**Exhibit 10.16**

 

**ASSET PURCHASE AGREEMENT**

 

Dated as of

 

December 2, 2007,

 

By and among

 

Barnhill’sBuffet, Inc.

asSeller

 

And

 

Star Buffet Management, Inc.,

as

Buyer

 

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ASSETPURCHASE AGREEMENT (this “Agreement”), dated as of December 2,2007, is by and among BARNHILL’S BUFFET, INC., a Tennessee corporation (the “Seller or the Company”)and STAR BUFFET MANAGEMENT, INC., a wholly owned subsidiary of StarBuffet, Inc., a Delaware corporation, (together with any successor andassigns, the “Buyer”).

 

RECITALS

 

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

 

B.            On the termsand subject to the conditions set forth in this Agreement, the Seller desiresto sell, and the Buyer desires to acquire certain assets and assume certainliabilities of Seller’s restaurants listed on Exhibit A attachedhereto (collectively, the “Restaurants”), and to assume certain realproperty and personal property leases as well as certain contracts relatedthereto necessary for the operation of the Restaurants.

 

C.            In connection with this Agreement,the Seller will commence a proceeding (the “Bankruptcy Case”) in theUnited States Bankruptcy Court for the Middle****Districtof Tennessee****(the “Bankruptcy Court”)by filing a voluntary petition for relief under Chapter 11 of Title 11 of theUnited States Code (the “Bankruptcy Code”) (the date of such filingbeing the “Petition Date”).

 

D.            The Seller and the Buyer have agreedthat the transactions contemplated hereby shall be accomplished through a saleand assignment of assets to the Buyer pursuant to Sections 363 and 365 of theBankruptcy Code.

 

E.             The Seller and the Buyercontemplate a closing of the transactions on the Target Date (as defined in Section 2.3herein) 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 (asdefined in Section 2.3).

 

F.             All disclosure schedules andexhibits referred to herein are hereby incorporated by reference and, takentogether with this Agreement (including the foregoing Recitals) shallconstitute but a single agreement.

 

**ARTICLE 1**

** **

**PURCHASE AND SALE**

** **

1.1           **Assets****.**  Subject to the terms of thisAgreement and pursuant to Sections 363 and 365 of the Bankruptcy Code, Selleragrees to sell, transfer, convey and/or assign to Buyer, and Buyer agrees topurchase 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 assetsdescribed 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 theEffective Time (as defined in Section 2.6), Seller shall sell,transfer and assign to Buyer all of Seller’s right, title and interest in andto all of the inventory on hand (including raw materials, work in process andfinished goods) at the Restaurant Sites.

 

(b)           **Real Property Lease Assignments**.  Described in Exhibit A arelocations of certain restaurant sites leased by Seller (the “RestaurantSites”) that constitute all of the sites on which the Restaurants arelocated.  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 tothe leases for the Restaurant Sites (the “Assumed Leases”) free andclear of all Encumbrances.

 

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

 

(d)           **Personal Property Leases and Executory ContractAssignments**.  Described inExhibit C are certain personal property leases (“PersonalProperty Leases”) as well as certain licenses (including, withoutlimitation, licenses relating to computer hardware and software), contracts,third-party warranties, arrangements and other agreements that may constituteexecutory contracts under Section 365 of the Bankruptcy Code (“ExecutoryContracts” and together with the Assumed Leases and the Personal PropertyLeases, 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 andto all “Books and Records” (including the right of possession) located at theRestaurants and/or Seller’s corporate headquarters that relate to the businessconducted at the Restaurant Sites and/or the ownership of the Assets.  Following the Closing, Seller shall have theright to retain copies of any Books and Records transferred to Buyer.    “Books and Records” means all salesrecords, purchase records, customer lists, supplier lists, advertising andpromotional materials, health inspection records including all recordsregarding the Occupational Safety and Health Act and similar governmentexaminations and clearances,correspondence and other records, real estate anddevelopmental data, blueprints.

 

(f)            **Perpetual License of Trade names**.  At the Closing but effective as of theEffective Time, Seller shall grant to Buyer a perpetual license to use anytrade names, trademarked names, or graphics owned by Seller for purposes ofoperating 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 contemplatedby this Agreement.  For the avoidance ofdoubt, subject to Section 9.3, all security deposits,refunds, deposits and prepaid expenses of Seller, whether or not they relate toa property subject to an Assignment Agreement, are not Assets to be transferredto Buyer (the “Prepaid Charges”).

 

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

 

(a)           Allliabilities and obligations arising after the Closing Date with respect to orarising under the Assets;

 

(b)           Allliabilities, obligations and commitments under the Assigned Agreements accruingwith respect to any periods after the Effective Time or requiring payment of anobligation which becomes due and payable after the Effective Time and which, inany event, is attributable to the period after the Effective Time; and

 

(c)           Allliabilities, obligations and commitments accruing with respect to any periodsafter the Effective Time requiring payment of an obligation which, in anyevent, becomes due and payable after the Effective Time resulting from, causedby or arising out of, directly or indirectly, the conduct by Buyer in operatingthe business at the Restaurant Sites.

 

1.4           **Retained Liabilities**.  Notwithstanding anything contained in thisAgreement 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 anddelivery of this Agreement or any document delivered at the Closing pursuant tothis Agreement, to have assumed, or to have agreed to pay, satisfy, dischargeor perform, any liability, obligation or indebtedness of Seller, whetherprimary or secondary, direct or indirect, other than the Assumed Liabilities.  Seller shall retain all liabilities andobligations of Seller other than the Assumed Liabilities to the extentspecifically 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 toherein as the “Retained Liabilities”). By way of illustration, and not of limitation, Retained Liabilitiesinclude:

 

(a)           Allliabilities, obligations and commitments of Seller or any predecessor(s) orAffiliate(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 9.4;

 

(b)           Allliabilities, obligations and commitments for any legal, accounting, investmentbanking, brokerage or similar fees or expenses incurred by Seller in connectionwith, resulting from or attributable to the transactions contemplated by thisAgreement;

 

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

 

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

 

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

 

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1.5           **Sale and Assignment Pursuant to Bankruptcy Code****.**  All the sales, assumptions and assignmentscontemplated by this Article 1 shall be subject to Bankruptcy Courtapproval pursuant to, among other things, Sections 363 and 365 of theBankruptcy Code.

 

1.6           **Assigned Agreements****.**Seller shallassume and assign to the Buyer all of the Assigned Agreements.  Setforth on Exhibits A and C is certain information describing themonetary obligations associated with the Assigned Agreements and any monetarydefaults there under as of the Petition Date (the “Cure Amounts”). To the extentrequired by the Bankruptcy Court under the Bankruptcy Code in order to permitthe assumption and assignment of the Assigned Agreements to the Buyer pursuantto this Agreement, (i) the Buyer hereby agrees to pay the Cure Amountslisted in Exhibits A and C, (ii) the Buyer shall provideadequate assurances of future performance as required by the Bankruptcy Codewith respect to each Assigned Agreement and (iii) at the Closing, anyobligations that have accrued but are not yet due for payment under theAssigned Agreements shall be pro-rated between the Seller and Buyer as of theClosing 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, andsubject to the provisions of this Agreement, at the Closing Buyer shall:

 

(a)           assumethe Assumed Liabilities; and

 

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

 

2.2           **Purchase Price****.** The purchase price for the sale of the Assetsshall be $7,500,000.00 in cash (the “Purchase Price”).

 

2.3           **Closing****.** The “Closing” of thetransactions contemplated herein, including payment of the Purchase Price,shall take place at the offices of the Company or such other location inNashville, TN as may be agreed upon, no later than five (5) days followingthe entry of the Sale Order (the “Target Date”) (or such earlier date asBuyer and Seller may mutually agree, the “Closing Date”); provided, thatno stay of the Sale Order shall be in effect and provided, further, that theSale Order shall contain a waiver of the automatic ten (10) day stay underRule 6004(h) of the Federal Rules of Bankruptcy Procedure; provided, further,however, that in no event unless otherwise agreed in writing shall theClosing take place on a date which is after February 1, 2008 (the “TerminationDate”). At the Closing, Buyer shall pay the Purchase Price to Seller by wiretransfer 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 Orderapproved by the Bankruptcy Court.

 

2.4           **Allocation**.  On or before the date thatis five (5) days before the Closing Date, the Seller and the Buyer willagree upon an allocation of the Purchase Price covering the Assets for federal,state and local Tax purposes.  The Sellerand the Buyer will implement, report and accept such allocation for federal,state and local Tax purposes.  Theparties agree that such allocations 

 

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willnot in any way limit their respective rights and obligations under the SaleDocuments (as defined in Section 3.2) in respect ofrepresentations, warranties, covenants and agreements and the breach thereof ordamages 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 tominimize any such taxes.

 

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

 

2.7           **Deposit**.  Upon the execution of this Agreement, Buyershall place in escrow with Seller’s counsel a refundable purchase price depositof $100,000 in cash.  Two weeks prior tothe Sale Hearing, an additional refundable purchase price deposit in an amount suchthat the total cash deposits placed in escrow with Seller’s counsel is equal tofive percent (5%) of the Purchase Price (allsuch 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 appliedagainst the Purchase Price.  Otherwise,the deposit will either be returned to Buyer or paid to Seller in satisfactionof Buyer’s obligation to pay the Seller Termination Fee as specified in Section 7.4.

 

**ARTICLE 3**

** **

**REPRESENTATIONS ANDWARRANTIES OF SELLER**

** **

Except (i) as set forth in the schedulesreferenced herein, to the extent (ii) it would not reasonably be expectedto result in a Material Adverse Effect, (iii) the Bankruptcy Courtdetermines otherwise, and (iv) the Bankruptcy Code provides otherwise, asan inducement to Buyer to enter into and perform its obligations under thisAgreement, 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 Tennesseeand has full organizational power and organizational authority to conduct itsbusiness as it is now being conducted and to own, operate or lease theproperties 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 andauthority to execute and deliver this Agreement and any agreement, document,certificate or instrument being delivered pursuant to or in connection with thetransactions contemplated by this Agreement (collectively, the “SaleDocuments”) to perform its obligations hereunder and there under and toconsummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreementand the other Sale Documents, and the performance by Seller of its obligationshereunder and there under, and the consummation of the transactionscontemplated hereunder and there under, have been duly authorized bySeller.  This Agreement and the otherSale Documents upon execution and delivery by Seller and upon approval of theBankruptcy Court will constitute the legal, valid and binding obligations ofSeller, enforceable against Seller in accordance with their respective terms.

 

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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 SaleDocuments and the consummation or performance of the transactions contemplatedherein and therein do not and will not:

 

(a)           conflictwith, result in the breach, modification, termination or violation of, or lossof any benefit under, constitute a default under, accelerate the performancerequired 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 anymanner release any party thereto from any obligation under, any materialmortgage, note, bond, indenture, contract, agreement, lease, license or other instrumentor obligation of any kind or nature by which Seller, or any of its propertiesor assets, may be bound or affected;

 

(b)           contraveneor conflict with, or result in a violation of, result in any loss of benefitunder, or give any Person the right to challenge any of the transactionscontemplated by this Agreement and the other Sale Documents or to exercise anyremedy or obtain any relief under, any permit, concession, franchise, order,judgment, writ, injunction, law, rule, ordinance, regulation, statute or decreeapplicable to Seller; or

 

(c)           conflictwith or violate any provision of the certificate of incorporation, bylaws orresolutions adopted by the board of directors or stockholders, each asheretofore amended, of Seller.

 

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

 

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

 

3.6           **Property****.**

 

(a)           Sellerhas 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 Sellerat the Restaurant Sites, constituting the Assets, in each case free and clearof all Encumbrances, except for Encumbrances identified on Schedule 3.6(a) heretoon the date hereof.  The Assets locatedat the Restaurant Sites (a) constitute all the assets, of any naturewhatsoever, necessary at the 

 

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Restaurant Sites in order for Seller to operateits business at the Restaurant Sites in the manner such business is presentlyoperated by Seller, and (b) include all of the operating assets of Sellerat the Restaurant Sites.  Upon theexecution of this Agreement, Buyer shall have the right to communicate withlandlords (and other parties in the leasehold chain) regarding the leaseholdsrelated to the Restaurant Sites.

 

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

 

3.7           **Condition of Property and Related Matters****.**

 

(a)           Allbuildings, machinery, equipment and other tangible assets constituting theAssets and used by Seller in the conduct of its business at the RestaurantSites, including but not limited to the Tangible Personal Property, are in fairor good operating condition and repair, reasonable wear and tear excepted, areusable in the ordinary course of business and are adequate and suitable for theuses to which they are being put.  Allsuch assets and property are located at real property locations constitutingthe Restaurant Sites.

 

3.8           **Material Contracts****.**  With respect to the business conducted at theRestaurant 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 theaggregate, written or oral, including without limitation any obligations formoney borrowed (the “Material Contracts”); true, correct and completecopies of all written Material Contracts previously have been furnished toBuyer.  Except as set forth on Schedule3.8, to the Knowledge of the Seller, Seller is not in default, and no eventhas occurred or circumstances exists that, with or without which, the giving ofnotice or the passage of time or both, may contravene, conflict with, result ina breach of or constitute a default by Seller, or any other party under anyMaterial Contract or any other obligation owed by Seller, and no event hasoccurred which, with the giving of notice or the passage of time or both, wouldconstitute a default by any other party to any such Material Contract orobligation.  The consummation of thetransactions contemplated by the Sale Documents will not result in a breach ofor constitute a default under, any Material Contract or the right of any otherparty to the Material Contract to terminate the same and there are nonegotiations pending to revise the terms of any such Material Contracts.

 

3.9           **Employee Matters**.

 

(a)           Selleris not a party to or bound by any collective bargaining agreement and there areno labor unions or other organizations representing, purporting to representor, to the Knowledge of Seller, attempting to represent any employees employedin the operation of the business conducted at the Restaurant Sites.  Since February 11, 2005, there has notoccurred or, to the Knowledge of Seller, been threatened any material strike,slowdown, picketing, work stoppage, concerted refusal to work overtime or othersimilar labor activity with respect to any employees employed in the operationof the business conducted at the Restaurant Sites.  There are 

 

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no labor disputes currently subject to anygrievance procedure, arbitration or litigation and there is no representationpetition pending or, to the Knowledge of Seller, threatened with respect to anyemployee employed in the operation of the business conducted at the Restaurant Sites.  The Seller has complied with all provisionsof all Legal Requirements (as defined in Article 10) pertaining tothe employment of employees, including, without limitation, all such LegalRequirements relating to labor relations, equal employment, fair employmentpractices, entitlements, prohibited discrimination or other similar employmentpractices, entitlements, prohibited discrimination or other similar employmentpractices or acts, except for any failure so to comply that, individually ortogether with all such other failures, has not and will not result in amaterial Liability or obligation on the part of the Buyer, and has not had orresulted in, and is not expected to have or result in, a Material AdverseEffect (as defined in Article 10).

 

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

 

3.10         **Books and Records****.**  All the books, records and accounts of Sellerrelating to the Restaurant Sites, all of which have been made available toBuyer, are in all material respects accurate and complete, accurately reflectall matters normally recorded in the books, records or accounts of Seller inaccordance with Seller’s historical practices, are in all material respects incompliance with all laws and regulations applicable to Seller as they relate tothe business conducted at the Restaurant Sites and accurately present andreflect in all material respects the transactions described therein.

 

3.11         **Taxes****.**  Except as set forth on Schedule3.11, all Tax returns, reports and declarations required by anygovernmental authority to be filed in connection with Seller’s ownership orlease of the Assets or the operation of the business conducted at theRestaurant Sites have been timely filed and, to the Knowledge of Seller, arecomplete and correct in all material respects and all Taxes related theretohave 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, withrespect to the business conducted at the Restaurant Sites (or pending or, tothe Knowledge of Seller, threatened against any of the officers, directors orkey employees of Seller with respect to business activities (including anyproducts sold) at the Restaurant Sites conducted on behalf of Seller) withrespect to or affecting Seller, its accounts, business, properties, assets orrights, or relating to the transactions contemplated hereby, before any court,agency, regulatory, administrative or other governmental body or officer orbefore any arbitrator; nor to the Knowledge of Seller, is there any reasonablebasis for any such claim, action, suit, proceeding or governmental,administrative or regulatory investigation that would result in a MaterialAdverse Effect.  Seller is not directlysubject to or affected by any order, judgment, decree or ruling of any court orgovernmental agency relating to affecting the

 

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Restaurant Sites.  Seller has not received any written opinionor memorandum of legal advice from legal counsel to the effect that it isexposed to any liability which may be material to the business, prospects, resultsof operations, financial condition or assets of Seller at the Restaurant Sites.

 

3.13         **Environmental and Safety Requirements****.**

 

(a)           Tothe Knowledge of Seller, Seller is in material compliance with all applicableEnvironmental and Safety Requirements (as defined below) at the RestaurantSites and Seller possesses all required permits, licenses and certificates forthe Restaurants, and has filed all notices or applications, requiredthereby.   To the Knowledge of Seller,Seller has not received any notice or other communication from any party withrespect to Seller’s failure to comply with Environmental and SafetyRequirements.  For purposes of thisAgreement, “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 withoutlimitation the handling of any polluted, toxic or hazardous materials), all asamended;

 

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

 

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

 

(d)           Sellerhas delivered to Buyer true and complete copies and results of any reports,studies, analyses, tests, or monitoring possessed or initiated by Sellerpertaining to hazardous materials or hazardous activities in, or, or under theRestaurant Sites, or concerning compliance by Seller or any other Person forwhose conduct it is or may be held responsible, with Environmental and SafetyRequirements.

 

3.14         **Store Inventory**.  All of the Store Inventory is located at oneor more of the Restaurant Sites.

 

3.15         **No Undisclosed Liabilities****.**  Seller has not incurred any liabilities orobligations of any nature, whether known or unknown, absolute, accrued,contingent or otherwise and whether due or to become due, arising out of orrelated to the business conducted at the Restaurant Sites, 

 

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except (a) as set forth in Schedule3.15, (b) as and to the extent disclosed or reserved against in themost recent balance sheet of Seller provided to Buyer, and (c) forliabilities and obligations that were (i) incurred in the ordinary courseof business consistent with past practice and (ii) individually or in theaggregate are not material to the business conducted at the Restaurant Sitesand have not had or resulted in, and would not reasonably be expected to resultin, a Material Adverse Effect.

 

3.16         **Disclosure**.  No representation or warranty or otherstatement made by Seller in this Agreement or in connection with thetransactions contemplated hereby omits to state a material fact necessary tomake any of them, in light of the circumstances in which it was made, notmisleading.

 

3.17         **Brokers, Finders, etc**.  Other than Brookwood Associates, retained bythe Seller as its investment banker in connection with the transactions setforth in this Agreement, all negotiations relating to this Agreement and thetransactions contemplated hereby, have been carried on without theparticipation of any Person acting on behalf of Seller in such manner as togive rise to any valid claim against the Buyer or any of its subsidiaries forany brokerage or finder’s commission, fee or similar compensation, or for anybonus payable to any officer, director, employee, agent or sale representativeof or consultant to Seller upon consummation of the transactions contemplatedhereby or thereby.  Buyer shall have noobligation to pay the fees and expenses of Brookwood Associates.

 

3.18         **Notice of Sale**.  Notice of this Agreement and Notice of theSale Order and the hearings therefore will be duly and properly given to allknown creditors and parties in interest in the Bankruptcy Case, including butnot limited to, any parties holding consensual or nonconsensual liens on theAssets, the non-Seller parties to the Assigned Agreements being assumedpursuant to this Agreement, the employees at the Restaurant Sites, andapplicable taxing and governmental authorities.

 

**ARTICLE 4**

** **

**REPRESENTATIONS ANDWARRANTIES OF BUYER**

** **

As an inducement to Seller to enter into andperform its respective obligations under this Agreement, Buyer hereby representsand 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 beingconducted and to own, operate or lease the properties and assets it currentlyowns, operates or holds under lease.

 

4.2           **Authorization****.**  Buyer has full power and authority to executeand deliver this Agreement and any agreement, document, certificate orinstrument being delivered pursuant to or in connection with the transactionscontemplated by this Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreementand the other Sale Documents, and the performance by Buyer of its obligationshereunder and there under, and the consummation of the transactions 

 

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contemplated hereunder and there under, havebeen duly authorized by Buyer.  ThisAgreement and the other Sale Documents upon execution and delivery by Buyershall constitute the legal, valid and binding obligations of Buyer, enforceableagainst Buyer in accordance with their respective terms.

 

4.3           **No Violation****. **Theexecution, delivery and performance by Buyer of this Agreement and the otherSale Documents and the consummation of the transactions contemplated herein andtherein do not and will not:

 

(a)           conflictwith, result in the breach, modification, termination or violation of, or lossof any benefit under, constitute a default under, accelerate the performancerequired 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 inany manner release any party thereto from any obligation under, any mortgage,note, bond, indenture, contract, agreement, lease, license or other instrumentor obligation of any kind or nature by which Buyer or any of its properties orassets may be bound or affected;

 

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

 

(c)           conflictwith or violate any provision of the articles of organization****or operating agreement, each as heretoforeamended, of Buyer.

 

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

 

4.5           **Financing Commitment****.**  Buyer has sufficient funds to pay thePurchase Price or, alternatively, has secured a financing commitment from athird 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, THESELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED,WITH RESPECT TO ANY MATTER RELATING TO THE ASSETS.  BUYER FURTHER ACKNOWLEDGES THAT BUYER HASCONDUCTED AN INDEPENDENT INSPECTION AND INVESTIGATION OF THE PHYSICAL CONDITIONOF THE ASSETS AND ALL SUCH OTHER MATTERS RELATING TO OR AFFECTING THE ASSETS ASBUYER DEEMED NECESSARY OR APPROPRIATE AND THAT, EXCEPT FOR ANY REPRESENTATIONSAND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE 3 AND THE CONDITION OFTITLE TO THE ASSETS CONFERRED BY THE SALE ORDER, BUYER IS PROCEEDING WITH ITSACQUISITION OF THE ASSETS BASED SOLELY UPON SUCH INDEPENDENT INSPECTIONS ANDINVESTIGATIONS.  ACCORDINGLY, BUYER WILLACCEPT THE ASSETS AT THE CLOSING “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS.”

 

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** **

**ARTICLE 5**

** **

**COVENANTS AND OTHERTERMS**

 

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

 

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

 

(a)           Conduct ofBusiness.  Usecommercially reasonable efforts to conduct the business at the Restaurant Sitesin the ordinary course and in substantially the same manner as such businesshas previously been carried out, without limiting the foregoing, the Sellerwill use commercially reasonable efforts to maintain adequate inventory levelsand adequate staffing levels, and the Seller will not engage in anytransactions not in the ordinary course.

 

(b)           Representationsand Warranties; Conditions.  Use commercially reasonable efforts not toengage in any practice, take any action, fail to take any action or enter intoany transaction that could reasonably be expected to (i) cause any of therepresentations and warranties herein to be untrue, inaccurate or incorrect atany time, or (ii) result in any of the conditions set forth in Section 6.1not 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 ordinarycourse of its business, or Encumbrances granted under the Seller’spost-petition financing facility or otherwise authorized by the BankruptcyCourt, or (ii) dispose of, or trade in, any of the Tangible PersonalProperty.

 

(d)           Maintenance ofRelationships.  Subject toSeller’s responsibilities as a debtor-in-possession under the Bankruptcy Code,use commercially reasonable efforts to preserve its current relationships withits customers, suppliers, vendors and other Persons with which it hassignificant business relationships. Subject to Bankruptcy Court approval, continue to honor giftcertificates / coupons tendered by customers and take all commerciallyreasonable steps to ensure that the Seller’s suppliers and vendors continue toprovide product and services to the Seller during the pendency of theBankruptcy Case and to the Buyer after Closing on ordinary trade and creditterms.  The Seller shall notify Buyer inwriting within five (5) Business Days of the receipt of any written noticeor Knowledge of the Seller (without due inquiry) to the effect that any currentmaterial vendor or supplier of the Seller or other party to any AssignedAgreement could reasonably be expected to terminate or materially alter itsbusiness relations with the Seller, either as a result of the Bankruptcy Case, thetransactions contemplated herein or otherwise.

 

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

 

5.3           **Notices and Consents**.  Seller shall be responsible for obtaining****priorto the Closing all waivers, permits, consents, approvals or otherauthorizations from third Persons and Governmental Units, if any, and to effectall such registrations, filings with and notices to third 

 

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Persons and Governmental Units, including alllocal, county, state and federal taxing authorities, as may be necessary inorder to permit the consummation of the transactions contemplated by thisAgreement free and clear of all Encumbrances. Buyer shall use reasonable efforts to assist Seller in obtaining suchwaivers, permits, consents, approvals and authorizations and in making suchregistrations and filings.

 

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

 

5.5           **Reasonable Efforts**.  Subject to the terms and conditions hereinprovided, 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 aspracticable, all things necessary to consummate the transactions contemplatedby this Agreement, including, without limitations, the prompt preparation andfiling by Seller of all necessary pleadings, motions and notices in connectionwith the approval by the Bankruptcy Court of this Agreement.

 

**ARTICLE 6**

** **

**CONDITIONS PRECEDENTTO THE CLOSING**

** **

6.1           **Conditions Precedent to Obligations of Buyer****.**  The obligations of Buyer under this Agreementto consummate the transactions contemplated hereby shall be subject to thesatisfaction, 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 partiesacknowledge and agree that any representations and warranties of the Sellercontained in Article 3 of this Agreement and referenced in this Section 6.1are 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 Sellercontained in this Agreement and referenced in this Section 6.1 arequalified in their entirety by those qualifications set forth in clauses (i) through(iii) of the introductory paragraph to Article 5):

 

(a)           Representationsand 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 forthherein and any related Sale Documents shall be true and correct in all materialrespects on and as of the Closing Date with the same force and effect as thoughmade on and as of the Closing Date (or, if made as of a specified date, as ofsuch date); (ii) the Seller shall have performed and complied in allmaterial respects with all of their covenants and other obligations containedin this Agreement required to be performed or complied with by Seller at orbefore the Closing; and (iii) the Buyer shall have received a certificateon behalf of the Seller as to the fulfillment of the conditions set forth inclauses (i) and (ii) above, which certificate shall have the effectof a representation and warranty of the Seller as to the matters set forththerein.

 

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RequiredConsents.  The Buyershall have received copies of all of the consents, permits, and regulatoryapprovals necessary to consummate the transactions contemplated by thisAgreement; provided the failure to obtain the consent of Spirit Master Funding,LLC to the assumption and/or assignment of the lease(s) for therestaurants in Apopka, Ocala, Columbus, Gulfport and Moss Point shall excuseBuyer from closing under this Agreement but shall not entitle Buyer to a BuyerTermination Fee.

 

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

 

(i)            one or more Bills of Sale, duly executed by theSeller, the forms of which shall be submitted by Buyer on or before such datethat is five (5) Business Days prior to the Sale Hearing (each, a “Billof Sale”);

 

(ii)           the License, duly executed by the Seller, the formof which shall be submitted by Buyer on or before such date that is five (5) BusinessDays prior to the Sale Hearing; and

 

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

 

(c)           **No Legal Obstruction****.** Except as is otherwise contemplated by theBankruptcy Case, no suit, action or proceeding not disclosed in the schedulesto this Agreement by any Person, entity or governmental agency shall be pendingor threatened in writing, which if determined adverse to Seller, or Buyer’sinterests, could reasonably be expected to have a Material Adverse Effect.  No injunction, restraining order or order ofany nature shall have been issued by or be pending before any court ofcompetent jurisdiction or any governmental agency challenging the validity orlegality of the transactions contemplated hereby or restraining or prohibitingthe consummation of such transactions or compelling Buyer to dispose of ordiscontinue or materially restrict the operations of a significant portion ofSeller’s business conducted at the Restaurants.

 

(d)           **Damage or Destruction****. **From the date hereof until the Closing, there shall have been no lossor destruction of any portion of the properties or assets of Seller at theRestaurants, nor any institution or threat of any condemnation or otherproceedings to acquire or limit the use of any of the properties or assets ofSeller at the Restaurants, which (in any such case) could reasonably beexpected to result in a Material Adverse Effect.

 

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

 

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6.2           **Conditions Precedent to Obligations of Seller****.**  The obligations of Seller under thisAgreement to consummate the transactions contemplated hereby will be subject tothe 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 CorrectRepresentations and Warranties.** There shall have been no material breach by Buyer in the performance ofany of the covenants herein to be performed by it in whole or in part prior tothe Closing, and the representations and warranties of Buyer contained in thisAgreement, if specifically qualified by materiality, shall be true and correctin all respects as of the date hereof and as of the Closing Date and, if not soqualified, shall be true and correct in all material respects as of the datehereof and as of the Closing Date, except for representations or warrantiesthat 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 theClosing and executed on behalf of Buyer, certifying in such detail as Sellermay reasonably require, the fulfillment of the foregoing conditions, andrestating and reconfirming as of the Closing all of the covenants,representations and warranties of Buyer contained in this Agreement, specifyingin detail the extent of any breaches thereof.

 

(b)           **No Legal Obstruction.**  Except as is otherwise contemplated by theBankruptcy Case, no suit, action or proceeding not disclosed in this Agreementby any person, entity or governmental agency shall be pending or threatened inwriting, which could reasonably be expected to have a material adverse effectupon (i) Buyer or (ii) the benefits to Seller of the transactionscontemplated hereby.  No injunction,restraining order or order of any nature shall have been issued by or bepending before any court of competent jurisdiction or any governmental agencychallenging the validity or legality of the transactions contemplated hereby orrestraining or prohibiting the consummation of such transactions or compellingthe disposition of or discontinue or materially restrict the operations of asignificant 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 substancereasonably satisfactory to Buyer, and shall have each become a Final Order; provided,however, that Buyer will use its reasonable efforts to consummate thetransactions contemplated hereby under circumstances where an appeal of theSale Order is pending, no stay has been obtained, and Buyer reasonably believesthat closing the transaction will moot any such appeal(s).  Any other orders of the Bankruptcy Court withrespect to this Agreement shall be in form and substance reasonablysatisfactory to Buyer.

 

6.3           **Waiver of Conditions**.  Buyer may unilaterally waive any of theconditions to closing set forth in Section 6.1 of thisAgreement.  Seller may unilaterally waiveany of the condition to closing set forth in Section 6.2 of thisAgreement.

 

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**ARTICLE 7**

** **

**BANKRUPTCY ACTIONS**

** **

7.1           **Commencement of the Case.**  Seller shall file voluntarypetitions under chapter 11 of the Bankruptcy Code as soon as practicable afterthe execution of this Agreement, but no later than five (5) daysthereafter.

 

7.2           **Bankruptcy Court Approvals**.

 

(a)           Assoon as practicable following the Petition Date, Seller shall file with theBankruptcy Court and serve motions seeking (the “Sale Motion”): (i) ahearing before the Bankruptcy Court on an expedited basis (the “InitialHearing”) for an order (the “Bid Procedures Order”) approving, amongother things, (A) procedural matters related to the transactionscontemplated hereby (including the process by which higher and better offers topurchase the Assets may be presented to the Seller), (B) the Seller’sobligations with respect to the Buyer protections described in this Article 7,(C) the adequacy of notice to creditors and parties in interest of thefinal hearing to approve the sale of the Assets and the assumption of theAssumed Liabilities (the “Sale Hearing”) and (D) setting a date forthe Sale Hearing; and (ii) an order (the “Sale Order”) authorizing,among other things, (A) Seller to sell the Assets to Buyer pursuant tothis Agreement and Sections 363 and 365 of the Bankruptcy Code, free and clearof all interests in or to the Assets within the meaning of Bankruptcy Code Section 363(f),and otherwise free and clear of all other liens, encumbrances, claims andliabilities, except for the Assumed Liabilities, and (B) Buyer to assumethe Assumed Liabilities and Seller to be relieved of liability therefrom.

 

(b)           Seller shall request an expedited hearing onshortened notice to cause the Initial Hearing on the Sale Motion to be held assoon as ten (10) Business Days, but no later than twenty (20) BusinessDays after the Petition Date, and shall on the Petition Date serve a notice ofthe Sale Motion, the Sale Motion, the proposed form of the Bid Procedures Orderand the request for an expedited hearing date by first-class mail, postageprepaid, upon:  all Persons known to haveexpressed an interest in a transaction with respect to the Assets or a portionthereof during the past six (6) months; all entities known to haveasserted any Encumbrance or interest in the Assets or Assigned Agreements; allnon-Seller parties to the Assigned Agreements; the United States Trustee; anyGovernmental Unit that may have a claim in the Bankruptcy Case, and the twentylargest unsecured creditors identified by Seller in its chapter 11 petition.  The Seller shall use reasonable efforts tocause the Bankruptcy Court to enter the Bid Procedures Order as promptly aspracticable but no later than three (3) Business Days after thecommencement of the initial hearing on the Sale Motion.

 

(c)           Bid Procedures Order.  The Bid Procedures Order shallprovide, among other things, that:

 

(i)            Within two (2) Business Days after the entry ofthe Bid Procedures Order (the “Mailing Date”), the Seller shall serve acopy of the Bid Procedures Order and a notice of sale, approved by theBankruptcy Court by first-class mail, postage prepaid, upon:  all Persons known to have expressed aninterest in a transaction with respect to the Assets or a portion thereofduring the past six (6) months; all entities known to have asserted anyEncumbrance or interest in the Assets; all non-Seller parties to the AssignedAgreements; the United States Trustee; and counsel to an Official Creditors’Committee, if one has been appointed (or if no counsel has been 

 

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retained,then on the members of such committee); all other known creditors and equitysecurity holders of the Seller; all Persons that have requested special noticein the Bankruptcy Case; and all other Persons as directed by the BankruptcyCourt;

 

(ii)           On or before the Mailing Date, the Seller shallserve on all non-Seller parties to the Assigned Agreements a notice of cureamount (the “Cure Notice”) stating as to each the Cure Amount necessary,if any, to cure defaults and compensate the non-Seller party under Section 365of the Bankruptcy Code in order for the Seller to assume and assign theAssigned Agreements.  The non-Sellerparty to an Assigned Agreement shall have until 4:00 p.m. Central Timefive (5) Business Days prior to the Sale Hearing (the “ContractObjectionDeadline”) to file with the Bankruptcy Court and serve its objection on anygrounds to the assumption or assignment of any Assigned Agreement to which itis a party or to the amount or terms of payment of the Cure Amount, and shallstate the grounds for its objection with specificity (with appropriatedocumentation in support thereof), including what alternative Cure Amount itcontends is required.  Such objections shallbe served so as to be actually received by counsel for the Seller and counselfor the Buyer on or before the Contract Objection Deadline.  If no objection is timely received, the CureAmount set forth in the Cure Notice shall be controlling, notwithstandinganything to the contrary in any Assigned Agreement or any other document, andeach non-Seller party to an Assigned Agreement that has received actual orconstructive notice of the Cure Objection Deadline shall be deemed (x) tohave waived and released any right to assert an objection to the Cure Amountset forth in the Cure Notice and (y) to have consented to the assumptionand assignment of such Assigned Agreement to the Buyer, and shall be foreverbarred from asserting any other claims against the Seller or its bankruptcyestate, the Buyer, or the property of either of them, with respect to suchAssigned Agreements as to amounts (other than the Cure Amount set forth in theCure Notice) that were due or defaults that existed or other performance thatwas due from the Seller under such Assigned Agreements prior to theClosing.  At the Sale Hearing, the Courtwill consider and resolve any objections to assumption and assignment of theAssigned Agreements, including objections to the Cure Amounts or to theprovision of adequate assurance of future performance that were timely raisedby the non-Seller party;

 

(iii)          The Buyer TerminationFee (as defined in Section 7.4) is approved and shall be affordedadministrative expense priority status pursuant to Section 503(b)(1)(A) ofthe Bankruptcy Code, and shall be authorized and directed to be paid at thetime and under the circumstances set forth in this Agreement;

 

(iv)          Each prospective bidder (each a “Potential Bidder”)must deliver to the Seller (x) financial statements, financing commitmentsor other satisfactory evidence which the Seller determines may be necessary todemonstrate the Potential Bidder’s ability to perform if its bid is acceptedand (y) an executed confidentiality agreement in form and substancesatisfactory to the Seller and substantially similar to the confidentialityagreement previously entered into between Buyer and the Company.  After a Potential Bidder delivers all suchmaterials and the executed confidentiality agreement, the Seller shalldetermine whether the Potential Bidder has demonstrated the financial capacityto consummate the purchase of the Assets and to be otherwise reasonably likelyto be able and willing to consummate the contemplated transactions and, if, so,shall designate the Potential Bidder as a “Qualified Bidder.”  The Seller shall promptly notify the Buyer ofthe identity of any Qualified Bidder;

 

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(v)           The Seller shall make available to each QualifiedBidder the form of purchase agreement which must be used to make a QualifiedBid (the “Form Agreement”), which form shall be substantiallysimilar to and in no material term shall it differ from this Agreement andshall be the template used by such Qualified Bidder in submitting a bid;

 

(vi)          A “Qualified Bid” is a written contract offersigned by a Qualified Bidder and received by the Seller no later than 4:00 p.m.Central Time on the date that is four (4) Business Days prior to the dateof the Sale Hearing (the “Qualified Bid Deadline”) and satisfies all ofthe requirements set forth in this Clause (vi). Such offer must be in the form of and substantially the same in allmaterial respects as the Form Agreement, and accompanied by a black-linedversion showing changes from the Form Agreement, which changes must beimmaterial and acceptable to the Seller; provided, however, that such offermust require the parties to consummate the transactions on the same timing asset forth in this Agreement, and may not be subject to any representations,warranties, covenants, contingencies or conditions that are not set forth inthis Agreement, including any financing, diligence, board approval or similarcontingencies or conditions.  Such offershall specify the purchase price that the Qualified Bidder proposes, whichshall be payable entirely (x) in cash at least equal to $7,850,000 (thesum of the Purchase Price, the Buyer Termination Fee, and $125,000), and (y) inthe assumption of liabilities equal to or greater than those to be undertakenby the Buyer under the Assigned Agreements (the “Minimum Overbid”).  The Seller shall promptly provide the Buyerand any other Qualified Bidder with copies of all Qualified Bids.  In order to be a Qualified Bid, such offermust be accompanied by a cash deposit equal to or greater than 5% of the cashconsideration set forth in such bid (such deposited amount, the “Bid Deposit”)in immediately available funds as “earnest money” which shall be deposited inan escrow account under an escrow agreement with an escrow agent, on terms andconditions substantially similar to the terms contained in this Agreement.  If such Qualified Bidder’s bid is notapproved as the Successful Bid at the Sale Hearing, the Bid Deposit plusaccrued interest will be returned to such Qualified Bidder;

 

(vii)         If the Seller receives at least one (1) QualifiedBid prior to the Qualified Bid Deadline, then the Seller shall notify the Buyerand any Qualified Bidder who has submitted a Qualified Bid prior to theQualified Bid deadline that the Seller shall consider at an auction to be held at the offices of the Company or such other location in Nashville, TNas may be specified, subject to such reasonable rules andregulations as may be established by Seller’s counsel, at 10:00 a.m.Central time two (2) Business Days prior to the Sale Hearing, any bidsthat may be submitted by the Buyer or a Qualified Bidder.  Only the Buyer and Qualified Bidders thathave submitted Qualified Bids prior to the Qualified Bid Deadline mayparticipate at the auction.  Copies ofall Qualified Bids shall be provided to Buyer and any other Qualified Bidder atleast two (2) Business Days before the auction.  The Seller at the commencement of the auctionshall identify the bid that they have deemed the highest and best offer. TheSeller shall permit the Buyer and Qualified Bidders to submit subsequent bids,provided that each subsequent bid must exceed the amount of the preceding bidby not less than $125,000.  Indetermining the amount of any subsequent bid by the Buyer, credit in the amountof the Buyer Termination Fee shall be given. The Seller, subject to oversightand approval by the Bankruptcy Court, shall supervise the bidding process andconduct the bidding in such a manner to provide the Buyer and Qualified Biddersfair and equal opportunity to participate in the auction. When the Seller hasreasonably determined that the bidding process is concluded, then the Sellershall determine which bid (that is in compliance with the requirements ofclause (vi)) is to be recommended to the Bankruptcy Court for approval.

 

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TheBankruptcy Court shall at the Sale Hearing authorize the Seller to complete asale to the highest and best bid (the “Successful Bid”); and

 

(viii)        If the Seller does notreceive at least one (1) Qualified Bid prior to the Qualified BidDeadline, then no auction shall be scheduled or conducted, and the BankruptcyCourt at the Sale Hearing shall proceed solely to consider approval of thisAgreement and the transactions contemplated herein and will not consider anycompeting or alternative offers or proposals to purchase assets from theSeller, nor shall the Bankruptcy Court consider any objections to the SaleMotion that are based on the existence or potential for other or differentoffers or proposals to purchase the Seller’s assets.

 

(d)           Sale Order.  The Seller shall request a Sale Hearing, suchhearing to be regularly noticed under applicable rules of procedure, to beheld as soon as thirty (30), but no later than ninety (90) days, after thePetition Date, and shall on the Petition Date serve a notice of the SalesMotion, the proposed form of the Sale Order and the date of the Sale Hearing byfirst-class mail, postage prepaid, upon: all Persons known to have expressed aninterest in a transaction with respect to the Purchased Assets or a portionthereof during the past six (6) months; all entities known to haveasserted any Encumbrance or interest in or upon the Assets or AssignedAgreements; all non-Seller parties to the Assigned Agreements; the UnitedStates Trustee; and the twenty (20) largest unsecured creditors identified bySeller in its chapter 11 petition. The Seller shall use all reasonable effortsto cause the Bankruptcy Court to enter the Sale Order as promptly aspracticable, but in no event later than three (3) Business Days after thecommencement of the Sale Hearing.

 

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

 

(A)          The Sale Motion is grantedand the sale of the Assets (including the assumption and assignment of theAssigned Agreements), in accordance with the terms and conditions of thisAgreement, is approved.  The sale of theAssets is necessary, essential and appropriate under the circumstances of theSeller’s bankruptcy estate, which (together with the Seller’s creditors) wouldsuffer immediate and irreparable harm if the Seller were not permitted to sellthe Assets (including assumption and assignment of the Assigned Agreements) atthis time.  The transactions contemplatedby this Agreement are permissible under Sections 363 and 365 of the BankruptcyCode, and do not amount to a sub rosa plan of reorganization.  The Seller has engaged in fair and reasonablemarketing, advertising and other sale efforts and procedures in connection withthe transactions, both before and after the Petition Date, and has compliedwith the Bid Procedures Order.

 

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

 

(C)           Notice of the Sale Motionwas appropriate and adequate in the circumstances and complied in all respectswith the requirements of the Bankruptcy Code, the Federal Rules ofBankruptcy Procedure, the Local Bankruptcy Rules for the Bankruptcy Courtand 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 beheard with respect to the Sale Motion has been given to all parties ininterest, including all Persons claiming any interest in or Lien on the 

 

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Assets,including landlords under any Assumed Leases, non-Seller parties to anyAssigned Agreements and governmental taxing authorities that may, as a resultof the transactions authorized hereby have claims, whether contingent,unliquidated, unknown or otherwise.

 

(D)          The Assets (including theAssigned Agreements) will be sold to the Purchaser free and clear of allEncumbrances, and of any other interests in the Assets because, in each case asappropriate, the requirements of Section 363(f) of the BankruptcyCode have been satisfied.  The sale freeand clear and the assumptions and assignments shall be self-executing andneither the Seller nor the Buyer shall be required to execute or file releases,termination statements, assignments, consents or other instruments in order toeffectuate the sale of the Assets free and clear, or to bind the non-Sellerparties to the assumption and assignment of the Assigned Agreements.  Any Encumbrances and other interests in theSeller’s interest in the Assets shall attach to the proceeds from the sale inthe order of their priority, with the same validity, force and effect whichthey now have against the Assets.

 

(E)           The Assigned Agreements tobe assumed and assigned under this Agreement and the Sale Order shall be infull 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 CureAmounts, if any, due under Section 1.6 of this Agreement.  If the Closing occurs, the Seller, not theBuyer, shall be solely responsible for satisfying any other obligations thataccrue before the Effective Time under the Assigned Agreements, and the Buyer,not the Sellers, shall be solely responsible for satisfying any obligationsaccruing there under after the Effective Time.  Subject to Section 7.5 herein, no consents are necessary forthe assumption and assignment of any of the Assigned Agreements, and theassumption and assignment of each of the Assigned Agreements shall be effectiveat the Closing notwithstanding any provisions therein or in applicable law thatrestrict 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 ofthe transactions set forth in this Agreement are approved, this Agreement andthe other Sale Documents (when executed) will constitute valid and bindingagreements of the Seller, enforceable against them in accordance with theirterms, and the Seller is authorized, empowered and directed to take all suchaction as may be necessary or appropriate to consummate the transactions, allwithout further order of the Bankruptcy Court.

 

(H)          The Bankruptcy Court shallretain jurisdiction to implement and enforce the terms of this Agreement andthe Sale Order, including the terms on which the Assigned Agreements areassumed and assigned.  The Buyer hasfurnished adequate assurance of future performance.

 

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

 

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(J)            The Sale Order is a final,appealable order, which shall be effective immediately upon entry, except tothe extent stayed by its terms.  The ten (10) daystay of the Sale Order, as provided in Rule 6004(h) and 6006(d) orany other Rule of the Federal Rules of Bankruptcy Procedure, shallnot apply.  Absent judicial imposition ofa stay of the Sale Order pending appeal, the Seller and the Buyer mayimmediately consummate the Transactions approved hereby, notwithstandingwhether an appeal of the Sale Order is pending at any time.

 

7.3           Time Periods.  Subject to Section 8.1, any ofthe time periods set forth in Sections 7.2(b) and (d) maybe extended for a period aggregating not more than fifteen (15) calendar daysas a result of delays in scheduling or conduct of court hearings that arise,notwithstanding the reasonable efforts of the Seller, due to the lack ofavailability of a hearing date on the calendar of the Bankruptcy Court orextensions or continuances granted by the Bankruptcy Court at the request ofthird parties.

 

7.4           **Payment of Termination Fee**.

 

(a)           Subjectto approval of the Bankruptcy Court, if a Qualified Bid submitted in accordancewith the Bid Procedures Order is approved by Order of the Bankruptcy Court andBuyer is not in breach under this Agreement, the Buyer shall be paid atermination fee of Two Hundred Twenty-five Thousand Dollars ($225,000) (the “BuyerTermination Fee”).  Similarly, Buyershall pay Seller a termination fee equal to the amount of the Deposit (the “SellerTermination Fee”) in the event Seller has satisfied its conditions toclosing 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 toSeller by Buyer shall constitute liquidated and agreed damages in respect ofthis Agreement and the transactions contemplated by this Agreement, and Buyershall have no further liability to Seller. Seller believes that it is impossible to determine accurately the amountof all damages that Seller would incur by virtue of a breach by Buyer of itsobligations to proceed with the transactions contemplated by this Agreement,and its sole and exclusive remedy for any such breach shall be to receivepayment of the Seller Termination Fee. Buyer’s obligation to pay the Seller Termination Fee to Seller shall bedischarged upon the release to Seller from the escrow described in Section 2.8of the full amount of the Deposit.  Ifthis Agreement is terminated for any reason that does not result in the paymentof the Seller Termination Fee, the Deposit shall be released from escrow andrefunded to Buyer not later than five (5) business days following suchtermination.

 

(b)           Paymentof the Buyer Termination Fee to Buyer shall (i) be full consideration forthe Buyer’s efforts and expenses in connection with the bidding process, thisAgreement and the transactions contemplated hereby, including the due diligenceefforts of the Buyer and its professionals and advisors and (ii) constituteliquidated and agreed damages in respect of this Agreement and the transactionscontemplated by this Agreement, and Seller shall have no further liability toBuyer.  Buyer believes that it isimpossible to determine accurately the amount of all damages that Buyer wouldincur by virtue of a breach by Seller of its obligations to proceed with thetransactions contemplated by this Agreement, and its sole and exclusive remedyfor any such breach shall be to receive payment of the Buyer TerminationFee.  Except as provided in this Section 7.4,Buyer shall have no right nor remedy against Seller, at law or in equity, by reasonof a breach by Seller of its obligation to proceed with the transactionscontemplated by this Agreement.

 

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(c)           TheBuyer Termination Fee shall be afforded administrative expense priority statuspursuant to Section 503(b)(1)(A) of the Bankruptcy Code and shall bepaid upon the earlier of (i) the closing of the transactions contemplatedby an accepted Qualified Bid and (ii) entry of any Order of the BankruptcyCourt directing payment by Seller of such amounts.

 

(d)           Notwithstandinganything contained in this Agreement to the contrary, no Buyer Termination Feeor Seller Termination Fee shall be payable to any party to this Agreement ifsuch party is in material breach of any provision of this Agreement.

 

7.5           **Adequate Assurance of FuturePerformance; Cooperation****.**  The Buyer shall be responsible for providingevidence and argument in support of the Sale Motion in order to establish itsability to provide “adequate assurance of future performance” (within themeaning of Section 365(f)(2)(B) of the Bankruptcy Code) of eachAssigned Agreement.  The Seller agrees touse commercially reasonable efforts to cooperate with the Buyer in thepresentation of such evidence and argument. The Bankruptcy Court’s refusal to approvethe assumption by the Buyer of any Assigned Agreement on the grounds that “adequateassurance of future performance” by the Buyer of such Assigned Agreement hasnot been provided shall not constitute grounds for termination pursuant to Section 8.1hereof.  In addition, the Buyer shallreasonably cooperate with the Seller in the Seller’s efforts to obtain theapproval of the Sale Motion.

 

**ARTICLE 8**

** **

**TERMINATION RIGHTS;CLOSING DELIVERIES**

** **

8.1           **Termination of Agreement****.**  The parties may terminate this Agreement andthe transactions contemplated hereby may be abandoned at any time prior to theClosing:

 

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

 

(b)           by Seller, if (i) the Bankruptcy Court approves a Qualified Bid(provided, that no termination under this Section 8.1(b) shallbe effective unless and until the Buyer Termination Fee shall have been paid toBuyer);

 

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

 

(d)           by Buyer, if (i) the Closing shall not have occurred on or priorto the Termination Date, unless such failure to consummatethe transactions herein is the result of a material breach of anyrepresentation, warranty, covenant or other agreement contained in the SaleDocuments by the Buyer, or (ii) uponwritten notice to Seller at any time prior to the Closing, and followingwritten notice thereof and a cure period of five (5) business daysthereafter, if Seller shall have breached any representation, warranty orcovenant contained in this Agreement in any material respect (provided,however, that (1) for purposes of this Section 8.1(d), any 

 

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representationsand warranties of the Seller contained in Article 3 of thisAgreement are qualified in their entirety by those qualifications set forth inclauses (i) through (iv) of the introductory paragraph to such Article 3, and (2) any covenants of the Seller contained in this Agreementare 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 cureperiod 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 entryof the Sale Order; provided, that (i) no stay of the Sale Order shall bein effect, (ii) the Sale Order shall contain a waiver of the automatic ten(10) day stay under Rule 6004(h) of the Federal Rules ofBankruptcy Procedure, and (iii) the terminating party is not then inmaterial breach of this Agreement; and

 

(f)            by either party, upon written notice to the other, if (i) the BidProcedures Order shall not have been entered by the Bankruptcy Court by 5:00 p.m.Central Time on December 31, 2007, or (ii) the Sale Order shall nothave been entered by the Bankruptcy Court on or prior to 5 p.m. CentralTime on January 31, 2007.

 

8.2           **Procedure and Effect of Termination**.  In the event that either Buyeror Seller terminates this Agreement pursuant to Section 8.1,written notice thereof shall forthwith be given to the other parties to thisAgreement, specifying the particular provision of Section 8.1 uponwhich such termination is based, and this Agreement shall terminate (subject tothe payment of any Buyer Termination Fee or Seller Termination Fee inaccordance with Section 8.1(b)) and the transactions contemplatedhereby shall be cancelled, without further action by any of the partieshereto.  If this Agreement is terminatedas provided herein:

 

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

 

(b)           noparty hereto shall have any liability or further obligation to any other partyto this Agreement resulting from such termination except that the provisions ofthis 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 fromtime to time, after the execution of this Agreement, execute and deliver suchfurther instruments of conveyance and transfer and take such additional actionas may be reasonably necessary to effect, consummate, confirm or evidence thetransactions contemplated by this Agreement and the other Sale Documents(including the exercise of good faith in the Bankruptcy Case and relatedproceedings).

 

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

 

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9.3           **Apportionment****.**  Any unpaid rents, taxes, assessments, commonarea maintenance charges, expenses and other charges (“UnpaidCharges”)for which Seller is directly or indirectly responsible and which relate to theRestaurant Sites for periods both before and after the Effective Time shall beprorated between Seller and Buyer on a daily basis, with Seller responsible forpayment of all such Unpaid Charges allocable to the time period up to andincluding the Effective Time and with Buyer responsible for payment of all suchUnpaid Charges allocable to the time period thereafter.  Seller and Buyer agree that all such UnpaidCharges (except to the extent reasonably disputed) shall be paid in full byeither Seller or Buyer, as the case may be, within sufficient time to preventany taxing agency or other creditor from making any claim.  If Seller or Buyer pays any Unpaid Charges infull in accordance with the preceding sentence, the other shall promptlyreimburse its pro rata portion to the paying party upon receipt of writtennotice of the fact and amount of such payment (subject, in Seller’s case, tothe approval of the Bankruptcy Court). Buyer agrees to reimburse Seller for any Prepaid Charges, includingprepayments of rents, security deposits (but only to the extent of theaggregate amount of security deposits with respect to which the estoppelcertificates for the lease to which the security deposit relates states that noclaim then exists against such deposits), taxes, expenses and other chargesmade by Seller to the extent and in the proportion that such Prepaid Chargesare retained for the benefit of Buyer or relate to periods after the EffectiveTime.

 

**ARTICLE 10**

** **

**DEFINITIONS**

** **

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

 

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

 

“Encumbrance” means, with regard toany asset, a mortgage, deed of trust, pledge, lien, collateral agreement,security interest, claim (including, without limitation, as that term isdefined in Section 101(5) of the Bankruptcy Code), securityarrangement, liability, encumbrance, accrued but unpaid taxes, tax liens or anyother interest of any nature whatsoever in respect of such asset to the fullestextent any such interest can be eliminated under Section 363(f) ofthe Bankruptcy Code; provided, however, that the term Encumbrance shall notinclude the rights pursuant to Section 365(n) of the Bankruptcy Codeof any licensee under a license of “intellectual property” (as such term isdefined in Section 101(35A) of the Bankruptcy Code) or fee interests inreal property such as easements or rights of way.

 

“Final Order” means an order orjudgment of the Bankruptcy Court which has not been reversed, stayed, modifiedor amended and is no longer subject to appeal, certiorari proceeding or otherproceeding for review or rehearing (giving effect to any reduction orelimination of the appeal period pursuant to an order of the Bankruptcy Court),and as to which no appeal, certiorari proceeding, other proceeding for reviewor 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 

 

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instrumentality(including but not limited to any regulatory or administrative authority oragency, court or arbitrational tribunal thereof) of the United States ofAmerica (but not a United States Trustee while serving as a trustee in a caseunder 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 asofficers and directors of Seller.

 

“LegalRequirement” 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 Personof any kind, character or description, whether known or unknown, absolute orcontingent, accrued or unaccrued, liquidated or unliquidated, secured orunsecured, joint or several, due or to become due, vested or unvested,executory, determined, determinable or otherwise and whether or not the same isrequired to be accrued on the financial statements of such Person.

 

“Material Adverse Effect” means anevent, change or occurrence which, individually or together with any otherevent, change, or occurrence, has a material adverse impact on (i) thebusiness conducted by Seller at the Restaurant Sites (taken as a whole), (ii) theability of Seller to perform its obligations under this Agreement or toconsummate the transactions contemplated by this Agreement, or (iii) theAssets taken as a whole.

 

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

 

 “Release”means any release, spill, emission, leaking, plumbing, pouring, dumping,emptying, injection, deposit, disposal, discharge, dispersal, leaching, ormigration 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 likeassessments, customs, duties, imposts, charges or fees, including, withoutlimitation, income taxes, gross receipts, ad valorem, value added, excise, realproperty, 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, windfallprofits, documentary, stamp, registration, transfer and gains taxes, tollcharges (for example, toll charges under Sections 367 and 1492 of theBankruptcy Code), or other taxes of any kind whatsoever, imposed by or payableto the United States, or any state, country, local or foreign government orsubdivision, instrumentality, authority or agency thereof or under any treaty,convention or compact between or among any of them, and in each instance suchterm shall include any interest (including interest on deferred tax liabilityunder Section 453A(c) of the Bankruptcy Code and “look-back” interestunder Section 460 of the Bankruptcy Code and similar amounts of interestimposed by the 

 

25

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BankruptcyCode), penalties, additions to tax or similar charges imposed in lieu of a Taxor attributable to any Tax, other than taxes imposed on or payable by Sellerthat are, or that are in the nature of taxes that are, based upon, measured byor imposed with respect to capital, net worth, net receipts or net income(including without limitation minimum taxes, tax preference items, alternativeminimum taxes, capital gains taxes, excise taxes, personal holding companytaxes and excess profits taxes).

 

**ARTICLE 11**

** **

**MISCELLANEOUS**

** **

11.1         **Notices, Consents, etc****.**  Any notices, consents or other communicationrequired to be sent or given hereunder by any of the parties shall in everycase be in writing and shall be deemed properly served if (a) deliveredpersonally, (b) delivered by registered or certified mail, in all suchcases with first class postage prepaid, return receipt requested, (c) deliveredby courier, at the addresses as set forth below or at such other addresses asmay be furnished in writing, or (d) delivered by facsimile transmissionwith confirmation of successful transmission, at the numbers as set forth belowor at such other numbers as may be furnished in writing.   Anynotice required herein shall be in writing (to the individuals listed in Section 11.1,unless specified otherwise pursuant to Section 11.1) unlessspecifically permitted to be given orally.**** All such notices and communicationsshall be deemed received upon the actual delivery thereof in accordance withthe foregoing.

 

(a)           Ifto 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:

 

TheHancock Law Firm

102Woodmont Boulevard, Suite 200

Nashville,TN 37205

Attn:  Caldwell Hancock, Esq.

Facsimile:(615) 345-0203

 

(b)           Ifto Buyer:

 

Star Buffet Management, Inc.

 

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Star Buffet Management, Inc.

1312 N. Scottsdale Road

Scottsdale, AZ 85257

Attn: Robert E. Wheaton, Chief Executive Officer

Facsimile:  (480)425-0494

 

With a copy to:

 

CRAIG B. WHEATON

Kilpatrick Stockton LLP

3737 Glenwood Ave., # 400

Raleigh, NC 27612

Attn: Craig B. Wheaton, Esq.

Facsimile: (919) 510-6115

 

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

 

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

 

11.4         **Actions Necessary to Complete Transaction****.** Each party will execute all documents and takesuch other actions as any other party may reasonably request in order toconsummate the transactions provided for herein and to accomplish the purposesof this Agreement, provided that Seller’s obligations hereunder shall besubject to any limitations imposed by the Bankruptcy Court or in connectionwith the Bankruptcy Case.

 

11.5         **Counterparts****.**  For the convenience of the parties, anynumber of counterparts of this Agreement may be executed by the partieshereto.  Each such counterpart shall be,and shall be deemed to be, an original instrument, but all such counterpartstaken together shall constitute one and the same agreement.  Delivery of an executed counterpart of thisAgreement by facsimile shall be equally as effective as delivery of theoriginal executed counterpart of this Agreement.

 

11.6         **Expenses****.**  Except as otherwise provided herein, eachparty to this Agreement agrees to pay its own reasonable costs and expensesincurred or to be incurred in negotiating and preparing this Agreement and inclosing and carrying out the transactions contemplated by this Agreement and theother Sale Documents.  Each party will beresponsible for their respective Taxes, directly or indirectly attributable tothe transactions contemplated by the Agreement.

 

11.7         **Governing Law****.**  This Agreement shall be construed andenforced in accordance with, and all questions concerning the construction,validity, interpretation and performance of this Agreement shall be governedby, the laws of the State of Tennessee, without giving effect to provisionsthereof regarding conflicts of law.  Eachparty and each Person claiming hereunder hereby designates the Bankruptcy Courtas the only court of proper jurisdiction and venue for any actions orproceedings relating to this Agreement, hereby irrevocably consents to suchdesignation, jurisdiction and venue; and hereby waives any objections ordefenses relating to jurisdiction or venue with respect to any action orproceeding initiated in the Bankruptcy Court; 

 

27

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and hereby consents to service of process underthe statutes and rules applicable to the Bankruptcy Court.

 

11.8         **Headings****.**  The subject headings of Articles and Sectionsof this Agreement are included for purposes of convenience only and shall notaffect the construction or interpretation of any of its provisions.

 

11.9         **Incorporationof Schedules and Exhibits****.**  The Schedules and Exhibits hereto areincorporated into this Agreement and will be deemed a part hereof as if setforth herein in full.  References to “thisAgreement” and the words “herein”, “hereof” and words of similar import referto this Agreement (including the Schedules and Exhibits) as an entirety.  In the event of any conflict between theprovisions of this Agreement and any Schedule or Exhibit, the provisions ofthis Agreement will control.  Capitalizedterms used in the Schedules have the meanings assigned to them in thisAgreement.  The Section referencesreferred to in the Schedules are to Sections of this Agreement, unlessotherwise expressly indicated.

 

11.10       **Assignment****.** This Agreement will be binding upon and inureto the benefit of the parties hereto and their respective successors andassigns. Neither this Agreement nor any of the rights, interests or obligationshereunder may be assigned or delegated by Buyer or Seller in any mannerwhatsoever, whether directly or by operation of law or otherwise, without theprior written consent of the other party. Any assignment or attempted assignment of all or any portion of thisAgreement which is not expressly permitted hereby shall be null and void and ofno force or effect.

 

11.11       **Entire Agreement****.**  This Agreement, the other Sale Documents, andthe documents, schedules and exhibits described herein or attached or deliveredpursuant hereto collectively constitute the sole and only agreement among theparties with respect to the subject matter hereof.  Any agreements, representations ordocumentation respecting the transactions contemplated by this Agreement, andany correspondence, discussions or course of dealing which are not expresslyset forth in this Agreement, the other Sale Documents, or the documents,schedules and exhibits described herein or attached or delivered pursuanthereto or are null and void, it being understood that no party has relied onany representation not set forth in this Agreement, the other Sale Documents orthe documents, schedules and exhibits described herein or attached or deliveredpursuant hereto.

 

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

 

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

 

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11.14       **No Strict Construction. **The language used in this Agreement willbe deemed to be the language chosen by the parties hereto to express theirmutual intent, and no rule of strict construction will be applied againstany party hereto.

 

11.15       **Time of Essence**.  Time is of the essence with respect to thisAgreement.

 

11.16       **Survival ofRepresentations and Warranties**. All representations and warranties of the parties set forth herein shallnot survive the Closing and shall not be of any force or effect thereafter.  Without limiting the foregoing, the partiesagree and acknowledge that (a) any representations and warranties of theSeller contained in Article 3 of this Agreement and referenced in this Section 11.16are 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’sliability with respect to representations and warranties made by Sellerhereunder are subject to the limitations set forth herein and in Section 8.1.

 

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**IN WITNESSWHEREOF**, the parties have executed this Agreement as of the date first abovewritten.

 

 
|   | **BARNHILL’S BUFFET, INC.** |                  |
|--------|----------------------------------|-----------------------|
|   |                             |                  |
|   | By:                              | /s/ W. CRAIG BARBER   |   |
|   | Name:                            | W. CRAIG BARBER       |   |
|   | Its:                             | PRESIDENT             |   |
|   |                             |                  |
|   |                             |                  |
|   | **STAR BUFFET MANAGEMENT, INC.** |                  |
|   |                             |                  |
|   | By:                              | /s/ Robert E. Wheaton |   |
|   | Name:                            | Robert E. Wheaton     |
|   | Its:                             | PRESIDENT             |   |
|        |                                  |                       |  |  |  |

 

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**SCHEDULESTO ASSET PURCHASE AGREEMENT**

 

The following schedules(each a “Schedule” and together the “Schedules”) to the AssetPurchase Agreement (the “Agreement”), dated as of the 2nd dayof December, 2007, by and among Star Buffet Management, Inc., a Delawarecorporation (the “Buyer”), and Barnhill’s Buffet, Inc., a Tennesseecorporation (the “Seller”), are incorporated by reference in and made apart of the Agreement.  Capitalized termsused but not defined in the Schedules have the meanings ascribed thereto in theAgreement.

 

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

 

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**EXHIBIT A**

 

**Restaurant Locations**

 

1. Huntsville, AL

2. Jonesboro, AR

3. Apopka, FL

4. Leesburg, FL

5. New Port Richey, FL

6. Ocala, FL

7. Tallahassee, FL

8. Warrington, FL

9. Bossier City, LA

10. Monroe, LA

11. Shreveport, LA

12. Columbus, MS

13. Gulfport, MS

14. Jackson, MS

15. Meridian, MS

16. Moss Point, MS

17. Starkville, MS

18. Tupelo, MS

19. Barlett, TN

20. Collierville, TN

21. Jackson, TN

 

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**EXHIBIT B**

 

**Tangible Personal Property**

 

----

 

**EXHIBIT C**

 

**Personal Property Leases; ExecutoryContract; Additional Contracts**

 

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** **

**FIRSTAMENDMENT TO ASSET PURCHASE AGREEMENT**

 

ThisFirst Amendment to the ASSET PURCHASE AGREEMENT (this “Agreement”),dated as of December 2, 2007, is by and among BARNHILL’S BUFFET, INC., aTennessee corporation (the “Selleror the Company”) and STAR BUFFET MANAGEMENT, INC., a wholly ownedsubsidiary of Star Buffet, Inc., a Delaware corporation, (together withany successor and assigns, the “Buyer”).

 

**RECITALS**

 

**WHEREAS**, the Company and the Buyer entered into theAgreement, such agreement being subject to terms and conditions set forththerein; and

 

**WHEREAS**, the Companyand the Buyer desire to make modifications to certain terms within theAgreement;

 

**NOW, THEREFORE**, for good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, itis agreed as follows:

 

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

 

“**Purchase Price****.** The purchase price for the sale of the Assetsshall be $5,000,000.00 in cash (the “Purchase Price”).”

 

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

 

“**Closing****.** The “Closing” of the transactionscontemplated herein, including payment of the Purchase Price, shall take placeat the offices of the Company or such other location in Nashville, TN as may beagreed upon, no later February 5, 2008 (the “Target Date”) (or suchearlier 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) daystay under Rule 6004(h) of the Federal Rules of BankruptcyProcedure; provided, further, however,that in no event unless otherwise agreed in writing shall the Closing takeplace on a date which is after February 12, 2008 (the “Termination Date”).  At the Closing, Buyer shallpay the Purchase Price to Seller by wire transfer of immediately availablefunds to one or more bank accounts of Seller, or as directed by Seller inaccordance with the terms of the Sale Order approved by the Bankruptcy Court.”

 

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3.             Exhibit Aattached to the Agreement is hereby modified to exclude the followingRestaurant Locations:

 

  3. Apopka, FL

  6. Ocala, FL

12. Columbus,MS

13. Gulfport,MS

16. MossPoint, MS

 

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

 

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

 

 

**IN WITNESSWHEREOF**, the parties have executed this Agreement as of January 21, 2008.

 

 
|   | **BARNHILL’S BUFFET, INC.** |
|--------|----------------------------------|
|   |                             |
|   | By: /s/ W. Craig Barber          |
|   | Name: W. Craig Barber            |
|   | Its: President                   |
|   |                             |
|   |                             |
|   |                             |
|   | **STAR BUFFET MANAGEMENT, INC.** |
|   |                             |
|   | By: /s/ Ron Dowdy                |
|   | Name: Ron Dowdy                  |
|   | Its: Secretary                   |

 

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