BUSINESS SERVICES AGREEMENT
THIS BUSINESS SERVICES 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 "Company"), and STAR BUFFET, INC., a Delaware
corporation ("Star").
RECITALS
A. The Company and Star are parties to that certain Credit
Agreement, dated as of a date even herewith (the "Credit Agreement")
whereby Star agreed from time to time to make Loans to the Company. Unless
otherwise defined herein, capitalized terms used herein shall have the same
meanings set forth in the Credit Agreement.
B. As a condition of the Credit Agreement, the parties agreed to
enter into this Agreement whereby Star shall provide (i) the services
described on Exhibit A attached hereto and incorporated herein by this
reference (the "Services") for the Company's restaurants located at the
addresses listed on Exhibit B attached hereto and incorporated herein by
reference (the "Restaurants"), and (ii) certain purchasing services for the
Restaurants.
NOW, THEREFORE, in consideration of the mutual covenants and promises
expressed herein, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree
as follows:
AGREEMENT
1. SERVICES. During the term of this Agreement, Star shall
provide to the Company the Services for the Restaurants, subject to the
terms and conditions specified in this Agreement. Star shall also provide
corporate purchasing services (the "Purchasing Services") to the
Restaurants pursuant to which Star shall use reasonable commercial efforts
to allow the Restaurants to purchase food and paper products, small wares
and equipment on substantially the same terms that such products may be
purchased by Star for its restaurants. Star is expressly authorized to
provide the Services (including the Purchasing Services) in any reasonable
manner it deems appropriate to meet the day-to-day requirements of the
business and administrative aspects of the Company's operation of the
Restaurants. Notwithstanding anything herein to the contrary, (i) Star
shall have no obligation to provide Services or Purchasing Services to any
restaurants owned, operated or franchised by the Company other than the
Restaurants, (ii) Star shall not be obligated to perform the Services or
the Purchasing Services for the Restaurants that Star does not perform for
its own restaurants or in a manner different from the manner which Star
provides for its own restaurants, (iii) except as expressly provided
herein, Star shall not be obligated to (A) provide the Company with any
legal services or representation, whether in-house or outside counsel, and
shall not be obligated to supervise any such legal services, or (B) provide
any services with respect to which Star would be required by applicable law
to hold a professional license or permit to provide, or (C) perform
functions usually and customarily performed or provided by any executive
officer, general counsel or other officer of a publicly held company, and
(iv) Star shall not be liable for any direct, indirect or consequential
damages suffered or incurred by the Company or to any third party,
including, without limitation, lost profits arising from or relating to the
performance of services by Star hereunder absent a finding in a final
judgment of a court of competent jurisdiction that such damages proximately
resulted from the bad faith, gross negligence or willful misconduct of Star
or its agents.
2. TERM. The term of this Agreement shall commence on the Closing
Date and, unless this Agreement is sooner terminated as provided herein,
shall continue for a period of five years from the Closing Date. Star
shall have the right to terminate this Agreement, upon notice to the
Company, upon (a) the occurrence of any Event of Default, (b) a breach of
any material provision of this Agreement by the Company which is not cured
by the Company to the satisfaction of Star within 30 days of receipt of
notice from Star; or (c) the entry of any judgment, order, injunction or
decree of any court, arbitrator or governmental agency which would cause
the provision of the Services or the Purchasing Services to be in conflict
with or in violation of any such judgment, order, injunction or decree.
This agreement may also be terminated by the mutual consent of the parties.
3. COMPENSATION.
3.1 In consideration for the Services provided hereunder, the
Company agrees to pay to Star (a) an administrative management fee for each
Restaurant equal to four and one-half percent (4.5%) of the first $35.0
million of total revenues of the Restaurants and three and one-half percent
(3.5%) of the total revenues in excess of $35.0 million for the Restaurants
(the "Administrative Fee") for each regular one-week accounting period
(each, an "Accounting Period"), and for any portion of an Accounting Period
occurring during the term of this Agreement (but excluding the initial 8
Accounting Periods (the "Deferred Fees")), and (b) to the extent requested
by the Company, an amount reasonably estimated from time to time by Star to
represent its actual cost (including labor, overhead and third-party
expenses and the allocated cost of employees or officers of Star or any
entity which has agreed to perform similar services to Star) of providing
Services to the Company relating to corporate financial reporting,
preparation of tax returns and compliance by the Company with its reporting
and disclosure obligations under applicable securities laws (the "Reporting
Fees" and, collectively with the Administrative Fees, the "Management
Fees"). The Company promises to pay the Deferred Fees on May 1, 1998.
3.2 In addition to the payment of the Management Fees, the
Company shall be responsible for the payment of any and all actual out of
pocket costs and expenses incurred by or on behalf of Star in connection
with the Services and Purchasing Services to be provided hereunder and
shall reimburse Star for such costs and expenses incurred by or on behalf
of Star or its affiliates or third party service providers in connection
with the Services and Purchasing Services rendered hereunder, including,
without limitation, costs and expenses relating to marketing programs and
services, costs of replacement equipment, travel expenses, year-end
employee/accounting reporting matters (for example, Form 1099's, W-2's,
etc.), and legal and accounting and other professional fees and expenses.
3.3 Star shall calculate all expense reimbursements due to Star
for each Accounting Period hereunder, which shall be paid by the Company
within seven (7) days after receipt of Star's invoice. The Company shall
report its total revenues to Star for each Accounting Period and pay the
Management Fee to Star based upon such report within seven (7) days of the
end of each such Accounting Period.
4. INDEMNIFICATION.
4.1 The Company shall indemnify, hold harmless and defend Star
and its affiliates, and any other entity which performs similar services
for Star, and their respective officers, directors, stockholders and
employees (collectively, the "Star Indemnified Parties"), from and against
any and all liabilities, losses, judgments, damages, demands, claims,
causes of action or any other legal or government proceedings, or any
settlement thereof, and any and all costs and expenses (including
reasonable attorneys' fees), whether or not covered by insurance, caused or
asserted to have been caused, directly or indirectly, by or as a result of
the performance of Services or Purchasing Services or any intentional or
willful misconduct or negligent acts or omissions by the Company and/or its
agents, employees and/or subcontractors (other than Star, its affiliates
and agents) during the term hereof.
Star shall indemnify, hold harmless and defend Company and its
employees, from and against any and all liabilities, losses, damages,
demands, claims, causes of action or any other legal or government
proceedings, or any settlement thereof, and any and all costs and expenses
(including reasonable attorneys' fees), whether or not covered by
insurance, caused or asserted to have been caused, directly or indirectly,
by or as a result of any intentional or willful misconduct, or the gross
negligence, of Star or any of its officers or management employees in
connection with Star's performance of its material covenants hereunder.
4.2 Promptly after being informed or learning thereof, any party
entitled to indemnification hereunder (an "Indemnified Party"), from the
other party hereto (an "Indemnifying Party"), shall give written notice to
the Indemnifying Party of any demand, claim, cause of action or other
proceeding (a "Third-Party Claim") which might give rise to a claim by an
Indemnified Party for indemnification against the Indemnifying Party under
Section 5.1, stating the nature and basis of said claims and the amounts
thereof, to the extent known by the Indemnified Party; provided, however,
that the failure to give such notice shall not relieve the Indemnifying
Party of its obligations, except if and to the extent it is materially
prejudiced by such failure. The Indemnifying Party shall have the right,
at its option, to defend, at its own expense and by counsel reasonably
acceptable to the Indemnified Party, against any such Third Party Claim;
provided that if the Indemnifying Party fails to do so within ten (10) days
after being notified or otherwise learning of any such Third Party Claim,
the Indemnified Party shall be entitled (i) to defend such Third Party
Claim with counsel of its own choosing, at the expense of the Indemnifying
Party (who shall pay such expenses, including the reasonable fees and
expenses of such counsel, as and when they are incurred by the Indemnified
Party); and (ii) to settle or compromise such Third Party Claim without the
consent of the Indemnifying Party. In no event shall any Indemnifying
Party compromise or settle any Third Party Claim without the consent of the
Indemnified Party, unless the terms of the settlement or compromise provide
for a general and unconditional release of the Indemnified Party from such
Third Party Claim and does not require the payment of any sums by, does not
place any restrictions or impose any covenants on, and does not require or
provide for any admission of any liability on the part of, the Indemnified
Party.
5. CONFIDENTIAL AND PROPRIETARY INFORMATION.
5.1 Each of the parties hereto shall (a) maintain in strict
confidence and not disclose any Confidential Information of the other party
without the other party's express written authorization; (b) not use any
Confidential Information in any way to the direct or indirect detriment of
the disclosing party; and (c) ensure that its affiliates and advisors who
have access to any of such Confidential Information shall comply with these
nondisclosure obligations and use restrictions; provided, however, that
each party may disclose Confidential Information to those of its
representatives who need to know Confidential Information for the purposes
of this Agreement, subject to the following conditions: (a) it being
understood and agreed to by each party that such representatives shall be
informed of the confidential nature of the Confidential Information,
(b) such Representative shall agree to be bound by this Section and shall
be directed by each party not to disclose to any other person any
Confidential Information and (c) each party shall be responsible for any
breach of this Section by any of its representatives.
5.2 If either party is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demands, or similar processes) to disclose or produce any
Confidential Information of the other party or its advisors or
representatives, the receiving party shall (a) provide the disclosing party
with prompt notice thereof and copies, if possible, and, if not, a
description, of the Confidential Information requested or required to be
produced so that the disclosing party may seek an appropriate protective
order or waive compliance with the provisions of this Section and
(b) consult with the disclosing party as to the advisability of the
disclosing party's taking of legally available steps to quash or narrow
such request. Each party further agrees that, if in the absence of a
protective order or the receipt of a waiver hereunder, the receiving party
is nonetheless, in the written opinion of its legal counsel, compelled to
disclose or produce Confidential Information of the other party to any
tribunal legally authorized to request and entitled to receive such
Confidential Information or to stand liable for contempt or suffer other
censure or penalty, the receiving party may disclose or produce such
Confidential Information to such tribunal without liability hereunder,
provided, however, that the receiving party shall give the disclosing party
written notice of the Confidential Information to be so disclosed or
produced as far in advance of its disclosure or production as is
practicable and shall use its best efforts to obtain, to the greatest
extent practicable, an order or other reliable assurance that confidential
treatment will be accorded to such Confidential Information so required to
be disclosed or produced.
For purposes of this Section 5, the term "Confidential
Information" shall mean any information of the disclosing party (whether
written or oral), including all notes, studies, information, forms,
business or management methods, formulae, recipes, marketing data, or trade
secrets or know-how, whether or not such Confidential Information is
disclosed or otherwise made available to one party by the other party
pursuant to this Agreement or otherwise. If the information is disclosed
in writing, it must be clearly labeled as confidential and, if the
information is disclosed orally, the disclosing party must summarize it in
writing and confirm that it is confidential within thirty days after its
oral disclosure to the receiving party. Confidential Information does not
include, however, any information that (i) is or becomes generally
available to and known by the public (other than as a result of the
disclosure directly or indirectly by the receiving party or its affiliates,
advisors or representatives that is not permitted by this Agreement or the
consent of the furnishing party); (ii) has already been or is hereafter
independently acquired or developed by the receiving party without
violating any confidentiality agreement with or other obligation of secrecy
to the furnishing party or (iii) information which a party has determined,
after consultation with its legal counsel, that it is required to disclose
by laws or government regulations applicable to it. The parties
acknowledge and agree that this Agreement may be filed with the Securities
and Exchange Commission by either or both of the parties in accordance with
the informational requirements of the Securities Exchange Act of 1934, as
amended.
6. ASSIGNMENT. This Agreement may not be assigned by the Company
without the prior written consent of Star. It is acknowledged that a
Change of Control shall constitute an assignment for purposes of this
Agreement, for which the consent of Star is required.
7. RELATIONSHIP OF THE PARTIES. Except as specifically provided
herein, none of the parties shall act or represent or hold itself out as
having the authority to act as an agent or partner of the other parties, or
in any way bind or commit the other party to any obligations. Nothing
contained in this Agreement shall be construed as creating a partnership,
joint venture, agency trust or other association of any kind, each party
being individually responsible only for its obligations as set forth in
this Agreement.
8. FORCE MAJEURE. If Star is prevented from complying, either
totally or in part, with any of the terms or provisions of this Agreement by
reason of fire, flood, storm, strike, lockout or other labor trouble, riot,
war, rebellion or other causes beyond the reasonable control of Star or other
acts of God, then upon written notice to Star, the affected provisions and/or
other requirements of this Agreement shall be suspended during the period of
such disability and Star shall have no liability to the Company in connection
therewith. Star shall make all reasonable efforts to remove such disability
as soon as reasonably practicable but in no event later than thirty days
after the occurrence of such disability.
9. MISCELLANEOUS TERMS INCORPORATED BY REFERENCE. The miscellaneous
provisions of the Credit Agreement contained in Sections 7.1 through 7.5,
inclusive, and Sections 7.8, 7.9 and 7.11 through 7.13, inclusive, thereof
are hereby incorporated by reference herein and made a part hereof, and for
purposes of this Agreement all references to the Lender or the Borrower in
such Sections of the Credit Agreement shall be deemed to refer to Star or
the Company, respectively.
IN WITNESS WHEREOF, the undersigned have caused this Business Services
Agreement to be executed by officers thereunto duly authorized as of the
date first above stated.
STAR BUFFET, INC.
By: /s/ Xxxxxxxx Xxxxxxx
---------------------------
Its: V.P. CFO
---------------------------
STACEY'S BUFFET, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------
Its: CEO
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EXHIBIT A
SERVICES TO BE PROVIDED
Star Buffet shall provide to the restaurants currently operated by
Stacey's Buffet all management and administrative services for the
operation of the restaurants including all of the following:
A. Accounting
B. Human resources
C. Product development
D. Marketing
E. Purchasing
F. Operations supervisory management above store level
G. Information systems management
H. Risk management/insurance administration
Accounting services shall include all of the following:
1. Payroll services
2. Payroll tax reporting
3. Financial reporting
4. Accounts payable
5. Accounts receivable
6. Maintaining accounting records as required by law or custom
A-1
STACEY'S BUFFET, INC.
EXHIBIT B - RESTAURANT LOCATIONS
Store
# Name Street Address City State Zip Code
--- ------------ ---------------------------- ------ ----- --------
102 Orlando 000 Xxxxx Xxxxxxx Xxxxxxxxx Xxxxxxx XX 00000
103 Sunrise 0000 Xxxxxxxxx 00xx Xxxxxx Xxxxxxx XX 00000
000 Xxxxxx Xxxx 0000 Xxxx Xxxxxx Xxxx Xxxxxx Xxxx XX 00000
000 Xx. Xxxxxxxxxx 0000 00xx Xxxxxx Xxxxx Xx. Xxxxxxxxxx XX 00000
000 Xxxx Xxxx Xxxxx 0000 Xxxxx Xxxxx Xxxxxxx Xxxx Xxxx Xxxxx XX 00000
110 Clearwater 00000 X.X. Xxxxxxx 00 Xxxxx Xxxxxxxxxx XX 00000
120 Port Xxxxxx 00000 X.X. Xxxxxxx 00 Xxxxx Xxxx Xxxxxx XX 00000
121 Lancaster 000 Xxxxxxxxxxx Xxxx Xxxxxxxxx XX 00000
129 Brick 00 Xxxxx Xxxxx Xxxxx XX 00000
000 Xxxxx Xxxxxx Xxxxxx Xxx Xxxxxxxx XX 00000
000 Xxxxxxxxxx Xx. 00 & Xxxxxx Xxxx Xxxxxxxxxx XX 00000
000 Xxxxxxxxx Xxxxxxx 000 Xxxx Xxxxxxx 000 Xxxxxxxxx Xxxxxxx XX 00000
138 Ft. Lauderdale 0000 Xxxxx Xxxx. Xx. Xxxxxxxxxx XX 00000
139 Ft. Xxxxx 00000 XxXxxxxx Xxxx. Xx. Xxxxx XX 00000
140 Holiday 0000 X.X. Xxxxxxx 00 Xxxxxxx XX 00000
141 Lakeland 0000 X.X. Xxxxxxx 00 Xxxxx Xxxxxxxx XX 00000
142 Largo 0000 Xxxxx Xxxxxxxx Xxxxxx Xxxxx XX 00000
000 Xxxxxxxxx 0000 Xxxxx Xxxxxxx Xxxxxx Xxxxxxxxx XX 00000
145 Stuart 0000 Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx XX 00000
000 Xxxxxxxx Xxxx 0000 00xx Xxxxxx Xxxxx Xxxxxxxx Xxxx XX 00000
148 Seffner 000 Xxxxxx Xxxxxx Xxxx Xxxx. X. Xxxxxxx XX 00000
150 North Ft. Xxxxx 00 Xxxx Xxxxxx Xxxx Xxxxx Xx. Xxxxx XX 00000
000 Xxxx Xxxxxxxxx 0000 Xxxxxxx Xxxxx Xxxx Xxxxxxxxx XX 00000
000 Xxxxx Xxxx 0000 X. Xxx XX Xxxxxxx 000 Xxxxx Xxxx XX 00000
B-1
