “Bankruptcy Court”) by filing a
voluntary petition for relief under Chapter 11 of Title 11 of the United States
Code (the “Bankruptcy Code”) (the date of such filing being the “Petition
Date”).

 

D.                                    The Seller and the Buyer have agreed that
the transactions contemplated hereby shall be accomplished through a sale and
assignment of assets to the Buyer pursuant to Sections 363 and 365 of the
Bankruptcy Code.

 

E.                                      The Seller and the Buyer contemplate a
closing of the transactions on the Target Date (as defined in Section 2.3
herein) following the entry of the Sale Order (as defined in Section 7.2), which
Sale Order shall not be subject to any stay, as of the Closing Date (as defined
in Section 2.3).

 

F.                                      All disclosure schedules and exhibits
referred to herein are hereby incorporated by reference and, taken together with
this Agreement (including the foregoing Recitals) shall constitute but a single
agreement.

 

ARTICLE 1

 

PURCHASE AND SALE

 

1.1                                 Assets.  Subject to the terms of this
Agreement and pursuant to Sections 363 and 365 of the Bankruptcy Code, Seller
agrees to sell, transfer, convey and/or assign to Buyer, and Buyer agrees to
purchase and acquire from Seller at the Closing (as defined in Section 2.3), all
of Seller’s right, title and interest, whatsoever, in and to the assets
described below and in the following manner (collectively, the “Assets”) free
and clear of all Encumbrances (as defined in Article 10):

 

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(a)                            Store Inventory.  At the Closing but effective as
of the Effective Time (as defined in Section 2.6), Seller shall sell, transfer
and assign to Buyer all of Seller’s right, title and interest in and to all of
the inventory on hand (including raw materials, work in process and finished
goods) at the Restaurant Sites.

 

(b)                           Real Property Lease Assignments.  Described in
Exhibit A are locations of certain restaurant sites leased by Seller (the
“Restaurant Sites”) that constitute all of the sites on which the Restaurants
are located.  Subject to Section 1.6, at the Closing but effective as of the
Effective Time, Seller shall transfer, sell and assign to Buyer all of Seller’s
right, title and interest in and to the leases for the Restaurant Sites (the
“Assumed Leases”) free and clear of all Encumbrances.

 

(c)                            Tangible Personal Property.  At the Closing but
effective as of the Effective Time, Seller shall sell, transfer and assign to
Buyer, free and clear of all Encumbrances, all of Seller’s right, title and
interest in and to all tangible personal property owned or leased by Seller and
located at the Restaurant Sites, including, without limitation, certain
leasehold improvements and fixtures located at the Restaurant Sites and further
including, without limitation, the items described on Exhibit B (the “Tangible
Personal Property”).

 

(d)                           Personal Property Leases and Executory Contract
Assignments.  Described in Exhibit C are certain personal property leases
(“Personal Property Leases”) as well as certain licenses (including, without
limitation, licenses relating to computer hardware and software), contracts,
third-party warranties, arrangements and other agreements that may constitute
executory contracts under Section 365 of the Bankruptcy Code (“Executory
Contracts” and together with the Assumed Leases and the Personal Property
Leases, the “Assigned Agreements”) to which the Seller is a party, relating to
the business conducted at the Restaurant Sites.

 

(e)                            Books and Records.  At the Closing, Seller shall
sell, convey, transfer and assign to Buyer all of Seller’s right, title and
interest in and to all “Books and Records” (including the right of possession)
located at the Restaurants and/or Seller’s corporate headquarters that relate to
the business conducted at the Restaurant Sites and/or the ownership of the
Assets.  Following the Closing, Seller shall have the right to retain copies of
any Books and Records transferred to Buyer.    “Books and Records” means all
sales records, purchase records, customer lists, supplier lists, advertising and
promotional materials, health inspection records including all records regarding
the Occupational Safety and Health Act and similar government examinations and
clearances, correspondence and other records, real estate and developmental
data, blueprints.

 

(f)                              Perpetual License of Trade names.  At the
Closing but effective as of the Effective Time, Seller shall grant to Buyer a
perpetual license to use any trade names, trademarked names, or graphics owned
by Seller for purposes of operating the Restaurants (the “License”).

 

1.2                                 Excluded Assets.  Except for the Assets set
forth in Section 1.1, all other assets of Seller are excluded from the purchase
and sale contemplated by this Agreement.  For the

 

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avoidance of doubt, subject to Section 9.3, all security deposits, refunds,
deposits and prepaid expenses of Seller, whether or not they relate to a
property subject to an Assignment Agreement, are not Assets to be transferred to
Buyer (the “Prepaid Charges”).

 

1.3                                 Assumed Liabilities.  On the Closing Date,
but effective as of the Effective Time, Buyer shall assume and agree to
discharge only the following specifically enumerated obligations and liabilities
of Seller (the “Assumed Liabilities”):

 

(a)                            All liabilities and obligations arising after the
Closing Date with respect to or arising under the Assets;

 

(b)                           All liabilities, obligations and commitments under
the Assigned Agreements accruing with respect to any periods after the Effective
Time or requiring payment of an obligation which becomes due and payable after
the Effective Time and which, in any event, is attributable to the period after
the Effective Time; and

 

(c)                            All liabilities, obligations and commitments
accruing with respect to any periods after the Effective Time requiring payment
of an obligation which, in any event, becomes due and payable after the
Effective Time resulting from, caused by or arising out of, directly or
indirectly, the conduct by Buyer in operating the business at the Restaurant
Sites.

 

1.4                                 Retained Liabilities.  Notwithstanding
anything contained in this Agreement to the contrary, Buyer does not assume or
agree to pay, satisfy, discharge or perform, and shall not be deemed by virtue
of the execution and delivery of this Agreement or any document delivered at the
Closing pursuant to this Agreement, to have assumed, or to have agreed to pay,
satisfy, discharge or perform, any liability, obligation or indebtedness of
Seller, whether primary or secondary, direct or indirect, other than the Assumed
Liabilities.  Seller shall retain all liabilities and obligations of Seller
other than the Assumed Liabilities to the extent specifically provided in
Section 1.3  subject to the prorations set forth in Section 9.3 (all such
liabilities and obligations retained by Seller being referred to herein as the
“Retained Liabilities”).  By way of illustration, and not of limitation,
Retained Liabilities include:

 

(a)                            All liabilities, obligations and commitments of
Seller or any predecessor(s) or Affiliate(s) of Seller relating to Taxes (as
defined in Article 10) with respect to the Assets or otherwise, for all periods,
or portions thereof, on or prior to the Closing Date, subject to the prorations
set forth in Section 9.3;

 

(b)                           All liabilities, obligations and commitments for
any legal, accounting, investment banking, brokerage or similar fees or expenses
incurred by Seller in connection with, resulting from or attributable to the
transactions contemplated by this Agreement;

 

(c)                            Liabilities, obligations and commitments for
which Buyer does not expressly assume an obligation or liability as described in
Section 1.3;

 

(d)                           Liabilities, obligations and commitments for any
borrowed money incurred by Seller or any predecessor(s) or Affiliate(s) of
Seller; and

 

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(e)                            All liabilities, obligations and commitments of
Seller, whether known or unknown, disclosed or undisclosed, resulting from,
caused by or accruing out of, at any time, directly or indirectly, the conduct
of its business or ownership or lease of any of its properties or assets or any
properties or assets previously used by Seller at any time prior to or on the
Closing Date.

 

1.5                                 Sale and Assignment Pursuant to Bankruptcy
Code.  All the sales, assumptions and assignments contemplated by this Article 1
shall be subject to Bankruptcy Court approval pursuant to, among other things,
Sections 363 and 365 of the Bankruptcy Code.

 

1.6                                 Assigned Agreements.  Seller shall assume
and assign to the Buyer all of the Assigned Agreements.  Set forth on Exhibits A
and C is certain information describing the monetary obligations associated with
the Assigned Agreements and any monetary defaults there under as of the Petition
Date (the “Cure Amounts”). To the extent required by the Bankruptcy Court under
the Bankruptcy Code in order to permit the assumption and assignment of the
Assigned Agreements to the Buyer pursuant to this Agreement, (i) the Buyer
hereby agrees to pay the Cure Amounts listed in Exhibits A and C, (ii) the Buyer
shall provide adequate assurances of future performance as required by the
Bankruptcy Code with respect to each Assigned Agreement and (iii) at the
Closing, any obligations that have accrued but are not yet due for payment under
the Assigned Agreements shall be pro-rated between the Seller and Buyer as of
the Closing in accordance with Section 9.3.

 

ARTICLE 2

 

CONSIDERATION; ALLOCATION; PAYMENT

 

2.1                                 Assumption; Purchase; Consideration.  In
consideration of the sale, conveyance, transfer and/or assignment of the Assets
as provided in Article 1, and subject to the provisions of this Agreement, at
the Closing Buyer shall:

 

(a)                            assume the Assumed Liabilities; and

 

(b)                           purchase the Assets for the Purchase Price (as
defined below).

 

2.2                                 Purchase Price.  The purchase price for the
sale of the Assets shall be $1,000,000.00 in cash (the “Purchase Price”).

 

2.3                                 Closing.  The “Closing” of the transactions
contemplated herein, including payment of the Purchase Price, shall take place
at the offices of the Company or such other location in Nashville, TN as may be
agreed upon, no later than five (5) days following the entry of the Sale Order
(the “Target Date”) (or such earlier date as Buyer and Seller may mutually
agree, the “Closing Date”); provided, that no stay of the Sale Order shall be in
effect and provided, further, that the Sale Order shall contain a waiver of the
automatic ten (10) day stay under Rule 6004(h) of the Federal Rules of
Bankruptcy Procedure; provided, further, however, that in no event unless
otherwise agreed in writing shall the Closing take place on a date which is
after February 14, 2008 (the “Termination Date”).  At the Closing, Buyer shall
pay the Purchase Price to Seller by wire transfer of immediately available funds
to one or more bank accounts of Seller, or as

 

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directed by Seller in accordance with the terms of the Sale Order approved by
the Bankruptcy Court.

 

2.4                                 Allocation.  On or before the date that is
five (5) days before the Closing Date, the Seller and the Buyer will agree upon
an allocation of the Purchase Price covering the Assets for federal, state and
local Tax purposes.  The Seller and the Buyer will implement, report and accept
such allocation for federal, state and local Tax purposes.  The parties agree
that such allocations will not in any way limit their respective rights and
obligations under the Sale Documents (as defined in Section 3.2) in respect of
representations, warranties, covenants and agreements and the breach thereof or
damages therefore.

 

2.5                                 Transfer Taxes.  Buyer shall pay all sales,
transfer and use taxes, if any, that arise from the Transaction.   The parties
will reasonably cooperate to minimize any such taxes.

 

2.6                                 Effective Time.  The effective time of the
transactions contemplated hereby shall be 12:01 a.m. (Nashville, Tennessee time)
on the first day following the Closing (the “Effective Time”), notwithstanding
the fact that the actual physical exchange of documents shall take place at the
Closing.

 

2.7                                 Deposit.  Upon the execution of this
Agreement, Buyer shall place in escrow with Seller’s counsel a refundable
purchase price deposit of $1,000 in cash.  One day prior to the Sale Hearing, an
additional refundable purchase price deposit in the amount of $99,000 in cash
shall be placed in escrow with Seller’s counsel (all such cash placed in escrow
hereinafter referred to as the “Deposit”), all of which shall be placed in an
interest-bearing account.  Upon Closing, the Deposit will be applied against the
Purchase Price.  Otherwise, the deposit will either be returned to Buyer or paid
to Seller as specified in Section 8.2.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except (i) as set forth in the schedules referenced herein, to the extent
(ii) it would not reasonably be expected to result in a Material Adverse Effect,
(iii) the Bankruptcy Court determines otherwise, and (iv) the Bankruptcy Code
provides otherwise, as an inducement to Buyer to enter into and perform its
obligations under this Agreement, Seller hereby represents and warrants to Buyer
as follows:

 

3.1                                 Organization and Good Standing.  Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Tennessee and has full organizational power and organizational
authority to conduct its business as it is now being conducted and to own,
operate or lease the properties and assets it currently owns, operates or holds
under lease.

 

3.2                                 Power and Authorization.  Subject to
approval by the Bankruptcy Court, Seller has full power and authority to execute
and deliver this Agreement and any agreement, document, certificate or
instrument being delivered pursuant to or in connection with the transactions
contemplated by this Agreement (collectively, the “Sale Documents”) to perform
its obligations hereunder and there under and to consummate the transactions
contemplated hereby and thereby.  The execution and delivery of this Agreement
and the other Sale Documents, and the performance

 

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by Seller of its obligations hereunder and there under, and the consummation of
the transactions contemplated hereunder and there under, have been duly
authorized by Seller.  This Agreement and the other Sale Documents upon
execution and delivery by Seller and upon approval of the Bankruptcy Court will
constitute the legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms.

 

3.3                                 No Violation.  Except as set forth on
Schedule 3.3 hereto, the execution, delivery and performance by Seller of this
Agreement and the other Sale Documents and the consummation or performance of
the transactions contemplated herein and therein do not and will not:

 

(a)                            conflict with, result in the breach,
modification, termination or violation of, or loss of any benefit under,
constitute a default under, accelerate the performance required by, result in or
give rise to a right to amend or modify the terms of, result in the creation of
any lien upon any assets or properties, or in any manner release any party
thereto from any obligation under, any material mortgage, note, bond, indenture,
contract, agreement, lease, license or other instrument or obligation of any
kind or nature by which Seller, or any of its properties or assets, may be bound
or affected;

 

(b)                           contravene or conflict with, or result in a
violation of, result in any loss of benefit under, or give any Person the right
to challenge any of the transactions contemplated by this Agreement and the
other Sale Documents or to exercise any remedy or obtain any relief under, any
permit, concession, franchise, order, judgment, writ, injunction, law, rule,
ordinance, regulation, statute or decree applicable to Seller; or

 

(c)                            conflict with or violate any provision of the
certificate of incorporation, bylaws or resolutions adopted by the board of
directors or stockholders, each as heretofore amended, of Seller.

 

3.4                                 No Consent Required.  Except for Bankruptcy
Court approval or as otherwise contemplated by this Agreement [or as set forth
on Schedule 3.4 hereto], no consent, approval, order or authorization of, or
declaration, filing or registration with, any Person, entity or governmental
authority is required to be made or obtained by Seller in connection with the
authorization, execution, delivery or performance of this Agreement, the other
Sale Documents or the transactions contemplated hereby and thereby.

 

3.5                                 Compliance with Laws; Permits.  To the
Knowledge of the Seller, Seller is in material compliance with all laws,
regulations, rules, ordinances, orders and other requirements applicable to the
operation, conduct or ownership of the business conducted at the Restaurant
Sites.  Seller holds all of the required permits, licenses, approvals and
authorizations of any Governmental Unit (as defined in Article 10) or third
parties (collectively, “Permits”) necessary or appropriate for the conduct of
its business at the Restaurant Sites.  To the Knowledge of the Seller, all such
Permits are in full force and effect, and will remain with Seller upon, and will
not be affected by, the Closing; there is no condition, nor has any event
occurred, which constitutes or with the giving of notice or passage of time or
both would constitute a violation of the terms of any Permit and no
cancellation, modification or revocation of any of the Permits is pending or
threatened.

 

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3.6                                 Property.

 

(a)                            Seller has good and marketable title or rights as
lessee to all real, personal, mixed, tangible and intangible property of any
kind or nature owned or used by Seller at the Restaurant Sites, constituting the
Assets, in each case free and clear of all Encumbrances, except for Encumbrances
identified on Schedule 3.6(a) hereto on the date hereof.  The Assets located at
the Restaurant Sites (a) constitute all the assets, of any nature whatsoever,
necessary at the Restaurant Sites in order for Seller to operate its business at
the Restaurant Sites in the manner such business is presently operated by
Seller, and (b) include all of the operating assets of Seller at the Restaurant
Sites.  Upon the execution of this Agreement, Buyer shall have the right to
communicate with landlords (and other parties in the leasehold chain) regarding
the leaseholds related to the Restaurant Sites.

 

(b)                           Seller has a valid leasehold interest to all of
the Assumed Leases.  Each of the Assumed Leases is the subject of a written
lease agreement and there are no oral terms inconsistent with the written terms
thereof.  Except as set forth on Schedule 3.6(b), to the Knowledge of the
Seller, no work has been performed on, or materials supplied to, any of the
Assumed Leases within the applicable statutory period which would give rise to
any mechanic’s or materialmen’s liens for any amount in excess of $1,000.

 

3.7                                 Condition of Property and Related Matters.

 

(a)                            All buildings, machinery, equipment and other
tangible assets constituting the Assets and used by Seller in the conduct of its
business at the Restaurant Sites, including but not limited to the Tangible
Personal Property, are in fair or good operating condition and repair,
reasonable wear and tear excepted, are usable in the ordinary course of business
and are adequate and suitable for the uses to which they are being put.  All
such assets and property are located at real property locations constituting the
Restaurant Sites.

 

3.8                                 Material Contracts.  With respect to the
business conducted at the Restaurant Sites, Seller has not entered into nor is
it bound by any contract, agreement or commitment of an amount or value in
excess of $50,000 in the aggregate, written or oral, including without
limitation any obligations for money borrowed (the “Material Contracts”); true,
correct and complete copies of all written Material Contracts previously have
been furnished to Buyer.  Except as set forth on Schedule 3.8, to the Knowledge
of the Seller, Seller is not in default, and no event has occurred or
circumstances exists that, with or without which, the giving of notice or the
passage of time or both, may contravene, conflict with, result in a breach of or
constitute a default by Seller, or any other party under any Material Contract
or any other obligation owed by Seller, and no event has occurred which, with
the giving of notice or the passage of time or both, would constitute a default
by any other party to any such Material Contract or obligation.  The
consummation of the transactions contemplated by the Sale Documents will not
result in a breach of or constitute a default under, any Material Contract or
the right of any other party to the Material Contract to terminate the same and
there are no negotiations pending to revise the terms of any such Material
Contracts.

 

3.9                                 Employee Matters.

 

(a)                            Seller is not a party to or bound by any
collective bargaining agreement and there are no labor unions or other
organizations representing, purporting to represent or, to the

 

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Knowledge of Seller, attempting to represent any employees employed in the
operation of the business conducted at the Restaurant Sites.  Since February 11,
2005, there has not occurred or, to the Knowledge of Seller, been threatened any
material strike, slowdown, picketing, work stoppage, concerted refusal to work
overtime or other similar labor activity with respect to any employees employed
in the operation of the business conducted at the Restaurant Sites.  There are
no labor disputes currently subject to any grievance procedure, arbitration or
litigation and there is no representation petition pending or, to the Knowledge
of Seller, threatened with respect to any employee employed in the operation of
the business conducted at the Restaurant Sites.  The Seller has complied with
all provisions of all Legal Requirements (as defined in Article 10) pertaining
to the employment of employees, including, without limitation, all such Legal
Requirements relating to labor relations, equal employment, fair employment
practices, entitlements, prohibited discrimination or other similar employment
practices, entitlements, prohibited discrimination or other similar employment
practices or acts, except for any failure so to comply that, individually or
together with all such other failures, has not and will not result in a material
Liability or obligation on the part of the Buyer, and has not had or resulted
in, and is not expected to have or result in, a Material Adverse Effect (as
defined in Article 10).

 

(b)                           Buyer shall have no Liability on account or with
respect to any benefits due Seller’s employees (including without limitation any
Liability arising in connection with or with respect to any of the following:
compensation, unemployment insurance contributions, termination payments,
severance payments, retirement, pension, profit-sharing, retirement plans,
bonus, vacation, disability, health, accrued sick leave or other employee
benefit plans, agreements or understandings).  The terms and conditions
(including the scope and amount of all benefits) under which any employment will
be offered to employees of Seller by Buyer shall be determined by Buyer in its
sole discretion.

 

3.10                           Books and Records.  All the books, records and
accounts of Seller relating to the Restaurant Sites, all of which have been made
available to Buyer, are in all material respects accurate and complete,
accurately reflect all matters normally recorded in the books, records or
accounts of Seller in accordance with Seller’s historical practices, are in all
material respects in compliance with all laws and regulations applicable to
Seller as they relate to the business conducted at the Restaurant Sites and
accurately present and reflect in all material respects the transactions
described therein.

 

3.11                           Taxes.  Except as set forth on Schedule 3.11, all
Tax returns, reports and declarations required by any governmental authority to
be filed in connection with Seller’s ownership or lease of the Assets or the
operation of the business conducted at the Restaurant Sites have been timely
filed and, to the Knowledge of Seller, are complete and correct in all material
respects and all Taxes related thereto have been paid.

 

3.12                           Litigation.  Except as set forth in Schedule
3.12, there is no claim, counter-claim, action, suit, order, proceeding or
investigation pending, in law or in equity, or, to the Knowledge of Seller,
threatened against or involving Seller, with respect to the business conducted
at the Restaurant Sites (or pending or, to the Knowledge of Seller, threatened
against any of the officers, directors or key employees of Seller with respect
to business activities (including any products sold) at the Restaurant Sites
conducted on behalf of Seller) with respect to or affecting Seller, its
accounts, business, properties, assets or rights, or relating to the
transactions contemplated hereby,

 

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before any court, agency, regulatory, administrative or other governmental body
or officer or before any arbitrator; nor to the Knowledge of Seller, is there
any reasonable basis for any such claim, action, suit, proceeding or
governmental, administrative or regulatory investigation that would result in a
Material Adverse Effect.  Seller is not directly subject to or affected by any
order, judgment, decree or ruling of any court or governmental agency relating
to affecting the Restaurant Sites.  Seller has not received any written opinion
or memorandum of legal advice from legal counsel to the effect that it is
exposed to any liability which may be material to the business, prospects,
results of operations, financial condition or assets of Seller at the Restaurant
Sites.

 

3.13                           Environmental and Safety Requirements.

 

(a)                            To the Knowledge of Seller, Seller is in material
compliance with all applicable Environmental and Safety Requirements (as defined
below) at the Restaurant Sites and Seller possesses all required permits,
licenses and certificates for the Restaurants, and has filed all notices or
applications, required thereby.   To the Knowledge of Seller, Seller has not
received any notice or other communication from any party with respect to
Seller’s failure to comply with Environmental and Safety Requirements.  For
purposes of this Agreement, “Environmental and Safety Requirements” means all
federal, state, provincial, foreign and local laws, bylaws, rules, regulations,
ordinances, decrees, orders, statutes, actions, guidelines, standards,
arrangements, injunctions, policies and requirements relating to public health
and safety, worker health and safety, disabilities, pollution and protection of
the environment (including without limitation the handling of any polluted,
toxic or hazardous materials), all as amended;

 

(b)                           To the Knowledge of the Seller, the properties at
the Restaurant Sites are not subject to any, nor are there any facts or
circumstances which Seller reasonably believes could form the basis for any,
Liability, contingent or otherwise arising out of any Environmental and Safety
Requirements.  There are no pending or, to the Knowledge of Seller, threatened
claims or Encumbrances for Seller’s failure to comply with any Environmental and
Safety requirements.  Seller does not have in its possession or under its
control at the Restaurant Sites any hazardous substances, except those hazardous
substances as are used in the ordinary course of the business of Seller and are
used or maintained in compliance with the Environmental and Safety Requirements;

 

(c)                            To the Knowledge of the Seller, during the period
Seller has occupied the Restaurant Sites, there has been no Release (as defined
in Article 10) or threat of Release, of any hazardous materials at or from the
Restaurant Sites or at any other locations where any hazardous materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Restaurant Sites, or from any other properties and
assets (whether real, personal, or mixed) in which Seller has or had an interest
or, to the Knowledge of Seller, any geologically or hydrologically adjoining
property, whether by Seller or any other Person; and

 

(d)                           Seller has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller pertaining to hazardous materials or hazardous
activities in, or, or under the Restaurant Sites, or concerning compliance by
Seller or any other Person for whose conduct it is or may be held responsible,
with Environmental and Safety Requirements.

 

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3.14                           Store Inventory.  All of the Store Inventory is
located at one or more of the Restaurant Sites.

 

3.15                           No Undisclosed Liabilities.  Seller has not
incurred any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
arising out of or related to the business conducted at the Restaurant Sites,
except (a) as set forth in Schedule 3.15, (b) as and to the extent disclosed or
reserved against in the most recent balance sheet of Seller provided to Buyer,
and (c) for liabilities and obligations that were (i) incurred in the ordinary
course of business consistent with past practice and (ii) individually or in the
aggregate are not material to the business conducted at the Restaurant Sites and
have not had or resulted in, and would not reasonably be expected to result in,
a Material Adverse Effect.

 

3.16                           Disclosure.  No representation or warranty or
other statement made by Seller in this Agreement or in connection with the
transactions contemplated hereby omits to state a material fact necessary to
make any of them, in light of the circumstances in which it was made, not
misleading.

 

3.17                           Brokers, Finders, etc.  Other than Brookwood
Associates, retained by the Seller as its investment banker in connection with
the transactions set forth in this Agreement, all negotiations relating to this
Agreement and the transactions contemplated hereby, have been carried on without
the participation of any Person acting on behalf of Seller in such manner as to
give rise to any valid claim against the Buyer or any of its subsidiaries for
any brokerage or finder’s commission, fee or similar compensation, or for any
bonus payable to any officer, director, employee, agent or sale representative
of or consultant to Seller upon consummation of the transactions contemplated
hereby or thereby.  Buyer shall have no obligation to pay the fees and expenses
of Brookwood Associates.

 

3.18                           Notice of Sale.  Notice of this Agreement and
Notice of the Sale Order and the hearings therefore will be duly and properly
given to all known creditors and parties in interest in the Bankruptcy Case,
including but not limited to, any parties holding consensual or nonconsensual
liens on the Assets, the non-Seller parties to the Assigned Agreements being
assumed pursuant to this Agreement, the employees at the Restaurant Sites, and
applicable taxing and governmental authorities.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

As an inducement to Seller to enter into and perform its respective obligations
under this Agreement, Buyer hereby represents and warrants to Seller as follows:

 

4.1                                 Organization and Good Standing; Power. 
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of [Delaware] and has full power and authority to
conduct its business as it is now being conducted and to own, operate or lease
the properties and assets it currently owns, operates or holds under lease.

 

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4.2                                 Authorization.  Buyer has full power and
authority to execute and deliver this Agreement and any agreement, document,
certificate or instrument being delivered pursuant to or in connection with the
transactions contemplated by this Agreement, to perform its obligations
hereunder and there under and to consummate the transactions contemplated hereby
and thereby.  The execution and delivery of this Agreement and the other Sale
Documents, and the performance by Buyer of its obligations hereunder and there
under, and the consummation of the transactions contemplated hereunder and there
under, have been duly authorized by Buyer.  This Agreement and the other Sale
Documents upon execution and delivery by Buyer shall constitute the legal, valid
and binding obligations of Buyer, enforceable against Buyer in accordance with
their respective terms.

 

4.3                                 No Violation.  The execution, delivery and
performance by Buyer of this Agreement and the other Sale Documents and the
consummation of the transactions contemplated herein and therein do not and will
not:

 

(a)                            conflict with, result in the breach,
modification, termination or violation of, or loss of any benefit under,
constitute a default under, accelerate the performance required by, result in or
give rise to a right to amend or modify the terms of, result in the creation of
any Encumbrance upon any assets or properties, or in any manner release any
party thereto from any obligation under, any mortgage, note, bond, indenture,
contract, agreement, lease, license or other instrument or obligation of any
kind or nature by which Buyer or any of its properties or assets may be bound or
affected;

 

(b)                           conflict with, violate or result in any loss of
benefit under, any permit, concession, franchise, order, judgment, writ,
injunction, regulation, statute or decree; or

 

(c)                            conflict with or violate any provision of the
articles of organization or operating agreement, each as heretofore amended, of
Buyer.

 

4.4                                 No Consent Required.  Except as otherwise
contemplated by this Agreement, no consent, approval, order or authorization of,
or declaration, filing or registration with, any person, entity or governmental
authority is required to be made or obtained by Buyer in connection with the
authorization, execution, delivery or performance of this Agreement, the other
Sale Documents or the transactions contemplated hereby.

 

4.5                                 Financing Commitment.  Buyer has sufficient
funds to pay the Purchase Price or, alternatively, has secured a financing
commitment from a third party in an amount sufficient to pay the Purchase Price.

 

4.6                                 “AS IS” Transaction.  BUYER HEREBY
ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ARTICLE 3 ABOVE, THE SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY MATTER RELATING TO THE ASSETS.  BUYER
FURTHER ACKNOWLEDGES THAT BUYER HAS CONDUCTED AN INDEPENDENT INSPECTION AND
INVESTIGATION OF THE PHYSICAL CONDITION OF THE ASSETS AND ALL SUCH OTHER MATTERS
RELATING TO OR AFFECTING THE ASSETS AS BUYER DEEMED NECESSARY OR APPROPRIATE AND
THAT, EXCEPT FOR ANY

 

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REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE 3 AND THE
CONDITION OF TITLE TO THE ASSETS CONFERRED BY THE SALE ORDER, BUYER IS
PROCEEDING WITH ITS ACQUISITION OF THE ASSETS BASED SOLELY UPON SUCH INDEPENDENT
INSPECTIONS AND INVESTIGATIONS.  ACCORDINGLY, BUYER WILL ACCEPT THE ASSETS AT
THE CLOSING “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS.”

 

ARTICLE 5

 

COVENANTS AND OTHER TERMS

 

Except (i) to the extent it would not reasonably be expected to result in a
Material Adverse Effect, (ii) to the extent the Bankruptcy Court determines
otherwise, and (iii) to the extent the Bankruptcy Code provides otherwise,
Seller and Buyer covenant and agree as follows:

 

5.1                                 Conduct of Business.  Seller agrees that
from the date of this Agreement through the earlier to occur of (x) the Closing
Date, and (y) the date on which this Agreement is terminated in accordance with
the provisions of Section 8.1 hereof, the Seller will:

 

(a)                            Conduct of Business.  Use commercially reasonable
efforts to conduct the business at the Restaurant Sites in the ordinary course
and in substantially the same manner as such business has previously been
carried out, without limiting the foregoing, the Seller will use commercially
reasonable efforts to maintain adequate inventory levels and adequate staffing
levels, and the Seller will not engage in any transactions not in the ordinary
course.

 

(b)                           Representations and Warranties; Conditions.  Use
commercially reasonable efforts not to engage in any practice, take any action,
fail to take any action or enter into any transaction that could reasonably be
expected to (i) cause any of the representations and warranties herein to be
untrue, inaccurate or incorrect at any time, or (ii) result in any of the
conditions set forth in Section 6.1 not being satisfied on or prior to the
Termination Date.

 

(c)                            Sale of Assets; Liens.  Not (i) transfer, convey,
sell or encumber any of the Assets, except inventory sold in the ordinary course
of its business, or Encumbrances granted under the Seller’s post-petition
financing facility or otherwise authorized by the Bankruptcy Court, or
(ii) dispose of, or trade in, any of the Tangible Personal Property.

 

(d)                           Maintenance of Relationships.  Subject to Seller’s
responsibilities as a debtor-in-possession under the Bankruptcy Code, use
commercially reasonable efforts to preserve its current relationships with its
customers, suppliers, vendors and other Persons with which it has significant
business relationships.  Subject to Bankruptcy Court approval, continue to honor
gift certificates / coupons tendered by customers and take all commercially
reasonable steps to ensure that the Seller’s suppliers and vendors continue to
provide product and services to the Seller during the pendency of the Bankruptcy
Case and to the Buyer after Closing on ordinary trade and credit terms.  The
Seller shall notify Buyer in writing within five (5) Business Days of the
receipt of any written notice or Knowledge of the Seller (without due inquiry)
to the effect that any current material vendor or supplier of the Seller or
other party to any Assigned Agreement could

 

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reasonably be expected to terminate or materially alter its business relations
with the Seller, either as a result of the Bankruptcy Case, the transactions
contemplated herein or otherwise.

 

5.2                                 Non-Interference.  Seller shall not take any
actions that impair or interfere with the rights of Buyer hereunder.

 

5.3                                 Notices and Consents.  Seller shall be
responsible for obtaining prior to the Closing all waivers, permits, consents,
approvals or other authorizations from third Persons and Governmental Units, if
any, and to effect all such registrations, filings with and notices to third
Persons and Governmental Units, including all local, county, state and federal
taxing authorities, as may be necessary in order to permit the consummation of
the transactions contemplated by this Agreement free and clear of all
Encumbrances.  Buyer shall use reasonable efforts to assist Seller in obtaining
such waivers, permits, consents, approvals and authorizations and in making such
registrations and filings.

 

5.4                                 Solicitation of Employees.  Upon execution
of this Agreement by both Buyer and Seller, Buyer may discuss with any of
Seller’s employees at the Restaurants their employment by Buyer after the
Closing.  Buyer may discuss employment with other Seller employees only upon
written request and approval.  Upon the Closing, Seller shall terminate all of
the employees employed by Seller at the Restaurants.   Buyer will have the
right, but not the obligation, to interview and hire any such employee of
Seller, and Seller and Buyer shall cooperate to effect an orderly transition of
any present or former employees of Seller to be hired by Buyer, in its sole
discretion, upon or after the Closing.

 

5.5                                 Reasonable Efforts.  Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done as promptly as practicable, all things necessary to consummate
the transactions contemplated by this Agreement, including, without limitations,
the prompt preparation and filing by Seller of all necessary pleadings, motions
and notices in connection with the approval by the Bankruptcy Court of this
Agreement.

 

ARTICLE 6

 

CONDITIONS PRECEDENT TO THE CLOSING

 

6.1                                 Conditions Precedent to Obligations of
Buyer.  The obligations of Buyer under this Agreement to consummate the
transactions contemplated hereby shall be subject to the satisfaction, at or
prior to the Closing, of all of the following conditions, any one or more of
which may be waived at the option of Buyer (provided, however, that (1) the
parties acknowledge and agree that any representations and warranties of the
Seller contained in Article 3 of this Agreement and referenced in this
Section 6.1 are qualified in their entirety by those qualifications set forth in
clauses (i) through (iv) of the introductory paragraph to such Article 3, and
(2) any covenants of the Seller contained in this Agreement and referenced in
this Section 6.1 are qualified in their entirety by those qualifications set
forth in clauses (i) through (iii) of the introductory paragraph to Article 5):

 

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(a)         Representations and Warranties; Performance of Agreements.  Subject
to the acknowledgments set forth in Section 4.6, (i) all of the representations
and warranties of the Seller set forth herein and any related Sale Documents
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date (or,
if made as of a specified date, as of such date); (ii) the Seller shall have
performed and complied in all material respects with all of their covenants and
other obligations contained in this Agreement required to be performed or
complied with by Seller at or before the Closing; and (iii) the Buyer shall have
received a certificate on behalf of the Seller as to the fulfillment of the
conditions set forth in clauses (i) and (ii) above, which certificate shall have
the effect of a representation and warranty of the Seller as to the matters set
forth therein.

 

Required Consents.  The Buyer shall have received copies of all of the consents,
permits, and regulatory approvals necessary to consummate the transactions
contemplated by this Agreement.

 

(b)         Ancillary Agreements.  The Buyer shall have received the following
Sale Documents, each dated as of the Closing Date and in full force and effect
as of the Closing Date:

 

(i)            one or more Bills of Sale, duly executed by the Seller, the forms
of which shall be submitted by Buyer on or before such date that is two
(2) Business Days prior to the Sale Hearing (each, a “Bill of Sale”);

 

(ii)           the License, duly executed by the Seller, the form of which shall
be identical to the license granted by Seller to Star Buffet Management, Inc.,
pursuant to that certain Asset Purchase Agreement dated as of December 2, 2007;
and

 

(iii)          all other instruments of transfer, duly executed by the Seller as
shall be reasonably necessary or appropriate to vest in the Buyer good and
indefeasible title to the Assets and to permit the Buyer to conduct the business
at the Restaurant Sites without interruption.

 

(c)         No Legal Obstruction.  Except as is otherwise contemplated by the
Bankruptcy Case, no suit, action or proceeding not disclosed in the schedules to
this Agreement by any Person, entity or governmental agency shall be pending or
threatened in writing, which if determined adverse to Seller, or Buyer’s
interests, could reasonably be expected to have a Material Adverse Effect.  No
injunction, restraining order or order of any nature shall have been issued by
or be pending before any court of competent jurisdiction or any governmental
agency challenging the validity or legality of the transactions contemplated
hereby or restraining or prohibiting the consummation of such transactions or
compelling Buyer to dispose of or discontinue or materially restrict the
operations of a significant portion of Seller’s business conducted at the
Restaurants. The obligations of the buyer under this Agreement to consummate the
transaction contemplated hereby shall be subject to Buyers confirmation that the
restaurants identified in the Agreement have been continuously operated since
January 22, 2008 and continue to be in operation at the time of closing.

 

(d)         Damage or Destruction.  From the date hereof until the Closing,
there shall have been no loss or destruction of any portion of the properties or
assets of Seller at the Restaurants, nor any institution or threat of any
condemnation or other proceedings to acquire or

 

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limit the use of any of the properties or assets of Seller at the Restaurants,
which (in any such case) could reasonably be expected to result in a Material
Adverse Effect.

 

(e)         Bankruptcy Court Approval.  The Sale Order shall have been entered
and shall be in form and substance reasonably satisfactory to Seller and Buyer,
and shall have become a Final Order (as defined in Article 10); provided,
however, that Buyer will use its reasonable efforts to consummate the
transactions contemplated hereby under circumstances where an appeal of the Sale
Order is pending, no stay has been obtained, and Buyer reasonably believes that
closing the transaction will moot any such appeal(s).  Any other orders of the
Bankruptcy Court with respect to this Agreement shall be in form and substance
reasonably satisfactory to Buyer.

 

6.2           Conditions Precedent to Obligations of Seller.  The obligations of
Seller under this Agreement to consummate the transactions contemplated hereby
will be subject to the satisfaction, at or prior to the Closing, of all the
following conditions, any one or more of which may be waived at the option of
Seller:

 

(a)         No Breach of Covenants; True and Correct Representations and
Warranties.  There shall have been no material breach by Buyer in the
performance of any of the covenants herein to be performed by it in whole or in
part prior to the Closing, and the representations and warranties of Buyer
contained in this Agreement, if specifically qualified by materiality, shall be
true and correct in all respects as of the date hereof and as of the Closing
Date and, if not so qualified, shall be true and correct in all material
respects as of the date hereof and as of the Closing Date, except for
representations or warranties that are made by their terms as of a date
specified by month, day and year, which shall be true and correct or true and
correct in all material respects, as applicable, as of such specified date. 
Seller shall receive at the Closing a certificate dated as of the Closing and
executed on behalf of Buyer, certifying in such detail as Seller may reasonably
require, the fulfillment of the foregoing conditions, and restating and
reconfirming as of the Closing all of the covenants, representations and
warranties of Buyer contained in this Agreement, specifying in detail the extent
of any breaches thereof.

 

(b)         No Legal Obstruction.  Except as is otherwise contemplated by the
Bankruptcy Case, no suit, action or proceeding not disclosed in this Agreement
by any person, entity or governmental agency shall be pending or threatened in
writing, which could reasonably be expected to have a material adverse effect
upon (i) Buyer or (ii) the benefits to Seller of the transactions contemplated
hereby.  No injunction, restraining order or order of any nature shall have been
issued by or be pending before any court of competent jurisdiction or any
governmental agency challenging the validity or legality of the transactions
contemplated hereby or restraining or prohibiting the consummation of such
transactions or compelling the disposition of or discontinue or materially
restrict the operations of a significant portion of Buyer.

 

(c)         Cure of Defaults.  Buyer shall have satisfied its obligations, if
any, under Section 1.6.

 

(d)         Sale Order.  The Sale Order shall have been entered, shall be in
form and substance reasonably satisfactory to Buyer, and shall have each become
a Final Order; provided,

 

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however, that Buyer will use its reasonable efforts to consummate the
transactions contemplated hereby under circumstances where an appeal of the Sale
Order is pending, no stay has been obtained, and Buyer reasonably believes that
closing the transaction will moot any such appeal(s).  Any other orders of the
Bankruptcy Court with respect to this Agreement shall be in form and substance
reasonably satisfactory to Buyer.

 

6.3           Waiver of Conditions.  Buyer may unilaterally waive any of the
conditions to closing set forth in Section 6.1 of this Agreement.  Seller may
unilaterally waive any of the condition to closing set forth in Section 6.2 of
this Agreement.

 

ARTICLE 7

 

BANKRUPTCY ACTIONS

 

7.1           Commencement of the Case.  Seller has filed a voluntary petition
under chapter 11 of the Bankruptcy Code.

 

7.2           Bankruptcy Court Approvals.

 

The Seller has sought and obtained an order setting a hearing to approve the
sale of the Assets and the assumption of the Assumed Liabilities (the “Sale
Hearing”) for February 12, 2008 at 9 a.m.  At the Sale Hearing the Debtor shall
seek an order (the “Sale Order”) authorizing (A) Seller to sell the Assets to
Buyer pursuant to this Agreement and Sections 363 and 365 of the Bankruptcy
Code, free and clear of all interests in or to the Assets within the meaning of
the Bankruptcy Code Section 363(f), and otherwise free and clear of all other
liens, encumbrances, claims and liabilities, except for the Assumed Liabilities,
and (B) Buyer to assume the Assumed Liabilities and Seller to be relieved of
liability therefrom.   The Seller shall use all reasonable efforts to cause the
Bankruptcy Court to enter the Sale Order as promptly as practicable, but in no
event later than one (1) Business Day after the commencement of the Sale
Hearing.

 

(i)            The Sale Order shall provide, among other things, that:

 

(A)          The Sale Motion is granted and the sale of the Assets (including
the assumption and assignment of the Assigned Agreements), in accordance with
the terms and conditions of this Agreement, is approved.  The sale of the Assets
is necessary, essential and appropriate under the circumstances of the Seller’s
bankruptcy estate, which (together with the Seller’s creditors) would suffer
immediate and irreparable harm if the Seller were not permitted to sell the
Assets (including assumption and assignment of the Assigned Agreements) at this
time.  The transactions contemplated by this Agreement are permissible under
Sections 363 and 365 of the Bankruptcy Code, and do not amount to a sub rosa
plan of reorganization.  The Seller has engaged in fair and reasonable
marketing, advertising and other sale efforts and procedures in connection with
the transactions, both before and after the Petition Date, and has complied with
the Bid Procedures Order.

 

(B)           The Sellers have obtained a fair and reasonable price for the
Assets.

 

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(C)           Notice of the Sale Motion was appropriate and adequate in the
circumstances and complied in all respects with the requirements of the
Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy
Rules for the Bankruptcy Court and the Bid Procedures Order, and is approved. 
No further notice of, or hearing on the Sale Motion is required.  Adequate
notice of and an opportunity to be heard with respect to the Sale Motion has
been given to all parties in interest, including all Persons claiming any
interest in or Lien on the Assets, including landlords under any Assumed Leases,
non-Seller parties to any Assigned Agreements and governmental taxing
authorities that may, as a result of the transactions authorized hereby have
claims, whether contingent, unliquidated, unknown or otherwise.

 

(D)          The Assets (including the Assigned Agreements) will be sold to the
Purchaser free and clear of all Encumbrances, and of any other interests in the
Assets because, in each case as appropriate, the requirements of
Section 363(f) of the Bankruptcy Code have been satisfied.  The sale free and
clear and the assumptions and assignments shall be self-executing and neither
the Seller nor the Buyer shall be required to execute or file releases,
termination statements, assignments, consents or other instruments in order to
effectuate the sale of the Assets free and clear, or to bind the non-Seller
parties to the assumption and assignment of the Assigned Agreements.  Any
Encumbrances and other interests in the Seller’s interest in the Assets shall
attach to the proceeds from the sale in the order of their priority, with the
same validity, force and effect which they now have against the Assets.

 

(E)           The Assigned Agreements to be assumed and assigned under this
Agreement and the Sale Order shall be in full force and effect, with no oral or
other modifications or waivers thereof, and all payments due there under are
current.  If the Closing occurs, the Buyer shall pay the portion of the Cure
Amounts, if any, due under Section 1.6 of this Agreement.  If the Closing
occurs, the Seller, not the Buyer, shall be solely responsible for satisfying
any other obligations that accrue before the Effective Time under the Assigned
Agreements, and the Buyer, not the Sellers, shall be solely responsible for
satisfying any obligations accruing there under after the Effective Time.  
Subject to Section 7.5 herein, no consents are necessary for the assumption and
assignment of any of the Assigned Agreements, and the assumption and assignment
of each of the Assigned Agreements shall be effective at the Closing
notwithstanding any provisions therein or in applicable law that restrict the
assignability thereof.

 

(F)           This Agreement was proposed, negotiated and entered into by the
Sellers and the Purchaser without collusion, in good faith and from arms’-length
bargaining positions.

 

(G)           The terms and conditions of the transactions set forth in this
Agreement are approved, this Agreement and the other Sale Documents (when
executed) will constitute valid and binding agreements of the Seller,
enforceable against them in accordance with their terms, and the Seller is
authorized, empowered and directed to take all such action as may be necessary
or appropriate to consummate the transactions, all without further order of the
Bankruptcy Court.

 

(H)          The Bankruptcy Court shall retain jurisdiction to implement and
enforce the terms of this Agreement and the Sale Order, including the terms on
which the

 

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Assigned Agreements are assumed and assigned.  The Buyer has furnished adequate
assurance of future performance.

 

(I)            No bulk sales law or any similar law of any state or other
jurisdiction shall apply in any way to the transactions authorized herein.

 

(J)            The Sale Order is a final, appealable order, which shall be
effective immediately upon entry, except to the extent stayed by its terms.  The
ten (10) day stay of the Sale Order, as provided in Rule 6004(h) and 6006(d) or
any other Rule of the Federal Rules of Bankruptcy Procedure, shall not apply. 
Absent judicial imposition of a stay of the Sale Order pending appeal, the
Seller and the Buyer may immediately consummate the Transactions approved
hereby, notwithstanding whether an appeal of the Sale Order is pending at any
time.

 

7.3           [Intentionally Omitted].

 

7.4           [Intentionally Omitted].

 

7.5           Adequate Assurance of Future Performance; Cooperation.  The Buyer
shall be responsible for providing evidence and argument in support of the Sale
Motion in order to establish its ability to provide “adequate assurance of
future performance” (within the meaning of Section 365(f)(2)(B) of the
Bankruptcy Code) of each Assigned Agreement.  The Seller agrees to use
commercially reasonable efforts to cooperate with the Buyer in the presentation
of such evidence and argument. The Bankruptcy Court’s refusal to approve the
assumption by the Buyer of any Assigned Agreement on the grounds that “adequate
assurance of future performance” by the Buyer of such Assigned Agreement has not
been provided shall not constitute grounds for termination pursuant to
Section 8.1 hereof.  In addition, the Buyer shall reasonably cooperate with the
Seller in the Seller’s efforts to obtain the approval of the Sale Motion.

 

ARTICLE 8

TERMINATION RIGHTS; CLOSING DELIVERIES

 

8.1           Termination of Agreement.  The parties may terminate this
Agreement and the transactions contemplated hereby may be abandoned at any time
prior to the Closing:

 

(a)           by mutual written consent of each of Seller and Buyer at any time
prior to the Closing;

 

(b)           [Intentionally Omitted];

 

(c)           by Seller, if (i) the Closing shall not have occurred on or prior
to the Termination Date (as defined in Section 2.3), unless such failure to
consummate the transactions herein is the result of a material breach of any
representation, warranty, covenant or other agreement contained in the Sale
Documents by the Seller, or (ii) upon written notice to Buyer at any time prior
to the Closing, and following written notice thereof and a cure period of five
(5) business days thereafter, if Buyer shall have breached any representation,
warranty or covenant contained in this Agreement in any material respect;

 

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(d)           by Buyer, if (i) the Closing shall not have occurred on or prior
to the Termination Date, unless such failure to consummate the transactions
herein is the result of a material breach of any representation, warranty,
covenant or other agreement contained in the Sale Documents by the Buyer, or
(ii) upon written notice to Seller at any time prior to the Closing, and
following written notice thereof and a cure period of five (5) business days
thereafter, if Seller shall have breached any representation, warranty or
covenant contained in this Agreement in any material respect (provided, however,
that (1) for purposes of this Section 8.1(d), any representations and warranties
of the Seller contained in Article 3 of this Agreement are qualified in their
entirety by those qualifications set forth in clauses (i) through (iv) of the
introductory paragraph to such Article 3, and (2) any covenants of the Seller
contained in this Agreement are qualified in their entirety by those
qualifications set forth in clauses (i) through (iii) of the introductory
paragraph to Article 5);

 

(e)           by either party, upon written notice to the other and following a
cure period of three (3) business days, if the Closing has not occurred by
5:00 p.m. Central Time on the day that is two (2) business days following the
entry of the Sale Order; provided, that (i) no stay of the Sale Order shall be
in effect, (ii) the Sale Order shall contain a waiver of the automatic ten
(10) day stay under Rule 6004(h) of the Federal Rules of Bankruptcy Procedure,
and (iii) the terminating party is not then in material breach of this
Agreement; and

 

(f)            by either party, upon written notice to the other, if the Sale
Order shall not have been entered by the Bankruptcy Court on or prior to 5 p.m.
Central Time on February 13, 2008.

 

8.2           Procedure and Effect of Termination.  In the event that either
Buyer or Seller terminates this Agreement pursuant to Section 8.1, written
notice thereof shall forthwith be given to the other parties to this Agreement,
specifying the particular provision of Section 8.1 upon which such termination
is based, and this Agreement shall terminate (subject to the retention of the
Deposit by Seller in the event of termination under Section 8.1(c)) and the
transactions contemplated hereby shall be cancelled, without further action by
any of the parties hereto.  If this Agreement is terminated as provided herein:

 

(a)         upon request therefor, each party shall redeliver (or, at the option
of the party holding such documents, destroy the same) all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same; and

 

(b)         no party hereto shall have any liability or further obligation to
any other party to this Agreement resulting from such termination except that
the provisions of this Section 8.2 shall remain in full force and effect.

 

ARTICLE 9

OTHER AGREEMENTS

 

9.1           Cooperation.  Buyer and Seller will, at any time, and from time to
time, after the execution of this Agreement, execute and deliver such further
instruments of conveyance and transfer and take such additional action as may be
reasonably necessary to effect, consummate,

 

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confirm or evidence the transactions contemplated by this Agreement and the
other Sale Documents (including the exercise of good faith in the Bankruptcy
Case and related proceedings).

 

9.2           Risk of Loss.  Seller assumes all risk of loss due to fire or
other casualty up to the Effective Time and Buyer shall assumes all risk of loss
subsequent to the Effective Time.

 

9.3           Apportionment.  Any unpaid rents, taxes, assessments, common area
maintenance charges, expenses and other charges (“Unpaid Charges”) for which
Seller is directly or indirectly responsible and which relate to the Restaurant
Sites for periods both before and after the Effective Time shall be prorated
between Seller and Buyer on a daily basis, with Seller responsible for payment
of all such Unpaid Charges allocable to the time period up to and including the
Effective Time and with Buyer responsible for payment of all such Unpaid Charges
allocable to the time period thereafter.  Seller and Buyer agree that all such
Unpaid Charges (except to the extent reasonably disputed) shall be paid in full
by either Seller or Buyer, as the case may be, within sufficient time to prevent
any taxing agency or other creditor from making any claim.  If Seller or Buyer
pays any Unpaid Charges in full in accordance with the preceding sentence, the
other shall promptly reimburse its pro rata portion to the paying party upon
receipt of written notice of the fact and amount of such payment (subject, in
Seller’s case, to the approval of the Bankruptcy Court).  Buyer agrees to
reimburse Seller for any Prepaid Charges, including prepayments of rents,
security deposits (but only to the extent of the aggregate amount of security
deposits with respect to which the estoppel certificates for the lease to which
the security deposit relates states that no claim then exists against such
deposits), taxes, expenses and other charges made by Seller to the extent and in
the proportion that such Prepaid Charges are retained for the benefit of Buyer
or relate to periods after the Effective Time.

 

ARTICLE 10

 

DEFINITIONS

 

For purposes of this Agreement, the following terms have the meaning set forth
below:

 

“Affiliate” has the meaning ascribed to that term in Rule 405 of the Securities
Act of 1933, as amended.

 

“Encumbrance” means, with regard to any asset, a mortgage, deed of trust,
pledge, lien, collateral agreement, security interest, claim (including, without
limitation, as that term is defined in Section 101(5) of the Bankruptcy Code),
security arrangement, liability, encumbrance, accrued but unpaid taxes, tax
liens or any other interest of any nature whatsoever in respect of such asset to
the fullest extent any such interest can be eliminated under Section 363(f) of
the Bankruptcy Code; provided, however, that the term Encumbrance shall not
include the rights pursuant to Section 365(n) of the Bankruptcy Code of any
licensee under a license of “intellectual property” (as such term is defined in
Section 101(35A) of the Bankruptcy Code) or fee interests in real property such
as easements or rights of way.

 

“Final Order” means an order or judgment of the Bankruptcy Court which has not
been reversed, stayed, modified or amended and is no longer subject to appeal,
certiorari proceeding or other proceeding for review or rehearing (giving effect
to any reduction or

 

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elimination of the appeal period pursuant to an order of the Bankruptcy Court),
and as to which no appeal, certiorari proceeding, other proceeding for review or
rehearing shall then be pending.

 

“Governmental Unit” means the United States of America; any state; commonwealth;
district; territory; municipality or foreign state; and any department, agency
or instrumentality (including but not limited to any regulatory or
administrative authority or agency, court or arbitrational tribunal thereof) of
the United States of America (but not a United States Trustee while serving as a
trustee in a case under the Bankruptcy Code), or any state, commonwealth,
district, territory, municipality or foreign state; or other foreign or domestic
government.

 

“Knowledge” means the actual knowledge by Craig Barber or Bob Langford in their
capacity as officers and directors of Seller.

 

“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

 

“Liability” means, with respect to any Person, any Liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due, vested or
unvested, executory, determined, determinable or otherwise and whether or not
the same is required to be accrued on the financial statements of such Person.

 

“Material Adverse Effect” means an event, change or occurrence which,
individually or together with any other event, change, or occurrence, has a
material adverse impact on (i) the business conducted by Seller at the
Restaurant Sites (taken as a whole), (ii) the ability of Seller to perform its
obligations under this Agreement or to consummate the transactions contemplated
by this Agreement, or (iii) the Assets taken as a whole.

 

“Person” means any shareholder, individual, corporation, partnership, firm,
joint venture, association, joint-stock seller, trust, unincorporated
organization, regulatory body or other entity.

 

 “Release” means any release, spill, emission, leaking, plumbing, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching,
or migration on or into the environment or into or out of any property.

 

 “Taxes”  means  (whether or not disputed) taxes of any kind, levies or other
like assessments, customs, duties, imposts, charges or fees, including, without
limitation, income taxes, gross receipts, ad valorem, value added, excise, real
property, personal property, occupancy, asset, sales, use, license, payroll,
transaction, capital, capital stock, net worth, estimated, withholding,
employment, social security, unemployment, unemployment compensation, workers’
compensation, disability, utility, severance, production, environmental, energy,
business, occupation, mercantile, franchise, premium, profits, windfall profits,
documentary, stamp, registration, transfer and gains taxes, toll charges (for
example, toll charges under Sections 367 and 1492 of the Bankruptcy Code), or
other taxes of any kind whatsoever, imposed by or payable

 

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to the United States, or any state, country, local or foreign government or
subdivision, instrumentality, authority or agency thereof or under any treaty,
convention or compact between or among any of them, and in each instance such
term shall include any interest (including interest on deferred tax liability
under Section 453A(c) of the Bankruptcy Code and “look-back” interest under
Section 460 of the Bankruptcy Code and similar amounts of interest imposed by
the Bankruptcy Code), penalties, additions to tax or similar charges imposed in
lieu of a Tax or attributable to any Tax, other than taxes imposed on or payable
by Seller that are, or that are in the nature of taxes that are, based upon,
measured by or imposed with respect to capital, net worth, net receipts or net
income (including without limitation minimum taxes, tax preference items,
alternative minimum taxes, capital gains taxes, excise taxes, personal holding
company taxes and excess profits taxes).

 

ARTICLE 11

MISCELLANEOUS

 

11.1         Notices, Consents, etc.  Any notices, consents or other
communication required to be sent or given hereunder by any of the parties shall
in every case be in writing and shall be deemed properly served if (a) delivered
personally, (b) delivered by registered or certified mail, in all such cases
with first class postage prepaid, return receipt requested, (c) delivered by
courier, at the addresses as set forth below or at such other addresses as may
be furnished in writing, or (d) delivered by facsimile transmission with
confirmation of successful transmission, at the numbers as set forth below or at
such other numbers as may be furnished in writing.   Any notice required herein
shall be in writing (to the individuals listed in Section 11.1, unless specified
otherwise pursuant to Section 11.1) unless specifically permitted to be given
orally.  All such notices and communications shall be deemed received upon the
actual delivery thereof in accordance with the foregoing.

 

(a)         If to Seller:

 

Barnhill’s Buffet, Inc.

1210 Briarville Road

Madison, TN  37115

Attn:  W. Craig Barber, President

Facsimile:  (615) 277-1220

 

With a copy to Seller’s counsel:

 

The Hancock Law Firm

102 Woodmont Boulevard, Suite 200

Nashville, TN 37205

Attn:  Caldwell Hancock, Esq.

Facsimile: (615) 345-0203

 

(b)         If to Buyer:

 

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Starlite Holdings, Inc.

1312 N. Scottsdale Road

Scottsdale, AZ 85257

Attn:  Robert E. Wheaton, Chief Executive Officer

Facsimile:  (480) 425-0494

 

With a copy to:

 

Kirkpatrick Stockton LLP

Suite 400

3737 Glenwood Avenue

Raleigh, NC  27612

Attn:  B. Ford Robertson, Esq.

Facsimile:  (919) 510-6110

 

11.2         Severability.  The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of any other
provision that shall remain in full force and effect and be enforceable to the
fullest extent permitted by law.

 

11.3         Amendment and Waiver.  This Agreement may not be amended, modified
or waived except by an instrument in writing signed on behalf of each of the
parties hereto.

 

11.4         Actions Necessary to Complete Transaction.  Each party will execute
all documents and take such other actions as any other party may reasonably
request in order to consummate the transactions provided for herein and to
accomplish the purposes of this Agreement, provided that Seller’s obligations
hereunder shall be subject to any limitations imposed by the Bankruptcy Court or
in connection with the Bankruptcy Case.

 

11.5         Counterparts.  For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto.  Each such
counterpart shall be, and shall be deemed to be, an original instrument, but all
such counterparts taken together shall constitute one and the same agreement. 
Delivery of an executed counterpart of this Agreement by facsimile shall be
equally as effective as delivery of the original executed counterpart of this
Agreement.

 

11.6         Expenses.  Except as otherwise provided herein, each party to this
Agreement agrees to pay its own reasonable costs and expenses incurred or to be
incurred in negotiating and preparing this Agreement and in closing and carrying
out the transactions contemplated by this Agreement and the other Sale
Documents.  Each party will be responsible for their respective Taxes, directly
or indirectly attributable to the transactions contemplated by the Agreement.

 

11.7         Governing Law.  This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Tennessee, without giving effect to provisions thereof regarding
conflicts of law.  Each party and each Person claiming hereunder hereby
designates the Bankruptcy Court as the only court of proper jurisdiction and
venue for any actions or proceedings relating to this Agreement, hereby
irrevocably consents to such

 

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designation, jurisdiction and venue; and hereby waives any objections or
defenses relating to jurisdiction or venue with respect to any action or
proceeding initiated in the Bankruptcy Court; and hereby consents to service of
process under the statutes and rules applicable to the Bankruptcy Court.

 

11.8         Headings.  The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.

 

11.9         Incorporation of Schedules and Exhibits.  The Schedules and
Exhibits hereto are incorporated into this Agreement and will be deemed a part
hereof as if set forth herein in full.  References to “this Agreement” and the
words “herein”, “hereof” and words of similar import refer to this Agreement
(including the Schedules and Exhibits) as an entirety.  In the event of any
conflict between the provisions of this Agreement and any Schedule or Exhibit,
the provisions of this Agreement will control.  Capitalized terms used in the
Schedules have the meanings assigned to them in this Agreement.  The
Section references referred to in the Schedules are to Sections of this
Agreement, unless otherwise expressly indicated.

 

11.10       Assignment.  This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned or delegated by Buyer or Seller in any manner whatsoever,
whether directly or by operation of law or otherwise, without the prior written
consent of the other party.  Any assignment or attempted assignment of all or
any portion of this Agreement which is not expressly permitted hereby shall be
null and void and of no force or effect.

 

11.11       Entire Agreement.  This Agreement, the other Sale Documents, and the
documents, schedules and exhibits described herein or attached or delivered
pursuant hereto collectively constitute the sole and only agreement among the
parties with respect to the subject matter hereof.  Any agreements,
representations or documentation respecting the transactions contemplated by
this Agreement, and any correspondence, discussions or course of dealing which
are not expressly set forth in this Agreement, the other Sale Documents, or the
documents, schedules and exhibits described herein or attached or delivered
pursuant hereto or are null and void, it being understood that no party has
relied on any representation not set forth in this Agreement, the other Sale
Documents or the documents, schedules and exhibits described herein or attached
or delivered pursuant hereto.

 

11.12       Third Parties.  Nothing herein express or implied is intended or
shall be construed to confer upon or give to any Person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason of this Agreement.

 

11.13       Interpretative Matters.  Unless the context otherwise requires,
(a) all references to Articles, Sections, schedules or exhibits are to Articles,
Sections, schedules or exhibits in this Agreement, and (b) words in the singular
or plural include the singular and plural, pronouns stated in either the
masculine, the feminine or neuter gender shall include the masculine, feminine
and neuter, and (c) the term “including” shall mean by way of example and not by
way of limitation.

 

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11.14       No Strict Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.

 

11.15       Time of Essence.  Time is of the essence with respect to this
Agreement.

 

11.16       Survival of Representations and Warranties.  All representations and
warranties of the parties set forth herein shall not survive the Closing and
shall not be of any force or effect thereafter.  Without limiting the foregoing,
the parties agree and acknowledge that (a) any representations and warranties of
the Seller contained in Article 3 of this Agreement and referenced in this
Section 11.16 are qualified in their entirety by those qualifications set forth
in clauses (i) through (iv) of the introductory paragraph to such Article 3, and
(b) Seller’s liability with respect to representations and warranties made by
Seller hereunder are subject to the limitations set forth herein and in
Section 8.1.

 

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

 

 

 

BARNHILL’S BUFFET, INC.

 

 

 

By:

/s/ W. Craig Barber

 

Name:

W. Craig Barber

 

Its:

President

 

 

 

 

 

STARLITE HOLDINGS, INC.

 

 

 

By:

/s/ Ron Dowdy

 

Name:

Ron Dowdy

 

Its:

Secretary

 

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SCHEDULES TO ASSET PURCHASE AGREEMENT

 

The following schedules (each a “Schedule” and together the “Schedules”) to the
Asset Purchase Agreement (the “Agreement”), dated as of the 29th day of
January , 2008, by and among Starlite Holdings, Inc., a Delaware corporation
(the “Buyer”), and Barnhill’s Buffet, Inc., a Tennessee corporation (the
“Seller”), are incorporated by reference in and made a part of the Agreement. 
Capitalized terms used but not defined in the Schedules have the meanings
ascribed thereto in the Agreement.

 

Each disclosure in a particular Schedule is made specifically, and a disclosure
made in any particular Schedule or section thereof shall not be deemed to have
been disclosed in any other section of such Schedule or in any other Schedule.

 

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EXHIBIT A

 

Restaurant Locations

 

1. Apopka, FL

2. Orange City, FL

3. Gulfport, MS

4. Moss Point, MS

 

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EXHIBIT B

 

Tangible Personal Property

 

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EXHIBIT C

 

Personal Property Leases; Executory Contract; Additional Contracts

 

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FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

 

This First Amendment to the ASSET PURCHASE AGREEMENT (this “Agreement”), dated
as of February 5, 2008, is by and among BARNHILL’S BUFFET, INC., a Tennessee
corporation (the “Seller or the Company”) and STARLITE HOLDINGS, INC., a wholly
owned subsidiary of Star Buffet, Inc., a Delaware corporation, (together with
any successor and assigns, the “Buyer”).

 

RECITALS

 

WHEREAS, the Company and the Buyer entered into the Agreement, such agreement
being subject to terms and conditions set forth therein; and

 

WHEREAS, the Company and the Buyer desire to make modifications to certain terms
within the Agreement;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, it is agreed as follows:

 

1.                                       Section 2.2 of the Agreement is hereby
deleted in its entirety and replaced with the following:

 

“Purchase Price.  The purchase price for the sale of the Assets shall be
$1,075,000.00 in cash (the “Purchase Price”).”

 

2.                                       Section 2.3 of the Agreement is hereby
deleted in its entirety and replaced with the following:

 

“Closing.  The “Closing” of the transactions contemplated herein, including
payment of the Purchase Price, shall take place at the offices of the Company or
such other location in Nashville, TN as may be agreed upon, no later March 31,
2008 (the “Target Date”) (or such earlier date as Buyer and Seller may mutually
agree, the “Closing Date”); provided, that no stay of the Sale Order shall be in
effect and provided, further, that the Sale Order shall contain a waiver of the
automatic ten (10) day stay under Rule 6004(h) of the Federal Rules of
Bankruptcy Procedure; provided, further, however, that in no event unless
otherwise agreed in writing shall the Closing take place on a date which is
after March 31, 2008 (the “Termination Date”).  At the Closing, Buyer shall pay
the Purchase Price to Seller by wire transfer of immediately available funds to
one or more bank accounts of Seller, or as directed by Seller in accordance with
the terms of the Sale Order approved by the Bankruptcy Court.”

 

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3.                                       Section 7.4 of the Agreement that is
shown [Intentionally Omitted] shall be replaced with the following

 

Payment of Termination Fee.

 

(a)                                  Subject to approval of the Bankruptcy
Court, if a Qualified Bid submitted in accordance with the Bid Procedures Order
is approved by Order of the Bankruptcy Court and Buyer is not in breach under
this Agreement, the Buyer shall be paid a termination fee of Seventy-five
Thousand Dollars ($75,000) (the “Buyer Termination Fee”).  Similarly, Buyer
shall pay Seller a termination fee equal to the amount of the Deposit (the
“Seller Termination Fee”) in the event Seller has satisfied its conditions to
closing under the Agreement (or is prevented from doing so by Buyer’s actions)
and Buyer fails to close the transactions contemplated by this Agreement. 
Payment of the Seller Termination Fee to Seller by Buyer shall constitute
liquidated and agreed damages in respect of this Agreement and the transactions
contemplated by this Agreement, and Buyer shall have no further liability to
Seller.  Seller believes that it is impossible to determine accurately the
amount of all damages that Seller would incur by virtue of a breach by Buyer of
its obligations to proceed with the transactions contemplated by this Agreement,
and its sole and exclusive remedy for any such breach shall be to receive
payment of the Seller Termination Fee.  Buyer’s obligation to pay the Seller
Termination Fee to Seller shall be discharged upon the release to Seller from
the escrow described in Section 2.8 of the full amount of the Deposit.  If this
Agreement is terminated for any reason that does not result in the payment of
the Seller Termination Fee, the Deposit shall be released from escrow and
refunded to Buyer not later than five (5) business days following such
termination.

 

(b)                                 Payment of the Buyer Termination Fee to
Buyer shall (i) be full consideration for the Buyer’s efforts and expenses in
connection with the bidding process, this Agreement and the transactions
contemplated hereby, including the due diligence efforts of the Buyer and its
professionals and advisors and (ii) constitute liquidated and agreed damages in
respect of this Agreement and the transactions contemplated by this Agreement,
and Seller shall have no further liability to Buyer.  Buyer believes that it is
impossible to determine accurately the amount of all damages that Buyer would
incur by virtue of a breach by Seller of its obligations to proceed with the
transactions contemplated by this Agreement, and its sole and exclusive remedy
for any such breach shall be to receive payment of the Buyer Termination Fee. 
Except as provided in this Section 7.4, Buyer shall have no right nor remedy
against Seller, at law or in equity, by reason of a breach by Seller of its
obligation to proceed with the transactions contemplated by this Agreement.

 

(c)                                  The Buyer Termination Fee shall be afforded
administrative expense priority status pursuant to Section 503(b)(1)(A) of the
Bankruptcy Code and shall be paid upon the earlier of (i) the closing of the
transactions contemplated by an accepted Qualified Bid and (ii) entry of any
Order of the Bankruptcy Court directing payment by Seller of such amounts.

 

(d)                                 Notwithstanding anything contained in this
Agreement to the contrary, no Buyer Termination Fee or Seller Termination Fee
shall be payable to any party to this Agreement if such party is in material
breach of any provision of this Agreement.

 

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4.                                       Capitalized terms used in this
Amendment which are not defined in this Amendment shall have the meaning
assigned to such term or terms in the Agreement.

 

5.                                       No other term or terms of the Agreement
are changed, altered, modified or amended, except as specifically set forth in
this Amendment.  The Agreement, as amended and modified by this Amendment, is
hereby ratified and remains in full force and effect.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of February 14,
2008.

 

 

 

BARNHILL’S BUFFET, INC.

 

 

 

By:

/s/ W. Craig Barber

 

Name:  W. Craig Barber

 

Its:  President

 

 

 

 

 

STARLITE HOLDINGS, INC.

 

 

 

By:

/s/ Ron Dowdy

 

Name:

Ron Dowdy

 

Its:

Secretary

 

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