ASSET PURCHASE AGREEMENT

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 , a ll 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 ”).

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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.

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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

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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.

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3.3            No Violation .   Except as set forth on Schedule 3.3 hereto, the execution, delivery and performance by Seller of this Agreement and the other 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

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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

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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

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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,

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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

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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.”

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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 th