OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is entered into as of this
31st day of October, 1997, by and between STACEY'S BUFFET, INC., a Florida
corporation (the "Seller"), and STAR BUFFET, INC., a Delaware corporation
(the "Buyer).
RECITALS
WHEREAS, Seller is engaged in the business of owning, operating and
licensing Stacey's Buffet restaurants; and
WHEREAS, Seller and Buyer are parties to that certain Credit Agreement
dated as of the date hereof (the "Credit Agreement") whereby Buyer will
from time to time make loans to Seller; and
WHEREAS, as a condition of the Credit Agreement, the parties agreed to
enter into this Option Agreement for the Buyer's option to purchase any or
all of the Stacey's Buffet restaurants set forth on Exhibit A hereto (the
"Restaurants").
NOW, THEREFORE, in consideration of the mutual covenants and promises
expressed herein, it is agreed by and between Seller and Buyer that:
AGREEMENT
1. OPTION TO PURCHASE. Seller hereby grants to Buyer an option (the
"Option") to purchase, concurrently in their entirety at one Closing or
separately at one or more Closings, all right, title and interest of Seller
in and to substantially all of the assets related to the ownership and
operation of any or all of the Restaurants, on substantially the terms and
conditions set forth in the form of Asset Purchase Agreement attached
hereto as Exhibit B (the "Purchase Agreement"). This Option is granted for
good and valuable consideration as identified in the Credit Agreement, the
receipt and sufficiency of which is hereby acknowledged. In the event that
Seller is unable to obtain the consents of the landlords of the leased real
property for any particular Restaurant, Buyer shall have the right to
substitute with Seller's approval additional and similar Stacey's Buffet
restaurant(s) in lieu of a Restaurant for which consent cannot be obtained.
2. TERM OF OPTION; EXPIRATION OF OPTION. As long as there is any
outstanding indebtedness owed by Borrower to Lender under the Credit
Agreement, Buyer shall have the right to exercise its Option (the "Option
Period"). Time is of the essence with respect to all of the express
conditions contained herein, thus, the Option shall automatically expire
and Buyer shall have no further right to exercise the Option to purchase
any or all of the Restaurants after the Option Period; provided, however,
that the closing on a Restaurant may take place after expiration of the
Option Period so long as Buyer has given notice to the Seller during the
Option Period.
3. EXERCISE OF OPTION. At any time during the Option Period Buyer
may exercise this Option by delivering to Seller (a) written notice of
election to do so and (b) a draft of the Purchase Agreement with specified
information relating to the identification of Restaurants to be purchased,
the purchase price, and the approximate date of closing. Upon receipt of
the notice and a draft of the Purchase Agreement, the Seller shall provide
all information requested by Buyer which is reasonably necessary to Buyer's
purchase decision, including, without limitation, the completion of
Seller's Disclosure Schedules (as defined in the Purchase Agreement).
Subject to Seller's prompt delivery to Buyer of Seller's Disclosure
Schedules and related documents and information required by Buyer, Buyer
shall use its commercially reasonable efforts to close a transaction
relating to the purchase of any of the Restaurants within thirty days of
the election to purchase.
4. PURCHASE PRICE.
4.1 PURCHASE PRICE. The purchase price (the "Purchase Price")
for each of the Restaurants shall be the amounts set forth opposite each of
the Restaurants on Exhibit A hereto.
4.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
by Buyer to Seller by (i) the cancellation of any outstanding principal and
accrued and unpaid interest owed by Seller to Buyer under the Credit
Agreement (the "Seller Indebtedness") and (ii) the set-off of any earned
and unpaid fees owed from Seller to Buyer under the Business Services
Agreement (as defined in the Credit Agreement) through December 1998 (the
"Management Fees"). In the event that the aggregate amount of the Seller
Indebtedness and Management Fees (the "Total Offset") is insufficient to
cover the Purchase Price, the Buyer shall pay to Seller on January 1, 1999,
cash in an amount equal to Purchase Price less the Total Offset.
5. REPURCHASE OPTION. In the event that Buyer exercises its Option
to purchase any or all of the Restaurants, Seller shall have the option to
repurchase (the "Repurchase Option") all, but not less than all, of the
Restaurants purchased by Buyer pursuant to the Option Agreement for cash at
a purchase price equal to the greater of (i) the cumulative Purchase Price
paid by Buyer for all of the Restaurants, plus any and all capital
expenditures made by Buyer for such Restaurants or (ii) three times
trailing earnings before interest, income taxes, depreciation and
amortization ("EBITDA") for the prior 12 month period for all of the
Restaurants, plus capital expenditures made by Buyer for such Restaurants,
reduced by 2.0% of revenues for the prior 12 month period for all of such
Restaurants. Seller shall exercise its Repurchase Option by giving written
notice to Buyer, and the closing of the sale of such Restaurants pursuant
to the Repurchase Option shall occur no less than fifteen (15) and no more
than thirty (30) days following the giving of written notice. All other
terms of the repurchase shall be consistent with the form of the Purchase
Agreement.
6. MISCELLANEOUS TERMS INCORPORATED BY REFERENCE. The miscellaneous
provisions of the Credit Agreement contained in Subsections 7.1 and 7.8 are
hereby incorporated by reference herein and made a part hereof except that
Lender shall mean Buyer and Borrower shall mean Seller.
7. ASSIGNMENT. This Agreement may not be assigned by Seller.
IN WITNESS WHEREOF, the undersigned have caused this Option Agreement
to be executed by officers thereunto duly authorized as of the date first
above stated.
BUYER
STAR BUFFET, INC.
By: /s/ Xxxxxxxx Xxxxxxx
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Xxxxxxxx Xxxxxxx
Chief Financial Officer
SELLER
STACEY'S BUFFET, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
CEO
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EXHIBIT A
LISTING OF LOCATIONS OF RESTAURANTS AND PURCHASE PRICE
Purchase Price
($ in 000s)
-----------
1. North Ft. Xxxxxx $ 102
2. Ft. Xxxxxx $ 126
3. Port Charlotte $ 1
4. Holiday $ 240
5. St. Petersburg $ 443
6. Port Xxxxxx $ 153
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TOTAL $1,065
Exhibit A
