Document:

Exhibit 10.16

 

ASSET PURCHASE AGREEMENT

 

Dated as of

 

December 2, 2007,

 

By and among

 

Barnhill’s
Buffet, Inc.

as
Seller

 

And

 

Star Buffet Management, Inc.,

as

Buyer

 

 

ASSET
PURCHASE 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 Star
Buffet, Inc., a Delaware corporation, (together with any successor and
assigns, the “Buyer”).

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 1

 

PURCHASE AND SALE

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

1.2           Excluded Assets.  Except for the Assets set forth in Section 1.1,
all other assets of Seller are excluded from the purchase and sale contemplated
by this Agreement.  For the avoidance of
doubt, subject to Section 9.3, all security deposits,
refunds, deposits and prepaid expenses of Seller, whether or not they relate to
a property subject to an Assignment Agreement, are not Assets to be transferred
to Buyer (the “Prepaid Charges”).

 

2

 

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

 

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

 

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

 

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

 

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

 

(a)           All
liabilities, obligations and commitments of Seller or any predecessor(s) or
Affiliate(s) of Seller relating to Taxes (as defined in Article 10)
with respect to the Assets or otherwise, for all periods, or portions thereof,
on or prior to the Closing Date, subject to the prorations set forth in Section 9.4;

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

ARTICLE 2

 

CONSIDERATION;
ALLOCATION; PAYMENT

 

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

 

(a)           assume
the Assumed Liabilities; and

 

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

 

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

 

2.3           Closing.  The “Closing” of the
transactions contemplated herein, including payment of the Purchase Price,
shall take place at the offices of the Company or such other location in
Nashville, TN as may be agreed upon, no later than five (5) days following
the entry of the Sale Order (the “Target Date”) (or such earlier date as
Buyer and Seller may mutually agree, the “Closing Date”); provided, that
no stay of the Sale Order shall be in effect and provided, further, that the
Sale Order shall contain a waiver of the automatic ten (10) day stay under
Rule 6004(h) of the Federal Rules of Bankruptcy Procedure; provided, further,
however, that in no event unless otherwise agreed in writing shall the
Closing take place on a date which is after February 1, 2008 (the “Termination
Date”). 
At the Closing, Buyer shall pay the Purchase Price to Seller by wire
transfer of immediately available funds to one or more bank accounts of Seller,
or as directed by Seller in accordance with the terms of the Sale Order
approved by the Bankruptcy Court.

 

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

 

4

 

will
not in any way limit their respective rights and obligations under the Sale
Documents (as defined in Section 3.2) in respect of
representations, warranties, covenants and agreements and the breach thereof or
damages therefore.

 

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

 

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

 

2.7           Deposit.  Upon the execution of this Agreement, Buyer
shall place in escrow with Seller’s counsel a refundable purchase price deposit
of $100,000 in cash.  Two weeks prior to
the Sale Hearing, an additional refundable purchase price deposit in an amount such
that the total cash deposits placed in escrow with Seller’s counsel is equal to
five percent (5%) of the Purchase Price (all
such cash placed in escrow hereinafter referred to as the “Deposit”),
all of which shall be placed in an interest-bearing account.  Upon Closing, the Deposit will be applied
against the Purchase Price.  Otherwise,
the deposit will either be returned to Buyer or paid to Seller in satisfaction
of Buyer’s obligation to pay the Seller Termination Fee as specified in Section 7.4.

 

ARTICLE 3

 

REPRESENTATIONS AND
WARRANTIES OF SELLER

 

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

 

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

 

3.2           Power and Authorization.  Subject to approval by the Bankruptcy Court, Seller has full power and
authority to execute and deliver this Agreement and any agreement, document,
certificate or instrument being delivered pursuant to or in connection with the
transactions contemplated by this Agreement (collectively, the “Sale
Documents”) to perform its obligations hereunder and there under and to
consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement
and the other Sale Documents, and the performance by Seller of its obligations
hereunder and there under, and the consummation of the transactions
contemplated hereunder and there under, have been duly authorized by
Seller.  This Agreement and the other
Sale Documents upon execution and delivery by Seller and upon approval of the
Bankruptcy Court will constitute the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms.

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

3.6           Property.

 

(a)           Seller
has good and marketable title or rights as lessee to all real, personal, mixed,
tangible and intangible property of any kind or nature owned or used by Seller
at the Restaurant Sites, constituting the Assets, in each case free and clear
of all Encumbrances, except for Encumbrances identified on Schedule 3.6(a) hereto
on the date hereof.  The Assets located
at the Restaurant Sites (a) constitute all the assets, of any nature
whatsoever, necessary at the 

 

6

 

Restaurant Sites in order for Seller to operate
its business at the Restaurant Sites in the manner such business is presently
operated by Seller, and (b) include all of the operating assets of Seller
at the Restaurant Sites.  Upon the
execution of this Agreement, Buyer shall have the right to communicate with
landlords (and other parties in the leasehold chain) regarding the leaseholds
related to the Restaurant Sites.

 

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

 

3.7           Condition of Property and Related Matters.

 

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

 

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

 

3.9           Employee Matters.

 

(a)           Seller
is not a party to or bound by any collective bargaining agreement and there are
no labor unions or other organizations representing, purporting to represent
or, to the Knowledge of Seller, attempting to represent any employees employed
in the operation of the business conducted at the Restaurant Sites.  Since February 11, 2005, there has not
occurred or, to the Knowledge of Seller, been threatened any material strike,
slowdown, picketing, work stoppage, concerted refusal to work overtime or other
similar labor activity with respect to any employees employed in the operation
of the business conducted at the Restaurant Sites.  There are 

 

7

 

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

 

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

 

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

 

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

 

3.12         Litigation. 
Except as set forth in Schedule 3.12, there is no claim, counter-claim,
action, suit, order, proceeding or investigation pending, in law or in equity,
or, to the Knowledge of Seller, threatened against or involving Seller, with
respect to the business conducted at the Restaurant Sites (or pending or, to
the Knowledge of Seller, threatened against any of the officers, directors or
key employees of Seller with respect to business activities (including any
products sold) at the Restaurant Sites conducted on behalf of Seller) with
respect to or affecting Seller, its accounts, business, properties, assets or
rights, or relating to the transactions contemplated hereby, before any court,
agency, regulatory, administrative or other governmental body or officer or
before any arbitrator; nor to the Knowledge of Seller, is there any reasonable
basis for any such claim, action, suit, proceeding or governmental,
administrative or regulatory investigation that would result in a Material
Adverse Effect.  Seller is not directly
subject to or affected by any order, judgment, decree or ruling of any court or
governmental agency relating to affecting the

 

8

 

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

 

3.13         Environmental and Safety Requirements.

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

except (a) as set forth in Schedule
3.15, (b) as and to the extent disclosed or reserved against in the
most recent balance sheet of Seller provided to Buyer, and (c) for
liabilities and obligations that were (i) incurred in the ordinary course
of business consistent with past practice and (ii) individually or in the
aggregate are not material to the business conducted at the Restaurant Sites
and have not had or resulted in, and would not reasonably be expected to result
in, a Material Adverse Effect.

 

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

 

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

 

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

 

ARTICLE 4

 

REPRESENTATIONS AND
WARRANTIES OF BUYER

 

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

 

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

 

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

 

10

 

contemplated hereunder and there under, have
been duly authorized by Buyer.  This
Agreement and the other Sale Documents upon execution and delivery by Buyer
shall constitute the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms.

 

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

 

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

 

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

 

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

 

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

 

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

 

4.6           “AS IS” Transaction.  BUYER HEREBY ACKNOWLEDGES AND AGREES THAT,
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ARTICLE 3 ABOVE, THE
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO ANY MATTER RELATING TO THE ASSETS.  BUYER FURTHER ACKNOWLEDGES THAT BUYER HAS
CONDUCTED AN INDEPENDENT INSPECTION AND INVESTIGATION OF THE PHYSICAL CONDITION
OF THE ASSETS AND ALL SUCH OTHER MATTERS RELATING TO OR AFFECTING THE ASSETS AS
BUYER DEEMED NECESSARY OR APPROPRIATE AND THAT, EXCEPT FOR ANY REPRESENTATIONS
AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE 3 AND THE CONDITION OF
TITLE TO THE ASSETS CONFERRED BY THE SALE ORDER, BUYER IS PROCEEDING WITH ITS
ACQUISITION OF THE ASSETS BASED SOLELY UPON SUCH INDEPENDENT INSPECTIONS AND
INVESTIGATIONS.  ACCORDINGLY, BUYER WILL
ACCEPT THE ASSETS AT THE CLOSING “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS.”

 

11

 

ARTICLE 5

 

COVENANTS AND OTHER
TERMS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

Persons and Governmental Units, including all
local, county, state and federal taxing authorities, as may be necessary in
order to permit the consummation of the transactions contemplated by this
Agreement free and clear of all Encumbrances. 
Buyer shall use reasonable efforts to assist Seller in obtaining such
waivers, permits, consents, approvals and authorizations and in making such
registrations and filings.

 

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

 

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

 

ARTICLE 6

 

CONDITIONS PRECEDENT
TO THE CLOSING

 

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

 

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

 

13

 

Required
Consents.  The Buyer
shall have received copies of all of the consents, permits, and regulatory
approvals necessary to consummate the transactions contemplated by this
Agreement; provided the failure to obtain the consent of Spirit Master Funding,
LLC to the assumption and/or assignment of the lease(s) for the
restaurants in Apopka, Ocala, Columbus, Gulfport and Moss Point shall excuse
Buyer from closing under this Agreement but shall not entitle Buyer to a Buyer
Termination Fee.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

ARTICLE 7

 

BANKRUPTCY ACTIONS

 

7.1           Commencement of the Case.  Seller shall file voluntary
petitions under chapter 11 of the Bankruptcy Code as soon as practicable after
the execution of this Agreement, but no later than five (5) days
thereafter.

 

7.2           Bankruptcy Court Approvals.

 

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

 

(b)           Seller shall request an expedited hearing on
shortened notice to cause the Initial Hearing on the Sale Motion to be held as
soon as ten (10) Business Days, but no later than twenty (20) Business
Days after the Petition Date, and shall on the Petition Date serve a notice of
the Sale Motion, the Sale Motion, the proposed form of the Bid Procedures Order
and the request for an expedited hearing date by first-class mail, postage
prepaid, upon:  all Persons known to have
expressed an interest in a transaction with respect to the Assets or a portion
thereof during the past six (6) months; all entities known to have
asserted any Encumbrance or interest in the Assets or Assigned Agreements; all
non-Seller parties to the Assigned Agreements; the United States Trustee; any
Governmental Unit that may have a claim in the Bankruptcy Case, and the twenty
largest unsecured creditors identified by Seller in its chapter 11 petition.  The Seller shall use reasonable efforts to
cause the Bankruptcy Court to enter the Bid Procedures Order as promptly as
practicable but no later than three (3) Business Days after the
commencement of the initial hearing on the Sale Motion.

 

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

 

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

 

16

 

retained,
then on the members of such committee); all other known creditors and equity
security holders of the Seller; all Persons that have requested special notice
in the Bankruptcy Case; and all other Persons as directed by the Bankruptcy
Court;

 

(ii)           On or before the Mailing Date, the Seller shall
serve on all non-Seller parties to the Assigned Agreements a notice of cure
amount (the “Cure Notice”) stating as to each the Cure Amount necessary,
if any, to cure defaults and compensate the non-Seller party under Section 365
of the Bankruptcy Code in order for the Seller to assume and assign the
Assigned Agreements.  The non-Seller
party to an Assigned Agreement shall have until 4:00 p.m. Central Time
five (5) Business Days prior to the Sale Hearing (the “Contract  Objection
Deadline”) to file with the Bankruptcy Court and serve its objection on any
grounds to the assumption or assignment of any Assigned Agreement to which it
is a party or to the amount or terms of payment of the Cure Amount, and shall
state the grounds for its objection with specificity (with appropriate
documentation in support thereof), including what alternative Cure Amount it
contends is required.  Such objections shall
be served so as to be actually received by counsel for the Seller and counsel
for the Buyer on or before the Contract Objection Deadline.  If no objection is timely received, the Cure
Amount set forth in the Cure Notice shall be controlling, notwithstanding
anything to the contrary in any Assigned Agreement or any other document, and
each non-Seller party to an Assigned Agreement that has received actual or
constructive notice of the Cure Objection Deadline shall be deemed (x) to
have waived and released any right to assert an objection to the Cure Amount
set forth in the Cure Notice and (y) to have consented to the assumption
and assignment of such Assigned Agreement to the Buyer, and shall be forever
barred from asserting any other claims against the Seller or its bankruptcy
estate, the Buyer, or the property of either of them, with respect to such
Assigned Agreements as to amounts (other than the Cure Amount set forth in the
Cure Notice) that were due or defaults that existed or other performance that
was due from the Seller under such Assigned Agreements prior to the
Closing.  At the Sale Hearing, the Court
will consider and resolve any objections to assumption and assignment of the
Assigned Agreements, including objections to the Cure Amounts or to the
provision of adequate assurance of future performance that were timely raised
by the non-Seller party;

 

(iii)          The Buyer Termination
Fee (as defined in Section 7.4) is approved and shall be afforded
administrative expense priority status pursuant to Section 503(b)(1)(A) of
the Bankruptcy Code, and shall be authorized and directed to be paid at the
time 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 commitments
or other satisfactory evidence which the Seller determines may be necessary to
demonstrate the Potential Bidder’s ability to perform if its bid is accepted
and (y) an executed confidentiality agreement in form and substance
satisfactory to the Seller and substantially similar to the confidentiality
agreement previously entered into between Buyer and the Company.  After a Potential Bidder delivers all such
materials and the executed confidentiality agreement, the Seller shall
determine whether the Potential Bidder has demonstrated the financial capacity
to consummate the purchase of the Assets and to be otherwise reasonably likely
to 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 of
the identity of any Qualified Bidder;

 

17

 

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

 

(vi)          A “Qualified Bid” is a written contract offer
signed 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 date
of the Sale Hearing (the “Qualified Bid Deadline”) and satisfies all of
the requirements set forth in this Clause (vi). 
Such offer must be in the form of and substantially the same in all
material respects as the Form Agreement, and accompanied by a black-lined
version showing changes from the Form Agreement, which changes must be
immaterial and acceptable to the Seller; provided, however, that such offer
must require the parties to consummate the transactions on the same timing as
set forth in this Agreement, and may not be subject to any representations,
warranties, covenants, contingencies or conditions that are not set forth in
this Agreement, including any financing, diligence, board approval or similar
contingencies or conditions.  Such offer
shall specify the purchase price that the Qualified Bidder proposes, which
shall be payable entirely (x) in cash at least equal to $7,850,000 (the
sum of the Purchase Price, the Buyer Termination Fee, and $125,000), and (y) in
the assumption of liabilities equal to or greater than those to be undertaken
by the Buyer under the Assigned Agreements (the “Minimum Overbid”).  The Seller shall promptly provide the Buyer
and any other Qualified Bidder with copies of all Qualified Bids.  In order to be a Qualified Bid, such offer
must be accompanied by a cash deposit equal to or greater than 5% of the cash
consideration set forth in such bid (such deposited amount, the “Bid Deposit”)
in immediately available funds as “earnest money” which shall be deposited in
an escrow account under an escrow agreement with an escrow agent, on terms and
conditions substantially similar to the terms contained in this Agreement.  If such Qualified Bidder’s bid is not
approved as the Successful Bid at the Sale Hearing, the Bid Deposit plus
accrued interest will be returned to such Qualified Bidder;

 

(vii)         If the Seller receives at least one (1) Qualified
Bid prior to the Qualified Bid Deadline, then the Seller shall notify the Buyer
and any Qualified Bidder who has submitted a Qualified Bid prior to the
Qualified 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, TN
as may be specified, subject to such reasonable rules and
regulations 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 bids
that may be submitted by the Buyer or a Qualified Bidder.  Only the Buyer and Qualified Bidders that
have submitted Qualified Bids prior to the Qualified Bid Deadline may
participate at the auction.  Copies of
all Qualified Bids shall be provided to Buyer and any other Qualified Bidder at
least two (2) Business Days before the auction.  The Seller at the commencement of the auction
shall identify the bid that they have deemed the highest and best offer. The
Seller shall permit the Buyer and Qualified Bidders to submit subsequent bids,
provided that each subsequent bid must exceed the amount of the preceding bid
by not less than $125,000.  In
determining the amount of any subsequent bid by the Buyer, credit in the amount
of the Buyer Termination Fee shall be given. The Seller, subject to oversight
and approval by the Bankruptcy Court, shall supervise the bidding process and
conduct the bidding in such a manner to provide the Buyer and Qualified Bidders
fair and equal opportunity to participate in the auction. When the Seller has
reasonably determined that the bidding process is concluded, then the Seller
shall determine which bid (that is in compliance with the requirements of
clause (vi)) is to be recommended to the Bankruptcy Court for approval.

 

18

 

The
Bankruptcy Court shall at the Sale Hearing authorize the Seller to complete a
sale to the highest and best bid (the “Successful Bid”); and

 

(viii)        If the Seller does not
receive at least one (1) Qualified Bid prior to the Qualified Bid
Deadline, then no auction shall be scheduled or conducted, and the Bankruptcy
Court at the Sale Hearing shall proceed solely to consider approval of this
Agreement and the transactions contemplated herein and will not consider any
competing or alternative offers or proposals to purchase assets from the
Seller, nor shall the Bankruptcy Court consider any objections to the Sale
Motion that are based on the existence or potential for other or different
offers or proposals to purchase the Seller’s assets.

 

(d)           Sale Order.  The Seller shall request a Sale Hearing, such
hearing to be regularly noticed under applicable rules of procedure, to be
held as soon as thirty (30), but no later than ninety (90) days, after the
Petition Date, and shall on the Petition Date serve a notice of the Sales
Motion, the proposed form of the Sale Order and the date of the Sale Hearing by
first-class mail, postage prepaid, upon: all Persons known to have expressed an
interest in a transaction with respect to the Purchased Assets or a portion
thereof during the past six (6) months; all entities known to have
asserted any Encumbrance or interest in or upon the Assets or Assigned
Agreements; all non-Seller parties to the Assigned Agreements; the United
States Trustee; and the twenty (20) largest unsecured creditors identified by
Seller in its chapter 11 petition. The Seller shall use all reasonable efforts
to cause the Bankruptcy Court to enter the Sale Order as promptly as
practicable, but in no event later than three (3) Business Days after the
commencement of the Sale Hearing.

 

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

 

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

 

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

 

(C)           Notice of the Sale Motion
was appropriate and adequate in the circumstances and complied in all respects
with the requirements of the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure, the Local Bankruptcy Rules for the Bankruptcy Court
and the Bid Procedures Order, and is approved. 
No further notice of, or hearing on the Sale Motion is required.  Adequate notice of and an opportunity to be
heard with respect to the Sale Motion has been given to all parties in
interest, including all Persons claiming any interest in or Lien on the 

 

19

 

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

 

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

 

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

 

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

 

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

 

(H)          The Bankruptcy Court shall
retain jurisdiction to implement and enforce the terms of this Agreement and
the Sale Order, including the terms on which the Assigned Agreements are
assumed and assigned.  The Buyer has
furnished adequate assurance of future performance.

 

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

 

20

 

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

 

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

 

7.4           Payment of Termination Fee.

 

(a)           Subject
to approval of the Bankruptcy Court, if a Qualified Bid submitted in accordance
with the Bid Procedures Order is approved by Order of the Bankruptcy Court and
Buyer is not in breach under this Agreement, the Buyer shall be paid a
termination fee of Two Hundred Twenty-five Thousand Dollars ($225,000) (the “Buyer
Termination Fee”).  Similarly, Buyer
shall pay Seller a termination fee equal to the amount of the Deposit (the “Seller
Termination Fee”) in the event Seller has satisfied its conditions to
closing under the Agreement (or is prevented from doing so by Buyer’s actions)
and Buyer fails to close the transactions contemplated by this Agreement.  Payment of the Seller Termination Fee to
Seller by Buyer shall constitute liquidated and agreed damages in respect of
this Agreement and the transactions contemplated by this Agreement, and Buyer
shall have no further liability to Seller. 
Seller believes that it is impossible to determine accurately the amount
of all damages that Seller would incur by virtue of a breach by Buyer of its
obligations to proceed with the transactions contemplated by this Agreement,
and its sole and exclusive remedy for any such breach shall be to receive
payment of the Seller Termination Fee. 
Buyer’s obligation to pay the Seller Termination Fee to Seller shall be
discharged upon the release to Seller from the escrow described in Section 2.8
of the full amount of the Deposit.  If
this Agreement is terminated for any reason that does not result in the payment
of the Seller Termination Fee, the Deposit shall be released from escrow and
refunded to Buyer not later than five (5) business days following such
termination.

 

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

 

21

 

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

 

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

 

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

 

ARTICLE 8

 

TERMINATION RIGHTS;
CLOSING DELIVERIES

 

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

 

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

 

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

 

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

 

(d)           by Buyer, if (i) the Closing shall not have occurred on or prior
to the Termination Date, unless such failure to consummate
the transactions herein is the result of a material breach of any
representation, warranty, covenant or other agreement contained in the Sale
Documents by the Buyer, or (ii) upon
written notice to Seller at any time prior to the Closing, and following
written notice thereof and a cure period of five (5) business days
thereafter, if Seller shall have breached any representation, warranty or
covenant contained in this Agreement in any material respect (provided,
however, that (1) for purposes of this Section 8.1(d), any 

 

22

 

representations
and warranties of the Seller contained in Article 3 of this
Agreement are qualified in their entirety by those qualifications set forth in
clauses (i) through (iv) of the introductory paragraph to such Article 3, and (2) any covenants of the Seller contained in this Agreement
are qualified in their entirety by those qualifications set forth in clauses (i) through
(iii) of the introductory paragraph to Article 5);

 

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

 

(f)            by either party, upon written notice to the other, if (i) the Bid
Procedures 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 not
have been entered by the Bankruptcy Court on or prior to 5 p.m. Central
Time on January 31, 2007.

 

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

 

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

 

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

 

ARTICLE 9

 

OTHER AGREEMENTS

 

9.1           Cooperation.  Buyer and Seller will, at any time, and from
time to time, after the execution of this Agreement, execute and deliver such
further instruments of conveyance and transfer and take such additional action
as may be reasonably necessary to effect, consummate, confirm or evidence the
transactions contemplated by this Agreement and the other Sale Documents
(including the exercise of good faith in the Bankruptcy Case and related
proceedings).

 

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

 

23

 

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

 

ARTICLE 10

 

DEFINITIONS

 

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

 

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

 

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

 

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

 

“Governmental Unit”
means the United States of America; any state; commonwealth; district;
territory; municipality or foreign state; and any department, agency or 

 

24

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 “Taxes” 
means (whether or not disputed) taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including, without
limitation, income taxes, gross receipts, ad valorem, value added, excise, real
property, personal property, occupancy, asset, sales, use, license, payroll,
transaction, capital, capital stock, net worth, estimated, withholding,
employment, social security, unemployment, unemployment compensation, workers’
compensation, disability, utility, severance, production, environmental,
energy, business, occupation, mercantile, franchise, premium, profits, windfall
profits, documentary, stamp, registration, transfer and gains taxes, toll
charges (for example, toll charges under Sections 367 and 1492 of the
Bankruptcy Code), or other taxes of any kind whatsoever, imposed by or payable
to the United States, or any state, country, local or foreign government or
subdivision, instrumentality, authority or agency thereof or under any treaty,
convention or compact between or among any of them, and in each instance such
term shall include any interest (including interest on deferred tax liability
under Section 453A(c) of the Bankruptcy Code and “look-back” interest
under Section 460 of the Bankruptcy Code and similar amounts of interest
imposed by the 

 

25

 

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

 

ARTICLE 11

 

MISCELLANEOUS

 

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

 

(a)           If
to Seller:

 

Barnhill’s Buffet, Inc.

1210 Briarville Road

Madison, TN 37115

Attn:  W.
Craig Barber, President

Facsimile: 
(615) 277-1220

 

With a copy to Seller’s counsel:

 

The
Hancock Law Firm

102
Woodmont Boulevard, Suite 200

Nashville,
TN 37205

Attn:  Caldwell Hancock, Esq.

Facsimile:
(615) 345-0203

 

(b)           If
to Buyer:

 

Star Buffet Management, Inc.

 

26

 

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

 

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

 

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

 

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

 

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

 

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

 

27

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

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

 

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

 

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

 

29

 

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

 

 

	
   

  	
  BARNHILL’S BUFFET, INC.

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ W. CRAIG BARBER

  	 

	
   

  	
  Name:

  	
  W. CRAIG BARBER

  	 

	
   

  	
  Its:

  	
  PRESIDENT

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  STAR BUFFET MANAGEMENT, INC.

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Robert E. Wheaton

  	 

	
   

  	
  Name:

  	
  Robert E. Wheaton

  
	
   

  	
  Its:

  	
  PRESIDENT

  	 

						

 

30

 

SCHEDULES
TO ASSET PURCHASE AGREEMENT

 

The following schedules
(each a “Schedule” and together the “Schedules”) to the Asset
Purchase Agreement (the “Agreement”), dated as of the 2nd day
of December, 2007, by and among Star Buffet Management, Inc., a Delaware
corporation (the “Buyer”), and Barnhill’s Buffet, Inc., a Tennessee
corporation (the “Seller”), are incorporated by reference in and made a
part of the Agreement.  Capitalized terms
used but not defined in the Schedules have the meanings ascribed thereto in the
Agreement.

 

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

 

31

 

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

 

32

 

EXHIBIT B

 

Tangible Personal Property

 

 

EXHIBIT C

 

Personal Property Leases; Executory
Contract; Additional Contracts

 

 

FIRST
AMENDMENT TO ASSET PURCHASE AGREEMENT

 

This
First Amendment to the ASSET PURCHASE 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 Star Buffet, Inc., a Delaware corporation, (together with
any successor and assigns, the “Buyer”).

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing.  The “Closing” of the transactions
contemplated herein, including payment of the Purchase Price, shall take place
at the offices of the Company or such other location in Nashville, TN as may be
agreed upon, no later February 5, 2008 (the “Target Date”) (or such
earlier date as Buyer and Seller may mutually agree, the “Closing Date”);
provided, that no stay of the Sale Order shall be in effect and provided,
further, that the Sale Order shall contain a waiver of the automatic ten (10) day
stay under Rule 6004(h) of the Federal Rules of Bankruptcy
Procedure; provided, further, however,
that in no event unless otherwise agreed in writing shall the Closing take
place on a date which is after February 12, 2008 (the “Termination Date”).  At the Closing, Buyer shall
pay the Purchase Price to Seller by wire transfer of immediately available
funds to one or more bank accounts of Seller, or as directed by Seller in
accordance with the terms of the Sale Order approved by the Bankruptcy Court.”

 

 

3.             Exhibit A
attached to the Agreement is hereby modified to exclude the following
Restaurant Locations:

 

  3. Apopka, FL

  6. Ocala, FL

12. Columbus,
MS

13. Gulfport,
MS

16. Moss
Point, MS

 

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

 

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

 

 

IN WITNESS
WHEREOF, the parties have executed this Agreement as of 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: SecretaryExhibit 10.1

 

EMPLOYMENT
AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(the “Agreement”) is entered into as of April 21, 2007, but shall be
effective, nunc pro tunc, as of April 21,
2008, by and between INLAND REAL ESTATE CORPORATION, a Maryland corporation
(the “Company”), and Mark Zalatoris (the “Executive”).

 

RECITALS:

 

A.            The Company is a real estate
investment trust which owns, operates and acquires neighborhood retail centers
and community centers within an approximate 400 mile radius of its headquarters
in Oak Brook, Illinois (the “Business”).

 

B.            Executive has served as the
Company’s Chief Operating Officer and has demonstrated certain unique and
particular talents and abilities with regard to the Business.

 

C.            The Company desires to
promote Executive to the position of Chief Executive Officer and President, by
entering into a new employment agreement to become effective as of April 21,
2008, which shall supercede the previous Employment Agreement dated April 17,
2007;

 

D.            Executive desires to
continue to be employed by the Company, subject to the terms, conditions and
covenants hereinafter set forth.

 

E.             As a condition for the
Company to enter into this Agreement, Executive has agreed to restrict his
ability to enter into competition with the Company.

 

NOW, THEREFORE, in
consideration of the foregoing and the agreements, covenants and conditions set
forth herein, Executive and the Company hereby agree as follows:

 

ARTICLE I

EMPLOYMENT

 

1.1           Employment.

 

(a)           The Company hereby employs
and engages Executive, and Executive hereby accepts employment, upon the terms
and conditions set forth in this Agreement. 
Effective as of April 21, 2008 (the “Effective Date”), Executive
shall serve as Chief Executive Officer and President, with duties commensurate
with such positions and such other duties and responsibilities as assigned from
time to time by the Company.

 

(b)           In addition, Executive shall provide advice,
consultation and services to any other entities which control, are controlled
by or are under common control with the Company now or in the future
(collectively, “Affiliates”), as may be requested by the Company.

 

 

1.2           Activities and Duties During Employment. 
Executive represents and warrants to the Company that she is free to
engage in full-time employment with the Company, and that she has no prior or
other commitments or obligations of any kind to anyone else which would hinder
or interfere with her acceptance of her obligations under this Agreement, or
the exercise of her reasonable commercial efforts as an employee of the
Company.  During the Employment Term (as
defined below), Executive agrees:

 

(a)           to faithfully serve and
further the interests of the Company in every lawful way, giving honest,
diligent, loyal and cooperative service to the Company and its Affiliates;

 

(b)           to comply with all
reasonable rules and policies which are consistent with the terms of this
Agreement and which, from time to time, may be adopted by the Company or its
Affiliates; and

 

(c)           to devote all of her
business time, attention and efforts to the faithful and diligent performance
of her services to the Company and its Affiliates.

 

ARTICLE II

TERM

 

2.1           Term.  The term of employment under this Agreement
shall commence on the Effective Date and shall last through and including December 31,
2009 (the “Employment Term”) except as this Agreement may be terminated as
provided in Section 2.2.

 

2.2           Termination.  The Employment Term and employment of
Executive may be terminated as follows:

 

(a)           By the Company immediately
for Cause (as hereinafter defined).

 

(b)           By the Company immediately
without Cause.

 

(c)           Automatically, without the
action of either party, upon the death of Executive.

 

(d)           By either party upon a
determination of Total Disability (as hereinafter defined) of Executive.

 

(e)           Voluntarily by Executive.

 

(f)            By Executive, immediately
for Good Reason (as hereinafter defined).

 

(g)           On expiration of the
Employment Term if not extended by the mutual consent of the Company and
Executive.

 

2

 

2.3           Definitions of “Cause,” “Total
Disability,” Good Reason” and “Change of Control.”

 

(a)           For the purpose of this
Agreement, “Cause”  shall
mean:  (i) conduct amounting to
fraud, embezzlement, disloyalty or illegal misconduct in connection with
Executive’s duties under this Agreement and as an employee of the Company; (ii) conduct
that the Company reasonably believes has brought the Company into substantial
public disgrace or disrepute; (iii) failure to perform her duties
hereunder as reasonably directed by the Company after providing written notice
of the failure to Executive and Executive has failed to cure within ten (10) days
of receiving notice; (iv) gross negligence or willful misconduct by the
Executive with respect to the Company, its clients, its employees and its
activities; or (v) material breach by the Executive of this Agreement or
any other agreement to which Executive and the Company are a party or any
material breach by the Executive of any written policy adopted by the Company
concerning conflicts of interest, standards of business conduct or fair
employment practices and any other similar matter, provided that the Company
has provided written notice of the breach to Executive and Executive has failed
to cure the breach within ten (10) days of receiving notice.

 

(b)           For purposes of this
Agreement, Executive shall be determined to have a “Total Disability” upon the
determination of a physician, acceptable to the Company and Executive that
Executive is unable, by reason of accident or illness, to substantially perform
his duties or is expected to be in the condition for periods totaling six (6) months
(whether or not consecutive) during any period of twelve (12) months.  Nothing herein shall limit Executive’s right
to receive any payments to which Executive may be entitled under any disability
or employee benefit plan of the Company or under any disability or insurance
policy or plan.  During a period of Total
Disability prior to termination hereunder, Executive shall continue to receive
his full compensation (including base salary) and benefits.

 

(c)           “Good Reason” will mean any
of the following events which have not been cured within ten (10) days
following the Company’s receipt of Executive’s written notice specifying the
events or factors constituting Good Reason:

 

(i)            the Company requires Executive to relocate his
principal residence to a location outside the Greater Chicago Metropolitan Area
in order to perform his duties and responsibilities hereunder;

 

(ii)           the Executive’s base salary or other compensation
and benefits is reduced to less than the amount of the Base Salary and other
compensation and benefits as set forth in Section 3.1 below;

 

(iii)          a material breach by the Company of the provisions
of this Agreement; or

 

(iv)          following a Change of Control, the assignment to
Executive of duties which constitute a material reduction in Executive’s title
or authority and 

 

3

 

which are materially inconsistent with
Executive’s position as contemplated by this Agreement.

 

(d)           “Change of Control” shall
mean any of the following events:

 

(i)            the members of the Company’s board of directors as
of the date of this Agreement fail to constitute a majority of the members of
the board; provided, however, that any individual becoming a
member of the board who is nominated or appointed to the board seat on the
recommendation and approval of the Company’s Nominating and Corporate
Governance Committee shall be treated as if he or she were a member of the
board as of the date of this Agreement;

 

(ii)           the disposition by the Company of all, or
substantially all, of the assets of the Company; or

 

(iii)          the termination and liquidation of the Company.

 

ARTICLE III

COMPENSATION AND BENEFITS

 

3.1           Compensation.

 

(a)           Base Salary.  During the Employment Term, the Company shall
pay Executive a base salary (the “Base Salary”) of $450,000 per annum.

 

(b)           Annual Incentive Bonus.  The Company shall, in addition to Executive’s
Base Salary, pay Executive an Annual Incentive Bonus, which shall be payable
within 120 days of the end of each fiscal year in accordance with the formula
set forth on Exhibit A, attached hereto and made a part hereof.

 

(c)           Annual Long Term Share Award.  No later than June 30 of each fiscal
year during the Employment Term, the Company shall grant Executive an Annual
Long Term Share Award consisting of shares of the common stock of the Company
(“Long Term Shares”), subject to the conditions set forth below and in
accordance with the schedule set forth on Exhibit B, attached
hereto and made a part hereof.  Twenty
percent (20%) of any Long Term Shares granted hereunder shall vest on each
successive yearly anniversary of the grant of the Long Term Shares.

 

(i)            All Long Term Shares shall be issued under, and in
accordance with, the Company’s 2005 Equity Award Plan (the “2005 Equity Award
Plan”); to the extent the terms of any Long Term Shares granted pursuant to
this Agreement conflict with the terms of the 2005 Equity Award Plan, the terms
of the 2005 Equity Award Plan shall apply to the minimum extent necessary to
eliminate the conflict.  Executive shall
be the record owner of any Long Term Shares granted hereunder; provided
that any Long Term Shares that have not yet vested shall be forfeited and
redeemed by the Company, without any further action on the part of the Company
or the Executive, if Executive is no longer 

 

4

 

employed by the Company for any reason, other than in connection with a
termination as described in Sections 2.2(b), (c) or (d).  Executive may not sell, transfer,
hypothecate, pledge or assign any Long Term Shares which have not vested.

 

(ii)           Upon the occurrence of any forfeiture of Long Term
Shares, Executive shall immediately take all actions necessary to permit the
Company to redeem any forfeited Long Term Shares.

 

(iii)          Unless forfeited, Executive may exercise all rights
of a stockholder, including the right to vote and receive dividends with
respect to any Long Term Shares granted Executive.

 

(iv)          All Long Term Shares which may be issuable hereunder
shall be issued in reliance upon the following representations, warranties and
agreements of Executive, each of which shall be true and correct as of the date
of issuance and each of which shall survive the termination of this Agreement.

 

(A)          Executive acknowledges that the common stock
underlying any Long Term Shares has been registered under the Securities Act of
1933, as amended (the “Securities Act”), pursuant to an effective registration
statement on Form S-8 (file no. 333-128624);

 

(B)           Executive acknowledges that once the common stock
underlying any Long Term Shares has been issued to Executive, the common stock
may not be subsequently transferred or sold by Executive except in compliance
with the registration requirements of federal and state securities law or
exemptions therefrom;

 

(C)           Executive acknowledges that an investment in the
Company’s common stock is subject to significant risk, including the risks
described, from time to time, in the Company’s annual reports on Form 10-K.  Executive represents and warrants that she
has such knowledge and expertise in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Company’s
common stock and the ability to bear the economic risk of the investment; and

 

(D)          Executive represents and warrants that he has had
the opportunity to ask questions of the Company concerning its business and to
obtain any information which he considers necessary to verify the accuracy of
or to amplify upon the Company’s disclosures and that all questions which have
been asked have been answered by the Company to Executive’s satisfaction.

 

(d)           Annual Stock Option Award.  No later than June 30 of each fiscal
year during the Employment Term, the Company shall grant Executive an Annual
Stock Option Award to purchase shares of the common stock of the Company
(“Annual Stock Options”), subject to the conditions set forth below and in
accordance with the schedule 

 

5

 

set forth on Exhibit C, attached
hereto and made a part hereof.  Twenty
percent (20%) of any Annual Stock Options granted hereunder shall vest on each
successive yearly anniversary of the grant of the Annual Stock Options.

 

(i)            All Annual Stock Options shall be issued under, and
in accordance with, the 2005 Equity Award Plan; to the extent the terms of any
Annual Stock Options awarded pursuant to this Agreement conflict with the terms
of the 2005 Equity Award Plan, the terms of the 2005 Equity Award Plan shall
apply to the minimum extent necessary to eliminate the conflict.  Any Annual Stock Options that have not yet
vested shall be forfeited and redeemed by the Company, without any further
action on the part of the Company or the Executive, if Executive is no longer
employed by the Company for any reason, other than in connection with a
termination as described in Sections 2.2(b), (c) or (d).  Executive may not sell, transfer,
hypothecate, pledge or assign any Annual Stock Options which have not vested.

 

(ii)           Upon the occurrence of any forfeiture of Annual
Stock Options, Executive shall immediately take all actions necessary to permit
the Company to redeem any forfeited Annual Stock Options.

 

(iii)          All Annual Stock Options which may be issuable
hereunder shall be issued in reliance upon the following representations,
warranties and agreements of Executive, each of which shall be true and correct
as of the date of issuance and each of which shall survive the termination of
this Agreement.

 

(A)          Executive acknowledges that the common stock
underlying any Annual Stock Options has been registered under the Securities
Act pursuant to an effective registration statement on Form S-8 (file no.
333-128624);

 

(B)           Executive acknowledges that once the common stock
underlying any Annual Stock Options has been issued to Executive, the common
stock may not be subsequently transferred or sold by Executive except in
compliance with the registration requirements of federal and state securities
law or exemptions therefrom;

 

(C)           Executive acknowledges that an investment in the
Company’s common stock is subject to significant risk, including the risks
described, from time to time, in the Company’s annual reports on Form 10-K.  Executive represents and warrants that she
has such knowledge and expertise in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Company’s
common stock and the ability to bear the economic risk of the investment; and

 

(D)          Executive represents and warrants that he has had
the opportunity to ask questions of the Company concerning its business and to
obtain any information which she considers necessary to verify the 

 

6

 

accuracy of or to amplify upon the Company’s disclosures and that all
questions which have been asked have been answered by the Company to
Executive’s satisfaction.

 

3.2           Payment.  All Base Salary due Executive hereunder shall
be paid in accordance with the general payroll payment practice of the  Company for executive level employees;
except that any payment relating to the termination of Executive shall be paid
as a lump sum payment within fifteen (15) days of termination.

 

3.3           Business Expenses.

 

(a)           Reimbursement.  The Company shall reimburse Executive for all
ordinary and necessary business expenses incurred by her in connection with the
performance of her duties hereunder.  The
reimbursement of business expenses will be governed by the policies for the
Company as they are in effect from time to time during the term of this
Agreement.

 

(b)           Accounting.  Executive shall provide the Company with an
accounting of any expenses, for which reimbursement is sought including a
description of the purpose for which each expense was incurred.  Executive shall provide the Company with such
other supporting documentation and other substantiation of reimbursable
expenses as may be required by Company to conform to Internal Revenue Service
or other requirements.  All such reimbursements
shall be payable by the Company to Executive within a reasonable time after
receipt by the Company of appropriate documentation required by the Company.

 

3.4           Other Benefits. The Company
shall provide Executive with such retirement benefits and group health and
other insurance coverage at such levels and on such terms as the Company
generally provides to its executive level employees in accordance with its
Company-sponsored benefit plans as they are in effect from time to time during
the term of the Agreement.

 

3.5           Compensation Upon
Termination.  If
Executive’s employment hereunder and this Agreement is terminated in accordance
with the provisions of Article II, the Company will be obligated to
provide to Executive compensation and benefits, in lieu of any severance under
any severance plan that the Company may then have in effect, and subject to
setoff for any amounts owed by Executive to the Company or any affiliate of the
Company by reason of any contract, agreement, promissory note,  advance, failure to return Company
property or loan document, as follows:

 

(a)           Upon Termination for Death
or Total Disability.  If
Executive’s employment hereunder and this Agreement is terminated by reason of
her death or Total Disability, under Sections 2.2(c) or (d), then
within thirty (30) days of the date of termination the Company will pay
Executive (or his estate or beneficiaries):

 

(i)            any Base Salary that has been accrued but not paid
as of the date of termination (the “Accrued Base Salary”);

 

7

 

(ii)           any compensation for unused vacation days accrued as
of the termination date in an amount equal to Executive’s Base Salary
multiplied by a fraction, the numerator of which is the number of accrued
unused vacation days and the denominator of which is 360 (the “Accrued Vacation
Payment”);

 

(iii)          any expenses incurred by Executive prior to the date
of termination that may be reimbursed pursuant to this Agreement (the “Accrued
Reimbursable Expenses”);

 

(iv)          any accrued and vested benefits required to be
provided upon death or Total Disability by the terms of any Company-sponsored
benefit plans or programs exclusive of any Long Term Shares or Annual Stock
Options (the “Accrued Benefits”), together with any benefits required to be
paid or provided in the event of Executive’s death or Total Disability under
applicable law; and

 

(v)           an amount equal to either the prorated portion of
the Annual Incentive Bonus that Executive received for the last fiscal year
completed prior to termination equal to the relevant Annual Incentive Bonus
multiplied by a fraction, the numerator of which is the number of days in the
year prior to the date of death or Total Disability and the denominator of
which is 360, or if the termination occurs in the first year of the Employment
Term, then the prorated portion of the Annual Incentive Bonus as if the target
bonus was received for that year (the “Accrued Bonus”) calculated in the same
fashion.

 

In addition, if Executive’s
employment and this Agreement is terminated under Sections 2.2(c) or
(d), any Long Term Shares or Annual Stock Options issued to Executive under
this Agreement which have not yet vested shall immediately vest and shall no
longer be subject to forfeiture.

 

(b)           Upon Termination by Company
for Cause or Voluntarily by Executive.  If Executive’s employment hereunder and this
Agreement is terminated under Sections 2.2(a) or (e), within
fifteen (15) days of the date of such termination, the Company will pay
Executive:

 

(i)            any Accrued Base Salary;

 

(ii)           any Accrued Vacation Payment;

 

(iii)          any Accrued Reimbursable Expenses; and

 

(iv)          any Accrued Benefits, together with any benefits
required to be paid or provided under applicable law.

 

In addition, if Executive’s
employment and this Agreement is terminated under Sections 2.2(a) or
(e), any Long Term Shares or Stock Option Awards issued to Executive which
have not yet vested shall immediately be forfeited by Executive.

 

8

 

(c)           Upon Termination by the
Company Without Cause or by Executive for Good Reason.  If Executive’s employment hereunder and this
Agreement is terminated under Sections 2.2(b) or (f), the Company
will pay Executive:

 

(i)            any  Accrued
Base Salary;

 

(ii)           any Accrued Vacation Payment;

 

(iii)          any Accrued Reimbursable Expenses;

 

(iv)          any Accrued Benefits, together with any benefits
required to be paid or provided under applicable law;

 

(v)           any Accrued Bonus; and

 

(vi)          an amount equal to 1.25 times the sum of: (A) Executive’s
then current per annum base salary; plus (B) an amount equal to the Annual
Incentive Bonus which was paid to Executive for the fiscal year immediately
preceding the year of termination; provided, however, that the
payment to Executive pursuant to this Section 3.5(c)(vi) shall
in no event exceed an amount which would cause Executive to receive an “excess
parachute payment” as defined in the Internal Revenue Code of 1986, as amended
(the “Code”); provided, however that if the termination occurs
within one year of a Change of Control, then in addition to the amounts
described in clauses (i) through (v) above, the Company will
pay Executive an amount equal to 2.99 times the sum of: (A) Executive’s
then current per annum base salary; plus (B) an amount equal to the Annual
Incentive Bonus which was paid to Executive for the fiscal year immediately
preceding the year of termination; plus (C) the aggregate dollar value of
each of the Annual Long Term Share Award and Annual Stock Option Award that was
granted to Executive for the fiscal year immediately preceding the year of
termination; provided, however, that the payment to Executive
pursuant to this Section 3.5(c)(vi) shall in no event exceed
an  amount which would cause
Executive to receive an “excess parachute payment” as defined in the Code.

 

In addition, if Executive’s
employment hereunder and this Agreement is terminated under Section 2.2(b),
any Long Term Shares or Annual Stock Options issued to Executive which have not
yet vested shall immediately vest and shall no longer be subject to forfeiture
by Executive.  If Executive’s employment
hereunder is terminated under Section 2.2(f), any Long Term Shares
or Annual Stock Options issued to Executive which have not vested shall
immediately be forfeited by Executive; provided that if this Agreement
is terminated under Section 2.2(f) within one year of a Change
of Control, then any Long Term Shares or Annual Stock Options issued to
Executive under this Agreement shall immediately vest and shall no longer be
subject to forfeiture by Executive.

 

3.6           Cessation of Rights and
Obligations: Survival of Certain Provisions.  On the date of expiration or earlier
termination of the Employment Term for any reason, all of the respective
rights, duties, obligations and covenants of the parties, as set forth herein,
shall, except as 

 

9

 

specifically provided herein to the contrary,
cease and become of no further force or effect as of the date of termination,
and shall only survive as expressly provided for herein.

 

ARTICLE IV

CONFIDENTIALITY AND NON-COMPETE AGREEMENT

 

4.1           Non-Disclosure of
Confidential Information. 
Executive hereby acknowledges and agrees that the duties and services to
be performed by Executive under this Agreement are special and unique and that
as a result of her employment by the Company hereunder Executive has developed
over time and will acquire, develop and use information of a special and unique
nature and value that is not generally known to the public or to the Company’s
industry, including but not limited to, certain records, secrets,
documentation, software programs, price lists, ledgers and general information,
employee records, mailing lists, shareholder lists, tenant lists and profiles,
prospective customer, acquisition candidate or tenant lists, accounts
receivable and payable ledgers, financial and other records of the Company or
its Affiliates, information regarding its shareholders, tenants or joint
venture partners, and other similar matters (all such information being
hereinafter referred to as “Confidential Information”).  Executive
further acknowledges and agrees that the Confidential Information is of great
value to the Company and that the restrictions and agreements contained in this
Agreement are reasonably necessary to protect the Confidential Information and
the goodwill of the Company and the Affiliates. 
Accordingly, Executive hereby agrees that:

 

(a)           Executive will not, during
the Employment Term or at any time thereafter, directly or indirectly, except
in connection with Executive’s performance of her duties under this Agreement,
or as otherwise authorized in writing by the Company for the benefit of the
Company or any Affiliate, divulge to any person, firm, corporation, limited
liability company, partnership or organization, or any affiliated entity
(hereinafter referred to as “Third Parties”),
or use or cause or authorize any Third Parties to divulge or use,
the Confidential Information, except as required by law; and

 

(b)           Upon the termination of the Employment
Term and this Agreement for any reason whatsoever, Executive shall deliver or
cause to be delivered to the Company any and all Confidential Information,
including drawings, notebooks, keys, data and other documents and materials
belonging to the Company or its Affiliates which is in her possession or under
hers control relating to the Company or its Affiliates, regardless of the
medium upon which it is stored, and will deliver to the Company upon
termination, any other property of the Company or its Affiliates which is in
her possession or under his control.

 

4.2           Non-Solicitation and
Covenant Not to Compete.

 

(a)           General.  Executive acknowledges that the covenants set
forth in this Section 4.2 are reasonable in scope and essential to
the preservation of the business and the goodwill of the Company, and are
consideration for the amounts to be paid to Executive hereunder.  Executive also acknowledges that the
enforcement of the covenants set forth in this Section 4.2 will not
preclude Executive from being gainfully employed in such manner and to the
extent as to provide a standard of living for herself, 

 

10

 

the members of her family and the others
dependent upon her of at least the level provided by this Agreement.  In addition, Executive acknowledges that the
Company and its Affiliates have obtained an advantage over their competitors
that is characterized by relationships with clients, principals, tenants and
other contacts.

 

(b)           Covenants. 
Executive hereby covenants and agrees that, except as permitted by the
Company, during the Employment Term, and any extensions thereof, and for a
period of one (1) year following the expiration, termination or extension
of this Agreement, Executive shall not, directly or indirectly:  (i) alone, together or in association
with others, either as a principal, agent, owner, shareholder, officer,
director, partner, employee, lender, investor or in any other capacity, engage
in, have any financial interest in or be in any way connected or affiliated
with, or render advice or services to, any business engaged in purchasing,
selling, financing, managing, leasing, brokering or providing services for
retail shopping centers or any new business or lines of business which the
Company may enter prior which business or businesses are conducted in the
greater metropolitan area of Chicago, Illinois, other than as an employee of
The Inland Group, Inc. (“TIGI”) or an affiliate of TIGI or otherwise on
behalf of the Company as an employee thereof or such other business as may be
permitted by the Company in writing; (ii) directly or indirectly divert,
take away, solicit or interfere with or attempt to divert, take away, solicit
or interfere with any present or prospective customer, except on behalf of the
Company as an employee thereof; (iii) directly or indirectly solicit,
induce, influence or attempt to solicit, induce or influence any employee or
agent of the Company to leave his employment or engagement with the Company, or
offer employment or engagement to or employ or engage any such employee of the
Company, or assist or attempt to assist any such employee of the Company in
seeking other employment; (iv) in any manner slander, libel or by other
means take action which is or intended, or could reasonably be expected, to be
detrimental to the Company or an Affiliate or their respective employees or
operations; (v) knowingly make or participate in any “solicitation” of
“proxies” or “consents” (as such terms are used in the proxy rules of the
United States Securities and Exchange Commission) or make proposals for
approval of the Company’s stockholders; (vi) knowingly form, join or
participate in a “group” (within the meaning of Section 13(d)(3) of
the Exchange Act) with respect to the Company’s securities; (vii) otherwise
knowingly act to control or seek to control the management, board of directors
or policies of the Company (except with respect to actions taken solely in
Executive’s capacity as an officer of the Company in the exercise of his
fiduciary duties; or (viii) make any agreement to do any of the foregoing
to the extent restricted thereby.  As
used in this Section 4.2, the term “Company” shall mean the Company
or any Affiliate thereof.  As used in
this Section 4.2(b), “customer” and “prospective customer” shall
include: (i) any tenant of the Company’s properties or any other person or
entity with whom the Company is negotiating for the leasing of real property
from the Company or an Affiliate at the time of the termination of this
Agreement or during the six month period immediately prior to such termination;
(ii) any owner or prospective owner of real property the purchase or sale
of which is being negotiated by the Company at the time of the termination of
this Agreement or during the six month period immediately prior to such
termination; or (iii) any joint venture partner of the Company.  The restrictions imposed by this subparagraph
4.2(b) shall not apply to the ownership of one percent (1%) or less of
all of the outstanding securities of any entity 

 

11

 

whose securities are listed on a national
securities exchange, or included for quotation on any interdealer quotation
system.

 

4.3           Remedies.

 

(a)           Injunctive Relief. 
Executive expressly acknowledges and agrees that the business of the
Company is highly competitive and that a violation of any of the provisions of Sections
4.1 or 4.2 would cause immediate and irreparable harm, loss and damage to
the Company or an Affiliate not adequately compensable by a monetary
award.  Executive further acknowledges
and agrees that the time periods and territorial areas provided for herein are
the minimum necessary to adequately protect the business of the Company, the
enjoyment of the Confidential Information and the goodwill of the Company.  Without limiting any of the other remedies
available to the Company at law or in equity, or the Company’s right or ability
to collect money damages, Executive agrees that any actual or threatened
violation of any of the provisions of Sections 4.1 or 4.2 may be
immediately restrained or enjoined by any court of competent jurisdiction, and
that a temporary restraining order or emergency, preliminary or final
injunction may be issued in any court of competent jurisdiction, upon
twenty-four (24) hour notice and without bond.

 

(b)           Enforcement. 
Executive expressly acknowledges and agrees that the provisions of Sections
4.1 or 4.2 shall enforced to the fullest extent permissible under the laws
and public policies in each jurisdiction in which enforcement might be
sought.  Accordingly, if any particular
portion of Sections 4.1 or 4.2 shall ever be adjudicated as invalid or unenforceable,
or if the application thereof to any party or circumstance shall be adjudicated
to be prohibited by or invalidated by such laws or public policies, such
section or sections shall be: (i) deemed amended to delete therefrom such
portions so adjudicated; or (ii) modified as determined appropriate by
such a court, such deletions or modifications to apply only with respect to the
operation of such section or sections in the particular jurisdictions so
adjudicating on the parties and under the circumstances as to which so
adjudicated.

 

ARTICLE V

MISCELLANEOUS

 

5.1           Notices.  All
notices or other communications required or permitted hereunder shall be in
writing and shall be deemed given or delivered: (i) when delivered
personally or by commercial messenger; (ii) one (1) business day
following deposit with a recognized overnight courier service; provided
such deposit occurs prior to the deadline imposed by such service for overnight
delivery; (iii) when transmitted, if sent by facsimile copy, provided confirmation
of receipt is received by sender and such notice is sent by an additional
method provided hereunder, in each case above provided such communication is
addressed to the intended recipient thereof as set forth below:

 

12

 

To Executive at his home
address.

 

	
  To
  the Company at:

  	
   

  	
  Inland
  Real Estate Corporation

  2901 Butterfield Road

  Oak Brook, Illinois 60523

  Attn Thomas P. D’Arcy, Chairman

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  Shefsky
  & Froelich Ltd.

  111 East Wacker Drive, Suite 2800

  Chicago, Illinois 60601

  Attn: Michael J. Choate

  Telephone: (312) 836-4066

  Facsimile: (312) 527-5921

  

 

Any party may change its
address for purposes of this paragraph by giving the other party written notice
of the new address in the manner set forth above.

 

5.2           Entire Agreement; Amendments, Etc.  This Agreement contains the entire agreement
and understanding of the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter thereof.  No modification, amendment, waiver or
alteration of this Agreement or any provision or term hereof shall in any event
be effective unless the same shall be in writing, executed by both parties
hereto, and any waiver so given shall be effective only in the specific instance
and for the specific purpose for which given.

 

5.3           Benefit. 
This Agreement shall be binding upon, and inure to the benefit of, and
shall be enforceable by, the heirs, successors and legal representatives of
Executive and the successors, assignees and transferees of the Company and its
current or future Affiliates.  This
Agreement or any right or interest hereunder may not be assigned by Executive.

 

5.4           No Waiver. 
No failure or delay on the part of any party hereto in exercising any
right, power or remedy hereunder or pursuant hereto shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder or pursuant thereto.

 

5.5           Severability. 
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law but, if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. 
If any part of any covenant or other provision in this Agreement is
determined by a court of law to be overly broad thereby making the covenant
unenforceable, the parties hereto agree, and it is their desire, that the court
shall substitute a judicially enforceable limitation in its place, and that as
so modified the covenant shall be binding upon the parties as if originally set
forth herein.

 

13

 

5.6           Compliance and Headings.  The headings in this Agreement are intended
to be for convenience and reference only, and shall not define or limit the
scope, extent or intent or otherwise affect the meaning of any portion hereof.

 

5.7           Governing Law. 
The parties agree that this Agreement shall be governed by, interpreted
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law provisions, and the parties agree that
any suit, action or proceeding with respect to this Agreement shall be brought
in the state courts in Chicago, Illinois or in the U.S. District Court for the
Northern District of Illinois.  The
parties hereto hereby accept the exclusive jurisdiction of those courts for the
purpose of any such suit, action or proceeding. 
Venue for any such action, in addition to any other venue permitted by
statute, will be in Chicago, Illinois.

 

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

 

5.9           No Presumption Against Drafter.  Each of the parties hereto has jointly
participated in the negotiation and drafting of this Agreement.  In the event an ambiguity or a question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by each of the parties hereto and no presumptions or burdens of
proof shall arise favoring any party by virtue of the authorship of any
provisions of this Agreement.

 

5.10         Enforcement. 
In the event either of the parties to this Agreement shall bring an
action against the other party with respect to the enforcement or breach of any
provision of this Agreement, the prevailing party in such action shall recover
from the non-prevailing party the costs incurred by the prevailing party with
respect to such action including court costs and reasonable attorneys’ fees.

 

5.11         Recitals.  The
Recitals set forth above are hereby incorporated in and made a part of this
Agreement by this reference.

 

[The
remainder of this page intentionally blank]

 

14

 

IN WITNESS WHEREOF,  each of the parties hereto has caused this
Agreement to be executed and delivered as of the day and year first above
written.

 

	
   

  	
  INLAND REAL ESTATE CORPORATION,

  
	
   

  	
   

  
	
   

  	
  a Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  Thomas P. D’Arcy

  
	
   

  	
   

  
	
   

  	
  Name:

  	
     Thomas P. D’Arcy

  
	
   

  	
   

  
	
   

  	
  Its:

  	
          Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
           /s/
  Mark Zalatoris

  
	
   

  	
   

  
	
   

  	
  Name:

  	
     Mark Zalatoris

  
							

 

#41980

 

 

EXHIBIT A

 

(FORMULA
FOR DETERMINING ANNUAL INCENTIVE BONUS)

 

I.                                         The Executive’s
Annual Incentive Bonus Opportunity (“AIBO”) shall be determined based on
performance of the Company, measured to either a Threshold, Target, or High
level of performance.

 

·                  The Company will have achieved a Threshold
level of performance if the Company’s annual growth in FFO per fully-diluted
share for the completed fiscal year immediately preceding the year in which the
AIBO is calculated, when compared to FFO per fully-diluted share for the next
preceding completed fiscal year, is not less than 80% of the median FFO growth
rate for the applicable year as published by NAREIT for the Retail REIT
Shopping Center subsector of the NAREIT Equity REIT Total Return Index (or, if
not then in existence, a comparable retail REIT shopping center index mutually
agreeable to the Company and Executive).

 

·                  The Company will have achieved a Target level
of performance if the Company’s annual growth in FFO per fully-diluted share
for the completed fiscal year immediately preceding the year in which the AIBO
is calculated, when compared to FFO per fully-diluted share for the next
preceding completed fiscal year, is not less than 100% of the median FFO growth
rate for the applicable year as published by NAREIT for the Retail REIT
Shopping Center subsector of the NAREIT Equity REIT Total Return Index (or, if
not then in existence, a comparable retail REIT shopping center index mutually
agreeable to the Company and Executive).

 

·                  The Company will have achieved a High level
of performance if the Company’s annual growth in FFO per fully-diluted share
for the completed fiscal year immediately preceding the year in which the AIBO
is calculated, when compared to FFO per fully-diluted share for the next
preceding completed fiscal year, is not less than 130% of the median FFO growth
rate for the applicable year as published by NAREIT for the Retail REIT
Shopping Center subsector of the NAREIT Equity REIT Total Return Index (or, if
not then in existence, a comparable retail REIT shopping center index mutually
agreeable to the Company and Executive).

 

For purposes of calculating
AIBO, “FFO” shall have the same meaning ascribed to that term in the Company’s
annual report on Form 10-K as filed with the SEC for the year in which the
bonus is to be calculated.

 

Subject to Section II.
below, if the Company achieves a Threshold level of performance, the
Executive’s AIBO will be equal to 20% of Executive’s Base Salary for the
applicable year.  If the Company achieves
a Target level of performance, the Executive’s AIBO will be equal to 30% of
Executive’s Base Salary for the applicable year.  If the Company achieves a High level

 

 

of performance, the
Executive’s AIBO will be equal to 50% of Executive’s Base Salary for the
applicable year.

 

II.                                     The Executive’s
Annual Incentive Bonus for the applicable year shall be determined by adding
two (2) components:

 

A.            The first component shall be equal to 50% of the
Executive’s AIBO.

 

B.            The second component shall be determined by the Company’s
Compensation Committee, as recommended to and approved by the full board of
directors, based on a subjective assessment of the Executive’s performance, and
may be up to but not in excess of 50% of the Executive’s AIBO.

 

III.                                 Notwithstanding
anything to the contrary in this Exhibit A, in the event that the
Company fails to achieve a Threshold level of performance in any given year,
the Executive’s Annual Incentive Bonus shall be equal to 10% of the Executive’s
Base Salary for the applicable year.  The
amount of any Annual Incentive Bonus determined pursuant to this Section III.
shall be non-discretionary on the part of the Company, and shall be paid to the
Executive in accordance with the provisions of Section 3.1(b) of
the Agreement.

 

 

EXHIBIT B

 

(FORMULA FOR DETERMINING ANNUAL AWARD OF LONG TERM SHARES)

 

I.                                         The Executive’s
Annual Award of Long Term Shares (“LTS”) shall be determined based on
performance of the Company, measured to either a Threshold, Target, or High
level of performance.

 

·                  The Company will have achieved a Threshold
level of performance if the Company’s annual growth in FFO per fully-diluted
share for the completed fiscal year immediately preceding the year in which the
grant of Long Term Shares is calculated, when compared to FFO per fully-diluted
share for the next preceding completed fiscal year, is not less than 80% of the
median FFO growth rate for the applicable year as published by NAREIT for the
Retail REIT Shopping Center subsector of the NAREIT Equity REIT Total Return
Index (or, if not then in existence, a comparable retail REIT shopping center
index mutually agreeable to the Company and Executive).

 

·                  The Company will have achieved a Target level
of performance if the Company’s annual growth in FFO per fully-diluted share
for the completed fiscal year immediately preceding the year in which the grant
of Long Term Shares is calculated, when compared to FFO per fully-diluted share
for the next preceding completed fiscal year, is not less than 100% of the
median FFO growth rate for the applicable year as published by NAREIT for the
Retail REIT Shopping Center subsector of the NAREIT Equity REIT Total Return
Index (or, if not then in existence, a comparable retail REIT shopping center
index mutually agreeable to the Company and Executive).

 

·                  The Company will have achieved a High level
of performance if the Company’s annual growth in FFO per fully-diluted share
for the completed fiscal year immediately preceding the year in which the grant
of Long Term Shares is calculated, when compared to FFO per fully-diluted share
for the next preceding completed fiscal year, is not less than 130% of the
median FFO growth rate for the applicable year as published by NAREIT for the
Retail REIT Shopping Center subsector of the NAREIT Equity REIT Total Return
Index (or, if not then in existence, a comparable retail REIT shopping center
index mutually agreeable to the Company and Executive).

 

For purposes of calculating
the LTS grant, “FFO” shall have the same meaning ascribed to that term in the
Company’s annual report on Form 10-K as filed with the SEC for the year in
which the bonus is to be calculated.

 

Subject to Section II.
below, if the Company achieves a Threshold level of performance, the
Executive’s LTS grant will be the number of shares equal to the quotient of (1) 20%
of the Executive’s Base Salary for the applicable year, divided by (2) the
average of the high and low trading price as reported by the New York Stock
Exchange on the date of grant.  If the
Company achieves a Target level of performance, the Executive’s LTS grant will
be the number of shares 

 

 

equal to the quotient of (1) 30%
of the Executive’s Base Salary for the applicable year, divided by (2) the
average of the high and low trading price as reported by the New York Stock
Exchange on the date of grant.  If the
Company achieves a High level of performance, the Executive’s LTS grant will be
the number of shares equal to the quotient of (1) 50% of the Executive’s
Base Salary for the applicable year, divided by (2) the average of the
high and low trading price as reported by the New York Stock Exchange on the
date of grant.

 

II.                                     The Executive’s
Annual Award of Long Term Shares for the applicable year shall be determined by
adding two components:

 

A.            The first component shall be equal to 50% of the
Executive’s LTS grant hereunder.

 

B.            The second component shall be determined by the Company’s
Compensation Committee, as recommended to and approved by the full board of
directors, based on a subjective assessment of the Executive’s performance, and
may be up to but not in excess of 50% of the Executive’s LTS grant.

 

III.           Notwithstanding anything to the contrary in this Exhibit B,
in the event that the Company fails to achieve a Threshold level of performance
in a given year, the Executive’s Annual Award of Long Term Shares shall be
equal to the quotient of (1) 10% of the Executive’s Base Salary for the
applicable year, divided by (2) the average of the high and low trading
price as reported by the New York Stock Exchange on the date of grant.  Any Annual Award of Long Term Shares
determined pursuant to this Section III. shall be non-discretionary
on the part of the Company, and shall be awarded to the Executive in accordance
with the provisions of Section 3.1(c) of the Agreement.

 

 

EXHIBIT C

 

(FORMULA FOR DETERMINING
ANNUAL STOCK OPTION AWARD)

 

I.                                         The Executive
will be awarded an Annual Stock Option Award only if the Company shall have
achieved a Threshold level of performance in the completed fiscal year
immediately preceding the award.  For these
purposes, the Company will have achieved a Threshold level of performance if
the Company’s annual growth in FFO per fully-diluted share for the completed
fiscal year immediately preceding the year in which the award of Annual Stock
Options is calculated, when compared to FFO per fully-diluted share for the
next preceding completed fiscal year, is not less than 80% of the median FFO
growth rate for the applicable year as published by NAREIT for the Retail REIT
Shopping Center subsector of the NAREIT Equity REIT Total Return Index (or, if
not then in existence, a comparable retail REIT shopping center index mutually
agreeable to the Company and Executive).

 

II.                                     If the Company achieves a
Threshold level of performance, the Executive’s Annual Stock Option Award will
authorize the Executive to purchase the number of shares equal to the quotient
of (1) 10% of the Executive’s Base Salary for the applicable year, divided
by (2) the closing price per share on the day immediately preceding the
date of grant (or, if not a trading day, on the next preceding trading day
during which a sale occurred), in each case as reported by the New York Stock
Exchange.  The strike price for each
share underlying each Annual Stock Option Award will be equal to the closing
price per share on the day immediately preceding the date of grant (or, if not
a trading day, on the next preceding trading day during which a sale occurred),
in each case as reported by the New York Stock Exchange.

 

#41980

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